Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedMarch 31, 2019

September 30, 2022

OR

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period fromto

__________to __________

Commission file number: 000–26495

000-26495

cyrn-20220930_g1.jpg
CYREN LTD.

(Exact name of Registrant as specified in its charter)

IsraelNot applicable
(State or other jurisdiction of(I.R.S. Employer

incorporation or organization)		(I.R.S. Employer
Identification No.)

10 Ha-Menofim St., 5th Floor
Herzliya, Israel
4672561
Herzliya, Israel4672561
(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code 011–972–9–863–6888

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which
 Registered
Ordinary Shares, par value ILS 3.00 per shareCYRNNasdaq Capital Market
Indicate the number of shares outstanding of each issuer’s classes of common shares, as of the latest practicable date: 7,999,808 ordinary shares as of October 31, 2022.

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒x No ¨

o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer¨☐Accelerated filer¨☐
Non-Accelerated filer☒Smaller reporting company☒
Emerging growth company¨☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes☐Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Ordinary Shares, par value ILS 0.15 per shareCYRNNasdaq Capital Market

Indicate the number of shares outstanding of each issuer’s classes of common stock, as of the latest practicable date: 54,465,357 ordinary shares as of April 30, 2019.


Table of Contents

CYREN LTD.
QUARTERLY REPORT ON FORM 10-Q
Table of Contents
Page
Page
Item 1.Financial Statements
2
1
4
3
5
4
6
5
7
6
Notes to Consolidated Financial Statements (unaudited)9
8
Management's21
22
28
33
30
35
36
Exhibits30
36
36
SIGNATURES31

37

CYREN LTD.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2019

($USD in thousands, except share and per share amounts)

(Unaudited)

Page
PART I – FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)2
Condensed Consolidated Balance Sheets2
Condensed Consolidated Statements of Operations4
Condensed Consolidated Statements of Comprehensive Loss5
Condensed Consolidated Statement of Changes in Shareholders’ Equity6
Condensed Consolidated Statements of Cash Flows7
Notes to Condensed Consolidated Financial Statements9

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Table of Contents
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

CYREN LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

($USD in thousands, except share and per share amounts)

(Unaudited)

  March 31,  December 31, 
  2019  2018 
  Unaudited    
ASSETS      
       
CURRENT ASSETS:      
Cash and cash equivalents $12,444  $17,571 
Trade receivables (net of allowances for doubtful accounts of $20 as of March 31, 2019 and December 31, 2018)  3,024   3,658 
Deferred commissions  909   887 
Prepaid expenses and other receivables  1,472   778 
         
Total current assets  17,849   22,894 
         
LONG-TERM ASSETS:        
Long-term deferred commissions  1,783   1,880 
Long-term restricted lease deposits  812   821 
Operating lease right-of-use assets  9,675   - 
Severance pay fund  541   503 
Property and equipment, net  4,692   4,608 
Intangible assets, net  8,554   8,802 
Goodwill  20,262   20,519 
         
Total long-term assets  46,319   37,133 
         
Total assets $64,168  $60,027 

September 30,
2022		December 31,
2021
(USD in thousands, except share and per share amounts)(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$13,520 $4,288 
Trade receivables (net of allowances for credit losses of $97 and $118, respectively)1,234 352 
Deferred commissions706 482 
Prepaid expenses and other receivables2,451 1,120 
Current assets held for sale (Note 3)— 1,082 
Total current assets17,911 7,324 
LONG-TERM ASSETS:
Long-term deferred commissions797 521 
Long-term lease deposits and prepaid expenses630 686 
Operating lease right-of-use assets5,265 6,207 
Severance pay fund740 921 
Property and equipment, net1,126 1,980 
Intangible assets, net1,750 3,499 
Goodwill6,518 11,598 
Long-term assets held for sale (Note 3)— 13,392 
Total long-term assets16,826 38,804 
Total assets$34,737 $46,128 


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September 30,
2022		December 31,
2021
(USD in thousands, except share and per share amounts)(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Trade payables$1,228 $1,059 
Employees and payroll accruals3,230 4,196 
Accrued expenses and other liabilities ($0 and $4 attributable to related parties, respectively)1,342 937 
Operating lease liabilities1,083 1,330 
Deferred revenues6,581 3,004 
Current liabilities held for sale (Note 3)439 2,180 
Total current liabilities13,903 12,706 
LONG-TERM LIABILITIES:
Deferred revenues2,590 72 
Convertible Debentures ($242 and $238 attributable to related parties, respectively)8,717 8,578 
Long-term operating lease liabilities4,293 5,749 
Deferred tax liability, net157 167 
Accrued severance pay833 983 
Other liabilities447 517 
Long-term liabilities held for sale (Note 3)— 3,528 
Total long-term liabilities17,037 19,594 
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Ordinary shares nominal value ILS 3.00 par value; Authorized: 80,000,000 shares as of September 30, 2022 (Unaudited) and December 31, 2021; Issued and Outstanding: 7,999,808 and 4,532,943 shares as of September 30, 2022 (Unaudited) and December 31, 2021, respectively6,890 3,759 
Additional paid-in capital293,555 283,577 
Accumulated other comprehensive loss— (1,877)
Accumulated deficit(296,648)(271,631)
Total shareholders’ equity3,797 13,828 
Total liabilities and shareholders’ equity$34,737 $46,128 
The accompanying notes are an integral part of the interim consolidated financial statements.

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CYREN LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

($USD in thousands, except share and per share amounts)

(Unaudited)

  March 31,  December 31, 
  2019  2018 
  Unaudited    
LIABILITIES AND SHAREHOLDERS’ EQUITY      
       
CURRENT LIABILITIES:      
Trade payables $1,270  $1,668 
Employees and payroll accruals  3,375   3,959 
Accrued expenses and other liabilities  1,343   910 
Operating lease liabilities  1,277   - 
Earn-out consideration  -   2,926 
Deferred revenues  5,498   5,773 
         
Total current liabilities  12,763   15,236 
         
LONG-TERM LIABILITIES:        
Deferred revenues  3,242   503 
Convertible notes  10,000   10,000 
Long-term operating lease liabilities  8,724   - 
Deferred tax liability  1,045   1,130 
Accrued severance pay  677   598 
Other liabilities  347   700 
         
Total long-term liabilities  24,035   12,931 
         
COMMITMENTS AND CONTINGENCIES        
         
SHAREHOLDERS’ EQUITY:        
Ordinary shares nominal value ILS 0.15 par value -        
Authorized: 75,353,340 shares at March 31, 2019 (Unaudited) and December 31, 2018; Issued: 54,405,881 shares at March 31, 2019 (Unaudited) and December 31, 2018; Outstanding: 54,260,357 and 54,057,208 shares at March 31, 2019 (Unaudited) and December 31, 2018, respectively  2,097   2,097 
Additional paid-in capital  245,527   245,570 
Treasury shares at cost – 145,524 and 348,673 Ordinary shares at March 31, 2019 (Unaudited) and December 31, 2018, respectively  (416)  (998)
Accumulated other comprehensive loss  (2,038)  (1,666)
Accumulated deficit  (217,800)  (213,143)
         
Total shareholders’ equity  27,370   31,860 
         
Total liabilities and shareholders’ equity $64,168  $60,027 

STATEMENTS OF OPERATIONS

(Unaudited and USD in thousands, except share and per share amounts)Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Revenues$5,834 $5,616 $17,302 $18,166 
Cost of revenues3,015 3,311 9,677 9,941 
Gross profit2,819 2,305 7,625 8,225 
Operating expenses:
Research and development, net3,449 3,516 11,174 10,606 
Sales and marketing2,705 2,447 7,677 7,097 
General and administrative2,178 2,162 6,972 6,262 
Total operating expenses8,332 8,125 25,823 23,965 
Operating loss(5,513)(5,820)(18,198)(15,740)
Other (expense) income, net(4)4 (6)(13)
Financial income (expenses), net ($5 and $148 interest expense attributable to related parties for the three months ended September 30, 2022, and 2021, respectively)(7)(282)104 (705)
Loss from continuing operations before taxes on income(5,524)(6,098)(18,100)(16,458)
Tax benefit (expense)1 (20)12 43 
Net loss from continuing operations(5,523)(6,118)(18,088)(16,415)
Discontinued operations (Note 3):
Income (loss) from operations of discontinued operations(575)331 (6,929)843 
Net loss$(6,098)$(5,787)$(25,017)$(15,572)
Basic net income (loss) per share:
Continuing operations$(0.71)$(1.57)$(2.64)$(4.44)
Discontinued operations$(0.07)$0.08 $(1.01)$0.23 
Basic net loss per share$(0.78)$(1.48)$(3.65)$(4.21)
Diluted net income (loss) per share:
Continuing operations$(0.71)$(1.57)$(2.64)$(4.44)
Discontinued operations$(0.07)$0.07 $(1.01)$0.19 
Diluted net loss per share$(0.78)$(1.50)$(3.65)$(4.25)
Weighted-average number of shares used in computing basic net income (loss) per share and diluted loss per share for continuing operations7,822,4243,899,5026,858,9373,700,789
Weighted-average numbers of shares used in computing basic net income (loss) per share for discontinued operations7,822,4243,899,5026,858,9373,700,789
Weighted-average numbers of shares used in computing diluted net income (loss) per share for discontinued operations7,822,4244,671,8326,858,9374,457,946
The accompanying notes are an integral part of the interim consolidated financial statements.

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CYREN LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($USD in thousands, except share and per share amounts)

(Unaudited)

  

Three months ended

March 31,

 
  2019  2018 
  Unaudited 
       
Revenues $9,655  $7,636 
Cost of revenues  4,000   3,382 
         
Gross profit  5,655   4,254 
         
Operating expenses:        
         
Research and development, net  4,177   3,355 
Sales and marketing  3,856   4,145 
General and administrative  2,432   2,038 
         
Total operating expenses  10,465   9,538 
         
Operating loss  (4,810)  (5,284)
   ��     
Other income (loss), net  248   (2)
Financial expenses, net  (53)  4 
         
Loss before taxes on income  (4,615)  (5,282)
Tax benefit  39   46 
         
Loss $(4,576) $(5,236)
         
Basic and diluted loss per share $(0.08) $(0.10)
         
Weighted average number of shares used in computing basic loss per share  54,177   53,381 
         
Weighted average numbers of shares used in computing diluted loss per share  54,177   53,381 

COMPREHENSIVE LOSS

Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited and USD in thousands, except share and per share amounts)2022202120222021
Net loss$(6,098)$(5,787)$(25,017)$(15,572)
Other comprehensive loss:
Foreign currency translation adjustments(203)(351)(1,225)(838)
Comprehensive loss$(6,301)$(6,138)$(26,242)$(16,410)
The accompanying notes are an integral part of the interim consolidated financial statements.

- 4 -

-4-

CYREN LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

($USD in thousands, except share and per share amounts)

(Unaudited)

  

Three months ended

March 31,

 
  2019  2018 
  Unaudited 
       
Loss $(4,576) $(5,236)
         
Other comprehensive income (loss):        
         
Foreign currency translation adjustments  (372)  374 
         
Comprehensive loss $(4,948) $(4,862)

CHANGES IN SHAREHOLDERS’ EQUITY

(USD in thousands, except share and per share amounts)Number of out
standing
ordinary
shares		Share
capital		Additional
paid-in
capital
Accumulated other compre
hensive
loss1
Accumulated
deficit		Total
shareholders’
equity
Balance as of December 31, 20203,063,596 $2,392 $258,962 $(725)$(248,592)$12,037 
Share issuance for financing, net of costs2
600,000 556 12,032 — — 12,588 
Restricted share units vested32,100 30 (30)— — — 
Payment of interest in shares14,572 13 246 — — 259 
Share-based compensation related to employees, directors and consultants— — 457 — — 457 
Issuance of shares upon early conversion of a Convertible Debentures60,074 55 804 — — 859 
Other comprehensive loss— — — (659)— (659)
Net loss— — — — (4,197)(4,197)
Balance as of March 31, 2021 (Unaudited)3,770,342 $3,046 $272,471 $(1,384)$(252,789)$21,344 
Payment of interest in shares11,670 10 132 — — 142 
Share-based compensation related to employees, directors and consultants— — 548 — — 548 
Other comprehensive income— — — 172 — 172 
Net loss— — — — (5,588)(5,588)
Balance as of June 30, 2021 (Unaudited)3,782,012 $3,056 $273,151 $(1,212)$(258,377)$16,618 
Issuance of shares and warrants, net of costs3
707,639 662 8,614 — — 9,276 
Restricted share units vested11,813 11 (11)— — — 
Payment of interest in shares16,726 16 243 — — 259 
Share-based compensation related to employees, directors and consultants— — 752 — — 752 
Other comprehensive loss— — — (351)— (351)
Net loss— — — — (5,787)(5,787)
Balance as of September 30, 2021 (Unaudited)4,518,190 $3,745 $282,749 $(1,563)$(264,164)$20,767 


(USD in thousands, except share and per share amounts)Number of out
standing
ordinary
shares		Share
capital		Additional
paid-in
capital
Accumulated other compre
hensive
loss1
Accumulated
deficit		Total
shareholders’
equity
Balance as of December 31, 20214,532,943 $3,759 $283,577 $(1,877)$(271,631)$13,828 
Issuance of shares and warrants, net of costs3
760,757 709 10,233 — — 10,942 
Restricted share units vested70,322 9 (9)— — — 
Exercise of pre-funded warrants365,059 345 (345)— — — 
Issuance of whole shares in lieu of fractional shares due to reverse stock split15,589 — — — — — 
Payment of interest in shares31,667 29 230 — — 259 
Share-based compensation related to employees, directors and consultants— — 630 — — 630 
Other comprehensive loss— — — (251)— (251)
Net loss— — — (6,483)(6,483)
Balance as of March 31, 2022 (Unaudited)5,776,337 $4,851 $294,316 $(2,128)$(278,114)$18,925 
Restricted share units vested7,998 — — — — — 
Exercise of pre-funded warrants2,003,259 1,873 (1,871)— — 2 
Share-based compensation related to employees, directors and consultants— — 488 — — 488 
Other comprehensive loss— — — (771)— (771)
Net loss— — — — (12,436)(12,436)
Balance as of June 30, 2022 (Unaudited)7,787,594 $6,724 $292,933 $(2,899)$(290,550)$6,208 
Restricted share units vested21,942 — — — — — 
Payment of interest in shares190,272 166 93 — — 259 
Share-based compensation related to employees, directors and consultants— — 529 — — 529 
Realized foreign currency translation— 3,102 3,102 
Other comprehensive loss— — — (203)— (203)
Net loss— — — — (6,098)(6,098)
Balance as of September 30, 2022 (Unaudited)7,999,808 $6,890 $293,555 $— $(296,648)$3,797 
1 Relates to foreign currency translation adjustments.
2 Net of issuance costs of $1,212
3 Net of issuance costs of $1,057
The accompanying notes are an integral part of the interim consolidated financial statements.

