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Form 10-Q CYREN Ltd. For: Jun 30

August 15, 2022 5:02 PM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to __________
Commission file number: 000-26495
cyrn-20220630_g1.jpg
CYREN LTD.
(Exact name of Registrant as specified in its charter)
IsraelNot applicable
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
10 Ha-Menofim St., 5th Floor
Herzliya, Israel
4672561
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code 011972–9–863–6888
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 shareCYRN
Nasdaq Capital Market
Indicate the number of shares outstanding of each issuer’s classes of common shares, as of the latest practicable date: 7,790,223 ordinary shares as of July 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 ☐ No



CYREN LTD.
QUARTERLY REPORT ON FORM 10-Q
Table of Contents
Page
 

i

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CYREN LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30,
2022
December 31,
2021
(USD in thousands, except share and per share amounts)(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$8,791 $4,288 
Trade receivables (net of allowances for credit losses of $53 and $118, respectively)
1,774 352 
Deferred commissions522 482 
Prepaid expenses and other receivables1,464 1,120 
Current assets held for sale (Note 3)11,255 1,082 
Total current assets23,806 7,324 
LONG-TERM ASSETS:
Long-term deferred commissions702 521 
Long-term lease deposits and prepaid expenses643 686 
Operating lease right-of-use assets5,531 6,207 
Severance pay fund852 921 
Property and equipment, net1,377 1,980 
Intangible assets, net2,331 3,499 
Goodwill6,518 11,598 
Long-term assets held for sale (Note 3) 13,392 
Total long-term assets17,954 38,804 
Total assets$41,760 $46,128 


-1-

June 30,
2022
December 31,
2021
(USD in thousands)(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Trade payables$858 $1,059 
Employees and payroll accruals3,631 4,196 
Accrued expenses and other liabilities ($4 and $4 attributable to related parties, respectively)
1,127 937 
Operating lease liabilities1,092 1,330 
Deferred revenues5,644 3,004 
Current liabilities held for sale (Note 3)5,225 2,180 
Total current liabilities17,577 12,706 
LONG-TERM LIABILITIES:
Deferred revenues3,084 72 
Convertible Debentures ($241 and $238 attributable to related parties, respectively)
8,670 8,578 
Long-term operating lease liabilities4,644 5,749 
Deferred tax liability156 167 
Accrued severance pay945 983 
Other liabilities476 517 
Long-term liabilities held for sale (Note 3) 3,528 
Total long-term liabilities17,975 19,594 
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Ordinary shares nominal value ILS 3.00 par value; Authorized: 80,000,000 shares as of June 30, 2022 (Unaudited) and December 31, 2021; Issued and Outstanding: 7,787,594 and 4,532,943 shares as of June 30, 2022 (Unaudited) and December 31, 2021, respectively
6,724 3,759 
Additional paid-in capital292,933 283,577 
Accumulated other comprehensive loss(2,899)(1,877)
Accumulated deficit(290,550)(271,631)
Total shareholders’ equity6,208 13,828 
Total liabilities and shareholders’ equity$41,760 $46,128 
The accompanying notes are an integral part of the interim consolidated financial statements.
-2-

