Press Release

The BoD of the Itway Group approves the Financial Statements as of December 31, 2018

New agreement for the sale to Cyber Security 1 of the Itway Hellas SA and Itway Turkyie Ltd subsidiaries

• Total revenue of Euro 33.1 million (+6%) compared with Euro 31.1 million in the previous fiscal year, net of the Business-e revenue and extraordinary transaction

• Net result of the period f Euro 354 thousand, compared with Euro 294 thousand previously, net of the Business-e revenue and extraordinary transaction
• Consolidated EBITDA Euro +1.6 million compared with Euro 195 thousand in the previous period
• EBIT of Euro 1.2 million compared with Euro -1.0 million previously
• Group Net Financial Position improves to Euro -4.3 million compared with Euro -6.8 million as of 31.12.2017
• Net result of the Parent Company Itway Euro 172 thousand compared with Euro -1,783 thousand as of 31.12.17;
• The Net Financial Position of the Parent Company Itway Spa Euro -4.6 million vs Euro -7.0 million in the previous fiscal period
• Allocation of the result of the period: Proposal to allocate Euro 172 thousand to reserve
•  

Ravenna, April 18 2019 – The Board of Directors of Itway S.p.A, a company listed on the Mercato Telematico Azionario organized and managed by Borsa Italiana, active in the IT sector, approved today the financial statements as of December 31, 2018 to submit for shareholder approval

In 2018, Itway continued, as it did in 2016 and 2017, to reposition and to reorganize the Group with an industrial plan that targets significant growth in the coming years and to value the experience matured and the investments made in the past that have continued in the current period. Itway returned to being an operational holding company while increasing at the same time its presence in consultancy and in planning and system integration for cyber security, with a particular focus on the client, product and the market in order to develop and establish itself in the more favourable industrial sector, that is more dynamic and with higher value added. This plan, while foreseeing the exit from the VAD sector (which is now low margin), is evolving towards the Digital product oriented model and higher growth activities, aimed at replacing lower margin lines with higher value added ones that require less use of working capital, that are realized through the establishment of four Business Units: Cybersecurity, Adapt/Smartys, Data Science and Safety

In April 2018, Itway signed an exclusive agreement with Cyber Security 1 AB (formerly Cognosec), a company listed on the Nasdaq First North Stockholm and a leading supplier of Cyber Security solutions, for the sale of 100% of Itway Hellas SA and Itway Turkyie Ltd at an agreed price, for both subsidiaries, of Euro 10 million made up of a cash deposit of Euro 2 million, to be paid at closing, of which Euro 500 thousand cashed in at the time of the signing of the Sales and Purchase Agreement (SPA) and a component in nature made up of No. 16,666,666 Cyber Security 1 AB newly issued shares for a total value of Euro 8 million and representing 6.35% of share capital. The closing of the transaction, initially scheduled for July 2018 was delayed and on November 8, 2018 all the cash component of the consideration was cashed in.

Also, in 2018 there was a favourable settlement of the dispute with Maticmind with the cashing in of the balance of the transaction for the sale of the Business-e subsidiary that had a Euro 1.6 million impact on the financial receivables of affiliate company Be Innova Srl and brought to cash proceeds of over Euro 300 thousand in the first quarter.

“The 2018 fiscal period proved intense and full of events that followed the strategic project to reposition the Group that began in previous years and is still not complete,” said Chairman and CEO of Itway G. Andrea Farina. “We completed the disposal program of the VAD activities to Cyber Security 1 of the high value added distribution of products and services in Greece and Turkey, strengthening also our position with Cyber Security 1 and its markets. Today the organizational structure of the Group is geared towards the development of the Digital product oriented model and the greater growth activities, aimed at replacing lower margin lines with an integrated offer of consultancy, engineering products that we plan and own that are higher value added and that are realized on the market through the establishment of four business units: Cybersecurity, Adapt/Smartys, Data Science and Safety in Italy and the foreign Countries where the Group is present. The new corporate flexibility and the investments made in previous years will allow the Group to seize new challenges and position itself also on the Digital Transformation market that leads to a new vision of corporate organization.

In October 2018 iNebula (IoT) was liquidated due to the continued significant losses and Itway bought at a price of Euro 1,198 thousand some innovative assets related to iNebula, the brand and the portal. The Group through the Be Innova affiliate (50% controlled), which increased its presence on the market, presided over security activities and Managed Security Services (MSS) as well as the development and the use of Smartys to manage bed space in hospitals, nursing homes, assisted living and in particular home care. It also assigned to 4Science (100% controlled) Data Science solutions and services, Data Management and Artificial Intelligence for scientific research, cultural heritage and Big Data. As a result of the above, the net financial position of the Group as of December 31, 2018 improved Euro 2.5 million compared with December 31, 2017.

