The accompanying notes are an integral part of
the unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of
the unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of
the unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of
the unaudited condensed consolidated financial statements
The following table provides a reconciliation
of cash and cash equivalent and restricted cash reported within the statement of financial position that sum to the total of the same
amounts shown in the statement of cash flows:
The accompanying notes are an integral part of
the unaudited condensed consolidated financial statements
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Share and Par Value Data)
NOTE 1 — DESCRIPTION OF BUSINESS
Overview
TINGO GROUP, Inc. (the “Company”, “We”, “us”,
“our”) was formed as a Delaware corporation on January 31, 2002 under the name Lapis Technologies, Inc. On March 14, 2013,
we changed our corporate name to Micronet Enertec Technologies, Inc. On July 13, 2018, following the sale of our former subsidiary, Enertec
Systems Ltd., we changed our name to MICT, Inc. On February 27, 2023, following the merger transaction with Tingo., we changed our name
to TINGO GROUP, Inc. Our shares have been listed for trading on The Nasdaq Capital Market since April 29, 2013 under the symbol “TIO”.
The Company is a holding company
conducting financial technology business and agri-fintech business through its subsidiaries and entities, both wholly-owned and controlled
through various VIE arrangements (“VIE entities”, together with the Company, the “Group”), which are located mainly
in Africa, Southeast Asia and the Middle East. The Group’s business has changed materially since December 1, 2022, following the
completion of two material acquisitions of Tingo Mobile and Tingo Foods, the details of which are described under Acquisition of Tingo
Mobile, Acquisition of Tingo Foods.
We currently operate in 4 segments:
(i) Verticals and Technology, comprised of our operations in China where we have 3 VIE entities through which we primarily operate our
insurance brokerage business; (ii) Online Stock Trading, primarily comprised of the operation of Magpie Securities Limited (“Magpie”)
through which we operate the online stock trading business, primarily out of Hong Kong and Singapore; (iii) Comprehensive Platform Service
which includes the operations of Tingo Mobile described above; and (iv) Tingo Food Processing, where crops and raw foods are processed
into finished products, through Tingo Foods, (purchased by the Company in February 2023) which commenced food processing operations in
August 2022.
Since July 1, 2020, as a result of the Company’s acquisition
of GFHI (the “GFHI Acquisition”) the Group has been operating in the financial technology sector. GFHI is a financial technology
company with a marketplace in China, as well as the wider southeast Asia area and other parts of the world and is currently in the process
of building various platforms for business opportunities in different verticals and technology segments to capitalize on such technology
and business, including the Company’s recent acquisitions of Tingo Mobile and Tingo Foods. The Company plans to increase its capabilities
and its technological platforms through acquisition and licensing technologies to support its growth efforts, particularly in the agri-fintech,
payment services, digital marketplace and financial services sectors.
In China, the Company is principally
focused on developing insurance broker business and products across approximately 130 insurance branches in China through its subsidiaries
and VIE entities, with planned expansion into additional markets. The Company has developed highly scalable proprietary platforms for
insurance products (B2B, B2B2C and B2C) and financial services/products (B2C), the technology for which is highly adaptable for other
applications and markets.
Following GFH Intermediate
Holdings Ltd (“Intermediate”) acquisition of Magpie, a Hong Kong securities and investment services firm, on February 26,
2021 and the subsequent regulatory approval from the Hong Kong Securities and Futures Commission (“HKSFC”), Magpie is licensed
to carry on Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities) and Type 9 (asset management)
regulated activities in Hong Kong.
Magpie launched Magpie Invest,
a global stock trading app, on September 15, 2021. It is a proprietary technology investment trading platform that is currently operational
in Hong Kong. Magpie has memberships/registrations with the Hong Kong Stock Exchange (“HKSE”), the London Stock Exchange (“LSE”)
and the requisite Hong Kong and China Direct clearing companies. The Company’s financial services business and first financial services
product, the Magpie Invest app, is able to trade securities on National Association of Securities Dealers Automated Quotations (“
NASDAQ”), New York Stock Exchange (“NYSE”), TMX, HKSE, China Stock Connect, LSE, the Frankfurt Stock Exchange and
the Paris Stock Exchange.
The growth of Magpie will continue
to be realized and executed through the Company’s business development efforts, which include the pivot of Magpie’s strategic
focuses to B2B, white-label and payment services in response to the change in market conditions for the retail client sector that materialized
in 2022. In order to strengthen Magpie’s offering to potential B2B and white-label clients, and enable the broadening of its product
offering, management made the decision to apply for a Capital Markets License (“CMS License”) from the Monetary Authority
of Singapore (“MAS”), which was granted in full on September 20, 2022. Magpie’s CMS License enables it to offer several
new products, including leveraged foreign exchange products and contracts for differences (“CFDs”), including CFDs on commodities
prices and crypto-currency prices.
TINGO GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Share and Par Value Data)
Acquisition of Tingo Mobile
Overview. On December
1, 2022, the Company acquired Tingo Mobile Limited, an agri-fintech business based in Nigeria (“Tingo Mobile”), from Tingo
Inc., a Nevada corporation (“TMNA”). Under the terms of the Merger Agreement we entered into with TMNA and representatives
of the shareholders of each of TMNA and the company (“Merger Agreement”), TMNA contributed its ownership of Tingo Mobile to
a newly organized holding company incorporated in the British Virgin Islands (“Tingo BVI Sub”). TMNA then merged Tingo BVI
Sub with and into MICT Fintech Ltd., a wholly-owned subsidiary of the company organized in the British Virgin Islands (“MICT Fintech”),
resulting in Tingo Mobile being wholly-owned by the Company (hereinafter, the “Merger”).
Consideration Provided.
As consideration for Tingo Mobile, we issued to TMNA 25,783,675 shares of our common stock, equal to 19.9% of our outstanding shares,
calculated as of the closing date of the Merger (the “Common Consideration Shares”) and two series of convertible preferred
shares – Series A Convertible Preferred Stock (“Series A Preferred Stock”) and Series B Convertible Preferred Stock
(“Series B Preferred Stock”).
Key Terms of Series A Preferred
Stock. Upon the approval of our stockholders, the Series A Preferred Stock will convert into 20.1% of the outstanding shares of our
common stock, calculated as of the closing date of the Merger. If such shareholder approval is not obtained by June 30, 2023, all issued
and outstanding shares of Series A Preferred Stock must be redeemed by us in exchange for TMNA receiving 27% of the total issued and outstanding
shares of Tingo Group Holdings, LLC, a Delaware-incorporated subsidiary of the company (“TGH”) that is the immediate parent
company of MICT Fintech, which in turn would reduce the Company’s interests in TGH and therefore Tingo Mobile by 27%.
