MICT, Inc. (NASDAQ:MICT) Q3 2019 Earnings Conference Call November 15, 2019 9:00 AM ET
David Lucatz - Chairman, President & Chief Executive Officer
Moran Amran - Controller
Conference Call Participants
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: This communication is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any securities or the solicitation of any vote in any jurisdiction pursuant to the proposed transaction or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law.
No offer of securities shall be made except by means of a prospective meeting the requirements of the Securities Act of 1933, as amended, subject to certain exceptions to be approved by the relevant regulators or certain factors to be ascertained, the public offer will not be made directly or indirectly, in or into any jurisdiction where to do so would constitute a violation of the laws of such jurisdiction, or by use of the mails or by any means or instrumentality, including without limitation, similarly transmission, telephone and the internet of inter-state or foreign commerce, or any facility of a National Securities Exchange of any such jurisdiction. Important additional information will be filed with the SEC.
In connection with the proposed acquisition, MICT intends to file a proxy statement on Schedule 14A and other relevant materials with the Securities and Exchange Commission, or SEC. Stockholders of MICT are urged to read MICT’s proxy statement and all other relevant documents filed with the SEC when they become available, as they will contain important information about the proposed transaction.
A definitive proxy statement will be sent to MICT’s stockholders seeking their approval of the proposed transaction. MICT’s stockholders will be able to obtain these documents when available free of charge at the SEC’s website, www.sec.gov. In addition, they may obtain free copies of these by contacting MICT’s Secretary, 28 West Grand Avenue, Suite 3, Montvale, New Jersey 07645.
Participants in solicitation; MICT and its directors and executive officers, may be deemed to be participants in the solicitation of proxies for the special meeting of MICT's stockholders to be held to approve the proposed business combination. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of MICT's stockholders in connection with the proposed business combination will be set forth in the proxy statement. You can find information about MICT's executive officers and directors in its Annual Report on Form 10-K for the year-ended December 31, 2018.
Please note, that the date of this conference call is November 15, 2019 and any forward-looking statements that management makes today are based on assumptions that are reasonable as of this date. Except as otherwise required by law, the company is under no obligation to and expressly disclaims any obligation to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.
On the call this morning, we have David Lucatz, Chairman, President, and Chief Executive Officer of MICT; and Moran Amran, Controller of MICT. And again, as a reminder, management will be referring to a slide presentation that can be accessed via the Investor Relations section of the company's site or the link in the press release. We will start with an opening message from David, who will give an overview of business developments for the three months ended, September 30, 2019. Then we will move to review the numbers with Moran.
I will now turn the call over to David, who will begin the presentation on slide 5. Please go ahead, David.
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 notes
This $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.
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.
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.