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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Tingo Inc (CE) | USOTC:TMNA | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.0001 | 0.00 | 01:00:00 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission File Number 333-205835
TINGO, INC.
(Exact name of registrant as specified in its charter)
Nevada |
| 83-0549737 |
(State or other jurisdiction of |
| (I.R.S. Employer |
incorporation or organization) |
| Identification No.) |
43 West 23rd Street, 2nd Floor New York, NY | 10010 (Zip Code) | |
(Address of principal executive offices) |
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Registrant’s telephone number, including area code: (646) 847- 0144
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(b) of the Act:
Class A Common Stock, $0.001 par value per share
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer ☒ | Smaller Reporting Company ☒ | Emerging Growth Company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company. Yes ☐ No ☒
There were 1,227,516,211 shares of the registrant’s Class A common stock, $0.001 par value, outstanding, as of May 12, 2022.
EXPLANATORY NOTE
As disclosed in the Registrant’s Current Report on Form 8-K filed on June 15, 2022, in preparation for the planned merger of Tingo, Inc. (the “Company”) with a wholly-owned subsidiary of Nasdaq-listed MICT, Inc., the Company has reviewed and considered its accounting treatment of its acquisition of Tingo Mobile PLC (“Tingo Mobile”) on August 15, 2021 (the “Acquisition”). Based on this review, the Company has elected to modify its accounting treatment of the Acquisition as a reverse acquisition of the Company by Tingo Mobile instead of as a forward acquisition of Tingo Mobile by the Company as had been previously presented.
This Amendment No. 1 to the Company’s Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2022 (“Amended 10-Q”) has been prepared in accordance with reverse acquisition accounting rules, and now includes the consolidated operating results of Tingo Mobile for the full period cover by the Report, rather than using forward acquisition accounting as had been presented previously, which included the results of Tingo Mobile only from the date of the Acquisition.
Accordingly, this Amended 10-Q supersedes and replaces in its entirety the Quarterly Report on Form 10-Q filed by the Company on May 16, 2022 (“Original Filing”). This Amended 10-Q does not reflect events occurring after the Original Filing except as noted above. Except for the foregoing amended information, this Amended 10-Q continues to speak as of the date of the Original Filing and the Company has not otherwise updated disclosures contained therein or herein to reflect events that occurred at a later date.
2
TINGO, INC.
(A Nevada Corporation)
INDEX
3
Part I.Financial Information
Item 1. Unaudited Condensed Consolidated Financial Statements
TINGO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31, |
| December 31, | |||
2022 | 2021 | |||||
Assets |
|
|
|
| ||
Current Assets |
|
|
|
| ||
Cash and Cash Equivalents | $ | 25,346,663 | $ | 128,367,605 | ||
Accounts and Other Receivables | 1,134,689,160 | 1,400,917,140 | ||||
Inventory | 103,218 | 123,823 | ||||
Prepayments - current portion | 403,801,148 | 409,434,667 | ||||
Total Current Assets | 1,563,940,189 | 1,938,849,235 | ||||
| ||||||
Non-Current Assets |
| |||||
Prepayments - non-current portion | 473,679,483 | 575,464,002 | ||||
Property, plant and equipment, net | 217,099,642 | 223,762,115 | ||||
Intangible Assets | 1,376,942 | 1,670,924 | ||||
Total non-current assets | 692,156,067 | 800,897,041 | ||||
Total Assets | $ | 2,256,096,256 | $ | 2,739,746,276 | ||
Liabilities and Stockholders Equity | ||||||
Current Liabilities | ||||||
Accounts Payable and accruals | $ | 270,935,582 | $ | 754,836,164 | ||
Deferred income - current portion | 485,496,071 | 492,269,333 | ||||
Value added tax - current portion | 37,809,831 | 38,190,992 | ||||
Tax Liability | 138,456,513 | 100,606,352 | ||||
Total current liabilities | 932,697,997 | 1,385,902,842 | ||||
Non-current liabilities | ||||||
Deferred income - non-current portion | 568,552,116 | 690,922,799 | ||||
Value added tax - non-current portion | 44,278,133 | 53,602,826 | ||||
Deferred Tax | 4,326,714 | 2,171,039 | ||||
Total non- current liabilities | 617,156,963 | 746,696,664 | ||||
Total Liabilities | 1,549,854,960 | 2,132,599,506 | ||||
COMMITMENTS AND CONTINGENCIES | ||||||
Stockholder's Equity | ||||||
Common stock - Class A, par value $.001 per share, 1,250,000,000 shares authorized, 1,215,016,211 and 1,205,016,211 shares and at March 31, 2022 and December 31, 2021, respectively | 1,182,511 | 1,172,511 | ||||
Common Stock - Class B, par value $.001 per share, 200,000,000 shares authorized, 65,000,000 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively | 65,000 | 65,000 | ||||
Additional paid-in-capital | 467,070,474 | 412,080,474 | ||||
Accumulated Surplus | 296,432,544 | 269,442,456 | ||||
Translation Reserve | (58,509,233) | (75,613,671) | ||||
Total Stockholders Equity | 706,241,296 | 607,146,770 | ||||
Total Liabilities and Stockholders Equity | $ | 2,256,096,256 | $ | 2,739,746,276 |
The accompanying notes are an integral part of these financial statements.
4
TINGO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For the 3 Months ended | For the 3 Months ended | |||||
| March 31, 2022 |
| March 31, 2021 | |||
Revenues | $ | 257,057,519 | $ | 45,238,125 | ||
Cost of Revenues | (103,782,685) | (2,511,941) | ||||
Gross Profit | 153,274,834 | 42,726,184 | ||||
Operating Expense | ||||||
Payroll and related expenses | 24,987,746 | 690,696 | ||||
Distribution expenses | 221,187 | 104,573 | ||||
Professional Fees | 55,524,912 | 315,434 | ||||
Bank fees and charges | 636,047 | 62,824 | ||||
Depreciation and amortization | 5,494,094 | 740,616 | ||||
General and administrative expenses - other | 860,331 | 189,167 | ||||
Bad Debt Expenses | 47,398 | — | ||||
Total Operating Expenses | 87,771,715 | 2,103,310 | ||||
Income from Operations | 65,503,119 | 40,622,874 | ||||
Other Income (Expenses) | ||||||
Other income | 185,798 | 59,721 | ||||
Total Other (Income) Expenses | 185,798 | 59,721 | ||||
Income before tax | 65,688,917 | 40,682,595 | ||||
Taxation | (38,698,829) | (13,018,431) | ||||
Net Income after Tax | 26,990,088 | 27,664,164 | ||||
Net Loss attributable to non-controlling interests | — | — | ||||
Net Income attributable to ordinary stockholders of Tingo, Inc. | $ | 26,990,088 | $ | 27,664,164 | ||
Net Income | 26,990,088 | 27,664,164 | ||||
Other Comprehensive Income (Loss) | ||||||
Translation Adjustment | 17,104,438 | (10,809,240) | ||||
Total Comprehensive Income | $ | 44,094,526 | $ | 16,854,924 | ||
Income (Loss) per share - Basic and Diluted | 0.04 | 0.42 | ||||
Weighted Average number of common shares outstanding | ||||||
Basic and diluted | 1,214,793,989 | 40,306,211 |
The accompanying notes are an integral part of these financial statements.