CYREN LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and USD in thousands, except share and per share amounts)Three Months
Ended June 30,
Six Months
Ended June 30,
2022202120222021
Revenues$5,752 $5,704 $11,468 $12,550 
Cost of revenues3,229 3,328 6,662 6,630 
Gross profit2,523 2,376 4,806 5,920 
Operating expenses:
Research and development, net3,776 3,501 7,725 7,090 
Sales and marketing2,492 2,355 4,972 4,650 
General and administrative2,270 2,125 4,794 4,100 
Total operating expenses8,538 7,981 17,491 15,840 
Operating loss(6,015)(5,605)(12,685)(9,920)
Other income (expense), net(2)2 (2)(17)
Financial income (expenses), net ($5 and $148 interest expense attributable to related parties, respectively)
233 (257)111 (423)
Loss from continuing operations before taxes on income(5,784)(5,860)(12,576)(10,360)
Tax benefit (expense)11 (2)11 63 
Net loss from continuing operations (5,773)(5,862)(12,565)(10,297)
Discontinued operations (Note 3):
Income (loss) from operations of discontinued operations as held for sale of $(6,790)
(6,663)274 (6,354)512 
Net loss$(12,436)$(5,588)$(18,919)$(9,785)
Basic net income (loss) per share:
Continuing operations$(0.75)$(1.55)$(1.97)$(2.86)
Discontinued operations$(0.86)$0.07 $(1.00)$0.14 
Basic net loss per share$(1.61)$(1.48)$(2.97)$(2.72)
Diluted net income (loss) per share:
Continuing operations$(0.75)$(1.55)$(1.97)$(2.86)
Discontinued operations$(0.86)$0.06 $(1.00)$0.12 
Diluted net loss per share$(1.61)$(1.49)$(2.97)$(2.74)
Weighted-average number of shares used in computing basic net gain (loss) per share and diluted loss per share for continuing operations7,733,4753,774,1876,369,2093,599,787
Weighted-average numbers of shares used in computing diluted net gain (loss) per share for discontinued operations7,733,4754,538,4406,369,2094,349,357
The accompanying notes are an integral part of the interim consolidated financial statements.
-3-

CYREN LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Three Months
Ended June 30,
Six Months
Ended June 30,
(Unaudited and USD in thousands, except share and per share amounts)2022202120222021
Net loss$(12,436)$(5,588)$(18,919)$(9,785)
Other comprehensive income (loss):
Foreign currency translation adjustments(771)172 (1,022)(487)
Comprehensive loss$(13,207)$(5,416)$(19,941)$(10,272)
The accompanying notes are an integral part of the interim consolidated financial statements.
-4-

CYREN LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited and 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)— —  
Placement agent warrants— (402)402 — —  
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 3,770,342 $2,644 $272,873 $(1,384)$(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 3,782,012 $2,654 $273,553 $(1,212)$(258,377)$16,618 


(Unaudited and 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 
Share and warrants issuance for financing, 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 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 7,787,594 $6,724 $292,933 $(2,899)$(290,550)$6,208 
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.
-5-

CYREN LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months
Ended June 30,
(Unaudited and USD in thousands except share and per share amounts)20222021
Cash flows from operating activities:
Net loss$(18,919)$(9,785)
Less: Income (loss) from discontinued operations(6,354)512 
Loss from continuing operations(12,565)(10,297)
Adjustments to reconcile net loss from continuing operations to net cash used in continuing operating activities:
(Gain) loss on disposal of property and equipment(1)17 
Loss on termination of operating leases10  
Depreciation757 1,023 
Share-based compensation1,105 971 
Amortization of intangible assets1,168 1,177 
Amortization of deferred commissions454 368 
Operating lease right-of-use-asset678 815 
Interest on convertible notes 285 
Interest and amortization of debt issuance costs on convertible debentures344 343 
Deferred taxes, net(11)(70)
Changes in assets and liabilities:
Trade receivables(1,424)(483)
Prepaid expenses and other receivables(370)(718)
Deferred commissions(681)(342)
Long-term lease deposits and prepaid expenses20 15 
Trade payables(1,315)(832)
Employees and payroll accruals, accrued expenses and other liabilities1,206 1,624 
Deferred revenues5,668 (543)
Accrued severance pay, net32 2 
Operating lease liabilities(1,355)(960)
Other long-term liabilities(41)(180)
Net cash used in operating activities from continuing operations(6,321)(7,785)
Net cash provided by operating activities from discontinued operations643 188 
Net cash used in operating activities(5,678)(7,597)
Cash flows from investing activities:
Proceeds from sale of property and equipment1 4 
Capitalization of technology (252)
Purchase of property and equipment(170)(129)
Net cash used in investing activities from continuing operations(169)(377)
Net cash used in investing activities from discontinued operations(5)(3)
Net cash used in investing activities(174)(380)
The accompanying notes are an integral part of the interim consolidated financial statements.
-6-

