Item
1. Financial Statements.
MICT,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(USD In
Thousands, Except Share and Par Value Data)
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
123,403
|
|
|
$
|
29,049
|
|
Trade accounts receivable, net
|
|
|
9,282
|
|
|
|
523
|
|
Inventories
|
|
|
1,935
|
|
|
|
2,002
|
|
Other current assets
|
|
|
2,918
|
|
|
|
1,756
|
|
Related party
|
|
|
174
|
|
|
|
-
|
|
Held for sales assets
|
|
|
449
|
|
|
|
*350
|
|
Total current assets
|
|
|
138,161
|
|
|
|
33,680
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
466
|
|
|
|
*417
|
|
Intangible assets, net
|
|
|
17,135
|
|
|
|
*17,159
|
|
Goodwill
|
|
|
27,219
|
|
|
|
22,405
|
|
Investment and loan to Huapie
|
|
|
-
|
|
|
|
3,038
|
|
Right of use assets
|
|
|
564
|
|
|
|
291
|
|
Long-term deposit and prepaid expenses
|
|
|
283
|
|
|
|
266
|
|
Restricted cash escrow
|
|
|
477
|
|
|
|
477
|
|
Total long-term assets
|
|
|
46,144
|
|
|
|
44,053
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
184,305
|
|
|
$
|
77,733
|
|
|
*
|
Reclassified – see note 2.
|
MICT,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(USD In
Thousands, Except Share and Par Value Data)
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturity of long term bank loans
|
|
$
|
660
|
|
|
$
|
884
|
|
Trade accounts payable
|
|
|
5,909
|
|
|
|
838
|
|
Related party
|
|
|
-
|
|
|
|
163
|
|
Other current liabilities
|
|
|
5,249
|
|
|
|
5,102
|
|
Total current liabilities
|
|
|
11,818
|
|
|
|
6,987
|
|
|
|
|
|
|
|
|
|
|
Long term escrow
|
|
|
477
|
|
|
|
477
|
|
Lease liability
|
|
|
332
|
|
|
|
164
|
|
Deferred tax liabilities
|
|
|
4,049
|
|
|
|
4,256
|
|
Accrued severance pay
|
|
|
148
|
|
|
|
153
|
|
Total long term liabilities
|
|
|
5,006
|
|
|
|
5,050
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
Common stock; $0.001 par value, 250,000,000 shares authorized, 114,177,951 and 68,757,447 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
|
|
|
114
|
|
|
|
68
|
|
Additional paid in capital
|
|
|
208,428
|
|
|
|
102,195
|
|
Additional paid in capital - preferred stock
|
|
|
138
|
|
|
|
138
|
|
Capital reserve related to transaction with the minority shareholder
|
|
|
(174
|
)
|
|
|
(174
|
)
|
Capital reserve from currency translation
|
|
|
410
|
|
|
|
(196
|
)
|
Accumulated loss
|
|
|
(44,427
|
)
|
|
|
(39,966
|
)
|
MICT, Inc. stockholders’ equity
|
|
|
164,489
|
|
|
|
62,065
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests
|
|
|
2,992
|
|
|
|
3,631
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
167,481
|
|
|
|
65,696
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
184,305
|
|
|
$
|
77,733
|
|
MICT,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(USD In
Thousands, Except Share and Earnings Per Share Data)
(Unaudited)
|
|
Three months ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
8,935
|
|
|
$
|
-
|
|
Cost of revenues
|
|
|
6,992
|
|
|
|
-
|
|
Gross profit
|
|
|
1,943
|
|
|
|
-
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
231
|
|
|
|
-
|
|
Selling and marketing
|
|
|
1,001
|
|
|
|
-
|
|
General and administrative
|
|
|
4,568
|
|
|
|
770
|
|
Amortization of intangible assets
|
|
|
926
|
|
|
|
-
|
|
Total operating expenses
|
|
|
6,726
|
|
|
|
770
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(4,783
|
)
|
|
|
(770
|
)
|
Share in investee losses
|
|
|
-
|
|
|
|
(640
|
)
|
Other income
|
|
|
87
|
|
|
|
-
|
|
Financial expenses, net
|
|
|
(566
|
)
|
|
|
(224
|
)
|
Loss before provision for income taxes
|
|
|
(5,262
|
)
|
|
|
(1,634
|
)
|
Taxes on income (benefit)
|
|
|
(356
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Total net loss
|
|
|
(4,906
|
)
|
|
|
(1,635
|
)
|
Net loss attributable to non-controlling interests
|
|
|
(445
|
)
|
|
|
-
|
|
Net loss attributable to MICT, Inc.
|
|
|
(4,461
|
)
|
|
|
(1,635
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share from continued operation
|
|
|
(0.05
|
)
|
|
|
(0.15
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
88,554,624
|
|
|
|
11,089,532
|
|
MICT,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(USD In
Thousands)
(Unaudited)
|
|
Three months ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,906
|
)
|
|
$
|
(1,635
|
)
|
Other comprehensive loss, net of tax:
|
|
|
|
|
|
|
-
|
|
Currency translation adjustment
|
|
|
412
|
|
|
|
(70
|
)
|
Total comprehensive loss
|
|
|
(4,494
|
)
|
|
|
(1,705
|
)
|
Comprehensive loss attributable to non-controlling interests
|
|
|
(639
|
)
|
|
|
-
|
|
Comprehensive loss attributable to MICT, Inc.
|
|
$
|
(3,855
|
)
|
|
$
|
(1,705
|
)
|
MICT, INC.
STATEMENTS OF CHANGES IN EQUITY
(USD In Thousands, Except Numbers of Shares)
(Unaudited)
|
|
Series
B Convertible Preferred Stock
|
|
|
Series
A Convertible Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Additional
Paid-in
|
|
|
Additional
Paid-in
|
|
|
Retained
|
|
|
Accumulated
Other Comprehensive
|
|
|
Non-
controlling
|
|
|
Total
Stockholders’
|
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Capital
|
|
|
Capital
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income
|
|
|
Interest
|
|
|
Equity
|
|
Balance,
December 31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
2
|
|
|
|
2,386,363
|
|
|
|
11
|
|
|
|
11,089,532
|
|
|
|
-
|
|
|
|
6,028
|
|
|
|
14,107
|
|
|
|
(16,974
|
)
|
|
|
70
|
|
|
|
0
|
|
|
|
3,244
|
|
Stock based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
|
|
Issuance of warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,635
|
)
|
|
|
(70
|
)
|
|
|
|
|
|
|
(1,705
|
)
|
Issuance of shares, net-
Series A Convertible Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
795,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
410
|
|
Issuance
of shares, net- Series B Convertible Preferred Stock
|
|
|
2
|
|
|
|
1,818,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,916
|
|
Balance,
March 31, 2020
|
|
|
2
|
|
|
|
1,818,182
|
|
|
|
3
|
|
|
|
3,181,818
|
|
|
|
11
|
|
|
|
11,089,532
|
|
|
|
1,914
|
|
|
|
6,437
|
|
|
|
14,169
|
|
|
|
(18,609
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
3,927
|
|
|
|
Series
B Convertible Preferred Stock
|
|
|
Series
A Convertible Preferred Stock
|
|
|
Common
Stock
|
|
|
Additional Paid-in
|
|
|
Additional Paid-in
|
|
|
Additional Paid-in
|
|
|
Retained
|
|
|
Accumulated Other Comprehensive
|
|
|
Capital reserve related to transaction
with the
|
|
|
Non- controlling
|
|
|
Total Stockholders’
|
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Capital
|
|
|
Capital
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income
|
|
|
minority
|
|
|
Interest
|
|
|
Equity
|
|
Balance,
December 31, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
68
|
|
|
|
68,757,450
|
|
|
|
-
|
|
|
|
138
|
|
|
|
102,195
|
|
|
|
(39,966
|
)
|
|
|
(196
|
)
|
|
|
(174
|
)
|
|
|
3,631
|
|
|
|
65,696
|
|
Shares issued to service
providers and employees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
69,107
|
|
|
|
|
|
|
|
|
|
|
|
(300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(300
|
)
|
Exercising options for employees
and consultants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,461
|
)
|
|
|
|
|
|
|
-
|
|
|
|
(445
|
)
|
|
|
(4,906
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
606
|
|
|
|
|
|
|
|
(194
|
)
|
|
|
412
|
|
Issuance 25M,net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
2,400,000
|
|
|
|
|
|
|
|
|
|
|
|
2,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
2,676
|
|
Public offering $60M
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
22,471,904
|
|
|
|
|
|
|
|
|
|
|
|
53,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,000
|
|
Public offering $54M
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
19,285,715
|
|
|
|
|
|
|
|
|
|
|
|
48,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,690
|
|
Exercising
warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1,173,775
|
|
|
|
|
|
|
|
|
|
|
|
1,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,213
|
|
Balance,
March 31, 2021
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
114
|
|
|
|
114,177,951
|
|
|
|
-
|
|
|
|
138
|
|
|
|
208,428
|
|
|
|
(44,427
|
)
|
|
|
410
|
|
|
|
(174
|
)
|
|
|
2,992
|
|
|
|
167,481
|
MICT,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(USD In
Thousands)
(Unaudited)
|
|
Three months ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net loss from continued operations
|
|
$
|
(4,906
|
)
|
|
$
|
(1,635
|
)
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Impairment of loan to Micronet Ltd.
|
|
|
-
|
|
|
|
272
|
|
Impairment of equity method investment in Micronet Ltd.
|
|
|
-
|
|
|
|
640
|
|
Depreciation and amortization
|
|
|
1,119
|
|
|
|
3
|
|
Change in deferred taxes, net
|
|
|
(207
|
)
|
|
|
-
|
|
Other non-current assets
|
|
|
(15
|
)
|
|
|
-
|
|
Due to related party
|
|
|
(145
|
)
|
|
|
-
|
|
Accrued interest and exchange rate differences on loans from others
|
|
|
-
|
|
|
|
(62
|
)
|
Settlement consideration in cash decreasing share capital
|
|
|
(300
|
)
|
|
|
|
|
Stock-based compensation for employees and consultants
|
|
|
-
|
|
|
|
62
|
|
Increase in trade accounts receivable, net
|
|
|
(8,829
|
)
|
|
|
-
|
|
Increase in inventories
|
|
|
(5
|
)
|
|
|
-
|
|
Decrease in accrued severance pay, net
|
|
|
(5
|
)
|
|
|
-
|
|
Increase in other current assets
|
|
|
(1,031
|
)
|
|
|
(195
|
)
|
Increase in trade accounts payable
|
|
|
5,792
|
|
|
|
-
|
|
Decrease in other current liabilities
|
|
|
6
|
|
|
|
303
|
|
Net cash used in operating activities
|
|
$
|
(8,526
|
)
|
|
$
|
(612
|
)
|
MICT,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(USD In
Thousands)
(Unaudited)
|
|
Three months ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(304
|
)
|
|
|
-
|
|
Purchase of Huapie (B)
|
|
|
1,834
|
|
|
|
-
|
|
Purchase of Beijing Fucheng Lianbao (A)
|
|
|
(4,891
|
)
|
|
|
-
|
|
Loan to related party (Micronet Ltd.)
|
|
|
-
|
|
|
|
(125
|
)
|
Net cash used in investing activities
|
|
$
|
(3,361
|
)
|
|
$
|
(125
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Current maturity of long term bank loans
|
|
$
|
(195
|
)
|
|
$
|
-
|
|
Repayment on account of redemption
|
|
|
-
|
|
|
|
(15,900
|
)
|
Payments on account of shares
|
|
|
-
|
|
|
|
15,900
|
|
Issuance of shares and warrants
|
|
|
105,365
|
|
|
|
-
|
|
exercise of warrants
|
|
|
1,213
|
|
|
|
-
|
|
Issuance of convertible preferred shares net
|
|
|
-
|
|
|
|
409
|
|
Net cash provided by (used in) financing activities
|
|
$
|
106,383
|
|
|
$
|
409
|
|
|
|
|
|
|
|
|
|
|
NET INCNREAS (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
94,496
|
|
|
|
(328
|
)
|
|
|
|
|
|
|
|
|
|
Cash, Cash Equivalents and restricted cash at beginning of the period
|
|
|
29,049
|
|
|
|
3,154
|
|
|
|
|
|
|
|
|
|
|
TRANSLATION ADJUSTMENT ON CASH AND CASH EQUIVALENTS
|
|
|
(142
|
)
|
|
|
-
|
|
Cash, Cash Equivalents and restricted cash at end of the period
|
|
$
|
123,403
|
|
|
$
|
2,826
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Amount paid during the period for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
26
|
|
|
$
|
15
|
|
Taxes
|
|
$
|
53
|
|
|
$
|
1
|
|
Appendix A: Beijing Fucheng Lianbao
|
|
February 10,
2021
|
|
Net working capital
|
|
|
106
|
|
Property and equipment
|
|
|
26
|
|
Current liabilities
|
|
|
(55
|
)
|
Goodwill
|
|
|
4,814
|
|
Cash
|
|
|
4,891
|
|
Appendix B: Huapei Global Securities Limited
|
|
February 26,
2021
|
|
Net working capital
|
|
|
206
|
|
Investment and loan to Huapie
|
|
|
(2,947
|
)
|
Property and equipment
|
|
|
24
|
|
Current liabilities
|
|
|
(19
|
)
|
Intangible assets
|
|
|
902
|
|
Cash
|
|
|
(1,834
|
)
|
Appendix C: Non-cash Transaction
On January 21, 2020, the Company entered into a Conversion
Agreement, or the Conversion Agreement, with BNN Technology PLC, or BNN, pursuant to which BNN agreed to convert the outstanding Convertible
Note in the amount of $2,000 into 1,818,181 shares of the Company’s newly-designated Series B Convertible Preferred Stock, par value
$0.001 per share, with a stated value of $1.10 per share, or the Series B Preferred Stock.
