UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20162022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________January 1, 2022 to ________________December 31, 2022

Commission file number 000-35850001-35850

MICRONET ENERTEC TECHNOLOGIES,TINGO GROUP, INC.
(Exact name of registrant as specified in its charter)

Delaware27-0016420

(State or other jurisdiction of


incorporation or organization)

(I.R.S. Employer

Identification No.)

28 West Grand Avenue, Suite 3, MontvaleNJ 07645
(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: (201) 225-0190

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading SymbolName of each exchange on
which registered

Common Stock, par value $0.001

Warrants (expiring April 23, 2018)

TIO

Nasdaq Capital Market

Nasdaq Capital Market

Securities registered underpursuant to Section 12(g) of the Act:

None

None.
(Title of class)

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐  No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. 

Yes ☐  No ☒

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). 

Yes ☒  No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this

Form 10-K or any amendment to this Form 10-K.  ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ☐  No ☒

The aggregate market value of the common stock, $0.001 par value, or Common Stock, of the registrant held by non-affiliates, as of June 30, 20162022 was approximately $7,311,577$59,822,058 based on a per share price of $2.24,$0.5688, the price at which the Common Stockcommon stock was last sold as of June 30, 2016.2022.

As of March 31, 2017,2023, there were 6,490,658163,727,382 shares of the issuer’s Common Stockcommon stock outstanding.

 

 

 

INDEX

PART I
Item 1.Business.Business1
Item 1A.Risk Factors.Factors1530
Item 1B.Unresolved Staff Comments.Comments2177
Item 2.Properties.Properties2177
Item 3.Legal Proceedings.Proceedings2178
Item 4.Mine Safety Disclosures.Disclosures2178
PART II
Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.Securities2279
Item 6.Selected Financial Data.[Reserved]2382
Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.Operations2382
Item 7A.Quantitative and Qualitative Disclosures About Market Risk.Risk3394
Item 8.Financial Statements and Supplementary Data.Data3394
Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.Disclosure3394
Item 9A.Controls and Procedures.Procedures3394
Item 9B.Other Information.Information3495
Item 9C.  Disclosure Regarding Foreign Jurisdictions That Prevent Inspections95
PART III
PART III
Item 10.Directors, Executive Officers and Corporate Governance.Governance3496
Item 11.Executive Compensation.Compensation39101
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.Matters41103
Item 13.Certain Relationships and Related Transactions, and Director Independence.Independence43106
Item 14.Principal Accounting Fees and Services.Services44106
PART IV
Item 15.Exhibits, Financial Statement Schedules45107
Item 16.Item 1610-K Summary46109

i

 

Unless the context provides otherwise, all references in this Annual Report on Form 10-K for the year ended December 31, 2016,2022, or this Annual Report, to “Micronet Enertec,“TINGO GROUP,” “we,” “us,” “our,” the “Company,” the “Registrant” or similar terms, refer to Micronet Enertec Technologies,TINGO GROUP, Inc., together with our wholly-owned subsidiaries and Micronetentities control under VIE’s arrangements (as defined below). Unless otherwise noted, all references to “dollars” or “$” are to United States dollars and all references to “NIS” are to New Israeli Shekels.Shekels, and all references to “NGN” are to legal currency of the People’s Republic of Naira, and all references to “HK DOLLARS” are to legal currency of the People’s Republic of Hong Kong,  and all references to “RMB” are to legal currency of the People’s Republic of China; Our website address is included several times in this Annual Report as a textual reference only and the information in any such website is not incorporated by reference into this Annual Report.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The statements contained in this

This Annual Report on Form 10-K (“Form 10-K”) contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements in this Form 10-K do not constitute guarantees of future performance and actual results could differ materially from those contained in the forward-looking statements. These statements are based on current expectations of future events. Such statements include, but are not limited to, statements about our products, including our newly acquired products, customers, regulatory approvals, the potential utility of and market for our products and services, our ability to implement our business strategy and anticipated business and operations, future financial and operational performance, our anticipated future growth strategy, including the recent merger with the sole operating subsidiary of Tingo, Inc and the integration of the two companies after the merger, or the acquisition of other companies or technologies, capital requirements, intellectual property, suppliers, joint venture partners, future financial and operating results, the impact of the COVID-19 pandemic, plans, objectives, expectations and intentions, revenues, costs and expenses, interest rates, outcome of contingencies, business strategies, regulatory filings and requirements, the estimated potential size of markets, capital requirements, the terms of any capital financing agreements and other statements that are not historical facts are “forward-looking statements” within the meaningfacts. You can find many of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Suchthese statements by looking for words like “believes,” “expects,” “anticipates,” “estimates,” “may,” “should,” “will,” “could,” “plan,” “intend,” or similar expressions in this Form 10-K. We intend that such forward-looking statements may be identified by, among other things,subject to the use of forward-looking terminology such as “believes,” “intends,” “plans” “expects,” “may,” “will,” “should,” or “anticipates” or the negative thereof or other variations thereon or comparable terminology, and similar expressions are intended to identify forward-looking statements. We remind readers thatsafe harbors created thereby.

These forward-looking statements are merely predictionsbased on the current beliefs and therefore inherentlyexpectations of our management and are subject to uncertaintiessignificant risks and other factors and involve known anduncertainties. If underlying assumptions prove inaccurate or unknown risks that could cause theor uncertainties materialize, actual results performance, levels of activity, or our achievements, or industry results, to bemay differ materially different from any future results, performance, levels of activity, or our achievements, or industry results, expressed or implied bycurrent expectations and projections. Factors that might cause such forward-looking statements. Such forward-looking statements appear in Item 1 – “Business” and Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations,a difference include those discussed under “Risk Factors,” as well as those discussed elsewhere in this Annual Report and include, among other statements, statements regarding the following:Form 10-K.

●Demand for our products as well as future growth, either through internal efforts, development of new products, potential segments and markets or through acquisitions;

●Leveraging our experience and other assets we possess to enhance Enertec’s (as defined below) product offerings;

●Levels of research and development costs in the future;

●Continuing control of at least a majority of Micronet’s share capital;

●The organic and non-organic growth of our business;

●Our financing needs; and

●The sufficiency of our capital resources.

The factors discussed herein, including those risks described in Item 1A. “Risk Factors,” and expressed from timeYou are cautioned not to time in our filings with the Securities and Exchange Commission could cause actual results and developments to be materially different from those expressed in or implied by such statements. Theplace undue reliance on these forward-looking statements, are madewhich speak only as of the date of this filing, and except as requiredForm 10-K or, in the case of documents referred to or incorporated by law wereference, the date of those documents.

All subsequent written or oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake noany obligation to release publicly update suchany revisions to these forward-looking statements to reflect subsequent events or circumstances.circumstances after the date of this Form 10-K or to reflect the occurrence of unanticipated events, except as may be required under applicable U.S. securities law. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

ii

 

PART I

Item 1.Business.

Item 1. Business.

We were

TINGO GROUP, Inc. (the “Company”) was formed as a Delaware corporation on January 31, 2002.2002 under the name Lapis Technologies, Inc. On March 14, 2013, we changed our corporate name from Lapis Technologies, Inc. to Micronet Enertec Technologies, Inc. The Company’sOn 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 tradedlisted for trading on the NASDAQThe Nasdaq Capital Market or NASDAQ, since April 29, 2013.2013 under the symbol “TIO”.

We provide high tech solutions for severe environments

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 battlefield, including missile defense technologiesMiddle 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, and About Tingo Group Holdings below.

We currently operate in 3 segments and following the acquisition of Tingo Foods we will be operating in 4 segments i) Verticals and Technology, comprising of our operations in China where we have 3 VIE Entities through which we operate, mainly, our business of insurance brokerage.; ii) Online Stock Trading, comprising mainly the operation of Magpie Securities Limited (“Magpie”) through which we operate the business of online stock trading, mainly out of Hong Kong and Singapore; (iii)Comprehensive Platform Service which includes the operations of Tingo Mobile described above and includes the operations of Tingo Mobile for the Aerospace & Defensemonth of December; and (iv) Tingo Foods, (purchased by the Company in February 2023) which commenced food processing operations in September 2022 .

Since July 1, 2020, following the completion 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 completion of 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 and rugged mobile devicesconditions for the growing commercialretail 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.


The following diagram illustrates the Company’s current corporate structure, including its subsidiaries, and variable interest entities (“VIEs”), as of December 31, 2022:

 

Acquisition of Tingo Mobile Resource Management,

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”). The acquisition was accomplished via a multi-phase forward triangular subsidiary merger. 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%. See TGH Group Structure below.

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 MRM, market.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

Overview. On February 9, 2023, the company and MICT Fintech acquired from Dozy Mmobuosi, Tingo Mobile Founder and Chief Executive Officer all of the outstanding share capital of Tingo Foods PLC (“Tingo Foods”), a Nigerian public limited company that has operated in the food processing industry since its inception in September 2022. As part of its expansion strategy, Tingo Foods plans to fit out and operate a state-of-the-art food processing facility in the Delta State of Nigeria, which is expected to be the largest of its kind in Africa and scheduled for completion by the end of the first half of 2024. We design, develop, manufacture and supply customized military computer-based systems, simulators, automatic testagreed to fit out the Tingo Foods facility with the necessary processing equipment and electronic instruments, addressingfurther agreed to require Tingo Foods to enter into a multi-billion-dollar defense industry. Solutionslong-term ground lease for the facility, with lease payments to commence when the facility becomes operational.

Consideration Provided. As consideration for Tingo Foods, we issued Mr. Mmobuosi a senior secured promissory note in the principal amount of $204 million, bearing interest at 5.0% per annum and systemsmaturing in 24 months.

About Tingo Group Holdings

TGH (and together with its subsidiaries, the “TGH Group”) is a Delaware limited liability company and a wholly-owned subsidiary of the Company. TGH is the leading Agri-Fintech company operating in Africa, with a comprehensive portfolio of innovative products, including a ‘device as a service’ smartphone and pre-loaded platform product. As part of its globalization strategy, TGH and its wholly owned subsidiary, Tingo Mobile Limited (“Tingo Mobile”), have recently begun to expand internationally and entered into trade partnerships that are integratedcontracted to increase the number of subscribed farmers from 9.3 million in 2022 to more than 32 million, providing them with access to services including, among others, the Nwassa ’seed-to-sale’ marketplace platform, insurance, micro-finance, and mobile phone and data top-up. Tingo Group’s other Tingo business verticals include: TingoPay, a SuperApp in partnership with Visa that offers a wide range of B2C and B2B services including payment services, an e-wallet, foreign exchange and merchant services; Tingo Foods, a food processing business that processes raw foods into critical systemsfinished products such as commandrice, pasta and control, missile fire control, maintenancenoodles; and Tingo DMCC, a commodity trading platform and agricultural commodities export business based out of military aircraftthe Dubai Multi Commodities Center.

Tingo Mobile’s Nwassa platform is believed to be Africa’s leading digital agriculture ecosystem that empowers rural farmers and missilesagri-businesses by using proprietary technology that enables users to access markets in which they operate. Using Tingo Mobile’s ecosystem, farmers can ship produce from farms throughout Nigeria, in both retail and wholesale quantities. Tingo Mobile’s system provides real-time pricing, straight from the farms, which eliminates middlemen. The customers of Nwassa users pay for produce bought using available pricing on the Israeli Air Force, Israeli Navyplatform.

Although TGH has a large retail subscriber base, its business model is essentially a business-to-business-to-consumer (“B2B2C”) model. Each of TGH’s current subscribers is a member of one of a small number of cooperatives with whom a subsidiary of TGH has a contractual relationship, which facilitates the distribution of Tingo-branded smartphones into the various rural communities of user farmers/agri-workers. Through TGH’s smartphones and by foreign defense entities. Our MRM division develops, manufactures and provides mobile computing platforms for the mobile logistics management marketproprietary applications imbedded in the U.S., Europephones, TGH is able to provide a wider array of agri-fintech services and Israel. American-manufactured systems are designed for outdoorgenerate diverse revenue streams as described in more detail herein.

Services offered to TGH’s retail subscribers include smart phone leasing, an agri-marketplace, airtime top ups, utility payment services, bill-pay and challenging work environments in trucking, distribution, logistics, public safetye-wallet, insurance products and construction.

We operate primarily through two Israel-based companies, Enertec Systems 2001 Ltd, or Enertec, our wholly-owned subsidiary,access to finance and Micronet Ltd, or Micronet, in which we have a controlling interest, which develop, manufacture, integrate and globally market rugged computers, tablets and computer-based systems and instruments forlending services. The TGH Group offers its services to the commercial, defense and aerospace markets. Our products, solutions and services are designed to perform in severe environments and battlefield conditions.

Micronet is publicly-traded on the Tel Aviv Stock Exchange, or TASE, and operates in the growing, or MRM, market and is a global developer, manufacturer and provider of mobile computing platforms, designed for integration into fleet management and mobile workforce management solutions. In June 2014, Micronet expanded its MRM business and operations in the U.S.agricultural market through the acquisitionNwassa platform and has recently launched a general B2C and B2B fintech platform and super-app, in partnership with Visa, branded as TingoPay.

On October 19, 2022, Tingo Mobile, signed an agreement with the All Farmers Association of Beijer Electronics Inc.Nigeria (AFAN), the umbrella body of the 56 recognized commodities and agricultural associations in Nigeria. Under the terms of the agreement, AFAN committed to add a minimum of 20 million additional subscribers to Tingo Mobile’s customer base. These new subscribers are expected to be comprised principally of owners of small and medium-sized agricultural enterprises throughout the country.

On November 10, 2022, Tingo Mobile opened a new regional head office in Ghana and launched operations there. In conjunction with the launch, Tingo Mobile also announced an agreement with the Ashanti Investment Trust, the investment arm of the Ashanti Kingdom, to enroll a minimum of 2 million new members in Ghana with Tingo Mobile within 120 days of signing and has agreed on a target to increase such enrollments to at least 4 million members.

On December 14, 2022, Tingo Mobile launched in Malawi as a strategic base from which to expand into East Africa and target neighboring countries such as Tanzania, Zambia, and Mozambique.


In addition to its agri-fintech business, on December 12, 2022, TGH launched its global commodities trading platform and export business (“Tingo DMCC”) from the Dubai Multi Commodity Centre (the “DMCC”) to facilitate offtake and export of agricultural commodities from both its existing customer base and new customers. Through the strong relationships between Tingo Mobile and the cooperatives and other parties it deals with in Nigeria and Ghana, TGH has secured access to significant quantities of agricultural produce for export, including wheat, millet, cassava, ginger, cashew nuts, cocoa and cotton.

On February 9, 2023, TGH acquired the entire share capital of Tingo Foods, which commenced food processing operations in September 2022, generating more than $400 million of revenue in its first four months of trading. Through Tingo Foods, the TGH Group expects to enhance its ability to integrate agricultural producers into the ’seed to sale’ value chain and digital ecosystem.

A key element of the growth plans for Tingo Foods is the development of its own food processing facility. To this end, through a joint venture, Tingo Foods has committed to build and operate a state-of-the-art $1.6 billion food processing facility in the Delta State of Nigeria, which is expected to be completed by the end of the first half of 2024. Tingo Foods estimates that its part of the build and fit-out costs will amount to approximately $500 million, which it expects to fund out of a combination of retained earnings and debt finance. The new facility is expected to multiply the size of Tingo Food’s processing capacity and revenues, allowing it to expand its current product range of rice, pasta, noodles, and other staple foods into new product areas such as tea, coffee, cereals, chocolate, biscuits, cooking oils, non-dairy milks, carbonated drinks, and mineral water, while also materially expanding its capacity for the offtake of produce from its farmers and increasing its supply into TGH’s commodity trading platform and export business. In line with its Environmental, Social and Governance (“ESG”) commitments, Tingo Foods has entered into a partnership with a third party company in the UK, Evtec Energy Plc, who have committed to fund and build a $150 million net zero carbon emission solar plant, to provide a sustainable and low-cost energy source to power its multi-billion dollar food processing facility. Through this first-of-its-kind facility in Nigeria, Tingo Foods aims to reduce Africa’s reliance on the import of finished food and beverage products and to increase exports of made-in-Africa produce, which in turn is expected to reduce the prices of finished products and significantly reduce shipping miles and carbon emissions.

As part of the TGH Group’s strategy to leverage its fintech platforms, infrastructure and the Tingo brand, it recently launched the TingoPay Super App in partnership with Visa. TingoPay broadens TGH’s reach outside of the agricultural sector, targeting retail customers of any age (18+) and demographic. TingoPay customers can apply for a Tingo Visa card and then access it via the TingoPay Super App, so as to make online transactions in their domestic or Beijer,foreign currencies, as well as to manage their cards, set up repeat payments and access transaction statements. The Tingo Visa card’s interface with the TingoPay super app and e-wallet also allows customers to use their digital money easily and securely for both online and physical payments anywhere Visa is accepted. Additionally, TingoPay’s users can benefit from a U.S.-based vehiclebroad selection of value-added services, including the ability to pay utilities and bills, top-up airtime and data, make funds and forex transfers, apply for loans, arrange pensions, purchase insurance products, make travel bookings and access the Nwassa agricultural produce marketplace. TingoPay and the Tingo Visa partnership are also expected to deliver significant benefits to businesses, in particular farmers and other Small and Medium Enterprises (SMEs) across all sectors. The integration of Visa’s range of merchant services with TingoPay’s commerce portal and the Nwassa marketplace, enables businesses to accept payments easily and securely in any currency from both retail and business customers, and use the TingoPay e-wallet to immediately fund purchases of inputs and make other payments.

TGH has an experienced management team, led by Dozy Mmobuosi, who founded Tingo Mobile in 2001 and serves as the TGH Group CEO. Mr. Mmobuosi is supported by an executive management team and has additional senior management personnel within each of its subsidiaries who are responsible for executing the TGH Group’s business strategy and day-to-day operations.

The TGH Group currently has trading operations in Nigeria, Ghana and Malawi in connection with Tingo Mobile, TingoPay and Tingo Foods, and Dubai in connection with the commodity trading platform and export business. In addition, TGH Group has administrative offices in the United States and the United Kingdom, which handle certain of the management and finance activities of the Company. 


TGH Strategy

The TGH Group aims to be the leading fintech and agri-fintech business in Africa, before expanding into Southeast Asia and certain other parts of the world, delivering financial inclusion and financial upliftment to its customers, including to rural farming communities through the Company’s agri-fintech platform and products.

●ESG Initiatives. Global climate change provides a challenge to sustainable production and food security. A key area of global interest under the United Nations Sustainable Development Goals (“SDGs”) and environmental, social and governance (“ESG”) impact investing is social upliftment. TGH’s strategy and market execution naturally includes ESG principles and provides an opportunity to address SDGs, including food security, in Africa and globally. TGH seeks to accomplish this through its full range of agri-fintech products, including its Nwassa platform, its global commodity platform and export business and its Tingo Food food processing business. As noted above, TGH aims to align with SDGs and related initiatives, such as gender equality through upliftment of female entrepreneurship, financial inclusion, poverty alleviation and zero hunger.

●Strategic Initiatives. TGH opportunistically reviews potential partnerships and mergers and acquisitions. TGH intends to identify key strategic partners and potential acquisitions that it believes can accelerate the TGH Group’s expansion towards becoming the leading agri-fintech operator in Africa, Southeast Asia and other emerging markets. TGH believes that pursuing a select number of investments in the agri-tech, banking services and fintech sectors can provide a strong pathway to enhance its proven activities in Nigeria and replicate them elsewhere, and TGH will continuously evaluate such opportunities. As TGH continues to grow, it intends to develop further strategic relationships and projects related to enhancing and expanding its capabilities and the development of the services that the TGH Group offers.

●Agri-Fintech and Value-Added Services. TGH generates income from agri-fintech and value-added services, including, but not limited to:

●Mobile device leasing ‘Device-as-a-Service’ (12-month contracts);

●Airtime and data top-ups;

●Nwassa (Agri-marketplace platform and value added transaction services);

●Utilities and other bill pay services through its electronic wallet solution; and

●Cross-sell fees from referrals for insurance and lending services offered by strategic partners.

●Export Services. In connection with the launch of Tingo DMCC, TGH intends to provide various services related to its export business, either directly or outsourced to third parties, including:

●Procurement;

●Invoicing, billing, and collections;

●Warehousing and storage;

●Logistics services, including loading, unloading, transport, and delivery; and

●Customs clearance and certified inspection.


●Food Processing Services. In connection with the acquisition of Tingo Foods, TGH aims to become the preferred buyer of surplus agricultural produce in Africa and elsewhere, and a leading processor of finished food and beverage products.

Tingo Foods’ goal in Africa is to reduce the continent’s reliance on the import of finished food and beverage products and increase its exports of made-in-Africa produce between countries within the continent, as well as to the rest of the world. This is expected to reduce the prices of finished goods for Africa’s consumers, while also creating a substantial environmental benefit by reducing the current need to export raw food materials outside of the continent for processing only to then import the finished and more expensive products back into Africa. To enable Tingo Foods to significantly accelerate its growth and increase capacity, it has entered into a joint venture to construct and operate a $1.6 billion state-of-the-art food processing facility in Nigeria, which is expected to the largest of its kind in Africa. Tingo Foods expects to construct and open more food processing facilities in Africa and other key markets as it grows and as it secures the supply of more agricultural produce through Nwassa platform using Tingo Mobile.

●Key Strategies. TGH intends to achieve growth and build competitive advantages through the following key strategies:

●Increasing the number of TGH users in Nigeria, including through new partnerships with additional agricultural cooperatives;

●Extending TGH’s services to other African countries, in addition to Nigeria, Ghana, and Malawi, where the TGH Group currently operates — these may include Tanzania, Zambia, Mozambique, Uganda and Kenya. TGH is conducting a detailed review with its corporate advisors to determine how best it can optimize and develop market entry strategies based on its proven success in Nigeria and, most recently, Ghana and Malawi;

●In the medium term, expanding TGH’s services to countries outside of Africa, including China, other countries in Southeast Asia and certain countries in South America;

●Expanding the Tingo DMCC commodity platform and export business across the globe;

●Increasing the food and beverage processing capacity of Tingo Foods, including in to other countries within Africa and into other parts of the world; and

●Further diversifying the TGH B2C and B2B customer base outside of the agricultural sector, with products such as TingoPay, Tingo Visa products, new app based products and a range of payment and foreign exchange services.


TGH Group Structure

The TGH Group structure has been organized to facilitate expansion within Africa, the integration of Tingo Foods into the company’s agricultural value chain, as well as the creation of TGH’s commodity export financing subsidiary in Dubai. The organizational structure of the TGH Group is represented in the following diagram (other non-agri-fintech subsidiaries of the company not shown):

 

Operations and Business Model

A key challenge in Africa’s agricultural value chain is the weak link between rural small holder farmers and demand centers in urban areas. TGH has developed the Nwassa platform to connect farmers directly with wholesale and retail purchasers, as well as experienced experts and suppliers. Farmers and farm cooperatives connect with brokers, arrange for storage and transportation of their produce, and ultimately obtain improved economic outcomes through higher product prices and lower storage and transportation losses. Since the launch of Nwassa in 2020  adoption and usage of the platform has grown rapidly.

Approximately 98% of TGH’s customers are active users of the Nwassa platform, and the platform processes approximately $1 billion USD in gross transaction value (GTV) on a monthly basis. In addition, TGH has invested in a cell-on-wheels platform to boost network and wireless coverage in regions with low wireless coverage in an effort to ensure its customers have consistent access to TGH services and Nwassa whenever such is required.

We believe that, as the TGH Group’s business continues to grow, it is positioned to benefit from operating leverage and economies of scale. In particular, TGH is able to provide incremental value-added services to its large customer base.

●Customers. TGH, principally through Tingo Mobile, its wholly-owned subsidiary, has consistently maintained over 9.3 million customers since 2014, with a focus on supporting customers who primarily work in the agricultural sector, which is now expected to grow through the recently signed trade partnerships with the All Farmers Association of Nigeria, who have contracted to enrol a minimum of 20 million new farmers, and the Kingdom of Ashanti in Ghana, who have contracted to enrol between 2 million and 4 million+ farmers, as well as the recent launch into Malawi, and other such geographical expansion and new trade partnerships in the future. Tingo Mobile has been able to do this though a unique and efficient B2B2C business model.  A member of the TGH Group contracts with farming cooperatives and other associations who engage their large agricultural customers to utilize Tingo’s products and services. TGH’s customers are a mix of farmers (small holder and subsistence), and individuals who work in storage, transportation and logistics across the agricultural value chain. The number of customers stated above represents the number of mobile handset devices that have been distributed, with 1 year (12 month) contracts, to members of TGH’s partner farmers’ cooperatives and those making monthly (12) lease payments, via the cooperatives, to TGH. TGH then provides additional services to the members of the cooperatives as described herein, primarily through the Nwassa platform.


1.Low Attrition.

●Because TGH contracts with agricultural cooperatives and associations who facilitate access to branded mobile devices and services to their members, attrition or “churn” rates have been consistently less than 1% over the last nine years.  The members of the farmers’ cooperatives have the option to sign up to TGH’s non-cancellable agreements for a 1-year leasing period. While these are non-cancelable agreements, there are instances whereby the farmers may cease making payments. However, as noted above, there has been a churn rate of less than 1% over each leasing cycle.

●Customer count and activity on TGH’s various platforms are key drivers of its revenue. TGH currently generates revenue from the following sources:

●Outright Sales of Mobile Phones. In 2020, Tingo Mobile sold 3.1 million handsets to a distributor based in Kenya, and in Q4 2021 Tingo Mobile sold an additional 2.9 million handsets to a non-agricultural cooperative in Nigeria. In Q3 2022, Tingo Mobile sold an additional 87,508 mobile devices in a bulk sale. TGH will likely seek to pursue similar sales opportunities in the future.

●Mobile Voice and Data Service. Through a Mobile Virtual Network agreement with Airtel, Tingo Mobile provides its customers in Nigeria with voice and data services. Each month its customers receive 2,500 airtime minutes, 10 free SMS text messages outside the Tingo network, 100 free SMS messages within the Tingo network and 500 MB data for a monthly access fee of circa $3.00 USD (using 414 USD/NGN exchange rate) per month. This fee is shared with Airtel, of which TGH’s share (16%) equates to USD $0.48 per user per month.

●Nwassa Platform. TGH’s proprietary platform, Nwassa, supports Nigeria’s agricultural value chain with market access and provides users with a variety of agri-tech and fintech services, including:

●Access to agricultural markets for crops, packaging, warehousing, and cargo logistics;

●Digital wallet services, including sending and receiving domestic payments, monitoring cash flow in real time and securely holding money;

●Access to other third-party services such as utility bill payment, virtual airtime top-up, insurance services, and alternative lending solutions. For each third-party service or product purchased by its customers, TGH receives an introducer fee or commission:

●Utility bill payment, airtime sales and commodity sales: 4% commission;

●Insurance on the insureds mobile handsets of 100 NGN (or foreign equivalent) per subscriber, the USD equivalent is $0.24 per subscriber using 414 NGN/USD exchange rate;

●Lending: TGH receives a commission on each loan arranged with third party lenders via the platform;

Tingo Pay. The Tingo Pay app was launched in February 2023. Tingo Pay offers the following services:

●Tingo wallet top-up;

●Peer-to-peer payments (including merchant payments at stores);

●Utility and expense payments (e.g., airtime, broadband, cable, electricity, water, hotels, flights);

●Pension payments; and

●QR code payment services.


Separate to its Tingo Mobile, Nwassa and TingoPay businesses, TGH has diversified into the Tingo DMCC commodity trading platform and export business and operations locatedthe Tingo Foods food processing business, both of which aim to meet the globe’s increasing shortfall in Utah,food and beverage product supply and to tackle the world’s food security crisis. Tingo DMCC and Tingo Foods currently generate revenues from the following sources:

●Tingo DMCC. The commodity trading platform and export business of Tingo DMCC facilitates through its operations in Dubai the sales of agricultural produce from farming cooperatives in Africa, as well as from other suppliers, and brokers the sale of such produce to distribution companies, wholesalers, supermarket groups and other large-volume buyers wherever they are in the world.

●Tingo Foods. Having commenced trading in September 2022, Tingo Foods was acquired by TGH on February 9, 2023. To date, Tingo Foods has outsourced its processing activities to third-party food processing plants in Nigeria, for which Tingo Foods arranges the supply of raw crops, as well as the customers for the finished processed foods. Tingo Foods aims to open its own state-of-the-art food processing facility in Nigeria by the end of the first half of 2024, which will enable it to significantly expand its product range and also multiply the size of its processing capacity and revenues.

Competition

In Nigeria and the other African countries in which TGH operates, it competes with a large number of mobile phone carriers. Current competitors may seek to intensify their investments in those markets and also expand their businesses into new markets. Competitive pressure from current or future competitors or TGH’s failure to quickly and effectively adapt to a changing competitive landscape could adversely affect its growth. Current or future competitors may offer lower prices and enhanced features, and, as a result, addedTGH may be forced to lower its prices and upgrade its phones and network in order to maintain its market share.

With respect to TGH’s payment services, TGH faces competition from financial institutions that offer payment processing services, debit and credit card service providers, other offline payment options and other electronic payment system operators, in each of the markets in which TGH operates. TGH expects competition to intensify in the future, as existing and new competitors may introduce new services or enhance existing services. New entrants tied to established brands may engender greater user confidence in the safety and efficacy of their services.

We believe that developing and maintaining awareness of the Tingo brand is critical to achieving widespread acceptance of the Tingo network and is an important element in attracting new users. Furthermore, we believe that the importance of brand recognition will increase as competition in TGH’s markets increases. Successful promotion of the Tingo brand will depend largely on the effectiveness of TGH’s marketing efforts and its ability to ensure that the Tingo network remains reliable, and useful at competitive prices. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses TGH incurs in building its brand. If TGH fails to successfully promote and maintain its brand or incurs substantial expenses in an unsuccessful attempt to promote and maintain its brand, TGH may fail to attract new customers and cooperative partners or to grow or maintain its telecommunications network.

If TGH fails to compete effectively, it may lose existing users and fail to attract new users, which could have a material adverse effect on its business, U.S.-basedfinancial condition, results of operations and prospects.

Market and Industry Trends

Africa is the second-largest continent by land mass and population. The continent is also the youngest by far, with a median age of 19.7 years for its 1.3 billion people in 2020. Tingo believes the building blocks for growth in Africa’s agriculture industry are in place and that it is well positioned to participate in the growth of this key demographic segment.

In a report by The Economist, Sub-Saharan Africa’s population is growing at a pace of 2.7% per year, which is more than twice as fast as the populations of South Asia 1.2% and Latin America 0.9%. At the current growth rate, the continent’s population will double by 2050. Africa’s younger population represents a significant opportunity for growth in the demand for agricultural commodities. This younger generation is also being born into a “networked” world and is more comfortable using technology to achieve their goals. In addition, Africa’s governments are increasingly focused on improving business conditions for entrepreneurs and small businesses on the continent. Sub-Saharan Africa’s World Bank Doing Business rank has improved by approximately 20 points: from 45 in 2004 to 65 in 2020. This trend appears likely to continue and will encourage the establishment of new ventures across a variety of economic sectors, including agriculture.

Foreign direct investment (FDI) to African countries hit a record $83 billion in 2021, according to UNCTAD’s World Investment Report 2022 published on 9 June. This was more than double the amount reported in 2020, when the COVID-19 pandemic weighed heavily on investment flows to the continent. Despite the strong growth, investment flows to Africa accounted for only 5.2% of global FDI, up from 4.1% in 2020. Foreign direct investments into Africa will likely continue to help resolve significant infrastructure constraints and create value in the agricultural sector.


Nigeria is the largest economy and the most populous country in Africa and is therefore central to the continent’s growth. According to an Oxford Business Group 2021 report, agriculture accounts for 14% of total GDP in sub-Saharan Africa, and a majority of the continent’s population is employed in the sector. Agriculture is therefore central to African livelihoods as many of sub-Saharan Africans are small holder farmers and the FAO estimates that Africa holds 60% of the world’s uncultivated arable land.

In Nigeria, the agricultural industry employs 36% of the labour force and represents 22% of the country’s GDP according to a PWC report. Despite the scale of the agricultural industry in Nigeria, relative productivity remains disappointing. Nigeria’s suboptimal agricultural productivity is driven by several factors, including broken linkages to demand centers, inefficient capital allocation for the purchase of inputs, and underdeveloped and fragmented access to services. Tingo aims to play a significant role in resolving these issues.

Technology, Manufacturing and Distribution

TGH continuously invests in its technology, data collection and analytics capabilities, operating primarily through TGH-employed developers in Nigeria. TGH’s research and development activities focus on the production, maintenance and operation of new and existing products and services. We believe the development of TGH’s technology serves as an investment in future growth that will enhance consumer experience and satisfaction. We may seek to increase investments into TGH’ technology and data capabilities in the future.

In March 2020, Tingo Mobile entered into a mobile phone procurement contract with UGC Technologies Company Limited, with located in Shenze Town, China. In January 2022, Tingo Mobile entered into an agreement with Bullitt Mobile Limited, based in Reading, England, who are a supplier of branded cellular telephone products and accessories. We made the decision to diversify Tingo Mobile’s supplier base given the many challenges experienced by companies with globally distributed supply chains through the Covid-19 pandemic.

UGC Technologies Company Limited and Bullitt Mobile Limited are the TGH Group’s sole suppliers of mobile phones at present. The procurement contract with UGC Technologies Company Limited allows TGH to raise purchase orders in line with its customer demand and provides capacity to meet demand from wholesale customers. In addition, TGH is exploring opportunities to establish relationships with other production partners.

Intellectual Property

Intellectual property rights are important to TGH’s business. We rely on copyright laws in the United States and other jurisdictions to establish and protect its intellectual property rights. However, these laws provide only limited protection. Although we takes steps to protect the TGH Group’s intellectual property rights, we cannot be certain that the steps taken will be sufficient or effective to prevent unauthorized access, use or copying. Moreover, others may seek to infringe on, misappropriate, or otherwise violate TGH’s intellectual property rights. Policing the unauthorized use of TGH’s intellectual property rights can be difficult. The enforcement of TGH’s intellectual property rights also depends on any legal actions we may bring against any such parties being successful, but these actions are costly, time-consuming, and may not be successful, even when TGH’s rights have been infringed, misappropriated, or otherwise violated.

In addition, aspects of TGH’s platform and services include software covered by open-source licenses. The terms of various open-source licenses have not been interpreted by United States courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on TGH’s services.

Although TGH relies on intellectual property rights in its business, it also seeks to preserve the integrity and confidentiality of its intellectual property rights through appropriate technological restrictions, such as physical and electronic security measures.


Employees, Contract Personnel and Human Capital Resources

TGH employs approximately 30 executive, marketing, and administrative personnel, inclusive of its executive officers. The TGH Group has approximately 409 full-time employees, 38 part-time employees, and approximately 20,000 part-time, commission-only self-employed agents who work with TGH’s farmer cooperatives and the All Farmers Association of Nigeria. The self-employed agents act representatives and liaisons between Tingo Mobile, the cooperatives / AFAN and the farmers enrolled with Tingo Mobile and the Nwassa platform, assisting the farmers to utilize the services of Tingo Mobile and Nwassa and generate more transaction throughput, and to deal with any customer services requirements.

TGH understands that its success depends on its ability to attract, train and retain its employees and contract personnel. TGH strives to attract, recruit, and retain employees through competitive compensation and benefit programs, learning and development opportunities that support career growth and advancement opportunities, and employee engagement initiatives that foster a strong company culture.

Facilities

The TGH Group’s largest office is in Lagos, Nigeria, where the bulk of its operations and support personnel are located. Tingo also has offices located in Accra in Ghana, Lilongwe in Malawi and in Dubai.

In the United States and the United Kingdom, TGH subleases office space on a month-to-month basis.

Government Regulation

Telecommunications Regulation

NCC Act. The primary statute and set of regulations governing the telecommunications sector in Nigeria is the Nigerian Communications Act (2003) (the “NCC Act”) and regulations made under it. Also relevant are the Wireless Telegraphy Act (1966), as amended (the “WT Act”), Cybercrimes (Prohibition Prevention, Etc.) Act (2015), the National Information Technology Development Agency Act (2007) and, to the extent that telecommunications companies may wish to use spectra ordinarily reserved for broadcast, the National Broadcast Commission Act (1992) and the respective regulations made under these statutes. The NCC Act is the key regulatory framework for the Nigerian telecommunications industry. The NCC Act stipulates rules relating to the classes of licenses, licensing processes and offenses for failure to comply with the provisions of the Act. It established the Nigerian Communications Commission (“NCC”) as a federal agency and regulator charged with the responsibility of facilitating investments in and entry into the Nigerian market for the provision and supply of communication services, equipment and facilities, granting and renewing communications spectrum and operating licenses and the promotion of fair competition in the communications.

Nigerian Communications Commission (NCC). The NCC is the independent national regulatory authority for the telecommunications industry in Nigeria. It is responsible for stimulating investments in the sector and creating an enabling environment for competition among operators in the industry. The NCC is mandated to monitor all significant matters relating to the performance of all licensed telecommunications service providers and publish annual reports. The powers of the NCC range from the issuance of various licenses relating to the provision of communications services, equipment, and products, to regulating competition, issuing spectrum and numbering resources for the industry.

Licensing Framework for the Nigerian Telecommunications Sector. License requirement Section 32 of the NCC Act empowers the NCC to issue communication licenses for the operation and provision of communication services or facilities by way of class or individual license on such terms and conditions as the NCC may from time to time determine. No person can operate a telecommunications system or facility, or provide a communications service in Nigeria, unless authorized to do so under a communications license or exempted under regulations made by the NCC. The NCC also issues an ‘international sub-marine cable infrastructure landing station services license’, which include manufacturingallows the licensee to land, install, operate and manage submarine cable infrastructure in Nigeria. The license is typically for a period of 20 years or such other period as may be imposed by the regulator.


Technical Standards and Duties to End Customers. The NCC Act and guidelines issued pursuant to it prescribe technical support infrastructure, salesstandards to which Tingo Mobile’s partner Airtel Nigeria is required to adhere. Under Section 130 of the NCC Act, the NCC must publish technical codes and marketing capabilitiesspecifications for telecommunication equipment and facilities to be used in Nigeria. It is an offense to use any technical equipment or system which hinders network inter-operability, or which compromises public safety. The NCC must also conduct type approval tests and issue certificates in respect of communications equipment and facilities to be used in Nigeria. It is an offense punishable by fine or imprisonment to sell or install any communications equipment or facilities without first obtaining the NCC’s type approval test certificate. The NCC regularly publishes technical standards applicable to all telecommunications equipment to be used in Nigeria on its website, as well as expanded its U.S. customer baselists of approved handsets and presence with local fleetstelecommunications equipment that have been tested and local MRMapproved by the NCC for use in Nigeria.

Universal Service Obligations. The NCC Act empowers the NCC to design, manage and implement a universal service providers. Micronet currently operates via its Israelisystem that will promote widespread availability and U.S. facilities, the first located in Azur, Israel, near Tel Aviv,usage of network services and the second located in Salt Lake City, Utah.

Micronet designs, develops, manufactures and sells rugged mobile computing devices that provide fleet operators and field workforces with mobile computing solutions in challenging work environments. Micronet’s vehicle cabin installed and portable tablets are designed to increase workforce productivity, enhance corporate efficiency and customer serviceapplication services throughout Nigeria. The NCC furthers this objective by offering computing power and communication capabilities. Micronet products provide fleet operators with visibility into vehicle location, fuel usage, speed and mileage and allow forencouraging the installation of softwarenetwork facilities and the provision of network services and applications to institutions in underserved areas and communication integration. This enablescommunities.

Federal Ministry of Communications. The Federal Ministry of Communications for Nigeria is responsible for policy formulation as it pertains to the usersinformation and communications technology sector. Its policy direction drives activities and developments within the sector. The Federal Ministry of Communications is mandated to managefacilitate universal, ubiquitous and cost-effective access to communications infrastructure and to utilize information and communications for job creation, economic growth and transparency in governance.

Anti-Money Laundering Act and Anti-Money Laundering Regulations. Section 1 of the driversNigeria Money Laundering (Prohibition) Act, 2011 (the “MLA”) provides that no body corporate shall, except in various aspectsa transaction concluded through a financial institution, make or accept cash payment of a sum exceeding ₦10 million (approximately $27 thousand USD). Section 2 of the MLA places a reporting obligation on any body corporate transferring funds or securities exceeding $10 thousand USD or its equivalent to or from a foreign country. The relevant body corporate is required to report in writing, within seven days of the transaction, to the Central Bank of Nigeria and the Nigerian SEC.

Data Protection Laws

The Consumer Code of Practice Regulations. The Consumer Code of Practice Regulations (2007) (the “CCP Regulations”) issued by the NCC regulates data protection in the telecommunications sector. The CCP Regulations obligate NCC licensees to take all steps reasonable to prevent the “inappropriate” and “inadvertent” disclosure of customers’ information. The CCP Regulations also prohibit the transfer of the information of customers to third parties except as consented to by the customers or as permitted or required by the NCC or other applicable legal or regulatory requirements. Licensees that collect customers’ information are required to adopt and implement a policy regarding the proper collection, use and protection of that information and ensure that other licensees to whom they disclose such as: driver identification, reporting hours worked customer/organization working proceduresinformation have adopted the consumer information policy.

The Nigeria Data Protection Regulations. The Nigeria Data Protection Regulations (2019) (the “NDPR”) safeguard the rights of natural persons to data privacy and protocols, route managementprohibit the manipulation of personal data. The NDPR applies to all transactions intended for the processing of personal data and navigation basedthe actual processing of personal data, notwithstanding the means by which the data processing is conducted or intended to be conducted, and in respect of natural persons present in Nigeria and natural persons residing in Nigeria or residing outside Nigeria but of Nigerian descent (the “Data Subject”). The NDPR imposes a duty of care on tasks and time schedule. End users may also receive real time messages for various services such as pickup and delivery, repair and maintenance, status reports, alerts, noticesanyone entrusted with or in possession (“Data Controller”) of any information relating to starta Data Subject (including but not limited to names, photographs, bank details, posts on social networking sites, and endingIP addresses) (“Personal Data”). A Data Controller will be held accountable for acts and omissions in respect of work, digital forms, issuingdata processing and printingin accordance with the principles of invoiceshandling Personal Data in the NDPR which are: (a) collection and payments. In addition, using its recently launched new product Micronet intendsprocession of Personal Data in line with the specific, legitimate and lawful purpose consented to provide third party telematics services such as HOSby the Data Subject; (b) adequacy, accuracy and commence evaluationnon-prejudice of integrations with other TSPs, which will allow MicronetPersonal Data; (c) storage during a reasonable period of need; and (d) security against all foreseeable hazards and breaches including but not limited to provide its consumers with services such as driver recognition, driver fatigue, driver behavior, preventive maintenance, fuel efficiencycyber-attack, manipulations and an advance driver assistance system.damage by exposure to natural elements.

1

 

Micronet’s customers consist primarilyThe consent of Application Service Providers,the Data Subject must be obtained by the Data Controller before processing the Personal Data of the Data Subject. In obtaining consent, the specific purpose of collection must be made known to the Data Subject. The Data Controller has an obligation to ensure that consent is not obtained by fraud, coercion or ASPs,undue influence. Consent should also not be sought, given or accepted in any circumstance that will engender the direct or indirect propagation of criminal acts or antisocial conduct.

Legal Proceedings

In November 2017, the Nigeria Economic and solution providers specializingFinancial Crimes Commission (“EEFC”) brought a criminal charge (Case No. 6491C/2017) in the MRM market.High Court of Lagos State, Nigeria, against Mr. Mmobuosi in connection with Tingo Mobile’s issuance of checks, amounting to approximately $72,000 in the aggregate, to three of Tingo Mobile’s suppliers. Payment on the checks was stopped due to a dispute with the suppliers over the delivery of services underlying the payments. These companies sell Micronet’s productssuppliers filed a petition with the EEFC who, in turn, filed the charge described above against Mr. Mmobuosi in his individual capacity as partsignatory for Tingo Mobile, as remitter of the checks.

The payment dispute between the suppliers, on the one hand, and Tingo Mobile, on the other hand, should have been resolved in a civil proceeding, particularly given that Tingo Mobile did have sufficient funds in its accounts to honor the checks, which would have been a prerequisite to defending a successful criminal charge. The suppliers, however, opted instead to file a petition with the EEFC against Tingo Mobile and Mr. Mmobuosi.

During the pendency of the charge, in April 2018, each of the suppliers entered into separate settlement agreements, dropping all charges against Tingo Mobile. Each of the suppliers also sent separate letters to the EEFC, informing the EEFC of their MRM systemssettlements and solutions. Currently, Micronet doeswithdrawal of charges. Following the settlements and explanatory letters, the parties expected that the EEFC would, sua sponte, file a dismissal with the High Court.

As several years passed and the EEFC did not sell directlytake action on its own to end users. Micronet customers are generally MRM solution and service providers, ASP providersadjudicate or dismiss the charge, on June 28, 2022, counsel to Mr. Mmobuosi filed a Motion in the transportation market,High Court of Lagos State in the Ikeja Judicial Division to dismiss the charges. The Motion has, thus far, been unopposed by the EEFC and any such opposition is not expected. We expect the matter to be dismissed later in 2023.

One or more members of the TGH Group is, from time to time, also involved in various de minimus legal proceedings before courts in the jurisdictions where we operate in the ordinary course of TGH’s business, and may also be subject to such proceedings in other countries. None of these proceedings is expected to have a material effect upon the TGH Group’s financial condition or results of operations.

TINGO GROUP’s Insurance Business Platform

The Company, through acquisitions from July 1, 2020 through July 2021 , holds several insurance businesses, that operate via its VIEs entities and subsidiaries, including long haul, local fleets’ student transportation (yellow busses)one insurance brokerage company, Beijing Fucheng, and fleettwo insurance agency companies, All Weather and field management systemsGuangxi Zhongtong, the Company conducts insurance brokerage and agency businesses in China and operates an online platform for constructionssales of a wide range of insurance products, including, but not limited to, automobile insurance, property and heavy equipment. Micronetliability insurance, life insurance and health insurance, which products are underwritten by over forty insurance companies in China.

VIE agreements with Guangxi Zhongtong:

On January 1, 2021, as amended on August 6, 2021, Bokefa, our wholly foreign-owned enterprise (“WFOE”), Guangxi Zhongtong, and nominee shareholders of Guangxi Zhongtong entered into six agreements, (together, the “Guangxi Zhongtong VIE Agreements”), described below, pursuant to which Bokefa is deemed to have controlling financial interest and be the primary beneficiary of Guangxi Zhogntong. Therefore, Guangxi Zhongtong is deemed a VIE of Bokefa.


Loan Agreement

Pursuant to this agreement, Bokefa agreed to provide loans to the registered shareholders of Guangxi Zhongtong. The term of the loan shall start from the date when the loan is actually paid, until the date on which the loan is repaid in full. The agreement shall terminate when the shareholders repay the loan. The loan should be used solely for Guangxi Zhongtong’s operating expenses and should be exclusively repaid by customers worldwide. transferring shares of Guangxi Zhongtong to Bokefa when PRC Law permits.

Exclusive Option Agreement

The United States currently constituteseffective term of the agreement is unlimited and the agreement shall terminate upon the transfer of all the equity interest of Guangxi Zhongtong to Bokefa in accordance with relevant laws and provisions as provided in the agreement, or upon written notice by Bokefa to shareholders. In consideration of Bokefa’s loan arrangement, the shareholders have agreed to grant Bokefa an exclusive option to purchase their equity interest. Distribution of residual profits, if any, are restricted without the approval of Bokefa. Upon request by Bokefa, Guangxi Zhongtong is obligated to distribute profits to the shareholders of Guangxi Zhongtong, who must remit such profits to Bokefa immediately. Guangxi Zhongtong and its largest market, representing approximately 74% and 83%shareholders are required to act in a manner that is in the best interest of revenueBokefa with regards to Guangxi Zhongtong’s business operation.

Equity Pledge Agreement

The agreement will be terminated upon such date when the other agreements have been terminated. Pursuant to the agreement, the nominee shareholders pledged all their equity interest in Guangxi Zhongtong to Bokefa as security for the years endedobligations in the other agreements. Bokefa has the right to receive dividends on the pledged shares, and all shareholders are required to act in a manner that is in the best interest of Bokefa.

Business Cooperation Agreement

The agreement is effective until terminated by both parties. Guangxi Zhongtong and its shareholders agree that the legal person, directors, general manager and other senior officers of Guangxi Zhongtong should be appointed or elected by Bokefa. Guangxi Zhongtong and its shareholders agree that all the financial and operational decisions for Guangxi Zhongtong will be made by Bokefa.

Exclusive Service Agreement

The effective term of this agreement is for one year and it can be extended an unlimited number of times if agreed by both parties. Bokefa agrees to provide exclusive technical consulting and support services to Guangxi Zhongtong and Guangxi Zhongtong agrees to pay service fees to Bokefa.

Entrustment and Power of Attorney Agreement

The shareholders of Guangxi Zhongtong agreed to entrust all the rights to exercise their voting power and any other rights as shareholders of Guangxi Zhongtong to Bokefa. The shareholders of Guangxi Zhongtong have each executed an irrevocable power of attorney to appoint Bokefa as their attorney-in-fact to vote on their behalf on all matters requiring shareholder approval. The agreement is effective until deregistration of Guangxi Zhongtong.

On August 23, 2021, Beijing Yibao Technology Co., Ltd (“Beijing Yibao”), Guangxi Zhongtong Insurance Agency Co., Ltd (“Guangxi Zhongtong”), and two shareholders of Guangxi Zhongtong entered into a capital increase agreement pursuant to which Beijing Yibao will invest approximately RMB30 million (USD 4.7 million) into Guangxi Zhongtong. On October 21, 2021, Beijing Yibao transferred the funds separately and the transaction closed. As a result of the transaction, Beijing Yibao now holds a sixty percent (60%) equity interest in Guangxi Zhongtong and is the controlling shareholder. As a condition of the closing, the previous agreements consummated on January 1, 2021 per the GZ Frame Work Loan became null and void, and the loan should be repaid by the shareholders before December 31, 20162023.


VIE agreements with Beijing Fucheng:

On December 31, 2020, as amended on August 25, 2021, Bokefa, Beijing Fucheng Lianbao Technology Co., Ltd. (“Beijing Fucheng”), and 2015, respectively.the shareholders of Beijing Fucheng entered into six agreements, described below, pursuant to which Bokefa is deemed to have a controlling financial interest and be the primary beneficiary of Beijing Fucheng. Therefore, Beijing Fucheng is deemed a VIE of Bokefa. Beijing Fucheng was incorporated on December 29, 2020 and had no assets or liabilities as of December 31, 2020.

Loan Agreement

Pursuant to this agreement, Bokefa agreed to provide loans to the registered shareholders of Beijing Fucheng. The term of the loan under this agreement shall start from the date when the loan is actually paid and shall continue until the shareholders repay all the loan in accordance with this agreement. The agreement shall terminate when the shareholders repay the loan. The loan should be used solely for Beijing Fucheng’s operating expenses, and should be exclusively repaid by transferring shares of Beijing Fucheng to Bokefa when PRC Law permits. As of December 31, 2022, the loans were not drawn.

Exclusive Option Agreement

The effective term of the agreement is unlimited and the agreement shall terminate upon the transfer of all of the equity interest of Beijing Fucheng to Bokefa in accordance with relevant laws and provisions as provided in the agreement, or upon written notice by Bokefa to the shareholders. In consideration for Bokefa’s loan arrangement, the shareholders have agreed to grant Bokefa an exclusive option to purchase their equity interest. Distribution of residual profits, if any, is restricted without the approval of Bokefa. Upon request by Bokefa, Beijing Fucheng is obligated to distribute profits to the shareholders of Beijing Fucheng, who must remit those profits to Bokefa immediately. Beijing Fucheng and its shareholders are required to act in a manner that is in the best interest of Bokefa with regards to Beijing Fucheng’s business operations.

Equity Pledge Agreement

The agreement will be terminated at the date when the other agreements have been terminated. Pursuant to the agreement, the shareholders pledged all their equity interest in Beijing Fucheng to Bokefa as security for their obligations under the agreements. Bokefa has the right to receive dividends on the pledged shares, and all shareholders are required to act in a manner that is in the best interest of Bokefa.

Business Cooperation Agreement

The agreement is effective until terminated by both parties. Beijing Fucheng and its shareholders agree that the legal person, directors, general manager and other senior officers of Beijing Fucheng should be appointed or elected by Bokefa. Beijing Fucheng and its shareholders agree that all financial and operational decisions of Beijing Fucheng will be made by Bokefa.

Exclusive Service Agreement

The effective term of this agreement is for one year and it can be extended an unlimited number of times if agreed by both parties. Bokefa agrees to provide exclusive technical consulting and support services to Beijing Fucheng and Beijing Fucheng agrees to pay service fees to Bokefa.

Entrustment and Power of Attorney Agreement

The shareholders of Beijing Fucheng agreed to entrust all the rights to exercise their voting power and any other rights as shareholders of Beijing Fucheng to Bokefa. The shareholders of Beijing Fucheng have each executed an irrevocable power of attorney to appoint Bokefa as their attorney-in-fact to vote on their behalf on all matters requiring shareholder approval. The agreement is effective until deregistration of Beijing Fucheng.


VIE agreements with All Weather:

On July 1, 2021, Bokefa, All Weather, and nominee shareholders of All Weather entered into six agreements, described below, pursuant to which Bokefa is deemed to have a controlling financial interest and be the primary beneficiary of All Weather. All Weather is deemed a VIE of Bokefa.

Loan Agreement

Pursuant to this agreement, Bokefa agreed to provide loans to the shareholders of All Weather. The term of the loan shall start from the date when the loan is actually paid until the date on which the loan is repaid in full. The agreement shall terminate when the shareholders repay the loan. The loan should be used solely by All Weather for operating expenses, and should be exclusively repaid by transferring shares of All Weather to Bokefa when PRC Law permits.

Exclusive Option Agreement

The effective term of the agreement is unlimited and the agreement shall terminate upon the transfer of all of the equity interest of All Weather to Bokefa in accordance with relevant laws and provisions in the agreement, or upon written notice by Bokefa to the shareholders. In consideration for Bokefa’s loan arrangement, the shareholders have agreed to grant Bokefa an exclusive option to purchase their equity interest. Distribution of residual profits, if any, is restricted without the approval of Bokefa. Upon request by Bokefa, All Weather is obligated to distribute profits to the shareholders of All Weather, who must remit the profits to Bokefa immediately. All Weather and its shareholders are required to act in a manner that is in the best interest of Bokefa with regard to All Weather’s business operations.