Six Months
Ended June 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 12,588 
Proceeds from pre-funded warrants exercised2  
Net cash provided by financing activities10,944 12,588 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(37)(21)
Increase in cash, cash equivalents and restricted cash5,055 4,590 
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$10,006 $14,504 
Supplemental disclosure of non-cash transactions:
Purchase of property and equipment by credit$(19)$(319)
Operating lease right-of-use asset exchanged for lease obligations$60 $ 
Issuance of shares on early conversion of Convertible Debentures$ $859 
Issuance of shares for payment of interest on Convertible Notes$ $143 
Net change in accrued payroll expenses related to capitalization of technology$ $(10)
Reconciliation of cash, cash equivalents and restricted cash as shown in the condensed consolidated statements of cash flow:
Cash and cash equivalents$8,791 $13,379 
Restricted cash included in long-term restricted lease deposits479 490 
Cash, cash equivalents and restricted cash included in assets held for sale736 635 
Total cash, cash equivalents and restricted cash$10,006 $14,504 
The accompanying notes are an integral part of the interim consolidated financial statements.




-7-


CYREN LTD.
UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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 be referred to in these consolidated financial statements as the “Company.”
The Company is engaged in developing and marketing cyber security solutions to identify and protect threats in email, files and from the Internet. The Company sells its cloud-based solutions worldwide, in both embedded and Software-as-a-Service (SaaS) models, to Original Equipment Manufacturers (“OEMs”), service providers and enterprises. The Company operates in one reportable segment, which constitutes its reporting unit.
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. At June 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 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 six months ended June 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, are exercisable immediately and expire on August 16, 2027. The pre-funded warrants have an exercise price of $0.001 and are exercisable immediately until exercised in full. The closing of the private placement occurred on February 14, 2022. The proceeds of the offering have been and will 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 €0.6 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.
-8-


CYREN LTD.
UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Subsequent to the closing date, the Company paid approximately $1.0 million in expenses associated with the Cyren GmbH Transaction. Beyond that, the Company intends to use 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 did not have operations during the second quarter of 2022.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The accompanying consolidated balance sheet as of June 30, 2022, the consolidated statements of operations, the consolidated statements of comprehensive loss for the three and six months ended June 30, 2022, and 2021, and the consolidated statements of cash flows for the six months ended June 30, 2022, and 2021, as well as the statement of changes in shareholders’ equity for the three and six months ended June 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 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 June 30, 2022, as well as its results of operations three and six months ended June 30, 2022, and 2021 and cash flows for the six months ended months ended June 30, 2022, and 2021. The results of operations for the three and six months ended June 30, 2022, are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for other interim periods or for future years.
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”) on March 24, 2022.
Other than the change described below, there have been no changes to the significant accounting policies described in the 2021 Annual Report that have had a material impact on the unaudited interim consolidated financial statements and related notes.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
-9-

CYREN LTD.
UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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 the Condensed Consolidated Balance Sheet, including the comparative prior year period. The results of discontinued operations are aggregated and presented separately in the 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 presented in the Condensed Consolidated Balance Sheet as assets and liabilities held for sale. The results of discontinued operations presented separately in the Condensed Consolidated Statement 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"), 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.

For the year ended December 31, 2021, and 2020, no impairment losses were identified. For the three and six months ended June 30, 2022, refer to Note 3.
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 subject 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 the Company for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company early adopted this new guidance January 1, 2022. The adoption of ASU 2020-06 did not have a material impact on the consolidated financial statements.
-10-

CYREN LTD.
UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
The Company has recorded certain assets as held for sale in its Condensed Consolidated Balance Sheets as of June 30, 2022, and 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 six months ended June 30, 2022, and 2021. 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 Sheets for all periods presented. The major classes of assets and liabilities included as part of discontinued operations are as follows:
June 30,
2022
December 31,
2021
(USD in thousands, except share and per share amounts)(Unaudited)
Assets held for sale
Cash and cash equivalents$617 $14 
Trade receivables (net of allowances for credit losses of $19 and $40, respectively)
286 447 
Deferred commissions429 500 
Prepaid expenses and other receivables183 121 
Long-term deferred commissions251 412 
Long-term lease deposits and prepaid expenses120 123 
Operating lease right-of-use assets2,702 3,073 
Property and equipment, net 148 203 
Intangible assets, net487 805 
Goodwill12,822 8,776 
Loss on classification as held for sale(6,790) 
Total assets held for sale$11,255 $14,474 
Liabilities held for sale
Trade payables$42 $16 
Employees and payroll accruals 222 218 
Accrued expenses and other liabilities 55 18 
Operating lease liabilities278 288 
Deferred revenues - current1,573 1,640 
Deferred revenues - long-term385 413 
Long-term operating lease liabilities2,521 2,875 
Deferred tax liability, net149 240 
Total liabilities held for sale$5,225 $5,708 
-11-