Key Terms of Series B Preferred
Stock. Upon approval by Nasdaq of the change of control of the company and upon the approval of our stockholders, the Series B Preferred
Stock will convert into 35.0% of the outstanding shares of our common stock, calculated as of the closing date of the Merger, giving TMNA
an aggregate ownership of 75.0% of our outstanding common stock, if both the Series A and series B preferred stock are converted in full.
If such shareholder or Nasdaq approval is not obtained by June 30, 2023, TMNA will have the right to cause us to redeem all of the Series
B Preferred Stock for (x) $666,666,667 or, (y) an amount of common stock of TGH equivalent in value to $666,666,667.
Loan to TMNA. In connection
with the Merger Agreement, we also loaned $23.7 million to TMNA. The loan bears interest at 5.0% per annum and matures on May 10, 2024.
Acquisition of Tingo Foods
On February 9, 2023 (“Effective
Date”), the Company. and MICT Fintech Ltd., an indirect wholly owned subsidiary of the Company organized under the laws of the British
Virgin Islands (“TINGO GROUP Fintech”) purchased from Dozy Mmobuosi 100% of the ordinary shares of Tingo Foods PLC (“Tingo
Foods”) (the “Acquisition”). Mr. Mmobuosi is the majority shareholder, Chairman and Chief Executive Officer of TMNA.
Tingo Foods started its operational
business in August 2022.
As consideration for the Acquisition,
the Company agreed to pay Mr. Mmobuosi, a purchase price equal to the cost value of Tingo Foods’ stock, which will be satisfied
by the issuance of a secured promissory note (“Promissory Note”) in the amount of US$204,000 and certain undertakings and
obligations of the Company. The Promissory Note is for a term of two years with an interest rate of 5%. MICT Fintech agreed to certain
covenants with respect to its ability to incur additional debt or create additional liens. The Acquisition will not result in any new
issuance of the Company common stock, nor of any instruments convertible into shares of the Company.
The parties additionally agreed
that Mr. Mmobuosi, as the owner of the real property on which the business of Tingo Foods is located and operates, to finance and complete
construction of the building, and for the Company and Tingo Foods to fit out the building and premises, including the installation of
mechanized equipment, for the specialized operations of a large food processing facility. Lastly, Mr. Mmobuosi will also provide the Company
and Tingo Foods with a long-term lease with respect to the real property.
On February 14, 2023, the
Company through its wholly owned subsidiary Tingo Mobile, and Visa, the global leader in digital payments, launched their pan-African
strategic partnership, which aims to improve access to digital payments and financial services, and drive financial inclusion across Africa.
The launch of the Tingo Visa card, together with the new TingoPay Super App and the TingoPay business portal, opens significant global
opportunities to Tingo’s subscribers, allowing secure cashless payments at more than 61 million merchants in over 200 countries
through Visa’s global network, as well as the ability for business subscribers to more readily and securely accept payments from
customers and other third parties.
TINGO GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Share and Par Value Data)
The following diagram illustrates
the Company’s current corporate structure, including its subsidiaries, and variable interest entities (“VIEs”), as of
March 31, 2023:
TINGO GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Share and Par Value Data)
Variable Interest
Entities (VIEs)
We currently conduct our insurance broker business
in China using 3 VIEs. The Company consolidates certain VIEs for which it is the primary beneficiary. VIEs consist of certain operating
entities not wholly owned by the Company.
The assets and liabilities
of the Company’s VIEs prior to intercompany adjustments included in the Company’s unaudited condensed consolidated financial
statements as of March 31, 2023 and December 31, 2022 are as follows:
| |
March 31, 2023 | | |
December 31, 2022 | |
Current assets: | |
| | |
| |
Cash and cash equivalent | |
$ | 1,276 | | |
$ | 3,690 | |
Trade accounts receivable, net | |
| 4,678 | | |
| 6,823 | |
Related party receivables | |
| 2,533 | | |
| 2,001 | |
Other current assets | |
| 1,400 | | |
| 2,278 | |
Total current assets | |
| 9,887 | | |
| 14,792 | |
| |
| | | |
| | |
Property and equipment, net | |
| 163 | | |
| 176 | |
Intangible assets, net | |
| 5,712 | | |
| 5,712 | |
Long-term deposit and other non-current assets | |
| 19 | | |
| 48 | |
Right of use assets under operating lease | |
| 669 | | |
| 711 | |
Restricted cash escrow | |
| 1,485 | | |
| 1,479 | |
Deferred tax assets | |
| 840 | | |
| 793 | |
Total long-term assets | |
| 8,888 | | |
| 8,919 | |
| |
| | | |
| | |
Total assets | |
$ | 18,775 | | |
$ | 23,711 | |
| |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Short-term loan | |
$ | 138 | | |
$ | 286 | |
Trade accounts payable | |
| 1,915 | | |
| 4,817 | |
Related party payables | |
| 4,099 | | |
| 4,002 | |
Current operating lease liability | |
| 269 | | |
| 230 | |
Other current liabilities | |
| 2,754 | | |
| 4,515 | |
Total current liabilities | |
| 9,175 | | |
| 13,850 | |
| |
| | | |
| | |
Long-term liabilities: | |
| | | |
| | |
Long-term loan | |
| 379 | | |
| 377 | |
Long-term operating lease liability | |
| 327 | | |
| 257 | |
Deferred tax liability | |
| 223 | | |
| 224 | |
Total long-term liabilities | |
| 929 | | |
| 858 | |
| |
| | | |
| | |
Total liabilities | |
$ | 10,104 | | |
$ | 14,708 | |
TINGO GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Share and Par Value Data)
Net revenues, loss from operations
and net loss of the VIEs that were included in the Company’s unaudited condensed consolidated financial statements for the three-month
ended March 31, 2023 and 2022 are as follows:
| |
For the three months Ended | | |
For the three months Ended | |
| |
March
31, | | |
March 31, | |
| |
2023 | | |
2022 | |
Net revenues | |
$ | 18,636 | | |
$ | 8,864 | |
Loss from operations | |
$ | (807 | ) | |
$ | (2,184 | ) |
Net loss | |
$ | (345 | ) | |
$ | (1,572 | ) |
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
These unaudited interim condensed
consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”)
for interim financial information and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission
Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been
included (consisting only of normal recurring adjustments except as otherwise discussed). For further information, reference is made to
the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2022.