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CYREN LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

($USD in thousands, except share and per share amounts)

(Unaudited)

  Number of outstanding ordinary shares  Share
capital		  Additional paid-in capital  Treasury shares  Accumulated other comprehensive income (loss) (*)  Accumulated deficit  Total shareholders’ equity 
Balance as of December 31, 2017  53,375,854   2,097   244,609   (3,312)  (1,195)  (195,098)  47,101 
Issuance of treasury shares upon exercise of options and vesting of restricted share units  11,686   -   (7)  43   -   (17)  19 
Stock-based compensation related to employees, directors and consultants  -   -   323   -   -   -   323 
Other comprehensive loss                  374       374 
Cumulative effect of accounting change  -   -   -   -   -   1,811   1,811 
Loss  -   -   -   -   -   (5,236)  (5,236)
Balance as of March 31, 2018 (Unaudited)  53,387,540  $2,097  $244,925  $(3,269) $(821) $(198,540) $44,392 

  Number of outstanding ordinary shares  Share
capital		  Additional paid-in capital  Treasury shares  Accumulated other comprehensive income (loss) (*)  Accumulated deficit  Total shareholders’ equity 
Balance as of December 31, 2018  54,057,208   2,097   245,570   (998)  (1,666)  (213,143)  31,860 
Issuance of treasury shares upon exercise of options and vesting of restricted share units  203,149   -   (312)  582   -   (81)  189 
Stock-based compensation related to employees, directors and consultants  -   -   269   -   -   -   269 
Other comprehensive loss                  (372)      (372)
Loss  -                   (4,576)  (4,576)
Balance as of March 31, 2019 (Unaudited)  54,260,357  $2,097  $245,527  $(416) $(2,038) $(217,800) $27,370 

(*)Relates to foreign currency translation adjustments.

CASH FLOWS

Nine Months Ended
September 30,
(USD in thousands, except share and per share amounts)20222021
Cash flows from operating activities:
Net loss$(25,017)$(15,572)
Less: Income (loss) from discontinued operations(6,929)843 
Loss from continuing operations(18,088)(16,415)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities from continuing operations:
(Gain) loss on disposal of property and equipment(1)17 
Loss on termination of operating leases13 — 
Depreciation1,042 1,532 
Share-based compensation1,647 1,705 
Amortization of intangible assets1,749 1,785 
Amortization of deferred commissions738 644 
Operating lease right-of-use-asset929 1,032 
Interest on convertible notes— 430 
Interest and amortization of debt issuance costs on convertible debentures520 523 
Deferred taxes, net(10)(62)
Changes in assets and liabilities:
Trade receivables(882)(2,627)
Prepaid expenses and other receivables(1,331)(578)
Deferred commissions(1,238)(637)
Long-term lease deposits and prepaid expenses19 (18)
Trade payables597 (1,622)
Employees and payroll accruals, accrued expenses and other liabilities(424)2,012 
Deferred revenues6,095 137 
Accrued severance pay, net31 (48)
Operating lease liabilities(1,703)(1,196)
Other long-term liabilities(70)(390)
Net cash used in operating activities from continuing operations(10,367)(13,776)
Net cash provided by operating activities from discontinued operations1,395 1,314 
Net cash used in operating activities(8,972)(12,462)
Cash flows from investing activities:
Proceeds from sale of a business8,076 — 
Proceeds from sale of property and equipment1 6 
Capitalization of technology— (262)
Purchase of property and equipment(177)(466)
Net cash provided by (used in) investing activities from continuing operations7,900 (722)
Net cash used in investing activities from discontinued operations(709)— 
Net cash used in investing activities7,191 (722)
The accompanying notes are an integral part of the interim consolidated financial statements.

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-6-

CYREN LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($USD in thousands, except share and per share amounts)

(Unaudited)

  

Three months ended

March 31,

 
  2019  2018 
  Unaudited 
Cash flows from operating activities:      
       
Loss $(4,576) $(5,236)
Adjustments to reconcile loss to net cash used in operating activities:        
Loss on disposal of property and equipment  1   - 
Depreciation  461   455 
Stock-based compensation  269   323 
Amortization of intangible assets  966   1,009 
Amortization of deferred commissions  (332)  242 
Amortization of operating lease right-of-use assets  351   - 
Interest on convertible notes  140   - 
Other expenses (income) related to the earn-out consideration  (256)  27 
Deferred taxes, net  (69)  (47)
         
Changes in assets and liabilities:        
         
Trade receivables  678   587 
Prepaid expenses and other receivables  (738)  (659)
Deferred commissions  407   (359)
Change in long-term lease deposits  20   (3)
Trade payables  (405)  (39)
Employees and payroll accruals, accrued expenses and other liabilities  (274)  (252)
Deferred revenues  2,463   (509)
Accrued severance pay, net  41   8 
Operating lease liabilities  (365)  - 
Other long-term liabilities  (111)  61 
         
Net cash used in operating activities  (1,329)  (4,392)
         
Cash flows from investing activities:        
         
Capitalization of technology, net of grants received  (627)  (662)
Purchase of property and equipment  (544)  (822)
         
Net cash used in investing activities  (1,171)  (1,484)


Nine Months Ended
September 30,
(Unaudited and USD in thousands)20222021
Cash flows from financing activities:
Proceeds from issuance of ordinary shares and warrants, net of issuance costs10,942 — 
Proceeds from stock issuance, net of costs— 21,864 
Proceeds from pre-funded warrants exercised2 — 
Net cash provided by financing activities10,944 21,864 
Effect of exchange rate changes on cash, cash equivalents and restricted cash— (36)
Increase in cash, cash equivalents and restricted cash9,163 8,644 
Cash, cash equivalents and restricted cash at the beginning of the period4,951 9,914 
Cash, cash equivalents and restricted cash at the end of the period$14,114 $18,558 
Supplemental disclosure of non-cash transactions:
Purchase of property and equipment by credit$(11)$(25)
Operating lease right-of-use asset exchanged for lease obligations$88 $— 
Issuance of shares on early conversion of Convertible Debentures$— $859 
Issuance of shares for payment of interest on Convertible Notes$518 $143 
Reconciliation of cash, cash equivalents and restricted cash as shown in the condensed consolidated statements of cash flow:
Cash and cash equivalents$13,520 $16,304 
Restricted cash included in long-term restricted lease deposits594 501 
Cash, cash equivalents and restricted cash included in assets held for sale1,753 
Total cash, cash equivalents and restricted cash$14,114 $18,558 
The accompanying notes are an integral part of the interim consolidated financial statements.

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-7-

CYREN LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($USD in thousands, except share and per share amounts)

(Unaudited)

  

Three months ended

March 31,

 
  2019  2018 
  Unaudited 
Cash flows from financing activities:      
       
Payment of earn-out consideration  (2,680)  - 
Proceeds from options exercised  189   19 
         
Net cash provided by (used in) financing activities  (2,491)  19 
         
Effect of exchange rate changes on cash, cash equivalents and restricted cash  (126)  36 
         
(Decrease) in cash, cash equivalents and restricted cash  (5,117)  (5,821)
Cash, cash equivalents and restricted cash at the beginning of the period  18,156   24,228 
         
Cash, cash equivalents and restricted cash at the end of the period $13,039  $18,407 
         
Supplemental disclosure of non-cash transactions:        
         
Purchase of property and equipment by credit $(7) $(17)
         
Net change in accrued payroll expenses related to capitalization of technology $(143) $(230)
         
Reconciliation of cash, cash equivalents and restricted cash as shown in the condensed consolidated statements of cash flow:        
         
Cash and cash equivalents $12,444  $17,940 
Restricted cash included in long-term restricted lease deposits  595   467 
         
Total cash, cash equivalents and restricted cash $13,039  $18,407 

The accompanying notes are an integral part of the interim consolidated financial statements.

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CYREN LTD.

UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

($USD in thousands, except share and per share amounts)

(Unaudited)

NOTE 1:-GENERAL


NOTE 1 - ORGANIZATION
Cyren Ltd. (henceforth “Cyren”) was incorporated under the laws of the State of Israel on February 10, 1991, and its legal form is a company limited by shares. Cyren listed its shares to the public on July 15, 1999, under the name Commtouch Software Ltd. and changed its legal name to Cyren Ltd. in January 2014. Cyren and its subsidiaries, unless otherwise indicated, will beare referred to in these condensed consolidated financial statements as the “Company”.

“Company.”

The Company is engaged in developing and marketing informationcyber security solutions for protecting web,to identify and protect threats in email and mobile transactions.electronic files and from the Internet. The Company sells its cloud-based solutions worldwide, in both embedded and Security-as-a-ServiceSoftware-as-a-Service (SaaS) models, to Original Equipment Manufacturersoriginal equipment manufacturers (“OEMs”OEM”), service providers and enterprises. The Company operates in one reportable segment, which constitutes its reporting unit.

NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES

a.Interim Financial Statements

Over the past several years, the Company has devoted substantially most of its effort to research and product development and increasing revenues through additional investments in sales & marketing.
The Company has incurred losses since inception and expects to continue to incur losses for the foreseeable future. The Company's accumulated deficit as of September 30, 2022, was $296.6 million and negative cash flows from operating activities during the nine month period ending September 30, 2022, was $9.0 million. At September 30, 2022, the Company’s cash and cash equivalents position was not sufficient to fund the Company’s planned operations for at least a year beyond the filing date of the condensed consolidated financial statements. Those factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due.
The Company intends to finance operating costs over the next twelve months through a combination of utilizing existing cash on hand, reducing operating spend, potentially divesting assets, and future issuances of equity and/or debt securities.
The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business.
The condensed consolidated financial statements for the three and nine months ended September 30, 2022, do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.
On February 10, 2022, the Company entered into a securities purchase agreement with certain institutional investors pursuant to which the Company issued and sold, in a private placement, an aggregate of 760,757 ordinary shares, pre-funded warrants to purchase up to 2,368,318 ordinary shares and ordinary warrants to purchase up to 3,129,075 ordinary shares for aggregate gross proceeds of approximately $12 million, before deducting fees to the placement agent and other offering expenses payable by the Company. The purchase price of each ordinary share and associated ordinary warrant was $3.835 and the purchase price of each pre-funded warrant and associated ordinary warrant was $3.834. The ordinary warrants have an exercise price of $3.71, became exercisable upon issuance and expire on August 16, 2027. The pre-funded warrants have an exercise price of $0.001 and became exercisable upon issuance until exercised in full. The closing of the private placement occurred on February 14, 2022. The proceeds of the offering have been and continue to be used for working capital and general corporate purposes.
On June 1, 2022, the Company entered into a definitive Sale and Purchase Agreement (the “SPA”) with Content Services Group GmbH to sell all the equity interests in the Company’s legacy secure email gateway business and wholly owned subsidiary, Cyren GmbH (the “Cyren GmbH Transaction”). Pursuant to the SPA, the purchase price was €10.0 million in cash, subject to customary post-closing adjustments. Refer to Note 3 - Assets Held for Sale and Discontinued Operations for additional information.
On August 1, 2022, the Company completed the Cyren GmbH Transaction and received the initial €9.4 million payment (equivalent to $9.6 million as of the closing date). Under the terms of the SPA, a holdback in the amount of €0.7 million (the "Holdback Amount") is currently held in an escrow to satisfy certain claims. The Holdback Amount,
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CYREN LTD.
UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
less deductions for claims against the Company, if any, will be released to the Company no later than twelve months after the closing date.
Subsequent to the closing date, the Company paid approximately $1.4 million in expenses associated with the Cyren GmbH Transaction. Furthermore, the Company estimates that the final purchase price will be reduced by $0.4 million based on working capital and other adjustments and has accrued a current liability as of September 30, 2022. Beyond that, the Company is using the proceeds from the sale for working capital and general corporate purposes.
On May 5, 2022, the Company formed a new German subsidiary, Cyren Germany GmbH, which has assumed a portion of Cyren GmbH's former operations as of the closing of the Cyren GmbH Transaction, including a datacenter and shared services center for the Company. Cyren Germany GmbH began operations in August 2022.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The accompanying consolidated balance sheet as of March 31, 2019,September 30, 2022, the consolidated statements of operations, the consolidated statements of comprehensive loss for the three and nine months ended September 30, 2022, and 2021, and the consolidated statements of cash flows for the threenine months ended March 31, 2019September 30, 2022, and 2018,2021, as well as the statement of changes in shareholders’ equity for the three and nine months ended March 31, 2019,September 30, 2022, are unaudited. These unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the "SEC") regarding interim financial reporting. In management’s opinion, the unaudited interim consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of the Company’s financial position as of March 31, 2019,September 30, 2022, as well as its results of operations for the three and nine months ended September 30, 2022, and 2021 and cash flows for the threenine months ended March 31, 2019September 30, 2022, and 2018.2021. The results of operations for the three and nine months ended March 31, 2019September 30, 2022, are not necessarily indicative of the results to be expected for the year ending December 31, 20192022, or for other interim periods or for future years.

b.Over the past several years, the Company has devoted substantially 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 4,576 and negative cash flow of 1,329 from operating activities in the three month period ended March 31, 2019, and has an accumulated deficit of 217,800 as of March 31, 2019. 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 approved a 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.

c.Significant accounting policies

Significant Accounting Policies
The accompanying unaudited interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “2021 Annual Report”) filed with the Securities and Exchange Commission (the “SEC”)SEC on March 29, 2019.

24, 2022.

Other than the change described below in Recently Issued and Adopted Pronouncements, there have been no changes to the significant accounting policies described in the 2021 Annual Report on Form 10-K for the fiscal year ended December 31, 2018 that have had a material impact on the unaudited interim consolidated financial statements and related notes.

- 9 -

Use of Estimates

CYREN LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

($USD in thousands, except share and per share amounts)

(Unaudited)

NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)

d.Use of estimates:

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions.assumptions that affect the amounts reported and disclosed in the Company's consolidated financial statements and accompanying notes. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities including goodwill impairment and disclosure of contingent assets and liabilities at the date of the interim consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Company’s management evaluates estimates, including those related to fair value and useful lives
-9-
Table of intangible assets, fair value of earn-out liabilities, valuation allowance on deferred tax assets, income tax uncertainties, fair values of stock-based awards, other contingent liabilities and estimates used in applying the revenue recognition policy. Such estimates are based on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

e.Recently issued and adopted pronouncements:

In June 2018, the FASB issued ASU No. 2018-07, ”Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” These amendments expand the scope of Topic 718, Compensation - Stock Compensation (which currently only includes stock-based payments to employees) to include stock-based payments issued to nonemployees for goods or services. Consequently, the accounting for stock-based payments to nonemployees and employees will be substantially aligned. This ASU supersedes Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. Adoption of this standard had an immaterial impact on the Company’s consolidated financial statements.

- 10 -

Contents

CYREN LTD.

UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

($USD

Discontinued Operations
A component of an entity that is disposed of by sale or abandonment is reported as discontinued operations if the transaction represents a strategic shift that will have a major effect on an entity's operations and financial results. Assets and liabilities of the discontinued operations are aggregated and reported separately in thousands, except sharethe Condensed Consolidated Balance Sheet, including the comparative prior year period. The results of discontinued operations are aggregated and per share amounts)

(Unaudited)

NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)

In February 2016,presented separately in the FASB issued ASU 2016-02, “Leases”Condensed Consolidated Statement of Operations. The disposed component cash flows are reflected as cash flows from discontinued operations within the Company’s Condensed Consolidated Statements of Cash Flows for each period presented. The Cyren GmbH Transaction was accounted for as discontinued operations and is presented in the Condensed Consolidated Balance Sheets as assets and liabilities held for sale. The results of discontinued operations are presented separately in the Condensed Consolidated Statements of Operation as discontinued operations.

Goodwill
Goodwill represents the excess of the purchase price over the estimated fair value of net assets of a business acquired in a business combination. Under ASC Topic 350, Intangibles - Goodwill and Other ("ASC 350"), ongoodwill is not amortized, but rather is subject to impairment test at least annually. The Company performs an annual impairment test as of December 31 of each year, or more frequently if events or changes in circumstances indicate the recognition, measurement, presentation and disclosure of leasescarrying value may not be recoverable. Goodwill is tested for both partiesimpairment at the reporting unit level by first performing a qualitative assessment to a contract (i.e., lessees and lessors). The new standard supersedes the lease requirements in Accounting Standards Codification (ASC) Topic 840, “Leases” and requires lessees, to classify leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expenseit is recognized based on an effective interest method or on a straight line basis overmore likely than not that the termfair value of the lease, respectively. A lesseereporting unit is also required to recordless than its carrying amount. If the reporting unit does not pass the qualitative assessment, the Company carries out a right-of-use asset and a lease liabilityquantitative test for all leases with a term greater than 12 months regardlessimpairment of their classification. Leases with a term of 12 months or less will be accounted for in a manner similar to the accounting under existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. In July 2018, the FASB also issued ASU 2018-11, Targeted Improvements to Topic 842, which provides an alternative transition method at the transition date, allowing entities to recognize a cumulative effect adjustment to the opening balance of retained earnings upon adoption. The guidance is effective for the interim and annual periods beginning on or after December 15, 2018, and early adoption is permitted. The Company adopted ASU 2016-02 as of January 1, 2019.

f.New accounting pronouncements not yet adopted:

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates step two of the goodwill impairment test and specifies that goodwill impairment should be measured by comparing the fair value of athe reporting unit with its carrying amount. Additionally, the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets shouldthe reporting unit that includes goodwill. The Company may bypass the qualitative assessment and proceed directly to performing the quantitative goodwill impairment test.

The Company operates in one operating segment, and this segment comprises its only reporting unit.

For the year ended December 31, 2021, no impairment losses were identified. For the three and nine months ended September 30, 2022, refer to Note 3 - Assets Held for Sale and Discontinued Operations.
Recently Issued and Adopted Pronouncements
In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-06, ASC Subtopic 470-20 Debt—Debt with Conversion and Other Options and ASC 815-40 Hedging—Contracts in Entity’s Own Equity. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be disclosed. ASU 2017-04 issubject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for annual or interim goodwill impairment tests performed inthe Company for fiscal years beginning after December 15, 2019, and early2023, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements and footnote disclosures.

In August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The update to the standard is effective for interim an annual periodspermitted, but no earlier than fiscal years beginning after December 15, 2019, with early adoption permitted. Entities can choose to adopt the ASU 2018-15 prospectively or retrospectively.2020, including interim periods within those fiscal years. The Company is currently assessing the impact of theearly adopted this new guidance January 1, 2022. The adoption of this standardASU 2020-06 did not have a material impact on itsthe consolidated financial statements and footnote disclosures.

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statements.

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Table of Contents
CYREN LTD.

UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

($USD

NOTE 3 - ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
As a result of the Cyren GmbH Transaction, the Company recorded certain assets as held for sale in thousands, except shareits Condensed Consolidated Balance Sheet as of December 31, 2021. Additionally, the Company has recorded a loss on classification as held for sale in its Consolidated Condensed Statements of Operations for the three and per share amounts)

(Unaudited)

nine months ended September 30, 2022, and 2021. Furthermore, the Company estimates that the final purchase price will be reduced by $0.4 million based on working capital and other adjustments and has accrued a current liability as of September 30, 2022. Refer to Note 1 - Organization for additional information.
The following assets and liabilities allocated to the discontinued operation are reflected as assets and liabilities of discontinued operations in the Company’s Consolidated Balance Sheet for the period presented. The major classes of assets and liabilities included as part of discontinued operations as of December 31, 2021, are presented in the following table:
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
(USD in thousands, except share and per share amounts)December 31,
2021
Assets held for sale
Cash and cash equivalents$14 
Trade receivables (net of allowances for credit losses of $19 and $40, respectively)447 
Deferred commissions500 
Prepaid expenses and other receivables121 
Long-term deferred commissions412 
Long-term lease deposits and prepaid expenses123 
Operating lease right-of-use assets3,073 
Property and equipment, net203 
Intangible assets, net805 
Goodwill8,776 
Total assets held for sale$14,474
Liabilities held for sale
Trade payables$16 
Employees and payroll accruals218 
Accrued expenses and other liabilities18 
Operating lease liabilities288 
Deferred revenues - current1,640 
Deferred revenues - long-term413 
Long-term operating lease liabilities2,875 
Deferred tax liability, net240 
Total liabilities held for sale$5,708

g.Leases:

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Table of Contents
CYREN LTD.
UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The Company adoptedfollowing details the new standard asCompany's results of January 1, 2019, usingdiscontinued operations.
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited and USD in thousands, except share and per share amounts)2022202120222021
Revenues$441 $1,845 $3,397 $5,661 
Cost of revenues88 421 870 1,391 
Gross profit353 1,424 2,527 4,270 
Operating expenses:
Research and development, net139 584 1,140 1,854 
Sales and marketing19 338 484 1,057 
General and administrative36 174 371 539 
Total operating expenses194 1,096 1,995 3,450 
Operating gain159 328 532 820 
Other income (expense), net(34)1 (33)1 
Financial expenses, net(505)(38)(517)(116)
Income (loss) from discontinued operations before taxes on income(380)291 (18)705 
Loss on sale(195)— (6,985)— 
Total income (loss) from discontinued operations before taxes on income(575)291 (7,003)705 
Tax benefit— 40 74 138 
Net income (loss) from discontinued operations(575)331 (6,929)843 

The following table presents the modified retrospective approach. The modified retrospective approach provides a method for recording existing leases at adoption andloss associated with the sale, presented in comparative periods that approximates the results of a full retrospective approach. discontinued operations:

Gross purchase price$10,264 
Transaction costs(1,422)
Provision(439)
Net assets sold(12,286)
Realized foreign currency translation adjustments(3,102)
Total net loss on divestiture$(6,985)
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CYREN LTD.
UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - LEASES
The Company has electedaccounts for leases according to utilizeASC 842, Leases. The Company determines if an arrangement is a lease and the available packageclassification of practical expedients permitted underthat lease at inception. Right-of-use (“ROU”) assets represent the transition guidance withinright to use an underlying asset for the new standard which does not requirelease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. For leases with terms greater than 12 months, the Company records the ROU asset and liability at commencement date based on the present value of lease payments according to their term.
The Company uses incremental borrowing rates based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The ROU asset also includes any lease payments made and excludes lease incentives. Lease terms may include options to extend or terminate the lease when it to reassessis reasonably certain that the prior conclusions aboutCompany will exercise that option. Lease expenses are recognized on a straight-line basis over the lease identification, lease classification and initial direct costs.

term.

In addition, the carrying amount of the ROU and lease liabilities are remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
The Company has elected the short-termpractical expedient for lease exception for leasesagreements with a term of 12twelve months or less. As part of this election it willless and does not recognize right-of-useROU assets and lease liabilities on the balance sheet for leases with terms less than 12 months.in respect of those agreements. The Company also elected the practical expedient to not separate lease and non-lease components for all ourits leases. This will result in the initial and subsequent measurement of the balances of the right-of-use asset and lease liability being greater than if the policy election was not applied.

Some leases include one or more options to extend the lease. The exercise of options to extend the lease is typically at the Company’s sole discretion; therefore, the majority of renewals to extend the lease terms are included in our right of use assets and lease liabilities as they are reasonably certain of exercise. The Company regularly evaluates the renewal options, and, when it is reasonably certain of exercise, it will include the renewal period in its lease term. Lease modifications result in remeasurement of the lease liability. 

The right-of-use asset and lease liability are initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate based on the information available at the date of adoption in determining the present value of the lease payments.

Some of the real estate leases contain variable lease payments, including payments based on an index or rate. Variable lease payments based on an index or rate are initially measured using the index or rate in effect at lease adoption. Additional payments based on the change in an index or rate are recorded as a period expense when incurred. 

- 12 -

CYREN LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

($USD in thousands, except share and per share amounts)

(Unaudited)

NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)

g.Leases:

The Company has various operating leases for office space and vehicles that expire through 2030.2028. Below is a summary of ourthe Company’s operating right-of-useROU assets and operating lease liabilities as of March 31, 2019:

Operating lease right-of-use assets $9,675 
     
Operating lease liabilities, current $1,277 
Operating lease liabilities long-term  8,724 
     
Total operating lease liabilities $10,001 

The short term lease liabilities is included within accrued expenses and other short term liabilities in the consolidated balance sheet.

September 30, 2022:

(Unaudited and USD in thousands)
Operating lease right-of-use assets$5,265 
Operating lease liabilities, current1,083 
Operating lease liabilities long-term4,293 
Total operating lease liabilities$5,376 
Minimum lease payments for our right of usethe Company’s ROU assets over the remaining lease periods as of March 31, 2019,September 30, 2022, adjusted for discontinued operations, are as follows:

Year ended December 31,   
2019 $1,403 
2020  1,854 
2021  1,752 
2022  1,207 
2023  1,055 
Thereafter  4,298 
     
Total undiscounted lease payments $11,569 
     
Less: Interest  1,568 
     
Present value of lease liabilities  10,001 

Year ended September 30,(Unaudited and USD in thousands)
2022$314 
20231,280 
20241,127 
20251,058 
20261,001 
Thereafter1,141 
Total undiscounted lease payments$5,921 
Less: Interest545 
Present value of lease liabilities$5,376 
Premises rent expense from continued operations was $467$430 and $441$574 for the three months ended March 31, 2019September 30, 2022, and 2018,2021, respectively, and $1,469 and $1,780 for the nine months ended September 30, 2022, and 2021, respectively.

As

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Table of March 31, 2019,Contents
CYREN LTD.
UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
During the quarter ended September 30, 2022, the Company had an additional operatingsubleased one real estate property as lessor, however this lease that had not yet commencedterminated in July 2022. Sublease receipts were $10 and $167 for the amount of $3,675. This operating lease will commence inthree months ended September 30, 2022 and 2021, respectively, and $202 and $496 for the first quarter of 2020 with a lease term through 2029.

nine months ended September 30, 2022 and 2021, respectively.

The weighted averageweighted-average remaining lease terms and discount rates for all of operating leases were as follows as of March 31, 2019:

September 30, 2022:
Remaining lease term and discount rate:
Weighted averageWeighted-average remaining lease term (years)3.55.1
Weighted averageWeighted-average discount rate4.10 4.16%

NOTE 5 - 13 -

COMMITMENTS AND CONTINGENCIES

CYREN LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

($USD in thousands, except share and per share amounts)

(Unaudited)

NOTE 3:-COMMITMENTS AND CONTINGENCIES

a.Cyren Ltd.,The Company, which was incorporated in Israel, has partially financed its research and development expenditures under programs sponsored by the Israel Innovation Authority (“IIA”) for the support of certain research and development activities conducted in Israel.

In connection with specific research and development expenditures under programs sponsored by the Israel Innovation Authority (“IIA”) for the support of certain research and development activities conducted in Israel.

Since the Company's inception through 2018, the Company received $3,699$6.4 million of participation payments from the IIA in connection with specific research and development. Of this amount, $2.6 million was subject to repayment to the IIA through Marchroyalties related to product sales as of September 30, 2022, and December 31, 2019.2021. In return for the IIA’s participation in this program, the Company is committed to pay royalties at a rate of 3.5%3% of the program’s developed product sales, up to 100% of the amount of grants received plus interest at the annual LIBOR rate. The Company’s total commitment for royalties payableFor the three months ended September 30, 2022, and 2021, the Company recorded zero and $31 thousand, respectively, as cost of revenues with respect to future sales, based on IIA participations received, net of royalties paid or accrued, totaled $2,834due to the IIA. For the nine months ended September 30, 2022, and $2,734 as of March 31, 2019 and December 31, 2018 respectively.

b.Litigations:

i.

Between 2014 and 2015 the Company entered into arbitral proceedings with the former shareholders of eleven regarding an escrow account and the earn-out consideration related to the purchase agreement of former eleven. With respect to these claims, on March 9, 2017, the arbitrational panel provided their ruling in which it accepted the claims submitted by the former eleven shareholders with respect to the escrow amount and the 2013 earn-out liability. The arbitrational panel also ruled that Cyren pay legal expenses and interest on the claimed amounts, which were reflected in the year ending December 31, 2016 on the Company’s balance sheet and in the consolidated statements of operations under adjustment to earn-out consideration.

The escrow account has been released to the former shareholders. The arbitrational award related to the 2013 earn-out consideration was declared enforceable by the applicable courts in Germany. Accordingly, on May 30, 2018, the Company paid the portion of the earn-out consideration in the amount of $604 that was declared enforceable by the German district court. The Company did not pay the remainder of the earn-out consideration, including accrued legal and interest, which appear on the Company’s consolidated balance sheets as of December 31, 2018, and has filed an appeal to the German Federal Supreme Court challenging the enforceability of the remaining amounts.

In February 2019, the parties have signed a settlement agreement to resolve all pending claims, and on February 28, 2019 the Company paid $2,680 to settle the earn-out consideration in full. The total amount paid to resolve all claims was $256 less than the accrued liability, which generated “other income” as reflected in the consolidated statement of operations for the period ending March 31, 2019.

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CYREN LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

($USD in thousands, except share and per share amounts)

(Unaudited)

NOTE 3:-COMMITMENTS AND CONTINGENCIES (Cont.)

ii.On June 28, 2017 a vendor filed a Statement of Claim in the Tel Aviv District Court (the “SOC”). According to the vendor’s SOC, the Company entered into an agreement with the vendor for receipt of services, based on a database developed by the vendor. In September 2015, the Company terminated the agreement with the vendor, effective as of December 31, 2015. The vendor claims that the Company continues to make use of the vendor’s database post termination, thus breaching the agreement, infringing on the vendor’s rights and commercial secrets, and being unjustly enriched.

