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 September 30, 2021
☐ 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) |
IWeb, Inc., 8/6 Soi Patanakarn 30, Patanakarn Road, Suan Luang, Bangkok, Thailand
(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(g) 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 1,205,016,211 shares of the registrant’s Class A common stock, $0.001 par value, outstanding, as of November 1, 2021.
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 and nine months ended September 30, 2021 ("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 November 15, 2021 ("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)
September 30, |
| |||||
| 2021 |
| December 31, | |||
(Unaudited) | 2020 | |||||
Assets |
|
|
|
| ||
Current Assets |
|
|
|
| ||
Cash and Cash Equivalents | $ | 25,365,654 |
| $ | 28,202,869 | |
Accounts and Other Receivables | 1,414,436,631 | 241,953,782 | ||||
Inventory | 225,000 | 30,941 | ||||
Prepayments - current portion | 409,434,667 | — | ||||
Total Current Assets | 1,849,461,952 | 270,187,142 | ||||
| ||||||
Non-Current Assets |
| |||||
Prepayments - non-current portion | 685,005,221 | — | ||||
Property, plant and equipment, net | 33,078,030 | 37,042,344 | ||||
Work-in-Progress | 192,712,052 | 207,968,849 | ||||
Intangible Assets | 1,970,067 | 3,055,061 | ||||
Total non-current assets | 912,765,370 | 248,066,254 | ||||
Total Assets | $ | 2,762,227,322 |
| $ | 518,253,396 | |
Liabilities and Stockholders Equity | ||||||
Current Liabilities | ||||||
Accounts Payable and accruals | $ | 714,172,570 |
| $ | 20,534,718 | |
Deferred income - current portion | 492,269,333 | — | ||||
Value added tax - current portion | 38,072,052 | — | ||||
Tax Liability | 120,467,713 | 67,601,594 | ||||
Total current liabilities | 1,364,981,668 | 88,136,312 | ||||
Non-current liabilities | ||||||
Deferred income - non-current portion | 822,618,778 | — | ||||
Value added tax - non-current portion | 63,621,239 | — | ||||
Deferred Tax | 1,268,498 | 2,360,003 | ||||
Total non- current liabilities | 887,508,515 | 2,360,003 | ||||
Total Liabilities | 2,252,490,183 | 90,496,315 | ||||
COMMITMENTS AND CONTINGENCIES | ||||||
Stockholder's Equity | ||||||
Common stock – Class A, par value $.001 per share, 1,250,000,000 shares authorized, 1,096,146,211 and 928,000,000 shares and at and | 1,063,641 | 928,000 | ||||
Common Stock – Class B, par value $.001 per share, 200,000,000 shares authorized, 65,000,000 shares issued and at 30, 2021 and 31, 2020 | 65,000 | 65,000 | ||||
Additional paid-in-capital | 115,048,344 | 508,549 | ||||
Accumulated Surplus | 459,872,603 | 458,538,770 | ||||
Translation Reserve | (66,312,449) | (32,283,238) | ||||
Total Tingo, Inc.'s stockholders' equity | 509,737,139 | 427,757,081 | ||||
Non-controlling interests | — | - | ||||
Total Stockholders Equity | 509,737,139 | 427,757,081 | ||||
Total Liabilities and Stockholders Equity | $ | 2,762,227,322 |
| $ | 518,253,396 | |
The accompanying notes are an integral part of these financial statements.
4
TINGO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For the three months ended | For the three months ended | For the nine months ended | For the nine months ended | |||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Revenues | $ | 176,985,441 | $ | 44,982,932 | $ | 317,540,202 | $ | 574,618,275 | ||||
Cost of Sales | (92,355,972) | (2,884,465) | (140,495,082) | (380,787,694) | ||||||||
Gross Profit | 84,629,469 | 42,098,467 | 177,045,120 | 193,830,581 | ||||||||
Operating Expense | ||||||||||||
Payroll and related expenses | 781,710 | 797,267 | 2,191,994 | 2,197,636 | ||||||||
Distribution expenses | 352,919 | 95,155 | 574,531 | 226,041 | ||||||||
Professional fees | 111,660,000 | 314,628 | 112,260,000 | 314,628 | ||||||||
Bank fees and charges | 286,072 | 384,959 | 513,342 | 889,356 | ||||||||
Depreciation and amortization | 701,160 | 1,518,654 | 2,108,884 | 4,561,058 | ||||||||
General and administrative expenses - other | 122,774 | 89,759 | 150,489 | 215,080 | ||||||||
Bad Debt Expenses | 23,012 | — | 44,365 | 9,159,736 | ||||||||
Total Operating Expenses | 113,927,647 | 3,200,422 | 117,843,605 | 17,563,535 | ||||||||
Income (Loss) from Operations | (29,298,178) | 38,898,045 | 59,201,515 | 176,267,046 | ||||||||
Other Income (Expenses) | ||||||||||||
