AGRI-FINTECH HOLDINGS, INC.
As described more fully under Sale of Tingo Mobile below, on
Prior to our sale of Tingo Mobile, the Company, together with its operating subsidiary, was 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
Tingo Mobile's platform has created an escrow solution that secures the buyer, funds are not released to its members until fulfilment. The platform also facilitates trade financing, ensuring that banks and other lenders compete to provide credit to its members.
Although Tingo Mobile has a large retail subscriber base, it is essentially a business-to-business-to-consumer (B2B2C) business model. Each of Tingo Mobile's subscribers is a member of one of two large farmers' cooperatives with whom it has a contractual relationship and which relationship facilitates the distribution of its branded smartphones into various rural communities of member farmers. And it is through its phones and its proprietary applications imbedded therein where Tingo Mobile is are able to distribute its wider array of agri-fintech services and generate the diverse revenue streams as described in more detail in this report.
Our principal office is located at
Sale of Tingo Mobile
Overview. On
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Consideration Received. As consideration for the Merger, we received the following:
Common and Preferred Stock. At the closing of the Merger, we received
25,783,675 shares of newly-issued common stock of TIO equal to 19.9% of its
? outstanding shares, calculated as of the closing date of the Merger, 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").
Undertaking to Pay Certain Liabilities of the Company. Pursuant to the terms
of the Merger Agreement, we also received an undertaking from TIO to pay
certain liabilities and accounts payable of the Company as of
2022, as well as certain other expenses relating to the maintenance of our
? reporting status under the Securities Exchange Act for the one-year period
following the Merger. As of
to this undertaking was approximately
below in our audited financial statements as 'Due from
Note 10 - Loans and Other Amounts Receivable.
Structure. Immediately following the Merger, our ownership interest in TIO and TIO's ownership of Tingo Mobile was as shown in the following diagram (other subsidiaries of TIO not shown):
[[Image Removed: Graphic]]
Key Terms of Series A Preferred Stock. Upon the approval of TIO's stockholders,
the Series A Preferred Stock will convert into 20.1% of the outstanding shares
of TIO common stock, calculated as of the closing date of the Merger. If such
shareholder approval is not obtained by
Key Terms of Series B Preferred Stock. Upon approval by Nasdaq of the change of
control of TIO and upon the approval of TIO's stockholders, the Series B
Preferred Stock will convert into 35.0% of the outstanding shares of TIO common
stock, calculated as of the closing date of the Merger, giving the Company an
aggregate ownership of 75.0% of TIO's outstanding common stock. If such
shareholder or Nasdaq approval is not obtained by
Temporary Investment Company Status. Effective upon the closing of the Merger, the Company became subject to the Investment Company Act of 1940, as amended (the "1940 Act"). Under the 1940 Act, any issuer of securities that has more than 100 beneficial owners and holds 'investment securities' (as defined under the 1940 Act) that exceed more than 40% of the value of the
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issuer's unconsolidated assets is considered an 'investment company' and is
therefore subject to various requirements of the 1940 Act, unless an exemption
therefrom is applicable. One such requirement of the 1940 Act includes
determining the fair value of equity securities held by the issuer instead of
consolidating the underlying operations of such equity holdings. Rule 3a-2
permits issuers such as the Company, to be "deemed not to be engaged in the
business of investing, reinvesting, owning, holding or trading in securities"
for up to one year from the date that the 1940 Act would have technically
applied if (i) the issuer's business activities are inconsistent with those of
an investment company, and (ii) the issuer's governing board passes a resolution
stating the issuer's "bona fide intent to be engaged primarily, as soon as is
reasonably possible" to be "in a business other than that of investing,
reinvesting, owning, holding or trading in securities" within such one year
period. Because the Company is actively involved in acquiring operating assets
or otherwise developing other operating businesses, its present activities are
inconsistent with those of an investment company. Moreover, inasmuch as the
Company expects to effect a conversion of the Series A Preferred Stock and the
Series B Preferred Stock no later than
Results of Operations
Use of Partial Year Results for Tingo Mobile
Because we sold Tingo Mobile, our sole operating subsidiary, on
Year Ended
The Company's consolidated results from operations for the years ended
Years Ended December 31,
(in Thousands) % of % of
2022 Revenue 2021 Revenue
Revenue(1) $ 989,217 - $ 865,838 -
Operating Expense (563,041) 56.92 % (800,479) 92.45 %
Operating Income 426,176 43.08 % 65,359 7.55 %
Other Income (Expenses), net 204,716 20.69 % 417 0.05 %
Income before taxes 630,891 63.78 % 65,776 7.60 %
Income tax expense (179,638) 18.16 % (104,802) 12.10 %
Net Income (Loss) $ 451,253 45.62 % $ (39,026) 4.51 %
(1) Revenue total reflects eleven months ended
amounts represent full-year results.