On October 2, 2020 our indirect
wholly-owned subsidiary BI Intermediate (Hong Kong) Limited (“BI Intermediate”) has entered a strategic agreement to acquire,
the entire share capital of Huapei Global Securities Limited (“Huapei”), Hong Kong based securities and investments firm for
a total purchase price of U.S.$3.0 million (“Purchase Price”). As part of the transaction, BI Intermediate has granted to
Huapei's seller, a loan under a loan agreement in a sum equal to the outstanding consideration due and payable by BI Intermediate upon
closing (the "Loan"). On February 26, 2021 we have completed the acquisition of Huapei upon the purchase of remaining outstanding
share capital (91% of the share capital) of Huapei and accordingly upon closing, the Loan was converted against the remaining outstanding
consideration. The acquisition was consummated following the receipt of the approval of the SFC for the change in the substantial shareholder
of Huapei. In consideration for the entire share capital of Huapei and as of this date onward we start to consolidate this company on
our financial reports.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(USD in
thousands, except per share data)
NOTE 1 — DESCRIPTION
OF BUSINESS
Overview
We were formed as a Delaware
corporation on January 31, 2002. On March 14, 2013, we changed our corporate name from Lapis Technologies, Inc. to Micronet Enertec Technologies,
Inc. On July 13, 2018, following the sale of our former subsidiary Enertec Systems Ltd., we changed our name from Micronet Enertec Technologies,
Inc. to MICT, Inc. Our shares have been listed for trading on The Nasdaq Capital Market under the symbol “MICT” since April
29, 2013.
Prior to July 1, 2020, MICT
operated primarily through its Israel-based majority-owned subsidiary, Micronet. Since July 1, 2020, after MICT completed its acquisition
(the “Acquisition”) of GFH Intermediate Holdings Ltd. (“GFHI” or “Intermediate”), pursuant to that certain
Agreement and Plan of Merger entered into on November 7, 2019 by and between MICT, GFHI, Global Fintech Holding Ltd. (“GFH”),
a British Virgin Islands company and the sole shareholder of GFHI, and MICT Merger Subsidiary Inc., a British Virgin Islands company and
a wholly owned subsidiary of MICT (“Merger Sub”), as amended and restated on April 15, 2020 (the “Restated Merger Agreement”
and “Merger”), we have been operating in the financial technology sector. Intermediate is a financial technology company
with a marketplace in China and in other areas of the world and is currently in the process of building various platforms for business
opportunities in various verticals and technology segments in order to capitalize on such technology and business. Intermediate plans
to continue and advance its capabilities and its technological platforms through acquisition or license of technologies to support in
growth efforts in the different market segments as more fully described below. Accordingly, after the Merger, MICT’s includes the
business of Intermediate, its wholly-owned subsidiary, operating through its operating subsidiaries, as described herein.
Our current business, following
the completion of the Acquisition, is primarily comprised and focused on the growth and development of the Intermediate financial technology
offering and the marketplace in China. We aim and are in the process of building various platforms for business opportunities in various
verticals and technology segments in order to capitalize on such technology and business.
As a result of our Acquisition
of Intermediate and the subsequent work we have undertaken with the management of Intermediate, we are positioned to establish ourselves,
through our operating subsidiaries, to serve the markets as a financial technology company with a significant China marketplace and in
other areas of the world. Intermediate has built various platforms to capitalize on business opportunities in a range of verticals and
technology segments, which currently includes stock trading and wealth management; commodities in segments of oil and gas trading; and
insurance brokerage. We are seeking to secure material contracts in these valuable market segments in China while developing opportunities,
in order to allow Intermediate to access to such markets. We will continue to add to the capabilities of such platforms such as through
acquisition and/or the license of technologies to support these efforts in the different market segments as more fully described below.
By building secure, reliable and scalable platforms with high volume processing capability, we intend to provide customized solutions
that address the needs of a highly diverse and broad client base.
We are planning to implement
our plans taking advantage of Intermediate experience and experience in local markets in China, and through the Company’s operating
subsidiaries which have begun to secure material contracts in fast growing market segments in China.
Our current valuable opportunities
have given us access the following market segments:
|
●
|
Stock trading and wealth management segment
|
|
●
|
Commodities in the field of Oil and gas trading segment
|
|
●
|
Insurance brokerage segment
|
As set hereunder, these opportunities
are supported and shall further planned to be executed and realized through our business development efforts which as set forth herein
include the acquisition of potential targets entities, business and assets (such as applicable required licenses) in the relevant business
space and segments in which we plan to operate, which allow the Company to enter the market quickly and leverage on such existing assets
in order to promote its growth strategy.
Significant transactions during the period:
On January 1, 2021 we have entered via Tianjin Bokefa technology co.,
ltd., our fully owned subsidiary, into a transaction with the shareholders of Guang Xi Zhong Tong, a local Chinese entity with business
and operations in the field of broker insurance. Pursuant to the transaction, we have granted to the Guang Xi Zhong Tong shareholders
(the “Shareholders”) with a frame work loan ("Frame Work Loan") in the total amount of up to RMB 40 million (approximately
$6,125,000) (“Frame work Loan Amount”) which is designated, if exercised, to be used as working capital for Guang Xi Zhong
Tong. As of March 31, 2021, only a sum of RMB 1,800,000 (approximately $275,000) drawn down our of the Frame work Loan Amount. In consideration
for the Frame Work Loan, the parties have entered into various additional agreements which include among other: (i) a pledge agreement
pursuant to which the Shareholders have pledged their shares for the benefit of Tianjin Bokefa technology co., ltd. in order to
secure the amount drown from the Frame work Loan Amount (ii) exclusive option agreement pursuant to which Tianjin Bokefa technology
co., ltd has an exclusive option to purchase the entire shares of Guang Xi Zhong Tong from the Shareholders (“Option Agreement”)
under such terms set forth in the Option Agreement which include an exercise price not less than the maximum Frame work Loan Amount and
the right to convert the Frame work Loan Amount into the purchased shares (iii) Entrustment Agreement and Power of Attorney Agreement
pursuant to which the Shareholders irrevocably entrusted and appointed Tianjin Bokefa as its proxy and trustee to exercise on their behalf
any and all rights under applicable law and the articles of association of Guangxi Zhongtong in the Shareholder’s equity interest
in Guangxi Zhongtong (iv) business cooperation agreement and a master exclusive service agreement which grants Tianjin Bokefa with rights
related to the Guang Xi Zhong Tong business and operations designed to secure repayment of the Loan Amount. The transaction above
was structured pursuant to a Variable Interest Entity (VIE) Structure (pursuant to which we do not technically hold the shares) and as
a result in view of our direct ownership in Tianjin Bokefa technology co., ltd. and its contractual arrangements with Guang Xi Zhong Tong,
we are regarded as Guang Xi Zhong Tong controlling entity and primary beneficiary of the Guang Xi Zhong Tong business . We have
therefore, consolidated the financial results of Guang Xi Zhong Tong in our consolidated financial statements in accordance with U.S.
GAAP.
Beijing Fucheng Lianbao Technology Co., Ltd
transaction
On February 10, 2021, the
Company closed a transaction pursuant to which it acquired (via Beijing Fucheng Lianbao Technology Co., Ltd. in which it holds 24% and
engaged in a VIE structure) all of the shares of Beijing Yibao Technology Co., Ltd., and indirectly its fully owned subsidiary Beijing
Fucheng Insurance Brokerage Co., Ltd. (the “Fucheng Insurance Transaction”). Beijing Fucheng Insurance Brokerage Co., Ltd.
is a Chinese insurance brokerage agency and is a nationwide licensed entity allowing it to offer insurance brokerage services for a broad
range of insurance products. The nationwide license will allow us, via the Fucheng Insurance Transaction with flexibility to offer and
create tailor-made insurance products, to leverage directly to customers or through distribution partners and to procure better
deals with both our existing and new insurance company partners. The consummation of the Fucheng Insurance Transaction will enable us
to accelerate the onboarding of new agents throughout China onto our platforms. It also creates the opportunity to promote our business
through some of China’s biggest online portals, which will provide business-to-business-to-consumer (B2B2C) as well as business-to-consumer
(B2C) channels. In addition, the Fucheng Insurance acquisition initiates the nationwide rollout of its mobile application, which will
facilitate access to those portals’ vast customer bases, offering MICT’S full complement of insurance products. The shares
were acquired for approximately $5.7 million, and funded through MICT, out of which, $0.9 million were allocated as working capital and
the remain $4.8 million were allocated to Goodwill.
Acquisition Agreement with Huapei Global Securities
Limited
On October 2, 2020 our indirect
wholly-owned subsidiary BI Intermediate (Hong Kong) Limited (“BI Intermediate”) has entered a strategic agreement (“Strategic
Agreement”) to acquire, the entire share capital of Huapei Global Securities Limited (“Huapei”), Hong Kong
based securities and investments firm for a total purchase price of Approximately $3.0 million (“Purchase Price”).
Huapei is licensed to trade securities on leading exchanges in Hong Kong, the U.S. and China including the valuable China A-Shares, all
of which are the primary target markets for Company’s global fintech business. The Strategic Agreement provided that the acquisition
shall be consummated in two phases, an initial purchase of 9% of the share capital of Huapei and thereafter, the remaining 91% of Huapei
would be purchased by BI Intermediate upon and subject to the approval of the Hong Kong Securities and Futures Commission (SFC), the principal
regulator of Hong Kong’s securities and futures markets. On November 11, 2020, BI Intermediate closed on its acquisition of the
first 9% of its acquisition and paid 9% of the Purchase Price. Additionally, pursuant to the Strategic Agreement upon the initial closing,
BI Intermediate made a loan to Huapei in an amount equivalent to the remaining 91% of the purchase price. Upon the closing of the remaining
91%, which remains subject to SFC approval, the loan will be cancelled, and BI Intermediate will acquire the remaining 91% of Huapei.
The loan was secured against the pledge of the 91% of the share capital of Huapei yet purchased at such time by BI Intermediate. The obligations
of Huapei, the seller of the interests of Huapei, under the loan agreement have been guaranteed by the ultimate controller of Huapei.