ANALYSYS OF THE OPERATING RESULTS, FINANCIAL POSITION AND CASH FLOWS OF THE GROUP IN 2018

Following are the main consolidated economic indicators for the fiscal period ended December 31, 2018 highlighting the new operating perimeter (Net Itway Group) compared with those of the previous fiscal period (Total Group includes the business unit sold, the results of the disposed Business-e subsidiary alone and the net result corresponding to the new consolidation perimeter).

         2018                                                          2017

In relation to the perimeter of the Group corresponding to the assets that remained within Itway, consolidated Revenue came in at Euro 33.1 million, up 6% from Euro 31.1 million in the 2017 fiscal period

EBITDA was a positive Euro 1.6 million compared with a negative Euro 0.2 million in 2017; EBIT was a positive Euro 1.2 million compared with a negative Euro 1.0 million the previous year.

The Result before taxes amounted to Euro 921 thousand compared with Euro 1,428 thousand in 2017

The data for the period were impacted by Euro 600 thousand of non-recurring costs related to the remodulation of debt and the management of extraordinary transactions as well as non-recurring proceeds of Euro 3 million mainly related to the deposit received for the sale of the Greek and Turkish subsidiaries and non-operating income for the removal of Euro 1 million of debt positions that were negotiated on a bilateral basis.

Group Net Financial Position

The Net Financial Position as of December 31, 2018 amounted to Euro -4.3 million compared with Euro -6.8 million as of December 31, 2017. The Net Financial Position improved approximately Euro 2.5 million due to the cashing in of the guarantee deposit on the sale of the Greek and Turkish subsidiaries, which impacted financial receivables towards the affiliate company BE Innova for a total of Euro 1.6 million and for Euro 319 thousand for amounts cashed in by the parent company. Furthermore some debt positions were removed, allowing the company to book non-operating income of approximately Euro 800 thousand. Payables towards to banking institutions were defined through the sale to the related company Fartech, which then settled with Itway for the definitive closing of the position while Unicredit and Banco BPM sold their positions to Mercatoria S.p.A. (a company with a debt collection license pursuant to article 115 of the TULPS) which has Euro 2.1 million of financial receivables towards Itway S.p.A. Current liabilities include an Iccrea medium term financing, for a total of Euro 766 thousand, the related covenants of which have not been respected and therefore are currently classified as short term, even if the redefinition of these parameters is currently underway in order to maintain the original medium term classification.

Market context

In November 2018, Gartner announced that the evolution in the digital market – Digital Product Marketing, Privacy, Digital Twin, Augmented Intelligence (AI), Culture – with the presence of digital products in high growth fields, would distinguish successful companies from the others. The digital market in Italy ended 2018 with growth of 2.3% for the entire sector, with segments related to Digital Innovation, defined as Digital Enablers, that continue growing at double digit rates [Assinform 2016-2019: Cybersecurity (+11.9%), Cloud Computing (+19.8%), IoT (+14.3%), Big Data (+23.1%)]

Market positioning

The Itway Group during the fiscal year continued to invest in the markets of Cybersecurity, IoT and Big Data that are all related and correlated. Furthermore, it continued to reposition on new product lines in order to replace low margin lines with those with higher value added that also allow for a lower use of working capital.

Performance of the Business Areas

Sector performance: Value Added Distribution (VAD)

Through the Value Added Distribution sector the Group operates in Greece and Turkey in the distribution of specialized hardware and software products, certification services on distributed software technologies and pre- and post-sale technical assistance.

Following are the main economic indicators of the VAD SBU, compared with those of the previous fiscal year:

* The definition of Ebitda and Ebit is included in the explanatory notes to the consolidated financial statements attached to the current Report

The Turkish subsidiary confirmed once again the development prospects of the Country and ended the fiscal period with revenue volumes and profitability in line with the same period of 2017 and a net result of almost Euro 900 thousand. The results for the period were however impacted by the performance of the Turkish Lira exchange rate, which lost approx. 33% of its value against the Euro compared with 2017. Therefore, in local currency terms, results would show a revenue increase of 30%.

The Greek subsidiary ended the period with a revenue increase of 25% compared with the previous fiscal period ending with a result before taxes of approximately Euro 300 thousand. These results position the Group as the leading VAD in the security market in Greece.