5
TINGO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
(Continued on Next Page)
Common Stock - Class A | Common Stock - Class B | Additional Paid | Accumulated | Translation | Total Stockholders' | |||||||||||||||||
| Number of Shares |
| Amount |
| Number of Shares |
| Amount |
| In Capital |
| Surplus |
| Reserve |
| Equity | |||||||
Balance as of January 1, 2021 |
| 928,000,000 | $ | 928,000 | 65,000,000 | $ | 65,000 | $ | 508,549 | $ | 458,538,770 | $ | (32,283,238) | $ | 427,757,081 | |||||||
|
|
|
|
| ||||||||||||||||||
Net income for the quarter ended March 31, 2021 | — | — | — | — | — | 27,664,164 | — | 27,664,164 | ||||||||||||||
Foreign Currency Translation Adjustment | — | — | — | — | — | — | (10,809,240) | (10,809,240) | ||||||||||||||
Balances as of March 31, 2021 | 928,000,000 | $ | 928,000 | 65,000,000 | $ | 65,000 | $ | 508,549 | $ | 486,202,934 | $ | (43,092,478) | $ | 444,612,005 |
6
TINGO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
(Continued from Previous Page)
Common Stock - Class A | Common Stock - Class B | Additional Paid | Accumulated | Translation | Total Stockholders' | |||||||||||||||||
Number of Shares | Amount | Number of Shares | Amount | In Capital | Surplus | Reserve | Equity | |||||||||||||||
Balances as of January 1, 2022 |
| 1,205,016,211 |
| $ | 1,172,511 |
| 65,000,000 |
| $ | 65,000 |
| $ | 412,080,474 |
| $ | 269,442,456 |
| $ | (75,613,671) |
| $ | 607,146,770 |
Shares issued for services provided - outside parties |
| 10,000,000 |
| 10,000 |
| — |
| — |
| 54,990,000 |
| — |
| — |
| 55,000,000 | ||||||
Net Income for the quarter ended March 31, 2022 |
| — |
| — |
| — |
| — |
| — |
| 26,990,088 |
| — |
| 26,990,088 | ||||||
Foreign Currency Translation Adjustment |
| — |
| — |
| — |
| — |
| — |
| — |
| 17,104,438 |
| 17,104,438 | ||||||
Balances as of March 31, 2022 |
| 1,215,016,211 | $ | 1,182,511 |
| 65,000,000 | $ | 65,000 | $ | 467,070,474 | $ | 296,432,544 | $ | (58,509,233) | $ | 706,241,296 |
The accompanying notes are an integral part of these financial statements.
7
TINGO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three months ended | ||||||
| March 31, 2022 |
| March 31, 2021 | |||
Cash Flows from operating activities |
|
|
| |||
Net Income | $ | 26,990,088 | $ | 27,664,164 | ||
Adjustments to reconcile net income to cash used in operating activites | ||||||
Depreciation and amortization | 5,458,094 | 760,566 | ||||
Stock issued to outside parties | 55,000,000 | — | ||||
Bad debt expense | 47,398 | — | ||||
Increase/Decrease related to | ||||||
Inventories | 26,605 | (34) | ||||
Trade and other receivables | 266,180,582 | 5,127,574 | ||||
Prepayments | 107,418,038 | — | ||||
Trade and other payables | (483,900,582) | (40,915) | ||||
Deferred income | (129,143,946) | — | ||||
Value added tax | (9,705,854) | (20,493,802) | ||||
Taxes payable | 40,005,836 | 13,454,347 | ||||
Net Cash provided by (used in) operating activites | (121,587,741) | 26,471,900 | ||||
Translation Adjustment | 18,556,799 | 216,035 | ||||
Net change in cash and cash equivalents | (103,020,942) | 26,687,935 | ||||
Cash and cash equivalents, beginning of the year | 128,367,605 | 28,202,869 | ||||
Cash and cash equivalents, end of the period | $ | 25,346,663 | $ | 54,890,804 | ||
Supplemental Cash flow information | ||||||
Cash paid for period for: | ||||||
Interest | $ | — | $ | — | ||
Non-cash disclosures | ||||||
Stock vesting for officers and directors | $ | 23,413,332 | $ | — | ||
Stock issued to outside parties | $ | 55,000,000 | $ | — |
The accompanying notes are an integral part of these financial statements.
8
TINGO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
(1) | Description of Business and Basis of Presentation |
Description of Business—Tingo, Inc. (“we,” “us,” “our,” “Tingo” and the “Company”), a Nevada corporation, was formed on February 17, 2015. Our shares trade on the OTC Markets trading platform under the symbol ‘TMNA’. We acquired our wholly-owned subsidiary, Tingo Mobile, PLC, a Nigerian public limited company (“Tingo Mobile”), in a share exchange with its sole shareholder effective August 15, 2021. The Company, including its subsidiary Tingo Mobile, is an Agri-Fintech company offering a comprehensive platform service through use of smartphones – ‘device as a service’ (using GSM technology) to empower a marketplace to enable subscribers/farmers within and outside of the agricultural sector to manage their commercial activities of growing and selling their production to market participants both domestically and internationally. The ecosystem provides a ‘one stop shop’ solution to enable such subscribers to manage everything from airtime top ups, bill pay services for utilities and other service providers, access to insurance services and micro finance to support their value chain from ‘seed to sale’.
As of March 31, 2022, Tingo had approximately 9.3 million subscribers using its mobile phones and Nwassa payment platform (www.nwassa.com). Nwassa is Africa’s leading digital agriculture ecosystem that empowers rural farmers and agri-businesses by using proprietary technology to enable access to market. Nwassa’s payment gateway also has an escrow structure that creates trust between buyers and sellers. Our system provides real-time pricing, straight from the farms, eliminating middlemen. Our users’ customers pay for produce bought using available pricing on our platform. Our platform is paperless, verified and matched against a smart contract. Data is efficiently stored on the blockchain.
Our platform has created an escrow solution that secures the buyer, funds are not released to our members until fulfilment. The platform also facilitates trade financing, ensuring that banks and other lenders compete to provide credit to our members.
Tingo aims to be Africa’s leading Agri-Fintech player that transforms rural farming communities by enabling growers to connect through our proprietary platform to meet their complete needs from inputs, agronomy, off take and marketplace which delivers sustainable income in an impactful way. Additional information about the Company can be obtained from our website at www.tingoinc.com. Our website, however, does not constitute a part of this Quarterly Report.
Basis of Presentation—The accompanying audited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Articles 3 and 3A of Regulation S-X. All normal recurring adjustments considered necessary for a fair presentation have been included. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”)
Our results of operations for the quarter ended March 31, 2022 are not necessarily indicative of results that ultimately may be achieved for the remainder of 2022.
The Impact of COVID-19—In response to the COVID-19 pandemic, there have been a broad number of governmental and commercial actions taken to limit the spread of the virus, including social distancing measures, stay-at-home orders, travel restrictions, business shutdowns and slowdowns. The COVID-19 pandemic continues to be dynamic, and near-term challenges across the economy remain. Although vaccines are now being distributed and administered across many parts of the world, new variants of the virus have emerged and may continue to emerge that have shown to be more contagious. We continue to adhere to applicable governmental and commercial restrictions and to work to mitigate the impact of COVID-19 on our employees, customers, communities, liquidity and financial position.
(2) | Change in Accounting Treatment |
As disclosed in the Company’s Current Report on Form 8-K filed on June 15, 2022, in preparation for the planned merger of the Company with a wholly owned subsidiary of Nasdaq-listed MICT, Inc., the Company reviewed and considered its accounting treatment of its Acquisition of Tingo Mobile on August 15, 2021. Based on this review, the Company elected to modify its accounting treatment of the Acquisition as a reverse acquisition of the Company by Tingo Mobile instead of as a forward acquisition of Tingo Mobile by the Company as had been previously presented.
9
Accordingly, the financial statements included herein have been prepared in accordance with reverse acquisition accounting rules, and now include the consolidated operating results of Tingo Mobile for the full periods presented, rather than using forward acquisition accounting as had been presented previously, which included the results of Tingo Mobile only from the date of the Acquisition.