Operating
results for the three months ended March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending
December 31, 2023.
Significant Accounting Policies
The significant accounting
policies followed in the preparation of these unaudited interim condensed consolidated financial statements are identical to those applied
in the preparation of the latest annual financial statements.
Recent Accounting Standards
Management does not believe
that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s
condensed financial statements.
Use of estimates
The preparation of financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those estimates.
Functional currency and Exchange Rate Income (Loss)
The functional currency of
our foreign entities is their local currency. For these foreign entities, we translate their financial statements into U.S. dollars using
average exchange rates for the period for statements of operations amounts and using end-of-period exchange rates for assets and liabilities.
We record these translation adjustments in Accumulated other comprehensive loss, a separate component of stockholders’ equity, in
our consolidated balance sheets. Exchange gains and losses resulting from the conversion of transaction currency to functional currency
are charged or credited to other comprehensive income (expense), net.
The exchange rate used for
conversion balance sheet data from Nigerian Naira and RMB to USD is presented below:
Currency | |
March 31, 2023 | | |
December 31, 2022 | |
Naira | |
| 460.35 | | |
| 448.55 | |
RMB | |
| 6.8676 | | |
| 6.8972 | |
TINGO GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Share and Par Value Data)
NOTE 3 — TINGO
MOBILE LIMITED TRANSACTION
Tingo Mobile, Purchase
Price Allocation
The table set forth below summarizes the estimates
of the fair value of assets acquired and liabilities assumed and resulting goodwill. During the measurement period, which is up to one
year from the acquisition date, we may adjust provisional amounts that were recognized at the acquisition date to reflect new information
obtained about facts and circumstances that existed as of the acquisition date.
In addition, the following
table summarizes the allocation of the preliminary purchase price as of the acquisition date:
Total Merger consideration (1) |
|
$ |
1,215,241 |
|
Total purchase consideration |
|
$ |
1,215,241 |
|
Less: |
|
|
|
|
Net working capital |
|
$ |
170,327 |
|
Property and equipment |
|
|
760,661 |
|
Intangible – farmer cooperative |
|
|
24,893 |
|
Intangible – trade names and trade marks |
|
|
54,576 |
|
Intangible – software |
|
|
90,030 |
|
Deferred tax liability (2) |
|
|
(50,849 |
) |
|
|
$ |
1,049,638 |
|
Goodwill (3) |
|
$ |
165,603 |
|
(1) | The $1,215,241 value of the Merger Consideration transferred was determined in accordance with ASC 820 and ASC 805. ASC 820 requires that fair value to maximize objective evidence and be determined using assumptions that a market participant would use, and when level 1 inputs exist, it should be used unless determined to be not representative. That would have meant using the unadjusted TINGO GROUP quoted price at the time of completion of the Transaction. The Company is of the opinion however, that the market value per share price as quoted on Nasdaq is not representative of the fair value and should not be used to determine the merger consideration. Using market value per share of TINGO GROUP would have led to a significant bargain purchase gain and an internal rate of return that was not reasonable as well as other valuation anomalies that it created. Hence, and in accordance with ASC 805-30-30-5, the Company reassessed the determination of the consideration transferred and determined that using Tingo, Inc. quoted price traded at the OTC Tingo Closing is more appropriate in determining the consideration fair value. |
(2) | Represents the income tax effect of the difference between the accounting and income tax bases of the identified intangible assets, using an assumed statutory income tax rate of 30%. |
(3) | The goodwill is not deductible for tax purposes. |
TINGO GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Share and Par Value Data)
Note
4 — Tingo Foods PLC Purchase Price Allocation
The table set forth below summarizes
the estimates of the fair value of assets acquired and liabilities assumed and resulting goodwill. In addition, the following table summarizes
the allocation of the preliminary purchase price as of the acquisition date. The amounts are provisional and will be adjusted during the
measurement period, and additional assets or liabilities may be recognized to reflect new information obtained about facts and circumstances
that existed as of the acquisition date that, if known, would have affected the amounts recognized as of that date.
Total Merger consideration (1) |
|
$ |
204,000 |
|
Total purchase consideration |
|
$ |
204,000 |
|
Less: |
|
|
|
|
Net working capital |
|
$ |
42,077 |
|
Property and equipment |
|
|
12,235 |
|
Intangible – Customer Relationships |
|
|
125,677 |
|
Intangible – trade names and trade marks |
|
|
22,097 |
|
Deferred tax liability (2) |
|
|
(44,332 |
) |
|
|
$ |
157,754 |
|
Goodwill (3) |
|
$ |
46,246 |
|
(1) | The $204,000 value of the Merger Consideration transferred as promissory note (“Promissory Note”). The Promissory Note is for a term of two years with an interest rate of 5% per annum. The interest rate on the Promissory Note is reasonably reflective of a market-participant rate. MICT Fintech agreed to certain covenants in connection with the Promissory Note, including with regard to its ability to incur additional debt or create additional liens. The Acquisition will not result in any new issuance of shares of the Company’s common stock, nor of any instruments convertible into shares of the Company’s common stock. |
(2) | Represents the income tax effect of the difference between the accounting and income tax bases of the identified intangible assets, using an assumed statutory income tax rate of 30%. |
(3) | The goodwill is not deductible for tax purposes. During the measurement period, which is up to one year from the date of the Acquisition (the “Acquisition Date”), we may adjust provisional amounts that were recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the Acquisition Date. |
Tingo Foods’s
net revenues and net profit are presented if the Acquisition Date had occurred at the beginning of the previous comparable period. Since
Tingo Foods started its operational business in August 2022, revenues and net profit for three months ended March 31, 2022 is zero.
(USD
in thousands) | |
| Three months
ended
March 31,
2023 | |
Revenues | |
$ | 885,009 | |
| |
| | |
Net profit | |
$ | 179,629 | |
The revenues and net profit
of Tingo Foods since the Acquisition Date included in the unaudited condensed consolidated statements of operations for the reporting
period are $577,219 and $100,213, respectively.
Note 5 —
Stockholders’ Equity
A. Common stock:
Common stock confers upon its
holders the rights to receive notice to participate and vote in general meetings of the Company, and the right to receive dividends if
declared.
B. Series A preferred stock:
As part of the consideration
paid by the Company to TMNA at the closing of the Merger on December 1, 2022, the Company issued 2,604.28 shares of Series A preferred
stock which are convertible into 26,042,808 shares of Company common stock equal to approximately 20.1% of the total issued and outstanding
common stock immediately prior to Closing. The Series A preferred stocks will be convertible to Company common stock upon stockholders’
approval. If stockholders have not approved the conversion of the Series A Preferred Stock into Company common stock by June 30,
2023 (the “Trigger Date”), then, the Company will issue to TMNA stocks to cause TMNA to own 27% of the total issued and outstanding
membership interests of TGH.