Developments in 2019

On April 4, 2018, Itway signed an exclusive agreement with Cyber Security 1 AB (formerly Cognosec), a company listed on the Nasdaq First North Stockholm (COGS OTC-Nasdaq Intl. Designation: CYBNY), a leading supplier of Cyber Security solutions operating in Europe, Africa and the Middle East, for the sale of 100% of Itway Hellas SA and Itway Turkyie Ltd. After the completion of the due diligence, an agreement was signed on June 19, 2018 with a Special Purpose Agreement (SPA) that can be summed up as follows:

• The agreed price paid by Cyber Security 1 AB to Itway for both sakes totals Euro 10 million and is made up of a cash deposit of Euro 2 million, to be paid at closing, of which Euro 50 thousand was cashed in at the signing of the SPA, and a component in nature comprising No 16,666,666 newly issued Cyber Security 1 shares for a total of Euro 8 million and representing 6.35% of share capital.
• It will be possible to sell the shares in quarterly instalments during the first five quarters after the closing of the transaction and the value of these shares, equal to Euro 1.6 million for each instalment, will be guaranteed by a PUT option, released by a company that is owned by the reference shareholder of Cyber1, Kobus Paulsen, that will be able to allow the sale of these shares at the same assigned price.The third amending act signed on October 26, 2018 reaffirmed very clearly that only after receiving a bank guarantee, issued by a leading banking institution, it would have been possible to proceed with the sale of the Turkish and Greek subsidiaries. The last date foreseen by the contract was January 31, 2019. Upon request from Cyber 1 this date was delayed further since the share performance did not allow the company to be able to issue the necessary guarantees, while they accelerated on some financial transactions underway so as to allow to finance the acquisition of Itway Hellas and Itway Turkyie. Itway, with the sale of the companies that distribute high value added products and services (Value Added Distribution, or VAD) in Greece and Turkey, completed its VAD activities disposal program.
• Following these events, in the months of January to April 2019, the parties, upon request of Cyber 1, negotiated in good faith a new agreement that will allow to sell the subsidiaries at conditions that are even more favourable than those that were signed in the original SPA.
• The closing of the transaction, originally scheduled for the end of July 2018, was delayed, through three amending acts requested by the buyer, to November 8, 2018 in exchange for the commitment to pay the total cash part of the consideration, which at that date was cashed in, and the release of guarantees necessary for the cashing in of the subsequent Euro 8 million. In case of delay of the closing, a mechanism kicked in whereby the buyer had to pay a penalty of Euro 15 thousand per day until the effective closing of the transaction.

Sector performance: Activities of the Parent Company and other Start-up sectors

After the sale of the Italian distribution activities to Esprinet S.p.A., Itway has assumed the role of parent company listed on Borsa Italiana S.p.A. that supplies services of different nature to the operational subsidiaries and includes new sectors, described below, which are investing in the realization of products and tat are in an operational and commercial start-up phase. Following the sale of Business-e, starting from the middle of 2018, Itway has become an operational holding that includes system integration and production activity.

• Itway S.p.A. returns to being an operational holding and deals with consultancy, planning and system integration in the field of cyber security, in particular on the GDPR , Internet of Things (IoT) and work safety in the EH&S (Environment, Health & Safety) sector. The IoT and Safety sectors are covered and approached with the iNebula brand of which Itway purchased, in the liquidation process underway, part of the products under development and the brand name.
• 4Science S.r.l. regards services and solutions for Big Data and Data Management and AI for the scientific research, cultural heritage and Big Data markets.

ANALYSIS OF OPERATING RESULTS, FINANCIAL POSITION AND CASH FLOWS OF THE PARENT COMPANY ITWAY SPA

The parent company Itway S.p.A. in the fiscal period ended December 2018 posted a positive result of Euro 172 thousand, compared with the negative Euro 1,783 thousand as of December 31, 2017.

EBIT was a positive Euro 871 thousand compared with the negative Euro 2,182 thousand at December 31, 2017.

Net financial position of the Parent Company

The net financial position of the Parent Company as at December 31, 2018 improved by some Euro 2.4 million compared with December 31, 2017.

Current financial liabilities for the time being include a medium-term Iccrea financing for Euro 194 thousand, for which the terms of the covenants were not observed and is therefore classified as short term. The parameters are currently being redefined in order to maintain the original status of medium term.

Expired debt positions of Itway S.p.A. and of the Itway Group, divided by type (financial, account, tax, social security and towards employees) and the eventual related reaction initiatives of creditors (solicitation, interruption of supply, injunctions, etc.)

As of December 31, 2018 expired financial positions of the parent company Itway amounted to Euro 7.8 million, while at the same date the expired financial positions of the Itway Group stood at Euro 8.6 million. Talks with banks have been opened to re-define the terms and conditions to remodulate financial indebtedness, with the objective of consolidating indebtedness; they are continuing on a bilateral basis with the single banking institutions.