The vendor is claiming license fees of approximately $3,150 and an injunction relief ordering2021, the Company and/or its customersrecorded zero and $90 thousand, respectively, as cost of revenues with respect to delete any remaining data androyalties due to cease from utilizing such data.

the IIA.

The Company denies all claims and has filed a Statement of Defense on November 15, 2017. Pretrial was scheduled for May 15, 2018. In accordance with the court’s recommendation from November 28, 2017, the parties agreed to examine a non-binding mediation process and have appointed a mediator. The parties agreed to conduct a third party audit of the Company’s databasesis not currently involved in the scope of the mediation and the audit is currently being conducted. At this early stage, the Company is unable to make any estimations as to the outcome of this litigation.

In September 2018 and January 2019, the same vendor filed a lawsuit against two of the Company’s customers in the United States. The vendor alleges that the clients misappropriated the vendor’s trade secrets and is seeking injunctive relief and monetary damages in an amount to be determined. Both customers have contended that the allegations relate to the services they receive from the Company, and the Company has agreed to indemnify both clients against theselegal proceedings or claims. As such, the Company has taken over the representation in these lawsuits. At this early stage, the Company is unable to make any estimations as to the outcome of these litigations.

NOTE 4:-ShareHOLDERS’ EQUITY

a.General:

NOTE 6 - SHAREHOLDERS’ EQUITY
General
Ordinary shares confer upon their holders the right to receive notice to participate and vote in general shareholder meetings of the Company and to receive dividends, if declared.

b.Issuance of new convertible notes:

On February 7, 2022, the Company held a Special Meeting of Shareholders (the “Special Meeting”). At the Special Meeting, the Company’s shareholders approved (i) an amendment to the Company’s Amended and Restated Articles of Association (the “Articles of Association”) to effect a reverse share split of the Company’s ordinary shares (the “Reverse Share Split”) at a ratio of not less than one-for-four and not more than one-for-twenty, with such ratio and the implementation and timing of the Reverse Share Split to be determined by the Company’s board of directors in its sole discretion within thirty days of the Special Meeting and (ii) an increase in the authorized share capital by up to NIS 216.0 million to 240.0 million and an amendment to the Company’s Articles of Association accordingly.
Following the Special Meeting, on February 7, 2022, the board of directors of the Company approved a one-for-twenty Reverse Share Split and an increase in the Company’s authorized share capital by NIS 216.0 million, and the Articles of Association of the Company were amended accordingly. The Reverse Share Split became effective on February 9, 2022. Additionally, effective at the same time, the total number of ordinary shares the Company is authorized to issue after the effect of the Reverse Share Split is 80 million, the par value per ordinary share is NIS 3.00 and the authorized share capital of the Company is NIS 240.0 million.
Upon the effectiveness of the Reverse Share Split, every twenty ordinary shares were automatically combined and converted into one ordinary share. Appropriate adjustments were also made to all outstanding derivative securities of the Company, including all outstanding equity awards and warrants.
No fractional shares were issued in connection with the Reverse Share Split. Instead, all fractional shares (including shares underlying outstanding equity awards and warrants) were rounded up to the nearest whole ordinary share.
All the ordinary shares and per share data have been retroactively adjusted for the impact of the Reverse Share Split.
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CYREN LTD.
UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Issuance of Convertible Notes
On December 5, 2018, the Company issued $10,000$10.0 million aggregate principal amount of convertible notes in a private offering. The notes arewere unsecured, unsubordinated obligations of Cyren and carrycarried a 5.75% interest rate, payable semi-annually in (i) 50% cash and (ii) 50% cash or ordinary shares at Cyren’s election. The notes havehad a 3-year term and are expected to maturematured in December 2021, unless converted in accordance with their terms prior to maturity.2021. The notes havewere issued with a conversion price of $3.90 per share. The conversion price may beshare which was subject to adjustment using a weighted averageweighted-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. On February 16, 2021, Cyren announced securities purchase agreements with several institutional investors for the purchase and sale, in a registered direct offering, of 12.0 million of the Company’s ordinary shares at a purchase price of $1.15 per share for net proceeds of $12.6 million. As a result of this offering, the conversion price of the convertible notes was adjusted to $3.38. On September 17, 2021, the Company issued to several institutional investors in a private placement 14,152,779 ordinary shares at a purchase price of $0.72 per share and warrants to purchase up to 14,152,779 ordinary shares at an exercise price of $0.60 per share. As a result of this offering, the conversion price of the convertible notes was adjusted to $3.02 per share. In addition, the notes would bewere subject to immediate conversion upon any change in control in the Company.

- 15 -

Company (or subject to repayment if the price in the change in control transaction is less than the conversion price).

The principal balance of $10.0 million on the convertible notes was repaid upon maturity on December 5, 2021. No further obligations remain with respect to the convertible notes.

The Company incurred no interest expense for the three and nine months ended September 30, 2022. The Company incurred interest expense of $0.1 million and $0.4 million for the three and nine months ended September 30, 2021.
Issuance of Convertible Debentures
In March 2020, the Company entered into purchase agreements with a select group of accredited investors for the purchase of $10.3 million aggregate principal amount of Convertible Debentures in a private placement. Upon the closing, the Company received approximately $9.4 million (net of $0.8 million in issuance expenses).
The debentures are unsecured, subordinated obligations of Cyren and carry a 5.75% interest rate per annum, payable semi-annually in cash or ordinary shares at Cyren’s election. The debentures have a four-year term and mature in March 2024, unless converted in accordance with their terms prior to maturity. The debentures have a conversion price of $15.00 per share and are convertible into 67 ordinary shares per $1.0 million principal amount of debentures. The conversion price is subject to adjustment based on the price and timing of future equity offerings and other customary adjustments. Upon the satisfaction of price and other conditions, Cyren has the right to force the conversion of the debentures.
In March 2021, the Company paid semi-annual interest payments totaling $0.3 million through the issuance of 14,572 shares of common stock. In September 2021, the Company paid semi-annual interest payments totaling $0.3 million through the issuance of 16,726 shares. In March 2022, the Company paid semi-annual interest payments totaling $0.3 million through the issuance of 31,667 shares of common stock. In September 2022, the Company paid semi-annual interest payments totaling $0.3 million through the issuance of 190,272 shares of common stock.
For the quarter ended March 31, 2021, two debenture holders converted a combined $1 million of principal plus interest of their debentures, which was a portion of their holdings. The principal and interest were paid through the issuance of 60,074 shares. There were no conversions for the quarter ended September 30, 2022.
The Company incurred interest expense of $176 thousand and $520 thousand for the three and nine months ended September 30, 2022, of which $48 thousand and $139 thousand was related to the amortization of debt issuance costs, respectively. The Company incurred interest expense of $180 thousand and $523 thousand for the three and nine months ended September 30, 2021, of which $44 thousand and $134 thousand was related to the amortization of debt issuance costs, respectively.
The Company had no accrued interest as of September 30, 2022, and $137 thousand as of December 31, 2021, respectively.
The principal balance of the Convertible Debentures as of September 30, 2022, was $8.7 million.
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CYREN LTD.

UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

($USD in thousands, except share and per share amounts)

(Unaudited)

NOTE 4:-SHAREHOLDERS’ EQUITY (Cont.)

c.Equity Incentive Plan:

In 1996, the Company adopted the 1996 CSI Share Option Plan for granting options to its U.S. employees and consultants to purchase ordinary shares of the Company, which was replaced in 2006 by the 2006 U.S. Share Option Plan. Until 1999, the Company issued options to purchase ordinary shares to its Israeli employees pursuant to individual agreements. In 1999, the Company approved the 1999 Section 3(i) stock option plan for its Israeli employees and consultants, (which was amended in 2003 and renamed the “Amended


Amended and Restated Israeli Share Option Plan”). 2016 Equity Incentive Plan
On December 22, 2016, the Company’s shareholders approved a new stock option plan - the 2016 Equity Incentive Plan (the “Equity Incentive Plan”). This plan, along with its respective Israeli appendix, has replaced all existingthen-existing employee and consultantsconsultants’ stock option plans which have terminated.

plans.

The Equity Incentive Plan allows for the issuance of Restricted ShareStock Units (“RSUs”), as well as options. The options and RSUs generally vest over a period of four years. Options granted under the Equity Incentive Plan generally expire after six years from the date of grant. Options and RSUs cease vesting upon termination of the optionee’sgrantee’s employment or other relationship with the Company. The per share exercise price for options shall be no less than 100% of the fair market value per ordinary share on the date of grant. Any options and RSUs that are canceledcancelled or not exercised within the option term become available for future grant.

On July 30, 2019, the shareholders of the Company approved an increase in the number of ordinary shares reserved for issuance under the 2016 Equity Incentive Plan and its Israeli Appendix to a total of 560,000. On August 31, 2022, the shareholders of the Company approved an increase in the number of ordinary shares reserved for issuance under the 2016 Equity Incentive Plan and its Israeli Appendix to a total of 1,225,000.
As of March 31, 2019,September 30, 2022, an aggregate of 1,260,498440,309 ordinary shares of the Company are stillwere available for future grant under the Equity Incentive Plan.

d.Non-Employee Directors stock option plan:

Amended & Restated 2016 Non-Employee Director Equity Incentive Plan
In 1999, the Company adopted the 1999 Directors ShareStock Option Plan, and in 2008, the Company's shareholders approved an extension of the term of this plan through July 13, 2019. On December 15, 2006, the plan was extended through 2016. On December 22, 2016, the Company’s shareholders approved a new stock option plan - the 2016 Non-Employee Director Equity Incentive Plan (the “Non-Employee Director Plan”). This plan, along with its respective Israeli appendix, has replaced all existing Directorsdirectors' stock option plans which have terminated.

plans.

The Non-Employee Director Plan allows for the issuance of Restricted Share Units (“RSUs”),RSUs as well as options. Each option and RSU granted under the Non-Employee Director Plan generally vests over a period of four years. Each option has an exercise price equal to the fair market value of the ordinary shares on the grant date of such option. Options granted under the Non-Employee Director Plan generally expire after six years from the date of grant. Options and RSUs cease vesting upon termination of the grantee's relationship with the Company.

On July 30, 2019, the shareholders of the Company approved an increase in the number of ordinary shares reserved for issuance under the Non-Employee Director Plan and its Israeli Appendix to a total of 57,500 ordinary shares. On August 31, 2022, the shareholders of the Company approved an increase in the number of ordinary shares reserved for issuance under the Non-Employee Director Plan and its Israeli Appendix to a total of 182,500 ordinary shares.
As of March 31, 2019,September 30, 2022, an aggregate of 170,21455,367 ordinary shares of the Company are stillremained available for future grantgrants to non-employee directors.

- 16 -

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CYREN LTD.

UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

($USD


A summary of the Company’s employees and directors’ stock option activity under the plans is as follows:
(Unaudited and USD in thousands, except share prices)Number of
options		Weighted-
average
exercise
price		Weighted-
average
remaining
contractual term
(years)		Aggregate
intrinsic
value
Outstanding at December 31, 2021181,286$38.58 2.74$— 
Granted—— 0— 
Exercised—— 0— 
Expired and forfeited(35,388)33.61 0— 
Outstanding at September 30, 2022145,898$40.09 2.30$— 
Options vested at September 30, 2022143,934$40.24 2.29$— 
Exercisable options at September 30, 2022121,871$41.92 2.08$— 
The aggregate intrinsic value in thousands, except sharethe tables above represents the total intrinsic value (the difference between the fair value of the Company’s ordinary shares as of the last day of each period and per share amounts)

(Unaudited)

NOTE 4:-SHAREHOLDERS’ EQUITY (Cont.)

e.A summary of the Company’s employees and directors’ stock option activity under the plans is as follows:

  Number of options  Weighted average exercise price  Weighted average remaining contractual term (years)  Aggregate intrinsic value 
             
Outstanding at December 31, 2018  6,474,982  $2.28   3.39  $4,475 
                 
Granted  217,500   2.52         
Exercised  (105,899)  1.78         
Expired and forfeited  (169,006)  2.69         
                 
Outstanding at March 31, 2019  6,417,577  $2.29   3.24  $1,071 
                 
Options vested and expected to vest at March 31, 2019  6,283,474  $2.33   3.19  $1,071 
                 
Exercisable options at March 31, 2019  5,015,181  $2.26   2.68  $1,071 
                 
Weighted average fair value of options granted during the quarter     $1.03         

the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on the last day of each period.

No options were exercised during the quarters ended September 30, 2022, and 2021, respectively, and the intrinsic value was zero as of September 30, 2022, and 2021, respectively.
For the quarter ended September 30, 2022, the Company did not grant options. The weighted-average grant date fair value of options granted to employees and directors during the quarter ended September 30, 2021, was $0.39.
As of March 31, 2019,September 30, 2022, the Company had $1,715$0.3 million of unrecognized compensation expense related to non-vested stock options granted to employees and directors, expected to be recognized over a remaining weighted averageweighted-average period of 3.131.11 years.

f.The employee and director options outstanding as of March 31, 2019, have been separated into ranges of exercise prices, as follows:

Outstanding Exercisable 
Exercise    Weighted average remaining contractual  Weighted average exercise     Weighted average exercise 
price per Options  life in  price per  Options  price per 
share outstanding  years  share  exercisable  share 
                
$1.44 - $1.93  1,410,802   3.09  $1.56   1,410,802  $1.56 
$2.00 - $2.13  1,503,869   3.76  $2.03   1,503,869  $2.03 
$2.29 - $2.79  1,656,906   3.73  $2.48   762,510  $2.58 
$3.00 - $3.14  1,523,000   2.74  $2.99   1,027,000  $3.02 
$3.16 - $3.32  323,000   1.29  $3.32   311,000  $3.32 
                     
   6,417,577   3.24  $2.34   5,015,181  $2.26 

- 17 -

The employee and directors’ options outstanding as of September 30, 2022, is separated into ranges of exercise prices as presented below:

OutstandingExercisable
Exercise price per shareOptions
outstanding		Weighted-
average
remaining
contractual
life in
years		Weighted-
average
exercise
price per
share		Options
exercisable		Weighted-
average
exercise
price per
share
$6.40 - $32.8030,8413.50$26.23 19,034$29.58 
$34.00 - $40.0024,0011.20$38.54 21,294$39.07 
$41.80 - $42.0054,3002.59$41.80 45,300$41.80 
$46.00 - $64.0036,7561.60$50.23 36,243$50.22 
Total employee and director options outstanding145,8982.30$40.09 121,871$41.92 
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CYREN LTD.

UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

($USD in thousands, except share


Options to non-employees and per share amounts)

(Unaudited)

NOTE 4:-SHAREHOLDERS’ EQUITY (Cont.)

gOptions to non-employees:

Issuance date Options outstanding  Exercise price per share  Options exercisable  Exercisable through
            
August 1, 2013  150,000  $3.08   150,000  Aug-19
May 14, 2014  3,000  $3.32   3,000  May-20
February 18, 2015  3,000  $3.00   3,000  Feb-21
February 10, 2016  40,000  $1.44   40,000  Feb-22
January 24, 2017  25,000  $2.00   25,000  Jan-23
               
   221,000       221,000   

non-directors are disclosed as follows:

Issuance dateOptions outstandingExercise price per shareOptions exercisableExercisable through
January 24, 20171,250$40.00 1,250Jan-23
The options vest and become exercisable at a rate of 1/16 of the options every three months.

h.A summary of the Company’s RSUs activity for employees, directors and non-employees under the plans is as follows:

Number of RSUs
Awarded and unvested at December 31, 2018479,000
Granted566,927
Vested(97,250)
Forfeited(15,000)
Awarded and unvested at March 31, 2019933,677

As of March 31, 2019,September 30, 2022, the Company did not have any unrecognized compensation expense related to non-employee non-vested stock options.
A summary of the Company’s RSUs activity for employees, directors and non-employees under the plans is as follows:
Number of
RSUs		Weighted-
Average
Grant
Date Fair
Value
Awarded and unvested at December 31, 2021344,307$18.20 
Granted713,0501.74 
Vested(100,634)20.57 
Forfeited(78,246)17.18 
Awarded and unvested at September 30, 2022878,477$4.66 
As of September 30, 2022, the Company had approximately $2,284$3.4 million of unrecognized compensation expense related to RSUs, expected to be recognized over a weighted averageweighted-average period of 3.552.14 years.

- 18 -

The total share-based compensation expense related to all of the Company’s equity-based awards, recognized for the three and nine-month periods ended September 30, 2022, and 2021 was as follows:

Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited and USD in thousands)2022202120222021
Cost of revenues$43 $76 $152 $166 
Research and development45 46 148 125 
Sales and marketing97 100 283 225 
General and administrative346 512 1,053 1,189 
Total share-based compensation expense from continuing operations$531 $734 $1,636 $1,705 
Share-based compensation expense included in discontinued operations(2)18 11 52 
Total share-based compensation expense$529 $752 $1,647 $1,757 
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CYREN LTD.

UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

($USD in thousands, except share and per share amounts)

(Unaudited)

NOTE 4:-SHAREHOLDERS’ EQUITY (Cont.)

i.The total stock-based compensation expense related to all of the Company’s equity-based awards, recognized for the three month periods ended March 31, 2019 and 2018 was as follows:

  

Three months ended

March 31,

 
  2019  2018 
  Unaudited 
       
Cost of revenues $29  $31 
Research and development  67   91 
Sales and marketing  49   101 
General and administrative  124   100 
         
  $269  $323 

NOTE 5:-SEGMENT AND GEOGRAPHIC INFORMATION

Summary information about geographic areas:


NOTE 7 - BASIC AND DILUTED NET LOSS PER SHARE

Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited and USD in thousands, except share amounts)2022202120222021
Numerator - continuing operations
(Loss) from continuing operations$(5,523)$(6,118)$(18,088)$(16,415)
Numerator - discontinued operations
Net income (loss) from discontinued operations$(575)$331 $(6,929)$843 
Denominator
Denominator for basic net loss per share weighted-average number of shares outstanding7,822,4243,899,5026,858,9373,700,789
Effect of diluting securities*— 772,330 — 757,157 
Denominator for diluted net loss per share - adjusted weighted average shares and assumed exercises7,822,4244,671,8326,858,9374,457,946
* For the discontinued operations, the total number of ordinary shares related to share-based compensation plans, aggregated to 613,377 and 683,156, for the three and nine months ended September 30, 2022, respectively, was excluded from the calculations of diluted loss per ordinary share since it would have an anti-dilutive effect.
NOTE 8 - SEGMENT AND GEOGRAPHIC INFORMATION
ASC 280, “SegmentSegment Reporting”, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision makerdecision-maker in deciding how to allocate resources and in assessing performance. The Company manages its business on the basis of one reportable segment and derives revenues from licensing of software and sales of professionalsupport services, maintenance and technical support (see noteNote 1 - Organization for a brief description of the Company’s business).
The following is a summarypresents total revenue by solutions offered by geographic area based on the billing address of revenues within geographic areas:

a.The following sets forth total revenue by solutions offered by geographic area based on billing address of the customer:

  Three Months Ended 
March 31,		 
  2019  2018 
       
United States $4,566  $2,750 
Europe  3,132   3,217 
Asia Pacific  610   775 
Israel  1,264   605 
Other  83   289 
         
  $9,655  $7,636 

- 19 -

the customer from continuing operations:

Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited and USD in thousands)2022202120222021
United States$3,375 $3,103 $9,739 $10,104 
Germany447 381 1,294 1,198 
Europe-Other768 756 2,509 2,412 
Asia Pacific581 401 1,432 1,480 
Israel544 849 1,967 2,610 
Other119 126 361 362 
Total revenue$5,834 $5,616 $17,302 $18,166 

CYREN LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

($USD in thousands, except share

Major Customers
During each of the quarters ended September 30, 2022, and per share amounts)

(Unaudited)

NOTE 5:-GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER AND PRODUCT DATA (Cont.)

b.Major customers:

During the quarter ended March 31, 2019, 20%2021, 23% and 22% of the Company’s revenues were derived from its largest customer, A. During the quarter ended March 31, 2018,and no other customer accounted for more than 10% of total revenue.

Revenue Recognized from Beginning Deferred Revenue
During the quarters ended September 30, 2022, and 2021, $3.1 million and $3.4 million of revenue was recognized from deferred revenue as of the beginning of the period, respectively.
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CYREN LTD.
UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

During the nine months endedSeptember 30, 2022, and 2021, $6.2 million and $8.9 million of revenue was recognized from deferred revenue as of the beginning of the period, respectively.
Remaining Performance Obligations
As of September 30, 2022, approximately $9.2 million of revenue is expected to be recognized from remaining performance obligations that are unsatisfied (or partially unsatisfied) for non-cancellable contracts. The Company expects to recognize revenue on approximately 26% of these remaining performance obligations during the remainder of 2022, approximately 51% in 2023, with the remainder recognized thereafter.
Revenue Generated by Customer Type
The following presents the Company's revenue by customer type from continuing operations:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited and USD in thousands)2022202120222021
OEM/Embedded Security1
$5,515 $5,423 $16,389 $17,625 
Enterprise/SMB2
287 193 881 541 
Other32 — 32 — 
Total Revenue$5,834 $5,616 $17,302 $18,166 
1 This market represents customers who embed Cyren Threat Detection Services and Threat Intelligence Service feeds into their infrastructure and/or products to protect their customers and users.
2 In this market, Cyren provides enterprise as well as small and midsize business customers email security products and threat intelligence to help protect their employees, data and IP.
c.The following sets forth the Company’s property and equipment by geographic area:

  March 31,  December 31 
  2019  2018 
  Unaudited    
       
Israel $1,332  $1,217 
United States  1,690   1,623 
Germany  1,364   1,453 
Other  306   315 
         
  $4,692  $4,608 

NOTE 6:-RELATED PARTIES

a.Balances with related parties:

  March 31,  December 31, 
  2019  2018 
  Unaudited    
       
Prepaid expenses (*) $-  $6 

(*)Related to a software license agreement with a related party. See note 6b. for further details.

b.Transactions with related parties:

  

Three months ended

March 31,

 
  2019  2018 
  Unaudited 
       
Software licensing expenses (**) $6  $6 

(**) Expenses arising from a software licensing agreement which was executed in March 2017. At the time of execution, the vendor was not a related party. On December 24, 2017, upon completion of the tender offer by WP, the vendor became a related party. The expenses were recorded under research and development expenses net, on the consolidated statements of operations.  The agreement ended March 31, 2019 and has not been renewed.

- - - - - - - - - - - - -

- 20 -
The following sets forth the Company’s long-lived tangible assets, net by geographic area from continuing operations:
(Unaudited and USD in thousands)September 30,
2022		December 31,
2021
Israel$4,921 $5,612 
United States541 1,017 
Germany219 669 
Other710 889 
Total long-lived tangible assets$6,391 $8,187 
NOTE 9 - FINANCIAL EXPENSES, NET
The following sets forth the Company’s financial income (expense), net by expense type from continuing operations:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited and USD in thousands)2022202120222021
Interest and accretion of discount$(213)$(331)$(640)$(960)
Foreign currency exchange differences, net219 47 800 254 
Other(13)2 (56)1 
Total financial expenses, net$(7)$(282)$104 $(705)
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CYREN LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - RELATED PARTIES
The following sets forth balances with related parties:
(Unaudited and USD in thousands)September 30,
2022		December 31,
2021
Interest expense accrual – Convertible Debentures1
$— $4 
Long-term Convertible Debentures2
242 238 
1 Related to the semi-annual interest payable due in March and September related to the Convertible Debentures entered into March 19, 2020. See Note 6 - Shareholders' Equity for further details.
2 Related to the Convertible Debentures entered into March 19, 2020. See Note 6 - Shareholders' Equity for further details.
The following sets forth transactions with related parties:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited and USD in thousands)2022202120222021
Revenue1
$25 $— $75 $— 
Interest expense on Convertible Notes2
$— $143 $— $285 
Interest expense on Convertible Debentures3
$5 $5 $15 $10 
1 Related to a new OEM customer agreement signed in Q3 2021 where the Company and this customer share an investor that qualifies as a related party for each.
2 Related to the semi-annual interest payable due in June and December related to the Convertible Note entered into December 5, 2018. The principal was repaid in December 2021. See Note 6 - Shareholders' Equity for further details.
3 Related to the semi-annual interest payable due in March and September related to the Convertible Debentures entered into March 19, 2020. See Note 6 - Shareholders' Equity for further details.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussionManagement’s Discussion and analysisAnalysis of ourFinancial Condition and Results of Operations and other parts of this Quarterly Report on Form 10-Q (“Quarterly Report”) describe the principal factors affecting the financial conditionresults, liquidity, capital resources and resultscritical accounting estimates of operationsCyren LTD (“Cyren,” “we,” “our,” “us,” or the "Company"), and 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 “2018“2021 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,

OVERVIEW
Cyren iswas an early pioneer and leading innovator of SaaScloud-delivered Software-as-a-Service (SaaS) cyber security solutions that protect businesses, and their employees and customers against threats from threats onemail, files, and the web, in email and on mobile devices. Our mission is to protect people and organizations from cyber threats when they use the internet.

Cyren’s cloud-firstInternet.

We believe our cloud-based approach to security sets us apart from other vendors in the market. Cyren is an internet security company that is delivering security results that are disrupting legacy vendors and appliance-based solutions. Our security solutions are architectedengineered around the fundamental belief that internetcyber 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 onemerge. As more and more businesses move their data and applications to the internet.

Cyren’scloud, they need a security cloud delivers faster detectionprovider that is able to keep pace.

Security threats are more prevalent and protection,stealthier than ever. As cybercrime has become more sophisticated, every malware, phishing, and ransomware variant is unique, making it more difficult to detect attacks. While organizations have traditionally protected their users with SaaSgateway security solutionsappliances at the network perimeter, more frequent and evasive attacks combined with a more distributed workforce are reducing the effectiveness of this approach. Traditional appliances lack the real-time threat intelligence and processing power to detect emerging threats, and the growth of mobile devices and an increasingly distributed workforce means that inspect webmore and email traffic before it reachesmore business is conducted outside of the traditional network perimeter. As a user’s browserresult, when new attacks appear in a matter of seconds, legacy cybersecurity products can leave companies vulnerable for hours, days 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.

even weeks.

Cyren’s cloud security products and services fall into three categories:
•Cyren Threat Detection Services – these services detect a variety of threats in email, files, and from the Internet, and are embedded into products from the world’s leading email providers, cyber security vendors and managed service providers. Cyren Threat Detection Services include our Email Security Detection Engine, Malware Detection Engine, Web Security Engine, and Threat Analysis Service.
•Cyren Threat Intelligence Data – these products provide valuable threat intelligence data that can be used by enterprise or original equipment manufacturer (OEM) customers to support threat detection, threat hunting, and incident response. Cyren’s Threat Intelligence offerings include IP Reputation Intelligence, Phishing Intelligence, Malware Intelligence, and Zombie Intelligence.
•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 Microsoft 365.
Cyren GmbH
On June 1, 2022, we entered into two markets:

·Cyren Cloud Security (CCS) – this SaaS security platform is designed for enterprise customers, and is sold either directly or through channel partners. Cyren Cloud Security (CCS) services currently include Email Security (CES), Web Security (CWS), DNS Security, and Cloud Sandboxing. Each of these service offerings may be purchased separately, or as part of a bundled suite. All products are sold on a per-user SaaS subscription model, providing customers with a quick-to-deploy, easy-to-manage solution and a low total cost of ownership. We market and sell our solutions worldwide both directly through our sales teams and indirectly through our Partner Program where our sales organization actively assists our network of distributors and resellers.

·Cyren Threat Intelligence Services (TIS) –this platform offers cloud-based cyber threat detection APIs, and SDKs to many of the world’s leading technology and security vendors. Cyren Threat Intelligence Services include Email Security, Web Security, Endpoint Security, and Advanced Threat Protection. These solutions are sold directly to Original Equipment Manufacturers (“OEMs”), embedded security vendors, and service providers that integrate Cyren Threat Intelligence Services and cloud detection services into their infrastructure or security products to protect their customers and users.

a definitive Sale and Purchase Agreement (the “SPA”) with Content Services Group GmbH to sell all the equity interests in our legacy secure email gateway business and wholly owned subsidiary, Cyren GmbH (the "Cyren GmbH Transaction").

On August 1, 2022, the Company completed the Cyren GmbH Transaction and received the initial €9.4 million payment (equivalent to $9.6 million as of the closing date). Under the terms of the SPA, a holdback in the amount of €0.7 million (the "Holdback Amount") is currently held in an escrow to satisfy certain claims. The Holdback Amount, less deductions for claims against the Company, if any, will be released to the Company no later than twelve months after the closing date.
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Subsequent to the closing date, the Company paid approximately $1.4 million in expenses associated with the Cyren GmbH Transaction. Furthermore, the Company estimates that the final purchase price will be reduced by $0.4 million based on working capital and other adjustments and has accrued a current liability as of September 30, 2022. Beyond that, the Company is using the proceeds from the sale for working capital and general corporate purposes.
Key Opportunities and Challenges

Threat Landscape

Over the

The last several years have possibly experienced the greatest magnitudeamount of significantdramatic global incidents directly related to malware and cyber threats have occurred since the advent of the internet.Internet. From election hacks to global ransomware attacks, and cyber breaches, malware threats are at an all-time high. Today,Phishing attacks have become increasingly common, and no itemcompany, large or user connected to the internet issmall seems immune to attack. While many businesses are still exploring effective security measures, cybercriminals are “all in”, creating dangerous new toolsthese threats. Hackers have become more successful at monetizing these attacks, and as long as these activities prove lucrative, we expect these incidents to target companies, governments, and private citizens. We need to be mindful that the world has changed; hyper-evasive malware and threat distribution via HTTPS are growing rapidly, mobile devices are increasingly targets, and Internet of Things (IoT) devices, from refrigerators to televisions, are an inviting new vector for criminal attacks. 