As part of the adjustment, the Company recorded the following corrections to the prior accounting treatment on the balance sheet:
Goodwill |
| $ | (3,694,107,417) |
Capitalized Acquisition Costs | $ | (111,360,000) | |
Additional Paid in Capital | $ | 4,170,398,451 | |
Accumulated Surplus | $ | (397,390,240) |
(3) | Significant Accounting Policies |
Reverse Acquisition Accounting—We have adopted reverse acquisition accounting methods in connection with the Company’s Acquisition of Tingo Mobile. Accordingly, the consolidated financial statements reflect the results of Tingo Mobile for the periods indicated in this Report.
Earnings Per Share—Basic and diluted per share calculations are computed utilizing the weighted-average number of shares of common stock outstanding for the period. Pursuant to our 2021 Equity Incentive Plan adopted in 2021, in accordance with ASC 260, Earnings Per Share, the unvested shares of restricted stock awarded in the first quarter of 2022 pursuant to our equity compensation plans are participating securities and, therefore, are included in the basic earnings per share calculation.
Classes of Common Stock—The Company has two classes of common stock. Each share of Class A common stock is entitled to one (1) vote, and is entitled to receive dividends when and if declared by the board of directors out of assets legally available therefor. Each share of Class B common stock is entitled to ten (10) votes, but carries no dividend, distribution, liquidation, conversion, or economic rights of any kind.
Distributable Earnings—The components that make up distributable earnings (accumulated undistributed surplus) on the Consolidated Balance Sheet as of March 31, 2022 and December 31, 2021 are as follows:
| March 31, 2022 |
| December 31, 2021 | |||
Net Profit (Loss) for period | $ | 26,990,088 | $ | (186,698,484) | ||
Accumulated surplus | 269,442,456 | 456,140,940 | ||||
Accumulated Surplus | $ | 296,432,544 | $ | 269,442,456 |
Impairment of Long-Lived Assets—In accordance with authoritative guidance on accounting for the impairment or disposal of long-lived assets, as set forth in Topic 360 of the ASC, the Company assesses the recoverability of the carrying value of its long-lived assets when events occur that indicate an impairment in value may exist. An impairment loss is indicated if the sum of the expected undiscounted future net cash flows is less than the carrying amount of the assets. If this occurs, an impairment loss is recognized for the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets.
Income Taxes—The Company uses the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the accounting bases and the tax bases of the Company’s assets and liabilities. The deferred tax assets are computed using enacted tax rates in effect for the year in which the temporary differences are expected to reverse.
10
The Company has adopted ASC guidance regarding accounting for uncertainty in income taxes. This guidance clarifies the accounting for income taxes by prescribing the minimum recognition threshold an income tax position is required to meet before being recognized in the consolidated financial statements and applies to all income tax positions. Each income tax position is assessed using a two-step process. A determination is first made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits, upon examination by the taxing authorities. If the income tax position is expected to meet the more likely than not criteria, the benefit recorded in the consolidated financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate settlement. At March 31, 2022 and December 31, 2021, there were no uncertain tax positions that required accrual.
In connection with our 2021 Equity Incentive Plan (“Incentive Plan”), for the quarter and year ended March 31, 2022 and December 31, 2021, respectively, the Company issued shares of Class A common stock valued at $55.0 million and $297.0 million, respectively, in exchange for services provided by employees, directors, officers and third-party consultants. In addition, certain portions of awards granted under the Incentive Plan in 2021 became vested during the three months ended March 31, 2022, resulting in an additional expense of $23.4 million for the quarter.
The reconciliation of income tax benefit at the U.S. statutory rate of 25.0% for quarter and year ended March 31, 2022 and December 31, 2021, respectively, to the Company’s effective tax rate is as follows:
The tax effects of temporary differences that give rise to the Company’s net deferred tax assets for the quarter and year ended March 31, 2022 and December 31, 2021, respectively, are as follows:
| March 31, 2022 |
| December 31, 2021 | |||
Beginning of period | $ | — | $ | — | ||
Net Operating Loss |
| 115,875,250 |
| 102,125,250 | ||
Valuation Allowance |
| (115,875,250) |
| (102,125,250) | ||
Net Deferred Tax Assets | $ | — | $ | — |
Regarding executive compensation in shares of the Company’s Class A common stock, certain of the amounts classified as compensation expense and any income tax benefit related thereto may be disallowed as excess compensation pursuant to Section 162(m) of the Internal Revenue Code.
Subject to any such disallowances pursuant to Code Section 162(m), as of March 31, 2022, the Company has approximately $463.5 million of net operating losses carried forward to offset taxable income, if any, in future years which expire commencing in fiscal year 2037. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on this assessment, management has established a full valuation allowance against all of the deferred tax asset relating to NOL’s because it is more likely than not that all of the deferred tax asset will not be realized as the parent company is not presently income producing.
Inventory—The Company holds certain stocks of spare parts to support the maintenance of new phones. These are recorded at cost. The company does not hold significant stock of new phones in the event of damage or replacement. Inventory is measured on the first-in, first-out method.
Prepayments—The company reflects the full cost of the mobile phones purchased as a prepaid cost at the outset. The leasing of mobile phones runs over a three-year term and a monthly release to cost of sales is conducted to match the income recognition of the monthly revenue from mobile phone leasing on a matching principle.
11
Deferred Income—The Company reflects the full value of the three-year revenues due in accordance with the mobile leasing contract. On a straight-line basis, a monthly release is made to profit and loss to reflect revenue from mobile leasing over the
term.Leased Assets—The Company makes the use of leasing arrangements principally for the provision of the offices and related facilities. The rental contracts for offices are typically negotiated for terms of between 1 and 10 years and some of these have extension terms. Lease terms for office fixtures and equipment have lease terms of between 1 year and 10 years without any extension terms. The company does not enter into sale and leaseback arrangements. All the leases are negotiated on an individual basis and contain a wide variety of different terms and conditions such as purchase options and escalation clauses. The Company assesses whether a contract is or contains a lease at inception of the contract. A lease conveys the right to direct the use and obtain substantially all of the economic benefits of an identified asset for a period of time in exchange for consideration.
Measurement and Recognition of Leases as a Lessee—At lease commencement date, the Company recognizes a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the company, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). The company depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Company also assesses the right-of-use asset for impairment when such indicators exist.
At the commencement date, the Company measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the incremental borrowing rate. The incremental borrowing rate is the estimated rate that the Company would have to pay to borrow the same amount over a similar term, and with similar security to obtain an asset of equivalent value. This rate is adjusted should the lessee entity have a different risk profile to that of the company.
Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised.
Subsequent to initial measurement, the liability will be reduced by lease payments that are allocated between repayments of principal and finance costs. The finance cost is the amount that produces a constant periodic rate of interest on the remaining balance of the lease liability.
The lease liability is reassessed when there is a change in the lease payments. Changes in lease payments arising from a change in the lease term or a change in the assessment of an option to purchase a leased asset. The revised lease payments are discounted using the incremental borrowing rate at the date of reassessment when the rate implicit in the lease cannot be readily determined. The amount of the remeasurement of the lease liability is reflected as an adjustment to the carrying amount of the right-of-use asset. The exception being when the carrying amount of the right-of-use asset has been reduced to zero then any excess is recognized in profit or loss.
Payments under leases can also change when there is either a change in the amounts expected to be paid under residual value guarantees or when future payments change through an index or a rate used to determine those payments, including changes in market rental rates following a market rent review. The lease liability is remeasured only when the adjustment to lease payments takes effect and the revised contractual payments for the remainder of the lease term are discounted using an unchanged discount rate. Except for where the change in lease payments results from a change in floating interest rates, in which case the discount rate is amended to reflect the change in interest rates.