TINGO GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Share and Par Value Data)
C. Temporary equity:
As part of the consideration
paid by the Company to TMNA at the closing of the Merger on December 1, 2022, the Company issued 33,687.21 shares of Series B preferred
stock which are convertible into 336,872,138 shares of Company common stock equal to approximately 35% of the total issued and outstanding
Company common stock immediately prior to the closing date of the Merger. The shares of Series B preferred stock will be convertible into
Company common stock upon approval by Nasdaq of the change of control of the Company and upon the approval of the Company’s stockholders.
If such stockholder or Nasdaq approval is not obtained by June 30, 2023, TMNA shall have the right to (i) cause the redemption of Series
B preferred stock to take place within 90 days; and (ii) cause the Company to redeem all of the Series B preferred stock in exchange for
$666,666,667 or an amount of common stock of TGH equivalent in value to $666,666,667. As the redemption provisions to redeem the Series
B preferred stock in cash is outside the control of the Company and contingent upon the approval of stockholders or Nasdaq approval of
the change in control application of the Company, they are required to be presented outside of stockholders’ equity and therefore
were presented as temporary equity on the face of the unaudited consolidated balance sheets.
D. Stock Option Plan:
2012 Plan. Our
2012 Stock Incentive Plan (the “2012 Incentive Plan”) was initially adopted by the Company’s board of directors (the
“Board”) on November 26, 2012, and approved by our stockholders on January 7, 2013 and subsequently amended on September 30,
2014, October 26, 2015, November 15, 2017 and November 8, 2018. Under the 2012 Incentive Plan, as amended, up to 5,000,000 shares of our
common stock, are currently authorized to be issued pursuant to option awards granted thereunder, 3,994,782 shares of which have been
issued or have been allocated to be issued as of December 31, 2022 and 1,005,218 shares remain available for future issuance as December
31, 2022. The 2012 Incentive Plan is intended as an incentive to retain directors, officers, employees, consultants and advisors to the
Company, persons of training, experience and ability, to attract new employees, directors, consultants and advisors whose services are
considered valuable, to encourage the sense of proprietorship and to stimulate the active interest of such persons in the development
and financial success of the Company, by granting to such persons options to purchase shares of the Company’s common stock (“2012
Options”), shares of the Company’s stock, with or without restrictions, or any other share-based award (“2012 Award(s)”).
The Plan is intended as an incentive to retain in the employ of, and as directors, consultants and advisors to the Company and its subsidiaries
(including any “employing company” under Section 102(a) of the Ordinance (as hereinafter defined) and any “subsidiary”
within the meaning of Section 424(f) of the United States Internal Revenue Code of 1986, as amended (the “Code”), collectively,
the “Subsidiaries”), persons of training, experience and ability, to attract new employees, directors, consultants and advisors
whose services are considered valuable, to encourage the sense of proprietorship and to stimulate the active interest of such persons
in the development and financial success of the Company and its Subsidiaries, by granting to such persons either (i) options to purchase
shares of the Company’s common stock, (the “Options”), (ii) shares of the Company’s common stock, with or without
restrictions, or (iii) any other stock-based award, granted to a grantee or an optionee (as such terms are defined below hereunder) under
the 2012 Incentive Plan and any stock issued pursuant to the exercise thereof.
2020 Plan. The
2020 Incentive Plan provides for the issuance of up to 25,000,000 shares of our common stock plus a number of additional shares issued
upon the expiration or cancellation of awards under our 2014 Incentive Plan, which was terminated when the 2020 Incentive Plan was approved
by our stockholders. Generally, shares of our common stock reserved for awards under the 2020 Incentive Plan that lapse or are canceled
(other than by exercise) will be added back to the share reserve available for future awards. However, shares of our common stock tendered
in payment for an award or shares of our common stock withheld for taxes are not available again for future awards. In addition, Shares
repurchased by the Company with the proceeds of the option exercise price may not be reissued under the 2020 Incentive Plan.
The following table summarizes
information about stock options outstanding and exercisable as of March 31, 2023:
Options Outstanding | | |
Options Exercisable | |
Number Outstanding on March 31, 2023 | | |
Weighted
Average Remaining Contractual Life | | |
Number Exercisable on March 31, 2023 | | |
Exercise
Price | |
| | |
Years | | |
| | |
$ | |
| 125,000 | | |
8 | | |
| 125,000 | | |
| 1.41 | |
| 370,000 | | |
8 | | |
| 277,500 | | |
| 1.81 | |
| 95,000 | | |
8 | | |
| 31,667 | | |
| 2.49 | |
| 590,000 | | |
| | |
| 434,167 | | |
| | |
TINGO GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Share and Par Value Data)
D. Stock Option Plan - (continued):
| |
Year ended March 31, 2023 | | |
Year ended December 31, 2022 | |
| |
Number of Options | | |
Weighted Average Exercise Price | | |
Number of Options | | |
Weighted Average Exercise Price | |
| |
| | |
| | |
| | |
| |
Options outstanding at the beginning of period: | |
| 590,000 | | |
$ | 1.83 | | |
| 1,558,000 | | |
$ | 1.74 | |
Changes during the period: | |
| | | |
| | | |
| | | |
| | |
Granted | |
| - | | |
$ | - | | |
| - | | |
$ | - | |
Exercised | |
| - | | |
$ | - | | |
| - | | |
$ | - | |
Forfeited | |
| - | | |
$ | - | | |
| (968,000 | ) | |
$ | 1.68 | |
| |
| | | |
| | | |
| | | |
| | |
Options outstanding at the end of the period | |
| 590,000 | | |
$ | 1.83 | | |
| 590,000 | | |
$ | 1.83 | |
Options exercisable at the end of the period | |
| 434,167 | | |
$ | 1.74 | | |
| 434,167 | | |
$ | 1.74 | |
The Company has warrants outstanding as follows:
| |
Warrants Outstanding | | |
Average Exercise Price | | |
Remaining Contractual Life | |
Balance, December 31, 2022 | |
| 62,863,879 | | |
$ | 2.854 | | |
| 4.25 | |
Granted | |
| - | | |
$ | - | | |
| - | |
Forfeited | |
| - | | |
$ | - | | |
| - | |
Exercised | |
| - | | |
$ | - | | |
| - | |
Balance, March 31, 2023 | |
| 62,863,879 | | |
$ | 2.854 | | |
| 4 | |
The Company is required to
assume a dividend yield as an input in the Black-Scholes model. The dividend yield assumption is based on the Company’s historical
experience and expectation of future dividends payouts and may be subject to change in the future.