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continue.

Cloud and Mobility

Businesses are going throughexperiencing a massivesignificant 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:

·Business internet traffic continues to increase every year;
·
•Business Internet traffic continues to increase every year;
•Data and applications are increasingly moving to the cloud;
·More and more users are working remotely;
·Buyers continue to move away from traditional on-premise solutions;
·Mature and legacy on premise deployments are reaching end of life and are increasingly being replaced by cloud and SaaS alternatives;
·IT security staffing shortages;
·Increasingly fast, sophisticated, expensive and high-profile attacks target organizations of all sizes;
·Compliance and regulatory mandates;
·Heightened cybercrime activity among commercial enterprises and nation states;
·Automation is increasingly considered critical to accelerating detection and protection; and
·The need to simplify operations through vendor consolidation.

These are someincreasingly moving to the cloud;

•More and more users are working remotely, particularly since the COVID-19 pandemic;
•Businesses continue to move away from traditional on-premise solutions;
•Mature and legacy on-premise deployments are reaching end of the reasons why we believelife and are increasingly being replaced by cloud and SaaS alternatives;
•IT security teams have experienced staffing shortages;
•Increasingly fast, sophisticated, expensive and high-profile attacks target organizations of all sizes;
•Compliance and regulatory mandates have increased;
•Cybercrime activity among commercial enterprises and nation states has heightened;
•Automation is increasingly considered critical to accelerating detection and protection; and
•Businesses need to simplify operations through vendor consolidation.
Given these trends, 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 (“R&D”) expenses, and sales and marketing expenses are all significant contributing factors to our operating losses. Nonetheless, we expect to increase our investments in all three areas in order to grow our revenues. Over time, we expect that ourwe will increase utilization of our cloud infrastructure which we expect will increase and provide the opportunity for improved gross margins. OurWe believe that our investments in R&Dresearch and development are required in order to enhance and improve our solutions. In the future, we expect to lower the rate of R&Dresearch and development investment as a percentage of revenue, and we will be able to drive more revenue from existing solutions rather than by adding new solutions.revenue. 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. Finally, weWe otherwise continue to increase ourmonitor and, where possible, reduce expenses. We believe managing future headcount to support the growth of the business, but we expect that reducing the historical rate of headcountand expense growth will be key in improving our gross and operating margins over time.

time given longer-term declining revenue trends.

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Growing Our Enterprise SaaS Business

Although all

Cyren has prioritized growing its enterprise revenues. With the mid-2020 release of our services are subscription services,anti-phishing solution, Cyren Inbox Security, we believe helping enterprises mitigate phishing attacks is our Enterprise Security-as-a-Service offerings onmost significant revenue growth opportunity. Given the CCS platform are typically invoiced up front for an annual contract amount, or the full multi-year contract amount, at the startsubstantial size of the term. As a result,enterprise anti-phishing market, Cyren believes this business is expectednew revenue stream has the potential to provide a larger immediate contribution to cash flow and better return on investment.grow faster than our legacy OEM business. As this enterpriseCyren Inbox Security business grows, asit has the potential to eventually contribute to a larger portion of our overall revenues,revenue, and longer term, we expect deferred revenue 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.

improve.

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, antimalwarethreat detection services and advanced threat protectionintelligence data product offerings.

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We sell all of our solutions as subscription services, either throughto OEMs and service providers which are considered Cyren customers, or as complete security services directly or indirectly via our partners, to enterprises.

Cost of Revenues

Revenue

Personnel costs, which consist of salaries, benefits, bonuses and stock-basedshare-based compensation for employees thatwho 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 partythird-party contractors, royalties for use of third partythird-party technologies, amortization of intangibles and depreciation of data center equipment. We expect these costs to continue to increase in absolute dollars as we continue to invest in enhancing our cloud infrastructure and our support services.

Operating Expenses

Our operating expenses consist of R&D,research and development, sales and marketing, and general and administrative expenses. Personnel costs, which consist of salaries, benefits, bonuses and stock-basedshare-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. R&D expense consists
Research and development expenses consist primarily of personnel costs and 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 R&D expenses to continue increasing in absolute dollars as we continue to invest in our service offerings. 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 expect our salesSales and marketing expenses to continue to increasehave increased in absolute dollars2022 as we continue to enhancehave enhanced our sales and marketing teamsefforts to support our further growth. Ourgrowth and invested in strategies related to new products launched in 2020. Newly hired 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 continue to grow in absolute dollars as we continue our operational growth.

business pursuits.

Other Income (Expense), net

Other income (expense), net generally consists primarily of capital gain or loss from the sale of assets.

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Financial Expenses, net

Financial expenses, net consist mainlyprimarily consists of foreign exchange gains and losses, interest expense on our outstanding debt, and interest income earned on our cash and cash equivalents.

In 2021 and 2022, 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 Accounting Standards Codification ("ASC") 606, Revenue Recognition.

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.

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RESULTS OF OPERATIONS

The following table sets forth our financial dataresults for the three and nine months ended March 31, 2019September 30, 2022, and 2018:

  

 

Three months ended

March 31,

 
  2019  2018 
  Amount  % of Revenue  Amount  % of Revenue 
Revenues $9,655   100% $7,636   100%
Cost of revenues  4,000   41   3,382   44 
Gross profit  5,655   59   4,254   56 
Operating expenses:                
Research and development, net  4,177   43   3,355   44 
Sales and marketing  3,856   40   4,145   54 
General and administrative  2,432   25   2,038   27 
Total operating expenses  10,465   108   9,538   125 
Operating loss  (4,810)  (50)  (5,284)  (69)
Other income (loss), net  248   3   (2)  - 
Financial expenses, net  (53)  (1)  4   - 
Loss before taxes on income  (4,615)  (48)  (5,282)  (69)
Tax benefit  39   -   46   1 
Net loss $(4,576)  (47)% $(5,236)  (69)%

Three Months Ended March 31, 2019 Compared2021:

Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
(Unaudited and USD in thousands)Amount
% of
 Revenue*
Amount
% of
 Revenue*
Amount
% of
 Revenue*
Amount
% of
 Revenue*
Revenues$5,834 100 %$5,616 100 %$17,302 100 %$18,166 100 %
Cost of revenues3,015 52 3,311 59 9,677 56 9,941 55 
Gross profit2,819 48 2,305 41 7,625 44 8,225 45 
Operating expenses:
Research and development, net3,449 59 3,516 63 11,174 65 10,606 58 
Sales and marketing2,705 46 2,447 44 7,677 44 7,097 39 
General and administrative2,178 37 2,162 38 6,972 40 6,262 34 
Total operating expenses8,332 143 8,125 145 25,823 149 23,965 132 
Operating loss(5,513)(94)(5,820)(104)(18,198)(105)(15,740)(87)
Other income (loss), net(4)— 4 — (6)— (13)— 
Financial income (expenses), net(7)— (282)(5)104 1 (705)(4)
Loss before taxes on income(5,524)(95)(6,098)(109)(18,100)(105)(16,458)(91)
Tax benefit (expenses)1 — (20)— 12 — 43 — 
Net loss from continuing operations$(5,523)(95)%$(6,118)(109)%$(18,088)(105)%$(16,415)(90)%
Income (loss) from operations of discontinued operations, including loss on classification as held for sale(575)(10)%331 6 %(6,929)(40)%843 5 %
Net loss$(6,098)(105)%$(5,787)(103)%$(25,017)(145)%$(15,572)(86)%
* Percentages may not sum to 100% due to rounding.
As of September 30, 2022, we employed a total of 157 employees compared to Three Months Ended March 31, 2018

203 employees as of September 30, 2021. Effective August 1, 2022, 37 employees transitioned with Cyren GmbH as part of the Cyren GmbH Transaction.

Revenues. Revenues increased by $2.0 million from $7.7 million for
For the three months ended March 31, 2018September 30, 2022, revenues increased $0.2 million, or 3.9%, compared to $9.7the same period in 2021. Revenue from our OEM business increased 1.7% resulting from growth of our Threat Intelligence Service solution. Revenue from our Enterprise business increased 48.7%, as our Cyren Inbox Security solution continued to generate year-over-year sales growth.
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For the nine months endedSeptember 30, 2022, revenues declined $0.9 million, or 4.8% compared to the same period in 2021. The decrease was mainly driven by a contract reduction from our largest customer (as first disclosed in our Form 10-Q for the three monthsquarter ended March 31, 2019,September 30, 2020), which represents a 26% year-over-year increase. The increase was primarily driven by contract expansions with two large Threat Intelligence customers which were signed duringeffective in the second quarter of 2018, as well as2021. The revenue impact of this contract reduction was $0.7 million. Additionally, revenue was adversely impacted by customer contract expirations or renewals at lower values coupled with the end of life of several legacy products that began during 2020. These declines were partially offset by new customers added in 2021 and upsell contracts 2022 in our Threat InDepth and Cyren Inbox Security products.
We released Cyren Inbox Security and Threat InDepth in the enterprise businesssecond quarter of 2020. Since these product launches, we have signed numerous new customer contracts representing over $3.8 million in estimated revenue over the lives of the contracts, but due to the timing, duration and ratable nature of the contracts, we did not recognize a material amount of related revenue for the nine months endedSeptember 30, 2022.
Cost of Revenues
For each of the three and nine months endedSeptember 30, 2022, cost of revenues declined $0.3 million, compared to the same periods in 2021. These declines were driven by favorable foreign exchange effects. Furthermore, certain hardware and software assets that support our products became fully depreciated during the second half of 2018.periods. These increasesdeclines were partially offset by a small numberan increase in costs associated with maintaining our data center operations.
As of customer terminations in the Threat Intelligence and enterprise businesses, but overall contract renewal rates were consistent with prior periods.

Cost of Revenues. CostSeptember 30, 2022, we employed 23 employees within cost of revenues increased by $0.6 million from $3.4 million forcompared to 32 employees as of September 30, 2021. Effective August 1, 2022, nine employees transitioned with Cyren GmbH as part of the three months ended March 31, 2018 to $4.0 million for the three months ended March 31, 2019, which represents an 18% year-over-year increase. Cyren GmbH Transaction.

Operating Expenses
For the three months ended March 31, 2019 cost of revenues represented 41% of revenue,September 30, 2022, operating expenses increased $0.2 million, or 2.5%, compared to 44% during the prior year,same period in 2021, driven by an increase in marketing expenses of 0.3 million, or 10.5%, partially offset by a decline in research and accordingly gross margins fordevelopment, net of $0.1 million, or 1.9%, while general and administrative expenses remained relatively flat. For the nine months endedSeptember 30, 2022, operating expenses increased $1.9 million, or 7.8%, compared to the same period were 59% forin 2021, the result of increases in general and administrative expenses of $0.7 million, or 11.3%, marketing expenses of $0.6 million, or 8.2%, and research and development of $0.6 million, or 5.4%.
Research and Development, Net
For the three months ended March 31, 2019September 30, 2022, research and development declined $0.1 million, or 1.9%, compared to 56% for the same period in the prior year. The increase in cost of revenues is2021. This decline was largely the result of continued investment in our global networklower compensation expenses. For the nine months endedSeptember 30, 2022, research and data centers, as well as additional payroll expense in our Support and Operations groupsdevelopment increased $0.6 million, or 5.4%, compared to the prior year. Duringsame period in 2021. This increase was driven primarily by the period, there was a slight decreasereduction in amortizationcapitalization of capitalizedtechnology development, expenses forwhich has the effect of increasing expenses.
As of September 30, 2022, we employed 78 employees within research and development compared to 111 employees as of September 30, 2021. Effective August 1, 2022, 23 employees transitioned with Cyren GmbH as part of the Cyren GmbH Transaction.
Sales and Marketing
For the three months ended March 31, 2019 to $0.8 million from $0.9 million during the prior year.

Operating Expenses. Overall operatingSeptember 30, 2022, sales and marketing expenses increased $0.3 million, or 10.5%, compared to the same period in 2021. For the nine months endedSeptember 30, 2022, sales and marketing expenses increased $0.6 million, or 8.2%, compared to the same period in 2021. These increases were driven by $1.0 million from $9.5 million forour usage of global demand generation programs and consultants in an effort to increase sales and marketing efforts to support the growth of the Cyren Inbox Security product.

As of September 30, 2022, we employed 37 employees within sales and marketing compared to 33 employees as of September 30, 2021. None of our sales and marketing personnel transitioned with Cyren GmbH as part of the Cyren GmbH Transaction.
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General and Administrative
For the three months ended March 31, 2018 to $10.5 million for the three months ended March 31, 2019, which represents an increase of 10% year-over-year. OperatingSeptember 30, 2022, general and administrative expenses for the quarter totaled 108% of quarterly revenue,increased 0.7% compared to 125% of quarterly revenue a year ago. Thethe same period in 2021. For the nine months endedSeptember 30, 2022, general and administrative expenses increased $0.7 million, or 11.3%, compared to the same period in 2021. This increase in operating expenses wasis primarily due to an increase in employee headcount, capturedexpenses for outside service, consultants and legal expenses, including costs associated with the Special Meeting of the Company's shareholders held in costFebruary 2022, which accounted for a $0.4 million increase year over year.
As of revenuesSeptember 30, 2022, we employed 19 employees in general and operating expenses, which totaled 272 employees at the end of March 31, 2019,administrative functions compared to 24727 employees atas of September 30, 2021. Effective August 1, 2022, five employees transitioned with Cyren GmbH as part of the end of March 31, 2018.

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Cyren GmbH Transaction .

Research and Development, Net. R&D expense increased by $0.8 million from $3.4 million for

Other Income (Expense), Net
For the three months ended March 31, 2018 to $4.2 million for the three months ended March 31, 2019, which represents an increase of 25%. R&D expense for the quarter represented 43% of revenue, compared to 44% a year ago. The increase in R&D expense is primarily driven by increased employee headcount, higher payroll and an increase in outsourced developmentSeptember 30, 2022, other income, net decreased $8 thousand compared to the same period in 2018. Approximately $0.2 million of2021. For the increase wasnine months endedSeptember 30, 2022, other income, net decreased $7 thousand, compared to the result of capitalization of technology development, which reduces overall R&D expenses. Capitalization of technology development decreased from $0.9 million for thesame period ended March 31, 2018 to $0.7 million forin 2021.
Financial Income (Expenses), Net
For the three months ended March 31, 2019.