Equity Pledge Agreement

The agreement will be terminated at the date when the other agreements have been terminated. Pursuant to the agreement, the nominee shareholders pledged all their equity interest in All Weather to Bokefa as security for their obligations pursuant to the other agreements. Bokefa has the right to receive dividends on the pledged shares, and all shareholders are required to act in a manner that is in the best interest of Bokefa.

Business Cooperation Agreement

The agreement is effective until terminated by both parties. All Weather and its shareholders agree that the legal person, directors, general manager and other senior officers of All Weather should be appointed or elected by Bokefa. All Weather and its shareholders agree that all the financial and operational decisions of All Weather will be made by Bokefa.

Exclusive Service Agreement

The effective term of this agreement is for one year and it can be extended an unlimited number of times if agreed by both parties. Bokefa agrees to provide exclusive technical consulting and support services to All Weather and All Weather agrees to pay service fees to Bokefa.

Entrustment and Power of Attorney Agreement

The shareholders of All Weather agreed to entrust all their rights to exercise their voting power and any other rights as shareholders of All Weather to Bokefa. The shareholders of All Weather have each executed an irrevocable power of attorney to appoint Bokefa as their attorney-in-fact to vote on their behalf on all matters requiring shareholder approval. The agreement is effective until the deregistration of All Weather. 

VIE agreements with Tianjin Dibao:

On April 2, 2022, Shanghai Zheng Zhong Energy Technologies Co., Ltd, Tianjin Dibao, and nominee shareholder of Tianjin Dibao entered into six agreements, described below, pursuant to which Zheng Zhong Energy is deemed to have a controlling financial interest and be the primary beneficiary of Tianjin Dibao. Tianjin Dibao is deemed a VIE of Zheng Zhong Energy.

Loan Agreement

Pursuant to this agreement, Zheng Zhong Energy agreed to provide loans to the shareholder of Tianjin Dibao. The term of the loan shall start from the date when the loan is actually paid. The agreement shall terminate when the shareholder repay the loan. The loan should be used solely to purchase Tianjin Dibao’s 76% equity, and should be exclusively repaid by transferring shares of Tianjin Dibao to Zheng Zhong Energy when PRC Law permits.


Exclusive Option Agreement

The effective term of the agreement is unlimited and the agreement shall terminate upon the transfer of all of the equity interest of Tianjin Dibao to Zheng Zhong Energy in accordance with relevant laws and provisions in the agreement, or upon written notice by Zhengzhong Energy to the shareholder. In consideration for Zheng Zhong Energy’s loan arrangement, the shareholder have agreed to grant Zheng Zhong Energy an exclusive option to purchase their equity interest. Distribution of residual profits, if any, is restricted without the approval of Zheng Zhong Energy. Upon request by Zheng Zhong Energy, Tianjin Dibao is obligated to distribute profits to the shareholder of Tianjin Dibao, who must remit the profits to Zheng Zhong Energy immediately. Tianjin Dibao and its shareholder are required to act in a manner that is in the best interest of Zheng Zhong Energy with regard to Tianjin Dibao’s business operations.

Equity Pledge Agreement

The agreement will be terminated at the date when the other agreements have been terminated. Pursuant to the agreement, the nominee shareholder pledged all of their equity interest in Tianjin Dibao to Zheng Zhong Energy as security for their obligations pursuant to the other agreements. Zheng Zhong Energy has the right to receive dividends on the pledged shares, and all shareholders are required to act in a manner that is in the best interest of Zheng Zhong Energy.

Business Cooperation Agreement

The agreement is effective until terminated by both parties. Tianjin Dibao and its shareholders agree that the legal person, directors, general manager and other senior officers of Tianjin Dibao should be appointed or elected by Zhengzhong Energy. Tianjin Dibao and its shareholder agree that all the financial and operational decisions of Tianjin Dibao will be made by Zheng Zhong Energy.

Exclusive Service Agreement

The effective term of this agreement is for one year and it can be extended an unlimited number of times if agreed by both parties. Zhengzhong Energy agrees to provide exclusive technical consulting and support services to Tianjin Dibao and Tianjin Dibao agrees to pay service fees to Zheng Zhong Energy.

Entrustment and Power of Attorney Agreement

The shareholder of Tianjin Dibao agreed to entrust all their rights to exercise their voting power and any other rights as shareholder of Tianjin Dibao to Zheng Zhong Energy. The shareholder of Tianjin Dibao have each executed an irrevocable power of attorney to appoint Zheng Zhong Energy as their attorney-in-fact to vote on their behalf on all matters requiring shareholder approval. The agreement is effective until the deregistration of Tianjin Dibao.

Market Opportunity

China’s insurance brokerage market has experienced rapid growth due to increased demand for insurance products in the past few years. According to iResearch report, the total insurance premium in China is expected to grow at a CAGR of 12.9% from 2019 to 2024.  China is the second biggest insurance market in the world. 497 insurance broker companies, which sell insurance policies underwritten by insurance companies and design and develop insurance products themselves according to customer needs, and 1764 insurance agent companies, which are only licensed to only sell insurance policies underwritten by insurance, sold insurance products with an aggregate premium amount of 3.98 trillion RMB (approximately $0.62 trillion) in the year of 2020.

Although the size of China’s insurance market in terms of insurance premium was the second largest in the world according to the iResearch report, insurance penetration (defined as insurance premium over GDP) and insurance density (defined as insurance premium per capita) in China were still substantially lower than those in developed countries, indicating significant growth potentials. According to the 14th Five Year Plan formulated by the Chinese government, China’s insurance penetration and density are expected to reach 6.8% and RMB6,596 (approximately US$971), respectively, by 2025.


Driven by the significant medical protection gap and rising awareness for protection, the Chinese insurance market is expected to reach RMB7.8 trillion by 2024, representing a CAGR of 12.9% from 2019. Thanks to regulatory tailwinds, growth in household disposable income and increasing awareness for health protection, Chinese insurance market is expected to continue to maintain the strong growth momentum in the long term.

Local insurance companies in China only offer a limited range of insurance products, which cannot meet the needs of a 1.4 billion Chinese population, as compared to the product offerings by U.S. or European insurers in those countries with a smaller population.

Through its regulatory actions, the Chinese government encourages participation of foreign investors in insurance companies and related businesses. Under the PRC law, foreign investors are permitted to have up to 100% ownership in insurance companies. Furthermore, foreign joint venture companies may transact insurance business online and offline.

Products and Services

The Company started to set up its insurance business team in China in November 2020. The Company entered into VIE Agreements with one insurance brokerage company, Beijing Fucheng, and two insurance agency companies, All Weather and Tianjin Dibao , to conduct its insurance brokerage and agency businesses. As of the date of this Annual Report, the Company has 130 insurance business branches in China and a business operation team with approximately 324 employees. In addition, the Company has established collaboration relationships with leading insurance companies in China, such as The People’s Insurance Company of China Limited, Ping An Insurance, Pacific Insurance, Sunshine Insurance and Dadi Insurance. For the year ended December 31, 20162022, the Insurance Companies generated income from sales of insurance products through insurance agents, which is the traditional sales model, aka “B (business) to A (agent)” model, and 2015, Micronet’srecognized $57.3 million of revenues in this verticals and technology segment.

The Company sells insurance products, mainly consisting of automobile insurance, property and liability insurance products, life insurance products and health insurance products, as insurance brokers agencies for insurance companies in China.

Automobile Insurance Products

The Company’s primary insurance products are automobile insurance. The standard automobile insurance policies the Company sells typically have a term of one year and cover damage caused to the insured vehicle from collision and other traffic accidents, falling or flying objects, fire, explosion and natural disasters. The Company also sell standard third-party liability insurance policies, which cover bodily injury and property damage caused in an accident involving an insured vehicle to a person not in the insured vehicle.

Property and Liability Insurance Products

The Company also offers commercial property insurance and liability insurance products. The commercial property insurance policies the Company sells typically cover damages to the insured property caused by fire, explosion, thunder and lightning. Comprehensive commercial property insurance policies generally cover damage, to the insured property caused by fire, explosion and certain natural disasters.

The liability insurance products the Company sells are primarily product liability and employer’s liability insurance products. These products generally cover losses to third parties due to the misconduct or negligence of the insured party but exclude losses due to fraud or the willful misconduct of the insured party.


Life Insurance Products

The life insurance products the Company offers can be broadly classified into three largestcategories, as set forth below. Due to constant product innovation by insurance companies, some of the insurance products the Company offers combine features of one or more of the following categories:

●Individual Whole Life Insurance. The individual whole life insurance products the Company sells provide insurance for the insured’s entire life in exchange for the periodic payment of fixed premiums over a pre-determined period. The face amount of the policy or, for some policies, the face amount plus accumulated interests, is paid upon the death of the insured.

●Individual Term Life Insurance. The individual term life insurance products the Company sells provide insurance for the insured for a specified time period or until the attainment of a certain age, in return for the periodic payment of fixed premiums over a pre-determined period. Term life insurance policies generally expire without value if the insured survives the coverage period.

●Group Life Insurance. The Company sells several group life insurance products, including group health insurance. These group products generally have a policy period of one year and require a single premium payment.

Health Insurance Products

The health insurance products the Company sells generally have a policy period of one year and require a single premium payment. These products generally cover medical expenses that arise due to an illness or casualty. The products we offer primarily include hospitalization subsidy insurance, group health insurance, group travel casualty insurance and group insurance for senior citizens.

Other Innovative Insurance Products

The Company has also worked together with a number of insurance companies to develop proprietary insurance products, such as student safety insurance, migrant workers’ wage guarantee insurance, golf sports insurance and loan credit guarantee insurance.

Services

In order to enhance customer satisfaction, the Company also provides customers represented approximately 23%, 20%with insurance plan proposal and 10%claim service. Based on risk characteristics of Micronet’s revenuesthe customer, the Company conducts an in-depth analysis of the risks a customer may encounter, and 18%, 16%then uses the analysis as the basis to develop a customized risk management and 11%transfer plan for the customer.

Additionally, as competition among insurance companies in China intensifies, some insurance companies have started to outsource their claim settlement functions to insurance claims adjusting companies. The Company has been providing its customers with insurance adjustment service.

Insurance Platform

Since the beginning of 2021, the Company has started to develop and build an online platform to help insurance brokers with client management and insurance policy sales. This platform supports insurance core data storage, policy management, insurance policy issuance, insurance agent management and service management, and auto insurance after-market (repair and maintenance for members) service management. This platform can be accessed as a mobile application from smart phones and as a built-in program on WeChat. Revenues streams for the insurance platform come from commissions earned on insurance sales, as well as from finance fees, insurer marketing fees and through the monetization of the Company’s total revenues, respectively.big data technology.

Customers

Through the VIE entities and its subsidiaries, the Company sells insurance products and provides insurance proposal and claim services to both individual and institutional customers, including but not limited to automobile owners, small, medium and large companies, employers, employees, students and their parents, migrant workers, golf players and so on. By providing quality insurance products and premium services to customers, the Company strives to build a loyal customer base.


 

During 2016,

Licenses

The VIE entities and our subsidiaries have obtained necessary approvals and licenses from the relevant PRC regulatory entities to operate insurance brokerage and agency business in China. The Company is the only company in China that has National Insurance Brokerage License, the National and Regional Insurance Agency License and the Insurance Adjuster License. The National Insurance Brokerage License enables us not only to sell policies to customers across the most developed China both online and offline, but also to design and develop insurance products and policies by ourselves as broker, which products and policies are underwritten by insurance companies, to better meet customers’ needs. The Insurance Agency License allows us to process the business all over China and locally at designated provinces by connecting to numerous insurance companies and sell a variety of existing insurance products and policies. Insurance Adjuster License allows us to inspect property damage or personal injury claims and collect information from all parties involved and assess the amount of insurance claims. Lastly but not least, we are also licensed to operate insurance brokerage and agency business through internet, which enable us to promote our products and service online to establish a cost-efficient, scalable and sustainable customer acquisition model.

Currently, Beijing Fucheng owned trough VIE’s structure has valid National Insurance Brokerage License, and All Weather owned trough VIE’s structure and Guangxi Zhongtong hold valid National and Regional Insurance Agency Licenses and Insurance Adjuster License. The relevant entities have also obtained the ICP licenses to conduct insurance transactions online, which allows customer to evaluate and purchase insurance products and/or receive customer services online.

Competitive Strengths

The Company believes the following strengths contribute to its success and differentiate the Company from its competitors:

●Strong and Proven Execution Capabilities. The Insurance Business Platform have 324 employees. Of these employees, 96 were employed in marketing positions, 69 were employed in Customer Services & Risk positions and the remainder were employed in finance, research and development, management and administrative positions. Most of them have over 10 years of experience in insurance industry. These employees are located in our 115 insurance business branches in China. Our management team have a long track record of operating through large retail stores in China. We could take this advantage to explore potential insurance sales channels.

●Unique and Comprehensive Insurance Licenses. We are the only company in China that has National Insurance Brokerage License, the National and Regional Insurance Agency License and the Insurance Adjuster License. Insurance agencies are entities that have obtained an insurance agency license from the regulator and engage in the sale of insurance products for, and within the authorization of, insurance companies. Insurance brokers are entities that have obtained an insurance broker license from the regulator and generally act on behalf the insurance applicants in seeking insurance coverage from insurance companies. Some insurance brokers also engage in reinsurance brokering and act on behalf of insurance companies in their dealings with reinsurance companies. Insurance adjuster firms are entities that have been approved by the regulator to engage in insurance adjusting activities such as the assessment, survey, authentication and loss estimation. With the licenses we are able to process the business throughout most of developed China, as well as rural areas across China, develop and provide comprehensive products and services by connecting to numerous insurance companies. With the broad business scope in which the licenses allow us to operate, we are able to serve 384 million car drivers on car insurance and repairing services, 280 million students in school and colleges and their parents on safe insurance and health insurance and 500 million farmers in rural areas on health insurance and life insurance.

●Business Relationships. we have established collaboration relationships with a number of other companies, including oil and gas sector, financial services sector, large internet portals and other insurance companies in the PRC, to promote our insurance products and after-market and after-sales services offerings to their customers.

●National Network.  We have built up a nationwide service network including over 130 insurance business branches  and 30 provinces in China. Any insurance agent, no matter where he or she lives, can register at our local branch and be qualified as an insurance agent.  These branches have signed business cooperation agreements with hundreds of local insurance companies to sell their developed insurance products in the region and provide insurance after-sales services for policyholders.

●Brand Awareness. We have established ourselves as a trusted brand through our VIE entities and subsidiaries. We are able to provide standard services with the prestigious brand across China.


Business Challenges

The Company is, and expects for the foreseeable future to be, subject to all the risks and uncertainties, inherent to a development-stage business and in a developing industry in China. These risks and challenges are, among other customer accountedthings:

●we operate in an industry that is heavily regulated by relevant governmental agencies in China;
●we rely on contractual arrangements with VIE entities and our subsidiaries, including Tianjin Dibao Technology Development Co. Ltd, Beijing Fucheng and All Weather, and their respective shareholders for our operations in China, which arrangement may not be as effective in providing operational control as direct ownership;

●our management may lack expertise, human and capital resources to implement important strategic initiatives in all branches across China;

●we may require additional capital to develop and expand our operations which may not be available to us when we require;

●our marketing and growth strategy may not be successful;

●our business may be subject to significant fluctuations in operating results; and

●we may not be able to attract, retain and motivate qualified professionals.

Business Strategy

The Company’s business strategy is to:

●Upgrade the online insurance plan to attract more insurance agents users for insurance sales through the Company’s platform. The Company plans to devote significant efforts to upgrading online platform to attract individual and institutional insurance agents to register on the Company’s platform and share commissions. The Company’s platform will provide the application programming interface to insurance agents and allow them to register as the Company’s insurance agents, sell insurance policies under the Company’s licenses with the Company’s platform. It will also enable the agents to have access to a vast selection of insurance products and receive higher commission on the Company’s platform through competitive pricing. The platform will also provide registered insurance agents (individuals or stores) with one-stop services, such as online insurance business training, business development, product promotion, policy issuing, claims settlement and after-sales service.

●Increase automobile insurance product offering. The Company plans to build comprehensive online automobile insurance after-market service features on its insurance platform to (i) connect automobile insurance customers with thousands of auto repair shops and auto wash stores nationwide and (ii) provide customers auto membership services, including online gas card recharge, online shopping, insurance claim settlements, roadside assistance, car wash appointment and maintenance and promotion coupons, insurance loyalty points and other related supporting services for insurance members. Through this platform, the Company will provide competitive insurance products and build a one-stop customer service system, including mobile billing function, online payment, inspection, loss assessment, online claim settlement and car purchase loans.

●Enhance business partner network and expand distribution network. The Company is currently negotiating collaboration agreements with large organizations in postal industry and gas stations industry, lottery stores, tobacco stores, car wash and maintenance chain stores all of which have big traffic of customers. The Company aims to transform the salesperson from the retail stores into users of the Company’s insurance platform and sell the insurance products online via the platform. Through the implementation of the B (business) to A (agent) to C (customer) and both online and offline promotion service model, the Company will lay out the sales scenarios of auto insurance and non-auto insurance products to reach insurance customers offline and provide customers with insurance product sales and after-sales claim services online. The Company also plans to expand its distribution network through opening more local branches in a number of selective major cities throughout China.

●Recruit talents and build a stronger sales force. The Company, through its VIE entities and our subsidiaries, has recruited a team of accomplished insurance industry and technology specialists, including senior executives from several of China’s largest listed and unlisted insurance companies, as well as from a number of China’s leading technology companies. The Company continues to recruit talents to join its professional team and sales force.

●Build a comprehensive and loyal customer base. In light of our expanded business and prospect, the increased recognition of our brand, and the latest market development, we have aim to focus on serving 384 million car drivers on car insurance and repairing services, 280 million students in school and colleges and their parents on safe insurance and health insurance and 500 million farmers in rural area on health insurance and life insurance.


Stock Trading and Wealth Management Platform: Magpie Invest

The Company launched Magpie Invest, a global stock trading app, on September 15, 2021, through its wholly owned subsidiary, Magpie Securities Limited (“Magpie”).

Magpie Invest is a proprietary technology investment trading platform. The Magpie Invest technology allows the platform to currently connect to seven major stock exchanges with the ability to connect to other major exchanges as the business need arises.

BI Intermediate (Hong Kong) Limited obtained an approval from the HKSFC on February 22, 2021 and successfully acquired Huapei Global Securities, Ltd. (“Huapei”), a licensed corporation in Hong Kong that is allowed to carry on Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities) and Type 9 (assent management) regulated activities in Hong Kong, on February 26, 2021. Huapei subsequently changed its name to Magpie Securities Limited on May 27, 2021.

Magpie is a participant of the SEHK (Hong Kong Stock Exchange) & HKSCC (Hong Kong Securities Clearing Company) and the China Connect program, which allows for mutual market access between the Hong Kong Stock Exchange and the mainland Chinese stock exchanges. Magpie is also the member of London Stock Exchange.  

Magpie has recently expanded into Singapore through its application for a Capital Markets Services License (“CMS License”) from the Monetary Authority of Singapore (“MAS”), which was approved in full on September 20, 2022. Magpie’s Singapore operations and trading are scheduled to commence by early second quarter of 2023. The CMS License allows Magpie to offer new products, including leveraged foreign exchange and contracts for difference (“CFDs”) on stocks, index futures and commodities.

Magpie currently employs more than 10% of Micronet’s revenue.25 full-time employees and 10 contract staff and aims to expand into additional jurisdictions and geographical markets, both within Asia and other regions.

 

Enertec operatesIn response to significant changes in retail client behaviors in the defense and aerospacetrading of global equity markets, and designs, develops, manufactures and supplies various customized military computer-based systems, simulators, automatic test equipment and,electronic instruments. Enertec’s solutions and systems are designed according to major aerospace integrators’ requirements and market technological needs and are integrated by them into critical systems such as command and control, missile fire control, maintenance of military aircraft and missiles for usedriven by the Israeli Air Force, Israeli Navyrise in global interest rates and by foreign defense entities.the end of COVID-19 restrictions in early 2022, Magpie pivoted its business strategy to a “B2B” Brokage-as-a-Service model. Magpie is currently progressing this strategy with major banks and financial services companies in various jurisdictions. However, the continued uncertainty in the global markets has posed challenges to Magpie’s pursuit of this strategy and the execution of contracts with such banks and financial services companies.  

The Platform for Securities Trading

Magpie believes it offers a unique user experience built upon a scalable and secure platform. The platform is currently designed to serve the emerging affluent Chinese and Southeast Asian population and diaspora, and targets generation Z and the millennial markets. Magpie is pursuing an opportunity to facilitate a shift in the wealth management industry and build a digital gateway into broader financial services. The platform is designed to provide a user experience that integrates clear and relevant market and company data, and easy to use trade execution.

 

Approximately 82%Magpie aims to continue to enhance its proprietary technology and 79%build a comprehensive, user-oriented and cloud-based platform that is fully licensed to conduct securities brokerage business on a global basis by expanding its license portfolio. Magpie Invest serves as one of Enertec’s revenues for the years ended December 31, 2016 and 2015 respectively, werefoundations from independent business units or groups within Israeli Aerospace Industries Ltd., or IAI,which the leading Israeli defense system integrator, and approximately 4% and 5%, respectively, were from business unitsCompany can execute its growth strategy of Rafael Advanced Defense Systems Ltd., or Rafael, another Israeli government-owned major defense developer and integrator of critical weapon systems. We believe that these leading Israeli systems integrators (which consist of various and distinct business units or groups, each ofbuilding a broader financial services platform.

Magpie provides investing services through a proprietary digital platform, which is accessible through any mobile device operating on iOS and Android, and more recently on other electronic devices via its web-based platform which was launched during the third quarter of 2022. The Magpie Invest platform and applications currently offer market data, news, research, analytical tools and provides customers with a different potential customer) diversify our business, marketsdata foundation to help simplify the investing decision-making process.

Market Opportunity

According to an iResearch Report published on January 15, 2020, the market size of the online brokerage industry focusing on global Chinese investors in terms of U.S. and revenue streams. The system integrators that are our primary customersHong Kong stock trading volume experienced rapid growth over the preceding three years. This presents an attractive market their solutions throughoutopportunity for online brokerage service providers focused on the world and across the full spectrum of military applications (land, sea and air). Command and control systems represented approximately 71% and 49% of Enertec’s revenues for the years ended December 31, 2016 and 2015, respectively, and our automated test equipment represented approximately 29% and 51% of Enertec’s revenues for the years ended December 31, 2016 and 2015, respectively. Managementglobal Chinese investor market. Magpie believes that the demandtechnology, functionality and user experience of the Magpie Invest platform also creates the opportunity for our products, systemsit to target a larger investor market (not only the Chinese investor market) in other major territories throughout the world.

Revenues are currently generated primarily from stock trading commission income. Magpie also has the opportunity to generate income from other revenue streams such as interest from financing and solutionsforeign exchange. Magpie plans to add derivatives, leveraged foreign exchange, and CFDs on global indexes and commodities to the platform in 2023, following the approval of its CMS License from MAS in September 2022.


With the popularization of mobile technology and growing acceptance of online trading, the Company believes that the online securities market is not affected significantlysubject to the following trends:

●traditional brokers are shifting online while purely offline brokers are increasingly at a disadvantage or, in some cases, exiting the market altogether;

●Internet giants continue to invest in online brokerage services, demonstrating the industry’s recognition of online brokerage services as an important component of a financial services business and potentially a gateway to broader opportunities;

●technological barriers to entry remain high particularly relating to building a secure infrastructure that can transcend geographies and asset classes;

●operational barriers to entry remain high particularly relating to regulatory and capital requirements;

●user experience remains a key competitive strength as digitally born investors become a larger component of the addressable market; and

●revenue models are evolving as competition intensifies, with ancillary and other value-added services underlying platform differentiation.

Challenges

Magpie’s ability to execute its business plan is subject to risks and uncertainties, including those relating to Magpie’s ability to:

●manage the continued rollout of Magpie’s trading platforms and Magpie’s future growth;

●navigate a complex and evolving regulatory environment;

●offer personalized and competitive services;

●increase the utilization of Magpie’s services by users and clients;

●

maintain and enhance the Company’s relationships with its business partners;;

●enhance Magpie’s technology infrastructure to support the growth of Magpie’s business and maintain the security of Magpie’s systems and the confidentiality of the information provided and utilized across Magpie’s systems;

●improve Magpie’s operational efficiency;

●attract, retain and motivate talented employees to support Magpie’s business growth;

●navigate economic and market conditions and fluctuation;

●

defend ourselves against legal and regulatory actions which could subject us to liability or damage our reputation, including, without limitation, actions involving intellectual property or privacy claims;

●

obtain any and all licenses necessary for the operation and growth of Magpie’s business, and to maintain the validity of such licenses as applicable to the operation and growth of Magpie’s business.

Strategy

Magpie intends to provide a high-quality and comprehensive investing experience by fluctuations in any particular geographic market outside the State of Israel because our products, systemsfocusing on delivering convenience and solutions can be tailoredstability to fit the needs of these different disciplines and are not limited to any specific geographic region.

Our overall strategy focuses on continued internal growth through diligent efforts in our traditional growing markets with new technologies and innovative systems and products,its own customers as well as to the developmentcustomers of new potential segmentsits white-label partners.

Magpie has designed every step of Magpie’s platform’s experience, from sourcing and markets. To enhance our growth, we also look for appropriate acquisitionsresearching ideas to complementtrade execution, with a goal to create a simple and expand our offerings, as well as support our goalsconvenient experience. Magpie identifies certain hurdles that investors, particularly retail investors, face along their investing journey, and increase our competitive strengths. Currently, we concentrateMagpie strives to mitigate inconvenience and information asymmetry through Magpie’s platform with the majorityuse of our resources, including our marketingdata and sales efforts, in the United States and, Israeli and European markets.technology.

On March __ our board of directors approved the Spinoff of our aerospace and defense division into a standalone company. If this spinoff is complete our shareholders would receive common stock of the spinoff entity on a pro rata basis.

Subsidiaries

We have two primary operating subsidiaries. We are the sole owner of Enertec. We also have a controlling interest in Micronet. Both Enertec and Micronet are held via our wholly-owned holding company Enertec Electronics Ltd, or Enertec Electronics, which operate the following businesses:

●Enertec, which operates in the defense and aerospace markets and designs, develops, manufactures and supplies various customized military computer-based systems, simulators, automatic test equipment and electronic instruments. In March 2011, Enertec became a wholly-owned subsidiary of Enertec Management Ltd., a private Israeli company, wholly owned by Enertec Electronics.

●Micronet, an Israel-based manufacturer and developer of rugged computers, tablets and computer based systems in which we hold a controlling interest. We currently own 50.07% of Micronet’s outstanding common shares and 49.99% on a fully diluted basis.

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EnertecMagpie recognizes that investing is a meaningful component of Magpie’s customers’ broader wealth management. With this in mind, the Magpie Invest platform features the following:

 

Enertec is one of the largest Israeli private manufacturers of specialized electronic systems for the military market and was founded in the 1980. Enertec operates in the defense and aerospace markets. It designs, develops and manufactures computer based instruments and aerospace electronic solutions designed to operate in severe environments and battlefield conditions, primarily for military use in air, space land and sea. Enertec’s products are grouped into three material product lines: computer-based command and control systems, automatic test equipment, and power supplies. The command and control systems are integrated in mission critical air defense missiles and other weapon systems and are designed to operate in severe environments. The automatic test equipment line includes a variety of test systems and simulators that test and assure combat readiness of various aircraft and missiles. The power supplies are uniquely designed to support our systems and are also supporting our customers as stand-alone solutions. Enertec’s solutions and systems are tailored to customers’ specifications and are, or are integrated into, critical weapon systems carries out large-scale, complex projects from design through customer support taking full responsibility for all stages of development, production and integration.

Enertec has successfully supplied electronic systems for a diverse range of military projects in Israel and abroad.

Areas in which Enertec develops and manufactures electronic systems on a turnkey basis:

●Power suppliesan automated multi-level protection mechanism to ensure the services and converters for combat aircraft, missiles,functions delivers to users and mobile ground units
●Test and simulation systems for a wide array of weapon systems 
●Ruggedized command & control mobile equipment for various weapon systems
●Mobile command & control centers for and missile defense systems
●Power supplies and switching systems 
●Drivers for laser systems.clients are secure;

 

Enertec isalso active as a subcontractor in the areas of electronic, mechanical, and software development, and produces electronic systems.

Applications of Enertec products and capabilities span a broad range:

●Missiles of various types 
●Unmanned aerial vehicles
●Electronic systems for tanks, combat aircraft, missile boatsstrict security policies and submarines
●Command & control systems installed in mobile centers
●Armaments testers for combat aircraft Systems installed on satellites.measures, including encryption technology and a two-factor authentication function, to protect proprietary data such as customers’ personal information and trading data;

Enertec holds high security clearance in Israel for the most sensitive defense programs. Our solutions and systems are marketed mainly by the leading Israeli defense industries (system integrators) and are used by the Israeli defense forces specifically by the Israeli Air Force and Israeli Navy as well as by other foreign defense entities served by our customers. Enertec is registered as a Single Site quality management system in conformance with ISO 9001: 2008 and AS9100-C, the international standards for quality assurance and quality design. These standards are important to customers that order custom-made products and are made up of a combination of quality system requirements.

Enertec generates revenue from long term projects. Thereafter, we anticipate moving to the production phase and generating revenue through direct sales from the mass production of its developed product.

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New products

In addition to our traditional systems and products, we have been developing systems, solutions and products in the following areas: (1) operationally resilient computers integrated into various weapon systems, (2) missile launch platforms, (3) command and control systems, (4) missiles communications systems, (5) generic testers for military equipment, (6) power distributer units for robotic application (air, sea and land). ) (7) mobile command & control centers, a rugged shelter which operates as a full system which is deployed in rugged and difficult terrains for the control and monitoring of advanced weapon systems. These systems and products utilize advanced know-how developed by Enertec’s trained and highly-skilled technical personnel. During 2016, we focused our development resources and solution capabilities in the missile defense area and accordingly, received orders in this area of business. Management believes that Enertec’s know-how, capabilities and expertise will enable us to further increase our product offerings to existing and other customers’ strategic projects in space land, air and sea.

Market conditions

The defense market, in which we operate through Enertec, includes the design and manufacturing of electronic systems developed to enhance large-scale military land, airborne and seaborne tactical platforms. These systems include operational resilient military computer based systems, simulators, automatic test equipment and electronic instruments that are used or integrated in critical weapon systems such as command and control systems, missile fire control systems, support military aircraft systems and other defense systems and equipment such as night visions systems, unmanned aerial vehicle, or UAV, systems, laser products, airborne photography measures, processing and display of data systems and communications systems. In the Israeli defense market, Israeli providers supply a significant portion of their products to the Israeli defense forces specifically in view of the continuing defense needs of the State of Israel. However, the Israeli defense industry is also a well-respected exporter of its products to armies and defense forces worldwide and such international markets provide for stable demand for military and defense products. 

We expect a continuing demand in the missile defense niche based on the increasing and growing use by defense forces around the world in various missiles and other electronic systems in different sectors such as self-defense missile systems, guided unmanned weapon systems, attack (air, sea and land) missiles and other missile systems. In view of the continuing defense trends to rely on missiles and missile defense systems as a significant factor in the defense strategy of armed forces worldwide, the global missile and missile defense system market is expected to continue to grow, according to the Global Missiles and Missile Defense Systems Market 2015-2025 report, published by Strategic Defense Intelligence on February 5, 2016. Cumulatively, the markets for missiles and missile defense systems are likely to account for the highest proportion of spending in the global missile and missile defense systems market.

We believe that we are currently well positioned with our proprietary know-how, capabilities and expertise in missile systems technologies to meet the expected demand, and expect this segment of the market to continue to be a major contributor to our business growth in the coming years.

In view of the recent $38 billion military assistance budget approved by the U.S. Congress, over the next decade Israel will receive annual amounts of $3.3 billion in foreign military financing and $500 million in missile defense funding each year for the duration of the budget program, which is the largest aid package in U.S. history. We believe that we will benefit from increasing orders and larger scale projects as a result of the military assistance package, as we are well positioned as a strategic and trusted partner for Israeli prime defense subcontractors.  

Marketing strategies

Our sales and marketing efforts are focused on developing new business opportunities as well as generating follow-on sales from our existing customers. Our sales efforts in view of our products,  solutions and services are generated primarily through our internal sales team, although we also retain third-party global selling agents from time to time. Various members of our senior management also serve as effective sales representatives who contribute to the generation of military and corporate business due to their long-standing customer relationships with leading industry integrators and knowledge of our customers’ mission-critical technologies, requirements and needed solutions. We continue to explore various Israeli and international business partnerships to increase our sales and market penetration. We actively participate in trade shows involving technology and electronics defense operations.  Additionally, our business development efforts include our website, preparation and distribution of marketing materials, advertising directed toward the defense and homeland security market and product demonstrations.

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Our strategy is to anticipate the needs of our clients, the relevant demand and needs in our market niches, to make investments in research and development (including developing know-how, capable manpower) and initiate the development of those products and solutions that we believe will meet the market and customers’ needs best. By doing so, we shorten our time to market, improve our market position from a technology perspective, and gain an edge on our competition. Furthermore, we have been able to identify those current and potential clients that we believe are likely to place large orders, and we focus our attention on developing our relationship with them. When successful, we are in an excellent position to offer both basic and advanced, sophisticated products enabling us to expand our relationship with these clients and resulting in additional revenue streams. In these cases, deepening our relationship with our clients creates the opportunity to incorporate our solutions into our customers’ core components and critical systems.

By continuously diversifying into new and more complex products and fully scaled systems, we have been able to set Enertec apart from its competition. We also continue to increase our suite of custom products based on our proprietary designs and technologies. These products are core components of several long-term military programs spearheaded by our customers, which historically have expected purchase lifecycles over periods of up to 10 years. In addition, we have been recognized as a certified supplier for the U.S. Department of Defense and for the North Atlantic Treaty Organization alliance countries. We are currently in the midst of our marketing and sales efforts to promote our product offerings with major U.S. defense organizations.

Since we expect a continuing demand for our products and solutions in the missile defense niche based on the increasing threats and demand for proper solutions in this market segment as described above, we are continuing to concentrate research, development and marketing efforts in this market segment. We believe we are well positioned to transform such knowledge into revenues. We expect this segment to continue to be an important, stable and material contributing activity in our overall business in the coming years.

Enertec’s strategy is driven and focused on continued internal growth through diligent efforts in its traditional growing markets with new technologies and innovative systems and products as well as the development of new potential segments and markets. Concurrent with its efforts to grow organically and in line with its strategy, it may seek acquisitions that will complement and expand Enertec’s product offerings and markets and increase its competitiveness. To help achieve its internal growth, Enertec has expanded its production capacity and facilities. The current target markets, in which Enertec concentrate most of its resources, include the Israeli domestic defense market which exports its systems worldwide.

Customers

Enertec’s customers are primarily leading Israeli defense system integrators. The system integrators’ customers are the Israeli Ministry of Defense and other ministries of defense worldwide. The balance of our sales is made directly to the Israeli defense and armed forces (mainly the IDF) that place direct orders.

As of December 31, 2016, approximately 86% of Enertec's annual revenues were from independent business units or groups within Rafael and the IAI, the two leading Israeli defense system integrators, as compared to 84% at December 31, 2015. These leading Israeli system integrators (which consist of various and distinct business units or groups, each of which is a different potential customer) create diversity to our business, markets and revenue streams.

The system integrators that are our primary customers market their solutions throughout the world and across the full spectrum of military applications (land, sea and air). Management believes that the demand for our products, systems and solutions is not affected significantly by fluctuations in any particular geographic market outside the State of Israel because our products, systems and solutions can be tailored to fit the needs of these different disciplines and are not limited to any specific geographic region.

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Backlog

As of December 31, 2016, Enertec had a backlog of orders for our systems, products and services in the amount of approximately $7.9 million (including $1.5 million in framework orders, which are orders that can be exercised from time to time but are an obligation of ours for the entire amount). As of December 31, 2015, Enertec had a backlog of orders for our systems, products and services in the amount of approximately $7.3 million (including $1.6 million in framework orders).

Competition

The defense market in which we operate through Enertec is fractured, intensely competitive and our main competition comes from customers'  internal development and manufacturing divisions and a number of relatively small private Israeli companies that specialize in electronic systems. This intensely competitive market is characterized by rapidly changing technologies, evolving industry standards, frequent new product introductions and changes in customer requirements. In order to maintain our competitive strength, we must continue to develop and introduce on a timely and cost-effective basis, new products and product features which are in line with the technological developments and emerging industry standards. 

Suppliers

Our suppliers are diversified, and we are not dependent upon a limited number of suppliers for essential raw materials, components, services or other items. In order for us to maintain the standards required by our customers, we require that our suppliers be well-established, with facilities and manufacturing capabilities that comply with our relevant standards. Although we are not dependent on any one supplier, disruptions in normal business arrangements due to the loss of one or a few suppliers could adversely affect us. Disruptions also may be experienced if our existing suppliers are no longer able to meet our requirements or if there is an industry shortage of electronic or mechanical components. Not only could these disruptions limit our production capacity, but also, if there is a shortage of components, such disruption could result in higher costs. The raw materials we use are either electronic components purchased from suppliers, or mechanical components primarily manufactured by local subcontractors.

Employees

As of December 31, 2016, we had approximately 84 full-time employees at Enertec and 5 full-time employees at Enertec Electronics. Of these employees, 63 are employed in engineering and manufacturing positions, and the remainder are employed in sales, management and administrative positions. Our employees are not represented by any collective bargaining agreement, and we have never experienced a work stoppage. We believe we have good relations with our employees.

Israeli labor laws and regulations apply to all employees based in Israel. The laws principally cover matters such as paid vacation, paid sick days, length of the workday, payment for overtime and severance payments upon the retirement or death of an employee or termination of employment under specified circumstances. The severance payments may be funded, in whole or in part, through a managers’ insurance fund or a pension fund. The payments to the managers’ insurance fund or pension fund toward severance amount to 8.3% of wages. Furthermore, Israeli employees and employers are required to pay predetermined sums to the National Insurance Institute of Israel. Since January 1, 1995, these amounts also include payments for health insurance.

Research and development expenditures

Research and development costs totaled approximately $518,000 and $559,000 for the years ended December 31, 2016 and 2015, respectively, which equates to approximately 5% and 6% of Enertec’s revenues during these years, respectively. These expenditures have adequately satisfied our research and development requirements. We are using our engineering resources to research and design new technologies, products and solutions that we expect to implement into the new projects and large military programs of our core customers.

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Intellectual property

Although we are not dependent on patents or trademark protection with regard to Enertec’s business and do not expect to be at any time in the future, proprietary rights and unique know-how are important to Enertec’s business because its ability to remain competitive in the market is dependent to a significant degree on its proprietary solutions and the technologies on which they are based. Enertec develops systems, products and solutions for its clients on a “work for hire” basis. Although, Enertec does not claim any rights in the products or services that it provides, its proprietary modules and subsystems play an integral and significant part in the development of the solutions, systems, products and services that it ultimately delivers. To protect its proprietary rights in these modules and subsystems, Enertec primarily relies on a combination of copyright and trade secret laws, internal knowledge and know-how, technological innovations and agreements with third parties, such as license agreements. In addition, Enertec employs internal controls such as the use of confidentiality and non-disclosure agreements. Enertec believes its proprietary technology incorporates processes, know-how, methods, algorithms, hardware and software that are the result of more than ten years of experience resulting in in-house expertise and thus are not easily copied. Further, most of the production process is performed in-house with the exception of certain components that are manufactured by subcontractors. This limited outsourcing process allows Enertec to maintain the majority of its proprietary information and know-how within the Company and lowers its exposure to the risk of its technology solutions being copied or used by any third parties.

Enertec’s management, together with its research and development team, closely and continuously monitors the technological developments in the market. Enertec considers and evaluates on an ad hoc basis whether technology and proprietary assets should be acquired through independent in-house development or through the purchase of patent or other technology licenses.

Regulation

Enertec’s electronic products must comply with the Underwriters Laboratories, or UL standards of the United States and the Conformité Européenne, or CE, standards of Europe to be eligible for sale in the respective countries subject to these standards. Each system must be tested, qualified and labeled under the relevant standards. This is a complicated and expensive process and once completed, the approved product may not be altered for sale.

Micronet

Micronet currently operates via its Israeli and U.S. facilities, the first located in Azur, Israel, near Tel Aviv, and the latter located in Salt Lake City, Utah, from which Micronet Inc., operates. Micronet operates in the MRM market as a global developer, manufacturer and provider of mobile computing platforms, designed for integration into fleet management and mobile workforce management solutions. Micronet designs, develops, manufactures and sells rugged mobile computing devices (tablets) that provide fleet operators and field workforces with computing solutions in challenging work environments. Micronet’s connected tablets collect data from the vehicle's environment, upload the data to the costumers cloud and are designed to increase workforce productivity, enhance corporate efficiency and customer service by offering computing power and communication capabilities. The Micronet products provide fleet operators among other things, with visibility, through in-cab audio and video, into vehicle location,  fuel usage, speed and mileage and allow the installation of software applications and communication integration enabling the users to manage the drivers in various aspects such as: driver identification, hours working report, customer/organization working procedures and protocols, rout management, electronic logging and navigation based on tasks and time schedule. End users may also receive real time messages for various services such as pickup and delivery, repair and maintenance, status reports, alerts, notices relating to start and ending of work, digital forms, issuing and printing of invoices and payments.

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Micronet conducts its sales and support activities mainly through its U.S.-based facilities. Micronet’s customers are leading international MRM solution and service providers. Micronet maintains an in-house research and development staff and operates an ISO 9001-2008 certified manufacturing facility. During the past years, with the exception of certain components purchased from subcontractors, Micronet has been manufacturing its products and solutions using its own facilities, capabilities and resources, which enable it to control and manage the manufacturing process. Micronet has begun utilizing overseas manufacturers for its new product offers in combination with its internal manufacturing resources. In addition, and dependent on volume and cost considerations, the company is evaluating outsourcing its Israeli manufacturing activity to a third party trusted an professional manufacturer. Micronet combines more than 30 years of experience in the industry with strong technical capabilities to provide a broad range of products and solutions that have met the rigorous standards of our customers.

Micronet’s ruggedized mobile computing devices are designed and manufactured to fit the special requirements of the MRM market, enabling customers to operate in challenging work environments, such as extreme temperatures, repeated vibrations or dirty and wet or dusty conditions. Micronet’s products, in conjunction with available third-party mobile applications solutions, provide fleet operators with real-time visibility into vehicle location, fuel usage, speed and mileage, as well as other insights into their mobile workface, reducing operating and capital costs while increasing revenue. Micronet’s products are used in and/or targeted to a wide range of MRM industry sectors, including:

●haulage and distribution, which includes short- and long- haul trucking and distribution servicing of urban retail and wholesale needs, such as delivery of packages, parts and similar items;

●public transport, which refers mainly to buses, para-transit, taxis and limousine services;

●construction, which refers to vehicle fleets that are involved in the construction industry such as cement trucks and heavy equipment;

●service industries, which include insurance companies, rental car companies and other companies operating large mobile service force of technicians, installers and similar personnel;

●municipalities, which include waste management and field workers such as public works; and

●public safety services,cloud technology which includes fire departments, ambulances, policeallows Magpie to process large amounts of data in-house, which should reduce the risks involved in data storage and forestry.transmission;

 

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backed up data across different servers at different locations; and

Micronet’s products are fully programmable and provide

●electronic processing and execution of all orders and transactions, which is designed to minimize the risks associated with human error while maintaining the stability of the platform.

Magpie provides customers with the operational flexibility to customize such products for their ongoing needs via a comprehensive development tool kit package that enables themset of services throughout their investing experience. Core services include trade execution and margin financing. The trade execution process is entirely online and automated. Orders are delivered directly to develop independently and support their own industry-specific applications and solutions.

Micronet’s strategy is to continue to leverage its market position in the U.S. and global markets, to become a market leader for MRM products and services.

Recent developments

Micronet believes that awareness and demand for MRM solutions is significantly increasing as customers seek to optimize their mobile asset utilization of commercial vehicle fleets and enhance workforce productivity and customer satisfaction.

During 2015, Micronet established a standard hardware platform which enables Micronet to serve as a better fit for various capabilities and continued to assimilate new technologies and additional features and improved its Android family of products. Our MRM products allow technological flexibility to our customers integrating their applications, and as a result increases the customer’s ability to respond to the rapidly growing safety and liability requirements in the field. The Android tablet products are installed in large commercial fleets providing a comprehensive fleet management and MRM solution. With the Android family products on board, commercial fleet operators can go beyond standard ‘track and trace’ applications, to full mobile workforce management solutions, supporting driver electronic logs, in-cab navigation, in-cab scanning and printing, in-cab video driver training, two-way messaging and dispatch, form-based status reporting, and more.

respective exchanges.

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We believe that these new products will further improve the performance and respond to additional specific MRM requirements, allowing the customers to better achieve the desired results and performance.

Micronet’s key initiatives for future revenue growth include the following:

●Expanding sales activities in the North American,  European, and Latin American markets which  will include establishing strong relationships with new customers and partners.

●Addressing the local fleet vertical of the MRM market with tablets that are specifically designed to support sales to local fleets through multiple value added resellers by offering advanced features at competitive prices. To our knowledge, the local fleet market is considered to be among the leading largest and fastest growing segments of the MRM market.

●Supporting the two operating systems, Windows and Android, to satisfy a wider customer base, enabling independent application programming and integration with various mission critical automotive system and enterprise-level software solutions.

●Upgrading and enhancing current products and engaging in new product development based on input from clients and partners.

●Partnering with major truck manufacturers to develop a built-in, telematics platform.

Developments in the communication market in recent years have enabled Micronet to integrate its products into new standard technologies, which have reduced communication costs and extended availability, thereby increasing the demand for Micronet’s products and solutions. Micronet has made significant investments in its facilities, infrastructures and manufacturing capabilities and has made product enhancements and strengthened functionality.

On February 23, 2017, Micronet filed an immediate report with the TASE announcing that it had closed on a public offering of its ordinary shares and sold an aggregate of 6,100,000 shares of its ordinary shares for aggregate gross proceeds of 9,844,020 million NIS. As a result of the public offering,operational efficiencies afforded by Magpie’s technology, Magpie can offer very competitive brokerage commission rates for online trading as compared to many of the Company’s ownership interestmore traditional competitors. Magpie’s revenues from securities brokerage services includes brokerage commissions and platform service fees from customers, which are recognized on a trade-date basis when the relevant transactions are executed.

Margin Financing

Magpie offers margin financing to customers who trade securities listed on the Hong Kong Stock Exchange, the major stock exchanges in Micronet was diluted from 62.9%the U.S., the United Kingdom and Europe in a manner compliant with the guidelines and requirements of the HKSFC . This feature essentially allows customers to 49.31%. Inborrow against their own stock and cash holdings in order to maintain a controlling interest of Micronet,buy additional securities on February 27, 2017,margin. All financing extended to its customers is secured by shares which has sufficient liquidity and low volatility as assessed by Magpie. The shares are automatically pledged in cross-market account assets so that the Company purchased an additional 140,000 shares of Micronetvalue in a separate transactioncustomers’ multiple market trading account, which may include cash in different currencies and acceptable securities listed on the aforementioned markets, will be aggregated when calculating the value of the customers’ collateral. Magpie believes this will provide efficiencies as it will eliminate the costs and procedures involved in cross-market currency translation or exchange.

Magpie’s customers are eligible for margin financing services when they hold securities that are acceptable as pledges to us in their accounts. Magpie maintains a list of acceptable marginable securities on Magpie’s website (www.magpiesecurities.com). The credit line for each eligible customer is determined based on the securities across all of their trading accounts. The margin financing services for eligible margin financing customers are activated automatically when the funds in their accounts are not sufficient to purchase the desired securities and there is still sufficient balance in their credit lines.

Magpie has a list of securities acceptable as collateral to us and their respective margin ratios that is regularly updated and shared with customers. Magpie’s risk management team’s role is to determine the margin ratio for each of the acceptable securities based on the trading frequency, historical price fluctuations and general market volatility. Magpie will also reference the financing terms of major financial institutions in establishing margin ratios and intend for margin requirements to be equal or lower than the financial institutions. Magpie’s margin ratios are monitored in real-time and the risk management team review and adjust the margin ratios for each acceptable security on a shareholderquarterly basis and more frequently in the case of Micronet. In addition, on February 28, 2017, Mr. David Lucatz,a significant and rapid price decline.


Impact of COVID-19 and Our Resources and Opportunities

The ongoing COVID-19 pandemic disrupted business operations of many companies in Hong Kong, China and elsewhere. We have taken a series of measures in response to the outbreak to protect our Presidentstaff, including, among others, combined office and Chief Executive Officer, executed an irrevocable proxy assigning his voting power over 45,000 shares of Micronetremote working arrangements for our benefit. As a result,employees and travel restrictions or suspension. Our operations, including our voting interest of Micronet was increasedservices to 50.07%our clients and internal control over financial reporting, have not been materially affected by these measures as we timely implemented our business continuity plan without any meaningful resource constraints.

Further, in view of the issuedincreased market volatility witnessed in the global capital markets and outstanding sharesincreased COVID-19 restrictions in Hong Kong until the recent policy relaxation, although people are spending more time at home, it has not led to an increased in new account sign-ups, or increasing trading velocity and higher net asset inflow.

This has increased competition and raised the cost of Micronet.

Market opportunity

We believe that Micronet is well positioned to pursue a substantial market opportunity. The MRM market, inacquisition of customers and also lengthened the cost recovery period which we operate through Micronet,believe is growingnot currently economical.

PRC Regulations Relating to Insurance Agencies, Insurance Brokers and Other Intermediaries

The insurance industry is expected to continue its growthheavily regulated in the coming years. Our management analysis, supported by market research, estimatedPRC. The applicable laws and regulations governing insurance activities undertaken within the territories of the PRC consist principally of the PRC Insurance Law and rules and regulations promulgated under that on a global basis, subscribers to MRM services will grow to approximately 37 millionlaw. China Banking and Insurance Regulatory Commission, or the CBIRC, is the authority authorized by the end of 2017. Further, as indicated in market research reports,PRC State Council to regulate and supervise the insurance industry in the United States,PRC.

The PRC Insurance Law, which historically has been Micronet’s largestprovided the initial framework for regulating the PRC insurance industry, was enacted in 1995, and significantly amended on January 1, 2003, October 1, 2009, August 31, 2014 and April 24, 2015. Among other things, the major provisions of the PRC Insurance Law include: (1) licensing of insurance companies and insurance intermediaries, such as agents and brokers; (2) separation of property and casualty business and life insurance business; (3) regulation of market there are currently approximately 10 million units in service with MRM systems,conduct by participants; (4) substantive regulation of insurance products; (5) regulation of the financial condition and this number is projectedperformance of insurance companies; and (6) supervisory and enforcement powers of the CBIRC

Regulations of Insurance Agencies

According to grow to approximately 12  millionthe Provisions on the Regulation of Insurance Agents, or the PRIA, which was promulgated by the endChina Banking and Insurance Regulatory Commission (CBIRC) on November 12, 2020 and was effective on January 1, 2021, the establishment of 2017. In 2016,an insurance agency is subject to minimum registered capital requirement and other requirements and to the global penetration rate of MRM systems was approximately 13% and the global penetration rate is forecasted to grow to approximately 15% by the end of 2017. In the United States, market penetration is projected to grow from 27% in 2016 to almost 32% by the end of 2017. The U.S. Department of Transportation's Federal Motor Carrier Safety Administration, or the FMCSA, mandate requires interstate commercial truck and bus companies to use Electronic Logging Devices (ELDs) in their vehicles to record their compliance with the safety rules that govern the number of hours a driver can work. full enforcementapproval of the regulations will commence in 2017. With full implementationCBIRC. The term “insurance agency” refers to an institution or individual, including professional insurance agency, concurrent-business insurance agency and individual insurance agent, who, under the entrustment by an insurance company, collects corresponding commission therefrom, and, within the scope of authorization thereby, handles insurance business on behalf of the rules, we estimateinsurance company. A professional insurance agency company may take any of the demand for our products will increase accordingly.following forms: (i) a limited liability company; or (ii) a joint stock limited company. The minimum registered capital of a professional insurance agency company whose business area is not limited to the province, autonomous region, municipality directly under the central government or city specifically designated in the state plan where its place of registration is located shall be RMB50 million. The minimum registered capital of a professional insurance agency company whose business area is the province, autonomous region, municipality directly under the central government or city specifically designated in the state plan where its place of registration is located shall be RMB20 million. The registered capital of a professional insurance agency company must be paid-in monetary capital. A professional insurance agency may engage in all or part of the following businesses:

 

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By 2019, truck drivers and carriers subject to the ELD mandate rules are required to use certified, registered ELDs that comply with the requirements of the ELD regulations. This market opportunity is driven, among other things, by new and further comprehensive legislation and regulatory requirements imposed on fleet management operators by the FMCSA, which include the need to comply with regulatory Hours of Service, or HOS, driver activity reporting requirements.

On December 10, 2015, the FMCSA announced the adoption of the final rules and implementation schedule of its Electronic Logging Device mandate, or ELD mandate. The ELD mandate enables professional truck drivers and commercial motor carriers to track HOS compliance easily and efficiently. By 2019, truck drivers and carriers subject to the ELD Mandate rules are required to use certified, registered ELDs that comply with the requirements of the ELD mandate.

ELD mandate is intended to help create a safer work environment for drivers, and make it easier, faster to accurately track, manage, and share records of duty status, or RODS, data. For carriers using automatic onboard recording devices, or AOBRDs, before the rule compliance date December 18, 2017, the rule will replace AOBRDs with ELDs over a four-year implementation period. An ELD, among other things, synchronizes with a vehicle engine to automatically record driving time, for easier, more accurate HOS recording.

Products and Services

Micronet currently offers various mobile and fix mounted computing tablets to the market, running on both Android and Microsoft operating systems, Micronet currently generates revenues primarily through the sale of its hardware products to service providers who sell those to end users.

During 2016, Micronet launched a new product to the market, the Treq5, which is a screen-less Android based On Board Computer, or OBC, which enables the company to compete in the black box market with, it believes, a much stronger product platform than currently exists in the market.

Also, during 2016, Micronet commenced an integration process with a certain telematics service provider, or TSP, according to which Micronet intends to provide third party telematics services such as HOS and commence evaluation of integrations with other TSPs, which will allow Micronet to provide its consumers with services such as driver recognition, driver fatigue, driver behavior, preventive maintenance, fuel efficiency and an advance driver assistance system. During 2017, Micronet plans to introduce a fully mobile ruggedized 5-inch tablet with a similar platform to the Treq5, which will enable the driver to use the tablet inside and outside of the cabin, while maintaining full connectivity.