The Company uses historical
volatility in accordance with FASB ASC Topic 718, “Compensation - stock compensation”. The computation of volatility uses
historical volatility derived from the Company’s exchange-traded shares.
The risk-free interest assumption
is the implied yield currently available on U.S. Treasury zero-coupon bonds, issued with a remaining term equal to the expected life term
of the Company’s options.
Pre-vesting rates forfeitures
were zero based on pre-vesting forfeiture experience.
The fair value of each option
granted is estimated on the date of grant, using the Black-Scholes option-pricing model with the following weighted average assumptions:
dividend yield of 0% for all years; expected volatility: as of March 31, 2023 and December 31, 2022-87.2%-100.4%; risk-free interest
rate: as of March 31, 2023 and December 31, 2022-0.99%-1.64%; and expected life: as of March 31, 2023 and December 31, 2022 -6.5-10 years.
The Company uses the simplified
method to compute the expected option term for options granted.
TINGO GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Share and Par Value Data)
On February 2, 2023, the
Company entered into settlement and repurchase agreements (the “Repurchase Agreements”) with certain holders of the outstanding
warrants over its common stock (“Warrant Holders”). The warrants being repurchased were originally issued by the Company between
November 2020 and March 2021 pursuant to three offerings of common stock and warrants. The exercise prices of the warrants were $3.12
in the first offering and $2.80 in the subsequent two offerings, with various expiration dates falling between August 16, 2024 and August
16, 2026. The repurchase will result in the surrender and cancellation of the warrants held by each Warrant Holder.
Pursuant to the Repurchase
Agreements, the Company paid $0.15 per share in April 2023 and $0.10 per share on May 1, 2023 at an aggregate amount of $6,548,115.99.
On February 5, 2023, The Company
granted 1,309,500 shares of common stock of the Company to Cushman Holdings Limited, an unrelated third party, as a success fee relating
to the completion of the acquisition of Tingo Mobile Limited.
On February 5, 2023, The Company
granted 750,000 shares of common stock of the Company to an unrelated third party, relating to the purchase by GFH Intermediate Holdings
Limited of certain software, technology and intellectual property from the beneficial owner of Data Insight Holdings Limited,
On February 5, 2023, The Company
granted 100,000 shares of common stock of the Company to China Strategic Investments Limited as an ex-gratia payment for the provision
of corporate finance services.
On February 5, 2023, The Company
granted 720,000 shares of common stock of the Company to certain directors and employees. The shares were issued pursuant to the 2020
Incentive Plan and 2012 Incentive Plan.
On February 5, 2023, the Company’s
Board unanimously approved a grant of 3,200,000 fully vested shares of common stock to Mr. Darren Mercer in recognition of the completion
of the acquisition of Tingo Mobile which is expected to be transformational for the Company. The size of the award takes into account
the improved terms for the Company that were negotiated in October 2022, and also the value Mr. Mercer is delivering to the growth of
the Company.
On March 6, 2023, The Company
granted 48,000 shares of common stock of the Company to Corprominence LLC as part of the payment for their services.
NOTE 6 — FAIR VALUE MEASUREMENTS
The Company measures and reports
certain financial instruments as assets and liabilities at fair value on a recurring basis. The Company’s financial assets measured
at fair value on a recurring basis were as follows (in thousands)
| |
Fair value measurements | |
| |
December 31, 2022 | |
(USD in thousands) | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Cash and cash equivalents | |
$ | 500,316 | | |
| - | | |
| - | | |
$ | 500,316 | |
Total | |
$ | 500,316 | | |
| - | | |
| - | | |
$ | 500,316 | |
| |
Fair value measurements | |
| |
March 31, 2023 | |
(USD in thousands) | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Cash and cash equivalents | |
$ | 780,153 | | |
| - | | |
| - | | |
$ | 780,153 | |
Total | |
$ | 780,153 | | |
| - | | |
| - | | |
$ | 780,153 | |
TINGO GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Share and Par Value Data)
NOTE 7 — SEGMENTS
ASC 280, “Segment Reporting”,
establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational
structure as well as information about geographical areas, operating segments and major customers in financial statements for detailing
the Company’s operating segments.
Operating segments are based
upon our internal organization structure, the manner in which our operations are managed and the availability of separate financial information.
As a result of our acquisition of GFHI on July 1, 2020 and Tingo Mobile on December 1, 2022, we currently serve the marketplace, through
our operating subsidiaries, as a financial technology company (Fintech Industry) targeting the African, Middle Eastern and South East
Asia marketplaces as well as other areas of the world.
During the period between June
23, 2020, and May 9, 2021, we have held a controlling interest in Micronet, and we have presented our mobile resource management (“MRM”)
business operated by Micronet as a separate operating segment. As of May 9, 2021, the Company’s ownership interest was diluted and,
as a result, we deconsolidated Micronet.
As of March 31, 2023, the Company
has four segments. This change came with the acquisition of Tingo Foods on February 9, 2023. The Company changed its reporting
structure to better reflect what the CODM is reviewing to make organizational decisions and resource allocations. Following the loss of
control over Micronet, MRM is no longer a separate operating segment or reportable segment since the CODM does not review discrete financial
information for the business. The Company recast the information as of March 31, 2023 to align with this presentation.