Other income (expenses) | (243,128) | 228,380 | (2,752) | 529,088 | ||||||||
Bad debt recoveries | — | 3,463,200 | 3,463,200 | |||||||||
Interest expense | — | (171,330) | — | (872,429) | ||||||||
Total Other Income (Expenses) | (243,128) | 3,520,250 | (2,752) | 3,119,859 | ||||||||
Income (Loss) before tax | (29,541,306) | 42,418,295 | 59,198,763 | 179,386,905 | ||||||||
Taxation | (15,141,810) | (13,722,861) | (54,548,065) | (61,674,092) | ||||||||
Net Income (Loss) | $ | (44,683,116) | $ | 28,695,434 | $ | 4,650,698 | $ | 117,712,813 | ||||
Net Income (Loss) | $ | (44,683,116) | $ | 28,695,434 | $ | 4,650,698 | $ | 117,712,813 | ||||
Other Comprehensive Income (loss) | ||||||||||||
Translation Adjustment | (2,555,063) | (6,570,787) | (33,935,739) | (27,367,339) | ||||||||
Total Comprehensive Income (Loss) | $ | (47,238,179) | $ | 22,124,647 | $ | (29,285,041) | $ | 90,345,474 | ||||
Net Income (Loss) per share - Basic and Diluted | $ | (0.04) | $ | 0.02 | $ | (0.03) | $ | 0.09 | ||||
Weighted Average number of common shares outstanding | ||||||||||||
Basic and diluted | 1,051,384,648 | 993,000,000 | 1,014,563,668 | 993,000,000 | ||||||||
The accompanying notes are an integral part of these financial statements.
5
TINGO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
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, 2020 |
| 928,000,000 | $ | 928,000 | 65,000,000 | $ | 65,000 | $ | 508,549 | $ | 316,568,435 | $ | (16,177,137) | $ | 301,892,847 | |||||||
Net income for the period ended September 30, 2020 |
| — |
| — | — |
| — |
| — |
| 117,712,813 |
| — | 117,712,813 | ||||||||
|
|
|
|
|
| |||||||||||||||||
Foreign Currency Translation Adjustment | — | — | — | — | — | — | (27,367,339) | (27,367,339) | ||||||||||||||
Balance as of September 30, 2020 | 928,000,000 | 928,000 | 65,000,000 | 65,000 | 508,549 | 434,281,248 | (43,544,476) | 392,238,321 | ||||||||||||||
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 nine months ended September 30, 2021 | — | — | — | — | — | 4,650,698 | — | 4,650,698 | ||||||||||||||
Issuance of shares for acquisition of IWeb | 40,306,211 | 7,801 | — | — | 3,207,635 | (3,316,865) | (93,472) | (194,901) | ||||||||||||||
Issuance of shares for services provided | 27,840,000 | 27,840 | — | — | 111,332,160 | — | — | 111,360,000 | ||||||||||||||
Aditional share issuances | 100,000,000 | 100,000 | — | — | — | — | — | 100,000 | ||||||||||||||
Foreign Currency Translation Adjustment | — | — | — | — | — | — | (33,935,739) | (33,935,739) | ||||||||||||||
| ||||||||||||||||||||||
Balance as of September 30, 2021 | 1,096,146,211 | $ | 1,063,641 | 65,000,000 | $ | 65,000 | $ | 115,048,344 | $ | 459,872,603 | $ | (66,312,449) | $ | 509,737,139 | ||||||||
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 June 30, 2020 |
| 928,000,000 | $ | 928,000 | 65,000,000 | $ | 65,000 | $ | 508,549 | $ | 405,585,814 | $ | (36,973,689) | $ | 370,113,674 | |||||||
Net income for the period ended September 30, 2020 |
| — |
| — | — |
| — |
| — |
| 28,695,434 |
| — | 28,695,434 | ||||||||
Foreign Currency Translation Adjustment | — | — | — | — | — | — | (6,570,787) | (6,570,787) | ||||||||||||||
Balance as of September 30, 2020 | 928,000,000 | 928,000 | 65,000,000 | 65,000 | 508,549 | 434,281,248 | (43,544,476) | 392,238,321 | ||||||||||||||
|
|
|
|
| ||||||||||||||||||
Balance as of June 30, 2021 | 928,000,000 |
| 928,000 | 65,000,000 |
| 65,000 |
| 508,549 |
| 507,872,584 |
| (63,663,914) | 445,710,219 | |||||||||
|
| |||||||||||||||||||||
Net loss for the period ended September 30, 2021 | — | — | — | — | — | (44,683,116) | — | (44,683,116) | ||||||||||||||
Issuance of shares for acquisition of IWeb | 40,306,211 | 7,801 | — | — | 3,207,635 | (3,316,865) | (93,472) | (194,901) | ||||||||||||||
Issuance of shares for services provided |
| 27,840,000 |
| 27,840 | — |
| — |
| 111,332,160 |
| — |
| — | 111,360,000 | ||||||||
|
|
|
|
|
| |||||||||||||||||
Aditional share issuances | 100,000,000 | 100,000 | — | — | — | — | — | 100,000 | ||||||||||||||
Foreign Currency Translation Adjustment | — | — | — | — | — | — | (2,555,063) | (2,555,063) | ||||||||||||||
Balance as of September 30, 2021 | 1,096,146,211 | $ | 1,063,641 | 65,000,000 | $ | 65,000 | $ | 115,048,344 | $ | 459,872,603 | $ | (66,312,449) | $ | 509,737,139 | ||||||||
The accompanying notes are an integral part of these financial statements.