Strategy

Micronet’s strategy focuses on three major vertical markets: (1) traditional long haul, (2) local fleets and (3) heavy equipment. In each vertical market, we implement the delivery of a comprehensive product offering that satisfies the particular needs of that market, and target potentially larger scale transactions that we expect could result in higher revenue as well as increased gross margin and overall profitability. Micronet continuously analyzes the needs of the markets in which it operates in order to best serve its customers’ needs. Micronet’s strategy is driven by, and focused on, both continued internal growth of its business through gaining a larger market share and the development of new potential markets, new technologies and innovative systems and products as well as through acquisitions.

Key elements of Micronet’s strategy include:

●Continuing to invest efforts in its technology and product development, through collaborations with its partners, customers and potential customers;

●Focusing on offering innovative reliable solutions at a competitive price which will target the  replacementsales of in house solutions of the service providers;

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●Expanding the sales channels through telecom operators or carriers;

●Penetrating and developing the truck OEM market;

●Partnering with and/or acquiring complementary technology to broaden and deepen its offerings and customer base; andinsurance products as an agency;
   
 ●

Integrating with third party TSPs in order to provide comprehensive solutions, which include hardwarecollection of insurance premiums as an agency;

●loss investigation and advanced telematicsclaims settlement of insurance-related services

as an agency; and
●other relevant businesses as prescribed by the insurance regulator under the State Council.

 

Micronet believes that one


The name of a professional insurance agency company must contain the words “insurance agency”. A professional insurance agency falling under any of the following circumstances shall, within five days from the date on which such circumstance arise, report the same via the regulatory information system prescribed by the insurance regulator under the State Council, and make public disclosure thereof as required: (i) change of name, domicile or business premises; (ii) change of any shareholder, registered capital or form of organization; (iii) change of the name of any shareholder or the amount of capital contribution; (iv) changing the company’s articles of association; (v) making equity investment, establishing any overseas insurance institution or non-business institution; (vi) undergoing division, merger or dissolution, or any of its core competitive strengthsbranches terminating insurance agency business activities; (vii) change of the main principal of any branch other than a provincial-level branch office; (viii) being subjected to administrative punishment or a criminal penalty, or under investigation for being suspected of committing any illegal or criminal offense; or (ix) any other matter to be reported as prescribed by the insurance regulator under the State Council. The senior managers of an insurance agency or its branches must meet specific qualification requirements and each senior manager of a professional insurance agency shall obtain the post-holding qualification approved by the competent insurance regulator prior to holding the post.

Under the PRIA, a professional insurance agency or a concurrent-business insurance agency collecting insurance premiums by proxy shall open an independent account for the collection of insurance premiums by proxy for settlement. A professional insurance agency or a concurrent-business insurance agency shall open an independent account for the collection of commission. They may not engage in the following activities: engaging in insurance agency business that may exceed the business scope and business area of the relevant principal insurance company; modifying any publicity material provided by the relevant principal insurance company without authorization; damaging the commercial goodwill of any competitor by means of fabricating or disseminating misrepresented facts, etc., or disrupting the order of the insurance market through false advertising, false publicity or other acts of unfair competition; having any insurance agency business dealing with an institution or individual illegally engaging in insurance business or insurance intermediary business; deducting any insurance commission directly from insurance premiums collected by proxy.

Regulations of Insurance Brokerages

The principal regulation governing insurance brokerages is the breadthProvisions on the Supervision and Administration of Insurance Brokers, or the “POSAIB”, promulgated by the China Insurance Regulatory Commission, or the CIRC (the predecessor of the CBIRC) on February 1, 2018 and effective on May 1, 2018. The term of “insurance broker” refers to an entity which, representing the interests of insurance applicants, acts as an intermediary between insurance applicants and insurance companies for entering into insurance contracts, and collects commissions for the provision of such brokering services. To engage in insurance brokerage business within the territory of the PRC, an insurance brokerage shall satisfy the requirements prescribed by the CIRC and obtain an insurance brokerage business permit issued by the CIRC, after obtaining a business license. An insurance brokerage may take any of the following forms: (i) a limited liability company; or (ii) a joint stock limited company. The minimum registered capital of an insurance brokerage company whose business area is not limited to the province in which it is registered is RMB50 million while the minimum registered capital of an insurance brokerage company whose business area is limited to its place of registration is RMB10 million. The name of an insurance broker shall include the words “insurance brokerage.” An insurance brokerage may conduct the following insurance brokering businesses:

●making insurance proposals, selecting insurance companies and handling the insurance application procedures for the insurance applicants;

●assisting the insured or the beneficiary to claim compensation;
●reinsurance brokering business;
●providing consulting services to clients with respect to disaster and damage prevention, risk assessment and risk management; and
●other business activities approved by the CIRC.


According to the POSAIB, to operate insurance brokerage business, an insurance brokerage company shall satisfy the following conditions: (i) its shareholders meet the requirements thereof, and make capital contribution with their self-owned, true and lawful funds instead of bank loans or non-self-owned funds in various forms; (ii) its registered capital meets the requirements above and is under the custody in accordance with the relevant provisions of the CIRC; (iii) its business scope recorded in the business license is in compliance with the relevant provisions; (iv) its articles of association are in conformity with the relevant provisions; (v) its company name is in conformity with the relevant provisions; (vi) its senior officers meet the qualification requirements thereof; (vii) it has established a governance structure and internal control system as stipulated by the CIRC, and a scientifically and reasonably feasible business mode; (viii) it has a fixed domicile in line with its scale of business; (ix) it has a business and financial information management system as stipulated by the CIRC; and (x) other conditions provided for in laws and administrative regulations and by the CIRC. In addition, any entities or individuals who are under any of the following circumstances may not be a shareholder of an insurance brokerage company: (i) have been punished or subject to major administrative penalties during the last five years; (ii) are being investigated by the relevant departments for suspected major offenses; (iii) have been identified as a subject of joint sanctions against discreditable conduct by relevant state authorities due to a serious discreditable conduct and shall be sanctioned accordingly in the insurance sector, or has had other bad records of serious discredits within the most recent five years; (iv) cannot invest in any enterprises in accordance with laws and administrative regulations; or (v) other circumstances where the CIRC deems the entity or individual inappropriate to be a shareholder of an insurance brokerage company in accordance with the principle of prudential supervision.

An insurance brokerage shall submit a written report to the CIRC and make public disclosure within five days from the date of occurrence of any of the following matters: (i) change of name, domicile or business premises; (ii) change of shareholders, registered capital or form of organization; (iii) change of names of shareholders or capital contributions; (iv) amendment to the articles of association; (v) equity investment, establishment of offshore insurance related entities or non-operational organizations; (vi) division, merger and dissolution or termination of insurance brokering business activities of its expertisebranches; (vii) change of the primary person in mobile data technologies, particularlycharge of its branches other than provincial branches; (viii) being a subject of administrative or criminal penalties, or under investigation for suspected involvement in MRM technologiesany violation of law or a crime; and (ix) other reportable events prescribed by the CIRC.

Insurance brokerages are not allowed to sell non-insurance financial products, except for those products approved by relevant financial regulatory institutions and the management of vehicle fleets and mobile workforces.

Micronet intends to enhance its existing products and develop new products by continuing to make investments in research and development. Micronet further intends to continue its strategy of internally developing productsinsurance brokerage shall obtain relevant qualification in order to enter new market segments.sell non-insurance related financial products that meets regulatory requirements.

 

SalesPersonnel of an insurance brokerage and Marketing

Micronet’s customers consist primarilyits branches who engage in any of TSPs, specializingthe insurance brokering businesses described above must comply with the qualification requirements prescribed by the CIRC. The senior managers of an insurance brokerage must meet specific qualification requirements set forth in the fleetPOSAIB.

Regulation of Internet Insurance Businesses

The principal regulation governing the operation of Internet insurance business is the Measures for the Regulation of Internet Insurance Business, or Regulation of Internet Insurance Business, promulgated by the CBIRC on December 7, 2020 and MRM markets. Currently, Micronet doeseffective on February 1, 2021. Under the Regulation of Internet Insurance Business, the term of “Internet insurance business” refers to insurance operating activities in which insurance institutions conclude insurance contracts and provide insurance services relying on the Internet. Insurance institutions include insurance companies (including mutual insurance organizations and internet insurance companies) and insurance intermediaries; insurance intermediaries include insurance agents (excluding individual insurance agents), insurance brokers and insurance loss adjusters; insurance agents (excluding individual insurance agents) include professional insurance agencies, banks as concurrent-business insurance agencies and internet enterprises that have legally obtained insurance agency business permits; and professional insurance intermediaries include professional insurance agencies, insurance brokers and insurance loss adjusters. Self-operated network platform refers to any network platform being independently operated while enjoying complete data permission, which is legally established by an insurance institution for the purpose of internet insurance business operation. No network platform established by any branch of an insurance institution or any non-insurance institution with a related-party relationship with an insurance institution in terms of equity, personnel, etc., belongs to the category of self-operated network platform. Internet insurance product refers to any insurance product sold by an insurance institution via the Internet.


An insurance institution which conducts internet insurance business along with its self-operated network platform shall meet the following conditions: (i) its service access place is located within the territory of the PRC; if its self-operated network platform is a website or mobile application, it shall legally go through the formalities for filing of internet information services with the relevant administrative department for the internet industry and obtain a filing number; or otherwise, it shall comply with relevant laws and regulations and meet the qualification requirements of the competent department for the relevant industry; (ii) it has an information management system and core business system that can support its internet insurance business operation, which can be effectively isolated from its other unrelated information systems; (iii) it has refined cybersecurity monitoring, information notification, emergency disposal working mechanisms as well as such cybersecurity protection means as refined perimeter protection, intrusion detection, data protection and disaster recovery; (iv) it implements the national classified cybersecurity protection system, carries out filing of cybersecurity classification, conducts classified protection evaluation on a regular basis, and implements security protection measures for the corresponding class; in terms of self-operated network platforms with insurance sales or insurance application function, as well as information management systems and core business systems that support their operation, relevant self-operated network platforms and information systems shall be under security protection of Class III or above; and in terms of self-operated network platforms without insurance sales or insurance application function, as well as information management systems and core business systems that support their operation, relevant self-operated network platforms and information systems shall be under security protection of Class II or above; (v) it has a legal and compliant marketing model, and has established an operation and service system that meets the needs for internet insurance operation and complies with the characteristics of internet insurance users while supporting its business coverage regions; (vi) it has established or defined its internet insurance business management department staffed by appropriate professionals, appointed a senior executive to act as the principal in charge of its internet insurance business, and specified the principal of each self-operated network platform; (vii) it has a sound internet insurance business management system and operating procedures; (viii) as an insurance company, it shall, when conducting internet insurance sales, comply with the relevant provisions of the CBIRC on regulatory evaluation of its solvency as well as protection of consumers’ rights and interests, etc.; (ix) as a professional insurance intermediary, it shall be a national institution with its operating area not selllimited to end users. Its customers are generally leading service providers of commercial solutions that integrate a wide range of positioning technologies and computing fleet communicationsthe province (autonomous region, municipality directly under the central government, or city specifically designated in the MRM market.

Micronetstate plan) of the place where the business license of its head office is registered while complying with the relevant provisions of the CBIRC on classified regulation of professional insurance intermediaries; and (x) other conditions prescribed by the CBIRC. The Regulation of Internet Insurance Business also specifies requirements on disclosure of information regarding insurance products are used by customers in over worldwide. The United States currently constitutes Micronet’s largest market, representing approximately 74% of Micronet’s revenuesold on the Internet and provides guidelines for the year ended December 31, 2016operations of the insurance institutions that engage in Internet insurance business.

Regulations of Foreign Investment in Insurance Intermediaries

Historically, PRC laws and 83%regulations have restricted foreign investment in ownership of insurance intermediary companies. In recent years, some rules and regulations governing the insurance intermediary sector in China have begun to encourage foreign investment. For instance, On March 1, 2015, the MOFCOM and the NDRC jointly promulgated the Catalogue for the year endedGuidance of Foreign Investment Industries (Revision 2015), or the 2015 Guidance Catalog, pursuant to which insurance brokerage are removed from the list of industries subject to foreign investment restriction. On April 27, 2018, the CBIRC further promulgated the Circular on Lifting Limits on the Business Scope of Foreign-invested Insurance Broker, which further lifts the restrictions on the business scope of foreign-invested insurance broker, and provides that foreign-invested insurance broker that has obtained the permit of in insurance brokerage business may conduct the following insurance brokerage business: (1) design insurance policy plans, select insurers and handle insurance formalities for policy holders; (2) assist the insured or beneficiaries with insurance claims; (3) reinsurance brokerage business; (4) provide principals with assessment to prevent from disasters, damage or risks, or risk management consulting services; and (5) other business approved by the CBIRC. For insurance agency business, the CBIRC promulgated the Circular on Permitting Foreign Investors to Engage in Insurance Agency Business in China on June 19, 2018, which provides that: (1) a professional insurance agent invested and established in China by an overseas insurance agent that has carried out the insurance agency business for over three years may apply for carrying out the insurance agency business in China, and the scope of specific allowable business and the market access criteria shall be subject to relevant provisions on professional insurance agents; or (2) a professional insurance agent established and invested in China by a China-based foreign-invested insurance company which has commenced its business for over three years may apply for carrying out the insurance agency business in China, and the scope of specific allowable business and the market access criteria shall be subject to relevant provisions on professional insurance agents. In addition, the CBIRC further promulgated the Circular on Clarifying the Measures Relating to the Liberalization of the Insurance Intermediary Market on December 31, 2015. In3, 2021, which provides that an insurance brokerage company funded and established in China by an overseas insurance brokerage company, which has the actual business experience and qualifies under the relevant regulations of the CBIRC, is allowed to operate the insurance brokerage business; in the Circular on Issuing the Content relating to the Insurance Sector in the Legal Documentation of China’s Accession to the WTO (Bao Jian Ban Fa [2002] No. 14), the related requirements that the foreign investor to establish a foreign-funded insurance brokerage company in China should have a history of business operations of more than 30 years in any given year,WTO member states, have maintained a single customer may accountrepresentative office in China for a significant portion of Micronet’s revenues. For the year ended December 31, 2016, our 5 largest customers represented approximately individually 23%, 20%, 10%, 8% and 5% of Micronet’s revenues, respectively. Our sales team consisted of 4 dedicated sales managers including back office team as of December 31, 2016.

Research and Development

Micronet believes that one of its core competitive strengths is the breadth of its expertise in mobile data technologies, particularly in MRM technologies for the management of vehicle fleets and mobile workforces. Micronet has developed this expertise over a period of 30 years. It has an experienced engineeringat least two consecutive years, and product development team. In order to keep up withhave a total asset of not less than US$200 million in the rapid technology evolution and the changing needs of the markets in which it operates, Micronet continues to focus on its innovation and the development of new products and technologies, by continuing to make the necessary investments in research and development.

Micronet upgrades and enhances its existing products on an on-going basis, including based on input from its clients and partners and from other sources. Enhancements include the addition of capabilities, improvement of product functionality and performance, and adding featuresyear immediately prior to the existing hardware in order to offer customers a variety of solutions, while continuing to decrease costs to enhance its profit margins and create a competitive market pricing position.application, shall not longer be applicable.

 

In addition, Micronet seeks to design and manage product life cycles through a controlled and structured process. It involves customers and industry experts from its target markets in the definition and refinement of its product development. Product development emphasis is placed on meeting industry standards, ease of integration, cost reduction, design-for manufacturability, versatility and innovation, and quality and reliability.

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DuringRegulations Related to Telecommunications Service and Online Trading

The Measures on Telecommunications Business Operating Licenses (2017 Revision), or the fiscal years ended December 31, 2016Telecom License Measures, which was promulgated by the Ministry of Industry and 2015, Micronet spent NIS 7.1 million (approximately $1.8 million)Information Technology on March 1, 2009 and NIS 7.7 million (approximately $1.9 million)last amended on July 3, 2017, requires that any approved telecommunications services provider shall conduct its business in accordance with the specifications in its license for value-added telecommunications services, or VATS License. The Administrative Measures on Internet Information Services (2011 Revision), respectively,which was promulgated on researchSeptember 25, 2000 and development activities. Micronet uses its own resourcesamended on January 8, 2011 by the State Council, requires that commercial Internet information services providers, which mean providers of information or services to finances its research and development activities and noneInternet users with charge, shall obtain a VATS License with the business scope of Internet information services, namely the cost of such activities is borne by its customers.

In April 2013, Micronet submittedInternet Content Provider License or the ICP License, from competent government authorities before providing any commercial Internet content services within the PRC. However, according to the Israeli Innovation Authority or IIA (previously2019 Negative List/ the Office2020 Negative List, the value-added telecommunications services carried on in PRC falls in the restricted category, and foreign investors cannot hold over 50% of the Chief Scientistequity interests in entities providing such services.

The Guiding Opinions of the Ministry of Economy, or OCS,) a requestCommerce on Online Transactions (Provisional), which was promulgated and implemented on March 6, 2007, aims to regulate online transactions, assist and encourage participants to carry out online transactions, alert and prevent transaction risks, and provide guiding requirements on the basic principles for financial support within a frameworkonline transactions, the entering into of a researchcontracts by participants of online transactions, and development program for a new product. In September 2013, a grant to Micronet in a total amount of NIS 5.5 million (approximately $1.5 million) was approved by the IIA. This grant was provided by the IIA for a period of one year (starting April 2013) at a level of 30% from the aforementioned amount. In addition, during 2014 Micronet received further confirmation for a grant from the IIA in the total amount of NIS 5.5 million (approximately $1.5 million). This grant was provided by the IIA for a period of one year (starting April 2014) at a level of 40% from the aforementioned amount. During 2015, Micronet received further confirmation for a grant from the IIA in the total amount of NIS 5.1 million (approximately $1.3 million) at a level of 40% from the aforementioned amount. We are obligated to pay royalties to the IIA amounting to 3%-3.5% of the sales of the products and other related revenues generated from such projects linked to the dollar plus Libor interest rate. To date, Micronet has received an aggregate of NIS 5.6 million (approximately $1.4 million) from the IIA under these three grants.

Competition

Micronet operates in a highly competitive industry. Further, during the last few years, competition in the field of mobile computers has significantly increased with the mass entrance and introduction to the market of smart phones, tablets, and laptops, as well as various GPS-based hand-held devices featuring additional functionalities.

Micronet’s current business is focused  on customers that are implementing “tailor made” solutions characterized by highly professional, mission critical and complex technological solutions. These solutions are based on Micronet’s products and must sustain and maintain performance under extreme and challenging field conditions for extended periods of time.

Its competitors are private companies or companies that do not disclose their sales or other financial information, making it difficult to estimate Micronet’s market share and position in the market. Micronet believes that its most significant competitors include: CalAmp Corp., Morey Corporation (U.S.A.), Mobile Devices Corporation, MOTIA Co. Ltd, Advantech Co., Ltd. Garmin USA, Inc. and Samsung. In addition, some service providers consider the use of their in house development capabilities for the supply of their internal needs for mobile devices.electronic signatures, online payments and advertising.

  

This intensely competitiveThe Administrative Measures for On-line Trading, which was promulgated on February 17, 2014 and implemented with effect from March 15, 2014, further specifies the relevant measures for protecting on-line consumers’ rights, especially with regard to after-sale service, privacy protection and standard contract management, diversifies the types of unjust competitions conducted by an operator through network or certain media, and clarifies the regulatory and administrative responsibilities of the industry is characterizedand commerce administration bureaus at different levels.

Pursuant to the E-Commerce Law of the PRC, which was promulgated by rapidly changing technologies, evolving industry standards, frequent new product introductionsthe SCNPC on August 31, 2018 and changestook effect on January 1, 2019, an e-commerce operator shall register itself as a market entity, fulfill its tax obligations pursuant to the relevant laws and obtain the administrative approvals necessary for its business operation, shall also display the information about its business license and the administrative approvals obtained for its business operation, or the links to the webpages with such information in customer requirements. the prominent position on its homepage, and shall expressly indicate the methods and procedures for querying, correcting and deleting its users’ information or deregistering their accounts and shall not set irrational conditions for such purposes.

In orderthe area of online trading, the Company and its operating subsidiaries are subject to maintainthe above-mentioned regulations because the Company’s and its competitive strength, Micronet must continueoperating subsidiaries plan on acting as operators of various online platforms for online transactions in relation to developall of its business sectors.

In addition, to the laws and introduce on a timely and cost-effective basis, new products and product featuresregulations applicable to China which are in line withsummarized above, as a BVI incorporated company, to the technological developmentsextent that Intermediate itself (rather than through its operating subsidiaries) were to conduct certain of the activities referenced above, consideration would need to be given to certain regulatory requirements of the BVI and emerging industry standards and address the increasingly sophisticated needs of its customers.

Micronet’s management believes its strongest competitive advantages are the durability of its products and reputationwhether any licenses in the industry. Its competitive strengths include the following:BVI are required.

 

●30 years of field-proven experience, including engineering and manufacturing know-how;

●ability to deliver solutions and products to organizations and customers that are leaders in their respective industries;

●ability to integrate advanced technological capabilities to develop new solutions and products with its own manufacturing infrastructures and facilities, as well as leverage overseas manufacturing partners, to have greater control over the end-to-end production process and cost-efficiencies;

●professional and direct marketing methodology focused on main target customers.

●reputation as a leading supplier in relevant markets;

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●lasting working relationships with customers;

●an experienced, dedicated and competent management team;

●ELD compliant products; and

●Proprietary technology and know-how that allows rapid configuration and implementation of new solutions to meet the special customer needs.

Micronet currently operates via two facilities, the first located in Azur, Israel, near Tel Aviv, and the second located in Salt Lake City, Utah. These two operating facilities give Micronet additional manufacturing and marketing flexibility to serve the market’s needs, reduce its operational risk, improve its U.S. presence  and provide management with additional tools to support the business.

Manufacturing

Micronet manufactures and assembles its products and solutions using its own facilities in Israel and the United States using its capabilities and resources, which enable it to control and manage the manufacturing and assembly process and ensure timely delivery. The Israeli facilities are primarily used for the manufacturing process while the United States facilities are primarily used for final assembly and shipment activities. The manufacturing process includes development of electronic cards, assembly of microchips on the electronic cards and the assembly thereof within the unit, final testing and quality tests. On a case by case basis, subcontractors specializing in certain development or manufacturing aspects may be retained to achieve improvement, efficiency or reduction of costs of development and/or manufacturing processes. In addition, and dependent on volume and cost considerations, the company is evaluating outsourcing its Israeli manufacturing activity to a third party manufacturer.

With some of Micronet’s newer product offerings, the company is utilizing overseas manufacturing in conjunction with its internal assembly test lines in Salt Lake City for final provisioning and shipping.

Following certain enhancements in its manufacturing and production capabilities, Micronet has excess manufacturing capacity and has the ability to meet current or foreseeable manufacturing needs without making any significant investments. Implemented enhancements include:

●upgraded production and assembly line and purchased new machinery with significant higher component implementation scale;

●increased factory facilities and upgraded various infrastructures;

●entered into agreements with subcontractors in the field that operate additional manufacturing facilities, and have significant procurement and manufacturing capabilities and resources that are available to Micronet;

●Certified subcontractors to perform manufacturing process to ensure flexible manufacturing infrastructures and deployment that can be used for disaster recovery scenarios or rapid increase in production needs.

If additional manufacturing resources are needed to meet increased demand for Micronet’s products, manufacturing capacity can be enhanced by outsourcing manufacturing processes, recruiting and training additional employees, adding shifts to the labor cycle and purchasing additional manufacturing equipment and machinery or other required infrastructures.

Intellectual Property

Proprietary rights are important to Micronet’s business because its ability to remain competitive in the market is dependent to a significant degree on its proprietary solutions and products and the technology on which they are based. To protect its proprietary rights, Micronet primarily relies on a combination of copyright and trade secret laws, internal know-how, and agreements with third parties, such as license agreements. In addition, Micronet employs internal controls such as the use of confidentiality and non-disclosure agreements. Micronet believes its proprietary technology incorporates processes, know-how, methods, algorithms, hardware and software that are the result of more than 20 years of experience and in-house expertise and thus are not easily copied.

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There is a significant amount of litigation with respect to intellectual property in the industry in which Micronet operates. Micronet has not, to date, been the subject of any claims or proceedings with regards to infringement of third party’s proprietary rights and it believes that its products, solutions and services do not violate or infringe any third party’s intellectual property rights. In light of the strong competition in the industry and the innovative solutions and technologies incorporated by Micronet into its recent products, Micronet has been exploring the use of patent applications and is in the process of filing certain patent applications related to its products in the United States, solutions and proprietary technologies. These patents, to the extent granted, are expected to assist Micronet to maintain its technological and competitive position in the market.Employees

 

Micronet’s management, together with its research and development team, monitor closely and continuously all technological developments in the market. Micronet considers and evaluates on an ad hoc basis whether technology and proprietary assets should be acquired through independent in-house development or through the purchase of patents or other technological licenses. Where the purchase of third party proprietary technology, solution or products is required and can be of advantage to its business, Micronet would purchase a license and pay appropriate royalties or license fees. Micronet currently has all third-party licenses or is in the process of acquiring licenses that it believes are necessary to maintain and develop its business.

Government Regulation

Micronet’s business is subject to certain international standards such as U.S. Federal Communications Commission, or FCC, Part 15B, FCC ID, CE and Restriction of Hazardous Substances, or RoHS, which define compatibility of interface and telecommunications standards to those implemented in Europe by the European Commission and in the United States by the FCC. Its solutions and products also comply with the E-Mark European standard, which is the standard that defines the compatibility of interface and telecommunications to all appliances installed in and around an automobile.

Employees

As of December 31, 2016, Micronet2022, TINGO GROUP had approximately 69797 full-time employees, The Chinese companies had approximately 324 full-time employees. Of these employees, 34 are96 were employed in manufacturingmarketing positions, 69 were employed in Customer Services & Risk positions and the remainders areremainder were employed in sales,finance, research and development, management and administrative positions. OurThe HK companies had approximately 34 full-time employees. Of these employees, are not represented by any collective bargaining agreement,1 were employed in marketing positions, 4 were employed in Customer Services & Risk positions and wethe remainder were employed in finance, research and development, management and administrative positions. Tingo mobile had approximately 409 full-time employees. Of these employees, 138 were employed in marketing positions, 26 were employed in Customer Services & Risk positions and the remainder were employed in finance, research and development, management and administrative positions. The Israeli companies had approximately 3 full-time employees in the finance department.

We have never experienced a work stoppage. We believeTo the best of our knowledge, we have good and sustainable relations with our employees.

 

Israeli labor laws and regulations apply to all employees based in Israel. The laws principally address matters such as paid vacation, paid sick days, length of the workday, payment for overtime and severance payments upon the retirement or death of an employee or termination of employment under specified circumstances. The severance payments may be funded, in whole or in part, through a managers’ insurance fund or a pension fund. The payments to the managers’ insurance fund or pension fund toward severance amount to 8.3% of wages. Furthermore, Israeli employees and employers are required to pay predetermined sums to the National Insurance Institute of Israel. Since January 1, 1995, these amounts also include payments for health insurance.

We, including all of our subsidiaries, employed an aggregate of 158 employees on December 31, 2016.

SEGMENT REPORTING

Operating segments are based upon our internal organization structure, the manner in which our operations are managed and the availability of separate financial information. Following the purchase of controlling shares of Micronet in September 2012 we have two operating segments: our defense and aerospace segment, conducted by Enertec, and our MRM segment, conducted by Micronet.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements included in “Exhibits and Financial Statement Schedules” of this Annual Report for further financial information on our operating segments.

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Item 1A.Risk Factors.

Item 1A. Risk Factors.

 

Investing in our securities is highly speculative and involves a high degree of risk. You should carefully consider the following factors and other information in this Annual Report and our other SEC filings before making a decision to invest in our securities. Additional risks and uncertainties that we are unaware of may become important factors that affect us. If any of the following events occur, our business, financial conditions and operating results may be materially and adversely affected. In that event, the trading price of our common stock and warrants may decline, and you could lose all or part of your investment.

 

Summary of Risks Affecting our Company

Our business is subject to numerous risks described in the section titled “Risk Factors” below. A summary of the material risk factors affecting our business is set forth below.

●The Company may be unable to successfully execute its growth strategy including the integration of the merger with Tingo Mobile.

●

The Company’s ability to be successful will be dependent upon the efforts of the Company Board and key personnel and the loss of such persons could negatively impact the operations and profitability of TINGO GROUP’s post-combination business.

●We may need a significant amount of additional capital, which could substantially dilute shares owned by current shareholders of the Company.


●If TINGO GROUP fails to meet all applicable Nasdaq requirements, Nasdaq may delist its Common Stock, which could have an adverse impact on its liquidity and market price. 
●The COVID-19 pandemic, or any other pandemic, epidemic or outbreak of an infectious disease, may materially and adversely affect TINGO GROUP’s business and operations.

●Because almost all of TINGO GROUP’s officers and directors are located in non-U.S. jurisdictions, you may have no effective recourse against management for misconduct.
●

TINGO GROUP anticipates that its operating costs and expenses will increase as the Company continue to grow our business.

●The Company’s platform and internal systems rely on software and technological infrastructure that is highly technical, and if they contain undetected errors, its business could be adversely affected.
●Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations.
●The complexities, uncertainties and rapid changes in PRC regulation of the Internet-related businesses and companies require significant resources for compliance and the uncertainties in the PRC legal system could limit the legal protections available to us.
●The 2006 M&A Rules established complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it difficult to pursue growth through acquisitions in China.
●Fluctuations in exchange rates of the RMB could materially affect financial results. Furthermore, TINGO GROUP’s financial results may be negatively affected by foreign exchange rate fluctuations.
●Under the enterprise income tax (“EIT”) Law, we may be classified as a “resident enterprise” of China. Such classification would likely result in unfavorable tax consequences.
●We have issued and may issue additional preferred stock in the future, and the terms of the preferred stock may reduce the value of our Common Stock.


●

The Company’s trading platform has no operating history, which makes it difficult to evaluate the Company’s future prospects.

●

The Company operates in a highly competitive and fragmented market and may not be able to maintain a competitive position in the future.

●

If the Company is unable to obtain stockholder approval for the conversion of the Series A Preferred Stock into Common Stock by June 30, 2023 (the “Trigger Date”), then all issued and outstanding shares of Series A Preferred Stock will be redeemed by the Company in consideration of the right to receive cash and the Company shall cause Tingo LLC, a wholly-owned subsidiary of the Company (“Delaware Sub”), to issue to Tingo, the amount of membership interests of Delaware Sub as needed to cause Tingo, to own 27% of the total issued and outstanding membership interests of Delaware Sub.

●In the event that (i) the Company does not receive by the Trigger Date the stockholder approval with respect to the conversion of Series B Preferred Stock and the amendment of the Company certificate of incorporation to increase the number of authorized shares of Common Stock, (ii) the Nasdaq change of control application is rejected, or (iii) Nasdaq requires Material Restrictions (as defined in the Series B Certificate of Designation) in order to approve the Nasdaq change of control application (each a “Trigger Event”), each holder of Series B Preferred Stock, at its sole option, shall have the right, but not the obligation, to reduce the Stated Value per share of Series B Preferred Stock in exchange for membership interests of Delaware Sub, up to a maximum of 33% of the outstanding membership interests of Delaware Sub.

Risk Factors Related to Our Businessthe Integration of Intermediate and IndustryOwnership of TINGO GROUP’s Securities

 

Potential political, economic and military instability in Israel could adversely affect our operations.TINGO GROUP may be unable to successfully execute its post merger growth strategy.

 

One of our principal officesthe Company’s strategies is to pursue organic growth by increasing product offerings and operating facilities is located in Israel. Accordingly, with respect to our Israeli facility, political, economicexpanding into new verticals and military conditions in Israel directly affect our operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israelnew markets such as China and its Arab neighbors. A state of hostility, varying in degree and intensity, has led to security and economic problems for Israel. Since October 2000, there has been an increase in hostilities between Israel and the Palestinian Arabs, which has adversely affected the peace process and has negatively influenced Israel’s relationship with its Arab citizens and several Arab countries, including the Israel-Gaza conflict. Such ongoing hostilities may hinder Israel’s international trade relations and may limit the geographic markets where we can sell our products and solutions. Hostilities involving or threatening Israel, or the interruption or curtailment of trade between Israel and its present trading partners, could materially and adversely affect our operations.

In addition, Israel-based companies and companies doing business with Israel have been the subject of an economic boycott by members of the Arab League and certain other predominantly Muslim countries since Israel’s establishment. Although Israel has entered into various agreements with certain Arab countries and the Palestinian Authority, and various declarations have been signed in connection with efforts to resolve some of the economic and political problems in the Middle East, we cannot predict whether or in what manner these problems will be resolved. Wars and acts of terrorism have resulted in significant damage to the Israeli economy, including reducing the level of foreign and local investment.

Furthermore, certain of our officers and employees may be obligated to perform annual reserve duty in the Israel Defense Forces and are subject to being called up for active military duty at any time. All Israeli male citizens who have served in the army are subject to an obligation to perform reserve duty until they are between 40 and 49 years old, depending upon the nature of their military service.

If we are unable to develop new products and maintain a qualified workforce weAfrica. TINGO GROUP may not be able to meetsuccessfully execute all or any of these initiatives, and the needs of our customers inresults may vary from the future.

Virtually allexpectations of the products that we produce and sellcombined entity or others. Further, even if these initiatives are highly engineered and require sophisticated manufacturing and system-integration techniques and capabilities. The markets and industry in which we operate are characterized by rapidly changing technologies. The products, systems and solutions needs of our customers change and evolve regularly. Accordingly, our future performance depends on our ability to develop and manufacture competitive products and solutions, and bring those products to market quickly at cost-effective prices. In addition, because of the highly specialized nature of our business, we mustsuccessful, TINGO GROUP may not be able to expand and upgrade its technology systems and infrastructure to accommodate increases in the business activity in a timely manner, which could lead to operational breakdowns and delays, loss of customers, a reduction in the growth of its customer base, increased operating expenses, financial losses, increased litigation or customer claims, regulatory sanctions or increased regulatory scrutiny. In addition, Intermediate will need to continue to attract, hire and retain thehighly skilled and qualified personnel necessarymotivated executives and employees to performboth execute the services required by our customers. If we are unablegrowth strategy and to develop new products that meet customers’ changing needs or successfully attractmanage the resulting growth effectively.

Cross-border merger and retain qualified personnel, our future revenues and earningsacquisition transactions may be subject to additional rules and regulations and requirements that could make merger and acquisition activities more time-consuming and complex. Our ability to expand our business through future mergers and acquisitions would as such be materially and adversely affected.

 

We areTINGO GROUP may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition and its share price, which could cause you to lose some or all of your investment.

TINGO GROUP cannot assure you that the due diligence it conducted on Intermediate has revealed all material issues that may be present with regard to such companies, or that it would be possible to uncover all material issues through a customary amount of due diligence or that risks outside of TINGO GROUP’s control will not later arise. Each of TINGO GROUP and Intermediate therefore has made its decision to complete the Merger on the basis of limited information, and the business combination may not be as profitable as expected, if at all. As a result of these factors, TINGO GROUP may be forced to later write-down or write-off assets, restructure operations, or incur impairment or other charges that could result in reporting losses. Even if TINGO GROUP’s due diligence successfully identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with TINGO GROUP’s preliminary risk analysis. Even though these charges may be non-cash items and would not have an immediate impact on TINGO GROUP’s liquidity, the fact that TINGO GROUP reports charges of this nature could contribute to negative market perceptions about TINGO GROUP or TINGO GROUP’s securities. Accordingly, TINGO GROUP cannot predict the impact that the consummation of the Merger will have on TINGO GROUP’s securities.


TINGO GROUP’s ability to be successful will be dependent upon the efforts of the TINGO GROUP Board and key personnel and the loss of such persons could negatively impact the operations and profitability of TINGO GROUP’s post-combination business.

TINGO GROUP’s ability to be successful will be dependent upon the efforts of the TINGO GROUP Board and key personnel. Furthermore, the business of TINGO GROUP following the Merger is made up in part of Intermediate’s business, and is entirely different from TINGO GROUP’s historical business. Individuals associated with Intermediate may be unfamiliar with the requirements of operating a U.S. public company, which could cause TINGO GROUP’s management to have to expend time and resources helping them become familiar with such requirements.

TINGO GROUP is dependent on the services of ourits executive officers, whose potential conflicts of interest may not permit usTINGO GROUP to effectively execute ourits business strategy. Tingo Mobile depends on its executive officers and other key employees, and the loss of one or more of these employees or an inability to attract and retain other highly skilled employees could harm its business.

 

WeTINGO GROUP is currently dependdependent on the continued services and performance of ourits executive officers, particularly David Lucatz, our ChairmanDarren Mercer, TINGO GROUP’s Chief Executive Officer and a director of the TINGO GROUP Board. Darren Mercer, is also Micronet’s Chairman and President. Mr. Lucatz also serves as the President, Chairman and Chief Executive Officer of D.L. Capital Ltd., or DLC,GFH which may result in a potential conflict of interest in Mr. Mercer carrying out his duties as a member of the primary assetTINGO GROUP Board.

TGH’s success, and the success of which isTingo Mobile and other operating subsidiaries of TGH, depends largely upon the continued services of its ownershipexecutive officers and other key employees, and in particular on Dozy Mmobuosi, the founder and CEO of sharesTingo Mobile, and senior management staff in Nigeria and elsewhere. TGH relies on its leadership team in the areas of our common stock. We have a managementresearch and consulting services agreement with DLC. Pursuant to a separate managementdevelopment, operations, security, marketing, sales, customer experience, general, and consulting services agreement, Mr. Lucatz has agreed to devote 60% of hisadministrative functions, and on individual contributors in its research and development and operations. From time to Micronet matters fortime, there may be changes in TGH’s executive management team resulting from the termhiring or departure of that agreement. Our business and results of operations may suffer if Mr. Lucatz, otherexecutives, which could disrupt its business. While TGH has employment agreements with its executive officers or directors,other key personnel that require them to continue to work for TGH, some of these agreements are unablenot for any specified period and, therefore, they could terminate their employment with TGH at any time. The loss of one or more of TGH’s executive officers, especially its Chief Executive Officer, or key employees could harm its business. Changes in TGH’s executive management team may also cause disruptions in, and harm to, devoteits business.

Provisions in TINGO GROUP’s certificate of incorporation and under Delaware law could make a future acquisition of TINGO GROUP, which may be beneficial to stockholders, more difficult and may prevent attempts by TINGO GROUP stockholders to replace or remove the attention necessarycurrent management.

Provisions in TINGO GROUP’s certificate of incorporation, as amended, and TINGO GROUP’s amended and restated bylaws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for TINGO GROUP’s common stock. These provisions could also limit the price that investors might be willing to our overall business strategy and operations.pay in the future for TINGO GROUP securities, thereby depressing the market price of TINGO GROUP’s securities. In addition, these provisions may frustrate, deter or prevent any attempts by TINGO GROUP stockholders to replace or remove current management by making it more difficult for stockholders to replace members of the TINGO GROUP Board. Because the TINGO GROUP Board is responsible for appointing the members of the TINGO GROUP management team, these provisions could in turn affect any attempt by stockholders to replace current members of the TINGO GROUP management team.

 

Moreover, because TINGO GROUP is incorporated in Delaware, it is governed by the provisions of Section 203 of the General Corporation Law of the State of Delaware, or the DGCL, which prohibits a person who owns in excess of 15% of outstanding voting stock from merging or combining with TINGO GROUP for a period of three years after the date of the transaction in which the person acquired in excess of 15% of outstanding voting stock, unless the merger or combination is approved in a prescribed manner. TINGO GROUP has not opted out of the restrictions under Section 203.

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Developing new technologies entailsWe may need a significant risksamount of additional capital, which could substantially dilute your investment

We may need significant additional capital in the future to continue our planned operations. No assurance can be given that we will be able to obtain such funds upon favorable terms and uncertainties that may cause usconditions, if at all. Failure to incur significant costs anddo so could have a material adverse effect on our operating results, financial condition, and/business. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell Common Stock, convertible securities, or cash flows.other equity securities in one or more transactions that may include voting rights (including the right to vote as a series on particular matters), preferences as to dividends and liquidation, and conversion and redemption rights, subject to applicable law, and at prices and in a manner we determine from time to time.

 

Such issuances and the exercise of any convertible securities will dilute the percentage ownership of our stockholders and may affect the value of our capital stock and could adversely affect the rights of the holders of such stock, thereby reducing the value of such stock. Moreover, any exercise of convertible securities may adversely affect the terms upon which we will be able to obtain additional equity capital, since the holders of such convertible securities can be expected to exercise them at a time when we would, in all likelihood, be able to obtain any needed capital on terms more favorable to us than those provided in such convertible securities.

If we sell shares or other equity securities in one or more other transactions, or issue stock or stock options pursuant to any future employee equity incentive plan, investors may be materially diluted by such subsequent issuances.

Historically, TINGO GROUP has funded its operations and capital expenditures primarily through equity issuances and cash generated from its operations along with negotiating credit terms with suppliers that allows to effectively match revenues from customers with supplier payment terms. Although TINGO GROUP currently anticipates that its existing cash and cash equivalents and cash flow from operations will be sufficient to meet its cash needs for the foreseeable future, it may require additional financing, and it may not be able to obtain debt or equity financing on favorable terms, if at all and to manage any currency risk due to a mismatch in the currency of revenues, primarily Naira and those of expenses. If TINGO GROUP raises debt financing, it may be required to accept terms that restrict its ability to incur additional indebtedness, force TINGO GROUP to maintain specified liquidity or other ratios or restrict its ability to pay dividends or make acquisitions.

If the price of our Common Stock is volatile, our securities could incur substantial losses.

The price of TINGO GROUP’s Common Stock has been and may continue to be volatile. The market price of TINGO GROUP’s Common Stock may be influenced by many factors, including but not limited to the following:

●developments regarding the Merger and the transactions;

●announcements of developments related to TINGO GROUP’s business (including those aspects of TINGO GROUP’s business received in connection with the Merger);


●quarterly fluctuations in actual or anticipated operating results;

●announcements of technological innovations;

●new products or product enhancements introduced by Micronet or its competitors;

●developments in patents and other intellectual property rights and litigation;

●developments in relationships with third party manufacturers and/or strategic partners;

●developments in relationships with customers and/or suppliers;

●regulatory or legal developments in the United States, Israel, China and other countries;

●general conditions in the global economy; and

●the other factors described in this “Risk Factors” section.

A sale by TINGO GROUP of a substantial number of shares of the Common Stock or securities convertible into or exercisable for Common Stock may cause the price of the Common Stock to decline and may impair the ability to raise capital in the future.

Our Common Stock is traded on Nasdaq and despite certain increases of trading volume from time to time, there have been periods when it could be considered “thinly-traded,” meaning that the number of persons interested in purchasing Common Stock at or near bid prices at any given time may have been relatively small or non-existent. Financing transactions resulting in a large amount of newly-issued securities, or other events that cause current stockholders to sell shares, could place downward pressure on the trading price of Common Stock. In addition, the lack of a robust resale market may require a stockholder who desires to sell a large number of shares of Common Stock to sell those shares in increments over time to mitigate any adverse impact of the sales on the market price of TINGO GROUP stock. If TINGO GROUP stockholders sell, or the market perceives that its stockholders intend to sell for various reasons, including the ending of restriction on resale, substantial amounts of Common Stock in the public market, including shares issued upon the exercise of outstanding options or warrants, the market price of Common Stock could fall. Sales of a substantial number of shares of Common Stock may make it more difficult for TINGO GROUP to sell equity or equity-related securities in the future at a time and price that TINGO GROUP deems reasonable or appropriate. Moreover, TINGO GROUP may become involved in securities class action litigation arising out of volatility resulting from such sales that could divert management’s attention and harm TINGO GROUP’s business.

We may acquire other companies or technologies which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and adversely affect our operating results.

We may in the future seek to acquire or invest in other businesses, features or technologies that we believe could complement or expand our market, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions, may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated. In addition, to the extent that we enter into any term sheets or otherwise announce any intention to acquire any additional businesses, features or technologies, any such acquisition would generally be subject to completion of due diligence and required approvals, and would require additional financing, and there can be no assurance that any such acquisition will occur or be completed in a timely manner, or at all.


If we acquire additional businesses, we may not be able to integrate the acquired personnel, operations, existing contracts and technologies successfully or effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from any acquired business, due to a number of factors, including:

●failure to identify all of the problems, liabilities or other shortcomings or challenges of an acquired company or technology, including issues related to intellectual property, regulatory compliance practices, product quality and safety, revenue recognition or other accounting practices, or employee or client issues;

●difficulty incorporating acquired technology and rights into our proprietary software and of maintaining quality and security standards consistent with our brands;

●inability to generate sufficient revenue to offset acquisition or investment costs;

●incurrence of acquisition-related costs or equity dilution associated with funding the acquisition;

●difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business;

●risks of entering new markets or new product categories in which we have limited or no experience;

●difficulty converting the customers of the acquired business into our customers;

●diversion of our management’s attention from other business concerns;

●adverse effects to our existing business relationships as a result of the acquisition;

●potential loss of key employees, clients, vendors and suppliers from either our current business or an acquired company’s business;

●use of resources that are needed in other parts of our business;

●possible write offs or impairment charges relating to acquired businesses;

●compliance with regulatory matters covering the products of the acquired business; and

●use of substantial portions of our available cash to consummate the acquisition.

In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. If an acquired business fails to meet our expectations, our business, relatesoperating results and financial condition may suffer.

If securities or industry analysts do not publish research or reports or publish unfavorable research about TINGO GROUP’s business, the price of its Common Stock could decline.

TINGO GROUP does not currently have any significant research coverage by securities and industry analysts and may never obtain such research coverage. If securities or industry analysts do not commence or maintain coverage of TINGO GROUP, the trading price for its Common Stock might be negatively affected. In the event such securities or industry analyst coverage is obtained, if one or more of the analysts who covers TINGO GROUP or will cover TINGO GROUP downgrades its securities, the price of Common Stock would likely decline. If one or more of these analysts ceases to developing sophisticated productscover TINGO GROUP or fails to publish regular reports on it, interest in the purchase of Common Stock could decrease, which could cause the price of Common Stock and applications. New technologiestrading volume to decline.


If we fail to continue to meet all applicable Nasdaq requirements, Nasdaq may delist our common stock, which could have an adverse impact on the liquidity and market price of our common stock.

TINGO GROUP’s common stock is currently listed on Nasdaq, which has qualitative and quantitative listing criteria. If TINGO GROUP continues to be unable to comply with Nasdaq listing requirements, including, for example, if the closing bid price for TINGO GROUP common stock continues to fall below $1.00 per share, in breach of Nasdaq Listing Rule 5550(a)(2), Nasdaq could determine to delist the TINGO GROUP common stock which could adversely affect its market liquidity market price. In that regard, on January 27, 2022, TINGO GROUP received written notice from Nasdaq indicating that it was not in compliance with Nasdaq Listing Rule 5550(a)(2), as the closing bid price of its common stock had been below $1.00 per share. Nasdaq’s letter advised the Company that, based upon the closing bid price during the period from December 21, 2021 to January 26, 2022, the Company no longer meets this test. TINGO GROUP was able to regain compliance by maintaining a minimum closing bid price of at least $1.00 for a minimum of 10 consecutive trading days; however there can be no assurance that TINGO GROUP will be able to maintain compliance with the Nasdaq listing requirements, or that the common stock will not be delisted from Nasdaq in the future. Such delisting could adversely affect the ability to obtain financing for the continuation of TINGO GROUP’s operations or prevent us from completing the Acquisition or any other alternative transaction, and could result in the loss of confidence by investors, customers and employees and cause our shareholders to incur substantial losses.

If Nasdaq delists TINGO GROUP’s securities from trading on its exchange and TINGO GROUP is not able to list its securities on another national securities exchange, TINGO GROUP expects its securities could be quoted on an over-the-counter market. If this were to occur, TINGO GROUP could face significant material adverse consequences, including:

●a limited availability of market quotations for its securities;

●reduced liquidity for its securities;

●a determination that the TINGO GROUP’s common stock is a “penny stock” which will require brokers trading in the TINGO GROUP’s common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for TINGO GROUP’s securities;

●a limited amount of news and analyst coverage; and

●a decreased ability to issue additional securities or obtain additional financing in the future.

TINGO GROUP’s stockholders may not realize a benefit from the Company’s merger with Tingo Mobile commensurate with the ownership dilution they will experience in connection with the mergers.

If TINGO GROUP is unable to realize the full strategic and financial benefits anticipated as a result of the merger with Tingo Mobile, TINGO GROUP’s stockholders will have experienced substantial dilution of their ownership interests in TINGO GROUP without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent TINGO GROUP is able to realize only part of the strategic and financial benefits anticipated from the mergers.

Intermediate may be untestedsubject to new or unproven.different statutory and regulatory requirements in the British Virgin Islands (“BVI”).

As the global regulatory and tax environment evolves, Intermediate may be subject to new or different statutory and regulatory requirements (for example, on January 1, 2019 the Economic Substance (Companies and Limited Partnerships) Act, 2018 of the British Virgin Islands came into force). It is difficult to predict what impact the adoption of these laws or regulations, or changes in the interpretation of existing laws or regulations could have on Intermediate, however, compliance with various additional obligations may create significant additional costs that may be borne by Intermediate or otherwise affect the management and operation of Intermediate.


The COVID-19 pandemic, or any other pandemic, epidemic or outbreak of an infectious disease, may materially and adversely affect TINGO GROUP’s business and operations.

Since being declared a pandemic by the World Health Organization in March 2020, COVID-19 has negatively impacted global economies, disrupted consumer spending and global supply chains, and created significant volatility and disruption of financial markets.

TINGO GROUP’s operations and business have experienced disruptions due to the unprecedented conditions surrounding the spread of COVID-19 throughout China, North America, Israel and the world. The COVID-19 pandemic and both public and private measures taken to contain it have negatively affected TINGO GROUP’s business, results of operations, financial condition, and liquidity, all of which may continue or worsen.

Even after COVID-19 has subsided, TINGO GROUP may continue to experience materially adverse impacts to its business as a result of its global economic impact, including any recession that has occurred or may occur in the future. There are no comparable recent events which may provide guidance as to the effect of the spread of COVID-19, and, as a result, the ultimate impact of COVID-19, or a similar health epidemic or pandemic, is highly uncertain and subject to change. While TINGO GROUP continues to monitor the business metrics that it has historically used to predict its financial performance, it is uncertain as to whether these metrics will continue to function as they have in the past. In addition, COVID-19 cause lock downs of cities which may happen again and affect our ablity to file our financial statements on time.

We have issued and may issue additional preferred stock in the future, and the terms of the preferred stock may reduce the value of our Common Stock.

We are authorized to issue up to 15,000,000 shares of preferred stock in one or more series. Our board of directors may determine the terms of future preferred stock offerings without further action by our stockholders. If we issue shares of preferred stock, it could affect stockholder rights or reduce the market value of our outstanding Common Stock. In particular, specific rights granted to future holders of preferred stock may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights, sinking fund provisions, and restrictions on our ability to merge with or sell our assets to a third party.

TINGO GROUP may be subject to litigation and regulatory investigations and proceedings, and may not always be successful in defending itself against such claims or proceedings. Negative outcomes of legal proceedings may adversely affect Tingo Group’s business and financial condition.

TINGO GROUP’s business operations entail substantial litigation and regulatory risks, including the risk of lawsuits and other legal actions relating to, among other matters, breach of contract, information disclosure, client onboarding procedures, sales practices, product design, fraud and misconduct, and control procedures deficiencies, as well as the protection of personal and confidential information of TINGO GROUP’s or Intermediate’s or Micronet’s clients. TINGO GROUP or its subsidiaries may be subject to arbitration claims and lawsuits in the ordinary course of its business. TINGO GROUP or its subsidiaries may also be subject to inquiries, inspections, investigations and proceedings by regulatory and other governmental agencies. TINGO GROUP and its subsidiaries will be subject to extensive and evolving regulatory requirements, non-compliance with which, may result in penalties, limitations and prohibitions on its future business activities or suspension or revocation of its licenses and trading rights, and consequently may materially and adversely affect its business, financial condition, operations and prospects.

Tingo Mobile is regularly involved in a number of legal proceedings before various courts. These proceedings may be complicated, costly, and disruptive to its business operations. Tingo Mobile may incur significant liabilities that are uniqueexpenses in defending these matters and may be required to our products and services. While we maintain insurance for some business risks, it is not practicable to obtain coverage to protect against all operational risks and liabilities.pay significant fines, awards, or settlements. In addition, we may seek limitationlitigation or other proceedings could result in restrictions on our current or future manner of doing business. Any of these potential liability related to the sale and use of our products and systems. We may elect to provide productsoutcomes, such as judgments, awards, settlements, or services even in instances where we are unable to obtain such indemnification or qualification. Accordingly, we may be forced to bear substantial costs resulting from risks and uncertainties of our products and products under development, whichorders could have a material adverse effect on ourTingo Mobile’s business, financial condition, operating results, financial conditionor ability to do business.


Additionally, the Merger and the transactions contemplated thereby, as well as certain private placements completed by the Company, may give rise to litigation and/or cash flows.other legal disputes. As previously disclosed, in March 2017, TINGO GROUP entered into an Investment Banking Agreement (the “Sunrise Agreement”) with Sunrise Securities LLC and Trump Securities LLC (collectively, “Sunrise”) through Sunrise’s principal, Amnon Mandelbaum, pursuant to which Sunrise agreed to assist TINGO GROUP in identifying, analyzing, structuring, and negotiating suitable business opportunities, such as a sale of stock or assets, merger, tender offer, joint venture, financing arrangement, private placement, or any similar transaction or combination thereof. The parties had disagreements about, among other things, the applicability of the Sunrise Agreement, and the Company received demand letters and other correspondences from Sunrise threatening litigation in connection therewith. As of the date hereof, the parties have executed a settlement and release agreement for the release and waiver of the above claims however, TINGO GROUP was not able to timely file a registration statement to register the shares, and shares underlying the warrants per the settlement agreement. The Sunrise parties notified TINGO GROUP that it has breached the settlement agreement. TINGO GROUP has made a significant offer to the Sunrise parties to settle such matter and is negotiating with the Sunrise parties to resolve this issue immediately. For further details see “Legal Proceedings” below.

 

If we are unableActions brought against TINGO GROUP or its subsidiaries may result in settlements, injunctions, fines, penalties, suspension or revocation of licenses, reprimands or other results adverse to effectively protect our proprietary technology, our business and competitive positionit that could harm its reputation. Even if TINGO GROUP is successful in defending itself against these actions, the costs of such defense may be harmed.  significant. In market downturns, the number of legal claims and the amount of damages sought in legal proceedings may increase.