On February 26, 2021 we have completed the acquisition of Huapei upon the purchase of remaining outstanding share capital (91% of the
share capital) of Huapei. The acquisition was consummated following the receipt of the approval of the SFC for the change in the substantial
shareholder of Huapei. In consideration for the entire share capital of Huapei , we paid a total Purchase Price of $2.947 million (reflecting
the net asset value of Huapei Global estimated at $2.034 million recorded as a working capital, and a premium $902 Thousands that were
recorded as a license in the Intangible assets. The Company is in the process of integrating its mobile app supporting platform with Huapei’s
licensed trading assets.
As a result of our acquisition
of Huapei we have now obtained the licenses and permits for operating the online platform and expect to launch the online stock trading
platform initially in Hong Kong once we have completed rigorous testing to ensure scale and reliablility of the systems. Thereafter. we
will be in a position to notify the Hong Kong regulator of our intended launch date of the new online trading APP.
Significant transactions in Micronet shares:
On June 10, 2020, MICT Telematics
Ltd, our fully owned subsidiary, purchased 5,999,996 of Micronet’s ordinary shares for aggregate proceeds of NIS 1.8 Million (or
$515 thousand) through tender offer issued by MICT Telematics. As a result, we have increased the ownership interest in Micronet to 45.53%
of Micronet’s issued and outstanding ordinary shares.
Subsequently, on June 23,
2020 we have purchased through public offering consummated by Micronet on the Tel Aviv Stock Exchange (the “TASE”), 10,334,000
of Micronet’s ordinary shares for total consideration of NIS 3,100,200 (or $887 Thousand), and as a result increased our ownership
interest in Micronet to 53.39% of Micronet’s outstanding ordinary shares. as a result, MICT applied purchase accounting and began
to consolidate Micronet beginning on such date. MICT recognized a $665 Thousand gain on previously held equity in Micronet.
On October 11, 2020, Micronet
has consummated a public equity offering on TASE , in which the Company purchased 520,600 of Micronet’s ordinary shares and 416,480
of Micronet’s stock options convertible into 416,480 Micronet ordinary shares (at a conversion price of NIS 3.5 per share), for
total consideration of NIS 4,961,202 (or $1,417,486). Following the Micronet’s offering and as a result thereof including the purchase
of Micronet shares, the exercise of our stock options and additional purchase of 115,851 Micronet shares from an individual seller our
ownership interest in Micronet was diluted from 53.39% to 50.31% of the Micronet outstanding share capital.
Offering of Secured shares
For share issuance see Note 3.
NOTE 2 — SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed unaudited
consolidated financial statements and condensed footnotes have been prepared in accordance with the applicable rules and regulations of
the SEC, regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by the
accounting principles generally accepted in the United States of America, or U.S. GAAP, for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring items) considered necessary for fair statement of results for the interim
periods presented have been included. The results of operations for the three months ended March 31, 2021 are not necessarily indicative
of the results to be expected for the full year 2021 or for other interim periods or for future years. The consolidated balance sheet
as of March 31, 2021 is derived from unaudited financial statements as of that date; and, it does not include all of the information and
footnotes required by U.S. GAAP for complete financial statements. These consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2020.
The Company’s operations
and business may still be subject to adverse effect due to the unprecedented conditions surrounding the spread of COVID-19 throughout
North America, Israel, China and the world. Although currently the COVID-19 (due to the measures implemented to reduce the spread of the
virus) have not had a material adverse effect on the Company financial reports; there can be no assurance that Company’s financial reports
will not be affected in the future from COVID-19 or resulting from restrictions and other government actions.
Principles of Consolidation
The accompanying consolidated financial statements
are prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP).
Revenue Recognition
With respect to Micronet applicable
revenue recognition GAAP requirements, Micronet implements a revenue recognition policy pursuant to which it recognizes its revenues at
the amount to which it expects to be entitled when control of the products or services is transferred to its customers. Control is generally
transferred when the Company has a present right to payment and title and the significant risks and rewards of ownership of products are
transferred to its customers. There is limited discretion needed in identifying the point control passes: once physical delivery of the
products to the agreed location has occurred, Micronet no longer has physical possession of the product and will be entitled at such time
to receive payment while relieved from the significant risks and rewards of the goods delivered. For most of Micronet’s products
sales, control transfers when products are shipped.
With respect to the GFHI applicable revenue recognition
GAAP requirements, the company implements a revenue recognition policy pursuant to which it recognizes its revenues at the amount to which
it expects to be entitled when control of the products or services is transferred to its customers. Control is generally transferred when
the Company has a present right to payment and title and the significant risks and rewards of ownership of products are transferred to
its customers. There is limited discretion needed in identifying the point control passes: once physical delivery of the products to the
agreed location has occurred, the company no longer has physical possession of the product and will be entitled at such time to receive
payment while relieved from the significant risks and rewards of the goods delivered.
The company’s income includes a). to provide
customers with marketing promotion and information drainage services, and to charge information service fees according to the customer
traffic information provided to customers with business needs; b). to provide insurance brokerage services or insurance agency services
on behalf of insurance carriers. In accordance with ASC 606-10-55, Revenue Recognition: Principal Agent Considerations, the Company considers
several factors in determining whether it acts as the principal or as an agent in the arrangement of merchandise sales and provision of
various related services and thus whether it is appropriate to record the revenues and the related cost of sales on a gross basis or record
the net amount earned as service fees. For b). insurance agency services, we have identified our promise to sell insurance policies on
behalf of an insurance carrier as the performance obligation in our contracts with the insurance carriers. Our performance obligation
to the insurance carrier is satisfied and commission revenue is recognized at the point in time when an insurance policy becomes effective.
Held for sale:
As of March 31,2021 Micronet classified the building as held for sale,
as Micronet is taking active steps to sell the building this year. According to the US-GAAP there company need to classify the building
for the previous periods . therefore the December,31 2020 numbers classified in accordance to this treatment.
Note 3
— Stockholders’ Equity
On June 4, 2019, we entered into
a Securities Purchase Agreement (the “Preferred Securities Purchase Agreement”) with the purchasers named therein (the “Preferred
Purchasers”), pursuant to which we agreed to sell 3,181,818 shares of newly designated Series A Convertible Preferred Stock with
a stated value of $2.20 per share (the “Preferred Stock”). The Preferred Stock, are convertible into up to 6,363,636 shares
of our common stock, par value $0.001 per share (the “Common Stock”), and were sold together with certain Common Stock purchase
warrants (the “Preferred Warrants”) to purchase up to 4,772,727 shares of Common Stock (representing 75% of the aggregate
number of shares of Common Stock into which the Preferred Stock shall be convertible), for aggregate gross proceeds of $7 million to us
(the “Preferred Offering”).
On July 29, 2019, the Company
completed the first closing in the Preferred Offering, pursuant to which it sold 2,386,363 shares of Series A Preferred Stock and 3,579,544
accompanying Series A Preferred Warrants for aggregate gross proceeds of $5,250,000. The Company paid an aggregate of $420,000 in fees
with respect to this closing of the Preferred Offering. Additionally, in January 2020, the Company completed a second closing of the sale
of Series A Convertible Preferred Stock, pursuant to which it sold 795,455 additional shares of Series A Preferred Stock and 1,193,183
accompanying Preferred Warrants to purchase up to 1,084,712 shares of the Company’s common stock, for aggregate gross proceeds of
$1,750,000. The Company paid an aggregate of $140,000 in fees with respect to this closing of the Preferred Offering.
The Series A Preferred Stock
was convertible into common stock at the option of each holder of Series A Preferred Stock at any time and from time to time, and was
also convertible automatically upon the occurrence of certain events. The Company also had the option to redeem some or all of the Series
A Preferred Stock, at any time and from time to time, beginning on December 31, 2019 subject to the satisfaction of certain conditions.
The holders of Series A Preferred Stock voted together with the holders of common stock as a single class on as-converted basis, and the
holders of Series A Preferred Stock holding a majority-in-interest of the Series A Preferred Stock were entitled to appoint an independent
director to the Company’s board of directors. The Preferred Securities Purchase Agreement provided for customary registration rights.
The Series A Preferred Warrants
have an exercise price of $1.01 (subject to customary adjustment in the event of future stock dividends, splits and the like) and are
exercisable immediately, until the earlier of (i) two years from the date of issuance or (ii) the later of (a) 180 days after the closing
by the Company of a change of control transaction, or (b) the Company’s next debt or equity financing of at least $20,000,000.
Pursuant to the April 21, 2020,
and the July 8, 2020 Agreements entered by MICT with various purchasers for the sale of certain convertible notes as described in the
Description of Business above, MICT sold convertible notes with an aggregate total principal amount of approximately $15.0 million under
such terms as described hereinabove. Based on the terms included in the convertible notes, following receipt of the Company’s stockholders
in September 2020, the Convertible Notes were converted into 13,636,363 shares of common stock of the Company at a conversion price of
$1.10 per share as set above.
On July 1, 2020, MICT completed
its acquisition (the “Acquisition”) of GFH Intermediate Holdings Ltd. (“GFHI”), pursuant to the previously announced
Agreement and Plan of Merger entered into on November 7, 2019 by and between MICT, GFHI, Global Fintech Holding Ltd. (“GFH”),
a British Virgin Islands company and the sole shareholder of GFHI, and MICT Merger Subsidiary Inc., a British Virgin Islands company and
a wholly owned subsidiary of MICT (“Merger Sub”), as amended and restated on April 15, 2020 (the “Restated Merger Agreement”).
As of the date hereof pursuant to the Acquisition the Company issued to GFH 22,727,272 shares of common stock reflecting a price of $1.10
per each MICT share.
On September 8, 2020, the Company
and all of the holders (the “Holders”) of the Company’s Series A Convertible Preferred Stock, par value $0.001 per share
(the “Series A Preferred”), entered into a series of Series A Convertible Preferred Stock Exchange Agreements (each an Exchange
Agreement and together, the “Exchange Agreements”), pursuant to which the Holders exchanged an aggregate of 3,181,818 shares
of the Series A Preferred, on a 1-for-2 basis, for an aggregate of 6,363,636 shares of the Company’s common stock, par value $0.001
per share (the “Common Stock”).
On September 10, 2020, the Company
and the holder (the “Holder”) of the Company’s Series B Convertible Preferred Stock, with a par value of $0.001 per
share (the “Series B Preferred”), entered into that certain Series B Convertible Preferred Stock Exchange Agreement (the “Exchange
Agreement”) in the form attached hereto as Exhibit 10.1, pursuant to which the Holder exchanged an aggregate of 1,818,181 shares
of the Series B Preferred, on a 1-for-1 basis, for an aggregate of 1,818,181 shares of the Company’s common stock, par value $0.001
per share (the “Common Stock”).
On November 2, 2020 the Company
entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain investors (the “Investors”)
for the purpose of raising $25.0 million in gross proceeds for the Company (the “Offering”). Pursuant to the terms of the
Purchase Agreement, the Company sold in a registered direct offering, an aggregate of 10,000,000 units (each, a “Unit”), with
each Unit consisting of one share of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and
one warrant to purchase 0.8 of one share of Common Stock (each, a “Warrant”). at a purchase price of $2.50 per Unit. The Warrants
are exercisable six months after the date of issuance at an exercise price of $3.12 per share and will expire five years following the
date the Warrants become exercisable. The closing of the sale of Units pursuant to the Securities. Purchase Agreement occurred
on November 4, 2020. By December 31, 2020, the Company had received a total of $22.325 million in gross proceeds pursuant to Offering
and issued in the aggregate, 7,600,000 Units. The remaining gross proceeds, in the additional aggregate amount of $2.675 million, were
received by the Company on March 1, 2021 and in consideration for such proceeds, the Company issued the remaining 2,400,000 units.
On
February 11, 2021, the Company announced that it has entered into a Securities Purchase Agreement (the “Purchase Agreement”)
with certain institution investors for the sale of (i) 22,471,904 shares of common stock, (ii) 22,471,904 Series A Warrants to purchase
22,471,904 shares of common stock and (iii) 11,235,952 Series B Warrants to purchase 11,235,952 shares of common stock at a combined
purchase price of $2.67 (the “Offering”). The gross proceeds to the Company from the Offering are expected to be approximately
$60.0 million . The Series A Warrants will be exercisable six months after the date of issuance, have an exercise price of $2.80 per
share and will expire five and one-half years from the date of issuance. The Series B Warrants will be exercisable six months after the
date of issuance, have an exercise price of $2.80 per share and will expire three and one-half years from the date of issuance. The Company
received net proceeds of $54.0 million on February 16, 2021 after deducting the Placement Agent’s fees and other expenses.