6
TINGO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine month ended | ||||||
| September 30, 2021 |
| September 30, 2020 | |||
Cash Flows from operating activities |
|
|
| |||
Net Income | $ | 4,650,698 | $ | 117,712,813 | ||
Adjustments to reconcile net income to cash used in operating activites | ||||||
Depreciation and amortization | 2,108,884 | 4,787,116 | ||||
Bad Debt expense | 44,365 | 9,159,736 | ||||
Stock issued for services | 111,360,000 | — | ||||
Stock issued for acquisition – other shares | 100,000 | — | ||||
Increase/Decrease related to | ||||||
Inventories | (194,509) | 160,274 | ||||
Trade and other receivables | (1,172,531,430) | (15,756,720) | ||||
Prepayments | (1,094,439,888) | 120,370,261 | ||||
Trade and other payables | 2,110,419,531 | (180,453,470) | ||||
Work in progress | 15,256,797 | — | ||||
Taxes paid | 51,774,614 | — | ||||
Net Cash provided by operating activites | 28,353,001 | 55,980,010 | ||||
Cash flows from investing activities | ||||||
Acquisition of property, plant and equipment | (403,947) | (197,547) | ||||
Acquisition of IWEB | (194,901) | — | ||||
Work in progress additions | — | (169,585,325) | ||||
Acquisition of intangibles | (573,915) | — | ||||
Net Cash used in investing activities | (1,172,763) | (169,782,872) | ||||
Cash flows from financing activities | ||||||
Net borrowings | — | (6,803,522) | ||||
Net Cash used in financing activities | — | (6,803,522) | ||||
Translation Adjustment | (30,017,453) | (28,226,329) | ||||
Net change in cash and cash equivalents | (2,837,215) | (148,832,713) | ||||
Cash and cash equivalents, beginning of period | 28,202,869 | 188,452,412 | ||||
Cash and cash equivalents, end of period | $ | 25,365,654 | $ | 39,619,699 | ||
Supplemental Cash flow information | ||||||
Cash paid for period for: | ||||||
Interest | $ | — | $ | 196,883 | ||
Non-cash disclosures | ||||||
Stock issued for acquisiton – other | $ | 100,000 | $ | — | ||
Stock issued for services | $ | 111,360,000 | $ | — | ||
The accompanying notes are an integral part of these financial statements.
7
TINGO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(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. Prior to the acquisition of Tingo Mobile, the Company was headquartered in Thailand and its principal business consisted of technology consulting. This business was discontinued following the acquisition of Tingo Mobile, and we attributed a $3.2 million in net equity to the Company's prior business as shown in the Condensed Consolidated Statements of Shareholders' Equity above.
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 September 30, 2021, 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. 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.
Tingo aims to be Africa’s leading Agri-Fintech player that transforms rural farming communities 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 unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X for interim financial information. All normal recurring adjustments considered necessary for a fair presentation have been included. Certain disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been omitted. The reporting currency of the Company is the U.S. Dollar.
The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of results that ultimately may be achieved for the remainder of the year.
The preparation of the unaudited interim consolidated financial statements requires management of the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingencies at the date of the unaudited interim condensed consolidated financial statements. These estimates are inherently subject to judgment and actual results could differ.
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
8
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.
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 Expenses | $ | (111,360,000) | |
Additional Paid in Capital | $ | 4,170,398,451 | |
Accumulated Surplus | $ | (397,390,240) | |
Translation Reserve | $ | 32,459,205 |
The Company also recorded expenses of $111,360,000 during the third quarter of 2021 relating to shares issued to service providers in connection with the Acquisition of Tingo Mobile. This expense is a restatement of previously capitalized acquisition expenses explained above.
(3) | Significant Accounting Policies |
The following is a summary of significant accounting policies followed by the Company in the preparation of our financial statements:
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.
Use of Estimates—The preparation of financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Although we believe the estimates and assumptions used in preparing these financial statements and related notes are reasonable in light of known facts and circumstances, actual results could differ from those estimates.
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 subsequent to quarter-end, in accordance with ASC 260, Earnings Per Share, the unvested shares of restricted stock awarded pursuant to our equity compensation plans are participating securities and, therefore, will be included in the basic earnings per share calculation in future quarters.
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 deficit) on the Condensed Consolidated Balance Sheet as of September 30, 2021 and December 31, 2020 are as follows:
9
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.
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 September 30, 2021 and December 31, 2020, there were no uncertain tax positions that required accrual.
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 relase to cost of sales is conducted to match the income recognition of the monthly revenue from mobile phone leasing on a matching principle.