 

Our successIn addition, TINGO GROUP may face arbitration claims and abilitylawsuits brought by its or tis subsidiaries’ users and clients who use its services and find them unsatisfactory. TINGO GROUP may also encounter complaints alleging misrepresentation with regard to competeits platforms and/or services. Actions brought against TINGO GROUP may result in settlements, awards, injunctions, fines, penalties or other results adverse to it including harm to its reputation. Even if TINGO GROUP is successful in defending against these actions, the defense of such matters may result in its incurring significant expenses. Predicting the outcome of such matters is inherently difficult, particularly where claimants seek substantial or unspecified damages, or when arbitration or legal proceedings are dependent on our proprietary technology. The steps each of our operations, Enertec and Micronet, has taken to protect its proprietary rights may not be adequate and we may not be able to prevent othersat an early stage. A significant judgement or regulatory action against TINGO GROUP or a material disruption in Intermediate’s stock trading platform business arising from using our proprietary technology. The methodologies and proprietary technology that constituteadverse adjudications in proceedings against the basis of each of Enertec’s and Micronet’s solutions and products are not protected by patents. Existing trade secret, copyright and trademark laws and non-disclosure agreements to which each of Enertec and Micronet is a party offer only limited protection. Therefore, others, including Enertec’sdirectors, officers or Micronet’s competitors, may develop and market similar solutions and products, copy or reverse engineer elements of Enertec’s systems or Micronet’s production lines, or engage in the unauthorized use of Enertec’s or Micronet’s intellectual property. Any misappropriation of Enertec’s or Micronet’s proprietary technology or the development of competitive technology mayemployees would have a significantmaterial adverse effect on Enertec’s or Micronet’s ability to competeTINGO GROUP’s liquidity, business, financial condition, results of operations and may harm our business and financial position.

We may incur substantial costs as a result of litigation or other proceedings relating to intellectual property rights.  

Third parties may challenge the validity of Enertec’s or Micronet’s intellectual property rights or bring claims regarding Enertec’s or Micronet’s infringement of a third party’s property rights. This may result in costly litigation or other time-consuming and expensive judicial or administrative proceedings, which could deprive us of valuable rights, cause us to incur substantial expenses and cause a diversion for technical and management personnel. An adverse determination may subject us to significant liabilities or require us to seek licenses that may not be available from third parties on commercially favorable terms, if at all. Further, if such claims are proven valid, through litigation or otherwise, we may be required to pay substantial financial damages or be required to discontinue or significantly delay the development, marketing, sale or licensing of the affected products and intellectual property rights.

Our earnings and margins may be negatively impacted if we are unable to perform under our contracts.

When agreeing to contractual terms, our management makes assumptions and projections about future conditions or events. These projections assess:

●the productivity and availability of labor;

●the complexity of the work to be performed;

●the cost and availability of materials;

●the impact of delayed performance; and

●The timing of product deliveries.

prospects.

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If there is a significant change in one or more of these circumstances or estimates, or if we face unexpected contract costs, the profitability of one or more of these contracts may be adversely affected and could affect, among other things, our earnings and margins, due to the fact that our contracts are often made on a fixed-price basis.

Our earnings and margins could be negatively affected by deficient subcontractor performance or unavailable raw materials or components.

We rely on other companies to provide raw materials, major components and subsystems for our products. Subcontractors perform some of the services that we provide to our customers. We depend on these subcontractors and vendors to meet our contractual obligations in full compliance with customer requirements. Occasionally, we rely on only one or two sources of supply that, if disrupted, could have an adverse effect on our ability to meet our commitments to customers. Our ability to perform our obligations as a prime contractor may be adversely affected if one or more of these suppliers is unable to provide the agreed-upon supplies or perform the agreed-upon services in a timely and cost-effective manner. Further, deficiencies in the performance of our subcontractors and vendors could result in a customer terminating a contract for default. A termination for default could expose us to liability and adversely affect our financial performance and our ability to win new contracts. 

We depend on major customers for a significant portion of our revenues and our future revenues and earnings could be negatively impacted by the loss or reduction of the demand for our products or services by such customers.

A significant portion of our annual revenues in the past two years were derived from a few leading customers that are large scale strategic Israeli defense groups. In the MRM industry a significant portion of our MRM annual revenues derived from a few leading customers. As of December 31, 2016, the MRM division had five customers that combined account for approximately 66% of its revenues.

Israeli defense spending historically has been driven by perceived threats to the country’s national security. Although Israel has been under a sustained elevated threat level in recent years, we cannot provide any assurance that its defense budget will continue to grow at the pace it has over the past decade. A decrease in Israel’s defense spending or changes in spending allocation could result in one or more of our programs being reduced, delayed or terminated. Reductions in our existing programs could adversely affect our future revenues and earnings. In the MRM market, most of our major customers do not have any obligation to purchase additional products or services from us. Therefore, we cannot provide any assurance that any of our leading customers will continue to purchase solutions, products or services at levels comparable to previous years. A substantial loss or reduction in Micronet’s existing programs could adversely affect our future revenues and earnings.

We operate in a highly competitive and fragmented market and may not be able to maintain our competitive position in the future.

A number of larger competitors have recently entered the MRM market in which Micronet operates. These large companies have far greater development and capital resources than Micronet. Further, there are competitors of Micronet that offer solutions, products and services similar to those offered by Micronet. If they continue, these trends could undermine Micronet’s competitive strength and position and adversely affect our earnings and financial condition.

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Micronet may cease to be eligible for, or receive reduced, tax benefits under Israeli law, which could negatively impact our profits in the future.  

Micronet and Enertec currently receive certain tax benefits under the Israeli Law for Encouragement of Capital Investments of 1959, as a result of the designation of its production facility as an “Approved Enterprise.” To maintain their eligibility for these tax benefits, Micronet and Enertec must continue to meet several conditions including, among others, generating more than 25% of its gross revenues outside the State of Israel and continuing to qualify as an “Industrial Company” under Israeli tax law. An Industrial Company, according to the applicable Israeli law (Law for the Encouragement of Industry (Taxes), 1969), is a company that resides in Israel (either incorporated in Israel or managed and controlled from Israel) that, during the relevant tax year, derives at least 90% of its income from an Industrial Factory. An Industrial Factory means a factory that is owned by an Industrial Company and where its manufacturing operations constitute a vast majority of the factory’s total operations/business. The tax benefits of qualifying as an Industrial Company include a reduction of the corporate tax from 25% for “Regular Entities” and 16% or 9% for “Preferred Enterprises” (depending on the location of industry) in 2016. In addition, in recent years the Israeli government has reduced the benefits available under this program and has indicated that it may further reduce or eliminate benefits in the future. There is no assurance that Micronet and Enertec will continue to qualify for these tax benefits or that such tax benefits will continue to be available at their current level, or at all. The termination or reduction of these tax benefits would increase the amount of tax payable by Micronet and Enertec and, accordingly, reduce our net profit after tax and negatively impact our profits.

Because almost all of ourTINGO GROUP’s officers and directors are located in non-U.S. jurisdictions, you may have no effective recourse against our management for misconduct.

 

Currently, a majority of ourTINGO GROUP’s directors and officers are or will be nationals and/or residents of countries other than the United States, and all or a substantial portion of their assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against such officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any U.S. state. Additionally, it may be difficult to enforce civil liabilities under U.S. securities law in original actions instituted in Israel.Israel, Nigeria , the UK or PRC. UK, PRC, Nigeria or Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws because Israel issuch jurisdictions are not the most appropriate forum to bring such a claim. In addition, even if an Israeli court agreessuch courts agree to hear a claim, itthey may determine that Israeli, Nigeria , UK or PRC law, as applicable, and not U.S. law is applicable to hear the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure willmay also be governed by UK, PRC or Israeli law.

 


OurTINGO GROUP’s financial results may be negatively affected by foreign exchange rate fluctuations.

 

OurTINGO GROUP’s revenues are mainly denominated in U.S. currency and our costs are mainly denominated in Israeli currency.dollars. Where possible, we matchTINGO GROUP matches sales and purchases in these and other currencies to achieve a natural hedge. Currently, neither Enertec nor Micronet has a policy with respect to the use of derivative instruments for hedging purposes, except that both Enertec and Micronet will consider engaging in such hedging activities on a case by case basis. To the extent we areTINGO GROUP is unable to fully match our sales and purchases in different currencies, ourits business will be exposed to fluctuations in foreign exchange rates.

If Following the Merger, The Company’s revenue and expenses have been and are expected to continue to be primarily denominated in RMB, HK Dollar, Nis and Naira and we failare exposed to manage our growth,the risks associated with the fluctuation in the currency exchange rate of RMB, HK Dollar, Nis and Naira. Should RMB, HK Dollar, Nis and Naira appreciate against other currencies, the value of the proceeds from this offering and any future financings, which are to be converted from U.S. dollar or other currencies into RMB, HK Dollar, Nis and Naira, would be reduced and might accordingly hinder our business could be disrupteddevelopment due to the lessened amount of funds raised. Substantial fluctuation in the currency exchange rate of RMB, HK Dollar, Nis and our profitability could be reduced.  Naira may have a material adverse effect on Intermediate’s business, operations and financial position and the value of your investment in the Units.

 

AsWe have identified a resultmaterial weakness in our internal control over financial reporting as of December 31, 2022.

We conducted an evaluation under the supervision of our acquisitionsChief Executive Officer and Chief Financial Officer (our Principal Executive Officer and Principal Financial Officer, respectively), regarding the effectiveness of Micronetthe Company’s disclosure controls and Beijer’s U.S. vehicle operations,procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the numberExchange Act) as of our employees has increased since September 2012. We expect our growth may significantly strain our management and other operational and financial resources. In particular, growth increases the integration challenges involved in recruiting, training and retaining skilled technical, marketingDecember 31, 2022 and management personnel; maintaining high quality standards; preservingconcluded that they were not effective. The five material weaknesses related to information technology and one material weakness related to engaging enough qualified employees knowledgeable in U.S. GAAP were directly related to our corporate culture, valuesrapid growth, inability to timely integrate various information technology systems from all of its acquired businesses, the ongoing effects of COVID-19 and entrepreneurial environment; developingPRC regulations related thereto. See Item 9A Controls and improving our internal administrative infrastructure, particularly our financial, operational, communications and other internal controls; and maintaining high levelsProcedures for a further description of client satisfaction.the identified material weaknesses. If we are unable to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results;

Risk Factors Relating to Intermediate’s and Tingo’s respective Businesses. TINGO GROUP anticipates that its operating costs and expenses will increase. Intermediate may not be able to manage its expansion effectively.

TINGO GROUP anticipates that its operating costs and expenses will increase in the foreseeable future as it endeavors to launch and grow Intermediate’s business, attract users and clients, enhance and develop its service offerings, enhance its technology capabilities, and increase its brand recognition. These efforts may prove more costly than TINGO GROUP anticipates, and it may not succeed in generating revenues sufficiently to offset these higher expenses. There are other external and internal factors that could negatively affect TINGO GROUP’s financial condition. For example, the transaction volume achieved on Intermediate’s platforms may be lower than expected, which may lead to lower than expected revenues. Furthermore, TINGO GROUP has adopted a share incentive plan in the past and may adopt new share incentive plans in the future, which have caused, and will result in, significant share-based compensation expenses to us. As a result of the foregoing and other factors, TINGO GROUP may incur net losses in the future.

Additionally, Intermediate’s current and planned personnel, systems, resources and controls may not be adequate to support and effectively manage its future operations. Intermediate’s plans for continuous expansion may increase the complexity of its business and may place a strain on its management, operations, technical systems, financial resources and internal control functions. Intermediate intends to upgrade its systems from time to time to cater to the need of launching new services, and the process of upgrading its systems may disrupt its ability to timely and accurately process information, which could adversely affect its results of operations and cause harm to its business.


If the Company is unable to attract and retain clients, or if it fails to offer services to address the needs of its clients as it evolves, Intermediate’s business and results of operations may be materially and adversely affected.

If there is insufficient demand for Intermediate’s services, it might not be able to achieve and increase its transaction volume and revenues as it expects, and its and the Company’s business and results of operations may be adversely affected.

The Company’s success will depend largely on its ability to attract and retain clients, in particular those that have highly frequent transactions. Failure to deliver services in a timely manner at competitive prices with satisfactory experience will cause clients to lose confidence in Intermediate and use its platforms less frequently or even stop using its platforms altogether, which in turn will materially and adversely affect Intermediate’s business. Even if Intermediate is able to provide high-quality and satisfactory services on its platforms in a timely manner and at favorable price terms, the Company cannot assure you that Intermediate will be able to attract and retain clients, encourage repeat and increase trading transactions due to reasons out of its control, such as Intermediate’s clients’ personal financial reasons or the deterioration of the market conditions.

If Intermediate is unable to generate clients and increase its client retention rates in a cost-effective manner, Intermediate’s business, financial condition and results of operations are likely to be adversely affected. Although the Company expects to spend significant financial resources on marketing expenses, these efforts may not be cost-effective to attract clients to Intermediate. The Company cannot assure its investors that Intermediate will be able to gain, maintain, or grow a client base in a cost-effective way, if at all.

TINGO GROUP will depend on its maintenance of its intellectual property and its proprietary technology, and its future results may be impacted if it cannot maintain technological superiority in its industry. Tingo Mobile may not be able to respond quickly enough to changes in technology and technological risks, and to develop and maintain its intellectual property.

TINGO GROUP’s potential success depends on Tingo Mobile’s ability to achieve technological advances and Intermediate’s sophisticated proprietary technology to empower the efficient operations of its platforms. If Intermediate’s technology becomes more widely available to its current or future competitors for any reason, its operating results may be adversely affected.

Changes in legislative, regulatory or industry requirements or in competitive technologies may render certain of Tingo Mobile’s planned products obsolete or less attractive. Tingo Mobile’s communications equipment may become obsolete, and our ability to anticipate changes in technology and regulatory standards and to successfully develop and introduce new and enhanced products on a timely basis will be a significant factor in Tingo Mobile’s ability to remain competitive. We cannot provide assurance that Tingo Mobile will be able to achieve the technological advances that may be necessary for it to remain competitive or that certain of Tingo Mobile’s products will not become obsolete.

Additionally, to keep pace with changing technologies and client demands, Intermediate must correctly interpret and address market trends and enhance the features and functionality of its technology in response to these trends, which may lead to significant research and development costs. Intermediate may be unable to accurately determine the needs of its users and clients or the trends of the various industries it anticipates to enter or to design and implement the appropriate features and functionality of its technology in a timely and cost-effective manner, which could result in decreased demand for its services and a corresponding decrease in its revenue. Also, any adoption or development of similar or more advanced technologies by its competitors may require that TINGO GROUP devotes substantial resources to the development of more advanced technology at Intermediate to remain competitive. The markets in which Intermediate competes are characterized by rapidly changing technology, evolving industry standards and changing trading systems, practices and techniques. Intermediate may not be able to keep up with these rapid changes in the future, develop new technology, realize a return on amounts invested in developing new technologies or remain competitive in the future.


In addition, Intermediate must protect its systems against physical damage from fire, earthquakes, power loss, telecommunications failures, computer viruses, hacker attacks, physical break-ins and similar events. Any software or hardware damage or failure that causes interruption or an increase in response time of its proprietary technology could reduce client satisfaction and decrease usage of its services.

Unexpected network interruptions, security breaches or computer virus attacks and failures in TINGO GROUP’s information technology systems could have a material adverse effect on its business, financial condition and results of operations. Additionally, interruptions or delays in the services provided by cellular networks or Internet service providers could impair Tingo Mobile’s operations and its business could suffer. Tingo Mobile’s use of open-source software may pose particular risks to its proprietary software and systems.

TINGO GROUP’s information technology systems will support all phases of its operations and will be an essential part of its technology infrastructure. If Intermediate’s systems fail to perform, it could experience disruptions in operations, slower response time or decreased customer satisfaction. Intermediate must be able to process, record and monitor a large number of transactions and its operations are highly dependent on the integrity of its technology systems and its ability to make timely enhancements and additions to its systems. System interruptions, errors or downtime can result from a variety of causes, including unexpected interruptions to the Internet infrastructure, technological failures, changes to Intermediate’s systems, changes in customer usage patterns, linkages with third-party systems and power failures. Intermediate’s systems will also be vulnerable to disruptions from human error, execution errors, errors in models such as those used for risk management and compliance, employee misconduct, unauthorized trading, external fraud, distributed denial of service attacks, computer viruses or cyberattacks, terrorist attacks, natural disaster, power outage, capacity constraints, software flaws, events impacting Intermediate’s key business partners and vendors, and other similar events.

Intermediate’s Internet-based businesses depend on the performance and reliability of the Internet infrastructure. Intermediate cannot assure its investors that the Internet infrastructure it depends on will remain sufficiently reliable for its needs. Any failure to maintain the performance, reliability, security or availability of Intermediate’s network infrastructure may cause significant damage to its ability to attract and retain users and clients. Major risks involving Intermediate’s network infrastructure include:

●breakdowns or system failures resulting in a prolonged shutdown of its servers;
●disruption or failure in the national backbone networks in the PRC, which would make it impossible for users and clients to access its platforms;
●damage from natural disasters or other catastrophic events such as typhoon, volcanic eruption, earthquake, flood, telecommunications failure, or other similar events; and
●any infection by or spread of computer viruses or other system failures.

Any network interruption or inadequacy that causes interruptions in the availability of Intermediate’s platforms or deterioration in the quality of access to its platforms could reduce user and client satisfaction and result in a reduction in the activity level of its users and clients as well as the number of clients making trading transactions on its platforms. Furthermore, increases in the volume of traffic on Intermediate’s platforms could strain the capacity of its computer systems and bandwidth, which could lead to slower response times or system failures. This could cause a disruption or suspension in Intermediate’s service delivery, which could hurt its brand and reputation. Intermediate may need to incur additional costs to upgrade its technology infrastructure and computer systems in order to accommodate increased demand if it anticipates that its systems cannot handle higher volumes of traffic and transaction in the future. In addition, it could take an extended period of time to restore full functionality to its technology or other operating systems in the event of an unforeseen occurrence, which could affect its ability to process and settle client transactions. Despite Intermediate’s efforts to identify areas of risk, oversee operational areas involving risks, and implement policies and procedures designed to manage these risks, there can be no assurance that it will not suffer unexpected losses, reputational damage or regulatory actions due to technology or other operational failures or errors, including those of its vendors or other third parties.


In addition, any damage to or failure of Tingo Mobile’s systems generally would prevent it from operating its business. Tingo Mobile relies on the cellular networks and internet and, accordingly, depend upon the continuous, reliable, and secure operation of these networks and internet servers, related hardware and software, and network infrastructure that Tingo Mobile uses are vulnerable to damage or interruption from human error, intentional bad acts, earthquakes, floods, fires, severe storms, war, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures, and similar events, many of which are beyond Tingo Mobile’s control, any of which could disrupt its service, destroy user content, or prevent Tingo Mobile from being able to continuously back up or record changes in its users’ content. In the event of significant physical damage to one of these data centers, it may take a significant period of time to achieve full resumption of our services, and Tingo Mobile’s disaster recovery planning may not account for all eventualities. Moreover, negative publicity arising from these types of disruptions could damage Tingo Mobile’s reputation and may adversely impact use of its products. Tingo Mobile may not carry sufficient business interruption insurance to compensate it for losses that may occur as a result of any events that cause interruptions in its service.

Additionally, Tingo Mobile uses open-source software in its proprietary software and systems and intends to continue using open-source software in the future. The licenses applicable to Tingo Mobile’s use of open-source software may require that source code that is developed using open-source software be made available to the public and that any modifications or derivative works to certain open-source software continue to be licensed under open-source licenses. From time to time, Tingo Mobile may face claims from third parties claiming infringement of their intellectual property rights, or demanding the release or license of the open source software or derivative works that Tingo Mobile developed using such software (which could include Tingo Mobile’s proprietary source code) or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require Tingo Mobile to purchase a costly license, publicly release the affected portions of its source code, be limited in or cease using the implicated software unless and until it can re-engineer such software to avoid infringement or change the use of, or remove, the implicated open-source software.

In addition to risks related to license requirements, use of certain open-source software can lead to greater risks than use of third-party commercial software, as open-source licensors generally do not provide warranties, indemnities or other contractual protections with respect to the software (for example, non- infringement or functionality). Tingo Mobile’s use of open-source software may also present additional security risks because the source code for open source software is publicly available, which may make it easier for hackers and other third parties to determine how to breach its website and systems that rely on open source software. Any of these risks could be difficult to eliminate or manage, and, if not addressed, could have a material adverse effect on Tingo Mobile’s business, financial condition, results of operations and prospects.

If TINGO GROUP or Tingo Mobile fails to protect its platform or the confidential information of its users and clients, whether due to cyber-attacks, computer viruses, physical or electronic break-ins or other reasons, it may be subject to liabilities imposed by relevant laws and regulations, and its reputation and business may be materially and adversely affected.

TINGO GROUP’s and Intermediate’s computer system, the networks it uses, the networks and online trading platforms of the exchanges and other third parties with whom it interacts, are potentially vulnerable to physical or electronic computer break-ins, viruses and similar disruptive problems or security breaches. A party that is able to circumvent TINGO GROUP’s or Intermediate’s security measures could misappropriate proprietary information or customer information, jeopardize the confidential nature of the information TINGO GROUP or Intermediate transmits over the Internet and mobile network or cause interruptions in its operations. TINGO GROUP, Intermediate or its respective service providers may be required to invest significant resources to protect against the threat of security breaches or to alleviate problems caused by any breaches.


In addition, TINGO GROUP and Intermediate will collect, store and process certain personal and other sensitive data from its users and clients, which makes TINGO GROUP and Intermediate potentially vulnerable targets to cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions. While TINGO GROUP and Intermediate will take steps to protect the confidential information that it expects to have access to, its security measures could be breached. Because the techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not recognized until they are launched against a target, TINGO GROUP and Intermediate may not be able to anticipate these techniques or implement adequate preventative measures. Any accidental or willful security breaches or other unauthorized access to TINGO GROUP’s or Intermediate’s system could cause confidential user and client information to be stolen and used for criminal purposes. Security breaches or unauthorized access to confidential information could also expose TINGO GROUP and Intermediate to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in TINGO GROUP’s or Intermediate’s technology infrastructure are exposed and exploited, its relationships with users and clients could be severely damaged, it could incur significant liability and its stock trading platform business and operations could be adversely affected. Furthermore, Intermediate’s corporate clients may utilize its technology to serve their own employees and customers. Any failure or perceived failure by TINGO GROUP or Intermediate to prevent information security breaches or to comply with privacy policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other customer data, could cause Intermediate’s clients to lose trust in it and could expose Intermediate to legal claims.

In addition, Tingo Mobile collects personally identifiable information and other data from its consumers and prospective consumers. Tingo Mobile uses this information to provide services and relevant products to its consumers, to support, expand and improve its business, and to tailor our marketing and advertising efforts. Tingo Mobile may also share consumers’ personal data with certain third parties as authorized by the consumer or as described in Tingo Mobile’s privacy policy. As a result, Tingo Mobile is subject to governmental regulation and other legal obligations related to the protection of personal data, privacy and information security in certain countries where it does business, and there has been, and we expect there will be a continuing increase globally in laws that restrict or control the use of personal data. Consumer privacy and consumer protection laws may be interpreted or applied by regulatory authorities in a manner that could require Tingo Mobile to make changes to its contracts, or its operations, or incur fines, penalties, or settlement expenses, which may result in harm to its business, results of operations, financial condition, and brand.

There are uncertainties as to the interpretation and application of laws in one jurisdiction which may be interpreted and applied in a manner inconsistent to another jurisdiction and may conflict with TINGO GROUP’s or Intermediate’s policies and practices or require changes to the features of its system. TINGO GROUP and Intermediate cannot assure that its user information protection system and technical measures will be considered sufficient under applicable laws and regulations. If TINGO GROUP or Intermediate is unable to address any information protection concerns, any compromise of security that results unauthorized disclosure or transfer of personal data, or to comply with the then applicable laws and regulations, it may incur additional costs and liability and result in governmental enforcement actions, litigation, fines and penalties or adverse publicity and could cause its users and clients to lose trust in us, which could have a material adverse effect on its stock trading platform business, results of operations, financial condition and prospects. TINGO GROUP and Intermediate may also be subject to new laws, regulations or standards or new interpretations of existing laws, regulations or standards, including those in the areas of data security and data privacy, which could require TINGO GROUP or Intermediate to incur additional costs and restrict its stock trading platform business operations.

Additionally, the regulatory landscape surrounding data protection, data privacy and information security is rapidly changing across Africa. Among the African countries, only Ivory Coast, Ghana, Senegal, Morocco, Nigeria, South Africa and Tunisia have established comprehensive data protection and data privacy laws. These data protection laws and regulations were only recently enacted. For example, the National Information Technology Development Agency in Nigeria passed new data protection guidelines in 2017, and we have implemented new policies to comply with these regulations.


Compliance with the various data protection laws in Africa is challenging due to the complex and sometimes contradictory nature of the different regulatory regimes. Because data protection regulations are not uniform among the various African nations in which TINGO GROUP, including its subsidiary Tingo Mobile operates, its ability to transmit consumer information across borders is limited by its ability to comply with conditions and restrictions that vary from country to country. In countries with particularly strict data protection laws, Tingo Mobile might not be able to transmit data out of the country at all and may be required to host individual servers in each such country where it collects data. For example, Ivory Coast, Ghana, Senegal, Morocco, and Tunisia all restrict data transfer across borders. Ghana also requires that a company notify consumers in the event of a personal data breach. Egypt currently has no data protection and privacy laws. However, the Egyptian government announced in 2017 that it is committed to doubling the size of its e-commerce sector by 2020 and intends to update all legislation and regulation relevant to e-commerce. Moreover, many data protection regimes apply based on where a consumer is located, and as TGH expands and new laws are enacted or existing laws change, it may be subject to new laws, regulations or standards or new interpretations of existing laws, regulations or standards, including those in the areas of data security, data privacy and regulation of email providers and those that require localization of certain data, which could require TGH to incur additional costs and restrict its business operations.

TGH and its subsidiaries in Nigeria and other African jurisdictions are also subject to other Nigeria and international laws. Although TGH takes precautions to prevent violations of these laws, its exposure for violating these laws increases as TGH continues to expand its international presence and any failure to comply with such laws could harm its reputation and our business.

Any failure or perceived failure by TGH or any of its subsidiares to comply with rapidly evolving privacy or security laws, policies, legal obligations or industry standards or any security incident that results in the unauthorized release or transfer of personally identifiable information or other consumer data may result in governmental enforcement actions, litigation (including consumer class actions), criminal prosecution, fines and penalties or adverse publicity and could cause our consumers to lose trust in the Tingo brand, which could have a material adverse effect on its business, financial condition, results of operations and prospects.

TINGO GROUP may not succeed in promoting and sustaining its brand, which could have an adverse effect on its future growth and business. If TINGO GROUP fails to compete effectively, it may lose existing users and fail to attract new users, which could have a material adverse effect on its business, financial condition, results of operations and prospects.

A critical component of TINGO GROUP’s launch and growth will be its ability to promote and sustain its brand. Promoting and positioning TINGO GROUP’s brand and platforms will depend largely on the success of its marketing efforts, its ability to attract users and clients cost-efficiently and its ability to consistently provide high-quality services and a superior experience. TINGO GROUP expects to incur significant expenses related to advertising and other marketing efforts, which may not be effective and may adversely affect its net margins.

If TINGO GROUP fails to maintain its brand cost-effectively, its ability to expand the number of users of the Tingo Mobile network will be impaired, its reputation may be harmed, and its business, results of operations, and financial condition may suffer.

We believe that developing and maintaining awareness of the Tingo brand is critical to achieving widespread acceptance of the Tingo Mobile network and is an important element in attracting new users. Furthermore, we believe that the importance of Tingo brand recognition will increase as competition in its market increases. Successful promotion of the Tingo brand will depend largely on the effectiveness of its marketing efforts and on its ability to ensure that the Tingo Mobile network remains reliable, and useful at competitive prices. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses Tingo Mobile incurs in building its brand. If Tingo Mobile fails to successfully promote and maintain its brand or incur substantial expenses in an unsuccessful attempt to promote and maintain its brand, it may fail to attract new organizations to Tingo Mobile or to grow or maintain its telecommunications network.


In addition, to provide a high-quality user and client experience, TINGO GROUP expects to invest substantial amounts of resources in the development and functionality of Intermediate’s platforms, websites, technology infrastructure and client service operations. Intermediate’s ability to provide a high-quality user and client experience will also be highly dependent on external factors over which it may have little or no control, including, without limitation, the reliability and performance of software vendors and business partners. Failure to provide Intermediate’s users and clients with high quality services and experience for any reason could substantially harm its reputation and adversely impact its efforts to develop a trusted brand, which could have a material adverse effect on its stock trading platform business, results of operations, financial condition and prospects.

Any failure to protect either Intermediate’s or Tingo Mobile’s intellectual property could harm their respective businesses and competitive position. Additionally, the products and services utilized by Tingo Mobile and its suppliers and service providers may infringe on intellectual property rights owned by others.

Intermediate expects to rely primarily on trade secret, contract, copyright, trademark and patent law to protect its proprietary technology. It is possible that third parties may copy or otherwise obtain and use Intermediate’s proprietary technology without authorization or otherwise infringe on its rights. Intermediate may not be able to successfully pursue claims for infringement that interfere with its ability to use its technology, website or other relevant intellectual property or have adverse impact on its brand. Intermediate cannot assure TINGO GROUP’s investors that any of its intellectual property rights would not be challenged, invalidated or circumvented, or such intellectual property will be sufficient to provide Intermediate with competitive advantages. In addition, other parties may misappropriate its intellectual property rights, which would cause it to suffer economic or reputational damages. Because of the rapid pace of technological change, TINGO GROUP cannot assure you that all of Intermediate’s proprietary technologies and similar intellectual property will be patented in a timely or cost-effective manner, or at all. Furthermore, parts of Intermediate’s business rely on technologies developed or licensed by other parties, or co-developed with other parties, and Intermediate may not be able to obtain or continue to obtain licenses and technologies from these other parties on reasonable terms, or at all.

Any claims or litigation could cause Intermediate and us to incur significant expenses and, if successfully asserted against Intermediate or us, could require that we pay substantial damages or ongoing royalty payments, restrict Intermediate or us from conducting our business or require that we or Intermediate comply with other unfavorable terms. We and Intermediate may also be obligated to indemnify parties or pay substantial settlement costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses, modify applications or refund fees, which could be costly. Even if we and Intermediate were to prevail in such a dispute, any litigation regarding Intermediate’s intellectual property could be costly and time-consuming and divert the attention of our management from Intermediate and our business operations.

TGH and its subsidiaries, including Tingo Mobile, relies on various patent, service mark, trademark, and trade secret laws and contractual restrictions to establish and protect its proprietary rights. Despite these actions, they only offer limited protection and may not prevent the misappropriation of TGH’s rights. Also, TGH may not be able to discover or determine the extent of or protect against any unauthorized use of its proprietary rights, which may increase the cost of protecting these rights or reduce TGH’s revenues. Any of these factors could have a material adverse effect on TGH’s business, financial condition, and operating results. TGH also purchases products from suppliers, including device suppliers, and outsource services to service providers, including billing and customer care functions, that incorporate or utilize intellectual property. TGH and some of its suppliers and service providers have received, and may receive in the future, assertions and claims from third parties that the products or software utilized by TGH or its suppliers and service providers infringe on the patents or other intellectual property rights of these third parties. These claims could require TGH or an infringing supplier or service provider to cease certain activities or to cease selling the relevant products and services. These claims can be time-consuming and costly to defend and divert management resources. If these claims are successful, TGH could be forced to pay significant damages or stop selling certain products or services or stop using certain trademarks, which could adversely affect its results of operations.


Intermediate faces risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt its operations. Additionally, equipment failure, natural disasters or terrorist acts may affect Tingo Mobile’s infrastructure and result in significant disruption to its business.

Intermediate’s stock trading platform business could be materially and adversely affected by natural disasters, health epidemics or other public safety concerns. Natural disasters may give rise to server interruptions, breakdowns, system failures, technology platform failures or Internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect its ability to operate its platform and provide services and solutions. Intermediate’s stock trading platform business could also be adversely affected if its employees are affected by health epidemics. In addition, Intermediates’ results of operations could be adversely affected to the extent that any health epidemic harms the economy in general. If any natural disasters, health epidemics or other public safety concerns were to affect the locations where Intermediate operates, its operation may experience material disruptions, which may materially and adversely affect its stock trading platform business, financial condition and results of operations.

In addition, equipment failures, natural disasters, including severe weather, terrorist acts or other disruptions that affect TGH’s wireline and wireless networks, including transport facilities, communications switches, routers, microwave links, cell sites, or other equipment or third-party owned local and long-distance networks on which TGH relies, could disrupt its operations, require significant resources to remedy, result in a loss of subscribers or impair its ability to attract new subscribers, which in turn could have a material adverse effect on TGH’s business, results of operations and financial condition.

We could incur significant liability or our reputation could be damaged if our information systems are breached or we otherwise fail to protect customer or Company data or information systems.

In operating our business and providing services and solutions to customers, we collect, use, store, transmit and otherwise process certain electronic information, including personal, confidential, proprietary and sensitive data such as information related to financial records, health care and personal data of our customers, colleagues and vendors. We rely on the efficient, uninterrupted and secure operation of complex information technology systems and networks to operate our business and securely process, transmit and store electronic information. In the normal course of business, we also share electronic information with our vendors and other third parties. This electronic information comprises sensitive and confidential data, including information related to financial records, health care and customers’ personal data. Our information technology systems and safety control systems, and those of our numerous third-party providers, as well as the control systems of critical infrastructure they rely on are potentially vulnerable to unauthorized access, damage or interruption from a variety of external threats, including cyberattacks, computer viruses and other malware, ransomware and other types of data and systems-related modes of attack. Our systems are also subject to compromise from internal threats such as improper action by employees, vendors and other third parties with otherwise legitimate access to our systems. We could experience significant financial and reputational harm if our information systems are breached, sensitive customer or our data are compromised, surreptitiously modified, rendered inaccessible for any period of time or maliciously made public, or if we fail to make adequate or timely disclosures to the public or law enforcement agencies following any such event, whether due to delayed discovery or a failure to follow existing protocols.

Any disruption of our business operations due to a cyber attack, even for a limited amount of time, may adversely affect its business and financial condition. Our information technology and other systems — including those of its third-party service providers — that maintain and transmit our proprietary information, the confidential information of our business partners and its employees, and its subscribers’ information, including credit card information, location data, or other personal information, may be compromised by a malicious third-party penetration of our network security, including by state-sponsored parties, or company employees or external actors, and impacted by advertent or inadvertent actions or inactions by our employees and agents. As a result, our proprietary or confidential information or the proprietary or confidential information of our business partners, employees and subscribers may be lost, disclosed, accessed, used, corrupted, destroyed, or taken without consent. Cyber attacks, such as the use of malware, computer viruses, dedicated denial of service attacks, or other means for disruption or unauthorized access, and data breaches have increased in frequency, scope, and potential harm in recent years. Cyber attacks may occur in conjunction with physical attacks on our network infrastructure. We also purchase equipment and software from third parties that could contain software defects, Trojan horses, malware, or other means by which third parties could access its network or the information stored or transmitted on such network or equipment.


While, to date, we are not aware of any cyber attacks or other cyber incidents that, individually or in the aggregate, have been material to TINGO GROUP’s consolidated operations or financial condition, the preventive actions the Company takes to reduce the risk of cyber incidents and protect its information technology and networks may be insufficient to repel a cyber attack in the future. In addition, the costs of such preventative actions, including insurance coverage that the Company maintains relating to cybersecurity incidents, may be significant, which may adversely affect its results of operations. Any disruption of the information technology systems that are necessary to conducting normal business operations due to a cyber attack, even for a limited amount of time, may prevent TGH from conducting normal business operations and adversely affect its financial condition. Any major compromise of the Company’s data or network security or that of its third-party service suppliers, failure to prevent or mitigate a loss of our services or network, its proprietary information, or its subscribers’ information, and delays in detecting any such compromise or loss, even for a limited amount of time, could disrupt the Company’s operations, impact its reputation and subscribers’ willingness to purchase its service, and subject the Company to significant additional expenses. Such expenses could include incentives offered to existing subscribers and other business relationships in order to retain their business, increased expenditures on cyber security measures and the use of alternate resources, lost revenues from business interruption, significant penalties under privacy laws, and litigation, which could be material. Furthermore, the potential costs associated with any such cyber attacks could be greater than the insurance coverage the Company maintains.

If TINGO GROUP is unable to obtain stockholder approval for the conversion of the Series A Preferred Stock into Common Stock by June 30, 2023 (the “Trigger Date”), then all issued and outstanding shares of Series A Preferred Stock will be redeemed by TINGO GROUP in consideration of the right to receive cash and TINGO GROUP shall cause Tingo LLC, a wholly-owned subsidiary of TINGO GROUP (“Delaware Sub”), to issue to Tingo, the amount of membership interests of Delaware Sub as needed to cause Tingo, to own 27% of the total issued and outstanding membership interests of Delaware Sub.

If stockholders have not approved the conversion of the Series A Preferred Stock into Common Stock by June 30, 2023 (the “Trigger Date”), then, (i) all issued and outstanding shares of Series A Preferred Stock will be immediately and automatically redeemed by the Company, and all accrued and unpaid dividends thereon to the date of redemption extinguished, in consideration of the right to receive an aggregate amount, in respect of all shares of Series A Preferred Stock, of $1.00 in cash, and (ii) the Company shall, within ten (10) Business Days following the Trigger Event, cause TGH to issue to TMNA, the amount of membership interests of TGH as needed to cause TMNA, to own 27% of the total issued and outstanding membership interests of TGH, subject to the terms of the Series A Preferred Stock Certificate of Designations. We cannot assure you we will receive stockholder approval for the conversion of the Series A Preferred Stock into Common Stock by the Trigger Date.

In the event that (i) TINGO GROUP does not receive by the Trigger Date the stockholder approval with respect to the conversion of Series B Preferred Stock and the amendment of TINGO GROUP’s certificate of incorporation to increase the number of authorized shares of Common Stock, (ii) the Nasdaq change of control application is rejected, or (iii) Nasdaq requires Material Restrictions (as defined in the Series B Certificate of Designation) in order to approve the Nasdaq change of control application (each a “Trigger Event”), each holder of Series B Preferred Stock, at its sole option, shall have the right, but not the obligation, to reduce the Stated Value per share of Series B Preferred Stock in exchange for membership interests of Delaware Sub, up to a maximum of 33% of the outstanding membership interests of Delaware Sub.

In the event that (i) we do not receive by June 30, 2023 the stockholder approval with respect to the conversion of Series B Preferred Stock and the amendment of TINGO GROUP’s certificate of incorporation to increase the number of authorized shares of Common Stock, (ii) the Nasdaq change of control application is rejected, or (iii) Nasdaq requires Material Restrictions (as defined in the Series B Certificate of Designation) in order to approve the Nasdaq change of control application (each a “Trigger Event”), each holder of Series B Preferred Stock, at its sole option, shall have the right, but not the obligation, to reduce the Stated Value per share of Series B Preferred Stock in exchange for membership interests of TGH, up to a maximum of 33% of the outstanding membership interests of TGH. If the holder of Series B Preferred Stock exercises its option to acquire the maximum number of membership interests of TGH, the Stated Value per share shall be reduced to $14,292.71. For each 1% the holder of Series B Preferred Stock chooses to receive in membership interests of TGH up to the maximum of 33%, the Stated Value per share of Series B Preferred Stock shall decrease by $216.56. Any amounts that equal less than 1% shall be proportionality reduced. On the date that is ninety (90) days following the date on which the earliest Trigger Event occurs, TINGO GROUP shall redeem all outstanding shares of Series B Preferred Stock for the Stated Value, as, and if, so reduced. We cannot assure you we will receive stockholder approval for the conversion of the Series A Preferred Stock into Common Stock by the Trigger Date or that Nasdaq will approve the change of control application in the present form.


Failure or poor performance of third-party software, infrastructure or systems on which we rely could adversely affect our business.

We will rely on third parties to provide and maintain certain infrastructure that will be critical to its business. For example, a strategic partner provides services to us in connection with various aspects of our operations and systems. If such services become limited, restricted, curtailed or less effective or more expensive in any way or become unavailable to us for any reason, its business may be materially and adversely affected. The infrastructure of our third-party service providers may malfunction or fail due to events out of its control, which could disrupt its operations and have a material adverse effect on its business, financial condition, results of operations and cash flows. Any failure to maintain and renew our relationships with these third parties on commercially favorable terms, or to enter into similar relationships in the future, could have a material adverse effect on its business, financial condition, results of operations and cash flows.

We also rely on certain third-party software, computer systems and service providers. Any interruption in these third-party services or software, deterioration in their performance, or other improper operation could interfere with its trading activities, cause losses due to erroneous or delayed responses, or otherwise be disruptive to its business. If our arrangements with any third party are terminated, it may not be able to find an alternative source of software or systems support on a timely basis or on commercially reasonable terms. This could also have a material adverse effect on our business, financial condition, results of operations and cash flows.

Employee misconduct could expose us to significant legal liability and reputational harm.

Our platforms will operate in industries in which integrity and the confidence of its users and clients are of critical importance. During our daily operations, it will be subject to the risks of errors and misconduct by its employees, which include:

●engaging in misrepresentation or fraudulent activities when marketing or performing services to users and clients;
●improperly using or disclosing confidential information of its users and clients or other parties;
●concealing unauthorized or unsuccessful activities; or
●otherwise not complying with applicable laws and regulations or its internal policies or procedures.

If any of our employees engages in illegal or suspicious activities or other misconduct, it could suffer serious harm to its reputation, financial condition, client relationships and ability to attract new clients and even be subject to regulatory sanctions and significant legal liability. We may also be subject to negative publicity from the sanction that would adversely affect its brand, public image and reputation, as well as potential challenges, suspicions, investigations or alleged claims against us. It is not always possible to deter misconduct by its employees or senior management during the operations of its business or uncover any misconduct occurred in their past employment, and the precautions we take to detect and prevent any misconduct may not always be effective. Misconduct by our employees, or even unsubstantiated allegations of misconduct, could result in a material adverse effect on its reputation and its business.


TGH may be adversely affected by changes in the regulations applicable to the telecommunications sector. Internet-related issues may reduce or slow the growth in the use of our services in the future. In particular, our future growth depends on the further acceptance of the Internet in China and particularly the mobile Internet as an effective platform for assessing trading and other financial services and content.

As the internet continues to revolutionize commercial relationships on a global scale and online penetration increases, new laws and regulations relating to the use of the internet in general and the e-commerce sector in particular may be adopted. These laws and regulations may govern the collection, use and protection of data, consumer protection, online payments, pricing, anti-bribery, tax, country specific prices and website contents and other aspects relevant to our business. The adoption or modification of laws or regulations relating to our operations could adversely affect our business by increasing compliance costs, including as a result of confidentiality or security breaches in case of non-compliance, and administrative burdens. In particular, privacy related regulation could interfere with TGH’s strategy to collect and use personal information as part of its data-driven approach along the value chain. We currently believe that TGH complies with these new guidelines, and its data protection and privacy policies address methods for continued compliance with such guidelines. TGH must comply with applicable regulations in all of the countries in which it operates, and any non-compliance could lead to fines and other sanctions.

Critical issues concerning the commercial use of the Internet, such as ease of access, security, privacy, reliability, cost, and quality of service, remain unresolved and may adversely impact the growth of Internet use. If Internet usage continues to increase rapidly, the Internet infrastructure may not be able to support the demands placed on it by this growth, and its performance and reliability may decline. Continuous rapid growth in Internet traffic may cause decreased performance, outages and delays. Our ability to increase the speed with which we provide services to users and clients and to increase the scope and quality of such services is limited by and dependent upon the speed and reliability of Intermediate’s users’ and clients’ access to the Internet, which is beyond our control. If periods of decreased performance, outages or delays on the Internet occur frequently or other critical issues concerning the Internet are not resolved, overall Internet usage or usage of our web-based services could increase more slowly or decline, which would cause Intermediate’s stock trading platform business, results of operations and financial condition to be materially and adversely affected.

Fluctuations in exchange rates of the RMB could materially affect financial results. Tingo Mobile is also experiencing difficulties in obtaining foreign exchange for use in its operations outside of Nigeria and is dependent for those operations on financing providers not situated in Nigeria.

The exchange rates between the RMB and the U.S. dollars and other foreign currencies are affected by, among other things, changes in China’s political and economic conditions. The People’s Bank of China regularly intervenes in the foreign exchange market to limit fluctuations in RMB exchange rates and achieve policy goals.

Tingo Mobile, Tingo Foods, and other businesses based in Nigeria generally are having difficulty sourcing foreign exchange through the Central Bank of Nigeria, which has restricted access to foreign exchange in an effort to support the local Naira currency. This has adversely affected Tingo Mobile’s customers and the business community generally in Nigeria. As a result, it has been necessary for TGH, the parent company of Tingo Mobile and Tingo Foods, to arrange financing outside of Nigeria for compliance, operations, and other costs associated with its business in the United States and other locations outside of Nigeria. Nevertheless, if TGH is unsuccessful in raising capital or generated cash flow outside of Nigeria, its operations may be adversely affected.


The costs to comply with, or our failure to comply with laws related to privacy, data security and data protection could adversely affect our financial condition, operating results and our reputation. TGH and its subsidiaries are subject to governmental regulation and other legal obligations related to privacy, data protection and information security. If TGH is unable to comply with these, it may be subject to governmental enforcement actions, litigation, fines and penalties or adverse publicity.

Improper collection, use disclosure, cross border transfer, and retention of confidential, personal, or proprietary data could result in regulatory scrutiny, legal and financial liability, or harm to our reputation. In operating our business and providing services and solutions to clients, we store and transfer sensitive employee and client data, including personal data, in and across multiple jurisdictions. We collect data from client and individuals located all over the world and leverage systems and teams to process it. As a result, we are subject to a variety of laws and regulations regarding privacy, data protection, data security and cyber-security. These laws and regulations are continuously evolving and developing. Some of these laws and regulations are increasing the level of data handling restrictions, including rules on data localization, all of which could affect our operations and result in regulatory liability and high fines. In particular, high-profile security breaches at major companies continue to be disclosed regularly, which is leading to even greater regulatory scrutiny and fines at the highest levels they have ever been.

The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting. Given the breadth and depth of changes in data protection obligations, including classifying data and committing to a range of administrative, technical and physical controls to protect data, our compliance with laws will continue to require time, resources and review of the technology and systems we use.

Through its operating subsidiaries, TGH collects personally identifiable information and other data from its consumers and prospective consumers. TGH uses this information to provide services and relevant products to its consumers, to support, expand and improve its business, and to tailor our marketing and advertising efforts. TGH may also share consumers’ personal data with certain third parties as authorized by the consumer or as described in TGH’s privacy policy. As a result, TGH is subject to governmental regulation and other legal obligations related to the protection of personal data, privacy and information security in certain countries where it does business, and there has been, and we expect there will be a continuing increase globally in laws that restrict or control the use of personal data.

Additionally, the regulatory landscape surrounding data protection, data privacy and information security is rapidly changing across Africa. Among the African countries, only Ivory Coast, Ghana, Senegal, Morocco, Nigeria, South Africa and Tunisia have established comprehensive data protection and data privacy laws. These data protection laws and regulations were only recently enacted. For example, the National Information Technology Development Agency in Nigeria passed new data protection guidelines in 2017, and we have implemented new policies to comply with these regulations.

Compliance with the various data protection laws in Africa is challenging due to the complex and sometimes contradictory nature of the different regulatory regimes. Because data protection regulations are not uniform among the various African nations in which TGH operates, its ability to transmit consumer information across borders is limited by its ability to comply with conditions and restrictions that vary from country to country. In countries with particularly strict data protection laws, TGHor its relevant subsidiary might not be able to transmit data out of the country at all and may be required to host individual servers in each such country where it collects data. For example, Ivory Coast, Ghana, Senegal, Morocco, and Tunisia all restrict data transfer across borders. Ghana also requires that a company notify consumers in the event of a personal data breach. Egypt currently has no data protection and privacy laws. However, the Egyptian government announced in 2017 that it is committed to doubling the size of its e-commerce sector by 2020 and intends to update all legislation and regulation relevant to e-commerce. Moreover, many data protection regimes apply based on where a consumer is located, and as TGH expands and new laws are enacted or existing laws change, it may be subject to new laws, regulations or standards or new interpretations of existing laws, regulations or standards, including those in the areas of data security, data privacy and regulation of email providers and those that require localization of certain data, which could require TGH to incur additional costs and restrict its business operations.


Any failure or perceived failure by TGH or its subsidiaries to comply with rapidly evolving privacy or security laws, policies, legal obligations or industry standards or any security incident that results in the unauthorized release or transfer of personally identifiable information or other consumer data may result in governmental enforcement actions, litigation (including consumer class actions), criminal prosecution, fines and penalties or adverse publicity and could cause our consumers to lose trust in TGH, which could have a material adverse effect on its business, financial condition, results of operations and prospects.

Risk Factors Relating to Intermediate’s Business

Intermediate’s trading platforms have no operating history, which makes it difficult to evaluate Intermediate’s future prospects.

Intermediate is focused on developing its various trading platforms and technology infrastructure, which have not launched. As Intermediate’s platforms will be built on technology and a significant portion of Intermediate’s staff come from Internet and technology companies, Intermediate has limited experience in most aspects of its trading platform business operation. Any aspect of Intermediate’s business model that does not achieve expected results may have a material and adverse impact on Intermediate’s financial condition and results of operations. It is therefore difficult to effectively assess TINGO GROUP’s future prospects.

Intermediate’s targeted markets may not develop as expected. Intermediate’s users and clients of Intermediate’s services may not be familiar with the development of these markets and may have difficulty distinguishing Intermediate’s services from those of Intermediate’s competitors. Convincing users and clients of the value of using Intermediate’s services will be critical to increasing the number of transactions on Intermediate’s platforms and to the success of Intermediate businesses.

You should consider Intermediate’s businesses in light of the risks and challenges it encounters or may encounter given the rapidly evolving markets in which it operates and its lack of operating history. These risks and challenges include our ability to, among other things:

●manage the launch of its trading platforms and its future growth;
●navigate a complex and evolving regulatory environment;
●offer personalized and competitive services;
●increase the utilization of its services by users and clients;
●maintain and enhance its relationships with its business partners;
●enhance its technology infrastructure to support the growth of its business and maintain the security of its systems and the confidentiality of the information provided and utilized across its systems;

●improve its operational efficiency;
●attract, retain and motivate talented employees to support its business growth;
●navigate economic condition and fluctuation;
●defend itself against legal and regulatory actions, such as actions involving intellectual property or privacy claims; and
●obtain any and all licenses necessary for the operation of its business.


Our business and reputation may be harmed by changes in business, economic or political conditions that impact global financial markets, or by a systemic market event.

As the Company offers financial services, our business, results of operations and reputation are directly affected by elements beyond our control, such as economic and political conditions, changes in the volatility in financial markets (including volatility as a result of the COVID-19 pandemic), significant increases in the volatility or trading volume of particular securities, broad trends in business and finance, changes in volume of securities trading generally, changes in the markets in which such transactions occur and changes in how such transactions are processed. These elements can arise suddenly and the full impact of such conditions can remain uncertain. A prolonged weakness in equity markets, such as a slowdown causing reduction in trading volume in securities, derivatives or cryptocurrency markets, may result in reduced revenues and would have an adverse effect on our business, financial condition and results of operations willoperations. Significant downturns in the securities markets or in general economic and political conditions may also cause individuals to be materially adversely affected.reluctant to make their own investment decisions and thus decrease the demand for our products and services and could also result in our customers reducing their engagement with our platform. Conversely, significant upturns in the securities markets or in general economic and political conditions may cause individuals to be less proactive in seeking ways to improve the returns on their trading or investment decisions and, thus, decrease the demand for our products and services. Any of these changes could cause our future performance to be uncertain or unpredictable, and could have an adverse effect on our business, financial condition and results of operations.

 

In addition, some market participants could be overleveraged. In case of sudden, large price movements, such market participants may not be able to meet their obligations to their respective brokers who, in turn, may not be able to meet their obligations to their counterparties. As a result, the financial system or a portion thereof could suffer, and the impact of such an event could have an adverse effect on our business, financial condition and results of operations.

In addition, a prolonged weakness in the U.S. equity markets or a general economic downturn could cause our customers to incur losses, which in turn could cause our brand and reputation to suffer. If our beneficial ownershipreputation is harmed, the willingness of Micronet’s ordinary shares declines,our existing customers, and potential new customers, to do business with us could be negatively impacted, which would adversely affect our business, financial condition and results of operations.

We operate in highly competitive markets, and many of our competitors have greater resources than we do and may have products and services that may be more appealing than ours to our current or potential customers.

The markets in which we compete are evolving and highly competitive, with multiple participants competing for the same customers. Our current and potential future competition principally comes from incumbent discount brokerages, established financial technology companies, venture-backed financial technology firms, banks, cryptocurrency exchanges, asset management firms and technology platforms. The majority of our competitors have longer operating histories and greater capital resources than we have and offer a wider range of products and services. The impact of competitors with superior name recognition, greater market acceptance, larger customer bases or stronger capital positions could adversely affect our results of operations and customer acquisition and retention. Our competitors may also be able to respond more quickly to new or changing opportunities and demands and withstand changing market conditions better than we can, especially larger competitors that may benefit from more diversified product and customer bases. For example, some of our competitors have quickly adopted, or are seeking to adopt, some of our key offerings and services, including commission-free trading, fractional share trading and no account minimums, since their introduction on our platform to compete with us. In addition, competitors may conduct extensive promotional activities, offer better terms or offer differentiating products and services that could attract our current and prospective customers and potentially result in intensified competition within our markets. We continue to experience aggressive price competition in our markets and we may not be able to treat Micronetmatch the marketing efforts or prices of our competitors. We may also be subject to increased competition as our subsidiary,competitors enter into business combinations or partnerships, or established companies in other market segments expand to become competitive with our business.


In addition, we compete in a technology-intensive market characterized by rapid innovation. Some of our competitors in this market, including new and emerging competitors, are not subject to the same regulatory requirements or scrutiny to which we are subject, which could place us at a competitive disadvantage, in particular in the development of new technology platforms or the ability to rapidly innovate. We may be unable to effectively use new technologies, adapt our products and services to emerging market standards or develop or introduce and market enhanced or new products and services. If we are not able to update or adapt our products and services to take advantage of the latest technologies and standards, or are otherwise unable to tailor the delivery of our services to the latest personal and mobile computing devices preferred by our customers or to provide products or services that are of a quality preferred by our customers, it could have an adverse effect on our business, financial position and results of operations.