The remeasurement of the lease liability is dealt with by a reduction in the carrying amount of the right-of use asset to reflect the full or partial termination of the lease for lease modifications that reduce the scope of the lease. Any gain or loss relating to the partial or full termination of the lease is recognized in profit or loss. The right-of-use asset is adjusted for all other lease modifications.
The Company has elected to account for short-term leases and leases of low-value assets using the practical expedients. These leases relate to residential houses for a year. Instead of recognizing a right-of-use asset and lease liability, the payments in relation to these are recognized as an expense in profit or loss on a straight-line basis over the lease term.
12
Accounting Pronouncements—In August 2020, the FASB issued ASU No. 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments. The new guidance removes the separation models for convertible debt with a cash conversion feature or a beneficial conversion feature. In addition, the new standard provides guidance on calculating the dilutive impact of convertible debt on earnings per share. The ASU clarifies that the average market price should be used to calculate the diluted earnings per share denominator when the exercise price or the number of shares that may be issued is variable. The ASU is effective for the Company on January 1, 2022, including interim periods, with early adoption permitted. The ASU permits the use of either a full or modified retrospective method of adoption. The Company is still evaluating the impact of the adoption of this ASU on its future financial statements and disclosures.
(4) | Revenue Recognition |
Policy
Revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount:
1. | Identification of the promised goods in the contract; |
2. | Determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; |
3. | Measurement of the transaction price, including the constraint on variable consideration; |
4. | Allocation of the transaction price to the performance obligations; and |
5. | Recognition of revenue when (or as) the Company satisfies each performance obligation. |
The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery.
Revenue comprises of the fair value for smart phone devices, services and financial technology solutions.We offer service-only contracts and contracts that bundle equipment used to access the services and/or with other service offerings. Some contracts have fixed terms and others are cancellable on a short-term basis (i.e., month-to-month arrangements).
Sources
The Company has the following revenue sources:
● | Mobile Leasing – customers enter a three-year contract for a fixed monthly rental. The customers are committed for the full term. Our accounting policy is to debit Accounts Receivable for the full value of the contract and a matched Deferred Income credit under Liabilities for the same value. We recognize such release to revenue on a monthly basis. |
● | Call and Data Services – our customers use call and data services at normalized rates which, given the increasing proliferation of wifi connections, even in rural locations, have steadily declined over time. |
● | Nwassa services – this is our Agri-Fintech platform powered by the smartphones leased on a three-year term above, known as ‘device as a service’. Revenue is recognized based on fixed percentage of the value of the transaction on the following basis when transactions are executed as follows: |
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● | Agri- Marketplace – percentage of the value of produce trade on Nwassa |
● | Mobile airtime top up – fixed percentage of value of top-up |
● | Utilities – fixed percentage of value of transaction |
● | Mobile Insurance – fixed fee recognized monthly based on contract |
● | Financial Services (Loans and related services) – fixed referral fee as completed |
(5) | Foreign Currency Translation |
Functional and presentation currency—The consolidated financial statements are presented in U.S. dollars, which is the presentation currency, the functional currency is Nigeria Naira.
The exchange rate used for conversion is:
| March 31, |
| December 31, | |
2022 | 2021 | |||
Balance Sheet: |
|
|
|
|
Nigerian Naira |
| 415.72 |
| 412.99 |
Profit and Loss : |
|
|
|
|
Nigerian Naira |
| 414.355 |
| 396.46 |
Foreign currency transactions—Foreign currency transactions are translated into the functional currencies of the Company’s subsidiaries using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated income statements. Non-monetary items carried at cost are translated using the exchange rate at the date of the transaction. Non-monetary items carried at fair value are translated at the date the fair value is determined. For Nigeria, due to the volatile nature of the exchange rate, we have applied the prudent approach to convert both the Profit and Loss and Balance Sheet at the same rate to indicate a fairer reflection of the state of affairs.
(6) | Inventory |
Inventory on hand consisted of the following:
| March 31, 2022 |
| December 31, 2021 | |||
Spare parts | $ | 103,218 | $ | 123,823 | ||
Total Inventory | $ | 103,218 | $ | 123,823 |
(7) | Accounts and Other Receivables |
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Accounts Receivable—This amount consists almost exclusively of trade receivables relating to our
-year smartphone leasing contract which our customers entered during 2021. The release and delivery of new phones in accordance with the new phone contracts took place in May 2021 and August 2021, respectively. The balances reflect the remaining balance outstanding as at March 31, 2022 and December 31, 2021. The previous lease contracts expired in May 2020. The delay in renewal of new contracts was due to impact of Covid 19 and delays in recommencement of our supply chains as a consequence. The new phone leasing contracts will expire in April 2024 and July 2024 respectively. The company had approximately 9.3 million subscribers for this service as of March 31, 2022 and December 31, 2021. The Company has successfully renewed its previous contract that expired in May 2020 without any attrition in the number of subscribers. We view this as significant, given the gap of a year due to the Covid-19 pandemic that affected our supply chain in 2020 and the early part of 2021. We believe it is a clear demonstration of our ability to maintain subscriber loyalty and reflection of affordability at the price point we offer our subscribers over the three-year leasing period. Management reviews accounts receivable periodically to determine if any receivables will potentially be uncollectible. Management’s evaluation includes several factors including the aging of the accounts receivable balances, a review of significant past due accounts, economic conditions, and our historical write-off experience, net of recoveries. The Company includes any accounts receivable balances that are determined to be uncollectible, along with a general reserve, in its allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. We recognized bad debt expense of $47,398 during the quarter ended March 31, 2022 and $99,247 relating to our receivables in 2021. The allowance for credit loss for the quarter ended March 31, 2022 was $49,094 and was $42,065 for the year ended December 31, 2021.We offer our customers the option to purchase certain wireless devices in installments over a specified period of time and, in many cases, once certain conditions are met, they may be eligible to trade in the original equipment for a new device and have the remaining unpaid balance paid or settled. As of December 31, 2021, all receivables on this arrangement have been collected and the balance has been written off, and no new receivables have been incurred during the quarter ended March 31, 2022.
We have a strong history of mobile leasing to our subscriber base in partnership with our farmers’ cooperatives. Unlike a typical mobile leasing business, we analyze credit risk on these cooperatives and not directly with our 9.3m subscribers. We have history of leasing to the same number of subscribers since 2017, and have a strong collection record where the cooperatives settle the monthly leasing receivables in bulk. The cooperatives manage the interaction and collection from their members and, therefore, we do not undertake direct credit risk with our subscribers. This ‘business to business’ credit model has assured minimal bad debts and late payments, as well as reduced administrative effort needed to collect monthly receivables due over the 36-month contract.
Prepayments—This represents the total cost of sales for the mobile devices purchased that are contracted out on three year leasing agreements. The company policy is to amortize the cost to profit and loss on a monthly basis to match the recognition of the monthly leasing revenue that the Company will recognize over the three-year contract term. The aging of the prepayments balance is as follows:
(8)Property, Plant & Equipment
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The fixed assets table above refers to the Tingo Mobile business as consolidated into Tingo Inc. for the quarter and year ended March 31, 2022 and December 31, 2021, respectively.
Property, plant and equipment are carried at historical value and depreciated over their useful life. All property and equipment with a cost of $5,000 or greater are capitalized. Major betterments that extend the useful lives of assets are also capitalized. Normal maintenance and repairs are charged to expense as incurred. When assets are sold or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in operations.