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 ofbetween 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 recognises 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 expenses incurred by the company, an estimate of any expenses 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.
10
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 expenses. 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 recognised 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-ofuse 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 recognised 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 recognising 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.
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.
11
(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 create and Accounts Receivable for the full value of the contract and a matched Deferred Income credit under Liabilities for the same value. The company recognizes such release to revenue on a monthly basis.
● 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:
● 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
12
● Tingopay – the company offers a mobile wallet and bill payment app and the company recognizes revenue as a fee or percentage commission as transaction 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:
| September 30, |
| December 31, | |
2021 | 2020 | |||
Balance Sheet: |
|
|
|
|
Nigerian Naira |
| 410 |
| 379.5 |
Profit and Loss : |
|
|
|
|
Nigerian Naira |
| 410 |
| 379.5 |
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:
| September 30, 2021 |
| December 31, 2020 | |||
Spare parts |
| $ | 225,000 |
| $ | 30,491 |
Total Inventory |
| $ | 225,000 |
| $ | 30,491 |
(7)Accounts and Other Receivables
| September 30, 2021 |
| December 31, 2020 | |||
Trade receivable gross |
| $ | 1,414,465,264 |
| $ | 242,072,989 |
Allowance for expected credit loss |
| (28,705) |
| (119,207) | ||
| 1,414,436,560 |
| 241,953,782 | |||
Directors current account |
| 72 |
| — | ||
| $ | 1,414,436,631 |
| $ | 241,953,782 | |
Accounts Receivable—The total value of our three-year mobile leasing contracts with our subscribers is recognized under accounts receivable at the outset. The balance is due and payable and is credited as receipts are received from our customers pursuant to these contracts. 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. During the quarter
13
ended September 30, 2021, a general allowance of 3 percent was made on all account receivables to cushion the possible effect of Covid 19 on our customers. We recognized bad debt expense of $6,525 relating to our receivables in the third quarter of 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 September 30, 2021, all receivables on this arrangement have been collected and balance written off.
Prepayments—This represents the total cost of sales for the mobile devices purchased that are contracted out on three year leasing agreements with our subscribers. Our 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 :
| September 30, 2021 |
| December 31, 2020 | |||
Due within one year |
| $ | 409,434,667 |
| $ | — |
Over one year: |
|
|
|
| ||
One to two years |
| 409,434,667 |
| — | ||
Over two years |
| 275,570,555 |
| — | ||
Total Prepayments |
| 1,094,439,888 |
| — | ||
Prepayments - current portion |
| 409,434,667 |
| — | ||
Prepayments - non-current portion |
| 685,005,221 |
| — | ||
Total Prepayments |
| $ | 1,094,439,888 |
| $ | — |
(8)Property, Plant & Equipment
|
| MOTOR |
| FURNITURE & |
| OFFICE |
| PLANT & |
|
| ||||
LAND | BUILDING | VEHICLES | FITTINGS | EQUIPMENT | MACHINERY | Total | ||||||||
| $ |
| $ |
| $ |
| $ |
| $ |
| $ |
| $ | |
COST | ||||||||||||||
January 1, 2021 |
| 9,560,176 |
| 34,540,253 |
| 10,992,230 |
| 225,788 |
| 71,899 |
| 65,232 |
| 55,455,578 |
ADDITIONS |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
Forex translation difference |
| (701,344) |
| (2,533,907) |
| (10,783,006) |
| (164,182) |
| (5,275) |
| 10,120,597 |
| (4,067,116) |
September 30, 2021 |
| 8,858,832 |
| 32,006,346 |
| 209,224 |
| 61,606 |
| 66,624 |
| 10,185,829 |
| 51,388,462 |
DEPRECIATION |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2021 |
| 0 |
| 7,256,776 |
| 10,960,171 |
| 104,655 |
| 57,869 |
| 33,763 |
| 18,413,234 |
CHARGED FOR THE PERIOD |
| 0 |
| 1,200,238 |
| 23,098 |
| 8,415 |
| 8,462 |
| 7,798 |
| 1,248,012 |
Forex translation difference |
| 0 |
| (532,364) |
| (10,863,194) |
| (73,369) |
| (4,246) |
| 10,122,360 |
| (1,350,813) |
September 30, 2021 |
| 0 |
| 7,924,650 |
| 120,076 |
| 39,701 |
| 62,085 |
| 10,163,921 |
| 18,310,433 |
NET BOOK VALUE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,2020 |
| 9,560,176 |
| 27,283,477 |
| 32,059 |
| 121,133 |
| 14,030 |
| 31,469 |
| 37,042,344 |
September 30,2021 |
| 8,858,832 |
| 24,081,696 |
| 89,149 |
| 21,905 |
| 4,539 |
| 21,909 |
| 33,078,030 |
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.