The activities of each of our
reportable segments from which the Company earns revenues, records equity earnings or losses and incurs expenses are described below:
|
● |
Verticals and technology segment develops insurance platform, for the Chinese market and have been generating revenues from insurance products in China. |
|
● |
Comprehensive platform service segment develops Nwassa agri-fintech marketplace platform, which enables customers in Nigeria to trade agricultural produce with customers, as well as to purchase farming inputs, to top up of airtime and data, to pay bills and utilities, to arrange insurance and to procure finance. |
| ● | Online stock trading segment develops technology investment
trading platform that is currently operational in Hong Kong and Singapore. |
|
● |
Food processing segment, which commenced its operations in August 2022 (and was acquired in February 2023). |
The
following table summarizes the financial performance of our operating segments:
| |
Three months ended March 31, 2022 | |
(USD in thousands) | |
Verticals and technology | | |
Online stock trading | | |
Corporate and others (2) | | |
Comprehensive
platform service | | |
Food processing | | |
Consolidated | |
Revenues from external customers | |
$ | 9,533 | | |
$ | 30 | | |
| - | | |
$ | - | | |
| - | | |
$ | 9,563 | |
Segment operating loss | |
| (4,295 | )(1) | |
| (3,544 | ) | |
| (2,131 | ) | |
| - | | |
| - | | |
| (9,970 | ) |
Other income, net | |
| 175 | | |
| | | |
| (20 | ) | |
| - | | |
| - | | |
| 155 | |
Finance income (expenses), net | |
| 178 | | |
| (480 | ) | |
| 380 | | |
| - | | |
| - | | |
| 78 | |
Consolidated loss before income tax benefit | |
| | | |
| | | |
| | | |
| | | |
| | | |
$ | (9,737 | ) |
| (1) | Includes $733 of intangible assets amortization, derived
from GFHI acquisition. |
| (2) | Corporate
and Other represents those results that: (i) are not specifically attributable to a reportable segment; (ii) are not individually reportable
or (iii) have not been allocated to a reportable segment for the purpose of evaluating their performance, including certain general and
administrative expense items. |
| |
Three months ended March 31, 2023 | |
(USD in thousands) | |
Verticals and technology | | |
Online stock trading | | |
Corporate and others (3) | | |
Comprehensive
platform service | | |
Food processing | | |
Consolidated | |
Revenues from external customers | |
$ | 20,552 | | |
$ | 8 | | |
| - | | |
$ | 253,466 | | |
| 577,219 | | |
$ | 851,245 | |
Segment operating loss | |
| (3,224 | )(1) | |
| (1,701 | ) | |
| (9,917 | ) | |
| 132,074 | (2) | |
| 143,445 | (4) | |
| 260,677 | |
Other income, net | |
| 448 | | |
| (8 | ) | |
| | | |
| (15 | ) | |
| | | |
| 425 | |
Finance income (expenses), net | |
| 65 | | |
| (47 | ) | |
| (634 | ) | |
| 2,343 | | |
| (283 | ) | |
| 1,444 | |
Consolidated loss before income tax benefit | |
| | | |
| | | |
| | | |
| | | |
| | | |
$ | 262,546 | |
| (1) | Includes
$733 of intangible assets amortization, derived from GFHI acquisitions. |
| (2) | Includes $7,248 of intangible assets amortization, derived
from the Tingo Mobile acquisition. |
| (3) | Corporate and Other represents those results that: (i) are
not specifically attributable to a reportable segment; (ii) are not individually reportable or (iii) have not been allocated to a reportable
segment for the purpose of evaluating their performance, including certain general and administrative expense items. |
| (4) | Includes
$3,078 of intangible assets amortization, derived from the Tingo Foods acquisition. |
TINGO GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Share and Par Value Data)
The following table summarizes
the financial statements of our balance sheet accounts of the segments:
|
|
As of March 31, 2023 |
|
(USD in thousands) |
|
Verticals and technology |
|
|
Online stock trading |
|
|
Comprehensive platform service |
|
|
Food processing |
|
|
Corporate and others |
|
|
Consolidated |
|
Assets related to segments |
|
$ |
32,478 |
(1) |
|
$ |
17,655 |
(3) |
|
$ |
1,624,159 |
(4) |
|
|
413,004 |
(6) |
|
|
283,515 |
|
|
$ |
2,370,811 |
|
Liabilities and redeemable preferred stock series B related to segments |
|
|
(12,962 |
)(2) |
|
|
(3,651 |
) |
|
|
(905,968 |
)(5) |
|
|
(312,689 |
)(7) |
|
|
(215,249 |
) |
|
|
(1,450,519 |
) |
Total equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
920,292 |
|
| (1) | Includes
$16,245 of intangible assets and $19,788 goodwill, derived from GFHI’s acquisition. |
| (2) | Includes
$2,784 of deferred tax liability, derived from GFHI All weather and Zhongtong acquisitions. |
| (3) | Includes
$1,225 of intangible assets. |
| (4) | Includes
$159,482 of intangible assets and $165,603 goodwill, derived from Tingo Mobile acquisition. |
| (5) | Includes
$47,952 of deferred tax liability, derived from the Tingo Mobile acquisition and $553,035 redeemable preferred stock series B. |
| (6) | Includes $144,695 of intangible assets and $46,246 goodwill, derived
from the Tingo Foods acquisition. |
| (7) | Includes $43,409 of deferred tax liability, derived from the Tingo
Foods acquisition. |
The following table summarizes
the financial statements of our balance sheet accounts of the segments:
| |
As of December 31, 2022 | |
(USD in thousands) | |
Verticals and technology | | |
Online stock trading | | |
Comprehensive platform service | | |
Corporate and others | | |
Consolidated | |
Assets related to segments | |
$ | 40,831 | (1) | |
$ | 21,077 | (3) | |
$ | 1,541,093 | (4) | |
| 79,357 | | |
$ | 1,682,358 | |
Liabilities and redeemable preferred stock series B related to segments | |
| (18,406 | )(2) | |
| (3,911 | ) | |
| (877,353 | )(5) | |
| (9,689 | ) | |
| (909,359 | ) |
Total equity | |
| | | |
| | | |
| | | |
| | | |
$ | 772,999 | |
(1) | Includes $17,009 of intangible assets and $19,788 goodwill, derived from GFHI’s acquisition. |
(2) | Includes $3,125 of deferred tax liability, derived from GFHI All weather and Zhongtong acquisitions. |
| (3) | Includes
$1,226 of intangible assets. |
| (4) | Includes
$167,143 of intangible assets and $81,459 goodwill, derived from the Tingo Mobile acquisition. |
| (5) | Includes
$50,143 of deferred tax liability, derived from the Tingo Mobile acquisition and $553,035 redeemable preferred stock series B. |
NOTE 8 — TRADE ACCOUNTS RECEIVABLE, NET
For the three months ended
March 31, 2023, and the fiscal year ended December 31, 2022, accounts receivable were comprised of the following:
| |
March 31, | | |
December 31, | |
(USD in thousands) | |
2023 | | |
2022 | |
Trade accounts receivable | |
$ | 359,542 | | |
$ | 14,553 | |
Allowance for doubtful accounts | |
| (2,771 | ) | |
| (3,012 | ) |
| |
$ | 356,771 | | |
$ | 11,541 | |
TINGO GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Share and Par Value Data)
Movement of allowance for doubtful
accounts the three months ended March 31, 2023 and the fiscal year ended December 31, 2022 are as follows:
(USD in thousands) | |
March 31, 2023 | | |
December 31, 2022 | |
Beginning balance | |
$ | 3,012 | | |
$ | 2,606 | |
Provision | |
| (507 | ) | |
| 618 | |
Exchange rate fluctuation | |
| 266 | | |
| (212 | ) |
| |
$ | 2,771 | | |
$ | 3,012 | |
NOTE 9 — RELATED PARTIES
Current assets – related parties
| |
March 31, | | |
December 31, | |
(USD in thousands) | |
2023 | | |
2022 | |
Shareholders of All Weather | |
$ | 5,901 | | |
$ | 4,603 | |
Beijing Fucheng Prospect Technology Co., Ltd | |
| 292 | | |
| 267 | |
Loan to Tingo Inc.(1) | |
| 8,023 | | |
| 8,099 | |
Shareholders of Guangxi Zhongtong | |
| 319 | | |
| 522 | |
| |
$ | 14,535 | | |
$ | 13,491 | |
| (1) | Tingo’s
loan- as discussed in Note 1. |
Current liabilities – related parties
| |
March 31, | | |
December 31, | |
(USD in thousands) | |
2023 | | |
2022 | |
Shareholders of Bokefa Petroleum and Gas | |
$ | 158 | | |
$ | 308 | |
Shareholders of All Weather | |
| 213 | | |
| 659 | |
Shareholders of Tingo Mobile Limited | |
| 46,712 | | |
| 56,539 | |
| |
$ | 47,083 | | |
$ | 57,506 | |
NOTE 10 — COMMITMENT AND CONTINGENCIES
We have certain fixed contractual
obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, and other
factors may result in actual payments differing from the estimates. The following tables summarize our contractual obligations as of March
31, 2023, and the effect these obligations are expected to have on our liquidity and cash flows in future periods.