On March
2, 2021, the Company entered into a Securities Purchase Agreement with certain investors for the purpose of raising approximately $54.0
million in gross proceeds for the Company. Pursuant to the terms of the Purchase Agreement, the Company agreed to sell, in a registered
direct offering, an aggregate of 19,285,715 shares of the Company’s common stock, par value $0.001 per share (the “Common
Stock”), at a purchase price of $2.675 per Share and in a concurrent private placement, warrants to purchase an aggregate of 19,285,715
shares of Common Stock, at a purchase price of $0.125 per Warrant, for a combined purchase price per Share and Warrant of $2.80 (the “Purchase
Price”) which was priced at the market under Nasdaq rules. The Warrants are immediately exercisable at an exercise price of $2.80
per share, subject to adjustment, and expire five years after the issuance date. The closing date was on March 4, 2021. The Company received
net proceeds of $48.69 million on March 4, 2021, after deducting the Placement Agent’s fees and other expenses.
NOTE 4 — GAIN
OF CONTROL OF SUBSIDIARY- Micronet Acquisition
On June 10, 2020, MICT Telematics
Ltd, our fully owned subsidiary, purchased 5,999,996 of Micronet’s ordinary shares for aggregate proceeds of NIS 1.8 Million (or
$515,000) through tender offer issued by MICT Telematics. As a result, we have increased the ownership interest in Micronet to 45.53%
of Micronet’s issued and outstanding ordinary shares.
Subsequently, on June 23,
2020 we have purchased through public offering consummated by Micronet on the Tel Aviv Stock Exchange (the “TASE”), 10,334,000
of Micronet’s ordinary shares for total consideration of NIS 3,100,200 (or $887,000). as a result increased our ownership interest
in Micronet to 53.39% of Micronet’s outstanding ordinary shares, and, as a result, MICT applied purchase accounting and began to
consolidate Micronet beginning on such date. MICT recognized a $665,000 , gain on previously held equity in Micronet.
On October 11, 2020, Micronet
has consummated a public equity offering on TASE , in which the Company purchased 520,600 of Micronet’s ordinary shares and 416,480
of Micronet’s stock options convertible into 416,480 Micronet ordinary shares (at a conversion price of NIS 3.5 per share), for
total consideration of NIS 4,961,202 (or $1,417,486). Following the Micronet’s offering and as a result thereof including the purchase
of Micronet shares, the exercise of our stock options and additional purchase of 115,851 Micronet shares from an individual seller our
ownership interest in Micronet was diluted from 53.39% to 50.31% of the Micronet outstanding share capital.
Micronet’s income
and net loss as presented if the Company’s acquisition date had occurred at the beginning of the annual reporting period
|
|
Three months ended
March 31,
|
|
|
|
2020
|
|
Revenues
|
|
$
|
617
|
|
|
|
|
|
|
Net loss
|
|
|
(3,070
|
)
|
Management engaged a third-party valuation firm to
assist them with the valuation of the intangible assets that are detailed in the schedule below.
NOTE 5 — LOAN TO MICRONET LTD.
On November 13, 2019, the
Company and Micronet executed a convertible loan agreement pursuant to which the Company agreed to loan to Micronet $500,000 in the aggregate
(the “Convertible Loan”). The Convertible Loan bears interest at a rate of 3.95% calculated and is paid on a quarterly basis.
In addition, the Convertible Loan, if not converted, shall be repaid in four equal installments, the first of such installment payable
following the fifth quarter after the issuance of the Convertible Loan, with the remaining three installments due on each subsequent quarter
thereafter, such that the Convertible Loan shall be repaid in full upon the lapse of 24 months from its grant. In addition, the outstanding
principal balance of the Convertible Loan, and all accrued and unpaid interest, is convertible at the Company’s option, at a conversion
price equal to 0.38 NIS per Micronet share. Pursuant to the Convertible Loan agreement, Micronet also agreed to issue the Company an option
to purchase up to one of Micronet’s ordinary shares for each ordinary share that it issued as a result of a conversion of the Convertible
Loan (“Convertible Loan Warrant”), at an exercise price of 0.60 NIS per share, exercisable for a period of 15 months. On July
5, 2020, the Company had a reverse split where the price of the Convertible Loan changed from 0.08 NIS per Micronet share into 5.7 NIS
per Micronet share. The option’s exercised price was changed from 0.6 NIS per share to 9 NIS per Micronet share.
On January 1, 2020, the Convertible
Loan transaction was approved at a general meeting of the Micronet shareholders and as a result, the Convertible Loan and the transactions
contemplated thereby entered into effect.
On August 13, 2020, MICT
Telematics extended to Micronet an additional loan in the aggregate amount of $175,000 (the “Third Loan” and the “Loan
Sum”, respectively) which governing the existing outstanding intercompany debt. The Third Loan does not bear any interest and is
provided for a period of twelve (12) months. The Loan Sum was granted for the purpose of supporting Micronet’s working capital
and general corporate needs.
NOTE 6 — GFH
Intermediate Holdings Ltd (“GFHI”) Acquisition
On July 1, 2020, MICT completed
its acquisition of GFH Intermediate Holdings Ltd. pursuant to the previously announced Agreement and Plan of Merger entered into on November
7, 2019 by and between MICT, Micronet, GFHI, Global Fintech Holding Ltd, a British Virgin Islands company and the sole shareholder of
GFHI, and MICT Merger Subsidiary Inc., a British Virgin Islands company and a wholly owned subsidiary of MICT, as amended and restated
on April 15, 2020. As described in the Restated Merger Agreement, upon consummation of the Acquisition, the outstanding share of GFHI
was cancelled in exchange for a convertible promissory note in the principal amount of $25,000,000 issued to GFH by MICT, which Consideration
Note has been converted into 22,727,273 shares of common stock of MICT at a conversion price of $1.10 per share. As a result of the acquisition
goodwill and intangible assets were created.
NOTE 6 — GFH
Intermediate Holdings Ltd (“GFHI”) Acquisition (Cont.)
GFHI’s income and net loss
as presented if the Company’s acquisition date had occurred at the beginning of the annual reporting period
|
|
Three months
ended
March 31,
|
|
|
|
2020
|
|
Revenues
|
|
$
|
-
|
|
|
|
|
|
|
Net loss
|
|
|
(542
|
)
|
NOTE 7 — SEGMENTS
Operating segments are based
upon our internal organization structure, the manner in which our operations are managed and the availability of separate financial information.
We have two operating segments: verticals and technology segments operated by GFHI and a MRM segment operated by Micronet.
The following table summarizes the financial performance
of our operating segments:
|
|
Three months ended March 31, 2020
|
|
|
|
Verticals
and
technology
|
|
|
Mobile
resource
management
|
|
|
Consolidated
|
|
Revenues from external customers
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Segment operating loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Non allocated expenses
|
|
|
|
|
|
|
|
|
|
|
(770
|
)
|
Finance expenses and other
|
|
|
|
|
|
|
|
|
|
|
(864
|
)
|
Consolidated loss before provision for income taxes
|
|
|
|
|
|
|
|
|
|
$
|
(1,634
|
)
|
|
|
Three months ended March 31, 2021
|
|
|
|
Verticals and technology
|
|
|
Mobile resource management
|
|
|
Consolidated
|
|
Revenues from external customers
|
|
$
|
8,209
|
|
|
$
|
726
|
|
|
$
|
8,935
|
|
Segment operating loss
|
|
|
(1,967
|
)(1)
|
|
|
(827
|
)(2)
|
|
|
(2,794
|
)
|
Non allocated expenses
|
|
|
|
|
|
|
|
|
|
|
(1,989
|
)
|
Finance expenses and other
|
|
|
|
|
|
|
|
|
|
|
(479
|
)
|
Consolidated loss before provision for income taxes
|
|
|
|
|
|
|
|
|
|
$
|
(5,262
|
)
|
(1)
|
Includes $733 of intangible assets amortization, derived from GFHI. acquisitions.
|
|
(2)
|
Includes $103 of intangible assets amortization, derived from Micronet consolidation.
|
The following table summarizes the financial statements
of our balance sheet accounts of the segments:
|
|
As of March 31, 2021
|
|
|
|
Verticals
and
technology
|
|
|
Mobile resource management
|
|
|
Consolidated
|
|
Assets related to segments
|
|
$
|
58,777
|
(3)
|
|
$
|
10,595
|
(4)
|
|
$
|
69,372
|
|
Non allocated Assets
|
|
|
|
|
|
|
|
|
|
|
114,933
|
|
Liabilities related to segments
|
|
|
(10,630)
|
(5)
|
|
|
(3,426)
|
(6)
|
|
|
(14,056
|
)
|
Non allocated liabilities
|
|
|
|
|
|
|
|
|
|
|
(2,768
|
)
|
Total Equity
|
|
|
|
|
|
|
|
|
|
$
|
167,481
|
|
(3)
|
Includes $15,265 of intangible assets and $24,602 goodwill, derived from GFHI’s acquisition.
|
|
(4)
|
Includes
$1,870 of intangible assets and $2,617 goodwill, derived from Micronet’s consolidation.
|
(5)
|
Includes $3,737 of deferred tax liability, derived from GFHI acquisition.
|
(6)
|
Includes $312 of deferred tax liability, derived from Micronet consolidation.
|
NOTE 8 — LEGAL PROCEEDINGS
In March 2017, MICT entered
into the Sunrise Agreement with Sunrise through Sunrise’s principal, Amnon Mandelbaum, pursuant to which Sunrise agreed to assist
MICT in identifying, analyzing, structuring, and negotiating suitable business opportunities, such as a sale of stock or assets, merger,
tender offer, joint venture, financing arrangement, private placement, or any similar transaction or combination thereof. The parties
initially disagreed as to the amount of the fee that would be payable upon the closing of the transactions contemplated by the Merger
Agreement. There are also questions about the applicability of the Sunrise Agreement to the Merger, and whether or not Sunrise is properly
owed any transaction fee upon the closing of the Merger. In any event, in order to resolve this matter, as of the date hereof, the parties
have executed a settlement and release agreement for the release and waiver of the above claims in consideration for the issuance of freely
tradable shares of common stock of MICT worth no less than $1,500,000 (the “Shares”), which Shares shall be delivered as follows:
(i) 67.5% of the Shares to Amnon Mandelbaum; (ii) 7.5% of the Shares to INTE Securities LLC; and (iii) 25% of the Shares to Amini LLC).
In addition, by no later than February 16, 2021, MICT shall issue 200,000 warrants to purchase 200,000 freely tradable registered shares
of Common Stock of MICT and deliver original copies of such warrants within five business days of the date of issuance of the warrants.
The shares issuable upon exercise of the warrants shall be registered on a registration statement. 150,000 of these warrants shall be
issued to Amnon Mandelbaum; 50,000 of these warrants shall be issued to Amini LLC, or its designee as named in writing. Each warrant shall
be exercisable into one share of registered common stock of MICT until one year after the date of issuance the warrants at an exercise
price of $1.01 per share, and in any other respects on the same material terms and conditions as are applicable to MICT’s current
outstanding warrants including, but not limited to, cashless exercise at all times from the date of issuance of the warrants until to
the expiration dates of the warrants, certain exercise price adjustments, and other terms as are no less favorable to MICT’s recently
issued common stock purchase warrant agreements. MICT was not able to timely file a registration statement to register the shares, and
shares underlying the warrants per the settlement agreement. The Sunrise parties notified MICT that it has breached the settlement agreement.
Subsequently, on March 30, 2021, MICT and the Sunrise parties signed an amended settlement agreement whereby MICT has obligated to to
make a $1,000,000 payment by March 31, 2021 and the share dollar amount set forth above was reduced from $1,500,000 to $500,000. Furthermore,
if MICT is not able to file a registration statement with the SEC for the Shares by June 4, 2021, it will be required to make a $600,000
payment to settle the matter in full and Sunrise will not receive any MICT shares. As of the date hereof, we have timely made the $1,000,000
payment above.