The parent company as of December 31, 2018 has expired account indebtedness towards suppliers of approx. Euro 3.1 million (of which approx. Euro 0.5 million for amounts being contested by one debtor, also through legal procedures) and an indebtedness towards tax authorities of Euro 28 thousand, which is expected to be paid by the terms foresees by regulations in force.

The Itway Group as of December 31, 2018 had an expired account indebtedness towards suppliers of the Companies of the Group of approx. Euro 7.3 million (of which approx. Euro 2.2 million for amounts being contested by the debtors, also through legal proceedings) and an expired indebtedness towards tax authorities of approx. Euro 327 thousand related to debt not paid at the natural expiry during previous fiscal periods and that are expected to be paid within the terms foreseen by regulations in force.

As of December 31, 2018 legal disputes that emerged following initiatives by creditors (injunctions and writ of summons) stood at Euro 1,035 thousand. Furthermore, as of December 31, 2018 foreclosure acts for a total of Euro 798 have been notified. To date these disputes have been resolved negotiating bilaterally with debtors a payment plan and a partial removal of the positions.

As of December 31, 2018 the Parent Company and the Itway Group have debt with social security bodies that expired at their natural maturity for Euro 13 thousand and Euro 28 thousand, respectively, while there are no   expired debts towards employees.

Going concern assessment

The consolidated financial statements of the Group as of December 31, 2018 report a positive result of Euro 354 thousand while the Parent Company ended the period with a net result of Euro 172 thousand. From a financial point of view, as already reported in the financial statements to December 31, 2017, the sale on November 30, 2016 of the 20-year old distribution business by the Parent Company, due to delays with which it materialized, led the company in the month of December 2016 to a position of financial stress that is still underway.

As of December 31, 2018, the Itway Group had a current net financial indebtedness of approximately Euro 9.2 million, of which Euro 8.6 million already expired at the date of writing of the balance sheet, an indebtedness towards tax authorities and social security institutions of Euro 327 thousand (which will be paid with the terms foreseen by regulations in force) and an indebtedness towards suppliers of approx. Euro 7.3 million (of which approx. Euro 2.2 million for amounts being contested, also through legal means).

This financial stress is still present, given the lower proceeds derived from the sale of Business-e S.p.A. compared with what was foreseen in the sales contract. To face this tension the Company has for some time started talks to remodulate debt on a bilateral basis with each lender and during the fiscal period this led to the definition of positions with two banking institutions that sold their receivables to related company Fartech, which in turn settled with Itway the definitive closing of the positions. Unicredit and Banco BPM sold their positions to Mercatoria S.p.A. (a company with a debt collection license pursuant to art. 115 of the TULPS) which has Euro 2.1 million of financial receivables towards Itway S.p.A. To date negotiations are still under way with Monte dei Paschi di Siena, Banca Intesa and other minor lenders while agreements are underway with Mercatoria to define the balance and the removal of the acquired positions.

In this context the Company deemed necessary to proceed with the sale of the stakes in Itway Hellas SA and Itway Turkyie Ltd to Cyber Security 1 AB and towards this end signed a Sale and Purchase agreement on June 19, 2018 for a total of Euro 10 million, of which Euro 2 million due at the closing that was scheduled by the end of September 2018 and Euro 8 million in Cyber 1 shares that could be sold as the same assignment price in five quarterly instalments starting from three months from the closing date.

The closing of the transaction, originally scheduled for July 2018, was delayed through three amending acts upon request of the buyer, to November 8, 2018 in exchange for a commitment to pay the total cash amount, which at that date was cashed in, and the release of the necessary guarantees to cash in the subsequent Euro 8 million. In case of delays in the closing, a penalty at the expense of the buyer of Euro 15 thousand per day kicked in that will be calculated until the effective date of the closing of the sale.

The third amending act signed on October 26, 2018 reaffirmed very clearly that only after receiving a bank guarantee, issued by a leading banking institution, it would have been possible to proceed with the sale of the Turkish and Greek subsidiaries. The last date foreseen by the contract was January 31, 2019. Upon request from Cyber 1 this date was delayed further since the share performance did not allow the company to be able to issue the necessary guarantees, while they accelerated on some financial transactions underway so as to allow to finance the acquisition of Itway Hellas and Itway Turkyie.

Following these events, in the months of January to April 2019, the parties, upon request of Cyber 1, negotiated in good faith a new agreement that will allow to sell the subsidiaries at conditions that are even more favourable than those that were signed in the original SPA.