Revenue
Generally. Total revenue for Tingo Mobile increased from
The increased use of agri-fintech services by Tingo Mobile's subscribers, which
? saw a record increase of approximately
for Nwassa, its Agri-fintech platform for the 11 months ended
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as compared to the full year ended
of enabling rural communities with an affordable smartphone 'device as a
service' has proved successful in increasing the volume of agri produce trading
being conducted on the platform, where revenue has more than tripled over the
full year 2021, with partial year 2022 revenue of
million).
? Loan brokerage fees increased over ten fold, growing from
full year 2021 to
Affordable pricing of mobile device insurance saw a substantial increase in the
? number of customers that opted for this service, resulting in an increase of
approximately 63.2% from 2021, to post revenue of
months ended
A significant number of customers see Nwassa as their chosen method to make
? payments for utilities. Tingo Mobile recorded a 91.3% growth in this revenue
component in the 11 months ended
full year 2021 (
The significant growth in Nwassa revenue is in line with Tingo Mobile's
? strategy to expand its Agri-Fintech business as its core focus, with the access
to mobile devices as an enabler to assure access and connectivity to its Nwassa
platform.
Mobile leasing revenue increased due to timing of the renewal of Tingo Mobile's
? 12-month leasing contracts. The new contracts commenced in
2022, renewing over 9.3 million existing subscribers, the majority of whom are
active on the Nwassa platform.
Agri-Fintech. The Agri-Fintech component of Tingo Mobile's business was
introduced in 2020, and grew from
[[Image Removed: Graphic]]
* Reflects 11 months ended
results.
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The percentage growth in the various components of Tingo Mobile's Nwassa revenue
from the full year 2021 to the eleven months ended November 30, 2022 is shown in
the following table:
NWASSA REVENUE
2022* 2021 Pct. Increase
Airtime $ 13,277,077 $ 10,129,247 31.1 %
Brokerage on Loans 23,089,912 2,334,312 889.2 %
Insurance 23,479,287 14,387,594 63.2 %
Agricultural Produce Trading Fees 245,520,655 80,655,494 204.4 %
Utility Payment Transaction Fees 174,262,000 91,132,027 91.2 %
Total $ 479,628,931 $ 198,638,674 141.5 %
* Reflects 11 months ended
Mobile Sales and Leasing. Regarding mobile phone leasing contracts, Tingo Mobile's new leasing cycles recommenced in May and August of 2021, concomitant with the commencement of leasing agreements with our two principal farmers' cooperatives. These leases expired after twelve months, and new twelve month leases were entered into during 2022.
In examining the financial model of Tingo Mobile and its affiliates, we believe
it is important to understand that the provision of smartphones is the means to
drive a higher level of access to Nwassa, its Agri-Fintech platform, to enable
Tingo Mobile's customers to participate in its Agri-marketplace, top up their
airtime, pay for utilities, insure their mobile devices and access credit
services through partner institutions. Typical fees and commissions on these
services can be up to 4.0%. Insurance revenue is fixed at
Cost of Revenue
The following table sets forth the cost of revenue for the eleven months ended
11 Months Ended Year Ended
November 30, 2022 December 31, 2021
Commission to Cooperatives and Agents $ 10,546,721 $ 9,378,916
Cost of Resold Mobile Phones 19,480,579 274,800,172
Total cost of revenue $ 30,027,300 $ 284,179,088
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Tingo Mobile's cost of revenue for the 11 months ended
Cost of revenue consists of two key elements:
Commissions to Cooperatives and Agents - Tingo Mobile has over 20,000 agents
? that support the rollout of its services through its farmers' cooperative
partners and an independent agency network of rural farmers and women.