(USD in thousands) | |
Total | | |
Less than 1 year | | |
1-3 year | | |
3-5 year | | |
5+ year | |
Contractual Obligation: | |
| | |
| | |
| | |
| | |
| |
Office leases commitment | |
| 1,959 | | |
| 951 | | |
| 953 | | |
| 55 | | |
| - | |
Short-term debt obligations Commitment | |
| 691 | | |
| 312 | | |
| 379 | | |
| - | | |
| - | |
Services Contract Commitment | |
| 309 | | |
| 266 | | |
| 43 | | |
| - | | |
| - | |
Total | |
| 2,959 | | |
| 1,529 | | |
| 1,375 | | |
| 55 | | |
| - | |
Legal Proceedings
The Company is subject to
litigation arising from time to time in the ordinary course of its business.
On April 20, 2023, the Company
received a motion for summary judgment in lieu of a complaint (the “Motion”) from certain investors in certain of the Company’s
direct securities offerings, seeking $13,426 in aggregate damages. The Motion against the Company in the Supreme Court of the State of
New York alleges that the Merger constituted a “Fundamental Transaction” as defined in the warrants issued in such securities
offerings and, as a result, plaintiffs were entitled to certain exercise rights pursuant to such warrants. More specifically, the plaintiffs
demand that as a result of the Merger, they are entitled to cash payments of $13,426 in respect of the warrants that they hold. The Group
has not recognized a liability in respect of this motion because management does not believe that the Group has incurred a probable material
loss by reason of any of this matter.
TINGO GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Share and Par Value Data)
NOTE 11 — OPERATING LEASES
The Company follows ASC No.
842, Leases. The Company has operating leases for its office facilities. The Company’s leases have remaining terms of approximately
4 years. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense
for these leases on a straight-line basis over the lease term. The Company does not separate non-lease components from the lease components
to which they relate, and instead accounts for each separate lease and non-lease component associated with that lease component as a single
lease component for all underlying asset classes.
Lessee
The following table provides
a summary of leases by balance sheet location:
Assets/liabilities | |
March 31, | | |
December 31, | |
(USD in thousands) | |
2023 | | |
2022 | |
Assets | |
| | |
| |
Right-of-use assets | |
$ | 2,001 | | |
$ | 2,260 | |
| |
| | | |
| | |
Liabilities | |
| | | |
| | |
Lease liabilities- current portion | |
$ | 1,165 | | |
$ | 1,215 | |
Lease liabilities- long term | |
| 691 | | |
| 905 | |
Total Lease liabilities | |
$ | 1,856 | | |
$ | 2,120 | |
The operating lease expenses were as
follows:
| |
Three months ended | |
(USD in thousands) | |
March 31,
2023 | | |
March 31,
2022 | |
Operating lease cost | |
$ | 477 | | |
$ | 412 | |
Maturities of operating lease liabilities
were as follows:
(USD in thousands) | |
Year ended December 31, | |
2023* | |
| 951 | |
2024 | |
| 694 | |
2025 | |
| 234 | |
2026 | |
| 24 | |
2027 | |
| 21 | |
Thereafter | |
| 35 | |
Total lease payment | |
| 1,959 | |
Less: imputed interest | |
| (103 | ) |
Total lease liabilities | |
| 1,856 | |
* | Not include operating leases with a term less than one year. |
TINGO GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Share and Par Value Data)
Lease term and discount rate | |
March 31, 2023 | |
Weighted-average remaining lease term (years) – operating leases | |
| 2.11 | |
Weighted average discount rate – operating leases | |
| 5.70 | % |
Lessor
The Company leases mobile
phones that classified as operating leases. The following table summarizes the components of operating lease revenue recognized during
the three months ended March 31, 2023:
| |
Three months ended March 31, | |
Lease revenue | |
2023 | |
Fixed contractual payments | |
| 113,660 | |
Future fixed contractual
lease payments to be received under non-cancelable operating leases in effect as of March 31, 2023, assuming no new or renegotiated leases
or option extensions on lease agreements are executed, are as follows (dollars in thousands):
Years Ending December 31, | |
Future
lease
payments
due | |
2023 | |
| 137,562 | |
2024 | |
| - | |
2025 | |
| - | |
2026 | |
| - | |
2027 | |
| - | |
Thereafter | |
| - | |
TINGO GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Share and Par Value Data)
NOTE 12 — PROVISION FOR INCOME TAXES
A. Basis of Taxation
United States:
On December 22, 2017, the U.S. Tax Cuts
and Jobs Act, or the Act, was enacted, which significantly changed U.S. tax laws. The Act lowered the tax rate of the Company. The statutory
federal income tax rate was 21% in 2020 and in the three months ended March 31, 2023, and 2022. As of March 31, 2023, the operating loss
carry forward were $70,192, among which there was $5,115 expiring from 2025 through 2037, and the remaining $60,041 has no expiration
date.