On September 22, 2020, the Company entered into a
settlement and release agreement with Craig Marshak, or Marshak, in connection with a claim filed by Marshak against the Company and additional
defendants. Pursuant to settlement and in consideration for a customary release and waiver for the benefit of MICT, MICT agreed to pay
Marshak a sum of $125,000 in cash. Mr. Marshak then dismissed such claim. On January 15, 2021 the parties have executed an amendment to
the settlement and release agreement for the payment to Marshak of $315,000 in exchange for the tender back of 60,000 of the Company’s
share promised to Mr. Marshak as part of the settlement and release agreement.
On November 2, 2020, the Company
entered into a settlement and release agreement with Maxim Group LLC, or Maxim, pursuant to which the Company and Maxim agreed to release
one another from any and all claims arising out of that certain advisory agreement entered into by and between Maxim and BNN Technology
PLC on February 22, 2018. In consideration therefor, the Company issued Maxim 269,107 shares of MICT common stock and agreed to file a
resale registration statement with respect to such shares. The Company failed to timely file the resale registration statement and entered
into an amendment to the settlement agreement on March 1, 2021 which required a payment of $300,000 in exchange for the return of 134,554
shares of MICT common stock. The $300,000 payment was made on March 3, 2021. In addition, pursuant to the amendment, the Company was required
to take all steps necessary to ensure that the resale registration with respect to such shares was declared effective within two business
days of the filing of its Annual Report on Form 10-K for the year ended December 31, 2020. The Form 10-K was filed on March 31, 2021 and
the registration statement was not declared effective within two business days thereafter. Since the registration statement was not declared
effective within two business days of the filing of the Company’s annual report, the Company paid Maxim $335,000 in full settlement
of this matter and the remaining 134,553 shares were returned to MICT.
NOTE 9 — INTENGABLE ASSETS
Composition:
|
|
Useful life
|
|
March 31,
|
|
|
December 31,
|
|
|
|
years
|
|
2021
|
|
|
2020
|
|
Original amount:
|
|
|
|
|
|
|
|
|
Technology
|
|
5-6
|
|
$
|
13,070
|
|
|
$
|
13,070
|
|
Trade name/ trademarks
|
|
5-10
|
|
|
850
|
|
|
|
850
|
|
Customer related intangible assets
|
|
5-6
|
|
|
4,910
|
|
|
|
4,910
|
|
License
|
|
|
|
|
902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,732
|
|
|
$
|
18,830
|
|
Accumulated amortization:
|
|
|
|
|
|
|
|
|
|
|
Technology
|
|
5-6
|
|
$
|
(1,674
|
)
|
|
$
|
(1,116
|
)
|
trade name/ trademarks
|
|
5-10
|
|
|
(107
|
)
|
|
|
(71
|
)
|
Customer related intangible assets
|
|
5-6
|
|
|
(726
|
)
|
|
|
(484
|
)
|
others
|
|
|
|
|
(90
|
)
|
|
|
|
|
|
|
5
|
|
$
|
(2,597
|
)
|
|
$
|
(1,671
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Amount:
|
|
|
|
$
|
17,135
|
|
|
$
|
17,159
|
|
NOTE 10 — BEIJING FUCHENG LIANBAO TECHNOLOGY
CO., LTD TRANSACTION
On February 10, 2021, the
Company closed a transaction pursuant to which it acquired (via Beijing Fucheng Lianbao Technology Co., Ltd. in which it holds 24% and
engaged in a VIE structure) all of the shares of Beijing Yibao Technology Co., Ltd., and indirectly its fully owned subsidiary Beijing
Fucheng Insurance Brokerage Co., Ltd. (the “Fucheng Insurance Transaction”).
The table set forth below
summarizes the estimates of the fair value of assets acquired and liabilities assumed and resulting gain on bargain purchase. In addition,
the following table summarizes the allocation of the preliminary purchase price as of the acquisition date:
Beijing Fucheng Lianbao Technology Co.,
Ltd transaction, Purchase Price Allocation
(USD In Thousands)
Total cash consideration (1)
|
|
|
5,711
|
|
Total Purchase Consideration
|
|
$
|
5,711
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Net working capital, (2)
|
|
$
|
926
|
|
Property and equipment (2)
|
|
|
26
|
|
Current liabilities (2)
|
|
|
(55
|
)
|
Fair value of net assets acquired
|
|
$
|
897
|
|
|
|
|
|
|
Goodwill value
|
|
$
|
4,814
|
|
|
(1)
|
Cash
paid at the closing of the transaction.
|
|
(2)
|
Book
value used as a proxy for fair value.
|
NOTE 11 — SUBSEQUENT EVENTS
Resignation of Jeffry P. Bialos
On April 12, 2021, Jeffrey
P. Bialos tendered his resignation as a member of the board of directors (the “Board”) of MICT, Inc. (the “Company”),
effective immediately. Mr. Bialos resigned to focus on other endeavors and not in connection with any disagreements with the Company.
Appointment of John Scott
Effective April 12, 2021,
the Board appointed John Scott as the non-executive Deputy Chairman. Mr. Scott assumed his position as the non-executive Deputy Chairman
the same day.
Appointment of Robert John Benton
Effective April 12, 2021,
the Board appointed Robert Benton to fill the vacancy created by the resignation of Jeffrey P. Bialos. Mr. Benton assumed his position
as a non-executive member of the Board on April 12, 2021.
On May 17, 2021, the MICT,
Inc.’s (the “Company”) the board of directors (the “Board”) unanimously approved a grant of 6,000,000 shares
of common stock (the “Shares”) to Darren Mercer, the Company’s Chief Executive Officer. The issuance of the Shares is
pursuant to the Company’s Long Term Incentive Plan as previously approved by the stockholders and negotiated in connection with
the Company’s acquisition of Global Fintech Holdings Limited. The Board unanimously agreed to issue the Shares in recognition of
Mr Mercer’s direct contribution to achieving numerous key deliverables including: (i) the completion of several acquisitions, including
those of Beijing Fucheng Insurance Brokerage Co., Ltd and Huapei Global Securities Ltd; (ii) obtaining regulatory approval from the Hong
Kong SFC regarding the acquisition of Huapei Global Securities Ltd; (iii) the signing of several major commercial contracts and partnerships,
including with a number of major insurance agents and one of China’s largest payment service providers; (iv) the signing of an exclusive
partnership with the Shanghai Petroleum and Natural Gas Trading Center to allow MICT to provide financial services to its customers; (v)
the successful launch of the insurance business in December 2020 and the delivery of significant revenues and revenue growth in Q1 2021;
and (vi) the completion of capital raises totaling in excess of $140 million and broadening the Company’s institutional investor
base. The Board further unanimously approved a grant of 125,000 stock options (the “Stock Options”) to Ms. Amram under the
Company’s 2020 Equity Incentive Plan (the “Plan”). The Stock Options have an exercise price of $1.41 per share of common
stock and have an expiration date of May 17, 2031.
On May 23, 2021 the Board
approved certain issuance of Company options pursuant to the Company's 2012 option plan ("Plan") to the following optionees
(i) to Mr. Robert Benton 80,000 options (ii) to Mr. John McMillan Scott 160, 000 options (iii) to Mr. Chezy Yehezkel (Chezy) Ofir 30,000
options and (iv) to Mr. Richard Abrahams 100,000 options ; All options as aforementioned have an exercise price based on the Company’s
share market price as closed on the last trading day prior to the date hereof, equal to exercise price of US1.81 per shares; For each
of the optionees, the options shall be vested as follows: 50% of the options shall be fully vested upon their issuance; 25% of the options
shall be vested following 12 months as of the date of their issuance and 25% of the options shall be vested following 24 months as of
the date of their issuance; All options shall be subject and governed by the terms of the Plan; Each optionee herein shall execute
a customary option plan in the form to be provided by the Company.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This Quarterly Report on Form
10-Q (the “Quarterly Report”), contains certain forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995 and other Federal securities laws, and is subject to the safe-harbor created by such Act and laws. In some
cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,”
“expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,”
“predict,” “potential” or “continue,” the negative of such terms, or other variations thereon or comparable
terminology. The statements herein and their implications are merely predictions and therefore inherently subject to known
and unknown risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those contemplated
by the forward-looking statements. Such factors include, but are not limited to changes in economic conditions, government
regulations, contract requirements and abilities, competitive pressures and constantly changing technology and market acceptance of our
products and services and other risks and uncertainties discussed in this annual Form 10-K report. Such forward-looking statements appear
in this Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and
may appear elsewhere in this Quarterly Report and include, but are not limited to, statements regarding the following:
|
●
|
our
ownership position in Micronet’s share capital;
|
|
●
|
the
impact of COVID-19 on both our operations and financial outlook and those of Intermediate, Micronet and MICT;
|
|
●
|
our
financing needs and strategies, and our ability to continue to raise capital in the future;
|
|
●
|
our
corporate development objectives;
|
|
●
|
our
financial position and the value of and market for our common stock;
|
|
●
|
use
of proceeds from any future financing, if any; and
|
|
●
|
the
sufficiency of our capital resources.
|
Our business is subject to substantial risks,
which increase the uncertainty inherent in the forward-looking statements contained or implied in this report. Except as required
by law, we assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions
affecting such forward-looking statements. Further information on potential factors that could affect our business is described in our
SEC filing and the risk factors included in Part II, Item IA below. Readers are also urged to carefully review and consider
the various disclosures we have made below and in that report. The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report.
Overview
We were formed as a Delaware
corporation on January 31, 2002. On March 14, 2013, we changed our corporate name from Lapis Technologies, Inc. to Micronet Enertec Technologies,
Inc. On July 13, 2018, following the sale of our former subsidiary Enertec Systems Ltd., we changed our name from Micronet Enertec Technologies,
Inc. to MICT, Inc. Our shares have been listed for trading on The Nasdaq Capital Market under the symbol “MICT” since April
29, 2013.
Prior to July 1, 2020, MICT
operated primarily through its Israel-based majority-owned subsidiary, Micronet. Since July 1, 2020, after MICT completed its acquisition
(the “Acquisition”) of GFH Intermediate Holdings Ltd. (“GFHI” or “Intermediate”), pursuant to that
certain Agreement and Plan of Merger entered into on November 7, 2019 by and between MICT, GFHI, Global Fintech Holding Ltd. (“GFH”),
a British Virgin Islands company and the sole shareholder of GFHI, and MICT Merger Subsidiary Inc., a British Virgin Islands company and
a wholly owned subsidiary of MICT (“Merger Sub”), as amended and restated on April 15, 2020 (the “Restated Merger Agreement”
and “Merger”), we have been operating in the financial technology sector. Intermediate is a financial technology company
with a marketplace in China and in other areas of the world and is currently in the process of building various platforms for business
opportunities in various verticals and technology segments in order to capitalize on such technology and business. Intermediate plans
to continue and advance its capabilities and its technological platforms through acquisition or license of technologies to support in
growth efforts in the different market segments as more fully described below. Accordingly, after the Merger, MICT’s includes the
business of Intermediate, its wholly-owned subsidiary, operating through its operating subsidiaries, as described herein.
Our current business, following
the completion of the Acquisition, is primarily comprised and focused on the growth and development of the Intermediate financial technology
offering and the marketplace in China. We aim and are in the process of building various platforms for business opportunities in various
verticals and technology segments in order to capitalize on such technology and business.
As a result of our Acquisition
of Intermediate and the subsequent work we have undertaken with the management of Intermediate, we are positioned to establish ourselves,
through our operating subsidiaries, to serve the markets as a financial technology company with a significant China marketplace and in
other areas of the world. Intermediate has built various platforms to capitalize on business opportunities in a range of verticals and
technology segments, which currently includes stock trading and wealth management; commodities in segments of oil and gas trading; and
insurance brokerage. We are seeking to secure material contracts in these valuable market segments in China while developing opportunities,
in order to allow Intermediate to access to such markets. We will continue to add to the capabilities of such platforms such as through
acquisition and/or the license of technologies to support these efforts in the different market segments as more fully described below.