? Cost of Resold Mobile Phones - Tingo Mobile matches the cost of mobile devices
which it offers for resale to the costs it pays its manufacturer.
Selling, General & Administrative Expenses
The following table sets forth selling, general and administrative expenses for
the years ended
Years Ended December 31,
2022 (1) 2021
Payroll and related expenses 65,924,664 72,990,188
Distribution expenses 1,173,395 985,801
Professional fees 70,565,512 192,842,115
Consulting fees 1,116,249 -
Depreciation and amortization 378,651,902 247,177,230
Bank fees and charges 1,535,795 926,256General and administrative expenses - other 13,893,333 1,278,898 Bad debt expenses
153,227 99,247
Selling, General and Administrative Expenses
Because these amounts were incurred in Tingo Mobile, our operating subsidiary
(1) that we sold on
eleven months ended
As the lessor of branded phones to its cooperative customers, Tingo Mobile
recognizes depreciation expense ratably over the three-year estimated useful
life of these devices. Other than the foregoing, prior year expenses mainly
relate to general and administrative expenses only. Our acquisition of Tingo
Mobile in 2021 and the attendant expenses to maintain our status as a public
reporting company has also substantially increased these expenses. In addition,
in 2021, we adopted our 2021 Equity Incentive Plan which provided for, among
other awards, shares of restricted stock to Plan participants. This resulted in
stock-based compensation expense of
Gross Profit and Income from Operations
Gross profit for the 11-month period ended
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Nwassa becomes a progressively larger component of our aggregate revenue, we expect overall gross profit margins to increase accordingly.
This trend is evidenced by the increased level of income from operations Tingo
Mobile has posted for the 11 months ended
Other Income
Other income was insignificant in 2022 and 2021. Given the manner in which Tingo Mobile bundles its services with branded phones, it does not typically incur a substantial amount of bad debt. Accordingly, we do not expect other income relating to the recovery of bad debts to be a significant revenue item in future periods.
2021 Equity Incentive Plan
On
As of
The following table summarizes the activity related to granted, vested, and unvested restricted stock awards under the Incentive Plan for the year endedDecember 31, 2022 : Weighted Number of Average Grant Shares Date Fair Value Unvested shares outstanding as of January 1, 2022 36,950,833 $ 1.75 Shares granted 22,500,000 3.93 Shares vested 42,717,917 2.85 Shares forfeited - - Unvested shares outstanding as of December 31, 2022 16,732,916 $ 1.97
Current Market Conditions
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As of
Consumer prices, which had largely been held in check during the pandemic, began
to rise steadily beginning in the second half of 2021. By the third quarter of
2022, inflation had increased to an annualized rate of 8.3%, the highest in over
four decades, before tapering in the fourth quarter and rounding out 2022 at
6.5% for the entire year. The slight downward trend has continued into
With respect to food security and agricultural production, we expect that the
focus of Tingo Mobile and its affilaites on providing market solutions for the
agriculture sector will increase in importance as the world seeks viable food
security solutions in alternate geographical areas such as
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. Once we are able to convert our Series B Preferred Stock and again consolidate the operations of Tingo Mobile, we expect that to be able to secure sufficient operating and working capital for our parent company activities for the next twelve months.
Cash on Hand. As of
Cash Provided from (Used in) Operating Activities. Operating activities used
approximately
Cash Provided from (Used in) Investing Activities. For the year ended
Cash Provided from (Used in) Financing Activities. For the years ended
Indebtedness: During 2022, we borrowed
We expect our cash on hand, proceeds received from our assets and operations, cash flow from 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 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
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our principal markets, is critical to our ability to maintain a positive cash flow from operations. The foregoing events individually or collectively could affect our results.
We are evaluating the impact of current market conditions on our Company and its ability to generate dollar-denominated income. We believe that our operating cash flow and cash on hand will be sufficient to meet operating requirements and to finance routine capital expenditures through the next twelve months.
Off Balance Sheet Arrangements
None.
Dividends
On
Subsequent Events
Our Management performed an evaluation of the Company's activity through the date the financial statements were issued, noting the following subsequent event:
On
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