14
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 | |
Project in Progress | ||
Office Equipment | 5 | |
Plant & Machinery | 4 |
The Total depreciation charge for 2021 is as follows:
3 months to September 30, 2021 - $ 208,777
9 months to September 30, 2021 - $ 1,248,012
(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 9 months ended September 30, 2021. This represents cost incurred on software development of 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 do financial transactions. This cost is amortized over 5 (Five) years, because on or before then we are expected to have significantly upgraded. For the period ended September 30, 2021, the Company incurred capitalised expenses of $0 and incurred $860,872 in amortization expenses for the nine months ended September 30, 2021.
Cost |
|
| |
As at 1 January, 2021 |
| $ | 6,193,507 |
Additions |
| — | |
Forex translation difference |
| (454,361) | |
As at 30 September, 2021 |
| $ | 5,739,146 |
Amortization |
|
| |
As at 1 January, 2021 |
| $ | 3,138,446 |
Charge for the period |
| 860,872 | |
Forex translation difference |
| (230,239) | |
As at 30 September, 2021 |
| $ | 3,769,079 |
Carrying Amount |
| $ | 1,970,067 |
Work -in-Progress—Consists of investment in ‘Cell On-Wheel’. This is a rollout of broadband and mobile network enhancement across rural Nigeria. Upon completion, we intend to allocate a depreciation charge. This is projected for completion later in 2021 or in 2022. The movements above represent the results for Tingo Mobile.
January 1, 2021 |
| $ | 207,968,849 |
Additions | — | ||
Forex translation difference | (15,256,797) | ||
Closing balance - September 30, 2021 | $ | 192,712,052 |
(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.
15
Cash and Cash Equivalents—As of September 30, 2021, we had cash and cash equivalents of $25.4 million on a consolidated basis. As of December 31, 2020, we had cash and cash equivalents of $28.2 million.
Short-term Loans—The Company had no short-term loans as at September 30, 2021 or December 31, 2020.
(11)Current and Non-Current Liabilities
Accounts Payable and Accruals
| September 30, 2021 |
| December 31, 2020 | |||
Trade payables |
| $ | 714,005,220 |
| $ | 20,493,803 |
Audit fee payable |
| — |
| 40,915 | ||
Other Payables |
| 167,350 |
| — | ||
Total Accounts Payable and Accruals |
| $ | 714,172,570 |
| $ | 20,534,718 |
Trade Payables—This represents the balance due to our Smartphone suppliers at September 30, 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 August 2024 accordingly. There was no deferred income as at December 31, 2020, as the last leasing contracts expired at the end of their full 3-year term in May 2020. The table below provides the aging of the balances between current and non-current liabilities as follows:
| September 30, 2021 |
| December 31, 2020 | |||
Due within one year |
| $ | 492,269,333 |
| $ | — |
Over one year |
|
|
|
| ||
One to two years |
| 492,269,333 |
| — | ||
Over two years |
| 330,349,444 |
| — | ||
Total Deferred income |
| $ | 1,314,888,111 |
| $ | — |
Deferred income - current portion |
| 492,269,333 |
| — | ||
Deferred income - non-current portion |
| 822,618,778 |
| — | ||
Total Deferred income |
| $ | 1,314,888,111 | $ | — |
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 :
| September 30, 2021 |
| December 31, 2020 | |||
Due within one year |
| $ | 38,072,052 |
| $ | — |
Over one year |
|
|
|
| ||
One to two years |
| 38,072,052 |
| — | ||
Over two years |
| 25,549,187 |
| — | ||
Total Value added tax |
| $ | 101,693,292 |
| $ | — |
Value added tax - current portion |
| 38,072,052 |
| — | ||
Value added tax - non-current portion |
| 63,621,239 |
| — | ||
Total Value added tax |
| $ | 101,693,292 | $ | — | |
(12)Taxation and Deferred Tax
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A reconciliation of the differences between the effective and statutory income tax rates for the periods ended September 30, 2021 and 2020 is as follows:
16
The provision for income tax consists of the following components for the nine months ended September 30, 2021 and 2020:
| September 30, 2021 |
| September 30, 2020 | |||
Income tax | $ | 51,138,811 | $ | 60,685,148 | ||
Education Tax | 3,409,254 | 4,045,677 | ||||
Current Tax | $ | 54,548,065 | $ | 64,730,825 | ||
The significant components of the tax liabilities as of September 30, 2021 and 2020 are summarized below:
Current Tax Liabilities |
| September 30, 2021 |
| September 30, 2020 | ||
Beginning of period | $ | 71,138,433 | $ | 35,992,292 | ||
Charge for the period |
| 54,548,065 |
| 64,730,825 | ||
| 125,686,498 |
| 100,723,117 | |||
Paid during the period |
| — |
| (34,147,817) | ||
Forex translation difference |
| (5,218,785) |
| (8,070,233) | ||
Total Current Tax Liabilites | $ | 120,467,713 | $ | 58,505,067 | ||
The significant components of the deferred tax liabilities as of September 30, 2021 and 2020 are summarized below:
Deferred Tax |
| September 30, 2021 |
| September 30, 2020 | ||
Beginning of period | $ | 1,368,923 | $ | 1,444,469 | ||
Change for the period |
| — |
| — | ||
Forex translation difference |
| (100,425) |
| (74,024) | ||
Total Deferred Tax Liabilities | $ | 1,268,498 | $ | 1,370,445 | ||
(13)Subsequent Events
Management performed an evaluation of the Company’s activity through the date the financial statements were issued, noting the following subsequent events:
Adoption of 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 on October 14, 2021, the Tingo Compensation Committee granted awards of restricted stock under the Incentive Plan to certain directors, executive officers, employees, and consultants in the aggregate amount of 104,820,000 shares. The majority of the awards so issued are each subject to a vesting requirement over a 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.