CYREN LTD.
UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The following details the Company's results of discontinued operations.
Three Months Ended
June 30,
Six Months Ended
June 30,
(Unaudited and USD in thousands, except share and per share amounts)2022202120222021
Revenues$1,414 $1,905 $2,956 $3,816 
Cost of revenues398 477 782 970 
Gross profit1,016 1,428 2,174 2,846 
Operating expenses:
Research and development, net505 609 1,001 1,270 
Sales and marketing238 376 465 719 
General and administrative171 180 335 365 
Total operating expenses914 1,165 1,801 2,354 
Operating gain102 263 373 492 
Other income (expense), net (1)1  
Financial expenses, net(11)(30)(12)(78)
Income from discontinued operations before taxes on income91 232 362 414 
Loss on classification as held for sale(6,790) (6,790) 
Total income (loss) from discontinued operations before taxes on income(6,699)232 (6,428)414 
Tax benefit36 42 74 98 
Net loss from discontinued operations (6,663)274 (6,354)512 
-12-

CYREN LTD.
UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - LEASES
The Company accounts for leases according to ASC 842, Leases. The Company determines if an arrangement is a lease and the classification of that lease at inception. Right-of-use (“ROU”) assets represent the right to use an underlying asset for the lease 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 is reasonably certain that the Company will exercise that option. Lease expenses are recognized on a straight-line basis over the lease 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 elected the practical expedient for lease agreements with a term of twelve months or less and does not recognize ROU assets and lease liabilities in respect of those agreements. The Company also elected the practical expedient to not separate lease and non-lease components for its leases.
The Company has various operating leases for office space and vehicles that expire through 2028. Below is a summary of the Company’s operating ROU assets and operating lease liabilities as of June 30, 2022:
Operating lease right-of-use assets$5,531 
Operating lease liabilities, current$1,092 
Operating lease liabilities long-term4,644 
Total operating lease liabilities$5,736 
Minimum lease payments for the Company’s ROU assets over the remaining lease periods as of June 30, 2022, adjusted for discontinued operations, are as follows:
Year ended June 30,(USD in thousands)
2022$649 
20231,303 
20241,145 
20251,074 
20261,019 
Thereafter1,155 
Total undiscounted lease payments$6,345 
Less: Interest609 
Present value of lease liabilities5,736 
Premises rent expense from continued operations was $478 and $576 for the three months ended June 30, 2022, and 2021, respectively, and $1,039 and $1,206 for the six months ended June 30, 2022 and 2021, respectively.
As of June 30, 2022, the Company subleases one real estate property as lessor. Sublease receipts were $69 and $157 for the three months ended June 30, 2022 and 2021, respectively, and $192 and $329 for the six months ended June 30, 2022 and 2021, respectively.
-13-

CYREN LTD.
UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The weighted-average remaining lease terms and discount rates for all operating leases were as follows as of June 30, 2022:
Weighted-average remaining lease term (years)5.4
Weighted-average discount rate 4.09 %
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Cyren Ltd., which was incorporated in Israel, 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.
Since the Company's inception through 2018, the Company received $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 royalties related to product sales as of June 30, 2022, and December 31, 2021. In return for the IIA’s participation in this program, the Company is committed to pay royalties at a rate of 3% of the program’s developed product sales, up to 100% of the amount of grants received plus interest at the annual LIBOR rate. For the three and six months ended June 30, 2022, and 2021, $19 thousand and $59 thousand, respectively, were recorded as cost of revenues with respect to royalties due to the IIA.
The Company is not currently involved in any legal proceedings or claims.
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.
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.
-14-