Plant and equipment consist of prototypes, software, furniture and equipment, which are depreciated on a straight-line basis over their expected useful lives.
|
| Estimated useful lives |
(years) | ||
Buildings |
| 20 |
Motor Vehicles |
| 5 |
Furniture & Fittings | 5 | |
Office Equipment | 5 | |
Plant & Machinery | 4 | |
Site Installations | 20 |
Site Installations relates to the capitalization of the Company’s investment in rural fibre network and equipment . Previously, it was classified as Work in Progress and the works were completed as as 31 December 2021. Depreciation on these assets commenced from 1 January 2022.
The Total depreciation charge for the quarter ended March 31, 2022 and March 31, 2021 was $5,174,153 and $450,719, respectively.
(9) | Intangible Assets and Work-in- Progress |
Intangible Assets—The details below relate to Intangible Assets for Tingo Mobile as consolidated into the Company for the three months ended March 31, 2022. This represents cost incurred on software development of our mobile operating system and secure browser. This is Tingo’s proprietary operating system and mobile/web browser. The system and its technology platform is designed to help our customers securely execute financial transactions. This cost is amortized over
(Five) years, because on or before then we are expected to have significantly upgraded the software. For the three months ended March 31, 2022, the Company incurred capitalized costs of $ 0 and charged $283,941 in amortization costs for this period.16
(10) | Liquidity and Financing Arrangements |
Liquidity—There are several factors that may materially affect our liquidity during the reasonably foreseeable future including, for example, currency volatility, foreign exchange controls and other items that affect cash flows to our parent company. In view of the foregoing, we believe that our operating cash flow and cash on hand will be sufficient to meet operating requirements from the date of this filing through the next twelve months.
Cash and Cash Equivalents—As of March 31, 2022, we had cash and cash equivalents of $25.3 million on a consolidated basis. As of December 31, 2021, we had cash and cash equivalents of $128.4 million on a consolidated basis. The cash and cash equivalent mainly consists of funds held with the company’s bank in Nigeria. The company ensures we optimize value by managing and placing excess liquidity on fixed deposits to earn income from such excess cashflows. Reduction is cash and cash equivalent is mainly due to a significant repayment of accounts payables to our core suppliers of mobile phones.
(11) | Current and Non-Current Liabilities |
Accounts Payable and Accruals
| March 31, 2022 |
| December 31, 2021 | |||
Trade Payables | $ | 271,065,477 | $ | 754,709,170 | ||
Other Payables |
| (129,895) |
| 126,994 | ||
$ | 270,935,582 | $ | 754,836,164 |
Trade Payables—This represents the balance due to our Smartphone suppliers at March 31, 2022 and December 31, 2021.
Deferred Income—The balance represents to gross income due over the term of the
phone leasing cycle. Monthly releases to revenue will be conducted in line with the Company’s revenue recognition policy and will reduce to $0 by April 2024 and July 2024 accordingly. The table below provides the aging of the balances between current and non-current liabilities as follows:17
VAT—This represents the current and future VAT liability at rate of 7.5% relating to the mobile phone leasing contracts included under Accounts Receivable and Deferred Income. The table below shows the aging of when such liabilities will become due and payable:
(12) | Taxation and Deferred Tax |
The provision for income tax consists of the following components for the three months ended March 31, 2022 and 2021:
| March 31, 2022 |
| March 31, 2021 | |||
Income tax | $ | 36,551,539 | $ | 12,182,861 | ||
Deferred tax | 2,147,290 | — | ||||
Education tax | — | 835,570 | ||||
Current Tax | $ | 38,698,829 | $ | 13,018,431 |
The significant components of the tax liabilities as of March 31, 2022 and December 2021 are summarized below:
The significant components of the deferred tax liabilities as of March 31, 2022 and December 31, 2021 are summarized below:
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(13) | Subsequent Events |
Management performed an evaluation of the Company’s activity through the date the financial statements were issued, noting the following subsequent event:
On June 15, 2022, the Company entered into an Amended and Restated Agreement and Plan of Merger (“Merger Agreement”) among MICT, Inc. (“MICT”), MICT Merger Sub, Inc. (“Merger Sub”), and the Company, whereby Merger Sub would be merged with and into the Company, and the Company would therefore become a wholly-owned subsidiary of MICT. The shares of MICT are traded on the Nasdaq Capital Market under the symbol ‘MICT’. A summary of the Merger Agreement and the actions taken by the Company and MICT in connection therewith are included in the Company’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission on June 15, 2022.
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Tingo, Inc. (“we,” “us,” “our,” “Tingo” or the “Company”), a Nevada corporation, was formed on February 17, 2015. Our shares trade on the OTC Markets trading platform under the symbol ‘TMNA’. We acquired our wholly-owned subsidiary, Tingo Mobile, PLC, a Nigerian public limited company (“Tingo Mobile”), in a share exchange with its sole shareholder effective August 15, 2021. The Company, including its subsidiary Tingo Mobile, is an Agri-Fintech company offering a comprehensive platform service through use of smartphones – ‘device as a service’ (using GSM technology) to empower a marketplace to enable subscribers/farmers within and outside of the agricultural sector to manage their commercial activities of growing and selling their production to market participants both domestically and internationally. The ecosystem provides a ‘one stop shop’ solution to enable such subscribers to manage everything from airtime top ups, bill pay services for utilities and other service providers, access to insurance services and micro finance to support their value chain from ‘seed to sale’.
As of March 31, 2022, Tingo had approximately 9.3 million subscribers using its mobile phones and Nwassa payment platform (www.nwassa.com). Nwassas Africa’s leading digital agriculture ecosystem that empowers rural farmers and agri-businesses by using proprietary technology to enable access to markets in which they operate. Farm produce can be shipped from farms across Africa to any part of the world, in both retail and wholesale quantities. Nwassa’s payment gateway also has an escrow structure that creates trust between buyers and sellers. Our system provides real-time pricing, straight from the farms, eliminating middlemen. Our users’ customers pay for produce bought using available pricing on our platform. Our platform is paperless, verified and matched against a smart contract. Data is efficiently stored on the blockchain.
Our platform has created an escrow solution that secures the buyer, funds are not released to our members until fulfilment. The platform also facilitates trade financing, ensuring that banks and other lenders compete to provide credit to our members.
Although we have a large retail subscriber base, ours is essentially a business-to-business-to-consumer (“B2B2C”) business model. Each of our subscribers is a member of one of two large farmers’ cooperatives with whom we have a contractual relationship and which relationship facilitates the distribution of our branded smartphones into various rural communities of member farmers. And it is through our phones and our proprietary applications imbedded therein where we are able to distribute our wider array of agri-fintech services and generate the diverse revenue streams as described in more detail in this report.
Our principal office is located at 43 West 23rd Street, 2nd Floor, New York, NY 10010, and the telephone number is +1-646-847-0144. Our corporate website is located at www.tingoinc.com, although it does not constitute a part of this Quarterly Report. We make available free of charge on our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed or furnished to the Securities and Exchange Commission (“SEC”). Our shares are traded on OTC Markets under the ticker symbol ‘TMNA’.