By building secure, reliable and scalable platforms with high volume processing capability, we intend to provide customized solutions
that address the needs of a highly diverse and broad client base.
We are planning to implement
our plans taking advantage of Intermediate experience and experience in local markets in China, and through the Company’s operating
subsidiaries which have begun to secure material contracts in fast growing market segments in China.
Our current valuable opportunities
have given us access the following market segments:
|
●
|
Stock trading and wealth management segment
|
|
●
|
Commodities in the field of Oil and gas trading segment
|
|
●
|
Insurance brokerage segment
|
As set hereunder, these opportunities
are supported and shall further planned to be executed and realized through our business development efforts which as set forth herein
include the acquisition of potential targets entities, business and assets (such as applicable required licenses) in the relevant business
space and segments in which we plan to operate, which allow the Company to enter the market quickly and leverage on such existing assets
in order to promote its growth strategy.
Significant transactions during the period:
On January 1, 2021 we have entered via Tianjin Bokefa technology co.,
ltd., our fully owned subsidiary, into a transaction with the shareholders of Guang Xi Zhong Tong, a local Chinese entity with business
and operations in the field of broker insurance. Pursuant to the transaction, we have granted to the Guang Xi Zhong Tong shareholders
(the “Shareholders”) with a frame work loan ("Frame Work Loan") in the total amount of up to RMB 40 million (approximately
$6,125,000) (“Frame work Loan Amount”) which is designated, if exercised, to be used as working capital for Guang Xi Zhong
Tong. As of March 31, 2021, only a sum of RMB 1,800,000 (approximately $275,000) drawn down our of the Frame work Loan Amount. In consideration
for the Frame Work Loan, the parties have entered into various additional agreements which include among other: (i) a pledge agreement
pursuant to which the Shareholders have pledged their shares for the benefit of Tianjin Bokefa technology co., ltd. in order to
secure the amount drown from the Frame work Loan Amount (ii) exclusive option agreement pursuant to which Tianjin Bokefa technology
co., ltd has an exclusive option to purchase the entire shares of Guang Xi Zhong Tong from the Shareholders (“Option Agreement”)
under such terms set forth in the Option Agreement which include an exercise price not less than the maximum Frame work Loan Amount and
the right to convert the Frame work Loan Amount into the purchased shares (iii) Entrustment Agreement and Power of Attorney Agreement
pursuant to which the Shareholders irrevocably entrusted and appointed Tianjin Bokefa as its proxy and trustee to exercise on their behalf
any and all rights under applicable law and the articles of association of Guangxi Zhongtong in the Shareholder’s equity interest
in Guangxi Zhongtong (iv) business cooperation agreement and a master exclusive service agreement which grants Tianjin Bokefa with rights
related to the Guang Xi Zhong Tong business and operations designed to secure repayment of the Loan Amount. The transaction above
was structured pursuant to a Variable Interest Entity (VIE) Structure (pursuant to which we do not technically hold the shares) and as
a result in view of our direct ownership in Tianjin Bokefa technology co., ltd. and its contractual arrangements with Guang Xi Zhong Tong,
we are regarded as Guang Xi Zhong Tong controlling entity and primary beneficiary of the Guang Xi Zhong Tong business . We have
therefore, consolidated the financial results of Guang Xi Zhong Tong in our consolidated financial statements in accordance with U.S.
GAAP.
Beijing Fucheng Lianbao Technology Co., Ltd
transaction
On February 10, 2021, the
Company closed a transaction pursuant to which it acquired (via Beijing Fucheng Lianbao Technology Co., Ltd. in which it holds 24% and
engaged in a VIE structure) all of the shares of Beijing Yibao Technology Co., Ltd., and indirectly its fully owned subsidiary Beijing
Fucheng Insurance Brokerage Co., Ltd. (the “Fucheng Insurance Transaction”). Beijing Fucheng Insurance Brokerage Co., Ltd.
is a Chinese insurance brokerage agency and is a nationwide licensed entity allowing it to offer insurance brokerage services for a broad
range of insurance products. The nationwide license will allow us, via the Fucheng Insurance Transaction with flexibility to offer and
create tailor-made insurance products, to leverage directly to customers or through distribution partners and to procure better
deals with both our existing and new insurance company partners. The consummation of the Fucheng Insurance Transaction will enable us
to accelerate the onboarding of new agents throughout China onto our platforms. It also creates the opportunity to promote our business
through some of China’s biggest online portals, which will provide business-to-business-to-consumer (B2B2C) as well as business-to-consumer
(B2C) channels. In addition, the Fucheng Insurance acquisition initiates the nationwide rollout of its mobile application, which will
facilitate access to those portals’ vast customer bases, offering MICT’S full complement of insurance products. The shares
were acquired for approximately $5.7 million, and funded through MICT, out of which, $0.9 million were allocated as working capital and
the remain $4.8 million were allocated to Goodwill.
Acquisition Agreement with Huapei Global Securities
Limited
On October 2, 2020 our indirect
wholly-owned subsidiary BI Intermediate (Hong Kong) Limited (“BI Intermediate”) has entered a strategic agreement (“Strategic
Agreement”) to acquire, the entire share capital of Huapei Global Securities Limited (“Huapei”), Hong Kong
based securities and investments firm for a total purchase price of Approximately $3.0 million (“Purchase Price”).
Huapei is licensed to trade securities on leading exchanges in Hong Kong, the U.S. and China including the valuable China A-Shares, all
of which are the primary target markets for Company’s global fintech business. The Strategic Agreement provided that the acquisition
shall be consummated in two phases, an initial purchase of 9% of the share capital of Huapei and thereafter, the remaining 91% of Huapei
would be purchased by BI Intermediate upon and subject to the approval of the Hong Kong Securities and Futures Commission (SFC), the principal
regulator of Hong Kong’s securities and futures markets. On November 11, 2020, BI Intermediate closed on its acquisition of the
first 9% of its acquisition and paid 9% of the Purchase Price. Additionally, pursuant to the Strategic Agreement upon the initial closing,
BI Intermediate made a loan to Huapei in an amount equivalent to the remaining 91% of the purchase price. Upon the closing of the remaining
91%, which remains subject to SFC approval, the loan will be cancelled, and BI Intermediate will acquire the remaining 91% of Huapei.
The loan was secured against the pledge of the 91% of the share capital of Huapei yet purchased at such time by BI Intermediate. The obligations
of Huapei, the seller of the interests of Huapei, under the loan agreement have been guaranteed by the ultimate controller of Huapei.
On February 26, 2021 we have completed the acquisition of Huapei upon the purchase of remaining outstanding share capital (91% of the
share capital) of Huapei. The acquisition was consummated following the receipt of the approval of the SFC for the change in the substantial
shareholder of Huapei. In consideration for the entire share capital of Huapei , we paid a total Purchase Price of $2.947 million (reflecting
the net asset value of Huapei Global estimated at $2.034 million recorded as a working capital, and a premium $902 Thousands that were
recorded as a license in the Intangible assets. The Company is in the process of integrating its mobile app supporting platform with Huapei’s
licensed trading assets.
As a result of our acquisition
of Huapei we have now obtained the licenses and permits for operating the online platform and expect to launch the online stock trading
platform initially in Hong Kong once we have completed rigorous testing to ensure scale and reliablility of the systems. Thereafter. we
will be in a position to notify the Hong Kong regulator of our intended launch date of the new online trading APP.
Significant transactions in Micronet shares:
On June 10, 2020, MICT Telematics
Ltd, our fully owned subsidiary, purchased 5,999,996 of Micronet’s ordinary shares for aggregate proceeds of NIS 1.8 Million (or
$515 thousand) through tender offer issued by MICT Telematics. As a result, we have increased the ownership interest in Micronet to 45.53%
of Micronet’s issued and outstanding ordinary shares.
Subsequently, on June 23,
2020 we have purchased through public offering consummated by Micronet on the Tel Aviv Stock Exchange (the “TASE”), 10,334,000
of Micronet’s ordinary shares for total consideration of NIS 3,100,200 (or $887 Thousand), and as a result increased our ownership
interest in Micronet to 53.39% of Micronet’s outstanding ordinary shares. as a result, MICT applied purchase accounting and began
to consolidate Micronet beginning on such date. MICT recognized a $665 Thousand gain on previously held equity in Micronet.
On October 11, 2020, Micronet
has consummated a public equity offering on TASE , in which the Company purchased 520,600 of Micronet’s ordinary shares and 416,480
of Micronet’s stock options convertible into 416,480 Micronet ordinary shares (at a conversion price of NIS 3.5 per share), for
total consideration of NIS 4,961,202 (or $1,417,486). Following the Micronet’s offering and as a result thereof including the purchase
of Micronet shares, the exercise of our stock options and additional purchase of 115,851 Micronet shares from an individual seller our
ownership interest in Micronet was diluted from 53.39% to 50.31% of the Micronet outstanding share capital.
Convertible Notes
On April 21, 2020, MICT, Inc.
entered into a series of note purchase agreements with certain investors identified therein pursuant to which, among other things, the
Purchasers purchased on July 1, 2020 certain convertible notes with an aggregate principal amount of approximately $11.0 million. On July
8, 2020, the Company entered into an additional series of purchase agreements with certain other purchaser pursuant to which such purchasers
purchased from the Company at such date convertible notes with an aggregate principal amount of approximately $4.0 million. Accordingly,
at total, pursuant to the above, the Company has sold convertible notes with an aggregate principal amount of approximately $15.0 million.
The Convertible Notes included
terms allowing for a conversion into shares of common stock of the Company at a conversion price of $1.10 per share. The Convertible Notes
are generally due two years from the date of issuance, except that certain convertible notes will be due five years from the date of issuance.
The Company is obligated to pay interest to the Purchasers on the outstanding principal amount at the rate of 1.0% per annum, payable
on each conversion date, in cash or, at the Company’s option, in shares of common stock. Subject to approval of the Company’s
stockholders, the Convertible Notes shall be convertible into shares of common stock. Upon the occurrence of certain events, the Purchasers
are permitted to require the Company to redeem the Convertible Notes, including any interest that has accrued thereunder, for cash. As
of the date hereof and based on the terms included in the convertible notes, following receipt of the Company’s stockholders, the
Convertible Notes were converted into shares of common stock of the Company at a conversion price of $1.10 per share as set above.
The convertible notes converted
automatically to shares of the Company on July 01 ,2020 according to the restated merger agreement terms. because the effective conversion
price was lower than the market price on the commitment date the company recorded finance expense sum up to 8.8$ Million , which related
to beneficial conversion feature.
Offering of Series A Convertible Preferred Stock
:
On June 4, 2019, we entered
into a Securities Purchase Agreement (the “Preferred Securities Purchase Agreement”) with the purchasers named therein (the
“Preferred Purchasers”) subject to approval by the Nasdaq Stock Market for as to the eligibility of the transaction, pursuant
to which we agreed to sell 3,181,818 shares of newly designated Series A Convertible Preferred Stock with a stated value of $2.20 per
share (the “Preferred Stock”). The Preferred Stock, which shall be convertible into up to 6,363,636 shares of the Company’s
common stock, par value $0.001 per share (the “Common Stock”), shall be sold together with certain Common Stock purchase warrants
(the “Preferred Warrants”) to purchase up to 4,772,727 shares of Common Stock (representing 75% of the aggregate number of
shares of Common Stock into which the Preferred Stock shall be convertible), for aggregate gross proceeds of $7 million to us (the “Preferred
Offering”). The terms of the Preferred Securities Purchase Agreement were approved by Nasdaq Stock Market on July 31, 2019 and as
a result the Company issued the preferred stock along with the warrants.