Our ability to compete successfully in the financial services market depends on a number of factors, including, among other things:

●providing easy-to-use, innovative and attractive products and services, as well as effective customer support;

●maintaining and expanding our market position;

●attracting and retaining customers;

●our reputation and the market perception of our brand and overall value;

●maintaining our relationships with our counterparties;

●maintaining competitive pricing;

●competing in a competitive landscape, including in the provision of products and services that have until recently been available only from our bank competitors;

●the effectiveness, reliability and stability of our technology (including the success of our outage prevention efforts and our cybersecurity measures and defenses), products and services;

●innovating effectively in launching new or enhanced products and services;

●adjusting to a dynamic regulatory environment;

●the differences in regulatory oversight regimes to which we and our competitors are subject; and

●general economic and market trends, including customer demand for financial products and services.

Our competitive position within our markets could be adversely affectaffected if we are unable to adequately address these factors, which could have an adverse effect on our business, financial condition and results of operations.operations.

 


If we fail to retain existing customers or attract new customers, or if our customers decrease their use of our products and services, our growth could be slower than we expect and our business may be harmed.

Our continued business and revenue growth is dependent on our ability to attract new customers, retain existing customers, increase the amount that our customers use our products and services and sell our premium services, and we cannot be sure that we will be successful in these efforts. There are a number of factors that could lead to a decline in our number of customers or their usage of our products and services, or that could prevent us from increasing our number of customers, including:

●our failure to introduce new products or services, or our introduction of new products or services, or changes in our existing products or services, that are not favorably received;

●pricing for our products and services;

●harm to our brand and reputation, or decreases in the perceived quality, reliability or usefulness of our products and services;

●our customers engaging with competitive products and services;

●our customers having difficulty installing, updating or otherwise accessing the our app on mobile devices as a result of actions by us or third parties that we rely on to distribute our app;

●our customers experiencing security breaches, account intrusions or other unauthorized access as a result of actions by us or our business partners, including third parties that we rely on to distribute the application;

●our failure to provide adequate customer service to our customers;

●a cybersecurity attack, data breach or other security incident resulting in loss in customer confidence;

●our inability to manage network or service outages, interruptions and internet disruptions, including during times of high trading activity, or other performance or technical problems that prevent our customers from accessing and managing their accounts or assets in a rapid and reliable manner;

●changes in our customers’ investment strategies or level of interest in investing;

●the enactment of proposed legislation that would impose taxes on certain financial transactions;

●changes mandated by legislation, regulatory authorities or litigation that adversely affect our products and services, or our ability to provide them to our customers;

●any restrictions on trading that we impose on our platform as a result of the capital requirements and cash deposit and collateral requirements to; and

●deteriorating general economic conditions, including as a result of the COVID-19 pandemic or a general downturn in the equity markets.


As we expand our business operations and enter new markets, new challenges in attracting and retaining customers will arise that we may not successfully address. Our success, and our ability to increase revenues and operate profitably, depends in part on our ability to cost-effectively acquire new customers, to retain existing customers and to keep existing customers engaged so that they continue to use our products and services. Our customers may choose to cease using our platform, products and services at any time, and may choose to transfer their accounts to another broker-dealer.

Our introduction of new products and services, or changes to existing products and services, could fail to attract or retain customers or generate growth and revenue.

Our ability to attract, engage and retain our customers and to increase our revenue depends heavily on our ability to continue to maintain and evolve our existing products and services and to create successful new products and services. We may introduce significant changes to our existing products and services or acquire or introduce new and unproven products and services, including using technologies with which we have little or no prior development or operating experience. We continue to incur substantial costs, and we may not be successful in continuing to generate profits, in connection with these efforts. In addition, the introduction of new products and services, or changes to existing products and services, may result in new or enhanced governmental or regulatory scrutiny or other complications that could adversely affect our business and results of operations. If our new or enhanced products and services fail to attract customers, or if our business plans are unsuccessful, we may fail to attract or retain customers or to generate sufficient revenue, operating margin or other value to justify our investments, and our business may be adversely affected.

If we do not keep pace with industry and technological changes and continue to provide new and innovative products and services, our business may become less competitive and our business may be adversely impacted.

Rapid and significant technological changes continue to confront the financial services industry, including developments in the methods in which securities are traded. If we fail to innovate and deliver products and services with market fit and differentiation, or fail to do so quickly enough as compared to our competitors, we may not be able to keep pace with industry and technological changes in our industry and we may face difficulty in competing within our market, which could harm our business.

We expect new technologies, products, services and industry norms to continue to emerge and evolve, and we cannot predict the effects of technological changes or industry practices on our business. Further, new technologies introduced in our markets may be superior to, or render obsolete, the technologies we currently hold 50.07% of Micronet’s outstanding ordinary shares throughuse in our subsidiary Enertec Electronics.products and services. Incorporating new technologies into our products and services may require substantial expenditures and take considerable time, and we may not be successful in realizing a return on these development efforts in a timely manner or at all. Our ability to successfully adopt new products and services and to develop and incorporate new technologies may be inhibited by industry-wide standards, changes to laws and regulations, changing customer expectations, demands and preferences or third-party intellectual property rights. If we are unable to consider Micronetenhance our products and services or to innovate or to develop new products and services that achieve market acceptance or that keep pace with rapid technological developments and evolving industry standards or practices, our business could be adversely affected.

We will need to continuously modify, enhance and improve our products and services to keep pace with changes in internet-related hardware, mobile operating systems such as iOS and other software, communication, browser and database technologies. We may not be successful in either developing these modifications, enhancements and improvements or in bringing them to market quickly or cost-effectively in response to market demands. Furthermore, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing platforms or technologies, could increase our research and development expenses. Any failure of our products and services to keep pace with technological changes or to innovate or to operate effectively with future network platforms and technologies, or to do so in a timely and cost-effective manner, could reduce the demand for our products and services, result in customer dissatisfaction and negative publicity, reduce our competitive advantage and harm our business and reputation.


Our products and internal systems rely on software that is highly technical, and if these systems contain errors, bugs or vulnerabilities, or if we are unsuccessful in addressing or mitigating technical limitations or vulnerabilities in our systems, our business could be adversely affected.

Our trading platform relies on software, including software developed or maintained internally and by third parties, that is highly technical and complex. In addition, our platform and our internal systems depend on the ability of such software, which includes machine learning models, to collect, store, retrieve, transmit, manage and otherwise process immense amounts of data. The software on which we rely may contain errors, bugs or vulnerabilities, and our systems are subject to certain technical limitations that may compromise our ability to meet our objectives. Some errors, bugs or vulnerabilities inherently may be difficult to detect and may only be discovered after code has been released for external or internal use. Errors, bugs, vulnerabilities, design defects or technical limitations within the software on which we rely may lead to negative customer experiences (including the communication of inaccurate information to customers), compromised ability of our products to perform in a manner consistent with customer expectations, delayed product introductions, compromised ability to protect the data (including personal data) of our customers and our intellectual property or an inability to provide some or all of our services. Such errors, bugs, vulnerabilities or defects could also be exploited by malicious actors and result in exposure of data of customers on our platform, or otherwise result in a security breach or other security incident. We may need to expend significant financial and development resources to analyze, correct, eliminate, or work around errors or defects or to address and eliminate vulnerabilities. Any failure to timely and effectively resolve any such errors, bugs, vulnerabilities or defects in the software on which we rely, and any associated degradations or interruptions of service, could result in damage to our reputation, loss of customers, loss of revenue, regulatory or governmental inquiries, civil litigation, or liability for damages, any of which could have an adverse effect on our business, financial condition and results of operations.

Our success depends in part upon effective operation with mobile operating systems, networks, technologies, products, hardware and standards that we do not control.

A substantial majority of our customers’ activity on our platform occurs on mobile devices. There is no guarantee that popular mobile devices will continue to feature our app, or that mobile device customers will continue to use our products and services rather than those of our competitors. We are dependent on the interoperability of our app with popular mobile operating systems, networks, technologies, products, hardware and standards that we do not control, such as mobile device operating systems. Any changes, bugs or technical issues in such systems or changes in our relationships with mobile operating system partners, device manufacturers or mobile carriers, or in their terms of service or policies that degrade the functionality of our app, reduce or eliminate our ability to distribute applications, give preferential treatment to competitive products, limit our ability to target or measure the effectiveness of applications, or impose fees or other charges related to our delivery of our application could adversely affect customer usage of our app. Further, we are subject to the standard policies and terms of service of these operating systems, as well as policies and terms of service of the various application stores that make our application and experiences available to our developers, creators and customers. These policies and terms of service govern the availability, promotion, distribution, content and operation generally of applications and experiences on such operating systems and stores. Each provider of these operating systems and stores has broad discretion to change and interpret its terms of service and policies with respect to our platform and those changes may be unfavorable to us and our developers’, creators’ and customers’ use of our platform. If we were to violate, or an operating system provider or application store believes that we have violated, its terms of service or policies, that operating system provider or application store could limit or discontinue our access to its operating system or store. In some cases, these requirements may not be clear or our interpretation of the requirements may not align with the interpretation of the operating system provider or application store, which could lead to inconsistent enforcement of these terms of service or policies against us, and could also result in the operating system provider or application store limiting or discontinuing access to its operating system or store. Any limitation or discontinuation of our access to any third-party platform or application store could adversely affect our business, financial condition or results of operations.

Additionally, in order to deliver a high-quality mobile experience for our customers, it is important that our products and services work well with a range of mobile technologies, products, systems, networks, hardware and standards that we do not control, and that we have good relationships with mobile operating system partners, device manufacturers and mobile carriers. We may not be successful in maintaining or developing relationships with key participants in the mobile ecosystem or in developing products that operate effectively with these technologies, products, systems, networks or standards. In the event that it is more difficult for our customers to access and use our app, or if our customers choose not to access or use our app on their mobile devices or use mobile products that do not offer access to our app, our customer growth and engagement could be harmed. In the event that our customers are adversely affected by these actions or if our relationships with such third parties deteriorate, our customer growth and engagement could be adversely affected and our business could be harmed.


If there is any negative publicity with respect to TINGO GROUP, its industry peers or its industries in general, TINGO GROUP’s business and results of operations may be materially and adversely affected.

TINGO GROUP’s reputation and brand recognition plays an important role in earning and maintaining the trust and confidence of its current and potential users and clients. TINGO GROUP’s reputation and brand are vulnerable to many threats that can be difficult or impossible to control, and costly or impossible to remediate. Regulatory inquiries or investigations, lawsuits initiated by clients or other third parties, employee misconduct, perceptions of conflicts of interest and rumors, among other things, could substantially damage TINGO GROUP’s reputation, even if they are baseless or satisfactorily addressed. In addition, any perception that the quality of its services may not be the same as or better than that of other companies can also damage its reputation. Moreover, any negative media publicity about the industries in general or product or service quality problems of other firms in these industries, including TINGO GROUP’s competitors, may also negatively impact TINGO GROUP’s reputation and brand. If TINGO GROUP is unable to maintain a good reputation or further enhance its brand recognition, its ability to attract and retain users, clients, third-party partners and key employees could be harmed and, as a consolidated subsidiary,result, its business and revenues would be materially and adversely affected.

Intermediate’s platform and internal systems rely on software and technological infrastructure that is highly technical, and if they contain undetected errors, its business could be adversely affected.

Intermediate’s platforms and internal systems rely on software that is highly technical and complex. In addition, Intermediate’s platforms and internal systems depend on the ability of the software to store, retrieve, process and manage immense amounts of data. The software may now or in the future contain, undetected errors or bugs. Some errors may only be discovered after the code has been released for external or internal use. Errors or other design defects within the software on which Intermediate relies may result in a negative experience for users and clients, delay introductions of new features or enhancements, result in errors or compromise Intermediate’s ability to protect data or its intellectual property. Any errors, bugs or defects discovered in the software on which it relies could result in harm to Intermediate’s reputation, loss of users or financial service providers or liability for damages, any of which could adversely affect its business, results of operations and financial conditions.

From time-to-time TINGO GROUP may evaluate and potentially consummate investments and acquisitions or enter into alliances, which may require significant management attention, disrupt Intermediate’s stock trading platform business and adversely affect its financial results.

TINGO GROUP may evaluate and consider strategic investments, combinations, acquisitions or alliances to further increase the value of Intermediate’s platforms and better serve Intermediate’s users and clients. These transactions could be material to its financial condition and results of operations if consummated. TINGO GROUP may not have the financial resources necessary to consummate any acquisitions in the future or the ability to obtain the necessary funds on satisfactory terms. Any future acquisitions may result in significant transaction expenses and risks associated with entering new markets in addition to integration and consolidation risks. TINGO GROUP may not have sufficient management, financial and other resources to integrate any such future acquisitions or to successfully operate new businesses, and it may be unable to profitably operate its expanded company.


Risks Related to Doing Business in China

Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations.

Intermediate division’s principal executive office and operations, through its operating subsidiaries, are located in China. We also plan to launch various platforms which are being built initially in China. Accordingly, TINGO GROUP’s business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic, social conditions and government policies in China generally. The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.

While the Chinese economy has experienced significant growth over the past decades, such growth has been uneven, both geographically and among various sectors of the economy, and the rate of growth has been slowing since 2012. Any adverse changes in economic conditions in China, in the policies of the PRC government or in the laws and regulations in China, could have a material adverse effect on the overall economic growth of China. Such developments could adversely affect TINGO GROUP’s business and operating results, lead to reduction in demand for TINGO GROUP’s services and adversely affect TINGO GROUP’s competitive position. COVID-19 had a severe and negative impact on Chinese and global economy in the past few years. Whether this will lead to a prolonged downturn in the economy is still unknown. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our Intermediate division’s financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past the PRC government has implemented certain measures, including interest rate adjustment, to control the pace of economic growth. These measures may cause decreased economic activity in China, which may adversely affect our Intermediate division’s business and operating results.

The PRC legal system embodies uncertainties which could limit the legal protections available to us.

PRC laws and the PRC legal system in general may have a significant impact on our business operations in China. Although China’s legal system has developed over the last several decades, PRC laws, regulations and legal requirements remain underdeveloped relative to the United States of America. Moreover, PRC laws and regulations change frequently and their interpretation and enforcement involve uncertainties. For example, the interpretation or enforcement of PRC laws and regulations may be subject to government rules or policies, some of which are not published on a timely basis or at all. In addition, the relative inexperience of China’s judiciary system in some cases may create uncertainty as to the outcome of litigation. These uncertainties could limit our ability to enforce certain legal or contractual rights or otherwise adversely affect our business and operations.

Furthermore, due to the existence of unpublished rules and policies, and since newly issued PRC laws and regulations may have expected and unexpected retrospective effects, we may not be aware of a violation of certain PRC laws, regulations, policies or rules until after the event.


The complexities, uncertainties and rapid changes in PRC regulation of the Internet-related businesses and companies require significant resources for compliance.

The PRC government extensively regulates the Internet industries, including foreign ownership of, and the licensing and permit requirements pertaining to, companies doing business in the Internet industry. These laws and regulations are relatively new and evolving, and their interpretation and enforcement involve significant uncertainty. As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations. Issues, risks and uncertainties relating to PRC regulation of these businesses include, but are not limited to, the following:

There are uncertainties relating to the regulation of the Internet-related businesses in China, including evolving licensing practices. This means that certain of our permits, licenses or operations may be subject to challenge, or we may fail to obtain permits or licenses that may be deemed necessary for operations.

New laws and regulations that regulate Internet activities, including operating online platforms for insurance intermediary may be promulgated. If these new laws and regulations are promulgated, additional licenses may be required for operations. If our operations do not comply with these new regulations after they become effective, or if we fail to obtain any licenses required under these new laws and regulations, TINGO GROUP or its subsidiaries could be subject to penalties.

The principal regulation governing the operation of Internet insurance business is the Measures for the Regulation of Internet Insurance Business, or Regulation of Internet Insurance Business, promulgated by the CBIRC on December 7, 2020 and effective on February 1, 2021. There is no assurance that Intermediate would be able to meet all the requirements set forth under the Regulation of Internet Insurance Business and effectively operate an online insurance brokerage business. Please refer to “Regulation of Internet Insurance Businesses”.

The interpretation and application of existing PRC laws, regulations and policies and any new laws, regulations or policies relating to the Internet-related industries have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of companies in these industries. We cannot assure you that Intermediate had obtained all the permits or licenses required for conducting its business in China or will be able to maintain existing licenses or obtain any new licenses required under any new laws or regulations. There are also risks associated with being found in violation of existing or future laws and regulations given the uncertainty and complexity of China’s regulation of these businesses.

In addition, new laws and regulations applicable to the Internet-related industries could be issued at the national or provincial level, or existing regulations could be interpreted more strictly. No assurance can be given that business on these industries in general or our services in particular will not be adversely impacted by further regulations. In particular, technical limitations on Internet use can also be developed or implemented. For example, restrictions can be implemented on personal Internet use in the workplace in general or access to Intermediate’s sites in particular. All such regulations, restrictions and limitations could lead to a reduction of user activities or a loss of users, and restrict the types of products and services we may be able to offer in China, which in turn could have a material adverse effect on our financial condition and results of operations in China.

The 2006 M&A Rules established complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it difficult to pursue growth through acquisitions in China.

On August 8, 2006, six PRC regulatory authorities promulgated the Regulations on Mergers and Acquisitions of Domestics Enterprises by Foreign Investors (the “2006 M&A Rules”), which were later amended on June 22, 2009. The 2006 M&A Rules and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex, including requirements in some instances that the Ministry of Commerce, People’s Republic of China (“MOFCOM”) be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. Moreover, the Anti-Monopoly Law of China requires that the anti-monopoly law enforcement authority shall be notified in advance of any concentration of undertaking if certain thresholds are triggered. In addition, the security review rules issued by the State Council that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOFCOM, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from the MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.


Governmental control of currency conversion may affect the value of business in China.

The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of foreign currency out of China. Certain revenues may be received in RMB. Shortages in the availability of foreign currency may restrict our or our partners’ ability in China to remit sufficient foreign currency to pay dividends or other payments, or otherwise satisfy their foreign currency-denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments, expenditures from trade related transactions and services-related foreign exchange transactions, can be made in foreign currencies without prior approval from the State Administration of Foreign Exchange (“SAFE”) by complying with certain procedural requirements. However, approval from SAFE or its local branch is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access to foreign currencies for current account transactions in the future.

Regulation and censorship of information disseminated over the Internet in China may adversely affect our business, and may cause interestliability for content that is displayed on any of its websites.

China has enacted laws and regulations governing Internet access and the distribution of products, services, news, information, audio-video programs and other content through the Internet. In the past, the PRC government has prohibited the distribution of information through the Internet that it deems to be in violation of PRC laws and regulations. If any of Intermediate’s Internet information on its online platforms is deemed by the PRC government to violate any content restrictions, we or our partners may not be able to continue to display such content and could become subject to penalties, including confiscation of income, fines, suspension of business and revocation of required licenses, which could materially and adversely affect our business, financial condition and results of operations. We or our partners may also be subjected to liability for any unlawful actions of their customers or users of their websites or for content distributed by such subsidiaries or partners that is deemed inappropriate. It may be difficult to determine the market pricetype of ourcontent that may result in liability.

It may be difficult for overseas regulators to conduct investigation or collect evidence within China.

Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to decline.implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests.

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Risks RelatedUnder the enterprise income tax (“EIT”) Law, we may be classified as a “resident enterprise” of China. Such classification would likely result in unfavorable tax consequences.

Under the EIT Law, which has been revised effective as of December 29, 2018, and its implementation rules, (the “Implementation Rules”), which has been revised and effective as April 23, 2019, an enterprise established outside of the PRC with “de facto management bodies” within the PRC is considered a resident enterprise and is subject to Ownershipenterprise income tax, or EIT, at the rate of 25% on its global income. The Implementation Rules define the term “de facto management bodies” as “establishments that carry out substantial and overall management and control over the manufacturing and business operations, personnel, accounting, properties, etc. of an enterprise.” The State Administration of Taxation issued the Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or Circular 82, on April 22, 2009. Circular 82 provides that a foreign enterprise controlled by a PRC company or a PRC company group will be classified as a “resident enterprise” with its “de facto management bodies” located within China if the following criteria are satisfied: (i) the place where the senior management and core management departments that are in charge of its daily operations perform their duties is mainly located in the PRC; (ii) its financial and human resources decisions are made by or are subject to approval by persons or bodies in the PRC; (iii) its major assets, accounting books, company seals, and minutes and files of its board and shareholders’ meetings are located or kept in the PRC; and (iv) more than half of the enterprise’s directors or senior management with voting rights frequently reside in the PRC.

Currently, we do not believe we meet all of the criteria above. If the PRC authorities consider that we meet all of the criteria above and treat us as a resident enterprise, a 25% EIT on global income could significantly increase our Securities’

We may not be successful in implementing a spin-offtax burden and materially and adversely affect its financial condition and results of our aerospace and defense division, andoperations.

In addition, even if we are there is no guarantee thatnot deemed as a resident enterprise by the spun off entityPRC authorities, pursuant to the EIT Law, dividends generated after January 1, 2008 and payable by a foreign-invested enterprise in China to its foreign investors will be successful.

While our Boardsubject to a 10% withholding tax, unless any such foreign investor’s jurisdiction of Directorsincorporation has a tax treaty with China that provides for a different withholding arrangement and provided that relevant tax authorities approved the foreign investors as the beneficial owners of such dividends under applicable tax regulations.

We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by non-PRC holding companies.

On February 3, 2015, the China State Administration of Taxation (“SAT”) issued the Circular on issues of enterprise Income Tax on Indirect Transfer of Assets by Non-PRC Resident Enterprise, or the SAT Circular 7, pursuant to which if a spin-offnon-resident enterprise transfers the equity interests of our aerospacea PRC resident enterprise indirectly by transfer of the equity interests of an offshore holding company (other than the purchase and defense division intosale of shares in public securities market) without a standalone company, there is no guarantee that wereasonable commercial purpose, the PRC tax authorities have the power to reassess the nature of the transaction and the indirect equity transfer might be treated as a direct transfer. As a result, the gain derived from such transfer, which means the equity transfer price minus the cost of equity, will be successfulsubject to the PRC withholding tax at a rate of up to 10%. SAT Circular 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets. Under the SAT Circular 7, the transfer which meets all of the following circumstances shall be deemed as having no reasonable commercial purpose: (i) over 75% of the value of the equity interests of the offshore holding company are directly or indirectly derived from PRC taxable properties; (ii) at any time during the year before the indirect transfer, over 90% of the total properties of the offshore holding company are investments within PRC territory, or in completing the contemplated spin-off. Evenyear before the indirect transfer, over 90% of the offshore holding company’s total income is directly or indirectly derived from within PRC territory; (iii) the function performed and risks assumed by the offshore holding company are insufficient to substantiate its corporate existence; or (iv) the foreign income tax imposed on the indirect transfer is lower than the PRC tax imposed on the direct transfer of the PRC taxable properties. In October 2017, SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Circular 37, which came into effect on December 1, 2017 and was amended on June 15, 2018. The SAT Circular 37 further clarifies the practice and procedure of the withholding of nonresident enterprise income tax. Where a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is an indirect transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such indirect transfer to the relevant tax authority. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax.


We face uncertainties as to the reporting and other implications of certain past and future transactions that involve PRC taxable assets, such as offshore restructuring, sale of the shares in our offshore subsidiaries and investments. We may be subject to filing obligations or taxed if we are able to complete the contemplated spin-off, there is no guarantee that our aerospacetransferors in such transactions, and defense division will become a profitable, standalone company or that our stockholders will benefit from such a transaction. 

Your ability to influence corporate decisions may be limited because ownershipsubject to withholding obligations if we are transferees in such transactions, under SAT Circular 7 or SAT Circular 37, or both.

The enforcement of the PRC Labor Contract Law and other labor-related regulations in the PRC may adversely affect TINGO GROUP’s business and results of operations.

The Standing Committee of the National People’s Congress enacted the Labor Contract Law in 2008 and amended it on December 28, 2012. The Labor Contract Law introduced specific provisions related to fixed-term employment contracts, part-time employment, probationary periods, consultation with labor unions and employee assemblies, employment without a written contract, dismissal of employees, severance, and collective bargaining to enhance previous PRC labor laws. Under the Labor Contract Law, an employer is obligated to sign an unlimited-term labor contract with any employee who has worked for the employer for ten consecutive years. Further, if an employee requests or agrees to renew a fixed-term labor contract that has already been entered into twice consecutively, the resulting contract, with certain exceptions, must have an unlimited term, subject to certain exceptions. With certain exceptions, an employer must pay severance to an employee where a labor contract is terminated or expires. In the case of retrenching 20 or more employees or where the number of employees to be retrenched is less than 20 but comprises 10% or more of the total number of employees of such employer under certain circumstances, the employer shall explain the situation to the labor union or all staff 30 days in advance and seek the opinion of the labor union or the employees, the employer may carry out the retrenchment exercise upon reporting the retrenchment scheme to the labor administrative authorities. In addition, the PRC governmental authorities have continued to introduce various new labor-related regulations since the effectiveness of the Labor Contract Law.

Under the PRC Social Insurance Law and the Administrative Measures on Housing Fund, employees are required to participate in pension insurance, work-related injury insurance, medical insurance, unemployment insurance, maternity insurance, and housing funds and employers are required, together with their employees or separately, to pay the social insurance premiums and housing funds for their employees. If we fail to make adequate social insurance and housing fund contributions, or fail to withhold individual income tax adequately, we may be subject to fines and legal sanctions, and our common stock is concentrated.

Asbusiness, financial conditions and results of March 31, 2017, Mr. Lucatz,operations may be adversely affected.

These laws designed to enhance labor protection tend to increase our Chairman, Chief Executive Officerlabor costs. In addition, as the interpretation and President beneficiallyowns 2,597,200 shares, or approximately 40.01% (and 33.79% on a fully diluted basis)implementation of these regulations are still evolving, our outstanding common stock.employment practices may not be at all times be deemed in compliance with the regulations. As a result, Mr. Lucatz,we could be subject to penalties or incur significant liabilities in connection with labor disputes or investigations.

PRC regulations relating to investments in offshore companies by PRC residents may effectivelysubject our PRC-resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries or limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits.

SAFE promulgated the SAFE Circular 37 on July 4, 2014, which replaced the former circular commonly known as “SAFE Circular 75” promulgated by SAFE on October 21, 2005. SAFE Circular 37 and its implementing rules require PRC residents to register with banks designated by local branches of SAFE in connection with their direct establishment or indirect control matters requiring stockholder approval, includingof an offshore entity, for the electionpurpose of directorsoverseas investment and approvalfinancing, with the PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a “special purpose vehicle.”


We notified substantial beneficial owners of significant corporate transactions. Such concentrationordinary shares who we know are PRC residents of ownershiptheir filing obligation, and pursuant to the former SAFE Circular 75, we filed the above-mentioned foreign exchange registration on behalf of certain employee shareholders who we know are PRC residents. However, we may not be aware of the identities of all of our beneficial owners who are PRC residents. We do not have control over our beneficial owners, and there can be no assurance that all of our PRC-resident beneficial owners will comply with relevant SAFE regulations. The failure of our beneficial owners who are PRC residents to register or amend their SAFE registrations in a timely manner or the failure of future beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in SAFE Circular 37 and subsequent implementation rules, may subject the beneficial owners or our PRC subsidiaries to fines and legal sanctions.

Furthermore, since it is unclear how those SAFE regulations, and any future regulation concerning offshore or cross-border transactions, will be further interpreted, amended and implemented by the relevant PRC government authorities, we cannot predict how these regulations will affect our business operations or future strategy. Failure to register or comply with relevant requirements may also have the effect of delaying or preventing a change in control of the Company,limit our ability to contribute additional capital to our PRC subsidiaries and thislimit our PRC subsidiaries’ ability to distribute dividends to our company. These risks may have a material adverse effect on our business, financial condition and results of operations.

Any failure to comply with PRC regulations regarding our employee equity incentive plans may subject the trading pricePRC participants in the plans, us or our overseas and PRC subsidiaries to fines and other legal or administrative sanctions.

Pursuant to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed companies may, prior to the exercise of an option, submit applications to SAFE or its local branches for the foreign exchange registration with respect to offshore special purpose companies. In the meantime, our common stock.

Provisionsdirectors, executive officers and other employees who are PRC citizens or who are non-PRC citizens residing in the PRC for a continuous period of not less than one year, subject to limited exceptions, and whom we or our corporate charter documentsoverseas listed subsidiaries have granted restricted share units, or RSUs, options or restricted shares, may follow the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company, issued by SAFE in February 2012, to apply for the foreign exchange registration. According to those regulations, employees, directors and under Delaware law could makeother management members participating in any stock incentive plan of an acquisitionoverseas publicly listed company who are PRC citizens or who are non-PRC citizens residing in China for a continuous period of us,not less than one year, subject to limited exceptions, are required to register with SAFE through a domestic qualified agent, which may be beneficiala PRC subsidiary of the overseas listed company, and complete certain other procedures. Failure to our stockholders, more difficultcomplete the SAFE registrations may subject them to fines and legal sanctions and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our certificate of incorporation, as amended, and amended and restated bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your common stock. These provisions could also limit their ability to make payment under the pricerelevant equity incentive plans or receive dividends or sales proceeds related thereto in foreign currencies, or our ability to contribute additional capital into our domestic subsidiaries in China and limit our domestic subsidiaries’ ability to distribute dividends to us. We also face regulatory uncertainties under PRC law that investors mightcould restrict our ability or the ability of our overseas listed subsidiaries to adopt additional equity incentive plans for our directors and employees who are PRC citizens or who are non-PRC citizens residing in the PRC for a continuous period of not less than one year, subject to limited exceptions.

In addition, the STA has issued circulars concerning employee RSUs, share options or restricted shares. Under these circulars, employees working in the PRC whose RSUs or restricted shares vest, or who exercise share options, will be willingsubject to PRC individual income tax. The PRC subsidiaries of an overseas listed company have obligations to file documents related to employee RSUs, share options or restricted shares with relevant tax authorities and to withhold individual income taxes of those employees related to their RSUs, share options or restricted shares. Although we and our overseas listed subsidiaries currently withhold individual income tax from our PRC employees in connection with the vesting of their RSUs and restricted shares and their exercise of options, if the employees fail to pay, inor the future for our securities, thereby depressingPRC subsidiaries fail to withhold, their individual income taxes according to relevant laws, rules and regulations, the market price of our securities. In addition, these provisionsPRC subsidiaries may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team.

Moreover, because we are incorporated in Delaware, we are governedface sanctions imposed by the provisions of Section 203 oftax authorities.


If our auditor is sanctioned or otherwise penalized by the General Corporation Law of the State of Delaware,Public Company Accounting Oversight Board (“PCAOB”) or the DGCL, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. We have not opted out of the restrictions under Section 203.

Our stockholders may experience significant dilutionSEC as a result of any additional financing usingfailure to comply with inspection or investigation requirements, our equity securities and/financial statements could be determined to be not in compliance with the requirements of the Exchange Act or debt securities.

Toother laws or rules in the extentUnited States, which could ultimately result in our Common Stock being delisted from The Nasdaq Capital Market.

In recent years, U.S. regulators have continued to express their concerns about challenges in their oversight of financial statement audits of U.S.-listed companies with significant operations in China. More recently, as part of increased regulatory focus in the U.S. on access to audit information, on May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act, or the HFCA Act, which includes requirements for the SEC to identify issuers whose audit reports are prepared by auditors that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in the auditor’s local jurisdiction. While we raise additional fundsunderstand that there has been dialogue among the CSRC, the SEC and the PCAOB regarding the inspection of PCAOB-registered accounting firms in China, there can be no assurance that our auditor or us will be able to comply with requirements imposed by issuing equity securitiesU.S. regulators.

Furthermore, on June 4, 2020, the U.S. President issued a memorandum ordering the President’s Working Group on Financial Markets to submit a report to the President within 60 days of the memorandum that includes recommendations for actions that can be taken by the executive branch, the SEC, the PCAOB or convertible debt securities, our stockholders may experience significant dilution. Sales of additional equity and/or convertible debt securities at prices below certain levels will trigger anti-dilution provisionsother federal agencies and departments with respect to certainChinese companies listed on U.S. stock exchanges and their audit firms, in an effort to protect investors in the United States. The recommendations are to include actions that could be taken under current laws and rules as well as possible new rulemaking recommendations.

On May 20, 2020, the HFCAA passed the United States Senate by unanimous consent. On December 2, 2020, the US House of Representatives passed by voice vote the Holding Foreign Companies Accountable Act (HFCAA), which would require auditors of foreign public companies to allow the Public Company Accounting Oversight Board (PCAOB) to inspect their audit work papers for audits of non-US operations as required by the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley). If a company’s auditors fail to comply for three consecutive years, then the Company’s shares would be prohibited from trading in the United States. The legislation passed the Senate in May. The HFCAA was signed into law on December 18, 2020. Furthermore, on June 22, 2021. the U.S. Senate passed. and the US house of representative on February 4, 2022 passed the Accelerating Holding Foreign Companies Accountable Act (the “AHFCAA”), which, if signed into law, would amend the HFCAA and require the SEC to prohibit an issuer’s securities we have previously sold. If additional funds are raised through a credit facilityfrom trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three consecutive years.

The HFCAA aims to address restrictions China has placed on the PCAOB’s ability to inspect or investigate PCAOB-registered public accounting firms in connection with their audits of Chinese companies. Sarbanes-Oxley created the issuancePCAOB “to oversee the audit of debt securities or preferred stock, lenders under the credit facility or holders of these debt securities or preferred stock would likely have rightspublic companies that are seniorsubject to the rightssecurities laws, and related matters, in order to protect the interests of holders of our common stock,investors and any credit facility or additional securities could contain covenants that would restrict our operations.

Iffurther the price of our common stock is volatile, purchasers of our common stock could incur substantial losses.

The price of our common stock has been, and may continue to be volatile. The market price of our common stock may be influenced by many factors, including but not limited to the following:

●announcements of developments related to our business;

●quarterly fluctuations in our actual or anticipated operating results;

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●announcements of technological innovations;

●new products or product enhancements introduced by us or by our competitors;

●developments in patents and other intellectual property rights and litigation;

●developments in our relationships with our third party manufacturers and/or strategic partners;

●developments in our relationships with our customers and/or suppliers;

●regulatory or legal developments in the United States, Israel and other countries;

●general conditions in the global economy; and

●the other factors described in this “Risk Factors” section.

For these reasons and others, you should consider an investment in our common stock as risky and invest only if you can withstand a significant loss and wide fluctuations in the value of your investment.

A sale of a substantial number of shares of our common stock or securities convertible into or exercisable for our common stock may cause the price of our common stock to decline and may impair our ability to raise capital in the future.

Our common stock is traded on NASDAQ and, despite certain increases of trading volume from time to time, there have been periods when it could be considered “thinly-traded,” meaning that the number of persons interested in purchasing our common stock at or near bid prices at any given time may have been relatively small or non-existent. Finance transactions resulting in a large amount of newly-issued securities may be readily tradable, or other events that cause current stockholders to sell shares, could place downward pressure on the trading price of our common stock. In addition, the lack of a robust resale market may require a stockholder who desires to sell a large number of shares of common stock to sell those shares in increments over time to mitigate any adverse impact of the sales on the market price of our stock. If our stockholders sell, or the market perceives that our stockholders intend to sell for various reasons, including the ending of restriction on resale, substantial amounts of our common stock in the public market, including shares issued upon the exercise of outstanding options or warrants, the market price of our common stock could fall. Sales of a substantial number of shares of our common stock may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate. Moreover, we may become involved in securities class action litigation that could divert management’s attention and harm our business.

If securities or industry analysts do not publish research or reports or publish unfavorable research about our business, the price of our common stock could decline.

We do not currently have any significant research coverage by securities and industry analysts and we may never obtain such research coverage. If securities or industry analysts do not commence or maintain coverage of us, the trading price for our common stock might be negatively affected. In the event we obtain securities or industry analyst coverage, if one or more of the analysts who covers us or will cover us downgrades our securities, the price of our common stock would likely decline. If one or more of these analysts ceases to cover us or fails to publish regular reports on us, interest in the purchasepreparation of our common stockinformative, accurate, and independent audit reports for companies the securities of which are sold to, and held by and for, public investors.” Specifically, the PCAOB is responsible for registering public accounting firms, establishing standards applicable to the preparation of audit reports for companies, conducting inspections and investigations of public accounting firms to ensure they are complying with those standards, and bringing enforcement actions when they are not.

The HFCAA could decrease, which could causeadversely affect the pricelisting and compliance status of our common stock and trading volume to decline.

We did not declare or pay cash dividends in either 2016 or 2015 and do not expect to pay dividends for the foreseeable future.

We have no dividends policy and will consider distributing dividends on a year by year basis. The payment of dividends, if any,China-based issuers listed in the future, rests within the discretion ofUnited States, such as our board of directorscompany, and will depend, among other things, upon our earnings, our capital requirementsmay have a material and our financial condition, as well as other relevant factors. There are no restrictions in our certificate of incorporation, as amended, or amended and restated bylaws that restrict us from declaring dividends. There are no assurances that we will pay dividends in the future.

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If we fail to continue to meet all applicable NASDAQ requirements, NASDAQ may delist our common stock, which could have an adverse impact on the liquiditytrading prices of the securities of such issuers, including our Common Stock, and market pricesubstantially reduce or effectively terminate the trading of our common stock.Common Stock in the United States.


 

Risk Factors Related to our insurance business

Results in our insurance brokerage segment may be adversely affected by a general decline in economic activity.

Demand for many types of insurance and reinsurance generally rises or falls as economic growth expands or slows. This is especially the case with our automobile insurance which is dependent upon the ability of persons to own and operate an automobile. This dynamic affects the level of commissions and fees generated by our VIEs. To the extent our customers become adversely affected by declining business conditions, they may choose to limit their purchases of insurance and reinsurance coverage, as applicable, which would inhibit our ability to generate commission revenue and other revenue based on premiums placed by us. Also, the insurance they seek to obtain through us may be impacted by changes in their assets, property values, sales or number of employees, which may reduce our commission revenue, and they may decide not to purchase our risk advisory or other services, which would inhibit our ability to generate fee revenue. Moreover, insolvencies and combinations associated with an economic downturn, especially insolvencies and combinations in the insurance industry, could adversely affect our brokerage business through the loss of customers or by limiting our ability to place insurance and reinsurance business, as well as our revenues from insurers. We are especially susceptible to this risk given the limited number of insurance company clients and reinsurers in the marketplace.

Volatility or declines in premiums and other market trends may significantly impede our ability to grow revenues and profitability.

A significant portion of our insurance brokerage revenue consists of commissions paid to us out of the premiums that insurers and reinsurers charge our clients for coverage. We do not determine the insurance premiums on which our commissions are generally based. Our common stockrevenues and profitability are subject to change to the extent that premium rates fluctuate or trend in a particular direction. The potential for changes in premium rates is currently listedsignificant, due to the normal cycles of pricing in the commercial insurance and reinsurance markets.

As traditional insurance companies continue to rely on NASDAQ, which has qualitativenon-affiliated brokers or agents to generate premium, those insurance companies may seek to reduce their expenses by lowering their commission rates. The reduction of these commission rates, along with general volatility or declines in premiums, may significantly affect our revenue and quantitative listing criteria.profitability. Because we do not determine the timing or extent of premium pricing changes, it is difficult to accurately forecast our commission revenues, including whether they will significantly decline. As a result, we may have to adjust our plans for future acquisitions, capital expenditures, dividend payments, loan repayments and other expenditures to account for unexpected changes in revenues, and any decreases in premium rates may adversely affect the results of our operations.

In addition to movements in premium rates, our ability to generate premium-based commission revenue may be challenged by disintermediation and the growing availability of alternative methods for clients to meet their risk-protection needs. This trend includes a greater willingness on the part of corporations to self-insure, the use of captive insurers, and the presence of capital markets-based solutions for traditional insurance and reinsurance needs. Further, the profitability of our insurance brokerage segment depends in part on our ability to be compensated for the analytical services and other advice that we provide, including the consulting and analytics services that we provide to insurers. If we are unable to meetachieve and maintain adequate billing rates for all of our services, our margins and profitability could decline. Furthermore, the insurance business in China where we operate is maturing and developing and if we do not compete efficiently and keep current with the trends in the market, our business may decline.

Our business may be harmed by any negative developments that may occur in the insurance industry or if we fail to maintain good relationships with insurance carriers.

Our businesses are heavily dependent on the insurance industry. Any negative developments that occur in the insurance industry may have a material adverse effect on our business and our results of operations. In addition, if we fail to maintain good relationships with insurance carriers, it may have a material adverse effect on our business and results of operations. The termination, amendment or consolidation of our relationships with our insurance carriers could harm our business, results of operations and financial condition.


Cyberattacks are increasing in frequency and evolving in nature. We are at risk of attack by a variety of adversaries, including state-sponsored organizations, organized crime, hackers, through use of increasingly sophisticated methods of attack. In particular, we are at increased risk of a cyberattack when geopolitical tensions are high, as diplomatic events and economic policies may trigger espionage or retaliatory cyber incidents. In addition, remote work arrangements in response to COVID-19 have increased the risk of phishing and other cybersecurity attacks or unauthorized dissemination of personal, confidential, proprietary or sensitive data.

Our information systems must be continually updated, patched, and upgraded to protect against known vulnerabilities. The volume of new software vulnerabilities has increased markedly, as has the criticality of patches and other remedial measures. In addition to remediating newly identified vulnerabilities, previously identified vulnerabilities must also be continuously addressed. Accordingly, we are at risk that cyberattacks exploit these known vulnerabilities before they have been communicated by vendors or addressed. Any failure related to these activities could have a material adverse effect on our business.

We have numerous vendors and other third parties who receive personal information from us in connection with the services we offer our customers. We also use tens of IT vendors and software providers to maintain and secure our global information systems infrastructure. In addition, we have migrated certain data, and may increasingly migrate data, to the cloud hosted by third-party providers. Some of these vendors and third parties also have direct access to our systems. We are at risk of a cyberattack involving a vendor or other third party, which could result in a breakdown of such third party’s data protection processes or the cyberattacks gaining access to our infrastructure through a supply chain attack.

We have a history of making acquisitions and investments within the insurance market. The process of integrating the information systems of any businesses we acquire is complex and exposes us to additional risk. For instance, we may not adequately identify weaknesses and vulnerabilities in an acquired entity’s information systems, either before or after the acquisition, which could affect the value we are able to derive from the acquisition, expose us to unexpected liabilities or make our own systems more vulnerable to a cyberattack. In addition, if we discover a historical compromise, security breach or other cyber incident related to the target’s information systems following the close of the NASDAQ listing requirementsacquisition, we may be liable and exposed to significant costs and other unforeseen liabilities. We may also be unable to integrate the systems of the businesses we acquire into our environment in a timely manner, which could further increase these risks until such integration takes place.

We expect competition in the Chinese insurance industry to increase, which may materially and adversely affect the growth of our business.

We face competitive pressures from both domestic and foreign-invested insurance brokerage companies operating in China, which may compete with our insurance businesses, and other financial institutions that sell other financial investment products in competition with ours. If we are not able to adapt to these increasingly competitive pressures in the future, including, for example, if the closing bid price for our common stock falls below $1.00 per share for 30 consecutive trading days, NASDAQ could determine to delist our common stock,growth rate may decline, which could materially and adversely affect our earnings.

Further development of regulations in China may impose additional costs or restrictions on our activities.

We operate in a highly regulated industry. The CBIRC supervises and administers the market liquidityinsurance industry in China. In exercising its authority, it is given certain discretion to administer the law. China’s insurance regulatory regime is undergoing significant changes toward a more transparent regulatory process and a convergent movement toward international standards. Some of these changes may result in additional costs or restrictions on our activities. For example, in November 2020, the Insurance Association of China issued a notice on revising the definition of critical illnesses, including revisions to the applicable scope and principles of critical illnesses as well as relevant provisions on insurance clauses for critical illnesses. From February 1, 2021, insurers may not continue to sell critical illness insurance products which were developed based on previous rules. The CBIRC in the same month also issued a notice stipulating that Critical Illness Morbidity Table in the Chinese Personal Insurance Industry (2020) promulgated by the China Association of Actuaries will serve as the evaluation table and pricing reference table for statutory liability reserve of life insurance products that include critical illness insurance liability. The notice also imposed restrictions on the applicable scope, evaluation of statutory reserves and pricing of the products. These new requirements apply to a number of key products sold by us. Although these new requirements are consistent with our long-term development strategy, making adjustments to relevant products during a short period of time may increase our operating costs and may adversely affect our business, results of operations and financial condition.

In addition, because the terms of our common stockproducts are subject to regulations, changes in regulations may affect our profitability on the policies and contracts we issue.


Any actions by the Chinese government, including any decision to influence our operations or to exert more oversight and control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, may cause us to make material changes to our operations and could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.

The Chinese government has exercised and continues to exercise significant oversight and regulation over almost every sector of the Chinese economy, including the insurance industry, and has discretion over many aspects in which it exercises such authority. Our operations are subject to various regulatory requirements. The Chinese government may also impose new and stricter regulations or impose new interpretations of existing regulations and take other actions that may influence our operations. These government actions, including changes in laws and regulations, particularly those relating to insurance, overseas listing, taxation, land use rights, foreign investment limitations, may result in a material change in our operations and the value of our securities.

On December 24, 2021, CSRC published proposed tightening rules governing Chinese companies listing abroad, which require an offshore IPO application to be filed with the CSRC. The proposed rules reflect the continued efforts and plan of the Chinese government to scrutinize and exert more oversight and control over capital market activities including offshore listings. We believe that we are currently not required to file with or obtain permissions from the CSRC to maintain our listing in U.S., but the CSRC or any other PRC regulatory authorities may issue any laws or rules that would require us to file with or obtain approvals from the CSRC or other governmental agencies, and may also take actions imposing restrictions on our continued listing in the U.S. Any such actions could significantly limit or completely hinder our ability to continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.

Our insurance business is exposed to various catastrophic events in which multiple losses can occur and affect multiple lines of business in any calendar year.

Natural disasters, such as hurricanes, earthquakes and other catastrophes, have the potential to adversely affect our operating results. Other risks, such as man-made catastrophes or pandemic disease, could also adversely affect our business and operating results to the extent they are covered by our insurance products. Concentration of exposure in certain industries or geographies may cause us to suffer disproportionate losses.

Catastrophic events, and any relevant regulations, could result in losses in any business in which we operate, and could expose us to:

●widespread claim costs associated with property, workers’ compensation, accident and health, travel, business interruption and mortality and morbidity claims;

●loss resulting from a decline in the value of our invested assets;

●limitations on our ability to recover deferred tax assets;

●loss resulting from actual policy experience that is adverse compared to the assumptions made in product pricing;

●revenue loss due to decline in customer base;

●declines in value and/or losses with respect to companies and other entities whose securities we hold and counterparties we transact business with and have credit exposure to, including insurers and reinsurers; and

●significant disruptions to our physical infrastructure, systems and operations.

Catastrophes will require us to pay out on many insurance claims including weather related natural disasters. The possibilities that the insurance companies that we write policies for cannot pay for the insurance claim could have a material adverse effect on our results of operations, cash flows and liquidity and we may be held liable for the unpaid insurance claims.


Risks Related to Our Corporate Structure

If the PRC government deems that the VIE Agreements do not comply with PRC regulatory restrictions on foreign investment in the relevant industries or other laws or regulations of the PRC, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations, which may therefore materially reduce the value of our ordinary shares.

We are a holding company. As a holding company, we conduct a portion of our operations through our VIEs in the PRC. We receive the economic benefits of our VIE’s business operations through certain contractual arrangements; however, our rights under the VIEs Agreements do not provide us with an equity interest in our VIEs and is not the same as actual ownership.

Our PRC subsidiaries has entered into the VIE Agreements with our consolidated VIEs and their shareholders, which enable us to (i) exercise effective control over the consolidated VIE, (ii) receive substantially all of the economic benefits of the consolidated VIEs, and (iii) have an exclusive option to purchase all or part of the equity interests and assets in the consolidated VIEs when and to the extent permitted by PRC law. As a result of these contractual arrangements, we have control over and are the primary beneficiary of the consolidated VIE and hence consolidate its financial results as our consolidated VIE under U.S. GAAP.

We believe that our corporate structure and contractual arrangements comply with the current applicable PRC laws and regulations. Our PRC legal counsel, Global Law Office, based on its understanding of the relevant laws and regulations, is of the opinion that each of the contracts among our wholly-owned PRC subsidiary, our consolidated VIE and its shareholders is valid, binding and enforceable in accordance with its terms. However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Thus, the PRC governmental authorities may take a view contrary to the opinion of our PRC legal counsel. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structure will be adopted or if adopted, what they would provide. PRC laws and regulations governing the validity of these contractual arrangements are uncertain and the relevant government authorities have broad discretion in interpreting these laws and regulations.

If our corporate structure and contractual arrangements are deemed by the relevant regulators that have competent authority, to be illegal, either in whole or in part, we may lose control of our consolidated VIEs, which holds significant assets and accounts for significant revenue, and has to modify such structure to comply with regulatory requirements. However, there can be no assurance that we can achieve this without material disruption to our business. Further, if our corporate structure and contractual arrangements are found to be in violation of any existing or future PRC laws or regulations, the relevant regulatory authorities would have broad discretion in dealing with such violations, including:

●revoking our business and operating licenses;

●levying fines on us;

●confiscating any of our income that they deem to be obtained through illegal operations;

●shutting down our services;

●discontinuing or restricting our operations in China;

●imposing conditions or requirements with which we may not be able to comply;

●requiring us to change our corporate structure and contractual arrangements;

●restricting or prohibiting our use of the proceeds from overseas offering to finance our consolidated VIE’s business and operations; and

●taking other regulatory or enforcement actions that could be harmful to our business.


Furthermore, new PRC laws, rules and regulations may be introduced to impose additional requirements that may be applicable to our corporate structure and contractual arrangements. Occurrence of any of these events could materially and adversely affect our business, financial condition and results of operations and the market price of our common stockordinary shares. In addition, if the imposition of any of these penalties or requirement to restructure our corporate structure causes us to lose the rights to direct the activities of our consolidated VIE or our right to receive their economic benefits, we would no longer be able to consolidate the financial results of such VIE in our consolidated financial statements, which may cause the value of our securities to significantly decline or even become worthless. However, we do not believe that such actions would result in the liquidation or dissolution of our company, our wholly-owned subsidiaries in China or our consolidated VIEs.

Our current corporate structure and business operations and the market price of our ordinary shares may be affected by the newly enacted Foreign Investment Law which does not explicitly classify whether VIE that are controlled through contractual arrangements would be deemed as foreign-invested enterprises if they are ultimately “controlled” by foreign investors.

The VIE structure has been adopted by many Chinese-based companies, including us, to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. On March 15, 2019, the National People’s Congress, China’s national legislative body (the “NPC”) approved the Foreign Investment Law, which took effect on January 1, 2020. On December 26, 2019, the PRC State Council approved the Implementation Rules of the Foreign Investment Law, which came into effect on January 1, 2020. Since they are relatively new, uncertainties exist in relation to their interpretation. The Foreign Investment Law does not explicitly classify whether variable interest entities that are controlled through contractual arrangements would be deemed as foreign-invested enterprises if they are ultimately “controlled” by foreign investors. However, it has a catch-all provision under definition of “foreign investment” that includes investments made by foreign investors in China through other means as provided by laws, administrative regulations or the State Council. Therefore, it still leaves leeway for future laws, administrative regulations or provisions of the State Council to provide for contractual arrangements being viewed as a form of foreign investment. Therefore, there can be no assurance that our control over our consolidated VIE through contractual arrangements will not be deemed as foreign investment in the future.

Furthermore, if future laws, administrative regulations or provisions mandate further actions to be taken by companies with respect to existing contractual arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could decrease. Such delisting could alsomaterially and adversely affect our ability to obtain financing forcurrent corporate structure and business operations and the continuationmarket price of our ordinary shares.

We conduct a portion of our operations through our VIEs, which is established in the PRC, and we rely on contractual arrangements with our consolidated VIEs and its shareholders to operate our business, which may not be as effective as direct ownership in providing operational control and otherwise have a material adverse effect as to our business.

We rely on contractual arrangements with our consolidated VIEs and its shareholders. A substantial majority of our revenue from Intermediate is generated by and a significant percentage of Intermediate consolidated assets are owned by the VIEs, whose financial statements are consolidated with ours. These contractual arrangements do not give us an equity interest in the VIEs and may not be as effective as direct ownership in providing us with control over our consolidated VIEs. If our consolidated VIEs or its shareholders fail to perform their respective obligations under these contractual arrangements, our recourse to the assets held by our consolidated VIEs is indirect and we may have to incur substantial costs and expend significant resources to enforce such arrangements in reliance on legal remedies under PRC law. These remedies may not always be effective, particularly in light of uncertainties in the PRC legal system. Furthermore, in connection with litigation, arbitration or other judicial or dispute resolution proceedings, assets under the name of any of record holder of equity interest in our consolidated VIEs, including such equity interest, may be put under court custody. As a consequence, we cannot be certain that the equity interest will be disposed pursuant to the contractual arrangement or ownership by the record holder of the equity interest.


All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions, such as the U.S. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. In the event that we are unable to enforce these contractual arrangements, or if we suffer significant time delays or other obstacles in the process of enforcing these contractual arrangements, it would be very difficult to exert effective control over our consolidated VIEs, and our ability to conduct our business and our financial condition and results of operations may be materially and adversely affected.

Any failure by our consolidated VIEs or its shareholders to perform their contractual obligations would have a material adverse effect on our business and the market price of our ordinary shares.

Our wholly foreign-owned enterprise in the PRC, has entered into the VIEs Agreements with our consolidated VIEs and its shareholders. If our consolidated VIEs or its shareholders fail to perform their respective obligations under these contractual arrangements, we may incur substantial costs and expend additional resources seeking to enforce such arrangements. We may also have to rely on legal remedies under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective under PRC laws. For example, if the shareholders of our consolidated VIEs were to refuse to transfer their equity interests in the consolidated VIEs to our WFOE or its designee when our WFOE exercises the purchase option pursuant to these contractual arrangements, or if the shareholders of the VIEs were otherwise to act in bad faith toward TINGO GROUP or our WFOE, then our WFOE may have to take legal actions to compel them to perform their contractual obligations.