The information contained in this section should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this Quarterly Report and in conjunction with the financial statements and notes thereto in the Company’s Amendment No. 2 to Annual Report on Form 10-K/A filed with the SEC on July 22, 2022 (“10-K”). In addition, some of the statements in this report constitute forward-looking statements. The matters discussed in this Quarterly Report, as well as in future oral and written statements by management of Tingo, that are forward-looking statements are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. Important assumptions include our ability to generate revenues, achieve certain margins and levels of profitability, and the availability of additional capital. In light of these and other uncertainties, the inclusion of a forward-looking statement in this Quarterly Report should not be regarded as a representation by us that our plans or objectives will be achieved. The forward-looking statements contained in this Quarterly Report include statements as to:
:
● | our future operating results; |
● | our business prospects; |
● | currency volatility, foreign exchange, and inflation risk; |
● | our contractual arrangements with our customers and other relationships with third parties; |
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● | the dependence of our future success on the general economy and its impact on the industries in which we invest; |
● | political instability in the countries in which we operate; |
● | uncertainty regarding certain legal systems in Africa; |
● | our dependence upon external sources of capital; |
● | our expected financings and capital raising; |
● | our regulatory structure and tax treatment; |
● | the adequacy of our cash resources and working capital; |
● | the timing of cash flows from our operations; |
● | the impact of fluctuations in interest rates on our business; |
● | market conditions and our ability to access additional capital, if deemed necessary; |
● | uncertainty regarding the timing, pace and extent of an economic recovery in the United States and elsewhere; and |
● | natural or man-made disasters and other external events that may disrupt our operations. |
There are a number of important risks and uncertainties that could cause our actual results to differ materially from those indicated by such forward-looking statements. For a discussion of factors that could cause our actual results to differ from forward-looking statements contained in this Quarterly Report, please see the discussion in “Item 1A. Risk Factors” in our 10-K. In particular, you should carefully consider the risks we have described in the 10-K and elsewhere in this Quarterly Report concerning the coronavirus pandemic and the economic impact of the coronavirus on the Company and our operations. You should not place undue reliance on these forward-looking statements. The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date this Quarterly Report is filed with the SEC.
Acquisition of Tingo Mobile plc
On August 15, 2021, the Company acquired all of the share capital of Tingo Mobile plc, a Nigerian corporation (“Tingo Mobile”) from Tingo International Holdings, Inc., a Delaware corporation (“TIH”), the sole shareholder of Tingo Mobile. Pursuant to the Acquisition Agreement executed in connection with the transaction, as subsequently amended, we issued TIH 1,028,000,000 shares of our Class A common stock and 65,000,000 shares of our Class B common stock. We also paid various fees and expenses in connection with the transaction, including 27,840,000 shares of our Class A common stock as a finder’s fee.
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Results of Operations
Three Months Ended March 31, 2022 Compared with the Three Months Ended March 31, 2021
The Company’s consolidated results from operations for the three months ended March 31, 2022 and March 31, 2021 are summarized as follows:
Three Months Ended | |||||||||||
(in Thousands) | % of | % of | |||||||||
March 31, 2022 | Revenue | March 31, 2021 | Revenue | ||||||||
Revenue | $ | 257,058 | — | $ | 45,238 | ||||||
Operating Expense | (191,554) | 74.52 | % | (4,615) | 10.20 | % | |||||
Operating Income |
| 65,503 |
| 25.48 | % | 40,623 | 89.80 | % | |||
Other Income, net |
| 186 |
| — | 60 | — | |||||
Income before taxes |
| 65,689 |
| 25.55 | % | 40,683 |
| 89.93 | % | ||
Income tax (benefit) |
| (38,699) | (13,018) | ||||||||
Income from continuing operations |
| 26,990 | 10.50 | % | 27,664 | 61.15 | % | ||||
Net Income |
| $ | 26,990 |
| 10.50 | % | $ | 27,664 |
| — |
Tingo’s operating income for the three months ended March 31, 2022 was $65.5 million as compared to $40.6 million during the three months ended March 31, 2021, an increase of $24.9 million, or 61.3%. Excluding costs associated with the Stock Equity Incentive Plan, Tingo’s operating income for the three months ended March 31, 2022 was $143.9 million. This represents a growth of 354.4% compared to the three months ended March 31, 2021. The substantial increase is largely due to renewal of the mobile leasing activity that commenced in May 2021 and significantly positive growth of revenue mix in the higher margin business in Nwassa, where we earn up to a 4.0% commission on various financial transactions and have relatively insignificant marginal costs as compared to our sales and leasing business. With increased adoption rates and growth in our subscriber base, as Nwassa becomes a progressively larger component of our aggregate revenue, we expect overall gross profit margins to increase accordingly. Nwassa generates net margins over 90%. This is reflective in the growth of Tingo’s Net Income (excluding costs associated with the Stock Equity Incentive Plan) which grew by 381% to $104.5 million for the three months ended March 31, 2022 compared to $27.7 million for the three months ended March 31, 2021.
Revenue
| Three Months Ended | |||||
March 31, 2022 | March 31, 2021 | |||||
Mobile Phone leasing |
| $ | 121,773,857 |
| $ | — |
Services- Mobile calls & data |
| 13,726,612 |
| 13,576,878 | ||
NWASSA revenue |
| 121,467,049 |
| 31,661,247 | ||
Airtime |
| 3,425,518 |
| 2,035,539 | ||
Brokerage on loans |
| 4,120,651 |
| 565,275 | ||
Insurance |
| 6,595,200 |
| — | ||
Trading on agricultural produce |
| 62,198,505 |
| 15,100,452 | ||
Utility |
| 45,217,176 |
| 13,959,981 | ||
Total Revenue |
| $ | 257,057,519 |
| $ | 45,238,125 |
22
Generally. We generated total revenue of $257.1 million during the quarter ended March 31, 2022 compared to $45.2 million during the quarter ended March 31, 2021, an over five-fold increase. In addition to recognizing leasing and service revenue from our mobile phones during the first quarter of 2022, we also experienced sharp growth in the utilization of our Nwassa agri-fintech platform as compared to the first quarter of 2021. Comparing successive quarters of Q4 2021 and Q1 2022, excluding one off-sales of mobile phones amounting to $301.0 million in 2021, total revenue for the Company increased substantially from from $215.5 million in the fourth quarter of 2021 to $256.9 million in the first quarter of 2022, an increase of $41.4 million, or 19.2%. Our Nwassa Agri-Fintech platform delivered a strong growth in revenue, increasing from $ 77.9 million in the fourth quarter of 2021 to $121.8 million in the first quarter 2022, a significant increase of 56.4% quarter-on-quarter. The principal reasons for the increases during the first quarter of 2022 as compared to the first quarter and fourth quarter of 2021 were as follows:
● | the increased use of our agri-fintech services by our subscribers, which saw an increase of $43.6 million in the first quarter of 2022 as compared to the first quarter of 2021 regarding revenues for Nwassa, our Agri-fintech platform. This represents a net growth of 55% for the period. Our strategy of enabling rural communities with an affordable smartphone ‘device as a service’ has proved successful in increasing the volume of agri produce trading being conducted on the platform. Given the fees we earn through these services, the Company processed approximately $2.9 billion in transaction volume for our subscribers during the first quarter of 2022 (fourth quarter of 2021 - $ 1.8 billion). |
● | The Agri-marketplace that enables farmers to trade their farm produce delivered over 100% growth in the number of farmers now trading their produce. The significant increase in activity posted over 115% growth in Nwassa revenues for this activity. Agri-trading tevenues for the first quarter of 2022 were $62.2 million, as compared to $15.1 million during the first quarter of 2021 and $29.4 million during the fourth quarter of 2021. This implies a gross transaction value of approximately $1.5 billion for the first quarter as compared to $0.7 billion in the fourth quarter 2021. |
● | Utility top-ups on Nwassa saw revenues increase to $45.2 million for the first quarter 2022 as compared to $13.9 million in the first quarter of 2021 and $37.4 million during the fourth quarter 2021. This represents a growth rate of 325% on a year-over-year basis, and a 20.8% growth rate as compared to the fourth quarter of 2021. |
● | The significant growth in Nwassa revenues is in line with our strategy to expand our Agri-Fintech business as our core focus with the access to mobile devices as an enabler to assure access and connectivity to our Nwassa platform. |
● | The decline in the Naira -USD exchange rate from March 31, 2021 to March 31, 2022 has been mitigated by the significant organic growth of both volume and margins on our agri-fintech trading business. |
Mobile leasing revenues continue to be in line with expectations of the three year leasing contract and has been slightly impacted by the declining exchange rate.