Amendment and Restatement of the Company’s Articles of Incorporation. On October 6, 2021 and again on October 18, 2021, our Board and holders of a majority of our outstanding voting securities approved the amendment and restatement of our Articles of Incorporation in their entirety (collectively, the “Restated Articles”). The purposes of the Restated Articles were principally to: (i) reflect the original intention of the Company to provide for ten (10) votes per share for each share of Class B common stock, but to eliminate all economic rights (including conversion, dividend, distribution, and liquidation rights) with respect to such stock; and (ii) increase the number of our authorized shares of capital stock from 1.5 billion to 2.5 billion shares, consisting of 2.25 billion authorized shares of Class A common stock, 200 million authorized shares of Class B common stock, and 50 million authorized shares of undesignated preferred stock.
17
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 (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 September 30, 2021, 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. 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.
Tingo aims to be Africa’s leading Agri-Fintech player that transforms rural farming communities 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.
The information contained in this section should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this Quarterly Report. 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; |
| ● | 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; |
18
| ● | 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. 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.
Results of Operations
Three Months Ended September 30, 2021 Compared with the Three Months Ended September 30, 2020
The Company’s consolidated results from operations for the three months ended September 30, 2021 and 2020 are summarized as follows:
Three Months Ended September 30, | ||||||||||
($in Thousands) | % of | % of | ||||||||
| 2021 |
| Revenue |
| 2020 |
| Revenue | |||
Revenue | $ | 176,985 | — | $ | 44,983 | |||||
Operating Expense | (206,284) | 116.55 | % | (6,085) | 13.53 | |||||
Operating Income |
| (29,298) |
| (16.55) | % | 38,898 | 86.47 | |||
Other Income, net |
| (243) |
| — | 3,520 | 7.8 | ||||
Income before taxes |
| (29,541) |
| (16.69) | % | 42,418 |
| 94.30 | ||
Income tax expense (benefit) |
| (15,142) | (13,723) | |||||||
Income from continuing operations |
| (44,683) |
| (25.25) | % | 28,695 |
| 63.79 | ||
Net Income (Loss) |
| $ | (44,683) |
| (25.25) | % | $ | 28,695 |
| 63.79 |
Revenue for the three months ended September 30, 2021 was significantly higher than the three months ended September 30, 2020 due to the following :
The Company generated $108.7 million, or 61.4% of its total revenue for the third quarter of 2021, from mobile leasing as compared to $0 during the three months ended September 30, 2020. The absence of mobile leasing revenue during the third quarter of 2020 was principally due to to smartphone supply shortages exacerbated by the Covid-19 pandemic. The Company's two groups of new three-year mobile leasing contracts commenced in May 2021 and August 2021, respectively.
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Nwassa agri-fintech revenues for the three months ended September 30, 2021 totaled $56.5 million, a net increase of 89.5% from $29.8 million for the three months ended September 30, 2020. The significant increase was principally attributable to the introduction of mobile insurance, fees from which totaled $5.0 million during the third quarter of 2021, as well as a 281% increase in income from payments for utilities by customers during the quarter, which increased from $7.1 million in the third quarter of 2020 to $27.1 million in the third quarter of 2021.
Cost of Sales for the three months ended September 30, 2021 was $92.4 million as compared to $2.9 million for the three months dneded September 30, 2020. The principal difference consisted of expenses related to the Company's new mobile leasing contracts and airtime and data commissions paid per the mobile leasing contracts.
Other major cost items in the third quarter of 2021 included expenses associated with the acquisition of Tingo Mobile Plc totaling $111.3 million, as compared to $0 for the third quarter of 2020. Other than the foregoing, there were no other material movements in the comparative operating expenses of the Company for the third quarters of 2021 and 2020.