CYREN LTD.
UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Issuance of Convertible Notes
On December 5, 2018, the Company issued $10.0 million aggregate principal amount of convertible notes in a private offering. The notes were unsecured, unsubordinated obligations of Cyren and carried 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 had a 3- year term and matured in December 2021. The notes were issued with a conversion price of $3.90 per share which was subject to adjustment using a weighted-average ratchet mechanism based on the size and price of future equity offerings and the total shares outstanding. On November 7, 2019, Cyren announced the closing of a rights offering that raised gross proceeds of $8.0 million. As a result of this offering, the conversion price of the convertible notes was adjusted to $3.73. 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 were subject to immediate conversion upon any change in control in the Company (or subject to repayment if the price in the change in control transaction is less than the conversion price).
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 six months ended June 30, 2022. The Company incurred interest expense of $0.1 million and $0.3 million for the three and six months ended June 30, 2021.
The Company has no accrued interest as of June 30, 2022, and December 31, 2021, respectively.
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, which was paid through the issuance of 14,572 shares of common stock. In March 2022, the Company paid semi-annual interest payments totaling, $0.3 million, which was paid through the issuance of 31,667 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 holding. The principal and interest were paid through the issuance of 60,074 shares. There were no conversions for the quarter ended June 30, 2022.
The Company incurred interest expense of $170 thousand and $344 thousand for the three and six months ended June 30, 2022, of which $44 thousand and $92 thousand is related to the amortization of debt issuance costs, respectively. The Company incurred interest expense of $167 thousand and $343 thousand for the three and six months ended June 30, 2021, of which $41 thousand and $90 thousand is related to the amortization of debt issuance costs, respectively.
The Company has accrued interest of $131 thousand and $137 thousand as of June 30, 2022, and December 31, 2021, respectively.
The principal balance of the Convertible Debentures as of June 30, 2022, was $9.0 million.
-15-

CYREN LTD.
UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Equity Incentive Plan
On December 22, 2016, the Company’s shareholders approved the 2016 Equity Incentive Plan (the “Equity Incentive Plan”). This plan, along with its Israeli appendix, replaced all then-existing employee and consultants’ stock option plans.
The Equity Incentive Plan allows for the issuance of Restricted Stock 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 grantee’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 cancelled 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.
As of June 30, 2022, an aggregate of 295,500 ordinary shares of the Company were available for future grant under the Equity Incentive Plan.
Non-Employee Directors Stock Option Plan
In 1999, the Company adopted the 1999 Directors Stock Option Plan, and in 2008, 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 the 2016 Non-Employee Director Equity Incentive Plan (the “Non-Employee Director Plan”). This plan, along with its Israeli appendix, replaced all existing Directors' stock option plans.
The Non-Employee Director Plan allows for the issuance of 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.
As of June 30, 2022, an aggregate of 42,867 ordinary shares of the Company remains available for future grants to non-employee directors.
-16-

CYREN LTD.
UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

A summary of the Company’s employees and directors’ stock option activity under the plans is as follows:
(Unaudited and USD in thousands)
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(20,833)32.60 0— 
Outstanding at June 30, 2022160,453$39.65 2.47$ 
Options vested and expected to vest at June 30, 2022157,838$39.81 2.45$ 
Exercisable options at June 30, 2022128,140$41.73 2.18$ 
The aggregate intrinsic value in the 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 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 June 30, 2022, and 2021, respectively, and the intrinsic value was zero as of June 30, 2022, and 2021, respectively.
The weighted-average grant date fair value of options granted to employees and directors during the quarters ended June 30, 2022, and 2021 was zero and $0.43, respectively.
As of June 30, 2022, the Company had $0.4 million of unrecognized compensation expense related to non-vested stock options granted to employees and directors, expected to be recognized over a remaining weighted-average period of 1.29 years.
The employee and directors’ options outstanding as of June 30, 2022, have been separated into ranges of exercise prices, as follows:
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 - $32.80
33,5663.76$26.09 18,125$30.84 
$34.00 - $40.00
33,8061.34$37.76 30,735$38.10 
$41.80 - $