Sales and Marketing. Sales and marketing expenses decreased bySeptember 30, 2022, financial income (expenses), net, increased $0.3 million (rounded) from $4.1 million for the three months ended March 31, 2018, to $3.9 million for the three months ended March 31, 2019, which represents a decrease of 7%. Sales and marketing expense represented 40% of revenue during the three month period ending March 31, 2019 compared to 54% of revenue for the same period ending March 31, 2018. The decrease in sales and marketing expense was primarily due2021. For the nine months endedSeptember 30, 2022, financial income (expenses), net, increased $0.8 million compared to a reduction of overall sales and marketing headcount from 65 employees to 59 employees at the end ofsame period in 2021. These increases were driven by changes in foreign exchange rates, as the first quarter 2019, as well assignificant decline in the Euro (EUR) against the U.S. dollar (USD) during 2022 caused a reduction in overall marketing spend related to advertising and industry trade shows.

General and Administrative. General and administrative (“G&A”) expense increased by $0.4 million from $2.0 million for the three months ended March 31, 2018 to $2.4 million for the three months ended March 31, 2019, which represents an increasecertain of 19%. G&A expense represented 25% of revenue for the first quarter of 2019, compared to 27% of revenue during the first quarter of 2018. The increase in G&A expense is mainly due to an increase in recruiting costs, legal costs, and board-related expenses compared to the first quarter of 2018.

Other our EUR-denominated liabilities.

Income (Expense), Net. Other income, net for the three months ended March 31, 2019 was $0.2 million, compared to an expense of $0.0 million for the three months ended March 31, 2018. During the first quarter, 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 3 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 $57 thousand for the three months ended March 31, 2019, to $53 thousand from an income of $4 thousand as compared to the prior year, due mainly to an increase in interest expenses associated with the convertible notes issued in December 2018. For additional information, please refer to Note 4 of the consolidated financial statements included elsewhere in this Quarterly Report. In addition, during the three months ended March 31, 2019 we also recorded a decrease of $53 thousand in the expenses resulting from the effect of foreign currency exchange rate fluctuation.

Taxes

Effective Corporate Tax Rates

Corporate

For the three and nine months ended September 30, 2022, corporate tax rates and real capital gains tax in Israel were 23% for the three months ended March 31, 2019 and 2018.

Our German subsidiary is.

Cyren GmbH was 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, 2019, there areSeptember 30, 2022, we carried no undistributed earnings of foreign subsidiaries.

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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

Carryforwards

As of December 31, 2018, Cyren’s net2021, Cyren Ltd.’s operating loss carryforwards for tax purposes amounted to $80.1 million and capital$114.2 million. Capital loss carryforwards ofamounted to $17.8 million which may be carried forward and offset against taxable income in the future, for an indefinite period.

As of December 31, 2018, the2021, Cyren Inc., our U.S. subsidiary, had net operating loss carryforwards of $40.3$42.8 million for federal tax purposes and $8.8$12.9 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 20192022 through 2038.

On December 24, 2017, a “change in the respective ownership” event occurred upon the completion of a tender offer of our ordinary shares by an entity controlled by funds affiliated with Warburg Pincus LLC (“Warburg Pincus”), and in accordance with the relevant provisions of the Internal Revenue Code 382 of 1986 and similar state provisions. Therefore, our utilization of U.S. net operating losses are subject to substantial annual limitations. Management believes that the annual limitations will result in the partial expiration of net operating losses before utilization.

2041.

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 as of September 30, 2022, to reduce deferred tax assets to their realizable value.

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LIQUIDITY AND CAPITAL RESOURCES

We

The Company has incurred losses since inception and expects to continue to incur losses for the foreseeable future. The Company intends to finance our operations primarily from ouroperating costs over the next twelve months through a combination of utilizing existing cash on hand, reducing operating spend, potentially divesting assets, and future issuances of equity and/or debt securities.
As of September 30, 2022, we had an accumulated deficit of $296.6 million, and cash and cash equivalents of $13.5 million. Current assets amounted to $17.9 million with current liabilities of approximately $13.9 million, resulting in working capital of $4.0 million.
For the nine months endedSeptember 30, 2022, we recorded a net loss of $25.0 million. We have incurred losses since inception and expect to continue to incur losses for the foreseeable future. The current cash from operations. As of March 31, 2019balance and December 31, 2018, we had approximately $12.4 million and $17.6 millionhistorical trend of cash used in operations along with the lack of certainty regarding a future capital raise, provides substantial doubt about our ability to continue as a going concern for the next twelve months from the date of issuance of this Quarterly Report. The inability to borrow or raise sufficient funds on commercially reasonable terms, would have serious consequences to our financial condition and cash equivalents, respectively.

results of operations.

As previously discussed, on August 1, 2022, the Company completed the Cyren GmbH Transaction and received the initial €9.4 million payment (equivalent to $9.6 million as of the closing date). Under the terms of the SPA, a holdback in the amount of €0.7 million (the "Holdback Amount") is currently held in an escrow to satisfy certain claims. The Holdback Amount, less deductions for claims against the Company, if any, will be released to the Company no later than twelve months after the closing date.
Subsequent to the closing date, the Company has paid approximately $1.4 million in expenses associated with the Cyren GmbH Transaction. Furthermore, the Company estimates that the final purchase price will be reduced by $0.4 million based on working capital and other adjustments and has accrued a current liability as of September 30, 2022The Company is using the proceeds from the sale for working capital and general corporate purposes.
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 platformproducts, and the expansion of sales and marketing activities.activities based on our market opportunities. We may be requiredexpect to seekrequire additional equity or debt financing. In the event thatIf 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 issue additional equity securities to raise additional funds, further dilution to existing shareholders may occur. However, we cannot predict with certainty the outcome of our actions to generate liquidity, including the availability of additional financing. If we are unable to raise additional capital when desired, our business, financial condition, and results of operations could be adversely affected.

Outlook

During 2019, we expect to continue to incur capital expenditures associated with R&D and data center infrastructure.  We generated a loss of $4.6 million and negative cash flow of $1.3 million from operating activities in the three month period ended March 31, 2019, and have an accumulated deficit of $217.8 million as of March 31, 2019. We are planning to finance our operations from our 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 us, and even if available, whether it will be on terms acceptable to us or in amounts required. Accordingly, our Board approved a contingency plan, to be effected if needed, in whole or in part, at its discretion, to allow us to continue our operations and meet our 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. We and the Board believe that our existing capital resources and other future measures that may be implemented, if so required, will be adequate to satisfy our expected liquidity requirements for at least twelve months from the filing date. 

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Cash Flow Analysis

Cash Flows from Operating Activities

Cash

Our primary source of cash provided by operating activities is revenues generated from sales of our services. Our primary uses of cash from operating activities include personnel costs, costs associated with maintaining our data centers and services necessary to support our customers.
Operating cash flow is calculated by adjusting our net loss for changes in working capital, as well as by excluding non-cash items such as: depreciation, non-cash operating lease expense, amortization expense of intangible assets, share-based compensation, impairment of research and development capitalization, amortization of deferred commissions, deferred taxes, net, non-cash interest expense on the convertible notes and Convertible Debentures.
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For the nine months endedSeptember 30, 2022, cash used in operating activities was $1.3$9.0 million as compared to cash used in operating activities of $12.5 million for the threesame period in 2021.
For the nine months ended March 31, 2019 as comparedSeptember 30, 2022, the most significant factor affecting our operating cash flows was our net loss of $25.0 million, which included loss from discontinued operations of $6.9 million pertaining to $4.3the Cyren GmbH sale. Net cash used by operating activities also was the result of changes in operating lease liabilities of $1.7 million; prepaid expenses and other receivables of $1.3 million; deferred commissions of $1.2 million; and trade receivables of $0.9 million. This was partially offset by changes in deferred revenues of $6.1 million; amortization of intangible assets of $1.7 million; share-based compensation of $1.6 million; employee and payroll accruals, depreciation of $1.0 million and operating lease right-of-use asset of $0.9 million.
For the nine months ended September 30, 2021, the primary factors affecting our operating cash flows during the period were our net loss of $15.6 million, which included income from continuing operations of 0.8 million pertaining to the Cyren GmbH Transaction, and adjusted for non-cash items of $1.7 million of stock-based compensation expense, $1.0 million for amortization of our non-cash operating lease expense, $3.9 million for depreciation and amortization of our property, equipment, and intangible assets, and $0.6 million for amortization of deferred commissions. The primary drivers of the three months ended March 31, 2018. Thechanges in operating assets and liabilities were a $1.2 million decrease in cash usageoperating lease liabilities, a $0.6 million decrease in capitalization of $3.0deferred commissions, a $0.6 million was primarily due todecrease in prepaid expenses and other receivables, and a multi-year prepayment for services to be provided related to a customer contract renewal during the first quarterdecrease in trade receivables of 2019. The prepayment is reflected on the balance sheet as an increase in short-term and long-term deferred revenue.

$2.6 million.

Cash Flows from Investing Activities

Cash used in investing activities was $1.2 million forprimarily consists of payments related to capitalized technology, purchases of computer and network equipment to support our data center infrastructure, and furniture and equipment. The extent of these investments will be affected by our ability to expand relationships with existing customers, grow our customer base, as well as constraints on cash expenditures due to our financial position and the threecurrent economic environment.
For the nine months ended March 31, 2019 as compared to $1.5September 30, 2022, net cash used in investing activities was $7.2 million, forconsisting primarily of the threeproceeds from the Cyren GmbH sale.
For the nine months ended March 31, 2018. The decreaseSeptember 30, 2021, net cash used in investing activities was $0.4 million which primarily consisted of $0.3 million was primarily duefor capitalization of technology and $0.1 million used to a decrease inpurchase property and equipment.
Our capital expenditures comparedover the last several years consisted primarily of continued investment in research and development and purchases of property and equipment to modernize and expand our data centers and to invest in our infrastructure to support new products and facilitate the same period a year ago.

Company's growth. We anticipate that capital expenditures for 2022 will be approximately $0.2 million.

Cash Flows from Financing Activities

Cash used

The changes in cash flows from financing activities primarily relate to the issuance of the Convertible Debentures, and the issuance of ordinary shares and warrants to fund operations, offset by the repayment of debt upon maturity.
For the nine months endedSeptember 30, 2022, net cash generated by financing activities was $2.5$10.9 million for the three months ended March 31, 2019 as compared to $0.0 million for the three months ended March 31, 2018. The increase of $2.5 million was primarily due to a payment of $2.7 million in conjunction with the eleven settlement. The eleven settlement was offset by $0.2 million generated from the exercise of stock options in the period.

Working Capital

As of March 31, 2019 and 2018, we had positive working capital of $5.1 million and $7.7 million, respectively. The decrease in working capital during the three months ended March 31, 2019 as compared to the prior year is primarily due to our negative cash flow from operations and lower amounts of capital raised during the fourth quarter of 2018 compared to amounts of capital raised during the fourth quarter of 2017.

Convertible Notes

On December 5, 2018, we issued an aggregate $10.0 million principal amount of convertible notesto several institutional investors in February 2022 in a private placement, (the “Notes”) to affiliates of an existing minority institutional shareholder. The 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 or3,129,075 ordinary shares at Cyren’s election. The Notes have a 3-year term and mature in December 2021, unless converted in accordance with their terms prior to maturity. The Notes have a conversionpurchase price of $3.90$3.835 per share which may be subject(or ordinary share equivalent) and associated warrants for net proceeds of approximately $10.9 million.

For the nine months ended September 30, 2021, net cash generated by financing activities was $12.6 million as we issued to adjustment usingseveral institutional investors in February 2021, in a weighted average ratchet mechanism based on the size andregistered direct offering 12,000,000 of our ordinary shares at a purchase price of future$1.15 per share for net proceeds of approximately $12.6 million.
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Financings
On February 16, 2021, we issued to several institutional investors in a registered direct offering, 600,000 of our ordinary shares at a purchase price of $23.00 per share for net proceeds of approximately $12.6 million. We used the proceeds from this offering for working capital raises and general corporate purposes. We also issued to the totalplacement agent or its designees warrants to purchase up to 36,000 ordinary shares, outstanding. In addition,representing 6% of the Notes would be subject to immediate conversion upon any change in controlaggregate number of ordinary shares sold in the Company.

Earn-Out Consideration

In conjunction with the 2012 acquisition of eleven, we entered intooffering. The placement agent warrants have 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, we had a legal dispute regarding the amount and timingexercise price equal to $28.75, or 125% of the earn-out paymentsoffering price, per Ordinary Share and had entered into arbitral proceedings withbecame exercisable on August 16, 2021, for five years from the former shareholderseffective date of eleven. the offering.

On September 17, 2021, we issued to several institutional investors in a private placement, 707,639 of our ordinary shares at a purchase price of $14.40 per share and warrants to purchase up to 707,639 ordinary shares at an exercise price of $12.00 per share for net proceeds of approximately $10.2 million. We used the gross proceeds from this offering for working capital and general corporate purposes. The warrants were exercisable immediately and terminate on March 9, 2017, we received the arbitral judgement. Pursuant17, 2025. We also issued to the judgement, the earn-out consideration balance was increasedplacement agent or its designees warrants to reflect additional legal expenses and interest expenses covering the periodpurchase up to December 31, 2016. During 2017 and 2018, we continued to accrue interest on42,459 ordinary shares, representing 6.0% of the unpaid earn-out consideration balance. Such interest is reflectedaggregate number of ordinary shares sold in the consolidated statements of operations under financial expenses, net. In May 2018, we made a partial paymentoffering. The placement agent warrants have an exercise price equal to $18.00 per share, or 125% of the earn-out considerationoffering price per share, were exercisable immediately and terminate on March 17, 2025.
On February 14, 2022, we issued to fiveseveral institutional investors in a private placement, 3,129,075 ordinary shares (or ordinary share equivalents) and warrants to purchase up to 3,129,075 ordinary shares at a purchase price of $3.835 per share (or ordinary share equivalent) and associated warrant for net proceeds of approximately $12 million. We used the gross proceeds from this offering for working capital and general corporate purposes. The warrants were exercisable immediately, have an exercise price of $3.71 per ordinary share and terminate on August 16, 2027. We also issued to the placement agent or its designees warrants to purchase up to 187,745 ordinary shares, representing 6.0% of the six former shareholders,aggregate number of ordinary shares sold in the offering. The placement agent warrants have an amountexercise price equal to $4.79 per share, or 125% of $0.6 million. The earn-out consideration balance presented on our 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,offering price per share, were exercisable immediately and terminate on February 28, 2019, we paid approximately $2.7 million to settle the earn-out consideration in full. For additional information, please refer to Note 3 of the consolidated financial statements included elsewhere in this Quarterly Report.

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15, 2027.

Registration Statements

In connection with a previously disclosed private placement in November 2017 in which we issued approximately 10.6 million ordinary shares to an entity controlled by funds affiliated with Warburg Pincus, 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 may be exercised starting August 6, 2018, subject to certain customary blackout periods. In addition, as of November 6, 2019, at the request of Warburg Pincus, we will be required to file a shelf registration statement covering the sale of Warburg Pincus’s shares.