Nine Months Ended September 30, 2021 Compared with the Nine Months Ended September 30, 2020
The Company’s consolidated results from operations for the nine months ended September 30, 2021 and 2020 are summarized as follows:
Nine Months Ended September 30, | ||||||||||
($in Thousands) | % of | % of | ||||||||
| 2021 |
| Revenue |
| 2020 |
| Revenue | |||
Revenue | $ | 317,540 | $ | 574,618 | ||||||
Operating Expense | (258,339) | 81.36 | % | (398,351) | 69.32 | |||||
Operating Income (loss) |
| 59,202 |
| 18.64 | % | 176,267 |
| 30.68 | ||
Other Income (expense) , net |
| (3) |
| 3,120 |
| |||||
Income (loss) before taxes |
| 59,199 |
| 18.64 | % | 17,987 |
| 31.22 | ||
Income tax expense (benefit) |
| (54,548) |
| (61,674) |
| |||||
Income (loss) from continuing | 4,651 | 1.46 | % | 117,713 | 20.49 | |||||
operations |
|
|
| |||||||
Income from discontinued |
|
|
| |||||||
operations , net of tax |
|
|
| |||||||
Net Income (loss) |
| $ | 4,651 |
| 1.46 | % | $ | 117,713 |
| 20.49 |
Revenue for the nine months ended September 30, 2021 was significantly lower than the nine months ended September 30, 2020 due to the following :
The Company generated revenue of approximately $310.0 million in connection with a one-off bulk sale of mobile phones during the nine months ended September 30, 2020. There were no one-off sales of mobile phones during the nine months ended September 30, 2021. The company earned $108.7 million and $161.9 million in the the three and nine months ended September 30, 2021, respectively, relating to the lease of mobile phones, as compared to $0 for both periods in 2020 due to smartphone supply and manufacturing shortages and other Covid-19 restrictions that affected our business as discussed above. Our new three-year mobile leasing contracts commenced in May 2021 and August 2021. The previous mobile leasing contracts expired in May 2020.
Nwassa agri-fintech revenues for the nine months ended September 30, 2021 totaled $120.7 million, an increase of 49.3% from $81.5 millin for the nine months ended September 30, 2020. The significant increase was attributable to a significant increase in income from agri-trading and utility top-up payments conducted on the platform.
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Revenue
| Three Months to September 30, |
| Nine Months to September 30, | |||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Outright Phone Sales |
| $ | — |
| $ | — |
| $ | — |
| $ | 310,000,000 |
Mobile Phone Leasing |
| 108,669,889 |
| — |
| 161,919,889 |
| 142,111,985 | ||||
Services- Mobile calls & data | 11,799,270 | 15,181,396 | 34,899,849 | 44,861,689 | ||||||||
NWASSA revenue |
| 56,516,282 |
| 29,801,537 |
| 120,720,464 |
| 77,644,601 | ||||
Airtime |
| 2,762,722 |
| 2,651,560 |
| 6,747,944 |
| 7,850,225 | ||||
Brokerage on loans |
| 552,180 |
| 1,027,717 |
| 1,563,546 |
| 2,271,341 | ||||
Insurance |
| 5,380,600 |
| — |
| 7,362,470 |
| 1,691,994 | ||||
Trading on agricultural produce |
| 20,746,218 |
| 19,012,268 |
| 51,269,806 |
| 30,269,146 | ||||
Utility |
| 27,074,562 |
| 7,109,992 |
| 53,776,698 |
| 35,561,895 | ||||
Total Revenue |
| $ | 176,985,441 |
| $ | 44,982,933 |
| $ | 317,540,202 |
| $ | 574,618,275 |
Our agri-fintech business grew from being 13.5% of total revenue in the nine months ended September 30, 2020 to 38.0% in the nine months ended September 30, 2021. This trend demonstrates the increased activity resulting from the adoption of the smartphone ‘device as a service’ strategy the Company has implemented. Nwassa revenue increased by over 55.5% for the nine-month period ended September 30, 2021 as compared to the nine months ended September 30, 2020.
For the comparative quarter ended September 30, 2021, the Company reported an 89.6% increase in revenues from its Nwassa agri-fintech business. A contributing factor has been the significant take up of mobile insurance and the use of utility top-ups. Agri trading activity has also seen significant growth for the comparative nine-month period which is significant, given the impact of Covid 19 on the market as a whole. That trend has held consistently in 2021 as illustrated in the comparative results for the three-month period.
Mobile sales leasing – the previous three-year cycle ended in May 2020. Due to Covid 19 and disruption to supply chains , the new three-year cycle recommenced in May 2021. Deliveries of 9 million devices was staggered between May 2021 and August 2021. We anticipate the level of revenue will increase significantly for subsequent quarters due to the full rollout of 9 million devices by August 2021. In 2020, the Company secured a wholesale distribution contract to supply devices, delivering sales of $310.0 million included in the nine month period ended September 30, 2020.
Leasing revenue is recognized over 36 months in equal instalments from the date of sign up of the contract. Nwassa, the Agri-Fintech platform generated 31.8% of total revenue. Total non-leasing (‘device as a service’) revenues represented 38.1% to total revenues. Typical fees and commissions range from 1.5% to 4.0%. Insurance revenue is fixed at $0.24 per device per month. There were no outright sales of phones in the period. Deferred Income represents the gross value of such contracts and a monthly release is made to revenue as per the terms of each contract and our accounting policy.