All of the VIEs Agreements are governed by PRC laws and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures, but an arbitration proceeding is not as formal as a court proceeding and the arbitrator may apply PRC law in a manner different from a court. The legal system in the PRC is not as developed as in some other jurisdictions, such as the U.S., and the arbitrator may render a decision which is in conflict with our understanding of the laws of the PRC and we may have little if any recourse. As a result, uncertainties in the PRC legal system and the arbitration procedure could limit the ability of our WFOE to enforce these contractual arrangements. Meanwhile, there are very few precedents and formal guidelines as to how contractual arrangements in the context of a VIEs should be interpreted or enforced under PRC laws. There remain significant uncertainties regarding the ultimate outcome of such arbitration should it become necessary. In addition, under PRC laws, rulings by arbitrators are final and parties cannot appeal arbitration results in court unless such rulings are revoked or determined unenforceable by a competent court. If the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay. In the event that our WFOE is unable to enforce these contractual arrangements, or if our WFOE suffers significant delay or other obstacles in the process of enforcing these contractual arrangements, TINGO GROUP may not be able to exert effective control over our consolidated VIEs, in which event we may lose the value of the VIEs Agreements and the relevant rights and licenses held by the VIEs which TINGO GROUP requires in order to operate its business, and its ability to conduct its business may be negatively affected. Any delay in effecting enforcement of our WFOE’s rights under the VIEs Agreements could materially and adversely affect our consolidated financial condition, the results of our operations, our prospects, our ability to continue in business and the market for and market price of our ordinary shares. If our WFOE is not able to enforce its rights, we may not be able to include the VIE’sfinancial statements with TINGO GROUP, which could cause our ordinary shares to lose most, if not all, of their value.

The arbitration provisions under the VIEs Agreements have no effect on the rights of our shareholders to pursue claims against us under the United States federal securities laws, although any such actions would have no effect on our WFOE’s ability to enforce its rights under the VIEs Agreements.


The shareholders of our consolidated VIEs may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition and the value of our ordinary shares.

The interests of the shareholders of our consolidated VIEs in their capacities as such shareholders may differ from the interests of our company as a whole, as what is in the best interests of our consolidated VIEs, including matters such as whether to distribute dividends or to make other distributions to fund our offshore requirement to the extent that such funding is permitted under PRC laws, may not be in our best interests. There can be no assurance that when conflicts of interest arise, any or all of these shareholders will act in our best interests of or that any conflicts of interest will be resolved in our favor. In addition, these shareholders may breach or cause our consolidated VIEs and its subsidiaries to breach or refuse to renew the existing contractual arrangements with us.

Our WFOE, however, could, at all times, exercise its option under the exclusive option agreement to cause the VIEs shareholders to transfer all of their equity ownership in our consolidated VIEs to a PRC entity or individual designated by our WFOE as permitted by the then applicable PRC laws. In addition, if such conflicts of interest arise, our WFOE could also, in the capacity of attorney-in-fact of the shareholders of our consolidated VIEs as provided under the power of attorney, directly appoint new directors of our consolidated VIEs. We rely on the shareholders of our consolidated VIEs to comply with PRC laws and regulations, which protect contracts and provide that directors and executive officers owe a duty of loyalty to our company and require them to avoid conflicts of interest and not to take advantage of their positions for personal gains, and the laws of the Cayman Islands, which provide that directors have a duty of care and a duty to act honestly in good faith with a view to our best interests. However, the legal frameworks of both China and the Cayman Islands do not provide guidelines on resolving conflicts with other corporate governance regimes. If our WFOE cannot resolve any conflicts of interest or disputes between our WFOE and the shareholders of our consolidated VIEs, TINGO GROUP would have to rely on the arbitration provisions of the VIEs Agreements, which, as discussed in the previous risk factor, could result in the disruption of our business and subject us to substantial uncertainty as to the outcome of any such. As a result, in the event that the shareholders of the VIEs do not comply with their obligations under the VIEs Agreements, our WFOE may not be able to enforce its rights, in which event we may not be able to include the VIEs financial statements with TINGO GROUP’s which could cause our ordinary shares to lose most, if not all, of their value.

Contractual arrangements in relation to our consolidated VIEs may be subject to scrutiny by the PRC tax authorities who may determine that our consolidated VIEs owes additional taxes, which could negatively affect our financial condition and the value of your investment.

Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. The PRC Enterprise Income Tax Law, or the EIT Law, requires every enterprise in China to submit its annual enterprise income tax return together with a report on transactions with its related parties to the relevant tax authorities. The tax authorities may impose reasonable adjustments on taxation if they have identified any related party transactions that are inconsistent with the arm’s length principles. We may face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements among our wholly-owned PRC subsidiary, our consolidated VIEs and its shareholders were not entered into on an arm’s length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, regulations and rules, and adjust their income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded by our wholly-owned PRC subsidiary or consolidated VIEs for PRC tax purposes, which could in turn increase their tax liabilities without reducing their tax expenses. Furthermore, the PRC tax authorities may impose late payment fees and other penalties on our PRC subsidiary and consolidated VIEs for adjusted but unpaid taxes according to applicable regulations. Our financial position could be materially and adversely affected if the tax liabilities of our PRC subsidiary and consolidated VIEs increase, or if they are required to pay late payment fees and other penalties.


We may lose the ability to use and enjoy assets held by our consolidated VIEs that are material to the operation of our business if the entity goes bankrupt or becomes subject to a dissolution or liquidation proceeding.

Our consolidated VIEs hold substantially all of our assets. Under the contractual arrangements, our consolidated VIEs may not and its shareholders may not cause it to, in any manner, sell, transfer, mortgage or dispose of its assets or its legal or beneficial interests in the business without our WFOE’s prior consent. However, in the event that the shareholders of our consolidated VIEs breach these contractual arrangements and voluntarily liquidate our consolidated VIEs, or our consolidated VIEs declares bankruptcy and all or part of its assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our WFOE’s consent, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. If our consolidated VIEs undergoes a voluntary or involuntary liquidation proceeding, independent third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.

Risk Factors Relating to Micronet’s Business and Industry

Potential political, economic and military instability in Israel could adversely affect operations.

Certain of TINGO GROUP and Micronet’s principal offices and operating facilities are located in Israel. Accordingly, with respect to such Israeli facilities, political, economic and military conditions in Israel directly affect the operations of TINGO GROUP and Micronet. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. A state of hostility varying in degree and intensity has led to security and economic problems for Israel. Since October 2000, there has been an increase in hostilities between Israel and Palestinians, which has adversely affected the peace process and has negatively influenced Israel’s relationship with its Arab citizens and several Arab countries, including the Gaza Strip, the West Bank, Lebanon and Syria. Such ongoing hostilities may hinder Israel’s international trade relations and may limit the geographic markets where Micronet can sell its products and solutions. Hostilities involving or threatening Israel, or the interruption or curtailment of trade between Israel and its present trading partners, could materially and adversely affect operations.

In addition, Israel-based companies and companies doing business with Israel have been subject to an economic boycott by members of the Arab League and certain other predominantly Muslim countries since Israel’s establishment, along with other private organizations around the world. Although Israel has entered into various agreements with certain Arab countries and the Palestinian Authority, and various declarations have been signed in connection with efforts to resolve some of the economic and political problems in the Middle East, whether or in what manner these problems will be resolved is unpredictable. Wars and acts of terrorism have resulted in significant damage to the Israeli economy, including reducing the level of foreign and local investment.

Substantial costs as a result of litigation or other proceedings relating to intellectual property rights may be incurred, which would have an adverse effect on the value of TINGO GROUP’s equity interest in Micronet.

Third parties may challenge the validity of Micronet’s intellectual property rights or bring claims regarding Micronet’s infringement of a third party’s intellectual property rights. This may result in costly litigation or other time-consuming and expensive judicial or administrative proceedings, which could deprive Micronet of valuable rights, cause them to incur substantial expenses and cause a diversion for technical and management personnel. An adverse determination may subject Micronet to significant liabilities or require it to seek licenses that may not be available from third parties on commercially favorable terms, if at all. Further, if such claims are proven valid, through litigation or otherwise, Micronet may be required to pay substantial financial damages or be required to discontinue or significantly delay the development, marketing, sale or licensing of the affected products and intellectual property rights. The occurrence of any of the foregoing could have an adverse effect on the value of TINGO GROUP’s equity interest in Micronet.


Risks Relating to TGH

Risks Related to Doing Business in Africa

Many African countries are, or have been, characterized by political instability or changes in regulatory or other government policies.

Frequent and intense periods of political instability make it difficult to predict future trends in governmental policies. For example, the Arab Spring of 2010 and 2011 caused substantial political turmoil across the Middle East and North Africa, particularly in Egypt. During this period of instability in Egypt, the government temporarily dissolved the parliament, suspended the constitution and shut down the internet. In addition, if government or regulatory policies in a market in which Tingo Mobile operates were to change or become less business-friendly, the business of Tingo Mobile and its operating subsidiaries based in Africa could be adversely affected.

Governments in Africa frequently intervene in the economies of their respective countries and occasionally make significant changes in policy and regulations.

Governmental actions have often involved, among other measures, nationalizations and expropriations, price controls, currency devaluations, mandatory increases on wages and employee benefits, capital controls and limits on imports. TGH’s business, financial condition and results of operations may be adversely affected by changes in government policies or regulations, including such factors as exchange rates and exchange control policies, inflation control policies, price control policies, consumer protection policies, import duties and restrictions, liquidity of domestic capital and lending markets, electricity rationing, tax policies, including tax increases and retroactive tax claims, and other political, diplomatic, social and economic developments in or affecting the countries where TGH or its subsidiaries operate. For example, the Central Bank of Nigeria requires domestic companies to obtain a certificate to obtain foreign exchange for operation in other countries. There can be no assurance that TGH will be successful in obtaining these certificates. Any failure to obtain the required certificates could impact TGH’s ability to utilize corporate funds in Nigeria for business purposes outside of Nigeria, or adversely affect the exchange rate at which such foreign exchange could be obtained. In the future, the level of intervention by the Nigerian Central Bank may continue to increase. These or other measures could have a material adverse effect on TGH’ business, financial condition, results of operations and prospects.

TGH’s business may be materially and adversely affected by an economic slowdown in any region of Africa.

While we believe that economic conditions in Africa will improve, poverty in Africa will decline and the purchasing power of African consumers will increase in the long term, there can be no assurance that these expected developments will actually materialize. The development of African economies, markets and levels of consumer spending are influenced by many factors beyond TGH’s control, including consumer perception of current and future economic conditions, political uncertainty, employment levels, inflation or deflation, real disposable income, poverty rates, wealth distribution, interest rates, taxation, currency exchange rates and weather conditions. For example, a collapse in oil prices in early 2016 placed pressure on Nigeria’s currency, causing a currency shortage and threatening substantial inflation. Consumer spending declined in the face of significant price increases. As Tingo Mobile’s operations in Nigeria generate the substantial majority of TGH’s revenues than its operations in any other country in which TGH currently operates, adverse economic developments in Nigeria could have a much more significant impact on TGH’s results than a similar downturn in other countries. The occurrence of any of these risks could have a material adverse effect on TGH’s business, financial condition, results of operations and prospects.

Uncertainties with respect to the legal system in certain African markets could adversely affect TGH.

Legal systems in Africa vary significantly from jurisdiction to jurisdiction. Many countries in Africa have not yet developed a fully integrated legal system, and recently-enacted laws and regulations may not sufficiently cover all aspects of economic activities in such markets. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties. Since local administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to predict the outcome of administrative and court proceedings and our level of legal protection in many of the markets in which TGH or its subsidiaries operate. Moreover, local courts may have broad discretion to reject enforcement of foreign awards. These uncertainties may affect TGH’s ability to enforce its contractual rights or other claims. Uncertainty regarding inconsistent regulatory and legal systems may also embolden plaintiffs to exploit such uncertainties through unmerited or frivolous legal actions or threats in attempts to extract payments or benefits from TGH.


Many African legal systems are based in part on government policies and internal rules, some of which are not published on a timely basis, or at all, and may have retroactive effect.

There are other circumstances where key regulatory definitions are unclear, imprecise or missing, or where interpretations that are adopted by regulators are inconsistent with interpretations adopted by a court in analogous cases. In Nigeria, for example, there are Sharia law courts that operate in the predominantly Muslim north, to which only Muslims are subject. Decisions of these courts are subject to appeal and reversal by the secular courts. As a result, TGH or one or more of its subsidiaries may not be aware of its violation of certain policies and rules until after the violation. In addition, any administrative and court proceedings in Africa may be protracted, resulting in substantial costs and the diversion of resources and management attention.

TGH’s business may be materially and adversely affected by violent crime or terrorism in any region of Africa.

Many of the markets in which TGH or its subsidiaries operate suffer from a high incidence in violent crime and terrorism, which may harm our business. Violent crime has the potential to interfere with our delivery and fulfilment operations. Further, the terrorist attacks of Boko Haram have created considerable economic instability in north-eastern Nigeria for nearly a decade. Although it is difficult to quantify the economic effect of Boko Haram’s terrorist activities, countless markets, shops, and schools have been temporarily or permanently closed over the years out of fear of coordinated attacks. In some of the areas most devastated by terrorism, commercial banks have chosen to remain open for only three hours per day. Many Nigerians have also chosen to migrate from the north to the south, or out of the country altogether. If Boko Haram’s terrorist activities were to spread throughout Nigeria, the increasing violence could have material adverse effects on the Nigerian economy. Recently there have been nationwide protests resulting in deaths of demonstrators in clashes with the armed forces in Nigeria calling for the ban of a police unit, the Special Anti- Robbery Squad, which demonstrations have continued after the squad was disbanded as broader protests against police brutality and corrupt government. A terrorist attack in Nairobi in January 2019 by Somalia-based militant group al-Shabab drew increased attention to the risks of destabilization in Kenya. An increase in violent crime or terrorism in any region of Africa may interfere with transportation activities and discourage economic activity, weaken consumer confidence, diminish consumer purchasing power or cause harm to TGH’s sellers and consumers in other ways, any of which could have a material adverse effect on TGH’s business, financial position, results of operations and prospects.

The operations of TGH’s agricultural customer base may be affected by climate change. 

The global climate is changing, and will continue to change, in ways that affect the planning and day to day operations of businesses, government agencies and other organizations. The manifestations of climate change include higher temperatures, altered rainfall patterns, and more frequent or intense extreme events such as heatwaves, drought, and storms. Nigeria is still practicing rain fed agriculture which renders agricultural operations there vulnerable to the adverse effects of climate change. Extreme events such as flooding, extreme heat and drought has led to soil degradation which has resulted in decreased agricultural production. These effects can impact agricultural operations in Nigeria and other African countries directly, as well as the personnel, physical assets, supply chain and marketing and distribution involved in those operations, and in turn adversely affect TGH’s customer base.

Tingo Mobile’s cash reserves are not diversified across a variety of financial institutions.

Tingo Mobile generates considerable cash flow from operations which it manages in conjunction with its primary deposit institution. Tingo Mobile has not, thus far, diversified its deposits among other financial institutions in Nigeria, and the amount that Tingo Mobile has on hand vastly exceeds the maximum deposit insurance provided by the Nigeria Deposit Insurance Corporation. If Tingo Mobile’s primary deposit institution were to experience a liquidity shortage or an interruption in banking activity, Tingo Mobile could be constrained from having access to its funds, and its operations, and that of TGH, could be materially adversely affected as a result.


Risks Related to TGH’s Business and Industry Sectors in Which It Operates

Inflation may have an adverse effect on TGH’s subscriber base.

Throughout 2020, 2021, and continuing into 2022, growing demand and supply chain disruption had resulted in increased prices of agricultural inputs, such as seeds and fertilizer, which in turn constrained growers’ ability to preserve margins on agricultural production, particularly for smaller farmers. Phosphate prices, for example, had increased approximately 139% from February 2020 to the end of 2021, while nitrogen had increased more than 80% during that period. The invasion of Ukraine by Russian armed forces in February 2022 has exacerbated inflationary pressure for these inputs, particularly inasmuch as Russia accounts for 13% of global production of potash, phosphate, and nitrogen and has been subjected to sweeping sanctions from western governments and the global financial system. Because of these input price pressures, TGH’s subscribers may find it more cost effective to produce at lower rates than historical levels, or abandon the current growing season entirely. Any diminution of growing activity by TGH’s subscriber base could also lead to lower activity on its Nwassa platform and lower revenue overall. We cannot guarantee you that TGH’s subscriber base will not be adversely affected by inflationary pressures regarding agricultural inputs, or that TGH’s financial condition or results of operations will not be adversely affected as a result.

TGH and its subsidiaries face competition, which may intensify.

In Nigeria, Tingo Mobile competes with a large number of mobile phone carriers. Current competitors, such as MTN, Airtel, Glo and 9 Mobile, being the four largest mobile networks, may seek to intensify their investments in those markets and also expand their businesses in new markets. Competitive pressure from current or future competitors or our failure to quickly and effectively adapt to a changing competitive landscape could adversely affect Tingo Mobile’s growth. Current or future competitors may offer lower prices and enhanced features, and Tingo Mobile may be forced to lower its prices and upgrade its phones and network in order to maintain its market share. With respect to Tingo Mobile’s payment services, it faces competition from financial institutions with payment processing offerings, debit and credit card service providers, other offline payment options and other electronic payment system operators, in each of the markets in which TGH or its subsidiaries operate. We expect competition to intensify in the future as existing and new competitors of TGH may introduce new services or enhance existing services. New entrants tied to established brands may engender greater user confidence in the safety and efficacy of their services. The expansion of mobile network operators and independent payment service providers may increase competition in the medium term.

TGH, through its subsidiaries, has entered into, or may enter into, agreements with various parties for certain business operations. Any difficulties experienced by TGH in maintaining these arrangements could result in additional expense, loss of confidencesubscribers and revenue, interruption of TGH’s services, or a failure or delay in the roll-out of new technology.

TGH, through its subsidiaries such as Tingo Mobile, has entered into, and may in the future enter into, agreements with various third parties for the day-to-day execution of services, provisioning, maintenance, and upgrading of TGH’s wireless and wireline networks, including the permitting, building, and installation of network upgrades; leases and subleases for space on communications towers; the development and maintenance of certain systems necessary for the operation of its business; customer service, related support to its wireless subscribers, outsourcing aspects of its wireline network and back office functions; and to provide network equipment, handsets, devices, and other equipment. For example, Tingo Mobile depends heavily on local access facilities obtained from ILECs to serve its data and voice subscribers, and payments to ILECs for these facilities are a significant cost of service for Tingo Mobile’s wireless customers. We also expect TGH’s dependence on key suppliers to continue as more advanced technologies are developed, which may lead to additional significant costs. If TGH’s key vendors fail to meet their contractual obligations or experience financial difficulty, or if TGH fails to adequately diversify its reliance among vendors, it may experience disruptions to its business operations or incur significant costs implementing alternative arrangements.

TGH and its subsidiaries are subject to anti-corruption, anti-bribery, and similar laws, and non-compliance with such laws can subject any one of them to criminal penalties or significant fines and harm the group’s business and reputation.

TGH and its subsidiaries are subject to anti-corruption and anti-bribery and similar laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, U.S. Travel Act, the USA PATRIOT Act, the U.K. Bribery Act 2010, Nigeria anti-corruption statutes and other anti-corruption, anti-bribery and anti-money laundering laws in countries in which TGH or its subsidiaries conduct activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly and prohibit companies and their employees and agents from promising, authorizing, making, or offering improper payments or other benefits to government officials and others in the private sector. As TGH expands its networks in Africa and internationally, its risks under these laws may increase. Noncompliance with these laws could subject us to investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, adverse media coverage, and other consequences. Any investigations, actions or sanctions could harm its business, results of operations, and financial condition.


Required licenses, permits or approvals may be difficult to obtain in the countries in which TGH or its subsidiaries currently operate, and once obtained may be amended or revoked arbitrarily or may not be renewed.

Given TGH’s diversified offering of services, it requires approvals and licenses from national, regional, and local governmental or regulatory authorities in the countries in which we currently operate. For example, we may be required to obtain licenses to be able to continue offering or expand certain of our payment solutions, and there can be no assurance that we will obtain any such licenses in a timely manner or at all. Even if obtained, licenses are subject to review, interpretation, modification or termination by investors, customersthe relevant authorities. Any unfavorable interpretation or modification or any termination of a required license may significantly harm our operations in the relevant country or may require us to close down parts or all of our operations in the relevant country.

We can offer no assurance that the relevant authorities will not take any action that could materially and employees.adversely affect these licenses, permits or approvals or of TGH’s ability to provide its services. TGH may experience difficulties in obtaining or maintaining some of these licenses, approvals and permits, which may require it to undertake significant efforts and incur additional expenses. If TGH or a subsidiary operates without a license, it could be subject to fines, criminal prosecution or other legal action. Any difficulties in obtaining or maintaining licenses, approvals or permits or the amendment or revocation thereof could have a material adverse effect on TGH’s business, financial condition, results of operations and prospects.

 

Item 1B.Unresolved Staff Comments.

Item 1B. Unresolved Staff Comments.

 

Not applicable.

 

Item 2.Properties.

Item 2. Properties.

 

Enertec’s properties consist of leased combined office and manufacturing facilities used for sales, support, research and development, manufacturing, and our headquarters (management and administrative personnel). Enertec’s offices and facilities currently consist of approximately 25,000 square feet located in Karmiel, in the north of Israel leased at approximately $237,000 per year for the remaining lease duration. The lease term expires in June 2021, subject to two five-year extension options and an early termination provision after five years, which we hold. We believe that Enertec’s present facilities are suitable for its existing and projected operations for the near future.

MicronetBI Intermediate (Hong Kong) Limited, a Hong Kong company (“BI Intermediate”) currently maintains two facilitiesa single office space in adjacent buildingsunit 1602-1603 Hong Kong. The BI Intermediate lease is a month-to-month lease with a term of three years, expiring in Azur, Israel. Both of these facilities are leased, one under a long-term lease, or the Long Term Lease, under which Micronet has purchased “like ownership” rights from the Israeli Land Administration.February 29, 2024. The rent is $12,206 (HKD 95,200) per month. The office facility subject to the Long Term Lease is used as Micronet’s headquarters and the other facility is an industrial building which houses its factory. Micronet’s executive offices occupy approximately 9,150 square feet and house the corporate functions, sales support, and marketing, finance, engineering and operating groups. The Long Term Lease expires in April 2028, subject to our option to extend the term by another 49 years. We do not pay rent with respect to this facility because we have purchased the lease rights. The factory facilityHong Kong occupies approximately 5,500 square feet at approximately $6,412 per month until June 30, 2017. The facility is used for the manufacturing and logistic support of the business, including warehouse. During 2016, Micronet paid $77,000 in connection with the Long Term Lease.  Micronet believes that its present facilities are suitable for its existing and projected operations for the near future. Our U.S. subsidiary, Micronet Inc., maintains leased offices in Salt Lake City, Utah. Micronet Inc.'s lease was extended on month to month basis in May 2016 until either party provides written three month notice to the other and the rent cost is approximately $200,000 per year. The factory facility in Salt Lake City occupies approximately 14,8091,680 square feet and is used for the assemblyheadquarters and logisticsales support.

Magpie Securities Limited, a Hong Kong company (“Magpie”) currently maintains two offices space in unit 1601 Hong Kong and in unit 2502-2503 Hong Kong. The Magpie lease is a month-to-month lease with a term of two years nine months & two years four months, respectively expiring in February 29, 2024. The rent is $6,462 (HKD 50,400) per month and $12,744 (HKD 99,400) per month, respectively. The office facility in Hong Kong occupies approximately 840 square feet, the second office space occupies approximately 1680 square feet. They are used for the headquarters, sales support, of the business, including warehouse.marketing, finance and operating groups.

 

Shenzhen Magpie Information Consulting Technology CO., LTD, (“Shenzhen Magpie”) a wholly owned subsidiary of BI Intermediate currently maintains office space in Rm 06-07, 20/F, Block C, Eastern New World Square, 1003 Shennan Boulevard, Futian District, Shenzhen, China . The Shenzhen Magpie lease is a month-to-month lease expiring in April 30, 2023. The rent is $2,615 (RMB 50,000 per quarter) per month.

Bokefa Petroleum and Gas Co. Ltd, a wholly-owned subsidiary of BI Intermediate, currently has office space in Hangzhou, Zhejiang Province. The lease is payable on a monthly basis for two years at an annual rent of US$18,405.25. The office facility in Zhejiang Province occupies and is used for sales support, marketing and finance. The company expiring in insurance biasness.


Tianjin Bokefa Technology Ltd. (“Tianjin Bokefa”) is a wholly-owned subsidiary of Bokefa Petroleum and Gas Co. Ltd and currently has office space in Beijing and Tianjin. Lease are paid annually or quarterly, with an average lease term of 1.50 years and an annual rent of US$231,164.83. The office facility in Beijing occupies and is used for the headquarters, sales support, marketing, finance and operating groups. The company expiring in insurance biasness.

Beijing Fucheng Insurance Brokerage Co. Ltd (“Fucheng”) is a wholly owned subsidiary of Beijing YibaoTech and currently has office space in Beijing and Guangxi. Leases are paid annually or quarterly, with an average lease term of 1.70 years and an annual rent of $115,144.00. The office facility in Beijing and Guangxi occupies and is used for sales support, marketing, finance and operations. The company expiring in insurance biasness.

Guangxi Zhongtong Insurance Agency Co Ltd is a 60% owned subsidiary of Beijing Yibao Technology Co., Ltd. and currently has office space in various cities in Guangxi Province. Leases are paid semi-annually, quarterly or monthly, with an average lease term of 1.55 years and an annual rent of $96,318.75. The office facility in Guangxi occupies and is used for headquarters, sales support, marketing, finance and operations. The company expiring in insurance biasness.

All Weather Insurance Agency, Inc. (“All Weather”) is a VIE controlled subsidiary and currently has office spaces in Beijing and other different cities in China. Leases are payable annually, semi-annually, quarterly or monthly, with an average lease term of 1.55 years and an annual rent of $344,742.74. The office facility in Beijing and other cities occupies and is used for headquarters, sales support, marketing, finance and operations. The company expiring in insurance biasness.

TGH currently leases office space near Salt Lake City, Utah in the United States.  The lease is for 3,692 square feet of executive office space and is paid at a monthly base rate of USD $3,000.  Other costs such as IT services, etc. are added monthly in addition to the base rate.  The lease has no end date but is on a month-to-month basis. 

TGH also currently leases office space in London in the United Kingdom. The lease is for 13 workstations and is paid at a monthly base rate of GBP 12,500.  The lease has an end date of June 30, 2023. 

Tingo Mobile currently maintains office space in (Allainz Towers, 95 Broad street Marina Lagos.) and building at (93 Dr Kenneth Ojo Crescent Lingo Estate Sahara 4, Lokogoma, FCT, Abuja). The Tingo lease is a month-to-month lease expiring on December 31, 2023. The rent is N6,450,000.00 (Approximately $14,500) per month. The office facility in Nigeria occupies approximately 1128 square meters. They are used for the headquarters, sales support, marketing, finance and operating groups.

In Ghana, we lease a 600 square meter office space in Accra at the rate of $8,000 per month, for a 2-year period commencing November 1, 2022.  We also lease a 3-bedroom apartment in Ghana for the use of our executives and staff to use while traveling to Ghana.  This lease is for a 1-year period commencing January 6, 2023 and is for $1,600 per month.

In Dubai, we lease office space at the rate of 33,333 Arab Emirate Dirhams (AED) per month.  Our lease covers approximately 300 square meters and is for a 1-year period commencing December 8, 2022.

Item 3.Legal Proceedings.

Item 3. Legal Proceedings.

 

From time to time we may become subject to litigation incidental to our business. EnertecThere is no open legal proceeding as of December 31, 2022 and Micronet are not currently parties to any material legal proceedings.as of today. We could be involved in ordinary course litigation.

 

Item 4.Mine Safety Disclosures.

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

21

 

 

PART II

 

Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Market Information

Our shares of common stock are listedbegan trading on NASDAQNasdaq under the symbol “MICT.” Our warrants are listed“TINGO GROUP” on NASDAQFebruary 27, 2023. under the symbol “MICTW.”

The following table sets forth,“TIO”. Before that date it was trading under the symbol “MICT” from April 29, 2013. Prior to that date, there was no established public trading market for the periods indicated, the range of high  and low sale prices through December 31, 2016:

Quarter High  Low 
2016      
First quarter $2.31  $1.57 
Second quarter $2.29  $1.61 
Third quarter $2.19  $1.6 
Fourth quarter $1.73  $1.17 
         
2015        
First quarter $3.78  $2.36 
Second quarter $3.91  $2.32 
Third quarter $3.84  $1.92 
Fourth quarter $2.77  $1.61 

The following table sets forth, for the periods indicated, the range of high and low sale prices of our warrants on NASDAQ through December 31, 2016:

Quarter High  Low 
2016      
First quarter $0.23  $0.17 
Second quarter $0.18  $0.14 
Third quarter $0.18  $0.12 
Fourth quarter $0.16  $0.05 
         
2015        
First quarter $0.74  $0.40 
Second quarter $0.60  $0.38 
Third quarter $0.95  $0.38 
Fourth quarter $0.42  $0.23 

On March 30, 2017, the last reported sale price of our common stock on The NASDAQ Capital Market was $1.75 per share.stock.

 

On March 30, 2017, the last reported sale price of our warrants on The NASDAQ Capital Market was $0.18 per warrant.Holders

  

Holders

As of March 31, 2017,2023, we had 6,490,658163,727,382 shares of common stock outstanding and such shares were held by 7282 stockholders of record. Because some of the shares of our common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

 

DividendsRecent Sales of Unregistered Securities

 

We didOn December 1, 2022, TGH and MICT Fintech were added as parties to the Merger Agreement, and TINGO GROUP completed the merger of Tingo BVI Sub with and into MICT Fintech and MICT Fintech became a wholly-owned subsidiary of TGH, which is a wholly-owned subsidiary of TINGO GROUP. At the closing of Merger , the total consideration paid by TINGO GROUP to TMNA was: (i) 25,783,675 shares of common stock of TINGO GROUP, representing approximately 19.9% of the number of shares of MICT’s common stock issued and outstanding immediately prior to Closing; (ii) 2,604.28 shares of Series A Preferred Stock convertible into 26,042,808 shares of TINGO GROUP Common Stock equal to approximately 20.1% of the total issued and outstanding TINGO GROUP Common Stock immediately prior to Closing; and (iii) 33,687.21 shares of Series B Preferred Stock convertible into 336,872,138 shares of TINGO GROUP Common Stock equal to approximately 35% of TINGO GROUP’s total issued and outstanding common stock. Of the foregoing of shares of TINGO GROUP common and preferred stock issued to TMNA in connection with the Merger (the “Merger Consideration Shares”), 5% of the Merger Consideration Shares was withheld in escrow to satisfy the indemnification obligations of TMNA under the Merger Agreement.

The issuance of the Merger Consideration Shares pursuant to the Merger Agreement was made in a transaction not declare constituting a public offering and, therefore, exempt from the registration requirements of the Securities Act of 1933, as amended , in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or payRegulation D promulgated thereunder.

Securities Authorized for Issuance under Equity Compensation Plans

The following table summarizes information about stock options outstanding and exercisable as of December 31, 2022:

  Year ended
December  31 2022		  Year ended
December 31 2021		 
  Number of
Options		  Weighted
Average
Exercise
Price		  Number of
Options		  Weighted
Average
Exercise
Price		 
             
Options outstanding at the beginning of period:  1,558,000  $1.74   1,158,000  $    2.24 
Changes during the period:                
Granted  -  $-   740,000  $1.97 
Exercised  -  $-   (60,000) $1.35 
Forfeited  (968,000) $1.68   (280,000) $1.41 
Options outstanding at the end of the period  590,000  $1.83   1,558,000  $1.74 
Options exercisable at the end of the period  434,167  $1.74   1,118,000  $1.57 

The Company has warrants outstanding as follows:

  Warrants
Outstanding		  Warrants
Exercisable		  Average
Exercise
Price		 Remaining
Contractual Life		 
Balance, December 31, 2021  62,863,879   62,863,879  $2.854  4.5 
Granted  -      $-  - 
Forfeited  -      $-  - 
Exercised  -      $-  - 
Balance, December 31, 2022  62,863,879   62,863,879  $2.854  4.25 


Related party transaction

On January 1, 2021, we entered into a transaction through our wholly-owned subsidiary, Bokefa, with the shareholders of Guangxi Zhongtong Insurance Agency Co., Ltd (“Guangxi Zhongtong”), a local Chinese entity with business and operations in the insurance brokerage business. Pursuant to the transaction, we loaned the Guangxi Zhongtong shareholders through a frame work loan (the “GZ Frame Work Loan”) the amount of up to RMB 40 million (approximately $6,125,000) (“GZ Frame Work Loan Amount”) which is designated, if exercised, to be used as a working capital loan for Guangxi Zhongtong. As of December 31, 2022, only RMB 8,010,000 (approximately $1,243,000) was drawn down from the GZ Frame Work Loan for working capital and approximately $522,000 was drawn down for loans to shareholders of Guangxi Zhongtong (as stipulated in the agreement). In consideration for the GZ Frame Work Loan, the parties entered into various additional agreements which include: (i) a pledge agreement pursuant to which the shareholders have pledged their shares for the benefit of  Bokefa in order to secure the GZ Frame work Loan Amount  (ii) an exclusive option agreement pursuant to which Bokefa has an exclusive option to purchase the entire issued and outstanding common shares of Guangxi Zhongtong from the shareholders (“Option Agreement”) under such terms set forth therein (which include an exercise price not less than the maximum GZ Frame Work Loan Amount and the right to convert the GZ Frame Work Loan Amount into the purchased shares) (iii) an entrustment agreement and power of attorney agreement pursuant to which the shareholders irrevocably entrusted and appointed Tianjin Bokefa as their proxy and trustee to exercise on their behalf any and all rights under applicable law and the articles of association of Guangxi Zhongtong in the shareholder’s equity interest in Guangxi Zhongtong (iv) a business cooperation agreement and a master exclusive service agreement which grants Bokefa rights related to Guangxi Zhongtong’s business and operations in order to secure repayment of the GZ Frame Work Loan Amount.

On July 1, 2021, Bokefa entered into a transaction with the shareholders of All Weather Insurance Agency Co., Ltd (“All Weather”),. Pursuant to the Transaction, Bokefa agreed to provide the All Weather shareholders with a frame work loan (the “AW Frame Work Loan”) for a total amount of up to RMB 30 million (approximately $4.7 million) (the “AW Frame Work Loan Amount”) which, if utilized, will be used for working capital purposes of All Weather. In consideration for the AW Frame Work Loan, the parties entered into various additional agreements which include: (i) a pledge agreement pursuant to which the shareholders pledged their shares for the benefit of Bokefa in order to secure the amount for the AW Frame Work Loan Amount (ii) an exclusive option agreement pursuant to which Bokefa has an exclusive option to purchase the entire issued and outstanding common shares of All Weather from the Shareholders (“Option Agreement”) under such terms set forth in the Option Agreement (which include an exercise price not less than the maximum AW Frame Work Loan Amount and the right to convert the AW Frame Work Loan Amount into the purchased shares) (iii) an entrustment agreement and power of attorney agreement pursuant to which the shareholders irrevocably entrusted and appointed Bokefa as their proxy and trustee to exercise on their behalf any and all rights under applicable law and the articles of association of All Weather in the shareholder’s equity interest in All Weather and (iv) a business cooperation agreement and a master exclusive service agreement which grants Bokefa rights related to All Weather’s business and operations in order to secure repayment of the AW Frame Work Loan Amount. The Transaction was structured as a VIE structure (pursuant to which we do not technically hold the shares) and as a result of our direct ownership in Bokefa and its contractual arrangements with All Weather, we are regarded as All Weather’s controlling entity and the primary beneficiary of All Weather’s business. On October 27, 2021, the entire AW Frame Work Loan Amount of $4.7 million was transferred to the shareholders and $2.7 million was transferred back to All Weather for purposes of working capital. In addition, as of December 31, 2022, the Company has outstanding receivables from the shareholder of All Weather in the sum of approximately $4,603,000. The fund was provided in 2021 in advance to a transaction between the parties pursuant to which the VIE structure described above shall be replaced by an equity structure for purchase by TINGO GROUP of such equity interests in All Weather on such commercial and other terms to  be agreed by the parties.

On November 13, 2019, the Company and Micronet executed a convertible loan agreement pursuant to which the Company agreed to loan to Micronet $500,000 in the aggregate (the “Convertible Loan”). The Convertible Loan bears interest at a rate of 3.95% calculated and is paid on a quarterly basis. In addition, the Convertible Loan, if not converted, shall be repaid in four equal installments, the first of such installment payable following the fifth quarter after the issuance of the Convertible Loan, with the remaining three installments due on each subsequent quarter thereafter, such that the Convertible Loan shall be repaid in full upon the lapse of 24 months from its grant. In addition, the outstanding principal balance of the Convertible Loan, and all accrued and unpaid interest, is convertible at the Company’s option, at a conversion price equal to 0.38 NIS per Micronet share. Pursuant to the Convertible Loan agreement, Micronet also agreed to issue the Company an option to purchase up to one of Micronet’s ordinary shares for each ordinary share that it issued as a result of a conversion of the Convertible Loan (“Convertible Loan Warrant”), at an exercise price of 0.60 NIS per share, exercisable for a period of 15 months. On July 5, 2020, Micronet had a reverse split where the price of the Convertible Loan changed from 0.08 NIS per Micronet share into 5.7 NIS per Micronet share. The option’s exercised price was changed from 0.6 NIS per share to 9 NIS per Micronet share. On January 1, 2020, the Convertible Loan was approved at a general meeting of the Micronet shareholders and as a result, the Convertible Loan and the transactions contemplated thereby became effective. The loan was repaid on January 4, 2022.


On May 13, 2022, the Company and TMNA executed a loan agreement pursuant to which the Company agreed to loan TMNA (“Maker”) a sum of $3,000,000 (the “Note” and “Loan” respectively) . The Loan bears an annual interest of 5%. The principal balance of the Loan and any accrued and unpaid interest due under the Note shall be due and payable on May 10, 2024 (“Initial Maturity Date”). The principal balance may be prepaid at any time by Maker without penalty.

On July 28, 2022, the Company agreed to replace the Note with a new note (“New Note”), pursuant to which the amount of the Loan granted under the New Note is $3,500,000, with all other terms remaining in effect without a change.

On September 28, 2022, the Company agreed to replace the New Note with a second new note (“Second New Note”), pursuant to which the amount of the Loan granted under the New Note is $3,700,000, with all other terms remaining in effect without a change.

On October 6, 2022, the Company agreed to replace the Second New Note with a third new Note (“Third New Note”) in the aggregate principal amount of $23,700,000 with all other terms remaining in effect without a change.

On October 15, 2022, TMNA extended a loan to Tingo Mobile in the aggregate principal amount of $15,866,000 (“Tingo Mobile Loan”). The Tingo Mobile loan bears interest at 5% per annum and matures on May 10, 2024.

On December 21, 2022, the Company and its subsidiary, MICT Fintech executed a loan agreement pursuant to which the Company agreed to loan MICT Fintech a sum of $10,000,000, with interest charged at a rate of 10% per annum. The principal balance of the loan and any accrued and unpaid interest shall be due and payable on December 31, 2023. On the same date, MICT Fintech loaned $10,000,000 to its subsidiary, Tingo Mobile, with interest charged at a rate of 25% per annum. The principal balance of this loan and any accrued and unpaid interest shall also be due and payable on December 31, 2023. The purpose of the loan is to fund costs relating to the purchase of smartphone handsets to be provided under operating lease agreements to two key customers of Tingo Mobile and Tingo Ghana Limited, which in turn is expected to facilitate a number of business revenue streams for Tingo Mobile and Tingo Ghana Limited, including but not limited to operating lease revenues, platform transaction revenues, product sale commissions and commodity export revenues. 

Overview. On February 9, 2023, the Company and MICT Fintech acquired from Dozy Mmobuosi, Tingo Mobile Founder and Chief Executive Officer all of the outstanding share capital of Tingo Foods PLC (“Tingo Foods”), a Nigerian public limited company that has operated in the food processing industry since its inception in September 2022. As part of its expansion strategy, Tingo Foods plans to fit out operate a state-of-the-art food processing facility in the Delta State of Nigeria, which is expected to be the largest of its kind in Africa, and scheduled for completion by the end of the first half of 2024.

Consideration Provided. As consideration for Tingo Foods, we issued Mr. Mmobuosi a senior secured promissory note in the principal amount of $204 million, bearing interest at 5.0% per annum and maturing in 24 months. In addition, we also agreed to fit out the Tingo Foods facility with the necessary processing equipment and further agreed to require Tingo Foods to enter into a long-term ground lease for the facility, with lease payments to commence when the facility becomes operational.


Current assets – related parties

  December 31,  December 31, 
  2022  2021 
(USD in thousands)      
Shareholders of All Weather $4,603  $3,680 
Beijing Fucheng Prospect Technology Co., Ltd  267     
Loan to Tingo inc.  8,099     
Convertible loan to Micronet  -   535 
Shareholders of Guangxi Zhongtong  522   919 
  $13,491  $5,134 

Current liabilities – related parties

  December 31,  December 31, 
  2022  2021 
(USD in thousands)      
Shareholders of Bokefa Petroleum and Gas $  308  $           - 
Shareholders of All Weather  659   4 
Shareholders of Tingo Mobile Limited  56,539   - 
  $57,506  $4 

Dividend Policy

As of the date of this Annual Report on Form 10-K, we have not paid any cash dividends in either 2016 or 2015 and currently do not plan to declare dividends on sharesstockholders. The declaration of our common stock in the foreseeable future. We have no dividends policy and will consider distributing dividends on a year by year basis. We expect to retain ourany future earnings, if any, for use in the operation and expansion of our business. Subject to the foregoing, the payment of cash dividends in the future, if any,dividend will be at the discretion of our board of directors and will depend upon such factors asour earnings, levels,if any, our capital requirements and financial position, the general economic conditions, and other pertinent conditions. It is our overall financial condition andpresent intention not to pay any other factors deemed relevant bycash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our board of directors.

business operations.

22

 

Recent Sales of Unregistered SecuritiesItem 6. Reserved

 

None.

Item 6.Selected Financial Data.

Not applicable.

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

OverviewResults of Operations

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Overview

We provide high tech solutions for severe environmentsare a holding company conducting financial technology business and agri-fintech business through our subsidiaries and entities, both wholly-owned and controlled through various VIE arrangements (“VIE entities”), which are located mainly in Africa, Southeast Asia and the battlefield, including missile defense technologies for Aerospace & DefenseMiddle East.


We currently operate in three segments and rugged mobile devicesfollowing the recent launches of Tingo DMCC and TingoPay, and the acquisition of Tingo Foods, we will be operating in six segments i) Fintech Verticals and Technology, comprising of our operations in China where we have 3 VIEs through which we operate our business of insurance brokerage.; ii) Online Stock Trading, comprising mainly the operation of Magpie through which we operate the business of online stock trading, located mainly in Hong Kong and Singapore; iii) Comprehensive Platform Service which includes the operations of Tingo Mobile described above and includes the operations of Tingo Mobile for the growing commercial MRM market.month of December; (iv) Commodity Trading Platform and Export, through Tingo DMCC, which handles the trading of agricultural commodities and the export of crops and processed foods (Tingo DMCC launched in December 2022 and commenced trading in January 2023); (v) Fintech, Payment Services and Value Added Services Super App and Merchant Services through TingoPay (which launched on February 13, 2023); and (iv) Food Processing, where crops and raw foods are processed into finished products, through Tingo Foods, (Purchase by the Company in February 2023) which commenced food processing operations in September 2022 .

Acquisition of Tingo Mobile

Our business has changed significantly in recent years and more specifically since December 1, 2022, following the completion of the Acquisition of Tingo Mobile. We design, develop, manufacturehave made another significant acquisition subsequent to December 31, 2022, of Tingo Foods.

Tingo Mobile is the leading Agri-Fintech company in Africa, with a comprehensive portfolio of innovative products, including a ‘device as a service’ smartphone and supply customized military computer-based systems, simulators, automatic test equipmentpre-loaded platform product.

Tingo Mobile’s Nwassa platform is believed to be Africa’s leading digital agriculture ecosystem that empowers rural farmers and electronic instruments, addressingagri-businesses by using proprietary technology that enables users to access markets in which they operate. Using Tingo Mobile’s ecosystem, farmers can ship produce from farms throughout Nigeria. The ecosystem provides real-time pricing, straight from the farms, which eliminates middlemen.

Although Tingo Mobile has a multi-billion-dollar defense industry. Solutions and systems are integrated into critical systems such as command and control, missile fire control, maintenancelarge retail subscriber base, its business model is essentially a business-to-business-to-consumer (“B2B2C”) model. Each of military aircraft and missiles for the Israeli Air Force, Israeli Navy and by foreign defense entities. Our MRM division develops, manufactures and provides mobile computing platforms for the multibillion dollar mobile logistics management market in the U.S., Europe and Israel. American-manufactured systems are designed for outdoor and challenging work environments in trucking, distribution, logistics, public safety and construction.

We operate primarily through two Israel-based companies, Enertec, our wholly-owned subsidiary, and Micronet, in whichcurrent subscribers is a member of one of a small number of cooperatives with whom we have a controlling interest,contractual relationship, which develop, manufacture, integratefacilitates the distribution of Tingo-branded smartphones into the various rural communities of user farmers/agri-workers.

Our revenues from Tingo mobile are derived from agri-tech business, inter-alia, smart phone leasing, an agri-marketplace, airtime top ups, utility payment services, bill-pay and globally market rugged computers, tabletse-wallet, insurance products and computer-based systemsaccess to finance and instrumentslending services.

On November 10, 2022, Tingo Mobile opened a new regional head office in Ghana and launched operations there enrolling additional 2 million new customers in Ghana and on December 14, 2022, Tingo Mobile launched in Malawi as a strategic base from which to expand into East Africa and target neighboring countries such as Tanzania, Zambia, and Mozambique.

In addition to its agri-fintech business, on December 12, 2022, we launched our global commodities trading platform and export business (“Tingo DMCC”) from the Dubai Multi Commodity Centre (the “DMCC”), which is regarded as the world’s No.1 Free Trade Zone and a major global commodity trading centre, to facilitate purchases and export of agricultural commodities from both its existing customer base and new customers. Through the strong relationships between Tingo Mobile and the cooperatives and other parties it deals with in Nigeria and Ghana, we have secured access to significant quantities of agricultural produce for the commercial, defenseexport, including wheat, millet, cassava, ginger, cashew nuts, cocoa and aerospace markets. Our products, solutions and services are designed to perform in severe environments and battlefield conditions.cotton.

 

Micronet is


As a publicly-traded companycomplementary step, on TASE and operates inFebruary 9, 2023, we acquired the growing commercial MRM market and is a global developer, manufacturer and providerentire share capital of mobile computing platforms, designed for integration into fleet management and mobile workforce management solutions. In June 2014, Micronet expanded its MRM business andTingo Foods, which commenced food processing operations in September 2022, generating more than $400 million of revenue in its first four months of trading. Through Tingo Foods, we expect to enhance our ability to integrate agricultural producers into the U.S. market’seed to sale’ value chain and digital ecosystem. We also plan the development of our own food processing facility, which is expected to be completed by the end of the first half of 2024.

As part of our strategy to leverage our fintech platforms, infrastructure and the Tingo brand, we recently launched the TingoPay Super App in partnership with Visa. TingoPay broadens our reach outside of the agricultural sector, targeting retail customers of any age (18+) and demographic. TingoPay customers via the TingoPay Super App, can make online transactions in their domestic or foreign currencies, as well as to manage their cards, set up repeat payments and access transaction statements.

We are aiming to be the leading fintech and agri-fintech business in Africa, before expanding into Southeast Asia and certain other parts of the world, delivering financial inclusion and financial upliftment to our customers, including to rural farming communities through the Company’s agri-fintech platform and products.

Reportable Segments

We report our financial performance based on the following segments: Verticals and Technology, Online Stock Trading, Comprehensive Platform Service. The segment amounts included in MD&A are presented on a basis consistent with our internal management reporting. Additional information on our reportable segments is contained in Note 14 – Segment Information and Geographic Data of the Notes to Financial Statements. Following the acquisition of Beijer, orTingo Mobile the Transaction,Company restructure its segments and retroactively applied it to all years presented.

Fintech Verticals and Technology – this segment comprising of our operations in China where we have 3 VIEs through which we operate, mainly, our business of insurance brokerage.

Online Stock Trading – this segment comprise mainly the operation of Magpie through which we operate the business of online stock trading, located mainly in Hong Kong and Singapore.

Comprehensive Platform Service – This segment includes the operations of Tingo Mobile described above and includes the operations of Tingo Mobile for the month of December.

Results of Operations

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

We measure our performance on a U.S.-based vehicle business and operations located in Utah, or the Vehicle Business, and as a result adding to its business U.S.-based facilities which include manufacturing and technical support infrastructure, sales and marketing capabilities as well as expanding its U.S. customer base and presence with local fleets and local MRM service providers. As a result of this acquisition, Micronet currently operates via its Israeli and U.S. facilities, the first located in Azur, Israel, near Tel Aviv, and the second located in Salt Lake City, Utah.

Enertec operates in the defense and aerospace markets and designs, develops, manufactures and supplies various customized military computer-based systems, simulators, automatic test equipment and electronic instruments. Enertec’s solutions and systems are designed according to major aerospace integrators’ requirements and market technological needs and are integrated by them into critical systems such as command and control, missile fire control, maintenance of military aircraft and missiles for use by the Israeli Air Force, Israeli Navy and by foreign defense entities.

Our strategy is driven and focused on continued internal growth through diligent efforts in our traditional growing markets with new technologies and innovative systems and productsconsolidated basis as well as the developmentperformance of new potential segments and markets. Concurrent with our efforts to grow organically and in line with our strategy, we will continue to seek acquisitions that will complement and expand our product offerings, support our goals and increase our competitiveness. In order to help achieve our internal growth, we have expanded our production capacity and facilities. We strongly believe that by utilizing Micronet as our commercial arm we will be able to access new market segments and new customers, thereby increase our overall customer base. Our current target markets, in which we concentrate the majority of our resources, include the Israeli domestic market, the U.S. market and the European market.each segment.

 

Revenues

Net revenues for the year ended December 31, 2022 were $146,035,000, compared to $55,676,000 for the year ended December 31, 2021, an increase of $90,359,000. The increase is mainly attributed to the acquisition of Tingo Mobile on December 1 2022, which in turn created the Company’s new Comprehensive Platform Service segment.


SEGMENT RESULTS OF OPERATIONS

(In Thousands, except percentages) 2022  2021  Percentage Change 
          
Revenue         
          
Fintech Verticals and Technology $57,364  $54,932   4%
Online Stock Trading  55   18   205%
Comprehensive Platform Service  88,616   -   -%
Mobile Resource Management      726   -%
             
Total $146,035  $55,676   262%
             
Loss from operating            
             
Verticals and technology $(12,538) $(9,648)    
Corporate and others  (26,203)  (20,744)    
Online Stock Trading  (9,829)  (7,504)    
Comprehensive Platform Service  36,778   -     
Total $(11,792) $(37,896)    

Reportable Segments

Fiscal Year 2022 Compared with Fiscal Year 2021

Fintech Verticals and Technology

 23●Net revenues related to the fintech business and insurance agency business for the year ended December 31, 2022 was $57,364,000, as compared to $54,932,000 revenues for the year ended December 31, 2021, and reflects an increase of $2,432,000, for the year ended December 31, 2022 as compared to the same period last year. The increase is attributed to acquisition of All Weather which we started to consolidate their financial results and business lines from the consummation of the transaction on July 1, 2021 (as further detailed above),and was offset by decrease in revenues from Guangxi Zhongtong and Tianjing Bokefa as a result of the lockdown in certain cities and regions during 2022 due to COVID-19.

 ●Cost of revenues for the year ended December 31, 2022 was $47,837,000, as compared to $45,740,000 for the year ended December 31, 2021, reflecting an increase of $2,097,000. The increase is attributable to costs associated to the operations of All Weather which we started to consolidate on July 1, 2021 and was offset by decrease in Cost of revenues from Guangxi Zhongtong as a result of the lockdown in certain cities and regions during 2022 due to COVID-19.

●Gross profit for the year ended December 31, 2022 was $9,527,000, as compared to $9,192,000 Gross profit for the year ended December 31, 2021, reflecting an increase of $335,000. The increase is attributable to the introduced insurance products with higher gross margins in 2022 as compared to last year, including engineering insurance and liability insurance. Therefore, the change in product mix resulted in higher gross margins.

Loss from operations related to the Fintech business and insurance agency business for the year ended December 31, 2022 was $12,538,000, as compared to $9,648,000 for the year ended December 31, 2021, and reflects an increase of $2,890,000 or 30%, for the year ended December 31, 2022 as compared to the same period last year. The increase is attributed to increase in selling and marketing expenses and increase in research and development expenses as further detailed below.


 

 

InOnline Stock Trading

●Net revenues related to the online stock trading platform segment for the year ended December 31, 2022 was $55,000, as compared to $18,000 for the year ended December 31, 2021, an increase of $37,000 as compared to last period. The increase is attributed to the launch of Magpie Invest, a global stock trading app, on September 15, 2021.

●Cost of revenues related to the online stock trading platform segment for the year ended December 31, 2022 was $65,000 as compared to nil in 2021. The increase is attributed to the broker applied minimum monthly brokerage charge in year 2022.

●Gross loss for the year ended December 31, 2022 was $10,000, as compared to gross profit of $18,000 for the year ended December 31, 2021, and reflects a decrease of $28,000. The decrease is attributed to the fact that the revenues can’t cover the broker monthly minimum charges.

●Loss from operations related to the online stock trading platform segment for the year ended December 31, 2022 was $9,829,000, as compared to $7,504,000 for the year ended December 31, 2021, and reflects an increase of $2,325,000 for the year ended December 31, 2022 as compared to the same period last year. The increase is attributed to increase in service charges amounts to $2,240,000.

Comprehensive AgriFtinech Platform Service

●Net revenues for the year ended December 31, 2022 was $88,616,000, as compared to nil for the year ended December 31, 2021.

●The increase is attributable to the acquisition of Tingo Mobile which was completed on December 1, 2022. We consolidate the operation of Tingo Mobile for one month and we expect revenues to increase significantly from 2023 when such operations are consolidated for a full year. The revenues of Tingo Mobile are also expected to increase due to its geographical expansion and the significant trade partnerships entered into during Q4 2022.

●Cost of revenues for the year ended December 31, 2022 was $33,341,000, an increase of $33,341,000. The increase relates to the cost of revenues of Tingo Mobile since its acquisition and consolidation on December 1, 2022.

●Gross profit for the year ended December 31, 2022 was $55,275,000 representing 62% margin. We believe that such margins will increase as a higher proportion of the revenues in Tingo Mobile are expected to be generated from its Nwassa digital marketplace and services.

●Gain from operations related to the Comprehensive AgriFtinech Platform Service segment for the year ended December 31, 2022 was $36,778,000. The increase is attributable to the acquisition of Tingo Mobile which was completed on December 1, 2022. We consolidate the operation of Tingo Mobile for one month.

