MICT, Inc.
Q3 2019 Earnings Call Transcript

Published: 15 Nov 2019

[Operator:]

Good morning and thank you for calling in to review MICT's Third Quarter 2019 Results. Management will provide an overview of the results. Importantly, there is a slide presentation which management will use during their overview. This presentation can be found on the Investor Relations section of the company's website, www.mict-inc.com, under Events and Presentations.You may also access a PDF copy of the presentation by clicking the link in the company's press release regarding these financial results issued yesterday and then clicking a second link, labeled third quarter 2019 results. Callers accessing the PDF copy of the presentation will need to manually scroll through the slides as management goes through the presentation.I will now take a brief moment to read the Safe Harbor statement. During the course of this call, management will make expressed and implied forward-looking statements within the Private Securities Litigation Reform Act of 1995 and other U.S. Federal Securities Laws. These forward-looking statements include, but are not limited to those statements regarding the proposed timing for the closing of the transaction with GFH Intermediate Holdings Ltd., Global Fintech Holdings Ltd. and other third parties, and the belief that such transaction will create substantial value for MICT shareholders, while also benefiting the merger partners; the proposed timing of the closing of the balance of the $1.75 million funding; the expectation that following the merger the company will have a strong balance sheet, which will enable the company to pursue a revenue acquisition program and to materialize significant fintech opportunities in China, that GFH expects over the coming months to implement its program to acquire substantial revenues through the acquisition of significant players in the sector, resulting in rapid growth and the contribution of significant profitability to the MICT group; the belief that the company's strategic decision to change its business will contribute very positively to value creation for its present and future shareholders; and the expectation that, following the merger, the combination of strong cash reserves and abundant opportunities will facilitate substantial earnings growth potential for the company.Such forward-looking statements and their implications involve known and unknown risks, uncertainties and other factors that may cause actual results or performance to differ materially from those projected. The forward-looking statements contained in this presentation are subject to other risks and uncertainties, including those discussed in the Risk Factors section and elsewhere in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission and in the Company's Annual Report on Form 10-Q for the quarter ended September 30, 2019, filed with the Securities and Exchange Commission.No offer or solicitation

[David Lucatz:]

Thank you. Good morning, everyone. Before we get into a review with the first quarter number for MICT, I would like to review the major funding and acquisition agreement we recently announced.We believe our strategic decision to enter into the fintech space through this acquisition agreement and $25 million in funding for a convertible note will potentially increases shareholder value for MICT today and into the future.On November 7, 2019, MICT, Inc. signed an agreement for a $25 million private placement of convertible notes, converting automatically subject to certain closing conditions at $ 1.41 per share at the closing of an acquisition by the Company of Global Fintech Holdings, GFH, which acquired the ParagonEX Limited group of companies and the trading companies of BNN Technology PLC.Through its newly acquired subsidiaries, GFH provide its platforms within the financial trading and Contracts for Difference, CFD sectors in Europe, Middle East, and Asia. Upon closing of the merger, the combined MICT Group is expected to have a strong balance sheet with over $25 million of cash, enabling the company to pursue a revenue acquisition program and to materialize significant Fintech opportunities in China. The acquisition agreement amongst the companies is subject to certain closing conditions.Now we move to Slide number 6 to review the third quarter numbers. During the third quarter, we successfully closed on a series of strategic transactions, resulting in the receipt by the company of a total of $7.25 million, consisting of Series A convertible preferred stock and convertible notesThis $7.25 million include, before expenses, $5.25 million in Series A convertible preferred stock, and a $2 million convertible note purchased by BNN Technology to replace MICT's existing creditor instruments on more favorable terms, plus applicable warrant coverage.BNN and MICT have the option to increase the amount of the note financing to $3 million in the future. An additional $1.75 million is expected through a Series A convertible preferred in the near future, resulting in an aggregate of potentially $9 million in the proceeds to the company.On Slide 7, we will review the third quarter 2019 financial results. As a reminder, MICT's current voting interest in Micronet Limited or Micronet stands at the 37.79%. Therefore, based on the U.S. GAAP rules, MICT no longer report consolidated results due to reduced ownership of Micronet effective March 1, 2019. MICT’s nine months results reported today reflect consolidated Micronet numbers for January 2019 and February 2019 only.Gross loss for MICT was zero for the three months ended September 30, 2019, compared to gross profit of $54,000 for the three months ended September 30, 2018. R&D expenses in the third quarter of 2019 was zero, as compared to $425,000 for the third quarter of 2018.Selling, general and administrative expenses was $501,000 in the third quarter of 2019, as compared to $2.93 million in the third quarter of 2018. Net loss attributable to MICT was $1.2 million in the third quarter of 2019, as compared to a net loss of $2.6 million in the third quarter of 2018.I will now turn the call to Moran for a more detailed financial review.

[Moran Amran:]

Thank you, David, and good morning everyone. The next slide illustrated revenue for the three-and-nine months period ended September 30, 2019 as compared to the same period in 2018. Revenue was zero in the third quarter of 2019 as compared to $2.22 million in the third quarter of 2018. During the nine months period ended September 30, 2019, MICTs revenue were $477,000, as compared to $12.9 million in the first nine months of 2018.Slide nine provide a more detailed breakdown of the numbers for both the three-and-nine months ended September 30, 2019 as compared to the same period in 2018. Total operating expense in the third quarter of 2019 was $501,000, as compared to $3.57 million in the third quarter of 2018. Loss from operation was $501,000 in the third quarter of 2019 as compared to $3.51 million in the third quarter of 2018.Net loss attributable to MICT in the third quarter of 2019 was $1.21 million or $0.11 per basic and diluted share, as compared to a net loss of $2.64 million or $0.28 per basic and diluted share in the third quarter of 2018. For the nine months ended September 30, 2019, total operating expenses were $2.64 million, as compared to $8.40 million in the first nine months of 2018. Loss from operation was $3 million in the first three quarters of 2019 as compared to $5.1 million in the same period of 2018.Net loss attributed to MICT in the nine months ended September 30, 2019 was $3.22 million or $0.03 per basic and diluted share, as compared to a net profit of $10,000 or loss of $0.54 per basis and diluted share in the same period in 2018.Turning to slide 10. On our balance sheet, we have $5.8 million in cash and cash equivalent, a $3.7 million in working capital and $2.9 million in shareholders equity, as of September 30, 2019.I will now turn the call back to David.

[David Lucatz:]

Thank you, Moran. We strongly believe we are building shareholder value through the acquisition agreement to enter the global fintech business in the $25 million convertible note. I would like to thank our shareholders and dedicated employees for being part of this. And we look forward to continue growing the company.

[End of Q&A:]

Thank you. This concludes Micronet Enertec Technologies third quarter 2019 results conference call. Thank you for your participation. You may go ahead and disconnect.