Cost of Sales
The following table sets forth the cost of sales for the three and nine month periods ended September 30, 2021:
Three Months to September 30, | Nine Months to September 30, | |||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |
$ | $ | $ | $ | |||||
Commission to Cooperatives and Agents |
| 2,241,861 |
| 64,567 |
| 6,630,971 |
| 8,946,179 |
Cost of Mobile Phones |
| 90,114,111 |
| 2,819,898 |
| 133,864,111 |
| 371,841,515 |
Total cost of sales |
| 92,355,972 |
| 2,884,465 |
| 140,495,082 |
| 380,787,694 |
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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. Prepayments on the Balance Sheet represent the gross value of phone expenses that will be amortized monthly. Prior year figures for the nine months ended September 30 , 2020 include cost of the devices sold. |
Selling, General & Administrative Expenses
The following table sets forth selling, general and administrative expenses for the three and nine month periods ended September 30, 2021:
| Three Months to |
| Nine Months to | |||||
September 30, | September 30, | |||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |
$ | $ | $ | $ | |||||
Selling, General and Adminstrative Expenses |
| 113,927,647 |
| 3,200,422 |
| 117,843,605 |
| 17,563,535 |
Selling , General and Administrative Expenses include the - $ 111.3m. All other operating expenses are in line with prior year and mainly relate to the opearing expenses for Tingo Mobile Plc.
Gross Profit and Income from Operations
Gross profit for the comparative three-month period increased by over 200% mainly due to the higher margin business mix of the Nwassa platform activity. Gross Margins achieved for the three months period was 48% . For the nine-month comparative period ended September 30, 2021, gross margin achieved was 55.8%. The comparative gross margin for comparable nine months ended September 30, 2020 was 33.6%. The margin mix is impacted by the proportion of mobile sales vs Nwassa activity. The increased activity on the Nwassa derives a higher gross margin, inasmuch as the level of direct expenses associated with this activity is relatively insignificant compared to cost of sales for mobile devices.
This trend is evidenced by the increased level of income from operations we have posted for the nine months and three months ended September 2021 compared to prior comparable period. For the comparable three-month period we have delivered a very strong growth of over 211% in income from Operations and maintained a relatively similar level of profitability despite a lower sales figure by 45% compared to the same nine-month period. This illustrates the significant value of the increased mix of Nwassa revenues relative to mobile sales will have a significant impact on margins and profitability into the future. Net margins achieved was 46% for the three months to September 2021 and 53.6% for the nine months ended September 30, 2021. For the comparable period, net margins were 31.2% for the nine months. For the three months ended September 30, 2020 net margins were 94%, demonstrating the high margin activity of our Nwassa Agri-Fintech business.
Other Income
Prior periods show a substantially higher level of income due mainly to recovery of bad debts.
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.
As of September 30, 2021, our cash and cash equivalents totaled $25.4 million on a consolidated basis.
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Operating activities generated approximately $28.3 million during the nine months ended September 30, 2021, representing a decrease of $27.6 million compared with 2020, driven by the net income of $4.6 million for the period, offset primarily by changes in working capital of $23.7 million.
Net cash used in investing activities was approximately $1.2 million during the nine months ended September 30, 2021, compared with approximately $169.8 million for the nine months ended September 30, 2020. The change is primarily due to the work in progress additions during the nine months ended September 30, 2020.
Net cash provided by financing activities during the nine months ended September 30, 2021 was zero compared with net cash used in financing activities of $6.6 million during the nine months ended September 30, 2020.
Indebtedness: The Company had no financial debt as at September 30, 2021.
We expect our cash on hand, proceeds received from our assets and operations, cash flow from continuing operations, and availability of funds from our private offering, 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.
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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 September 30, 2021 and (ii) our internal control over financial reporting was not effective as of September 30, 2021, 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, we are subject to a number of risks. 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 Amendment No. 1 to our Quarterly Report on Form 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 filings with the SEC, including the Company’s financial statements and the related notes thereto. The risks and uncertainties described throughout this 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
On August 15, 2021, we issued 1,028,000,000 shares of our Class A common stock to Tingo International Holdings, Inc., the previous owner of Tingo Mobile. We also issued 27,840,000 shares of our Class A common stock as a finder’s fee in connection with the transaction. No solicitation was made and no underwriting discounts were given or paid in connection with this transaction. We believe that the issuance of our shares of Class A common stock in connection with the acquisition of Tingo Mobile was exempt from registration with the Securities and Exchange Commission pursuant to Section 4(2) of the Securities Act of 1933.
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
3. |
| Articles of Incorporation or Bylaws | |
(a) | |||
(b) | |||
(c) | |||
10. | Material Contracts | ||
(a) | Form of Indemnification Agreement between the Company and its directors and certain officers.* | ||
(b) | |||
(c) | |||
31. | Rule 13a-14(a)/15d-14(a) Certifications | ||
1. | |||
2. | |||
32. | Rule 1350 Certifications | ||
1. | |||
2. | |||
101.INS | Formatted in Inline XBRL (Extensible Business Reporting Language) (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). | ||
101.SCH | Inline XBRL Taxonomy Extension Schema Document. | ||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | ||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | ||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | ||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | ||
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). | ||
* 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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