Leasing revenue is recognized over 36 months in equal instalments from the date of sign up of the contract. Inasmuch as our lease agreements did not commence until later in 2021, we had $0 in leasing revenue during the quarter ended March 31, 2021 as compared to $121.8 million for the quarter ended March 31, 2022. Nwassa, our Agri-Fintech platform generated 47.3% of total Company revenue during the three months ended March 31, 2022 compared to 70.0% of total revenue for the three months ended March 31, 2021. The substantially higher relative contribution of Nwassa to overall revenue in the first quarter of 2021 was merely due to the absence of leasing revenue during that period. By comparison, our agri-fintech revenue for the three months ended December 31, 2021 was 15.1%. Examining quarter-on-quarter growth more closely, the level of growth in our Nwassa Agri-Fintech platform recorded significant increased activity in the number of farmers trading on our Agri-Marketplace by over 90% for the three months ended March 31, 2022 as compared to the three months ended December 31, 2021.
Utility top-up activity levels more than tripled during the first quarter of 2022 as compared to the first quarter of 2021, and were also up 38% as compared to the fourth quarter of 2021. We believe that the strong performance of the Agri-fintech side of our business is a clear demonstration of the maturity and adoption of the Nwassa platform by a higher percentage of our ‘Device as a Service’ customer base , powered through farmers’ cooperatives. The level of loan brokerage increased by over 700% for the quarter ended March 31, 2022 as compared to the first quarter of 2021 and over 270% as compared to the fourth quarter of 2021. We noted that at least 30% of the non-leasing customer base who purchased our mobile phones in November 2021 registered for access to the Nwassa platform to manage airtime and utility payments. This is significant, inasmuch as it is a demonstration of our successful campaigns we ran to register customers who bought a phone via a third cooperative with which we contracted in November 2021.
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However, we believe that it is important to understand that the provision of smartphones is the means to drive a higher level of access to our AgriFintech platform Nwassa, to enable our customers to participate in our Agri-marketplace, top up their airtime, pay for utilities, insure their mobile devices and access credit services through partner institutions. Typical fees and commissions on these services can be up to 4.0%. Insurance revenue is fixed at $0.24 per device per month. Our focus on providing an affordable mobile device is core to the delivery of our fintech services and we call that ‘Device as a Service’ model. The richness of our Agri-Fintech service and related payment services deliver a very unique model of social upliftment and financial inclusion to rural communities. The agri-marketplace we have created provides our customers with an opportunity to market their fresh produce to reduce the ‘time to market’ and contribute towards our objectives to support the rural farming community with products and services that enable reduction in ‘post-harvest losses’ - a key area of focus for us as part of our investment to deliver services through use of smartphones to drive tangible social upliftment through increased sales for such farmers using the Nwassa platform.
Cost of Sales
The following table sets forth the cost of sales for the three months ended March 31, 2022 and March 31, 2021:
Three Months Ended | ||||||
March 31, 2022 | March 31, 2021 | |||||
Commission to Cooperatives and Agents |
| $ | 2,499,840 |
| $ | 2,511,941 |
Cost of Mobile Phones |
| 101,282,845 |
| — | ||
Total cost of sales |
| $ | 103,782,685 |
| $ | 2,511,941 |
The Company’s cost of sales for the three months ended March 31, 2022 was $103.8 million as compared to $2.5 million for the three months ended March 31, 2021 and $387.9 million for the three months ended December 31, 2021. The low cost of sales in the first quarter of 2021 was due to the absence of leasing revenue during the period. The sharp decrease from the fourth quarter of 2021 to the first quarter of 2022 was largely due to one-off costs associated with a bulk sale of mobile phones in November 2021 of $301 million. Cost of revenue principally consists of matching the release of our lease prepayments to our manufacturer to that of our customers over the 36-month mobile leasing period. Increases over the prior year are a combination of a longer leasing period in 2021, due to the renewal of new contracts in May and August of 2021. However, because overall cost of revenue also includes the cost of our agri-fintech services, the trending decrease in cost of revenue as a percentage of overall sales is inversely related to the proportional increase over time of revenue generation from our higher margin agri-fintech services as described below. In other words, as we expand our Nwassa platform and revenue streams associated therewith, we expect our overall cost of revenue, as a percentage of overall revenue, to decrease accordingly.
Cost of sales consists of two key elements:
● | Commissions to Cooperatives and Agents - the Company has over 17,000 agents that support the rollout of our services through Cooperatives and an independent agency network of rural farmers and women. |
● | Cost of mobile phones – we amortize and match the cost of the mobile devices in line with the 36-month contract recognition of revenue for our leased phones. There were no outright sales of phones during this period. Prior period quarter ended December 31, 2021 also contained costs relating to one-off sales. |
● | Prepayments on the Balance Sheet represent the gross value of phone costs that will be amortized monthly. |
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Selling, General & Administrative Expenses
The following table sets forth selling, general and administrative expenses for the three months ended March 31, 2022 and March 31, 2021:
Three Months Ended | ||||||
| March 31, 2022 |
| March 31, 2021 | |||
Payroll and related expenses | $ | 24,987,746 | $ | 690,696 | ||
Distribution expenses | 221,187 | 104,573 | ||||
Professional fees | 55,524,912 | 315,434 | ||||
Bank fees and charges | 636,047 | 62,824 | ||||
Depreciation and amortization | 5,494,094 | 740,616 | ||||
General and administrative - other | 860,331 | 189,167 | ||||
Bad debt expenses | 47,398 | — | ||||
Selling, General and Adminstrative Expenses |
| $ | 87,771,715 |
| $ | 2,103,310 |
Prior year expenses mainly relate to general and administrative expenses only. Our acquisition of Tingo Mobile and the attendant expenses to maintain our status as a public reporting company has substantially increased these costs. In addition, in 2021, we adopted our 2021 Equity Incentive Plan which provided for, among other awards, shares of restricted stock to Plan participants. This resulted in compensation expense of $23.4 million for the quarter ended March 31, 2022 , included under Payroll and related expenses ( prior three months ended December 31, 2021 - $220.1m). In addition, professional fees above relates to stock incentive granted to consultants at a cost of $55m ( prior three months ended December 31, 2021 - $ 76.5m). Eliminating non-cash expenditures such as compensation expense relating to these stock awards, the Company had profit before tax of approximately $105.4 million on a consolidated basis during the first quarter of 2022. A detailed breakdown of other costs included in Selling General and Administrative Expenses are contained in the Consolidated Profit and Loss Statement. A substantial part of these costs relate to Tingo Mobile’s operations in Nigeria.
2021 Equity Incentive Plan
On October 6, 2021, the Board adopted our 2021 Equity Incentive Plan (“Incentive Plan”), the purpose of which was to promote the interests of the Company by encouraging directors, officers, employees, and consultants of Tingo to develop a long-term interest in the Company, align their interests with that of our stockholders, and provide a means whereby they may develop a proprietary interest in the development and financial success of the Company and its stockholders. The Incentive Plan is also intended to enhance the ability of the Company and its subsidiaries to attract and retain the services of individuals who are essential for the growth and profitability of the Company. The Incentive Plan permits the award of restricted stock, common stock purchase options, restricted stock units, and stock appreciation awards. The maximum number of shares of our Class A common stock that are subject to awards granted under the Incentive Plan is 131,537,545 shares. The term of the Incentive Plan will expire on October 6, 2031. On October 12, 2021, our stockholders approved our Incentive Plan and, during the fourth quarter of 2021 and the first quarter of 2022, the Tingo Compensation Committee granted awards under the Plan to certain directors, executive officers, employees, and consultants in the aggregate amount of 118,870,000 shares. The majority of the awards so issued are each subject to a vesting requirement over a 2-year period unless the recipient thereof is terminated or removed from their position without “cause”, or as a result of constructive termination, as such terms are defined in the respective award agreements entered into by each of the recipients and the Company. We account for share-based compensation using the fair value method, as prescribed by ASC 718, Compensation—Stock Compensation. Accordingly, for restricted stock awards, we measure the grant date fair value based upon the market price of our common stock on the date of the grant and amortize the fair value of the awards as share-based compensation expense over the requisite service period, which is generally the vesting term. In connection with these awards, we recorded compensation expense of $78.4 million for the three months ended March 31, 2022.