Net revenues related to the Mobile Resource Management (MRM (Micronet)) for the year ended December 31, 2022 were $0, as compared to $726,000 for the year ended December 31, 2021 and reflects a decrease of $726,000 for the year ended December 31, 2022. MRM revenues were solely contributed by Micronet. The changes is attributed to the consolidation of the MRM Segment (Micronet) results as of the second quarter of 2013,2020 and the dilution in our ownership and voting interests in Micronet, causing us to cease consolidating Micronet’s operations in our financial statements commencing from May 9, 2021.

Cost of revenues

Total Cost of revenues for the year ended December 31, 2022 was $81,243,000, compared to $46,456,000 for the year ended December 31, 2021. This represents an increase of $34,787,000, for the year ended December 31, 2022 as compared to the same period last year.

There was no Cost of revenues related to the MRM segment for the year ended December 31, 2022, as compared to $716,000 for the year ended December 31, 2021. The decrease is attributed to the dilution in our ownership and voting interests in Micronet, causing us to cease consolidating Micronet’s operations in our financial statements from May 9, 2021 through December 31, 2022. 


Gross profit

Gross profit for the year ended December 31, 2022 was $64,792,000, representing 44% of the revenues. This is in comparison to gross profit of $9,220,000, representing 16% of the revenues for the year ended December 31, 2021 and reflects an increase of $55,572,000, for the year ended December 31, 2022 as compared to the same period last year. The increase is mainly attributable to the acquisition of Tingo Mobile, as well as to the development of our fintech business and insurance agency business.

There was no Gross profit related to the MRM (Micronet) segment for the year ended December 31, 2022, as compared to gross loss of $10,000 for the year ended December 31, 2021 and reflects a decrease of $10,000 for the year ended December 31, 2022. MRM Gross profit were. The change is attributed to the dilution in our ownership and voting interests in Micronet, causing us to cease consolidating Micronet’s operations in our financial statements from May 9, 2021

Selling and Marketing Expenses

Selling and Marketing expenses are part of operating expenses. Selling and marketing cost for the year ended December 31, 2022, was $11,140,000, as compared to $6,814,000 for year ended December 30, 2021. This represents an increase of $4,326,000, for the year ended December 31, 2022 as compared to the same period last year. The increase is mainly the result of : (i) an increase of $1,469,000 related to the operations of Tingo Mobile and; (ii) an increase of marketing charges related to the insurance brokerage within the Fintech Verticals and Technology segment, in an amount of $3,483,000 and; (iii) a decrease of $601,000 related to Online Stock trading segment. As global stock markets suffered sell-offs and high levels of volatility, resulting in reduced levels of retail investment, Magpie significantly reduces its marketing activity and instead focused on pivoting its business to a B2B model and to compliment the established business model of Tingo Mobile.

General and Administrative Expenses

General and administrative expenses are part of operating expenses. General and administrative expenses for the year ended December 31, 2022 was $58,165,000, compared to $36,488,000 for the year ended December 31, 2021. This represents an increase of $21,677,000, which is due in the main to (i) nonrecurring merger costs of $9,573,000, as noted above, (ii) an increase in salaries associated with the operations of the Fintech Verticals and Technology segment, whereby in 2021 we closedcompleted acquisitions of several insurance businesses that were only consolidated for part of the year, from the date of acquisition, whereas a public offeringfull year of costs is included in 2022. The wages and salaries for the year ended December 31, 2022 also includes $3,603,000 of costs relating to Tingo Mobile; (iii) an increase in depreciation of $1,693,000, which relates in the main to Tingo Mobile; (iv) a decrease in share based expenses to directors and employees in the of amount of $4,633,000; and (v) an increase in service charges, mainly relating to the Online Stock Trading segment as the year ended December 31, 2021 only included such costs from the date of launch in September 2021, whereas the year ended December 31, 2022 includes a full year of costs. The increase in service charges amounts to $2,240,000.

Research and Development Expenses

Research and development costs, includes mainly salaries, materials and sub-contractors. R&D expenses for the year ended December 31, 2022 was $1,689,000, compared to $889,000 for the year ended December 31, 2021 an increase of $800,000. On one hand, we have an increase of $1,145,000 in expenses related to the acquisition of Zongtong and All weather in 2021. On the other hand, we have a decrease of $231,000 from deconsolidation of the MRM segment (Micronet) results with the company from the second quarter of 2021, and because the global stock markets trading keep going downwards, we can see a decrease of $114,000 from research and development expenses.


Loss from Operations

Our loss from operations for the year ended December 31, 2022 was $11,792,000, compared to loss from operations of $37,896,000, for the year ended December 31, 2021. The decrease in loss from operations is mainly attributable to the profitable operations of Tingo mobile that we consolidated in December 1, 2022 for the first time.

Finance Income (Expense), Net

Finance income (expenses), net for the year ended December 31, 2022, was $(750,000) compared to $ 395,000 for the year ended December 31, 2021a decrease of $1,145,000. The decrease in financial expenses, net for the year ended December 31, 2022, is primarily due to a net favorable change in exchange rates.

Net Loss Attributed to TINGO GROUP, Inc.

Our net loss for the year ended December 31, 2022, was $47,069,000, compared to $36,428,000, for the year ended December 31, 2021 an increase of $10,641,000. The increase for the year ended December 31, 2022 is mainly a result of an increase in tax expenses relating to the acquisition and consolidation of Tingo.

Liquidity and Capital Resources

We have funded our operations with proceeds from the sales of shares of Common Stock,our common stock, which we undertook in November 2020 and February and March 2021. As of December 31, 2022, our total cash and cash equivalents balance was $500,316,000, as compared to $96,619,000 as of December 31, 2021. This reflects an increase of $403,697,000 in cash and cash equivalents which relates in the main to the acquisition and consolidation of Tingo Mobile on December 1, 2022, which had accumulated such cash through its trading activities. Notwithstanding the sizeable cash balance held by Tingo Mobile, it should be noted that the majority of the cash is held at its bank in Nigeria, and there are certain foreign exchange restrictions in place that limit the conversion of such cash into US Dollars, and into other currencies from Naira. As stated in numerous recent Company announcements, we are progressing a strategy to dollarize the business of Tingo Mobile, including through the Tingo DMCC commodity trading platform and export business; expansion into other countries that have freely tradeable currency, such as Ghana, Malawi and Dubai; and through the launch of TingoPay in partnership with Visa.

The Company’s operations are cash generative following the acquisition of Tingo Mobile Limited. There is however the possibility that the Company may seek to raise external financing in the future, if required to fund its growth plans and expansion strategy

As stated above, the majority of the cash held by Tingo in Nigeria is not freely transferable inside the group. Even taking into account the foreign exchange restrictions on the cash in Tingo Mobile, based on our current operating plan we believe that our cash, cash equivalents, as of December 31, 2022, will be sufficient to fund our currently projected operating expenses for at least the next 12 months.

Sales of our Securities

On February 11, 2021, the Company announced that it has entered into a securities purchase agreement (the “February Purchase Agreement”) with certain institutional investors for the sale of (i) 22,471,904 shares of common stock, (ii) 22,471,904 Series A warrants to purchase 22,471,904 shares of Common Stockcommon stock and (iii) 11,235,952 Series B warrants to purchase 11,235,952 shares of common stock at a combined purchase price of $2.67 (the “February Offering”). The gross proceeds to the Company from the February Offering were expected to be approximately $60.0 million. The Series A warrants are exercisable nine months after the date of issuance, have an exercise price of $2.80 per share and will expire five and one-half years from the date of issuance. The Series B warrants are exercisable nine months after the date of issuance, have an exercise price of $2.80 per share and will expire three and one-half years from the date of issuance. The Company received net proceeds of $54.0 million on February 16, 2021 after deducting the placement agent’s fees and other expenses.


On March 2, 2021, the Company entered into a securities purchase agreement (the “March Purchase Agreement”) with certain investors for the purpose of raising approximately $54.0 million in gross proceeds for the Company. Pursuant to the terms of the March Purchase Agreement, the Company agreed to sell, in a registered direct offering, an aggregate consideration of $9,324,00019,285,715 shares of the Company’s common stock, par value $0.001 per share, at a purchase price of $2.675 per Share and in a concurrent private placement, warrants to purchase an aggregate of 19,285,715 shares of common stock, at a purchase price of $0.125 per warrant, for a combined purchase price per share and warrant of $2.80 which was priced at the market under Nasdaq rules. The warrants are immediately exercisable at an exercise price of $2.80 per share, subject to adjustment, and expire five years after the issuance date. The closing date for the March Purchase Agreement was on March 4, 2021. The Company received net proceeds of $48.69 million on March 4, 2021, after deducting the placement agent’s fees and other expenses.

Contractual Obligations

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 December 31, 2022, and the effect these obligations are expected to have on our liquidity and cash flows in future periods.

Contractual Obligation: Total  Less than
1 year		  1-3 year  3-5 year  5+ year 
Office leases commitment  2,246,040   1,287,995   904,174   53,871   - 
Short-term debt obligations Commitment  837,442   460,477   376,965   -   - 
Services Contract Commitment  260,975   260,975   -   -   - 
Total  3,344,457   2,009,447   1,281,139   53,871   - 

Loans Provided by TINGO GROUP

On May 13, 2022, the Company and TMNA executed a loan agreement pursuant to which the Company agreed to loan TMNA (“Maker”) a sum of $3,000,000 (the “Note” and “Loan” respectively) . The Loan bears an annual interest of 5%. The principal balance of the Loan and any accrued and unpaid interest due under the Note shall be due and payable on May 10, 2024 (“Initial Maturity Date”). The principal balance may be prepaid at any time by Maker without penalty.

On July 28, 2022, the Company agreed to replace the Note with a new note (“New Note”), pursuant to which the amount of the Loan granted under the New Note is $3,500,000, with all other terms remaining in effect without a change.

On September 28, 2022, the Company agreed to replace the New Note with a second new note (“Second New Note”), pursuant to which the amount of the Loan granted under the New Note is $3,700,000, with all other terms remaining in effect without a change.

On October 6, 2022, the Company agreed to replace the Second New Note with a third new Note (“Third New Note”) in the aggregate principal amount of $23,700,000 with all other terms remaining in effect without a change.

On December 21, 2022, the Company and its subsidiary, MICT Fintech executed a loan agreement pursuant to which the Company agreed to loan MICT Fintech a sum of $10,000,000, with interest charged at a rate of 10% per annum. The principal balance of the loan and any accrued and unpaid interest shall be due and payable on December 31, 2023. On the same date, MICT Fintech loaned $10,000,000 to its subsidiary, Tingo Mobile, with interest charged at a rate of 25% per annum. The principal balance of this loan and any accrued and unpaid interest shall also be due and payable on December 31, 2023. The purpose of the loan is to fund costs relating to the purchase of smartphone handsets to be provided under operating lease agreements to two key customers of Tingo Mobile and Tingo Ghana Limited, which in turn is expected to facilitate a number of business revenue streams for Tingo Mobile and Tingo Ghana Limited, including but not limited to operating lease revenues, platform transaction revenues, product sale commissions and commodity export revenues. 


Debt Repayment

As of December 31, 2022, the Company had short-term loans from others of $460,000 comprised as follows: $286,000 loans of All Weather Insurance Agency bear interest of  0%,  will be repaid before deductionDecember 31, 2023. The $174,000 loans of Zhongtong Insurance that bear interest of 10% will be repaid before December 31, 2023.

As of December 31, 2021, the Company had short-term loans from others of $1,657,000 comprised as follows: $1,155,000 loans of All Weather Insurance Agency bear interest of 0%, of which $1,088,000 will be repaid on December 31, 2022 and $67,000 will be repaid on August 3, 2022. The $314,000 loans of Zhongtong Insurance that bear interest of 10% has been repaid subsequently on January 11, 2022, and the remaining loans of Zhongtong Insurance in amount of $188,000 loans that bear interest of 10% will be repaid before December 31, 2022.

As of December 31, 2022, the Company had long-term loans from others of $377,000 comprised as follows: $377,000 loans of All Weather Insurance Agency bear interest of 0%, will be repaid before December 31, 2025.

For the year ended December 31, 2022, our working capital was $265,781,000, compared to $102,107,000 for the year ended December 31, 2021. The increase is mainly due to the increase in our cash and trade account receivable, in relation to our acquisition and consolidation of Tingo Mobile on December 1, 2022, as described above. Based on our current business plan, and in view of our cash balance following the completion of the acquisition of Tingo Mobile, we anticipate that our cash balances will be sufficient to permit us to conduct our operations and carry out our contemplated business plans for at least the next 12 months from the date of this Report.

  For the year Ended
December 31,		 
  2022  2021 
  USD in
thousands		  USD in
thousands		 
Net Cash provided by (used in) Operating Activities $46,011  $(31,336)
Net Cash provided by (used in) Investing Activities  366,961   (8,853)
Net Cash provided by (used in) Financing Activities  (10,715)  109,602 
Translation adjustment on cash and restricted cash  1,256   97 
Cash and cash equivalents and restricted cash at Beginning of Period  99,036   29,526 
Cash and cash equivalents and restricted cash at end of period $502,549  $99,036 

Cash Flow from Operating Activities

For the year ended December 31, 2022, our cash flows from operating activities related to net loss adjusted for non-cash expenses, primarily depreciation and amortization and share based compensation in the amount of $(47,755,000), as well as (1) changes in deferred tax, net of $(28,759,000) which relates in the main to the deferred tax arising on the Purchase Price Allocation for the acquisition of Tingo Mobile; and (2) effects of changes in working capital in the amount of $30,503,000, which in the main relate to the acquisition and consolidation of Tingo Mobile, which completed on December 1, 2022.

 For the year ended December 31, 2021, our cash flows from operating activities related to net loss adjusted for non-cash expenses, primarily depreciation and amortization and share based compensation in the amount of $(18,979,000), as well as (1) changes in deferred tax, net of $2,539,000, and (2) effects of changes in working capital in the amount of $47,776,000.


Cash Flow from Investing Activities

For the year ended December 31, 2022, we had net cash inflows arising from investing activities of $366,961,000, which consisted of (1) net cash used in investing of purchase of property and equipment of $39,645,000 and (2) cash held by at Tingo Mobile of $(430,563,000) which was consolidated into the Company from the completion of its acquisition on December 1, 2022 and (3) repayment of loan back from Micronet of $(534,000) (4) the issuance costs of $1,921,841 payablea loan to Tingo Inc of $23,700,000 (5) loan to related party of $791,000. 

For the year ended December 31, 2021, we had net cash used in investing activities of $8,853,000, which consisted of (1) deconsolidation of Micronet operations of $2,466,000, (2) loan to related party of $4,265,000, (3) purchase of property and equipment of $689,000 and (4) investment in new companies and expansion of business activities of $913,000 and (5) additional intangible assets of $520,000.

Cash Flow from Financing Activities

For the year ended December 31, 2022, we had net cash provided by us. Thefinancing activities of $10,715,000, which consisted of: (1) repayment of loan to related party and others of $10,859,000 and (2) short term loan from bank of $(144,000).

For the year ended December 31, 2021, we had net cash provided by financing activities of $109,602,000, which primarily consisted of: (1) Proceeds from issuance of shares and warrants began tradingof $(105,366,000) from our public offering in February and March 2021; (2) proceeds from the exercise of warrants and options of $(2,554,000); (3) Repayment of current maturity of long-term bank loans of $195,000 and (4) receipt of loan from others of $(1,657,000) and (5) loan repayment from Micronet of $(220,000).

Financing Needs

The Company’s operations are cash generative following the acquisition of Tingo Mobile Limited. There is however the possibility that the Company may seek to raise external financing in the future, if required to fund its growth plans and expansion strategy, for example in relation to financing Tingo Foods’ share of the build and fit out of its new food processing facility.

In the event that any external financing is required to cover Tingo Foods’ share of the build and fit out of the new food processing facility, which is estimated at $500 million, the Company will seek to do so by raising debt funding.

Based on our current business plan, and in view of our cash balance following the Merger transaction described in this Item 2, we anticipate that our cash balances will be sufficient to permit us to conduct our operations and carry out our contemplated business plans for at least the next 12 months from the date of this Report.

Critical Accounting Policies and Estimates

In the preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”), we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures. Our management reviews these estimates and assumptions on an ongoing basis. While we believe the estimates and judgments we use in preparing our consolidated financial statements are reasonable and appropriate, they are subject to future events and uncertainties regarding their outcome; therefore, actual results may materially differ from these estimates. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts first become known. We consider the following items in the consolidated financial statements to require significant estimation or judgment. See Note 2 to our consolidated financial statements for a summary of our significant accounting policies.


Acquisition Accounting

We have made significant acquisitions in the past and we intend to make additional acquisitions in the future that meet our selection criteria with an objective of increasing our revenues, improving our profitability, diversifying our end market and geographic exposure and strengthening our competitive position. The assets acquired and liabilities assumed are recorded based on their respective fair values at the date of acquisition. Such fair market value assessments require judgments and estimates that can be affected by various factors over time, which may cause final amounts to differ materially from original estimates. The significant judgments include the estimation of future cash flows, which are dependent on forecasts; the estimation of a long-term rate of growth; the estimation of the useful life over which cash flows will occur; and the determination of a risk-adjusted weighted average cost of capital. When appropriate, our estimates of the fair values of assets and liabilities acquired include assistance from independent third-party appraisal firms. The judgments made in determining the estimated fair value assigned to the assets acquired, as well as the estimated life of the assets, can materially impact net income in periods subsequent to the acquisition through depreciation and amortization, and in certain instances through impairment charges, if the asset becomes impaired in the future. As discussed below, we regularly review for impairments.

New and used equipment inventories, long-lived assets (primarily rental equipment), goodwill, and other intangible assets generally represent the largest component of our acquisitions. Inventories acquired in the transaction are valued at fair value, which approximates a market participant’s estimated selling price adjusted for (1) costs to sell and (2) a reasonable profit allowance. In addition to long-lived assets, we also acquire other assets and assume liabilities. These other assets and liabilities typically include, but are not limited to, accounts receivable, accounts payable, floor plans payable and other working capital items.

Because of their short-term nature, the fair values of these assets and liabilities generally approximate the carrying values reflected on the NASDAQ on April 24, 2013 underacquired entities balance sheets. However, when appropriate, we adjust these carrying values for factors such as collectability, existence, and consistency with Company accounting policies.

We record as goodwill the symbols “MICT” and “MICTW,” respectively.

On December 11, 2015, the Company reported that the U.S. Department of Transportation's Federal Motor Carrier Safety Administration, or FMCSA, announced on December 10, 2015 the publicationexcess of the final rule and implementation schedule of its Electronic Logging Mandate. The FMCSA mandate requires interstate commercial truck and bus companies to use Electronic Logging Devices, or ELDs, in their vehicles to record their compliance withconsideration transferred over the safety rules that govern the number of hours a driver can work. Implementation of rule compliance will begin immediately, and full enforcementfair values of the regulations will commence in 2017.  With full implementationidentifiable net assets acquired. The intangible assets that we have acquired consist of tradenames, technology related intangibles and customer relationships. A tradename has a fair value equal to the present value of the rules, industry analysts anticipateroyalty income attributable to it. The royalty income attributable to a tradename represents the hypothetical cost savings that are derived from owning the numbertradename instead of ELD-equipped trucks onpaying royalties to license the road will increasetradename from 1 million today to approximately 2.7 million in 2017.another owner.

 

During 2016, Micronet received a total of 2,000 units ELD mandate related orders and expects additional orders in 2017 pursuant to the implementation of the final ELD mandate.

The FMCSA mandate on ELDs potentially significantly impacts both drivers and trucking companies and offers an opportunity for the industry to increase the use of mobile technology to achieve better efficiencies while at the same time meet the new compliance requirements. In order to log their hours of service, or HOS, the mandate requires all long-haul drivers to use ELDs rather than the old paper forms. Using ELDs will assist drivers to accurately share reports of their HOS electronically in real time. We estimate based on the compliance requirements that since all drivers must be in compliance by 2019, a significant number of large trucking companies will need to purchase ELDs to meet the mandatory requirements of the mandate and hence the demand for ELD compliance devices and/or products will increase.

During 2016, Micronet launched a new product to the market, the Treq5, which is a screen-less Android based On Board Computer, or OBC, which enables the company to compete in the black box market with, it believes, a much stronger product platform than currently exists in the market.

Non-GAAP Financial Measures

 

In addition to providing financial measurements based on generally accepted accounting principles in the United States of America,U.S., or GAAP, we provide additional financial metrics that are not prepared in accordance with GAAP, or non-GAAP financial measures. Management uses non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes and to evaluate our financial performance.

 

Management believes that these non-GAAP financial measures reflect our ongoing business in a manner that allows for meaningful comparisons and analysis of trends in our business, as they exclude expenses and gains that are not reflective of our ongoing operating results. Management also believes that these non-GAAP financial measures provide useful information to investors in understanding and evaluating our operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies.

 


The non-GAAP financial measures do not replace the presentation of our GAAP financial results and should only be used as a supplement to, not as a substitute for, our financial results presented in accordance with GAAP.

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The non-GAAP adjustments, and the basis for excluding them from non-GAAP financial measures, are outlined below:

 

●Amortization of acquired intangible assets- We are required to amortize the intangible assets, included in our GAAP financial statements, related to the AcquisitionTransaction and the Transaction.Acquisition. The amount of an acquisition’s purchase price allocated to intangible assets and term of its related amortization are unique to these transactions. The amortization of acquired intangible assets are non-cash charges. We believe that such changescharges do not reflect our operational performance. Therefore, we exclude amortization of acquired intangible assets to provide investors with a consistent basis for comparing pre- and post-transaction operating results.

 

●Amortization of note discount- These expenses are non-cash and are related to amortization of discount of the note purchase agreements with YA II PN. Such expenses do not reflect our on-going operations.

●Stock-based compensation is share based awards granted to certain individuals. They are non-cash and affected by our historical stock prices which are irrelevant to forward-looking analyses and are not necessarily linked to our operational performance.

 

●Expenses related to the purchase of a business - These expenses relate directly to the purchase of the Tingo Mobile transaction and consist mainly of legal and accounting fees, insurance fees and other consultants. We believe that these expenses do not reflect our operational performance. Therefore, we exclude them to provide investors with a consistent basis for comparing pre- and post-Mobile Business purchase operating results.

●Expenses related to settlement agreement - These expenses relate directly to the settlement agreement with Maxim and Sunrise. More information can be found in the legal proceeding part.

The following table reconciles, for the periods presented, GAAP net loss attributable to Micronet EnertecTINGO GROUP to non-GAAP net income attributable to Micronet EnertecTINGO GROUP. and GAAP loss per diluted share attributable to Micronet EnertecTINGO GROUP to non-GAAP net incomeloss per diluted share attributable to Micronet Enertec:TINGO GROUP.:

 

  

Year ended
December 31,

 
  (Dollars in Thousands, other than share and per share amounts) 
  2016  2015 
GAAP net loss attributable to Micronet Enertec Technologies, Inc. $(5,807) $(2,467)
Amortization of acquired intangible assets  582   701 
Stock-based compensation and shares issued to service providers  294   336 
Amortization of note discount  (24)  - 
Income tax-effect of above non-GAAP adjustments  (6)  (25)
Total Non-GAAP net loss attributable to Micronet Enertec Technologies, Inc. $(4,961) $(1,455)
Non-GAAP net loss per diluted share attributable to Micronet Enertec Technologies, Inc. $(0.83) $(0.25)
Shares used in per share calculations  5,966,622   5,861,630 
GAAP net loss  per diluted share attributable to Micronet Enertec Technologies, Inc. $(0.97) $(0.42)
Shares used in per share calculations  5,966,622   5,861,630 
  Year ended
December 31,		 
  (Dollars in Thousands,
other than share and
per share amounts)		 
  2022  2021 
GAAP net loss attributable to TINGO GROUP, Inc. $(47,069) $(36,428)
Amortization of acquired intangible assets  5,590   2,925 
Stock-based compensation  6,615   10,580 
Expenses related to purchase of a business  9,574   - 
One time expenses relates to settlement agreement  143   303 
Income tax effect of above non-GAAP adjustments  (1,543)  (773)
Total Non-GAAP net loss attributable to TINGO GROUP, Inc. $(26,690) $(23,393)
         
Non-GAAP net loss per diluted share attributable to TINGO GROUP, Inc. $(0.21) $(0.20)
Weighted average common shares outstanding used in per share calculations  129,345,764   112,562,199 
GAAP net loss per diluted share attributable to TINGO GROUP, Inc. $(0.36) $(0.32)
Weighted average common shares outstanding used in per share calculations  129,345,764   112,562,199 

 

Results of Operations

Year Ended December 31, 2016 Compared to Year Ended December 31, 2015

Revenues

Revenues for the year ended December 31, 2016 were $22,748,000 as compared to $23,587,000 for the year ended December 31, 2015. These revenues represent a decrease of $839,000, or 4%, in the Company’s revenues for the year 2016. The decrease is mainly due to a decrease in Micronet revenues of $1,285,000 mainly due to a reduction of unit volumes related to the company’s current product line and delayed market adaptation of the company’s new product line, combined with a change in management.

Total revenues related to the aerospace and defense segment for the year ended December 31, 2016 were $9,464,000 as compared to $9,018,000 during 2015. Total revenues related to the MRM segment for the year ended December 31, 2016 were $13,284,000 as compared to $14,569,000 during 2015.

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Gross profit decreased by $3,153,000, or 43%, to $4,150,000 for the year ended December 31, 2016. This is in comparison to gross profit of $7,303,000 for the year ended December 31, 2015.  Gross profit as a percentage of sales was 18% for the year ended December 31, 2016 compared to 31% for the year ended December 31, 2015. Enertec’s gross profit as a percentage of sales was 16% for the year ended December 31, 2016 compared to 30% for the year ended December 31. The decrease in gross profit is mostly due to an $500,000 inventory write-off and completion of some projects with lower profitability. Micronet’s gross profit decreased from 32% in the year ended December 31, 2015 to 20% for the same period in 2016, mainly due to inventory write offs mostly attributed to Microneto old product line combined with increased customer support cost associated with the introduction of the Company’s new product line.

Selling and Marketing

Selling and marketing costs are part of operating expenses. Selling and marketing costs for the year ended December 31, 2016 were $1,941,000, as compared to $1,530,000 for the year ended December 31, 2015. This represents an increase of $411,000, or 27% for the year 2016. The increase is primarily due to a increase in the MRM segment as a result of an increase in the sales force.

General and Administrative

General and administrative costs are part of operating expenses. General and administrative costs for the year ended December 31, 2016 were $5,933,000 as compared to $4,723,000 for the year ended December 31, 2015. This represents an increase of $1,210,000, or 26%, for the year ended December 31, 2016. The increase is mainly due to a $150,000 payment relating to a settlement agreement pursuant to the company’s termination of a potential acquisition, in addition to an increase in professional consultants and increase of $260,000 in doubtful debt related to the MRM division.

Research and Development Costs

Research and development costs are part of operating expenses. Research and development costs, which include mainly wages, materials and sub-contractors, for the year ended December 31, 2016, were $2,320,000 compared to $2,453,000 for the year ended December 31, 2015. This represents a decrease of $133,000, or 5% for the year ended December 31, 2016.

Net Loss from operations

Our net loss from operations for the year ended December 31, 2016 was $6,970,000, or 31% as a percentage of sales, compared to an operating loss of $2,521,000or 11% as a percentage of sales, for the year ended December 31, 2015. The increase in net loss is mainly a result of the decrease in revenues and in gross margins.

Finance Expenses, net

Financial expenses net, for the year ended December 31, 2016 were $672,000 compared to $610,000, for the year ended December 31, 2015. This represents an increase of $62,000, or 10%, for the year ended December 31, 2015. The increase in interest expenses in the year ended December 31, 2016 as compared to the year ended December 31, 2015 was primarily due to an increase in interest and bank commission.

Net Loss attributed to Micronet Enertec Technologies, Inc.

Our net loss attributable to Micronet Enertec was $5,807,000, or 26% as a percentage of sales, in the year ended December 31, 2016 compared to net loss attributable to Micronet Enertec of $2,467,000, or 10% as a percentage of sales, in the year ended December 31, 2015. This represents an increase in net loss of $3,340,000, or 135%, as compared with the year ended December 31, 2015.  The change is mainly a result of the decrease in revenues and the changes in gross profit and operating expenses as described above.

26

 

Liquidity and Capital Resources

The Company finances its operations through current revenues, loans and securities offerings. The loans are divided into bank loans and a loan from Meydan Family Trust No 3, or Meydan, as described below.

As of December 31, 2016, our total cash and cash equivalents and restricted cash and marketable securities balance was $8,134,000 (of which marketable securities amounted to $2,978,000), as compared to $12,139,000 (of which marketable securities amounted to $5,643,000) as of December 31, 2015. This reflects a significant decrease of $4,005,000 in cash and cash equivalents and restricted cash and marketable securities. The decrease in cash and cash equivalents is primarily a result of the net loss.

On June 30, 2016, the Company and Enertec, collectively, the Borrowers, entered into a Note Purchase Agreement with YA II, whereby YA II purchased $600,000 of notes from the Borrowers, or the Notes. The outstanding principal balance of the notes bears interest at 7% per annum. On a quarterly basis commencing on October 10, 2016, the Borrowers are required to make payments of $150,000 of principal plus accrued interest. All amounts payable are due on July 10, 2017. Upon the occurrence of an event of default under the Notes, all amounts payable may be due immediately.

On October 28, 2016, the Borrowers entered into an additional Note Purchase Agreement with YA II whereby YA II loaned an additional $500,000 to the Borrowers pursuant to an additional secured promissory note. The outstanding principal balance of the additional note bears interest at 7% per annum. The additional note matures on November 20, 2017. The Borrowers have agreed to make payments of $125,000 from the principal balance of the additional note plus all accrued and unpaid interest on each of March 20, 2017, June 20, 2017, September 20, 2017 and November 20, 2017. Upon the occurrence of an event of default under the additional note, all amounts payable may be due immediately.

On December 22, 2016 the Borrowers entered into a Supplemental Agreement with YA II, whereby YA II agreed to lend the Company an additional $1,000,000 pursuant to a secured promissory note. The outstanding principal balance of the this note bears interest at 7% per annum. The note matures on December 20, 2017. The Borrowers have agreed to use 50% of the net proceeds of any cash raised from financing transactions completed while the note is outstanding to repay the principal and interest on the note. Upon the occurrence of an event of default, all amounts payable may be due immediately. The note, along with the other notes held by YA II, are secured by a pledge of shares of Micronet owned by Enertec.

Pursuant to the Supplemental Agreement, YA II agreed to revise the payment schedule of the June 2016 note such that the Company shall be required to make payments of $150,000 from the principal balance of such note plus all accrued and unpaid interest on each of October 10, 2016, May 1, 2017 and September 1, 2017. In addition, pursuant to the Supplemental Agreement, YA II agreed to revise the payment schedule of the October 2016 note such that the Company shall be required to make payments of $150,000 from the principal balance of the such note plus all accrued and unpaid interest on each of May 1, 2017 and September 1, 2017. The Borrowers agreed to pay to YA Global II SPV LLC (as designee of YA II) a commitment fee in the amount of $100,000, with $50,000 of such commitment fee due and payable in cash upon the closing of the note, and the remaining balance of $50,000 of the commitment fee paid in cash or in freely tradable shares of the Company’s common stock as follows: (i) $25,000 on or before July 1, 2017, and (ii) $25,000 on or before December 31, 2017, provided that these remaining portions shall be waived if the Borrowers have repaid at least $500,000 of the principal amount of the Note on or before July 1, 2017.  In connection with the Supplemental Agreement and issuance of the Note, the Company issued to YA II a five-year warrant, or the Warrant, to purchase 120,000 shares of the Company’s common stock at an exercise price of $3.00 per share.

On September 2, 2015, Enertec entered into a Credit Line Agreement with a financing firm, or the Financing Firm, pursuant to which the Financing Firm agreed to grant Enertec a credit line.  The maximum aggregate amount of the Credit Line Agreement is $675,000 and up to 85% of open trade receivables invoices. The annual interest rate is Prime plus 1.75%. The Credit Line Agreement will expire on April 30, 2017. As of December 31, 2016, Enertec had financed $669,000 pursuant to the Credit Line Agreement. 

27

On December 30, 2015, the Company entered into a Loan Agreement, or the Meydan Loan, with Meydan, pursuant to which Meydan agreed to loan the Company $750,000 on certain terms and conditions. The proceeds of the Meydan Loan have been used by the Company for working capital and  general corporate needs. The Meydan loan bears interest at the rate of Libor plus 8% per annum and is due and payable in 4 equal installments beginning on July 10, 2016.

On October 9, 2016 the Company amended the Meydan loan pursuant to which Meydan agreed to revise the payment schedule of an existing loan with a principal balance of $ 814,000 as of December 31, 2016 and such that the Company shall be required to make payments of $187,000 from the principal balance of the December 31, 2016 the Meydan Loan plus all accrued and unpaid interest on each of April 10, 2017, July 10, 2017, October 10, 2017 and January 10, 2018.

In connection with our acquisition of the Vehicle Business, Micronet entered into a loan agreement, or the FIBI Loan Agreement, with the First International Bank of Israel, or FIBI.  Under this agreement, FIBI loaned Micronet $4.85 million for the financing of this acquisition.  Pursuant to the terms of the FIBI Loan Agreement, $2.425 million of the loan bears interest at a quarterly adjustable rate of Prime plus 1.5 percent (3.75% percent as of the date of the loan), or the Long Term Portion. The Long Term Portion plus interest is due and payable in twelve equal consecutive quarterly installments beginning on August 29, 2014. The balance of the loan in the amount of $2.425 million bears interest at a quarterly adjustable rate of Prime plus 1.2% (3.45% as of the date of the loan), or the Short Term Portion. The Short Term Portion is due and payable within one year from the date of the loan, and the interest on the Short Term Portion is due and payable every quarter beginning on August 29, 2014. The loan is secured mainly by a floating charge against Micronet’s assets and a mortgage on a building owned by Micronet. The loan is subject to customary covenants, terms, conditions, events of default and certain pre-payment provisions. As of May 28, 2015, Micronet repaid the Short Term Portion and borrowed a new loan for the same amount and on the same terms as the prior Short Term Portion for a period of nine months ending on November 29, 2016. As of November 29, 2016, Micronet repaid the Short Term Portion and borrowed a new loan for the same amount and on the same terms as the prior Short Term Portion until January 29, 2017. As of December 31, 2016, the balance on this loan (the Long Term Portion and the Short Term Portion) was approximately $2,580,700 and the interest rates were Prime plus 1.2% and Prime plus 1.5% for the Short Term Portion and the Long Term Portion, respectively.

On June 17, 2014, Enertec entered into a loan agreement, or the Mercantile Loan Agreement, with Mercantile Discount Bank Ltd., or Mercantile Bank, pursuant to which Mercantile Bank agreed to loan the Company approximately $3,631,000 on certain terms and conditions, or the Mercantile Loan. The proceeds of the Mercantile Loan were used by the Company: (1) to refinance previous loans granted to the Company in the amount of approximately $1,333,000; (2) to complete the purchase by the Company, via Enertec, of 1.2 million shares of Micronet constituting 6.3% of the issued and outstanding shares of Micronet; and (3) for working capital and general corporate purposes.

Pursuant to the terms of the Mercantile Loan Agreement: (1) approximately $3,050,000 of the Mercantile Loan bears interest at a quarterly adjustable rate of Prime plus 2.45 percent, or the Mercantile Long Term Portion, and (2) approximately $581,000 of the Mercantile Loan bears interest at a quarterly adjustable rate of Prime plus 1.7 percent, or the Mercantile Short Term Portion. The Mercantile Long Term Portion is due and payable in five equal consecutive annual installments beginning on July 1, 2015, and the interest on the Mercantile Long Term Portion is due and payable in ten equal consecutive annual installments beginning at January 1, 2015. The Mercantile Short Term Portion in the amount of approximately $581,000 bears interest of Prime plus 1.7%. The Mercantile Loan is secured mainly by (1) a negative pledge on Enertec’s assets, (2) a pledge of Enertec’s financial deposits which shall be equal to 25% of Enertec’s outstanding credit balance, and (3) a fixed charge of Micronet shares at such value equal to at least 200% of the outstanding net balance of the Mercantile Loan. The Mercantile Loan is subject to customary covenants, terms, conditions, events of default and certain pre-payment provisions. As of December 31, 2016, the balance on the Mercantile Loan was $2,192,000 and the interest rates were Prime plus 2.45% and Prime plus 1.7%. for the Mercantile Long Term Portion and the Mercantile Short Term Portion, respectively.

Pursuant to the terms of the Mercantile Loan Agreement, the parties agreed to grant Mercantile Bank a five-year Phantom Stock Option, or the Phantom Stock Option, pursuant to which Mercantile Bank is entitled to participate in the future appreciation of the Company’s shares and receive a cash amount equal to the increase in the value of the shares underlying the Phantom Stock Option on certain terms and conditions. The Phantom Stock Option allows Mercantile Bank to theoretically exercise, on a cashless basis, options to purchase 1,144,820 shares of Micronet, or the Option Shares, and to receive a cash amount equal to the difference between approximately 4 million NIS, (representing 110 percent of the average market value of Micronet Option Shares during the 30 trading days prior to the date of the Mercantile Loan) and the actual market price of such Option Shares on the date of the exercise of the Phantom Stock Option. Pursuant to the Mercantile Loan Agreement, the parties further agreed that the potential gain to Mercantile Bank resulting from the Phantom Stock Option shall not exceed NIS 3 million. In the event the Mercantile Loan is repaid prior to the third anniversary of the Mercantile Loan, the gain to Mercantile Bank resulting from the Phantom Stock Option shall not exceed NIS 2 million. As of the date of the Mercantile Loan the exercise price of the Phantom Stock Options is higher than the market price of the Option Shares. As of December 31, 2016, the fair value of this Phantom Stock Option was less than $4,000.

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On January 10, 2015, the Company repaid all of its remaining debt to UTA Capital LLC in the amount of $1,000,000.

As of December 31, 2016, our total current assets were $26,349,000, as compared to $33,534,000 at December 31, 2015. The decrease is mainly due to the decrease in cash and cash equivalents as described above.

Our trade accounts receivable at December 31, 2016 were $11,558,000 as compared to $12,353,000 at December 31, 2015.  The decrease is due to the decrease in revenues.

As of December 31, 2016, our working capital was $6,729,000, as compared to $13,291,000 at December 31, 2015. The decrease in the working capital primarily is due to the decrease in cash and cash equivalents and the increase of short term bank loans.

As of December 31, 2016, our total debt (including current portion on long-term loans from others) was $14,388,000 as compared to $14,402,000 at December 31, 2015.

Our bank and other debt is composed of short-term loans amounting to $13,107,000 as of December 31, 2016 compared to $12,049,000 at December 31, 2015, and long-term loans amounting to $1,281,000 as of December 31, 2016 compared to $2,353,000 at December 31, 2015.

Our current debt includes our bank debt described above, a working capital credit facility, a loan from Meydan ,YA II PN and the Credit Line Agreement.

●Our bank debt is composed of short-term loans to Enertec Electronics, Enertec  and Micronet amounting to $9,993,000 as of December  31, 2016 compared to $11,012,000 at December 31, 2015, and long-term loans amounting to $1,093,000 as of December 31, 2016 compared to $1,978,000 at December 31, 2015.  The short-term loans bear interest rates between Israeli prime (currently 1.6%) plus 0.7% to 2.45%.  The long-term loans have maturity dates between May 2017 and July 2019 and bear interest rates Israeli Prime plus 2.45%.

●Enertec has covenanted under its bank loans at June 30 and December 31 of each year, among other things that (1) its shareholder’s equity according to its financial statements will not fall below NIS 17 million, and (2) its shareholder’s equity will not be lower than 30% of the total liabilities on its balance sheet. Enertec has not met all of its bank covenants as of December 31, 2016. As a result the Company reclassified its loans from long-term to short-term liabilities. Certain restricted cash is used as collateral to secure the loans.

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●Enertec Electronics has covenanted under its bank loan mainly that the Company will present separate financial statements equity of not less than 32.5% of total assets. Enertec Electronics had met all of its bank covenants as of December 31, 2016. Certain restricted cash is used as collateral to secure the loan.

●In addition, Micronet has undertaken under its bank loan documents the following primary financial covenants: (1) a cash and marketable securities balance of not less than NIS 15 million; (2) a minimum equity of NIS 30 million and (3) total solvency ratio of not less than 30%. Micronet had not met all of its bank covenants as of December 31, 2016. As of March 31, 2017, Micronet has repaid this loan to the bank.

●The outstanding balance of the Meydan loan in the amount of $814,000 with  interest at the rate of Libor plus 8% per annum, are due and payable in 4 equal quarterly installments beginning on April 10, 2017.

●On September 2, 2015, Enertec entered into a Credit Line Agreement with a financing firm, or the Financing Firm, pursuant to which the Financing Firm agreed to grant Enertec a credit line.  The maximum aggregate amount of the Credit Line Agreement is $675,000 and up to 85% of open trade receivables invoices. The annual interest rate is Prime plus 1.75%. The Credit Line Agreement will expire on April 30, 2017. As of December 31, 2016, Enertec had financed $669,000 pursuant to the Credit Line Agreement.
●On June 30, 2016, the Borrowers, entered into a Note Purchase Agreement with YA II, whereby YA II purchased $600,000 of notes from the Borrowers, or the Notes. The outstanding principal balance of the notes bears interest at 7% per annum. On a quarterly basis commencing on October 10, 2016, the Borrowers are required to make payments of $150,000 of principal plus accrued interest. All amounts payable are due on July 10, 2017.  Thereafter, on October 28, 2016, the Borrowers entered into an additional Note Purchase Agreement with YA II  whereby YA II loaned an additional $500,000 to the Borrowers pursuant to an additional secured promissory note. The outstanding principal balance of the additional note bears interest at 7% per annum. The additional note matures on November 20, 2017. The Borrowers have agreed to make payments of $125,000 from the principal balance of the additional note plus all accrued and unpaid interest on each of March 20, 2017, June 20, 2017, September 20, 2017 and November 20, 2017. Finally, on December 22, 2016, the Borrowers entered into a Supplemental Agreement with YA II, whereby YA II agreed to lend the Company an additional $1,000,000 pursuant to a secured promissory note. The outstanding principal balance of the this note bears interest at 7% per annum. The note matures on December 20, 2017.

Financing Needs

Although we currently do not have any material commitments for capital expenditures, we expect our capital requirements to increase over the next several years as we continue to support the organic and non-organic growth of our business. Among other activities, we plan to develop, manufacture and market larger-scale solutions, support our growing manufacturing and finance needs, continue the development and testing of our suite of products and systems, increase management, marketing and administration infrastructure, and embark on developing in-house business capabilities and facilities. Our future liquidity and capital funding requirements will depend on numerous factors, including but not limited to (1) the levels and costs of our research and development initiatives, (2) the cost of hiring, training and certifying additional highly skilled professionals (mainly engineers and technicians), and maintaining our management including sales and marketing personnel to promote our products, and (3) the cost and timing of the expansion of our development, manufacturing and marketing efforts.

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In 2017 we expect to pay off the current portion of certain bank loans in the amount $948,000 , the Meydan and YA in the amount of $2,445,000 and a short term bank loan amounted to 2,211,000, using its cash flow from operations or possibly additional debt or equity financings.

The Company has an effective Form S-3 registration statement, filed under the Securities Act of 1933, as amended, with the Securities and Exchange Commission using a “shelf” registration process. Under this shelf registration process, the Company may, from time to time, sell common stock, warrants or units in one or more offerings up to a total dollar amount of $30 million.

In addition, the Company has utilized its SEDA for purposes of raising capital and may continue to do so in the future.

On June 30, 2016, the Borrowers, entered into a Note Purchase Agreement with YA II, whereby YA II purchased $600,000 of notes from the Borrowers, or the Notes. The outstanding principal balance of the notes bears interest at 7% per annum. On a quarterly basis commencing on October 10, 2016, the Borrowers are required to make payments of $150,000 of principal plus accrued interest. All amounts payable are due on July 10, 2017. Thereafter, on October 28, 2016, the Borrowers entered into an additional Note Purchase Agreement with YA II whereby YA II loaned an additional $500,000 to the Borrowers pursuant to an additional secured promissory note. The outstanding principal balance of the additional note bears interest at 7% per annum. The additional note matures on November 20, 2017. The Borrowers have agreed to make into a Supplemental Agreement with YA II, whereby YA II agreed to lend the Company an additional $1,000,000 pursuant to a secured promissory note. The outstanding principal balance of the this note bears interest at 7% per annum. The note matures on December 20, 2017.

As of December 31, 2016 pursuant to the SEDA, we have offered securities with an aggregate market value of $2,390,000, and we have sold $768,000 of our securities, pursuant to General Instruction I.B.6. of Form S-3 during the prior twelve calendar month period.  The Company is not obligated to utilize any of the $2.39 million available under the SEDA and there are no minimum commitments or minimum use penalties.  The total amount of funds that ultimately can be raised under the SEDA over the three-year term will depend on the market price for the Company’s common stock and the number of shares actually sold. 

The SEDA does not impose any restrictions on the Company’s operating activities. During the term of the SEDA, YA II is prohibited from engaging in any short selling or hedging transactions related to the Company’s common stock.

Based on our current business plan, we anticipate that our existing cash balances and cash generated from future sales will be sufficient to permit us to conduct our operations and to carry out our contemplated business plans for the next twelve months. However, we believe that we may need to raise additional funds if we want to materially decrease our dependence on our existing cash and other liquidity resources. Currently, the only external sources of liquidity are our banks, the SEDA agreement, and we may seek additional financing from them or through securities offerings, to expand our operations, using new capital to develop new products, enhance existing products or respond to competitive pressures. However, we may also undertake additional debt or equity financings (including sales of common stock, warrants or units under our shelf registration statement) to better enable us to grow and meet our future operating and capital requirements. There is no assurance that we will be able to consummate such offerings on favorable terms or at all.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect that is material to investors on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

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Critical Accounting Policies

Principles of consolidation.  The consolidated financial statements include the Company’s and its subsidiaries financial statements. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its operating activities. In assessing control legal and contractual rights are taken into account. The consolidated financial statements of subsidiaries are included in the consolidated financial statements from the date that control is achieved until the date that control ceases. Intercompany transactions and balances are eliminated upon consolidation.

Accounts receivable and allowances for doubtful accounts.  Our trade receivables include amounts due from customers. We perform ongoing credit evaluations of our customers’ financial condition and we require collateral as deemed necessary. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make payments. In judging the adequacy of the allowance for doubtful accounts, we consider multiple factors including the aging of our receivables, historical bad debt experience and the general economic environment. Management applies considerable judgment in assessing the realization of receivables, including assessing the probability of collection and the current creditworthiness of each customer. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Impairment of long-lived assets and goodwill. In accordance with ASC 360-10, “Accounting for the Impairment or Disposal of Long-lived Assets,” long-lived assets, such as property, plant and equipment and purchased intangibles subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying value of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying value of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying value of the asset exceeds the fair value of the asset. Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. Goodwill is not amortized, but rather is subject to an annual impairment test.  The Company has two operating segments: Mobile Resource Management and Defense and Aerospace. The goodwill was allocated to one reporting unit which included in the MRM division. The goodwill impairment tests are conducted in two steps. In the first step, the Company determines the fair value of the reporting unit. If the net book value of the reporting unit exceeds its fair value, the Company would then perform the second step of the impairment test which requires allocation of the reporting unit’s fair value of all of its assets and liabilities in a manner similar to an acquisition cost allocation, with any residual fair value being allocated to goodwill. The implied fair value of the goodwill is then compared to the carrying value to determine impairment, if any.

Revenue recognition.  The Company’s subsidiary Enertec enters into long-term fixed-price contracts with customers to manufacture test systems, simulators, and airborne applications. Revenue on these long-term fixed-price contracts is recognized under the percentage-of-cost method. In using the percentage of completion method, revenues are generally recorded based on the percentage of cost incurred to date on a contract relative to the estimated total expected contract cost. Management uses historical experience, project plans and an assessment of the risks and uncertainties inherent in the arrangement to establish the total estimated costs. The percentage of completion is established by the costs incurred to date as a percentage of the estimated total costs of each contract (cost-to-cost method). Contract costs include all direct material and labor costs. The Company begins recognizing revenue on a project when persuasive evidence of an arrangement exists, recoverability is probable, and project costs are incurred. The Company recognizes contract losses, if any, in the period in which they first became evident.

Revenues from the sales of MRM products are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee payable by the customer is fixed and determinable; and collection of the resulting receivable is reasonably assured. The title and risk of loss passes to the customer, delivery has occurred and acceptance is satisfied once the product leaves the Company premises.

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Income taxes.  Deferred taxes and liabilities are determined utilizing the “asset and liability” method, whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and the tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, when it is more likely than not that deferred tax assets will not be realized in the foreseeable future. Deferred tax liabilities and assets are classified as current or non-current based on the expected reversal dates.

The Company adopted ASC 740-10-05, “Income Tax,” which provides guidance for recognizing and measuring uncertain tax positions, and prescribes a threshold condition that a tax position must meet for any of the benefits of the uncertain tax position to be recognized in the financial statements. It also provides accounting guidance on de-recognition, classification and disclosure of these uncertain tax positions. The Company’s policy on classification of all interest and penalties related to unrecognized income tax positions, if any, is to present them as a component of income tax expense.

Item 7A.Quantitative and Qualitative Disclosures about Market Risk.

Item 7A.Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable.

 

Item 8.Financial Statements and Supplementary Data.

Item 8. Financial Statements and Supplementary Data.

 

The Report of Independent Registered Public Accounting Firm, the Consolidated Financial Statements and the Notes to Consolidated Financial Statements appearing on pages F-[2]F-1 to F-[30]F-59 of this Annual Report are incorporated herein by reference.

 

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

None.On October 3, 2022, Friedman LLP notified the Company that it resigned its position as external auditor of the Company. On October 6, 2022, the Audit Committee approved the appointment of Brightman Almagor Zohar & Co., certified public accountants, a firm in the Deloitte global network (“Deloitte Israel”) as the Company’s new independent registered public accounting firm, effective as of such date. As described below, the change in independent registered public accounting firm is not the result of any disagreement with Friedman LLP.

 

On June 17, 2022, the audit report of Friedman LLP on the financial statements of the Company, as of and for the year ended December 31, 2021, did not contain an adverse opinion or a disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or accounting principles.

During the year ended December 31, 2021 and through the subsequent interim period preceding the expiry of Friedman LLP engagement as external auditor, there were: (i) no disagreements with Friedman LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which if not resolved to Friedman LLP’s satisfaction would have caused it to make reference thereto in connection with its reports on the financial statements for such years. (ii) no reportable events of the type described in Item 304(a)(1)(v) of Regulation S-K.  

During the years ended December 31, 2021 and through the subsequent interim period preceding Deloitte Israel’s appointment as external auditor neither the Company nor anyone on its behalf consulted with Deloitte Israel with respect to any of (i) the application of accounting principles to a specified transaction, either completed or proposed; (ii) the type of audit opinion that might be rendered on the Company’s financial statements; or (iii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or an event of the type described in Item 304(a)(2)(i) and (ii) of Regulation S-K.

The Company provided Friedman LLP with a copy of the foregoing disclosure and requested Friedman LLP to furnish the Company with a letter addressed to the Securities and Exchange Commission stating whether it agrees with the statements made therein. A copy of such letter, dated October 7, 2022, furnished by Friedman LLP is filed as Exhibit 10.19 to this Annual Report on Form 10-K.

Item 9A.Controls and Procedures

Item 9A.Controls and Procedures

 

Evaluation of Disclosure Controls and ProceduresProcedures.

 

We conducted an evaluationDisclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the supervision ofExchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer (our principal executive officer(together, the “Certifying Officers”), or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Under the supervision and principal financial officer, respectively), regardingwith the participation of our management, including our Certifying Officers, we carried out an evaluation of the effectiveness of the Company’sdesign and operation of our disclosure controls and procedures (asas defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of December 31, 2016.Act. Based on this evaluation, the aforementioned evaluation, management hasCertifying Officers concluded that ourthe Company’s disclosure controls and procedures were effective as ofat December 31, 2016.2022 were effective.

 


Management’s Report on Internal Control overOver Financial Reporting

 

Our management including our principal executive officer and our principal financial officer is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting has beenis designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes in accordance with U.S. GAAP.

Our internal control over financial reporting includes those policies and procedures thatthat:

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our assets;Company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America,U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizationauthorizations of our management and directors; and

(3) provide reasonable assurance regarding prevention or timely detection of any unauthorized acquisition, use or disposition of our assets that could have a material effect on ourthe consolidated financial statements.

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Because of its inherent limitations, internalInternal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect toerrors or misstatements in our consolidated financial statement preparation and presentation. Projectionsstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree ofor compliance with the policies or procedures may deteriorate.

 

Management, including the Certifying officers has assessed the effectiveness of ourthe Company’s internal control over financial reporting atas of December 31, 2016. In making this assessment, management used2022 based on the criteria set forth in 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission inInternal Control—Integrated Framework (2013).Commission. Based onupon its review, the Certifying Officers concluded that assessment under those criteria, management has determined that, atas of December 31, 2016, our2022, the Company’s internal control over financial reporting was effective.

 

As permitted by SEC guidance, management has excluded from its assessment of internal control over financial reporting the internal controls related to Tingo Mobile acquired on December 1, 2022. As of December 31, 2022, and for the year ended December 31, 2022, total assets and total operating revenues excluded from management’s assessment of internal control over financial reporting related to this Tingo Mobile represented approximately 97% and 61% of the Company’s consolidated total assets and total operating revenues, respectively.

Remediation of Previously Reported Material Weakness

As previously disclosed in Item 9A of our Annual Reports on Form10-K for the year ended December 31, 2021, management identified five material weaknesses related to our Information Technology, consisting of (i) failure to implement certain formal risk and vulnerability assessment procedures, (ii) failure to upgrade certain operating systems and security patches on certain of our computers, (iii) failure to design and implement certain effective data backup and recovery management systems, (iv) failure to design and implement effective access to systems and data and (v) failure to have antivirus software running on certain of our computers; and one material weakness related to not having sufficient full-time personnel with appropriate levels of accounting knowledge and expertise.

During 2022, the Company performed the following remediation activities: With respect to the need to implement certain formal risk and vulnerability assessment procedures, the Company has adopted in its systems various new procedures to identify formal risk and conduct vulnerability assessment procedures; The Company has also upgraded its operating systems and installed security patches and antivirus software on its main financial systems; the Company is in the process of implementing up to date effective data backup and recovery process which will be completed during 2023 including the formation of a data room for the use of our entire group; Company has improved its ability to effectively access its systems and data mainly to its financial systems via adoption of an applicable authorization process. As of the date of this report, the Company has initiated the implementation of a proper firewall software to protect its systems and data. In addition, in order to improve and maintain appropriate levels of accounting knowledge and expertise, the Company hired additional staff in its finance department, conducted a mapping of its processes and controls that support financial reporting and performed tests to evaluate the effectiveness of the controls. As a result, management concluded that each of the previously reported material weaknesses was remediated as of December 31, 2022.