Itway, following the sale of the companies that distribute high value added products and services (Value Added Distribution, or VAD) in Greece and Turkey, completes its disposal programs of VAD activities.

Industrial plan 2019-2022 and financial plan of Itway SpA 2019-2020

The Board of Directors of Itway also approved the guide lines of the industrial plan of the Group for the period 2018-2022. These guidelines foresee that the Group does not exit from the security sector but that it re-positions itself on the basis of investments made by Itway S.p.A., the coverage of which will derive from financial proceeds from the sale of the Greek and Turkish subsidiaries as well as a greater focus on the affiliate company Be Innova S.r.l. and 4Science S.r.l. There will also be a continuation of the development of foreign operations in the MENA area where the group is present through stakes in Itway Mena FZC. The plan foresees the continuation of the above mentioned activities and from a financial point of view is based on two key premises:

• The payment of financial proceeds deriving from the al of the stakes in Itway Hellas SA and Itway Turkyie Ltd;
• The favourable outcome of negotiations, as indicated above, with the remaining banking institutions in order to allow remodulating maturities according to the forecasts of the plan.

Today, the Board of Directors approved the financial plan for Itway S.p.A. until all of 2020.

On the basis of this approved financial plan and having made the necessary checks on future expected cash flows, the Directors, though acknowledging elements of uncertainty surrounding the positive outcome of the transactions that make up the fundamental assumptions of the plan, drafted the balance sheet on the basis that the Group in its new configuration will be able to fulfil its commitments in the 2019-2022 time frame and therefore confirmed the adoption of the going concern principle in the drafting of the consolidated and separate financial statements of the Parent Company as at December 31, 2018.

Relationships with related parties

In the 2018 fiscal period the Group had commercial and financial relationships with related parties. These relationships were part of normal management activity, regulated at market conditions that are established by contract by the parties in line with the standard procedures.

SUBSEQUENT EVENTS

Foreseeable evolution of operations

The guidelines foresee that the Group focuses on the security sector, the market for which is expected to grow over 12% over the next five years, and that there be a repositioning in products and services. Furthermore there is expected to be a greater focus on the Be Innova S.r.l. and 4Science S.r.l. subsidiaries. The development of foreign operations continues also in the MEA area where the Group is present through its stake in Itway Mena FZC.

Furthermore, we count on developing alliances and partnerships with players that have synergies with us, therefore with skills that are complementary to ours and with whom to face projects that are now we do not have access to. While considering also projects that are financed at a national and/or European level, we will focus only on those projects where we satisfy the requirements to take part, some already in the 2018-2019 Pipeline Prospects, not with the view of a non-repayable funding but with a view of a sub-supplier, where the activities of the Group will be remunerated.

Own shares

The Parent Company as at December 31, 2018 owns 853,04 own shares (equal to 10.79% of share capital) for a nominal value of Euro 426,522 and a net movement in 2018 of approx. Euro -40 thousand and an overall purchase cost for the shares held in portfolio of Euro 1,346 thousand (equal to the amount reflected in the Own share reserve deducted from net equity of the fiscal period and at a consolidated level). During the 2018 fiscal year, as authorized by the Shareholders meeting of Itway Spa, a total of 34,323 own shares were sold (equal to 0.43% of share capital) for a nominal value of Euro 17,162.

Proposal for the allocation of the Result of the period

The Company proposes to allocate to reserve the profit for the 2018 period of Euro 172 thousand.

Other deliberations 

The Board of Directors also approved the Report on Corporate Governance and Ownership Structure and proceeded to ascertain the persistence of the requirements of independence of non-executive directors Valentino Bravi, Annunziata Mangotti and Piera Magnatti pursuant to article 148, paragraph 3 of the TUF as well as the Code of Self Conduct for listed companies.

The Board of Directors also approved the Interim Management report as of September 30, 2018. For further details please see the Interim Management Report as of September 30, 2018 that will be published on www.itway.com

The Board of Directors, lastly, deliberated to convene the Annual General Meeting of Shareholders of the Company in first and second call on May 22-23, at the headquarters in Ravenna.

* * * * * *

As foreseen by paragraph 2, art. 154-bis of the T.U.F., the manager mandated to draft the corporate Accounting documents of Itway Group, Sonia Passatempi, declares that the corporate accounting information in this press release corresponds to the documental evidence, financial books and accounting records

* * * * * *

Founded in Ravenna on July 4, 1996, Itway S.p.A. is the parent of a group that operates in the IT sector through the planning, production and distribution of technologies and solutions in the cyber security sector, cloud computing and big data. The group for over 20 years has represented a reference point in terms of solutions and services for digital transformation

CONTACTS

Tables attached to the press release