Liquidity and Capital Resources
Sources and Uses of Cash: Our principal sources of liquidity are our cash and cash equivalents, and cash generated from operations. On September 24, 2021, we filed a Form D with the Securities and Exchange Commission indicating the sale of our securities in one or more private transactions (the “Private Offering”). We expect that, as a result of the Private Offering, we will also be able to secure sufficient operating and working capital for our parent company activities for the next twelve months.
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Cash on Hand. As of March 31, 2022, our cash and cash equivalents totaled $25.3 million on a consolidated basis. This is a significant reduction from the quarter ended December 31, 2021 due mainly to a substantial reduction in accounts payable linked to the Company’s mobile phone supplier.
Indebtedness: The Company had no financial debt as at March 31, 2022 or December 31, 2021.
We expect our cash on hand, proceeds received from our assets and operations, cash flow from continuing operations will be sufficient to meet our anticipated liquidity needs for business operations for the next twelve months. There can be no assurance that we will continue to generate cash flows at or above current levels or that we will be able to raise additional financing to support our parent company’s operating and compliance expenditures.
Our cash flows from continuing operations could be adversely affected by events outside our control, including, without limitation, changes in overall economic conditions, regulatory requirements, changes in technologies, demand for our products and services, availability of labor resources and capital, natural disasters, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as COVID-19, and other conditions. Our ability to attract and maintain a sufficient customer base, particularly in our principal markets, is critical to our ability to maintain a positive cash flow from operations. The foregoing events individually or collectively could affect our results.
We are evaluating the impact of current market conditions on our Company and its ability to generate dollar-denominated income. We believe that our operating cash flow and cash on hand will be sufficient to meet operating requirements and to finance routine capital expenditures through the next twelve months.
Off Balance Sheet Arrangements
None.
Dividends
On November 10, 2021, our Board adopted a Dividend Policy for the Company. The Policy provides a process that the Board will undertake when approving quarterly, annual, and special dividends for the Company including, but not limited to, various financial criteria and macroeconomic factors, as well as certain financial and economic factors specific to the Company. In the case of quarterly dividends, within ninety (90) calendar days following the end of each fiscal year, the Board will determine the dividend payment, if any, that will be made to holders of the Company’s capital stock. Such dividend will generally be expressed as a cash amount equal to a percentage of the Company’s consolidated after-tax net income for such prior fiscal year, and will be divided into fourths, with one-fourth of the amount payable each quarter.
Subsequent Events
Our Management performed an evaluation of the Company’s activity through the date the financial statements were issued, noting the following subsequent event:
On June 15, 2022, the Company entered into an Amended and Restated Agreement and Plan of Merger (“Merger Agreement”) among MICT, Inc. (“MICT”), MICT Merger Sub, Inc. (“Merger Sub”), and the Company, whereby Merger Sub would be merged with and into the Company, and the Company would therefore become a wholly-owned subsidiary of MICT. The shares of MICT are traded on the Nasdaq Capital Market under the symbol ‘MICT’. A summary of the Merger Agreement and the actions taken by the Company and MICT in connection therewith are included in the Company’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission on June 15, 2022.
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Item 3.Quantitative and Qualitative Disclosure about Market Risk
We are subject to financial market risks, including changes in interest rates, lease rates, credit rates, and general debt terms.
We are subject to risks regarding currency volatility and foreign exchange rates. In particular, we are subject to fluctuations in foreign exchange rates between the U.S. dollar, our reporting currency, and currencies of countries where we market or source our products and services, which presently consists principally of the Nigerian Naira. Such fluctuations may result in significant increases or decreases in our reported revenue and other results as expressed in dollars, and in the reported value of our assets, liabilities and cash flows. In addition, currency fluctuation may adversely affect receivables, payables, debt, firm commitments and forecast transactions denominated in non-U.S. currencies. In particular, transition risks arise where parts of the cost of sales are not denominated in the same currency of such sales. We currently do not hedge this exposure. Fluctuation in exchange rates, depreciation of local currencies, changes in monetary and/or fiscal policy or inflation in the countries in which we operate could have a material adverse effect on our business, financial condition, results of operations and prospects.
In addition to foreign currency risk, our ability to generate operating cash flows at our parent company level depends on the ability of our subsidiaries to upstream funds. Nigeria and other countries in which we may operate have exchange controls that can, from time to time, place restrictions on the exchange of local currency for foreign currency and the transfer of funds abroad. These controls and other controls that may be implemented in the future could limit the ability of our subsidiaries to transfer cash to us and make us dependent upon external sources of cash and credit.
We can offer no assurance that additional restrictions on currency exchange will not be implemented in the future or that these restrictions will not limit the ability of our subsidiaries to transfer cash to us, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Item 4.Controls and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
Management assessed the effectiveness of our internal control over financial reporting as of September 30, 2021. In making this assessment, management used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013.
Based upon our evaluation of internal controls, our CEO and CFO determined that (i) we have a material weakness over our entity level control environment as of March 31, 2022 and (ii) our internal control over financial reporting was not effective as of March 31, 2022, inasmuch as we have recharacterized the acquisition of Tingo Mobile as a reverse acquisition under applicable accounting rules and have amended and restated our financial statements in this quarterly report on Form 10-Q accordingly.
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Part II.Other Information
Item 1.Legal Proceedings
From time to time, the Company is a party to certain proceedings incidental to the normal course of our business including the enforcement of our rights under contracts with our customers and subscribers. While the outcome of these legal proceedings cannot at this time be predicted with certainty, we do not expect that these proceedings will have a material effect upon the Company’s financial condition or results of operations.
Item 1A. Risk Factors
In connection with our acquisition of Tingo Mobile and as a public company focused on the agri-fintech sector, we are subject to a number of risks, many of which are identified in our Amendment No. 2 to our Annual Report on Form 10-K/A filed with the SEC on July 22, 2022 (“10-K”). As the business of the Company and its subsidiaries continues to develop, we intend to identify, as will be reasonably possible, any such additional risks and include the same in our subsequent filings and reports with the SEC.
Moreover, the economic dislocation precipitated by the coronavirus pandemic is still rapidly evolving. As of the date of filing of this Amended 10-Q, we are unable to predict either the potential near-term or longer-term impact that the coronavirus may have on our financial and operating results due to numerous uncertainties regarding the duration and severity of the crisis. To the greatest extent possible, we intend to operate our business in the ordinary course. Nevertheless, the ultimate impact of the coronavirus pandemic is highly uncertain and subject to change, and our business, results of operations, and financial condition have been and will likely continue to be impacted by future developments concerning the pandemic and the resulting economic disruption.
Readers should carefully consider these risks and all other information contained in our 10-K, including the Company’s financial statements and the related notes thereto. The risks and uncertainties described in our 10-K and throughout this Amended 10-Q are not the only ones facing the Company.
Additional risks and uncertainties not presently known to us, or not presently deemed material by us, may also impair our operations and performance.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3.Defaults Upon Senior Securities
None.
Item 4.Mine Safety Disclosures
Not Applicable.
Item 5.Other Information
Not Applicable.
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Item 6.Exhibits
* Filed herewith
**The certifications furnished in Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
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