On September 21, 2018, we filed a shelf registration statement on Form F-3 with the Securities and Exchange Commission (“SEC”),SEC, which we intend to convertconverted to a Form S-3 during the second quarter ofon August 16, 2019. This registration statement enabledenables 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, once we convert the registration statement on Form F-3 to a registration statement on Form S-3, we will thereafter be able to file a prospectus supplement with the SEC which describes the amount and type of securities being offered each time we issue securities under thethis registration statement. No securities wereIn November 2019, we issued undershares as part of our rights offerings and in February 2021, we issued shares in the registered direct offering using our Form S-3 as described above. On July 28, 2022, we filed a replacement shelf registration statement on Form F-3S-3 to replace the existing S-3 that expired on August 16, 2022.
Our market capitalization may limit our ability to raise additional capital in the public markets. Although we are currently eligible to use our Form S-3, we are limited to selling no more than one-third of our unaffiliated market capitalization, or public float, on Form S-3 in a 12-month period as our public float is below $75 million.
Outlook
The Company has incurred losses since inception and expects to continue to incur losses for the foreseeable future. The Company intends to finance operating costs over the next twelve months through a combination of utilizing existing cash on hand, reducing operating spend, potentially divesting assets, and future issuances of equity and/or debt securities.
The Company’s ability to continue as a going concern is dependent upon growing its business, obtaining the necessary financing to meet its obligations and repay its liabilities arising from September 21, 2018normal business operations. While the Company intends to finance operating costs over the next twelve months through a combination of existing cash on hand, reducing operating spend, potentially divesting assets, and future issuances of equity and/or debt securities the dateCompany cannot predict the availability of additional financing or the outcome of its actions to generate liquidity or maintain compliance with the Nasdaq Capital Market listing standards.
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At a Special Meeting of the filingCompany's shareholders held on February 7, 2022, the Company's shareholders approved a Reverse Share Split (including the relevant amendments to the Articles of this Quarterly Report.

Off-Balance Sheet Arrangements

AsAssociation of Marchthe Company) within a range of 1:4 to 1:20, and amendments to the Company's Articles of Association authorizing an increase in the Company's authorized share capital (and corresponding authorized ordinary shares) by up to NIS 216 million. The board of directors approved the implementation of a one-for-twenty Reverse Share Split and an increase in the Company's authorized share capital by NIS 216 million to NIS 240 million. The Reverse Share Split was effective on February 8, 2022, and the Company’s ordinary shares began trading on a split-adjusted basis on February 9, 2022. Following the Reverse Share Split and increase in authorized share capital, the total number of ordinary shares that the Company is authorized to issue is 80 million shares. While the Company was able to regain compliance with the Nasdaq minimum bid price requirement in February 2022 following the effectiveness of the Reverse Share Split, there can be no assurance that the Company will continue to meet the Nasdaq listing requirements. The inability to remain listed on Nasdaq may make it difficult for us to raise additional capital.

Over the past several years, the Company has devoted most of its effort to research and development and increasing revenues through additional investments in sales and marketing. For the nine months endedSeptember 30, 2022, the Company generated a net loss of $25.0 million and a negative cash flow from operating activities of $9.0 million. For the year ended December 31, 2019, we did not have any off-balance sheet arrangements. 

Critical Accounting Policies2021, the Company recorded a net loss of $23.0 million and Estimates

a negative cash flow from operating activities of $16.5 million. The Company has incurred losses since inception and expects to continue to incur losses for the foreseeable future.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our significant accounting policies are discussed in Note 2.2 - Significant Accounting Policies to our consolidated financial statements included in the Company’s Form 10-K filed with the Securities and Exchange Commission on March 29, 2019.2021 Annual Report. There have been no significant changes to these policies for the three months ended March 31, 2019,September 30, 2022, except as described in Note 2.2 - Significant Accounting Policies to our condensed consolidated financial statements are included elsewhere in this Quarterly Report. The critical accounting policies requiring estimates, assumptions, and judgementsjudgments 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 20182021 Annual Report.

Recent Accounting Pronouncements

Please refer to Note 2.2 - Significant Accounting Policies to our condensed consolidated financial statements included elsewhere in this Quarterly Report for a full description of recent accounting pronouncements.

Goodwill represents the excess of the purchase price over the estimated fair value of net assets of a business acquired in a business combination. Under ASC Topic 350, Intangibles - Goodwill and Other ("ASC 350"), goodwill is not amortized, but rather is subject to impairment test at least annually. The Company performs an annual impairment test as of December 31 of each year, or more frequently if events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If the reporting unit does not pass the qualitative assessment, the Company carries out a quantitative test for impairment of goodwill by comparing the fair value of the reporting unit with the carrying amount of the reporting unit that includes goodwill. The Company may bypass the qualitative assessment and proceed directly to performing the quantitative goodwill impairment test.
The Company operates in one operating segment, and this segment comprises its only reporting unit.
December 31, 2021, 2020, no impairment losses were identified. For the three and nine months ended September 30, 2022, refer to Note 3.
It is possible that changes in circumstances existing at the measurement date or at other times in the future, or in the numerous estimates associated with management’s judgments, assumptions and estimates made in assessing the fair value of our goodwill, could result in an impairment charge of a portion or all of our goodwill. If the Company recorded an impairment charge, its financial position and results of operations would be adversely affected. For additional information, see "Risk Factors" in Item 1A of Part II of this report. We will continue to monitor certain events that impact our operations to determine if an interim assessment of goodwill impairment should be performed prior to the next required assessment date of December 31, 2022.
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RUSSIAN INVASION OF UKRAINE
We maintain sales operations, employees, and customers located in multiple countries. We have contractors in Ukraine that assist in our operations group which support our products. The ongoing military conflict between Ukraine and Russia has resulted in minimal interruption of our operations in Ukraine and we are developing alternative plans should our contractors not be available for a period of time. While the precise effect of the ongoing military conflict and the sanctions on the Russian and global economies remains uncertain, should tensions continue to increase, financial markets may continue to experience significant volatility as well as economic and security consequences.
While as of the date of this Quarterly Report there have not been any material impacts from the above-mentioned matter in our consolidated financial statements, we are continuously monitoring the developments to assess any potential future impacts that may arise as a result of the ongoing crisis.
Other potential consequences include, but are not limited to, growth in the number of popular uprisings in the region, increased political discontent, especially in the regions most affected by the conflict or economic sanctions, increase in cyberterrorism activities and attacks, displacement of persons to regions close to the areas of conflict and an increase in the number of refugees fleeing across Europe, among other unforeseen social and humanitarian effects.
A protracted conflict between Ukraine and Russia, any escalation or expansion of that conflict, and the financial and economic sanctions and the above-mentioned adverse effect on the wider global economy and market conditions could, in turn, have a material adverse effect on our business, financial condition and results of operations

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

[Not required for smaller reporting companies.

]

Special Note Regarding Forward-Looking Statements

This Quarterly Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. We urge you to consider that statements which use the terms “anticipate,” “believe,” “expect,” “plan,” “intend,” “estimate”,“estimate,” “will” and similar expressions are intended to identify forward-looking statements. Specifically, this Quarterly Report contains forward-looking statements regarding:

·our expectations regarding increases in cost of revenue and operating expenses, including as a result of our anticipated investments in R&D;
·our beliefs regarding the importance of R&D;

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•our expectations regarding our future profitability and revenue growth;

·our expectation to lower the rate of R&D investment as a percentage of revenue in the future and to drive more revenue from existing solutions rather than by adding new solutions;
·our expectations regarding reducing the historical rate of headcount growth and its resulting impact on our gross and operating margins over time;
·our expectations regarding our business strategies, including our contingency plan;
·our expectations regarding growth of our enterprise business and its expected impact on our business and operating results, including its contribution to our cash flow and return on investment;
·our expectations regarding our capital expenditures for 2019;
·our belief regarding the adequacy of our existing capital resources and other future measures to satisfy our expected liquidity requirements;
·our anticipated increases in investments to grow our revenue;
·our beliefs and expectations regarding existing and new threats, key challenges and opportunities in our industry and their impact on our business;
·our expectations regarding the increase in utilization of our cloud infrastructure and the resulting impact on our gross margins;
·our beliefs regarding factors that make our vision compelling to the IT security market;
·our intention to convert our registration statement on Form F-3 to a registration statement on Form S-3;
·our beliefs regarding our net operating loss carry-forwards; and
·our expectations and estimates regarding certain tax and accounting matters, including the impact on our financial statements.

•our expectations regarding increases in cost of revenue and operating expenses, including as a result of our anticipated investments in R&D;
•our expectation to lower the rate of R&D investment as a percentage of revenue in the future and to drive more revenue from existing solutions rather than by adding new solutions;
•our expectations regarding reducing the historical rate of headcount growth and its resulting impact on our gross and operating margins over time;
•our expectations regarding growth of our enterprise business and its expected impact on our business, including its contribution to our cash flow and return on investment;
•our expectations regarding our ability to raise additional capital or issue more debt;
•our expectations regarding our capital expenditures for 2022;
•our belief regarding the adequacy of our existing capital resources and other future measures to satisfy our expected liquidity requirements;
•our beliefs regarding our competitive position in the market in which we operate;
•our expectations regarding the regulatory environment of data privacy in the EU;
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•our anticipated significant investments in R&D and promotion of our brand;
•our expectations regarding trends in the market for Internet security and technology industry;
•our expectations regarding existing and new threats, key challenges and opportunities in our industry and their impact on our business, including the impact of innovations in the technology industry;
•our expectations regarding the increase in utilization of our cloud infrastructure and the resulting impact on our gross margins;
•our expectations regarding continued and future customers that will contribute to our revenue, and the solutions we provide to such customers;
•our beliefs regarding factors that make our vision compelling to the IT security market;
•our expectations regarding the locations where we conduct our business;
These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions. We wish to caution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from those expressed in any forward-looking statement. The most important factors that could prevent us from achieving our goals, and cause the assumptions underlying forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, the following:

·our ability to execute our business strategies;
·lack of demand for our solutions, including as a result of actual or perceived decreases in levels of advanced cyber attacks;
·our ability to manage our cost structure, avoid unanticipated liabilities and achieve profitability;
·our ability to grow our revenues, including the ability of existing solutions to drive sufficient revenue;
·our ability to attract new customers and increase revenue from existing customers;
·market acceptance of our existing and new product offerings;
·our ability to adapt to changing technological requirements and shifting preferences of our customers and their users;
·loss of any of our large customers;
·adverse conditions in the national and global financial markets;
·the impact of currency fluctuations;
·political and other conditions in Israel that may limit our R&D activities;
·our ability to successfully implement our contingency plan, if needed, and its ability to allow us to continue our operations and meet our cash obligations;
·our ability to comply with applicable laws and regulations and the impact of changes in applicable laws and regulations, including tax legislation or policies;
·economic, regulatory and political risks associated with our international operations;
·the impact of our controlling shareholder’s decisions, which may differ with respect to our strategic direction;and
·our ability to successfully estimate the impact of certain accounting and tax matters, including the effect on our company of adopting certain accounting pronouncements.

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•our ability to continue as a going concern;

•our ability to execute our business strategy;
•our ability to successfully enhance our existing products and introduce new products;
•the commercial success of our products;
•lack of demand for our products, including actual or perceived decreases in levels of cyber attacks;
•our ability to manage our costs, indebtedness and avoid unanticipated liabilities and achieve profitability;
•our ability to grow our revenues, including the ability of existing products to drive sufficient revenue;
•our ability to raise additional capital or debt;
•our ability to attract new customers and increase revenue from existing customers;
•the impact of future impairments of goodwill or other assets;
•market acceptance of our existing and new products;
•our ability to adapt to changing technological requirements and shifting preferences of our customers;
•the impact of COVID-19;
•our ability to remain listed on The Nasdaq Stock Market (“Nasdaq”);
•loss of any of our large customers or contracts;
•adverse conditions in the national and global financial markets;
•the impact of currency fluctuations;
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•political and other conditions that may limit our R&D activities;
•the impact of the ongoing military conflict between Ukraine and Russia or any further escalation or expansion;
•The impact of increased inflation;
•increased competition or our ability to anticipate or effectively react to competitive challenges;
•the ability of our brand awareness strategies to enhance our brand recognition;
•our ability to retain key personnel;
•performance of our OEM partners, service providers and resellers;
•our ability to successfully estimate the impact of regulatory matters;
•our ability to comply with applicable laws and regulations and the impact of changes in applicable laws and regulations, including tax legislation or policies;
•economic, regulatory, and political risks associated with our international operations;
•the impact of cyber attacks or a security breach of our systems;
•our ability to protect our brand name and intellectual property rights; and
•our ability to successfully estimate the impact of certain accounting and tax matters, including the effect on our company of adopting certain accounting pronouncements.
The foregoing list of important factors does not include all such factors, nor necessarily present them in order of importance. In addition, you should consult other disclosures made by usthe Company (such as in our other filings with the SEC or in company press releases) for other factors that may cause actual results to differ materially from those projected by us.the Company. Please refer to Part I. Item 1A. Risk Factors, of our 2018the 2021 Annual Report for additional information regarding factors that could affect our results of operations, financial condition and liquidity. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as required by applicable law, including the securities laws of the United States, we undertake no obligation to update or revise any forward-looking statements to reflect new information, future events or circumstances, or otherwise after the date hereof.

ITEM 4. CONTROLS AND PROCEDURES

Management’s Evaluation of Disclosure Controls and Procedures

MANAGEMENT'S EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
In order to ensure that the information we must disclose in our filings with the SEC is recorded, processed, summarized and reported on a timely basis, we have formalized our disclosure controls and procedures. Our principal executive officer and principal financialaccounting officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Securities and Exchange Act Rules 13a-15(e) and 15d-15(e) as of March 31, 2019.September 30, 2022. Based on such evaluation, such officers have concluded that, as of March 31, 2019,September 30, 2022, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes to our internal control over financial reporting, as defined in Securities and Exchange Act Rules 13a-15(f) and 15d-15(f), that occurred during the quarter ended March 31, 2019September 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION.

ITEM 1A. RISK FACTORS
No material changes have transpired in our risk factors from those disclosed in Item 1A. Risk Factors of our 2021 Annual Report and in Item 1A. Risk Factors of our quarterly reports for the periods ended March 31, 2022, and June 30, 2022.

ITEM 6. EXHIBITS

Exhibit No.Description of Exhibits
31.1
Certification by Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2Certification by Chiefand Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 20022002..
32.131.2
Certification by Chief Executive and Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification by Chief Executive and ChiefPrincipal Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 20022002..
101.INSInline XBRL Instance Document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.DEF101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.CAL101.LABXBRL Taxonomy Extension Calculation Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.

- 30 -104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
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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.

CYREN LTD.
CYREN LTD.
May 15, 2019
November 14, 2022/s/ Brett Jackson
Brett Jackson

Chief Executive and Principal Financial Officer
(Duly Authorized Officer)

May 15, 2019/s/J. Michael Myshrall
November 14, 2022J. Michael Myshrall
Chief Financial Officer/s/ P. Brady Hayden
(P. Brady Hayden
Vice President, Finance and Accounting
Principal Financial Officer)Accounting Officer

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