The Preferred Stock shall
be convertible into Common Stock at the option of each holder of Preferred Stock at any time and from time to time at a conversion price
of $1.10 per share, and shall also convert automatically upon the occurrence of certain events, including the completion by us of a fundamental
transaction. Commencing on March 31, 2020, cumulative cash dividends shall become payable on the Preferred Stock at the rate per share
of 7% per annum, which rate shall increase to 14% per annum on June 30, 2020. We shall also have the option to redeem some or all of the
Preferred Stock, at any time and from time to time, beginning on December 31, 2020. The holders of Preferred Stock shall vote together
with the holders of Common Stock as a single class on as-converted basis, and the holders of Preferred Stock holding a majority-in-interest
of the Preferred Stock shall be entitled to appoint an independent director to the Company’s board of directors (the “Preferred
Director”). The Preferred Securities Purchase Agreement provides for customary registration rights.
The Preferred Warrants shall
have an exercise price of $1.01 (subject to customary adjustment in the event of future stock dividends, splits and the like), which is
above the average price of the Common Stock during the preceding five trading days of entry into the Preferred Securities Purchase Agreement,
and shall be exercisable immediately, until the earlier of (i) two years from the date of issuance or (ii) the later of (a) 180 days after
the closing by the Company of a change of control transaction, or (b) the Company’s next debt or equity financing of at least $20
million.
On September 8, 2020, the
Company and all of the holders of the Company’s Series A Convertible Preferred Stock, par value $0.001 per share, entered into a
series A Convertible Preferred Stock Exchange Agreements (each an Exchange Agreement and together, the “Exchange Agreements”),
pursuant to which the Holders exchanged an aggregate of 3,181,818 shares of the Series A Preferred, on a 1-for-2 basis, for an aggregate
of 6,363,636 shares of the Company’s common stock, par value $0.001 per share.
Offering of Convertible Note and Warrants
On June 4, 2019, we entered
into a Securities Purchase Agreement (the “Note Purchase Agreement”) with BNN Technology Plc (“BNN”) subject to
approval by the Nasdaq Stock Market for as to the eligibility of the transaction, pursuant to which BNN agreed to purchase from us $2
million of convertible notes, which subscription amount shall be subject to increase by up to an additional $1 million as determined by
BNN and us (collectively, the “Convertible Notes”). The Convertible Notes, which shall be convertible into up to 2,727,272
shares of Common Stock (using the applicable conversion ratio of $1.10 per share), shall be sold together with certain Common Stock purchase
warrants (the “Note Warrants”) to purchase up to 2,727,272 shares of Common Stock (representing 100% of the aggregate number
of shares of Common Stock into which the Convertible Notes are convertible) (the “Convertible Note Offering”). The Convertible
Notes shall have a duration of two (2) years.
The Convertible Notes shall
be convertible into Common Stock at the option of the Note Purchaser at any time and from time to time, and upon the issuance of one or
more Convertible Notes. Darren Mercer, the Chief Executive Officer of BNN, was appointed to the Company’s board of directors (the
“Note Director”). The Note Purchase Agreement provides for customary registration rights. The terms of the note purchase agreement
were approved by Nasdaq Stock Market on July 31, 2019 and as a result the Company issued the convertible notes along with the warrants.
The Note Warrants shall have
an exercise price of $1.01 (subject to customary adjustment in the event of future stock dividends, splits and the like), and shall be
exercisable immediately upon receipt of stockholder approval of the Convertible Note Offering, until the earlier of (i) two years from
the date of issuance or (ii) the later of (a) 180 days after the closing by the Company of a change of control transaction, or (b) the
Company’s next debt or equity financing of at least $20 million.
In accordance with ASC 470
“Debt”, the Company analyzed the Note Purchase Agreement and the Preferred Securities Purchase Agreement (as described above)
as combined transaction, as both agreements were signed simultaneously with an overall objective and as a result allocated the total proceeds
between convertible notes, the warrants and Series A Convertible Preferred Stock based on their relative fair value at the closing date.
The Company analyzed the warrants issued, the convertible conversation feature and Series A Convertible Preferred Stock and concluded
that they meet the definition of an equity instrument.
On January 21, 2020, we entered
into a Conversion Agreement with BNN, pursuant to which BNN agreed to convert the outstanding convertible note, issued on July 31,
2019, into 1,818,181 shares of the Company’s newly-designated Series B Preferred Stock, par value $0.001 per share, with a stated
value of $1.10 per share (the “Series B Preferred”) (collectively, the “Conversion”). In accordance with the Conversion,
the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series B Preferred with the Secretary of State
of the State of Delaware on January 21, 2020 to designate the rights and preferences of up to 1,818,181 shares of Series B Preferred.
On September 10, 2020, the
Company and the holder of the Company’s Series B Convertible Preferred Stock, with a par value of $0.001 per share , entered into
that certain Series B Convertible Preferred Stock Exchange Agreement, pursuant to which the Holder exchanged an aggregate of 1,818,181
shares of the Series B Preferred, on a 1-for-1 basis, for an aggregate of 1,818,181 shares of the Company’s common stock, par value
$0.001 per share.
Offering of Secured Convertible Debentures
On November 2, 2020,
the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain investors (the “Investors”)
for the purpose of raising $25.0 million in gross proceeds for the Company (the “Offering”). Pursuant to the terms of the
Purchase Agreement, the Company sold in a registered direct offering, an aggregate of 10,000,000 units (each, a “Unit”), with
each Unit consisting of one share of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and
one warrant to purchase 0.8 of one share of Common Stock (each, a “Warrant”). at a purchase price of $2.50 per Unit. The Warrants
are exercisable six months after the date of issuance at an exercise price of $3.12 per share and will expire five years following the
date the Warrants become exercisable. The closing of the sale of Units pursuant to the Securities Purchase Agreement occurred on
November 4, 2020. By December 31, 2020, the Company had received a total of $22.325 million in gross proceeds pursuant to Offering and
issued in the aggregate, 7,600,000 Units. The remaining gross proceeds, in the additional aggregate amount of $2.675 million, were received
by the Company on March 1, 2021 and in consideration for such proceeds, the Company issued the remaining 2,400,000 units.
On February 11, 2021, the
Company announced that it has entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institution
investors for the sale of (i) 22,471,904 shares of common stock, (ii) 22,471,904 Series A Warrants to purchase 22,471,904 shares of common
stock and (iii) 11,235,952 Series B Warrants to purchase 11,235,952 shares of common stock at a combined purchase price of $2.67 (the
“Offering”). The gross proceeds to the Company from the Offering are expected to be approximately $60.0 million . The Series
A Warrants will be exercisable six months after the date of issuance, have an exercise price of $2.80 per share and will expire five
and one-half years from the date of issuance. The Series B Warrants will be exercisable six months after the date of issuance, have an
exercise price of $2.80 per share and will expire three and one-half years from the date of issuance. The Company received net proceeds
of $54.0 million on February 16, 2021, after deducting the Placement Agent’s fees and other expenses
On March 2, 2021, the Company
entered into a Securities Purchase Agreement with certain investors for the purpose of raising approximately $54.0 million in gross proceeds
for the Company. Pursuant to the terms of the Purchase Agreement, the Company agreed to sell, in a registered direct offering, an aggregate
of 19,285,715 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a purchase price
of $2.675 per Share and in a concurrent private placement, warrants to purchase an aggregate of 19,285,715 shares of Common Stock, at
a purchase price of $0.125 per Warrant, for a combined purchase price per Share and Warrant of $2.80 (the “Purchase Price”)
which was priced at the market under Nasdaq rules. The Warrants are immediately exercisable at an exercise price of $2.80 per share, subject
to adjustment, and expire five years after the issuance date. The closing date was on March 4, 2021. The Company received net proceeds
of $48.69 million on March 4, 2021, after deducting the Placement Agent’s fees and other expenses.
Beijing Fucheng Lianbao Technology Co., Ltd
transaction
On February 10, 2021, the
Company closed a transaction pursuant to which it acquired (via Beijing Fucheng Lianbao Technology Co., Ltd. in which it holds 24% and
engaged in a VIE structure) all of the shares of Beijing Yibao Technology Co., Ltd., and indirectly its fully owned subsidiary Beijing
Fucheng Insurance Brokerage Co., Ltd. (the “Fucheng Insurance Transaction”).
The table set forth below
summarizes the estimates of the fair value of assets acquired and liabilities assumed and resulting gain on bargain purchase. In addition,
the following table summarizes the allocation of the preliminary purchase price as of the acquisition date:
Beijing Fucheng Lianbao Technology Co.,
Ltd transaction, Purchase Price Allocation
(USD In Thousands)
Total cash consideration (1)
|
|
|
5,711
|
|
Total Purchase Consideration
|
|
$
|
5,711
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Debt-free net working capital, (2)
|
|
$
|
926
|
|
Property and equipment (2)
|
|
|
26
|
|
Current liabilities (2)
|
|
|
(55
|
)
|
Fair value of net assets acquired
|
|
$
|
897
|
|
|
|
|
|
|
Goodwill value
|
|
$
|
4,814
|
|
|
(1)
|
Cash
paid at the closing of the transaction.
|
|
(2)
|
Book
value used as a proxy for fair value.
|
Non-GAAP Financial Measures
In addition to providing financial
measurements based on generally accepted accounting principles in the U.S., or GAAP, we provide additional financial metrics that are
not prepared in accordance with GAAP, or non-GAAP financial measures. Management uses non-GAAP financial measures, in addition to GAAP
financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making,
for planning and forecasting purposes and to evaluate our financial performance.
Management believes that these
non-GAAP financial measures reflect our ongoing business in a manner that allows for meaningful comparisons and analysis of trends in
our business, as they exclude expenses and gains that are not reflective of our ongoing operating results. Management also believes
that these non-GAAP financial measures provide useful information to investors in understanding and evaluating our operating results and
future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies.
The non-GAAP financial measures
do not replace the presentation of our GAAP financial results and should only be used as a supplement to, not as a substitute for, our
financial results presented in accordance with GAAP.
The non-GAAP adjustments,
and the basis for excluding them from non-GAAP financial measures, are outlined below:
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●
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Amortization of acquired intangible assets - We are required to amortize the intangible assets, included in our GAAP financial statements, related to the Transaction and the Acquisition. The amount of an acquisition’s purchase price allocated to intangible assets and term of its related amortization are unique to these transactions. The amortization of acquired intangible assets are non-cash charges. We believe that such charges do not reflect our operational performance. Therefore, we exclude amortization of acquired intangible assets to provide investors with a consistent basis for comparing pre- and post-transaction operating results.
|
|
●
|
Expenses related to the settlement agreements - These expenses relate to a settlement agreement as described in part III -Item 1. Legal Proceedings of this reports. We believe that these expenses do not reflect our operational performance. Therefore, we exclude them to provide the investors with a consistent basis for comparing pre- and post-transaction operating results.
|
The following table reconciles,
for the periods presented, GAAP net loss attributable to MICT to non-GAAP net income attributable to MICT. and GAAP loss per diluted share
attributable to MICT to non-GAAP net loss per diluted share attributable to MICT.:
|
|
Three months ended
March 31,
|
|
|
|
(Dollars in Thousands, other than share and per share amounts)
|
|
|
|
2021
|
|
|
2020
|
|
GAAP net loss attributable to Mict, Inc.
|
|
$
|
(4,461
|
)
|
|
$
|
(1,635
|
)
|
Amortization of acquired intangible assets
|
|
|
786
|
|
|
|
-
|
|
Expenses related to settlement agreements
|
|
|
465
|
|
|
|
-
|
|
Income tax-effect of above non-GAAP adjustments
|
|
|
(199
|
)
|
|
|
-
|
|
Total Non-GAAP net loss attributable to Mict, Inc.
|
|
$
|
(3,409
|
)
|
|
$
|
(1,635
|
)
|
|
|
|
|
|
|
|
|
|
Non-GAAP net loss per diluted share attributable to Mict, Inc.
|
|
$
|
(0.04
|
)
|
|
$
|
(0.15
|
)
|
Weighted average common shares outstanding used in per share calculations
|
|
|
85,554,624
|
|
|
|
11,089,532
|
|
GAAP net loss per diluted share attributable to Mict, Inc.
|
|
$
|
(0.05
|
)
|
|
$
|
(0.15
|
)
|
Weighted average common shares outstanding used in per share calculations
|
|
|
85,554,624
|
|
|
|
11,089,532
|
|
Results of Operations
Three Months Ended March 31, 2021 Compared
to Three Months Ended March 31, 2020
As of March 31, 2021, we have
maintained control in Micronet and we are therefore consolidating Micronet’s operations in our financial statements. In addition,
on July 1, 2020, we have completed and consummated a merger transaction for the acquisition of GFH Intermediate Holdings Ltd. (“GFHI”)
As a result of such acquisition, we are consolidating the results of GFHI as of such closing date and for the period thereafter. Relating
to our operations, beginning on the second half of December 2020, we have launched our insurance platform operated by GFHI for the Chinese
market and from that day onward, we have been generating certain revenues in GFHI in this segment of operations. Also, as described above,
during the first quarter of 2021, we have entered into certain transaction with Guang Xi Zhong Tong, Beijing Fucheng Lianbao Technology
Co., Ltd. and completed the acquisition of Huapei Global Securities Ltd. which operates in the field of securities trading platform.