Israel:
The Company’s Israeli subsidiaries
and associated are governed by the tax laws of the state of Israel which had a general tax rate of 23% in the three months ended March
31, 2023, and 2022. As of March 31, 2023 the operating loss carry forward was $8,828, which does not have an expiration date.
Mainland China:
The Company’s Chinese subsidiaries
in the PRC are subject to the PRC Corporate Income Tax Law (“CIT Law”) and are taxed at the statutory income tax rate of 25%.
As of March 31, 2023, the operating loss carry forward was $14,722, which will expire from 2023 through 2027.
Hong Kong:
Our subsidiaries incorporated in Hong
Kong, such as Magpie Securities Limited, BI Intermediate Limited, are subject to Hong Kong profit tax on their profits arising from their
business operations carried out in Hong Kong. Hong Kong profits tax for a corporation from the year of assessment 2018/2019 onwards is
generally 8.25% on assessable profits up to HK$2,000; and 16.5% on any part of assessable profits over HK$2,000. Under the Hong Kong Inland
Revenue Ordinance, profits that we derive from sources outside of Hong Kong are generally not subject to Hong Kong profits tax.
As of March 31, 2023, the tax loss carry
forward was $17,946 for Magpie Securities Limited, and the operating loss carry forward was $6,010 for BI Intermediate Limited. Tax losses
can be carried forward indefinitely until utilized.
Singapore:
Our subsidiaries incorporated in Singapore are subject to an income
tax rate of 17% for taxable income earned in Singapore. Singapore does not impose a withholding tax on dividends for resident companies.
In 2022, we did not incur any income tax as there was no estimated assessable profit that was subject to Singapore income tax.
As of March 31, 2023, the operating
loss carry forward was $975.
Subject to qualifying conditions, trade
losses can be carried forward indefinitely while unutilized donations can be carried forward for up to 5 years of assessment.
Australia:
Our subsidiaries incorporated in Australia
are subject to an income tax rate of 25% for taxable income earned in Australia. Australia does not impose a withholding tax on dividends
for resident companies. In 2022, we did not incur any income tax as there was no estimated assessable profit that was subject to Australia
income tax.
As of March 31, 2023, the operating loss carry forward was
$116.
Nigeria:
The
Company’s Nigerian subsidiaries Tingo Mobile Limited and Tingo Foods is governed by the tax laws of the Federal Republic of Nigeria
which had a corporate tax rate of 30% in the three months ended March 31, 2023, and 2022. As of March 31, 2023, the operating loss
carry forward were nil, which does not have an expiration date.
TINGO GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Share and Par Value Data)
B.
Profit (Loss) Before Income Taxes
| |
Three months ended March 31, | |
(USD in thousands) | |
2023 | | |
2022 | |
Foreign | |
$ | 272,508 | | |
$ | (8,698 | ) |
Domestic | |
| (9,962 | ) | |
| (1,272 | ) |
Total | |
$ | 262,546 | | |
| (9,970 | ) |
C. Provision for (Benefit of) Income Taxes
| |
Three months ended March 31, | |
(USD in thousands)
| |
2023 | | |
2022 | |
Current | |
| | |
| |
Domestic | |
$ | 40 | | |
$ | - | |
Foreign | |
| 89,176 | | |
| 3 | |
Total | |
$ | 89,216 | | |
| 3 | |
Deferred | |
| | | |
| | |
Domestic | |
$ | - | | |
$ | - | |
Foreign | |
| (3,302 | ) | |
| (1,079 | ) |
Total | |
$ | 85,914 | | |
$ | (1,076 | ) |
D. Deferred Tax Assets
and Liabilities
Deferred tax reflects the net tax effects
of temporary differences between the carrying amounts of assets or liabilities for financial reporting purposes and the amounts used for
income tax purposes. As of March 31, 2023, and December 31, 2022, deferred tax assets were included in long-term deposit and prepaid expenses,
and the Company’s deferred taxes were in respect of the following:
| |
March 31, | | |
December 31, | |
(USD in thousands) | |
2023 | | |
2022 | |
Deferred tax assets | |
| | |
| |
Provisions for employee rights and other temporary differences | |
$ | 88 | | |
$ | 234 | |
Provisions for bad debt | |
| 711 | | |
| 753 | |
Net operating loss carry forward | |
| 24,599 | | |
| 21,839 | |
Valuation allowance | |
| (21,383 | ) | |
| (19,165 | ) |
Deferred tax assets, net of valuation allowance | |
| 4,015 | | |
| 3,661 | |
Deferred tax liabilities | |
| | | |
| | |
Recognition of intangible assets arising from business combinations | |
| (129,565 | ) | |
| (89,597 | ) |
Deferred tax assets (liabilities), net | |
$ | (125,550 | ) | |
$ | (85,936 | ) |
TINGO GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Share and Par Value Data)
NOTE 13 — GOODWILL
| |
Three months ended March 31, 2023 | |
(USD in thousands) | |
Verticals and technology | | |
Food processing | | |
Comprehensive platform service | | |
Corporate and others | | |
Online stock trading | | |
Consolidated | |
Balance as of January 1, 2023 | |
$ | 19,788 | | |
| - | | |
| 81,459 | | |
| - | | |
| | | |
$ | 101,247 | |
Impairment loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Acquisitions in 2023 | |
| - | | |
| 46,246 | | |
| - | | |
| - | | |
| - | | |
| 46,246 | |
Adjustments to purchase price allocations | |
| - | | |
| - | | |
| 84,144 | | |
| - | | |
| - | | |
| 84,144 | |
Balance as of March 31, 2023 | |
| 19,788 | | |
| 46,246 | | |
| 165,603 | | |
| - | | |
| - | | |
$ | 231,637 | |
| |
Year ended December 31, 2022 | |
(USD in thousands) | |
Verticals and technology | | |
Food processing | | |
Comprehensive platform service | | |
Corporate
and
others | | |
Online stock trading | | |
Consolidated | |
Balance as of January 1, 2022 | |
$ | 19,788 | | |
| - | | |
| - | | |
$ | - | | |
$ | - | | |
$ | 19,788 | |
Impairment loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Acquisitions in 2022 | |
| - | | |
| - | | |
| 81,459 | | |
| - | | |
| - | | |
| 81,459 | |
Balance as of December 31, 2022 | |
| 19,788 | | |
| - | | |
| 81,459 | | |
| - | | |
| - | | |
$ | 101,247 | |