As a result of such transactions we have started to consolidate these financial results of these companies and business in the first quarter.
These business activities
conducted by MICT in combination with the completion of the above acquisitions, contributed to the following P&L items:
Revenues
Revenues for the three-month
ended March 31, 2021 were $8,935,000, compared to $0 revenues for the three-month ended March 31, 2020 and reflects an increase of $8,935,000,
for the three-month ended March 31, 2021 as compared to the same period last year.
Total revenues related to
the MRM segment for the three months ended March 31, 2021 were $726,000, as compared to no revenues for the three months ended March 31,
2020 and reflects an increase of $726,000 for the three months ended March 31, 2021. The increase is attributed to the consolidation of
the MRM Segment (Micronet) results as of the second quarter of 2020.
Total revenues related to
the Verticals and technology segment for the three months ended March 31, 2021 were $8,209,000, as compared to no revenues for the three
months ended March 31, 2020 and reflects an increase of $8,209,000, for the three months ended March 31, 2021. The increase is attributed
to the consolidation of the GFH results as of July 1, 2020 and revenues generated as a result of certain commercial and business combination
transaction entered by the Company during the first quarter of 2021 (as further detailed above).
Cost of revenues
Cost of revenues for the three-month
ended March 31, 2021 were $6,992,000, compared to $0 for the three-month ended March 31, 2020. This represents an increase of $6,992,000,
for the three-month ended March 31, 2021 as compared to the same period last year.
Total Cost of revenues related
to the MRM segment for the three months ended March 31, 2021 were $716,000, as compared to $0 for the three months ended March 31, 2020.
This represents an increase of $716,000 for the three months ended March 31, 2021. The increase is attributed to the consolidation of
the MRM Segment (Micronet) results as of the second quarter of 2020.
Total Cost of revenues related
to the Verticals and technology segment for the three months ended March 31, 2021 were $6,276,000, as compared to $0 for the three months
ended March 31, 2020 and reflects an increase of $6,276,000, for the three months ended March 31, 2021. The is attributed to the consolidation
of the GFH results as of July 1, 2020 and revenues generated as a result of certain commercial and business combination transaction entered
by the Company during the first quarter of 2021 (as further detailed above).
Gross profit
Gross profit for the three-month
ended March 31, 2021 decreased by $1,943,000 to $1,943,000 and represents 22% of the revenues. This is in comparison to gross profit of
0 of the revenues for the three-month ended March 31, 2020.
Selling and Marketing
Selling and Marketing costs
are part of operating expenses. Selling and marketing cost for the three-month ended March 31, 2021 were $1,001,000, as compared to cost
of $0 for three-month ended March 31, 2020. This represents an increase of $1,001,000, for the three-month ended March 31, 2021 as compared
to the same period last year.
General and Administrative
General and administrative
costs are part of operating expenses. General and administrative costs for the three-month ended March 31, 2021 were $4,568,000, compared
to $770,000 for the three-month ended March 31, 2020. This represents an increase of $3,798,000, or 493%, for the three month ended March
31, 2021 as compared to the same period last year. The increase is mainly a result of (i) the acquisitions as noted above, and (ii)
an increase in retaining professional advice from various service providers, advisors and professionals in connection with the consummation
of the public offering closed on February 2021 and March 2021; and (iii) an increase associated with the D&O insurance
Research and Development Costs
Research and development costs
are part of operating expenses. Research and development costs, which mainly include wages, materials and sub-contractors, for the three-month
ended March 31, 2021, were $231,000, compared to $0 for the three-month ended March 31, 2020. This represents an increase of $231,000,
for the three month ended March 31, 2021 as compared to the same period last year.
Loss from Operations
Our loss from operations for
the three-month ended March 31, 2021 was $4,783,000, compared to loss from operations of $770,000, for the three-month ended March 31,
2020. The increase in loss from operations is mainly a result of the acquisitions as mention above, as well as the increase in general
and administrative costs as explained in the General and Administrative section above.
Financial Expenses, net
Financial expenses, net for
the three-month ended March 31, 2021 were $566,000, compared to expenses of $224,000 for the three-month ended March 31, 2020. This represents
an increase of $342,000, for the three-month ended March 31, 2021. The increase in financial expenses for the three month ended March
31, 2021 is primarily due to exchange rate differentials.
Net Profit/Loss Attributed to MICT, Inc.
Our net loss attributed to
MICT, Inc. for the three-month ended March 31, 2021 was $4,461,000, compared to a net loss of $1,635,000 for the three-month ended March
31, 2020. This represents an increase in net loss of $2,826,000 for the three-month ended March 31, 2021 as compared to the same period
last year. The increase is mainly a result of the acquisitions as noted above, as well as the increase in general and administrative
costs and increase in Financial costs as explained above.
Liquidity and Capital Resources
As of March 31, 2021, our
total cash and cash equivalents balance was $123,403,000, as compared to $29,049,000 as of December 31, 2020. This reflects an increase
of $94,354,000 in cash and cash equivalents for the reasons described below.
Sales of our Securities
On November 2, 2020, the Company
entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain investors (the “Investors”)
for the purpose of raising $25.0 million in gross proceeds for the Company (the “Offering”). Pursuant to the terms of the
Purchase Agreement, the Company sold in a registered direct offering, an aggregate of 10,000,000 units (each, a “Unit”), with
each Unit consisting of one share of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and
one warrant to purchase 0.8 of one share of Common Stock (each, a “Warrant”). at a purchase price of $2.50 per Unit. The Warrants
are exercisable six months after the date of issuance at an exercise price of $3.12 per share and will expire five years following the
date the Warrants become exercisable. The closing of the sale of Units pursuant to the Securities Purchase Agreement occurred on
November 4, 2020. By December 31, 2020, the Company had received a total of $22.325 million in gross proceeds pursuant to Offering and
issued in the aggregate, 7,600,000 Units. The remaining gross proceeds, in the additional aggregate amount of $2.675 million, were received
by the Company on March 1, 2021 and in consideration for such proceeds, the Company issued the remaining 2,400,000 units.
On
February 11, 2021, the Company announced that it has entered into a Securities Purchase Agreement (the “Purchase
Agreement”) with certain institution investors for the sale of (i) 22,471,904 shares of common stock, (ii) 22,471,904 Series A
Warrants to purchase 22,471,904 shares of common stock and (iii) 11,235,952 Series B Warrants to purchase 11,235,952 shares of
common stock at a combined purchase price of $2.67 (the “Offering”). The gross proceeds to the Company from the Offering
are expected to be approximately $60.0 million . The Series A Warrants will be exercisable six months after the date of issuance,
have an exercise price of $2.80 per share and will expire five and one-half years from the date of issuance. The Series B Warrants
will be exercisable six months after the date of issuance, have an exercise price of $2.80 per share and will expire three and
one-half years from the date of issuance. The Company received net proceeds of $54.0 million on February 16, 2021 after deducting
the Placement Agent’s fees and other expenses.
On
March 2, 2021, the Company entered into a Securities Purchase Agreement with certain investors for the purpose of raising approximately
$54.0 million in gross proceeds for the Company. Pursuant to the terms of the Purchase Agreement, the Company agreed to sell, in a registered
direct offering, an aggregate of 19,285,715 shares of the Company’s common stock, par value $0.001 per share (the “Common
Stock”), at a purchase price of $2.675 per Share and in a concurrent private placement, warrants to purchase an aggregate of 19,285,715
shares of Common Stock, at a purchase price of $0.125 per Warrant, for a combined purchase price per Share and Warrant of $2.80 (the “Purchase
Price”) which was priced at the market under Nasdaq rules. The Warrants are immediately exercisable at an exercise price of $2.80
per share, subject to adjustment, and expire five years after the issuance date. The closing date was on March 4, 2021. The Company received
net proceeds of $48.69 million on March 4, 2021, after deducting the Placement Agent’s fees and other expenses.
Loans Provided by MICT
On November 13, 2019, the
Company and Micronet executed a convertible loan agreement pursuant to which the Company agreed to loan to Micronet $500,000 in the aggregate
(the “Convertible Loan”). The Convertible Loan bears interest at a rate of 3.95% calculated and is paid on a quarterly
basis. In addition, the Convertible Loan, if not converted, shall be repaid in four equal installments, the first of such installment
payable following the fifth quarter after the issuance of the Convertible Loan, with the remaining three installments due on each subsequent
quarter thereafter, such that the Convertible Loan shall be repaid in full upon the lapse of 24 months from its grant. In addition, the
outstanding principal balance of the Convertible Loan, and all accrued and unpaid interest, is convertible at the Company’s option,
at a conversion price equal to 0.38 NIS per Micronet share. Pursuant to the Convertible Loan agreement, Micronet also agreed to issue
the Company an option to purchase up to one of Micronet’s ordinary shares for each ordinary share that it issued as a result of
a conversion of the Convertible Loan (“Convertible Loan Warrant”), at an exercise price of 0.60 NIS per share, exercisable
for a period of 15 months. On July 5, 2020, Micronet had a reverse split where the price of the Convertible Loan changed from 0.08 NIS
per Micronet share into 5.7 NIS per Micronet share. The option’s exercised price was changed from 0.6 NIS per share to 9 NIS per
Micronet share.
On January 1, 2020, the Convertible
Loan transaction was approved at a general meeting of the Micronet shareholders and as a result, the Convertible Loan and the transactions
contemplated thereby entered into effect.
On August 13, 2020, MICT Telematics
extended to Micronet an additional loan in the aggregate amount of $175,000 (the “Third Loan” and the “Loan
Sum”, respectively) which governing the existing outstanding intercompany debt. The Third Loan does not bear any interest and
is provided for a period of twelve (12) months. The Loan Sum was granted for the purpose of supporting Micronet’s working capital
and general corporate needs.
Debt Repayment
As of March 31, 2021, our
total debt, was $660,000 as compared to $884,000 on December 31, 2020. The change in total debt is primarily due to Micronet’s repayment
of a loan to the bank.
Total Current Assets, Trade Accounts Receivable
and Working Capital
As of March 31, 2020, our
total current assets were $138,161,000, as compared to $33,680,000 on December 31, 2020. The increase is mainly due to the increase in
our cash and cash equivalents as described above.
Our trade accounts receivable
at March 31, 2021, were $9,282,000 as compared to $523,000 at December 31, 2020. The increase is due to consolidation of GFH and Micronet
financial reports.
As of March 31, 2021, our
working capital was $126,343,000, as compared to $26,693,000 at December 31, 2020. The increase is mainly due to the increase in our cash
and cash equivalents as described above.
Financing Needs
The Company will be required
to support its own operational financial needs, which include, among others, our general and administrative costs (such as for our various
consultants in regulatory, tax, legal, accounting and other areas of business) and our financing costs related to the loans and funding
instruments assumed by us.
We expect the net proceeds
from the sale of the securities will be used to fund the growth and development of our business, as well as for working capital and for
other general corporate purposes. We may also use a portion of the net proceeds to acquire or invest in businesses, products and technologies
that are complementary to our business, but we currently have no commitments or agreements relating to any of these types of transactions.
Based on our current business
plan, and in view of our cash balance following the transactions described in this Item 2, we anticipate that our cash balances will be
sufficient to permit us to conduct our operations and carry out our contemplated business plans for at least the next 12 months from the
date of this Report.