Changes in Internal Control overOver Financial Reporting

 

ThereExcept for the changes noted above in connection with the initiatives to remediate material weaknesses, there have been no other changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) underof the Exchange Act) during the fourthmost recent fiscal quarter of fiscal year 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B.Other Information.

Item 9B.Other Information.

 

None.

 

Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections

Not applicable.


PART III

 

Item 10.Directors, Executive Officers and Corporate Governance.

Item 10. Directors, Executive Officers and Corporate Governance.

 

The membersfollowing table sets forth the name, age and position of our board of directors, or the Board,each current director and our executive officers, together with their respective ages and certain biographical information are set forth below. Mr. Lucatz receives no compensation for his services as a board member but is entitled to management services fees paid to a company under his control. Directors hold office until the next annual meeting of our stockholders and until their successors have been duly elected and qualified. Our executive officers are elected by and serve at the designation and appointmentofficer of the board of directors.Company.

 

Name Age Position
David LucatzDarren Mercer 6059 Chairman of the Board, Chief Executive Officer and PresidentDirector
Tali DinarHao (Kevin) Chen 4541 Chief Financial Officer of Enertec Electronics Ltd
Oren HarariMoran Amran 42 Chief Financial OfficerController
Chezy (Yehezkel)Yehezkel (Chezy) Ofir(1)(2)(3)(4)70Director
Robert Benton (1)(2)(3) 6566 Director
Jeffrey P. BialosJohn McMillan Scott (1)(2)(3) 6176 Director
Miki BalinSir David Trippier, R.D.,J.P.,D.L(1)(2)(3) 4676 Director
John J. Brown64Director
​Kenneth Denos55Director, Executive Vice President, General Counsel of Tingo Group Holdings LLC, a wholly-owned subsidiary of the Company

 

(1) (1)A member of the Audit Committee.

(2)(2)A member of the Compensation Committee.

(3)(3)A member of the Corporate Governance/Nominating Committee.
(4)On February 7, 2023, Yehezkel (Chezy) Ofir resigned from the board of directors effective immediately. The reason for Mr. Ofir’s resignation is to comply with the terms of the Amended Agreement and Plan of Merger with Tingo, Inc. and Tingo Mobile Limited and not in connection with any disagreements with the Company on any matter.

 

The following is a brief account of the business experience of each of our directors and executive officers during the past five years or more.

 

David LucatzDarren Mercer. Mr. Lucatz was elected toMercer has served on our Board since November 2019 and was appointed as our President andInterim Chief Executive Officer in May 2010April 2020, and subsequently, our Chief Executive Officer. Mr. Mercer began his career as an investment banker in the 1980s, holding senior roles in institutional equity sales and corporate brokering at Henry Cooke Lumsden PLC and Albert E. Sharp LLC. In 2007, Mr. Mercer founded BNN and has served as its Chief Executive Officer since from its inception to October 2017. In February 2018, Mr. Mercer accepted an invitation to serve as an executive director from the newly appointed board of directors of BNN. During his tenure, Mr. Mercer restructured BNN by disposing of various subsidiaries and seeking strategic business partners. Mr. Mercer founded Global Fintech and Global Fintech Holdings Ltd. (“GFH”) in October 2018 and November 2019, respectively and has served as director of both companies since their inception, and as a Director of Strategic Partnerships and Business Development and Executive Director since 2017. Since Mr. Mercer joined the TINGO GROUP Board, he helped TINGO GROUP achieve substantial fund raising and introduced significant new business opportunities to TINGO GROUP. Mr. Mercer holds an MSI (DIP) qualification a BASc in Economics from the University of Manchester. We believe that Mr. Mercer is well-qualified to serve on the TINGO GROUP Board due to his extensive financial services, operational, management and investment experience.


Yehezkel (Chezy) Ofir. Professor Ofir has served on the Board of TINGO GROUP since April 2013. He was appointed as a director of Micronet Ltd., our 50.07% owned subsidiary, in September 2012. Since May 2010, Mr. LucatzOfir has been serving as the Presidentover 25 years of Enertec Systems 2001 Ltd, our wholly-owned subsidiary. Since 2006, he has been the Chairman of the Board, President and Chief Executive Officer of DL Capital Ltd, a boutique investment holding company based in Israel specializing in investment banking, deal structuring, business development and public/private fund raising with a strong focus in the defense and homeland security markets. From 2001 until 2006, he was part of the controlling shareholder groupconsulting experience and served as a Deputy Presidentdirector at various companies, including as an external director of Adama Ltd (SZSE: 000553) from 2012 until 2015, a director at Shufersal Ltd. (TASE: SAE) from 2004 to 2010, Director at the Israeli Postal Bank Company as of 2014 and Chief Financial Officeracting Chairman and director as of I.T.L. Optronics Ltd.2016 until 2017. A director at Soda Stream (NASDAQ: Soda) from 2016 to 2019. A director at Hadassah Medical Centers (Ein-Karem, Jerusalem) from 2015-Currently, and Micronet (TAS: MCRNT), from 2013-Currently. Mr. Ofir has served as a publicly-traded company listed onmember of the Tel Aviv Stock Exchange engaged inboard of directors at TINGO GROUP Inc. (NASDAQ: TINGO GROUP) since April 2013. Mr. Ofir is the development, productionKmart Chair Emeritus Professor and marketingfaculty member at the School of advanced electronic systems and solutions for the defense and security industries. From 1998 to 2001, he was the Chief Executive OfficerBusiness Administration, The Hebrew University of Talipalast, a leading manufacturer of plastic products. Previously,Jerusalem. Mr. Lucatz was an executive vice president of Securitas, a public finance investments group. Mr. LucatzOfir holds a B.Sc. in Agriculture Economics and Management from the Hebrew University of Jerusalem and a M.Sc. in Industrial and Systems Engineering from Ohio StateBen-Gurion University, M.Phil. and Ph.D. in Business Administration from Columbia University.

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We believe that Mr. Lucatz’sProfessor Ofir extensive experience over the last 25 years in management, operations, financegovernance and business development in corporate turnaround, roll-up and M&A situations, asbusiness consulting makes him very well as his experience in the electronics defense and homeland security sectors, make him suitablequalified to serve as a director of the Company.

 

Tali DinarRobert Benton. Mrs. Dinar currentlyMr. Benton has served on the Board of TINGO GROUP since April 2021.He has been the Director and Founder of Anthology Media, Ltd, (formerly Bob & Co, Ltd) where he provides integrated strategies designed to bridge the gap between creativity and finance for TV and film production companies since August 2010. Prior to his employment at Anthology Media, Ltd, Mr. Benton was a Managing Director and Head of Media Investments at Canaccord Adams Ltd., from September 2008 to June 2010, where he focused on marketing, sales, and corporate finance. Mr. Benton was also a Managing Director at Ingenious Media, an investment company specializing in the media, infrastructure, real estate and education sectors from August 2006 to May 2008. Prior to his employment at Canaccord Adams Ltd and Ingenious Media, Mr. Benton was employed as the Chief Executive Officer at Bridgewell Securities Ltd, a United Kingdom investment banking firm, from January 2002 to June 2006. From 1997 to 2001, Mr. Benton served as a Chairman and Chief Executive Officer for Charterhouse Securities Limited. Mr. Benton also served as the Global Head of Sales for ABN-ABRO from June 1994 to June 1997. Prior to that, Mr. Benton was a Managing Director of HSBC James Capel Ltd, from November 1992 to June 1995. Mr. Benton currently serves as interim Chief Executive Officerthe Deputy Chair of Micronet Ltd.Everbright Securities Financial Holding Limited, which engages in the provision of financial brokerage services. He also sits on the board of directors for International Literacy Properties, a company that works with authors, managers of literary estates and Enertec's Chief Financial Officer. Mrs. Dinarindividual heirs to help realize the value from book-based intellectual property. Mr. Benton has served on the board of The Discerning Eye, a United Kingdom based educational charity that promotes a wider understanding and appreciation of the visual arts and further stimulates debate about the place and purpose of art in our society through its annual exhibition. Mr. Benton sits on the Advisory Committee for Nash & Co Capital, Ltd, which is an independent corporate finance and advisory company. Previously, Mr. Benton served as our Chief Financial Officerthe Chairman of Clarkson Plc, the FTSE 250 shipping group, from May 2010 until May 13, 2015, Chief Financial Officer of Enertec2005 to January 2015. Mr. Benton holds a degree in Politics and Economics from Exeter University. We believe Mr. Benton is well qualified to serve as a director due to his extensive leadership experience.

John M. Scott. Mr. Scott has served on our Board since November 20092019. Mr. Scott began his career as a stockbroker in October 1970 with Charlton Seal Dimmock & Co. He became a Partner at the same firm in 1982 and subsequently a Director of Wise Speke Limited following a merger in 1990. In August 1994, he joined Albert E. Sharp LLP as a Director, where he remained until June 2007. In 2007, he joined WH Ireland Group Plc, a financial services company offering private wealth management, wealth planning and corporate broking services, where he oversaw the firm’s private client business in Manchester, U.K. until his retirement from his role as an Executive Director from WH Ireland’s Board of Directors in 2013. We believe that Mr. Scott is qualified to serve on our Board because of his accounting expertise and his experience serving as an officer and director of public and private companies.

Hao (Kevin) Chen. Mr. Chen was promoted by the Board to serve as the Chief Financial Officer of Micronet since May 2015. Since October 2009, Ms. Dinarthe Company in November 2021. He has more than 13 years of experience providing financial services to a variety of public and private companies, including in the role as Chief Financial Officer. He has a demonstrated history of working within the technology industry and is skilled in US GAAP accounting, SOX internal controls, debt and equity financing and strategic management. Mr. Chen previously served as vice president, financethe Chief Financial Officer and board member of DLC, where she servesChina Rapid Finance (NYSE:XRF), a holding company operating primarily in the emergency rescues services business, which utilizes cloud and other cutting-edge technologies to provide emergency rescue services, including an app based mobile platform, cloud call centers and large data centers. Prior to that, Mr. Chen served as key advisora Senior Financial Reporting Manager to Qunar.com (China’s online travel platform NASDAQ:QUNR) from 2013 to 2015 and served as an Audit Manager with Ernst & Young from 2008 to 2013. Mr. Chen holds a Master of Business Administration from Kellogg School of Management at Northwestern University, a Master of Economics from Shanghai University of Finance and Economics and a Bachelor of Mathematics from Shandong University. He is a Certified Public Accountant in the U.S.


Moran Amran. Mrs. Amran has been the Company’s Controller since 2011. In January 2019 Ms. Amran was appointed to serve as the Company’s principal financial officer until Mr. Chen was promoted to the company’s management and is responsible for implementing internal controls driving major strategic financial issues.role in November 2021. From 20072010 until 2009,2011, she served as chief controllerFinancial Controller of the Global Consortium on Security Transformation, a global homeland security organization. From 20022006 until 2007, she was the chief controller of I.T.L. Optronicsserved as an assistant accountant for Agan Chemicals Ltd. Ms. DinarMrs. Amran holds a B.A. in Accounting and Business Management from The College of Management Academic Studies and earned her CPA certificate in 1999.

Oren Harari. Mr Harari currently serves as our Chief Financial Officer. Prior to joining the Company,Rishon LeZion, Israel, obtained an MBA from January 2012 to October 2014, Mr. Harari, served as Chief Financial Officer at 3i-Mind, a software defense company (part of AGT International – a defense integrator), from September 2008 to October 2011 as Chief Financial Officer of Raysat Antenna Systems, a satellite telecommunication company (defense & commercial)The Ono Academic College in Kiryat Ono, Israel and Finance Manager of Telrad Connegy (the PBX division of Telrad Networks). Mr. Harari is a licensed Certified Public Accountant (Israel)certified public accountant in Israel.

Sir David Trippier, R.D.,J.P.,D.L Until April 2011 Sir David Trippier was the Chairman of Cambridge shire Horizons, the company delivering sustainable development in the Cambridge Sub-region, and holds an M.B.A. in Accounting and Corporate Finance fromhe was the CollegeChairman of Management and Business Administration, Tel Aviv.

Chezy (Yehezkel) Ofir. Professor Ofir has served on our Board since April 2013.W H Ireland Group plc, Stockbrokers until May 2008 when the company was taken over by a consortium. He was appointed asuntil recently a directorNon-Executive Director of Micronet in September 2012. Professor Ofir has over 20 years of experience in business consultingITV Granada Television and corporate management. During this period, Professor Ofir has served as a member of the boards of directors of a large number of companies in various sectors. Professor Ofir has been a director or Chairman of several quoted companies. Sir David was knighted by the Queen in July 1992 when he was 46 years of age. In 1994 he was appointed by the Council of the Stock Exchange to sit on the committee, which formulated and launched the Alternative Investment Market (AIM) in June 1995. Since 1992, he has been Chairman or main Board Director of three companies, which have floated on the Stock Exchange and are now in the Main List, and one that has floated on the AIM Market. He was born in May 1946, educated at Bury Grammar School and later was commissioned as an officer in the Royal Marines Reserve in which he has served for 30 years. He passed the Commando Course at the Commando Training Centre in Devon in 1969 and the following year qualified as a parachutist at RAF Abingdon. He subsequently qualified as a Company Commander at the School of Infantry at Warminster and later passed the Staff College Course at the Royal Naval College at Greenwich. He has served with 40 Commando Royal Marines in Singapore and Malaysia, 41 Commando in Malta and the 3rd Commando Brigade in Norway. He was awarded the Royal Marines Reserve Decoration in 1983. In January 1996, he was appointed Honorary Colonel of the Royal Marines Reserve in the Northwest by the Commandant General Royal Marines. He retired from that role in January 2010. At the age of 22, he was admitted to the Stock Exchange. He was also a director of a financial planning company as well as being a Stockbroker. He was a senior partner in Pilling Trippier & Co before it was taken over by Capel-Cure Myers whilst he was a Minister. He was elected to the Rochdale Metropolitan Borough Council in 1969. In 1975, he became the leader of the Council when he was 28 years of age and in the same year was appointed a magistrate. In 1979, he was elected as MP for Rosendale at the age of 32 and became MP for the new constituency of Rosendale and Darwen from 1983 to 1992. In 1982, Sir David was appointed Parliamentary Private Secretary to the then Minister for Health (Rt Hon Kenneth Clarke QC, MP). From June 1983 to September 1985, Sir David was the Minister for Small Firms and Enterprise at the Department of Trade and Industry. From September 1985 to June 1987, he was the Minister for Tourism, Small Firms and Enterprise in the Department of Employment. In 1987 he became the Minister for Housing, Inner Cities and Construction in the Department of the Environment. Later in 1989, he was promoted to become the Minister of State for the Environment and Countryside. As the “Green” Minister he was instrumental in negotiating the international agreements on Climate Change and Global Warming on behalf of the United Kingdom. In February 1994, he became a Deputy Lieutenant of Lancashire. In April 1997, he became High Sheriff of Lancashire for the year 1997/98. In 1999, he published his autobiography entitled “Lend Me Your Ears”. He became the President of the Manchester Chamber of Commerce for the year 1999-2000. He was the National Chairman of the Tidy Britain Group from 1996 to 1998. He became the President of the Royal Lancashire Show for the year 1999. Sir David became the Chairman of the North West of England Reserve Forces and Cadets Association from 2000 to 2008. He was the National Vice Chairman of the Council of Reserve Forces from 1999 to 2008 representing the Royal Marines. He served as the County Chairman for the St. John Ambulance in Lancashire from 2003 to 2007. He was the County President of the Royal British Legion in Lancashire from 2005 to 2008.He was the founder of the Rosendale Enterprise Trust and the Rosendale Groundwork Trust. He is the President Elect of the Soldiers, Sailors, Airmen and Families Association - Forces Help for Greater Manchester. In November 2006, Sir David won a National Award for “Outstanding Leadership” sponsored by the Daily Telegraph. He was nominated as one of 100 of Britain’s most influential men and women in the Public and Private Sectors. He is married and has three sons. His wife, Lady Ruth Trippier, is a practicing barrister on the Northern Circuit.


Kenneth Denos.Kenneth Denos has served as Tingo, Inc.’s Executive Vice President, General Counsel, and Corporate Secretary since September 2021. Since June 2005, Mr. Denos has been an officer and director of Equus Total Return, Inc. (NYSE: EQS), a closed-end fund traded on the New York Stock Exchange, serving as its President and CEO from 2007-09. He is also a founder and principal of Outsize Capital Ltd., an international corporate finance advisory firm based in London, and is the founder and Chairman of Kenneth I. Denos, P.C., a U.S.-based corporate and consumer law firm. Previously, Mr. Denos was the Financial Reporting CommitteeCEO of Makhteshim Agam,MCC Global NV, a leading manufacturerFrankfurt stock exchange listed investment advisory firm based in London, and distributor of crop protection products, hasalso served as a director and memberexecutive officer of all board committeestwo London Stock Exchange listed firms, Healthcare Enterprise Group plc and Tersus Energy plc. Mr. Denos has worked in the private equity and advisory industry for virtually his entire career, having served as a principal and/or advisor to private and public companies and funds in the Middle East, Europe, Africa, and North America. He holds a Bachelor of I.T.L. Optronics Ltd.,Science degree in Business Finance and Political Science from the University of Utah. He also holds a publicly-traded company listedMaster of Business Administration and a Juris Doctor from the University of Utah. We believe that Mr. Denos is well-qualified to serve on the Tel Aviv Stock Exchange engaged inboard due to his extensive international legal and corporate governance background, as well as his financial services and investment experience.

John J. Brown.John J. Brown has served on the development, productionboard of directors of Tingo, Inc. since September 2021. Since 2016, Mr. Brown has also been the Managing Partner of Sands Point Consulting, an advisor to entrepreneurs, founders, and marketing of advanced electronic systemssenior corporate leaders to develop new business strategies for a rapidly changing market. From 2009 – 2016, he was the Group Managing Director and solutions for the defense and security industries, and as a member of the boardWMA Executive Committee for UBS Wealth Management Americas. From 1995-2000, Mr. Brown was the Managing Director and Global Head of directors, Chairman of the Audit CommitteeConvertible Securities Trading at UBS, and member of all board committees of Shufersal, the largest foodfrom 1980-1995 and non-food retail chain in Israel.again from 2000-2009 he was a Managing Director for Merrill Lynch & Co., holding senior executive leadership positions at Merrill Lynch, most notably COO, Operations, Technology & Corp. Services Group. At Merrill Lynch, Mr. Brown managed a $1 billion annual operating budget. He also served as a memberthe Head of the Executive Export TradeUS Equity Financing & CEO, Merrill Lynch Professional Clearing Corp in its Prime Broker Division. We believe Mr. Brown is well qualified to sit on our board due to his extensive experience at various positions at UBS and Marketing Committee of the Industry and Trade Ministry where he evaluated company programs and formulated and recommended funding to the committee. Professor Ofir has been a faculty member at the Hebrew University for more than 20 years. Professor Ofir founded an Executive MBA program for CEOs, which is the first and only program of its kindMerrill Lynch, as well, as his experience in Israel. Additionally, Professor Ofir has been the Chairman of the Marketing Department at the Hebrew University Business School for fifteen years. Professor Ofir has been invited as a lecturer or research partner to many top universities, including Stanford University, University of California Berkeley, New York University and Georgetown University. Professor Ofir’s publications have been covered in media and leading internationaldeveloping new business magazines and papers, including The Financial Times, MIT Sloan Management Review and Stanford Business. Professor Ofir holds a B.Sc. and M.Sc. in Engineering and doctorate and master’s degrees in Business Administration from Columbia University.

strategies.

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We believe that Professor Ofir’s extensive experience in consulting companies on strategic processes, international business development, business and marketing strategy, establishing control systems, products and new product strategies and pricing strategy, makes him suitable to serve as a director of the Company.Family Relationships

 

Jeffrey P. Bialos Mr. Bialos has served on our Board  since April 2013. Mr. Bialos has over 30 years of experience in a broad range of domestic and international legal, governmental and public policy positions. He served as Deputy Under Secretary of Defense for Industrial Affairs from January 1999 through December 2001 and in senior positions at the State and Commerce Department during the Clinton Administration and served on Defense Science Board task forces from June 1996 through June 1997. He also was appointed to the Secure Virginia Panel, Virginia’s homeland security board, by two Virginia Governors.  Mr. Bialos also spent considerable time in private legal practice in Washington, D.C. with two large national law firms (currently, Sutherland, Asbill & Brennan LLP where he has been a partner since 2002 and, previously, Weil, Gotshal & Manges from January 1990 through June 1996). He has represented a wide range of domestic and foreign firms (including large multinational corporations and leading defense and aerospace firms), foreign governments, development institutions such as the European Bank for Reconstruction and Development and the International Finance Corporation, private equity funds, public-private partnerships and other entities, in a diverse range of corporate and commercial, adjudicatory, regulatory, policy and interdisciplinary matters. He has considerable experience in Europe, the Middle East and Asia. Mr. Bialos holds a J.D. from the University of Chicago Law School, a M.P.P. from the Kennedy School of Government at Harvard University and an A.B. from Cornell University.  He is a member of the New York Council on Foreign Relations.

We believe that Mr. Bialos’ broad and intimate familiarity with the aerospace, defense, information technology, space and homeland security industries and the depth and breadth of his professional experience as a practicing lawyer and former government official, make him suitable to serve as a director of the Company.

Miki Balin Mr. Balin has served on our Board since April 2013. Mr. Balin has been the Chief Executive Officer and founder of Targetingedge Ltd., a subsidiary of TLVmedia Ltd since 2013. Prior to Targetingedge he founded WinBuyer in 2006 and Conversion Methods in 2004, which developed products for e-retailers. Mr. Balin has devoted much of his career to managing marketing-related ventures. Prior to establishing Conversion Methods and WinBuyer, he founded Balin, Adatto & Cohen, a leading healthcare consulting and advertising firm in Israel. He also managed a family-owned food distribution company, and served as general manager of the Rina Shinfeld Ballet Theatre, where he still serves as a director. In 2011, WinBuyer was awarded the “Best Product at eCommerce Expo” for its product Winbuyer 2.0.

We believe that Mr. Balins’ experience as a business and marketing executive make him suitable to serve as a director of the Company.

There are no arrangements or understandings with major stockholders, customers, suppliers or othersbetween our directors and any other person pursuant to which our directors were nominated or elected for their positions. There are no family relationships between any of our directors or members of senior management were selected as such. In addition, there are no family relationships among our executive officers and directors.

Our future success depends, in significant part, on the continued service of certain key executive officers, managers, and sales and technical personnel, who possess extensive expertise in various aspects of our business. We may not be able to find an appropriate replacement for any of our key personnel. Any loss or interruption of our key personnel’s services could adversely affect our ability to implement our business plan. It could also result in our failure to create and maintain relationships with strategic partners that are critical to our success. We do not presently maintain key-man life insurance policies on any of our officers.

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Corporate Governance

 

Our board of directors is currently comprised of foursix directors. Mr. Lucatz,Mercer, our chairman, President and Chief Executive Officer is not independent as that term is defined under the NASDAQNasdaq Listing Rules. Professor Ofir and Messrs. Bialos, and Balin have been directors since our public offering. Each of Professor Ofir and Messrs. Bialos, and Balinour directors, other than Mr. Mercer, qualify as “independent” under the NASDAQNasdaq Listing Rules, and SEC rules with respect to members of boards of directors. Ourdirectors and our Audit Committee, Compensation Committee and Corporate Governance/Nominating Committee, and otherwise meet the NASDAQNasdaq corporate governance requirements.

 

As of April 2. 2020, the Board does not have a chairman. Recognizing that the Board is composed almost entirely of outside directors, in addition to the Board’s strong committee system (as described more fully below), we believe this leadership structure is appropriate for the Company and allows the Board to maintain effective oversight of management. On May 23, 2021, Mr. Scott was elected to serve as vice Chairman of the Board.

Our board of directors has three standing committees: the Compensation Committee, the Audit Committee and the Corporate Governance/Nominating Committee.

 


Audit Committee

 

The members of our Audit Committee are Professor Ofir,  Mr. BialosBenton, Sir David Trippier, R.D.,J.P.,D.L and Mr. Balin. Professor OfirScott. Mr. Benton is the Chairman of the Audit Committee, and our board of directors has determined that Professor OfirMr. Benton is an “Audit Committee financial expert” and that all members of the Audit Committee are “independent” as defined by the rules of the SEC and the NASDAQNasdaq rules and regulations. The Audit Committee operates under a written charter that is posted on our website atwww.micronet-enertec.com. www.TINGO GROUP-inc.com. The primary responsibilities of our Audit Committee include:

 

●Appointing,appointing, compensating and retaining our registered independent public accounting firm;

●
●Overseeingoverseeing the work performed by any outside accounting firm;

 

●Assistingassisting the board of directors in fulfilling its responsibilities by reviewing: (1) the financial reports provided by us to the SEC, our stockholders or to the general public and (2) our internal financial and accounting controls; and

●
●Recommending,recommending, establishing and monitoring procedures designed to improve the quality and reliability of the disclosure of our financial condition and results of operations.

 

Compensation Committee

 

The members of our Compensation Committee are Professor  Ofir, Mr. BialosBenton, Sir David Trippier, R.D.,J.P.,D.L and Mr. Balin. Professor .  OfirScott. Mr. Scott is the Chairman of the Compensation Committee and our board of directors has determined that all of the members of the Compensation Committee are “independent” as defined by the rules of the SEC and NASDAQNasdaq rules and regulations. The Compensation Committee operates under a written charter that is posted on our website atwww.micronet-enertec.com.www.TINGO GROUP-inc.com. The primary responsibilities of our Compensation Committee include:

 

●Reviewingreviewing and recommending to our board of directors of the annual base compensation, the annual incentive bonus, equity compensation, employment agreements and any other benefits of our executive officers;

●
●Administeringadministering our equity basedequity-based compensation plans and exercising all rights, authority and functions of the board of directors under all of the Company’s equity compensation plans, including without limitation, the authority to interpret the terms thereof, to grant options thereunder and to make stock awards thereunder; and

 

●Annuallyannually reviewing and making recommendations to our board of directors with respect to the compensation policy for such other officers as directed by our board of directors.

 

The Compensation Committee meets, as often as it deems necessary, without the presence of any executive officer whose compensation it is then approving. Neither theThe Compensation Committee norand the Company engaged or received advice from any compensation consultant during 2015.

in 2022.

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Corporate Governance/Nominating Committee

 

The members of our Corporate Governance/Nominating Committee are Professor Ofir. Mr. BialosBenton, Sir David Trippier, R.D.,J.P.,D.L and Mr. Balin. Professor  OfirScott. Mr. Scott is the Chairman of the Corporate Governance/Nominating Committee and our board of directors has determined that all of the members of the Corporate Governance/Nominating Committee are “independent” as defined by NASDAQNasdaq rules and regulations. The Corporate Governance/Nominating Committee operates under a written charter that is posted on our website atwww.micronet-enertec.com. www.TINGO GROUP-inc.com. The primary responsibilities of our Corporate governance and Nominating Committee include:

 

●Assistingassisting the board of directors in, among other things, effecting board organization, membership and function including identifying qualified board nominees; effecting the organization, membership and function of board of directors committees including composition and recommendation of qualified candidates; establishment of and subsequent periodic evaluation of successor planning for the Chief Executive Officer and other executive officers; development and evaluation of criteria for board membership such as overall qualifications, term limits, age limits and independence; and oversight of compliance with applicable corporate governance guidelines; and

 

●Identifyingidentifying and evaluating the qualifications of all candidates for nomination for election as directors.

 


Potential nominees will be identified by the board of directors based on the criteria, skills and qualifications that will be recognized by the Corporate Governance/Nominating Committee. In considering whether to recommend any particular candidate for inclusion in the board’sboard of directors’ slate of recommended director nominees, our Corporate Governance/Nominating Committee will apply criteria including the candidate’s integrity, business acumen, knowledge of our business and industry, age, experience, diligence, conflicts of interest and the ability to act in the interests of all stockholders. No particular criteria will be a prerequisite or will be assigned a specific weight, nor do we have a diversity policy. We believe that the backgrounds and qualifications of our directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will result in a well-rounded board of directors and allow the board of directors to fulfill its responsibilities.

 

There have not been any changes in our process for nominating directors.

 

Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports

 

Section 16(a) of the Exchange Act, requires our directors and executive officers, and directors, and personsanyone who ownbeneficially owns ten percent (10%) or more than 10% of our common stock,Common Stock, to file reports regarding ownership of, and transactions in, our securities with the SEC initial reports of beneficial ownership and reports of changes in beneficial ownership of Common Stock. Anyone required to file such reports also need to provide us with copies of those filings. all Section 16(a) forms they file.

Based solely on ourupon a review of the(i) copies of such formsthe Section 16(a) filings received by us,during or with respect to 2021 and (ii) certain written representations from certain reporting persons,of our officers and directors, we believe that all filings required to be made pursuant to Section 16(a) of the Exchange Act during fiscal year ended December 31, 2016, all filing requirements applicableand with respect to our officers, directors and ten percent beneficial owners2021 Please update were complied with.filed in a timely manner.

 

Code of Ethics

 

We have adopted a Code of Business Conduct and Ethics that applies to our directors, executive officers and all of our employees. The Code of Business Conduct and Ethics is available on our website atwww.micronet-enertec.com and we will provide, at no charge, persons with a written copy upon written request made to us.

www.TINGO GROUP-inc.com.

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Item11.Executive Compensation

Item 11. Executive Compensation

 

The following information is furnished forSummary of Compensation table sets forth the compensation paid by our Company during the two years ended December 31, 20162022 and December 31, 2015 for our named executive officers.2021, to all Executive Officers earning in excess of $100,000 during any such year. 

 

Name and Principal Position Year Salary (1)  Bonus (2)  Option Awards (3)  All Other Compensation (4)  Total 
David Lucatz (5) 2016 $378,711  $-   88,539  $7,937  $475,188 
Chief Executive Officer and President 2015 $376,272  $-  $106,247  $7,512  $490,031 
                       
Tali Dinar 2016 $173,803  $-  $28,333  $24,449  $226,584 
Chief Financial Officer of Enertec and Interim Chief Financial Officer of Micronet Ltd. Electronics Ltd. 1-4.2015 $54,048  $-  $33,999  $7,906  $95,953 
                       
Oren Harari (6) 2016  -   -   -   -   - 
Chief Financial Officer of Micronet Enertec Technologies Inc. 2015  -   -   -   -   - 
Name and Principal Position Year Salary(1)  Bonus(2)  Option
Awards(3)		  Stock Based
Awards (5)		  All Other
Compensation(4)		  Total 
Darren Mercer 2021 $571,251  $913,125  $-  $8,580,000  $196,074  $10,260,450 
Chief Executive Officer (7) 2022 $800,000  $999,875  $-  $2,145,600  $229,362  $4,174,837 
Hao (Kevin) Chen (6) 2021 $141,000  $-  $-  $-  $-  $141,000 
Chief Financial Officer 2022 $216,000   -   -  $53,640   -  $269,640 
Moran Amran 2021 $232,013  $116,795  $153,744  $-  $17,082  $519,634 
Controller 2022 $244,310  $90,000  $201  $21,456  $21,488  $377,455 

 

(1)

Salary paid partly in NIS and partly in U.S. dollars. The amounts are converted according to the average foreign exchange rate U.S. dollar/NIS for 20162022 and 2015,2021, respectively.

(2)

Represents discretionary bonus in connection with the performance and achievements of the Company.

TINGO GROUP.
(3)

The fair value recognized for such option awards was determined as of the grant date in accordance with Accounting for StandardStandards Codification, or ASC, Topic 718. Assumptions used in the calculations for these amounts are included in Note 133 to ourthe consolidated financial statements for the year ended December 31, 20162020 included elsewhere in this Annual Report.

(4)Includes the following: pay-out of unused vacation days, personal use of company car (including tax gross-up), personal use of company cell phone, contributions to manager’s insurance (retirement and severance components), contributions to advanced study fund, recreational allowance, premiums for disability insurance and contributions to pension plan.   In addition, Ms. Dinar
(5)The Company accounts for stock-based compensation under the fair market value method under which compensation cost is entitled to receive director compensation from Micronet  as a membermeasured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.
(6)On November 29, 2021, the board of directors of Micronet, pursuantTINGO GROUP, promoted Hao (Kevin) Chen, its Financial controller of its China business to the Israeli Companies Law regulations (compensation and expenses reimbursement for independent directors).Mrs. Dinar’s compensation and expenses reimbursement for servingserve as a director of Micronet amounted to a total of $4,000 and $3,300 for the period ended December 31, 2016 and 2015 respectively.
(5)In November 2012, entities controlled by Mr. Lucatz reached agreements with each of Micronet and the Company, for the provision of management and consulting services to Micronet and the Company, respectively. On November 7, 2012, the board of directors and the Audit Committee of the board of directors of Micronet approved the entry into a management and consulting services agreement with DLC, pursuant to which, effective November 1, 2012 Mr. Lucatz agreed to devote 60% of his time to Micronet matters for the three year term of the agreement and Micronet agreed to pay the entities controlled by Mr. Lucatz management fees of NIS 65,000 (approximately $18,172) on a monthly basis, and cover other monthly expenses. Such agreement was further subject to the approval of Micronet’s stockholders, which was obtained at a special meeting held on January 30, 2013 for that purpose and went into effect following its execution on February 8, 2013. The management and consulting agreement between DLC and Micronet was extended on November 1, 2015 for three years on the same terms and conditions. The management and consulting agreement was approved by Micronet's Board of Directors on October 11, 2015 and approved by Micronet's shareholders on November 16, 2015.  On November 26, 2012, DLC entered into a 36-month management and consulting services agreement with the Company, effective November 1, 2012, which provides that we (via any of our directly or indirectly fully owned subsidiaries) will pay the entities controlled by Mr. Lucatz: (1) management fees of $13,333 on a monthly basis, and cover other monthly expenses, (2) an annual bonus of 3% of the amount by which the annual earnings before interest, tax, depreciation and amortization, or EBITDA, for such year exceeds the average annual EBITDA for 2011 and 2010, and (3) a one-time bonus of 0.5% of the purchase price of any acquisition or capital raising transaction, excluding only a specified 2013 public equity offering, completed by us during the term of the agreement. According to the agreement, the management and consulting services agreement between DLC and the Company automatically renewed for a successive one year term on the same terms and conditions.
(6)Mr. Harari was appointed as Chief Financial Officer of the CompanyCompany.
(7)Effective on January 18, 2017.October 2021, the board of directors approved Darren Mercer’s new employment terms inclusive of an annual base salary of $800,000.

 

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Employment Agreements

 

Darren Mercer

Effective October 2021, the board of directors approved Darren Mercer’s new employment terms as follows: (i) an annual base salary fee will be $800,000 and, (ii) a total annual bonus in accordance with the bonus program adopted by the Company from time-to-time. The target bonus amount for Mr. Mercer’s work in the calendar year 2021 was $713,000. The Target Bonus Amount for 2022, 2023, and 2024 shall be $1,200,000.  Which Executive works for the Company outside the United Kingdom for at least five days.

All other terms of Mr. Mercer’s employment agreement, as amended, remain in full force and effect. 

Hao Chen

On November 29, 2021, the board of directors of TINGO GROUP promoted Hao (Kevin) Chen, its Financial controller of its China business to serve as the Chief Financial Officer of the Company. The Company and Mr. Chen are finalizing the negotiation of Mr. Chen’s employment agreement and will file such agreement when available.

None of our employees is subject to a collective bargaining agreement.

 

On January 18, 2017,Mr. Harari entered into an employment agreement with the Company pursuant to which, Mr. Harari:(i) receives a monthly company cost of45,780NIS (approximately US$12,050 based on an exchange rate of 3.8 NIS to US$1 as of January 18, 2017); (ii) was entitled to a car and phone; (iii) is entitled to receive bonuses and options; and (iv)shall be entitled to customary Israeli pension funds and other social benefits. The employment agreement is not limited to a certain duration. The employment agreement is terminable by either party at any time by providing 60 days’ prior written notice. The employment agreement also contains customary confidentiality, non-competition and non-solicitation provisions. In addition, the Company agreed to issue Mr. Harari a stock option to purchase 100,000 shares of the Company’s common stock at an exercise price of $4.30 per share, with such option vesting as follows: (i) 1/4 vesting immediately; and (ii) 1/4 vesting on each of the first three annual anniversaries of the date of grant.

Outstanding Equity Awards

 

During 2016,2022, no options and shares were issued to our directors, officers and employees under theour 2012 StockIncentive Plan.

During 2022, TINGO GROUP issued 6,612,500 shares of common stock to our directors, officers and employees under our 2020 Incentive Plan as described below. The following table presents the outstanding equity awards held asout of December 31, 2016, bywhich 4,000,000 shares of common stock were issued to Darren Mercer (which shall be released/vest subject to satisfaction of applicable performance conditions) under our named executive officers:2020 Incentive Plan.

 

  Option Awards 
Name Number of securities underlying unexercised options (#) exercisable  Number of securities underlying unexercised options unexercisable  Option exercise price ($)  Option expiration date 
David Lucatz  250,000   -   4.30   11/11/2024 
Tali Dinar  80,000   -   4.30   11/11/2024 
Shai Lustgarten  160,000   -   4.30   11/11/2024 
Shai Lustgarten  46,667   46,667   4.30   05/27/2025 


 

Director Compensation

 

The following table provides information regardingsummarizes the compensation earned by, awarded or paid to each person for serving as a director who is not an executive officernon-employee directors during the fiscal year ended December 31, 2016:2022. 

 

Name(1)    Fees earned
($) (4)		  

Option

Awards
($)(2)(3)

  

All Other

Compensation
($) (5)

  Total
($)		 
Chezy (Yehezkel) Ofir  2016  $12,000  $4,272   2,000  $18,272 
Jeffrey P. Bialos  2016  $12,000  $4,272   3,600  $19,872 
Jacob Berman  2016  $12,000  $4,272   2,000  $18,272 
Miki Balin  2016  $12,000  $4,272   2,000  $18,272 
Name(1) Fees
Earned
or paid
in cash
($) (6)		  Option
Awards
($) (2)(3)(4)		  Stock
Awards
($)		  All Other
Compensation
($)		  Total
($)		 
Yehezkel (Chezy) Ofir(2) $45,000  $10,322  $59,004  $-  $114,326 
Sir David Trippier (5) $28,750  $-  $21,456  $-  $50,206 
Robert Benton (3) $45,000  $27,525  $21,456  $-  $93,981 
John McMillan Scott (4) $55,000  $55,050  $107,280  $334  $217,664 

 

(1)Mr. Lucatz, who serves as our Chairman, Chief Executive Officer and President, is not included in this table because he receives no compensation for his services as a director. The compensation received by Mr. Lucatz is as shown above in the Summary Compensation Table.

(2)(1)The fair value recognized for such option awards was determined as of the grant date in accordance with Accounting for ASC Topic 718. Assumptions used in the calculations for these amounts are included in Note 133 to our consolidated financial statements for the year ended December 31, 20162022 included elsewhere in this Annual Report.

(3)(2)As of December 31, 2016, each of the directors listed in the table above2022, Professor Yehezkel (Chezy) Ofir, held options to purchase 10,00030,000 shares, of Common Stockthe options to purchase 30,000 shares were granted to him on May 23, 2021 at an exercise price of $4.30$1.81 per share, 5,000share. Out of which 22,500 of the options have vested. As of December 31, 2022, Professor Yehezkel (Chezy) Ofir, held 235,000 shares, out of which 110,000 were granted to him on April 29, 2013 and 5,000May 10, 2022.
(3)As of December 31, 2022, Mr. Robert Benton, held options to purchase 80,000 shares, the options to purchase 80,000 shares were granted to him on May 23, 2021 at an exercise price of $1.81 per share. Out of which 60,000 of the options have vested. As of December 31, 2022, Mr. Robert Benton, held 40,000 shares, out of which 40,000 were granted to him on November 11, 2014. Such options vest within three years following the date of grant.May 10, 2022.

(4)During 2016,(4)As of December 31, 2022, Mr. John McMillan Scott held options to purchase 160,000 shares, the options to purchase 160,000 shares were granted to him on May 23, 2021 at an exercise price of $1.81 per share. Out of which 120,000 of the options have vested. As of December 31, 2022, Mr. John McMillan Scott, held 300,000 shares, out of which 200,000 were granted to him on May 10, 2022.
(5)As of December 31, 2022, Sir David Trippier held no options to purchase shares. As of December 31, 2022, Sir David Trippier, held 40,000 shares, out of which 40,000 were granted to him on May 10, 2022.
(6)For the year ended December 31, 2022, we paid an aggregate amount of $173,750 to our directors received compensationas Compensation for serving on our board in the amount of $57,600.directors. Independent directors received $12,000$30,000 fixed annual fees plus applicable taxes$ 5,000 fixed fee for membership in each yearcommittee, the vice chairman of service as directors.the board received an additional fixed annual fee of $ 10,000 in salary.

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(5)Independent directors receive $250 (or $100 if the director participates via telephone or video conference) for each meeting in excess of three meetings in any monthand reimbursement of expenses.

(6)Mr. Berman did not stand for reelection at the Company’s 2016 Annual Stockholders Meeting held on October 18, 2016.

Other than as described above, we have no present formal plan for compensating our directors for their service in their capacity as directors. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. The board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director. Other than indicated above, no director received and/or accrued any compensation for his or her services as a director, including committee participation and/or special assignments during 2016.2021.

 

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table sets forth certain information regarding the beneficial ownership of our common stock as of March 31, 201730, 2023 based on information obtained from the persons named below, with respect to the beneficial ownership of the outstanding common stock held by (1) each person known by us to be the beneficial owner of more than 5%shares of our common stock; (2)stock, by:

●each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;

●each of our executive officers and directors that beneficially owns shares of our common stock; and

●all our executive officers and directors as a group.


Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or will become exercisable within 60 days. Except as described in the footnotes below and subject to applicable community property laws and similar laws, we believe that each person listed below has sole voting and investment power with respect to such shares.

In the table below, percentage ownership is based on 163,679,382 shares of Common Stock outstanding as of March 31, 2023. The table below does not include any shares of Common Stock underlying our current directors; (3) eachoutstanding options or warrants because such securities are not exercisable within 60 days of our named executive officers; and (4) our executive officers and current director as a group. May 31, 2023.

Unless otherwise indicated, thewe believe that all persons named in the table below have sole voting and investment power with respect to the numberall shares of shares indicated ascommon stock beneficially owned by them. Unless otherwise indicated, the address for each of the below persons is c/o Micronet Enertec Technologies, Inc., 27 Hametzuda St., Azur 58001 Israel.

 

Name Number of Shares Beneficially Owned  Percentage of Shares Beneficially Owned(1) 
5% Stockholders      
D.L. Capital Ltd.(2)  2,597,200   36.00%
UTA Capital LLC(3)  726,746   10.07%
Meydan(4)  600,000   8.32%
Directors and Named Executive Officers        
David Lucatz(2)(5)  2,847,200   39.46%
Tali Dinar(5)  80,000   1.11%
Oren Harari  25,000   0.35
Shai Lustgarten(5)  253,333   3.51%
Chezy (Yehezkel) Ofir(5)  10,000   0.14%
Jeffrey P. Bialos(7)  27,424   0.38%
Miki Balin(5)  10,000   0.14%
Directors and Executive Officers as a group (7 persons) (6)  3,252,957   45.09%
  Number of Shares Beneficially Owned  Percentage of Shares Beneficially Owned(1) 
5% Stockholders      
Tingo, Inc.(1)  25,783,675   15.7%
Darren Mercer  15,620,939   9.5%

Why twice Directors and Named Executive Officers

        
Moran Amran(2)  382,500   * 
Yehezkel (Chezy) Ofir(3)  257,500   * 
Darren Mercer  15,620,939   9.5%
John McMillan Scott(4)  530,000   * 
Robert John Benton(5)  160,000   * 
Hao (Kevin) Chen(6)  300,000   * 
Sir David Trippier(7)  100,000   * 

Kenneth Denos

  45,000   — 
John Brown  45,000   — 
Directors and executive officers as a group (9 persons)(8)  17,170,939   9.5%

 

*Less than one percent
(1)Applicable percentage ownership is based on 7,214,991Does not include 26,042,808 shares of Common Stock outstanding as of March 31, 2017, together with securities exercisable or convertible intocommon stock underlying shares of CommonSeries A Preferred Stock within 60 daysand 336,872,138 shares of March 31, 2017 forcommon stock underlying shares of Series B Preferred Stock held by Tingo, Inc.. The conversion of each stockholder. Beneficial ownership is determined in accordance with the rules of the SECSeries A Preferred Stock and generally includes voting or investment powerSeries B Preferred Stock is subject to the approval of TINGO GROUP’s stockholders and the conversion of the Series B Preferred Stock is further subject to the approval of Nasdaq of a Change of Control application with respect to securities. Sharesthe TINGO GROUP acquisition of Common Stock that are currently exercisable or exercisable within 60 days of March 31, 2017 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.Tingo Mobile.

41

(2)Mr. Lucatz, by virtueConsists of being the controlling shareholder of DLC as well as the Chief Executive Officer and Chairman of the board of directors of DLC, may be deemed to beneficially own the 2,597,200257,500 shares of our Common Stock held by DLC.

(3)

According to information contained in Schedule 13G/A filed jointly on February 18, 2014 with the SECcommon stock and a Form 4 filed jointly on November 12, 2014 with the SEC by (1) UTA Capital LLC; (2) the members or beneficial owners of membership interests in UTA, which include (a) YZT Management LLC, a New Jersey limited liability company and the managing member of UTA, and (b) Alleghany Capital Corporation, a Delaware corporation and a member of UTA; (3) Alleghany Corporation, a publicly-traded Delaware corporation of which Alleghany Capital Corporation is a wholly-owned subsidiary; and (iv) Udi Toledano, the managing member of YZT Management LLC. Based on those filings and information subsequently available to us, as of March 31, 2017, UTA held sole voting and dispositive power with respect to such shares. YZT Management LLC, Alleghany Capital Corporation, Alleghany Corporation, and Udi Toledano have shared voting and dispositive power with respect to such125,000 shares by virtue of their relationships with UTA. UTA’s principal business address is 100 Executive Drive, Suite 330, West Orange, New Jersey.

(4)According to information contained in a Schedule 13G/A filed on May 9, 2013 with the SEC. Based on this filing and information subsequently available to us, as of April 14, 2016, Meydan held sole voting and dispositive power with respect to such shares. Meydan's principal business address is 38A Lansell Road, Toorak, Australia VIC 3142.
(5)Includes of common stock issuable upon the exercise of outstanding stock options.options owned by Mrs. Amran.
(3)Consists of 235,000 shares of common stock and 22,500 shares of common stock issuable upon the exercise of stock options owned by Mr. Ofir.
(4)Consists of 410,000 shares of common stock and 120,000 shares of common stock issuable upon the exercise of stock options owned by Mr. Scott.
(5)Consists of 100,000 shares of common stock and 60,000 shares of common stock issuable upon the exercise of stock options owned by Mr. Benton.
(6)Includes 638,333Consists of 300,000 shares of common stock owned by Mr. Hao and the remaining balance of 100,000 shares will be issued on or before May 10, 2023, subject to performance.
(7)Consists of 100,000 shares of common stock owned by Sir David Trippier.
(8)Consists of 45,000 shares of common stock owned by Kenneth Denos.
(9)Consists of 45,000 shares of common stock owned by John Brown.
(10)Consists of 427,500 shares of common stock issuable upon the exercise of stock options beneficially owned by the referenced persons, and 2,614,624 share of common stock.
(7)Includes 10,000 of common stock issuable upon the exercise of stock options owned by Mr. Bialos and 17,424 shares of common stock.persons.

 


Securities Authorized For Issuance Under Equity Compensation Plans

 

Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights  Weighted-average exercise price of outstanding options, warrants and rights  Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) 
  (a)  (b)  (c) 
Equity compensation plans approved by security holders  746,000   4.30   254,000 
Equity compensation plans not approved by security holders  -   -   - 
Total  746,000   4.30   254,000 

2012 Plan: Our 2012 Stock Incentive Plan (the “2012 Incentive Plan”) was initially adopted by 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 as shares or options. As of 31.12.2022, the total number of options and shares of common stock awarded under the 2012 Incentive Plan is 3,994,782 and includes options and shares of common stock which have been issued or have been allocated to be issued. 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 TINGO GROUP, Inc., a Delaware corporation (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 Stock, (the “Options”), (ii) shares of the Company’s 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 Plan and any Stock issued pursuant to the exercise thereof. Stock awards and the grant of Options to purchase shares of Stock, or the issue of each of the above under sub-sections (i) - (iii) shall be referred as the “Award(s).

 

The following table summarizes the equity securities granted under the 2012 Stock Incentive as of December 31, 2022. The shares covered by outstanding equity securities awards are subject to adjustment for changes in capitalization, stock splits, stock dividends and similar events.

Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (*)  Weighted-
average exercise price of outstanding options, warrants and rights		  Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) 
  (a)  (b)  (c) 
Equity compensation plans approved by security holders  590,000  $1.96   1,005,218 
Equity compensation plans not approved by security holders  -   -   - 
Total  590,000  $1.96   1,005,218 

(*)Excluded the shares of common stock awarded under the 2012 Incentive Plan in amount of 2,146,782.


Pursuant to our 2012 Stock Incentive Plan, as amended, our board of directors is authorized to award (i) stock options to purchase shares of common stock and (ii) shares of common stock, to our officers, directors, employees and certain others, up to a total of 1,000,0005,000,000 shares of Common Stock,common stock, subject to adjustment in the event of a stock split, stock dividend, recapitalization or similar capital change.

  

Pursuant to our 2014 Stock Incentive Plan, our board of directors is authorized to issue stock options, restricted stock and other awards to officers, directors, employees, consultants and other service providers in an amount up to a total of 100,000 shares of Common Stock.

As of December 31, 2016, 52,5252022 1,005,218 stock options remain available for future awards under the 20142012 Stock Incentive Plan.

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2020 Plan: The 2020 Stock Incentive 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 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 common stock tendered in payment for an award or shares of 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.  

Item 13.Certain Relationships and Related Transactions, and Director Independence. 

Item 13.Certain Relationships and Related Transactions, and Director Independence.

 

Our policy is to enter into transactionsDarren Mercer, our Chief Executive Officer, and a director, presently owns, with certain family members and related parties, on terms that are on the whole no less favorable to us than those that would be available from unaffiliated parties at arm’s length. Based on our experience in the business sectors in which we operate and the terms of our transactions with unaffiliatedapproximately one third parties, we believe that all of the transactions described below met this policy standard at the time they occurred.

As described above, Micronetissued and the Company have executed a management and consulting services agreement with entities controlled by Mr. Lucatz.

On July 12, 2011, the Company entered into a Note and Warrant Purchase Agreement with UTA, or the Purchase Agreement (and as amended by that certain letter agreement dated as of August 16, 2011, and as further amended by that certain Second Amendment to Note and Warrant Purchase Agreement dated as of August 31, 2011 and that certain Third Amendment to Note and Warrant Purchase Agreement dated as of November 24, 2011, the Original Agreement), pursuant to which UTA, agreed to provide financing to the Company on a secured basis.  On March 8, 2013, UTA fully exercised certain warrants or the UTA Warrants, and the Company issued an aggregate of 726,746outstanding shares of Common Stock to UTA upon such exercise, which represented approximately 18.3%GFH and is the sole officer and one of the Company’s outstanding Common Stock asthree directors of March 14, 2013.  Of the UTA Warrants, warrants to purchase 476,113 shares of Common Stock, issued to UTA in September 2011, were exercisedGFH.

Please update for the full amount of such shares at an aggregate exercise price of $476,000 based on an exercise price of $1.00 per share, which exercise price was paid by reducingtingle transaction including the $480,000 liability the Company owed UTA for the amendments and releases described above. The remaining UTA Warrants to purchase 300,000 shares of Common Stock, issued to UTA in September 2012, were partially exercised for 250,633 shares through a cashless exercise method.  In May 2013, the Company repaid certain of its debt to UTA in the total amount of $1,185,000. In June 2013, the Company repaid additional amounts of its debt to UTA pursuant to a certain promissory note in a total amount of $282,000. On January 10, 2015, the Company repaid all of its remaining debt to UTA in the amount of $1,000,000.

On October 9,2016 the Company the company amended the Meydan loan pursuant to which Meydan agreed to revise the payment schedule of an existing loan with a principal balance of $ 814,000 as of December 31, 2016 and such that the Company shall be required to make payments from the principal balance of the December 31, 2106 the Meydan Loan plus all accrued and unpaid interest on each of April 10, 2017, July 10, 2017, October 10, 2017 and January 10, 2018.

Except as described above, no director, executive officer, principal stockholder holding at least 5% of our Common Stock, or any family member thereof, had or will have any material interest, direct or indirect, in anytingle foods transaction or proposed transaction, during 2016 or 2015 in which the amount involved in the transaction exceeded or exceeds $120,000 or one percent of the average of our total assets at the year-end for the last two completed fiscal years.

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Item 14.Principal Accounting Fees and Services.

Item 14.Principal Accounting Fees and Services.

 

The fees billed by BDO Ziv Haft,Brightman Almagor Zohar & Co and Friedman LLP . for the fiscal year 2022 and the fees billed by Friedman LLP for the fiscal year 2021, our independent registered public accounting firm,firms, for professional services provided to the Company for each of the last two fiscal years were as follows: 

 

  Year ended on
December 31,		  Year ended on
December 31,		 
  2016  2015 
       
Audit Fees $100,000  $100,000 
         
Audit-Related Fees  6,500  $- 
         
Tax Fees $25,500  $36,300 
         
All Other Fees  -   - 
Total Fees $132,000  $136,300 
  Year ended on
December 31,		  Year ended on
December 31,		 
  2022  2021 
       
Audit Fees $1,575,481  $470,000 
         
Tax Fees $-  $- 
         
All Other Fees $-  $52,517 
Total Fees $1,575,481  $522,517 

 

Audit Fees

 

Audit fees are for audit services for each of the years shown in this table, review of our quarterly financial results submitted on Form 10-Q, and performance of local statutory audits.

 

Audit-RelatedAll Other Fees

 

Audit-relatedOther fees relatethat related to assurance and associated services that traditionally are performed by the independent auditor, due diligence services and other services.

 

Tax Fees

Tax fees are for professional services rendered by our auditors for tax advice on actual or contemplated transactions, audit of tax return and OCS incentives.

Audit Committee Pre-Approval Policies and Procedures

 

Currently, the audit committee acts with respect to audit policy, choice of auditors, and approval of out of the ordinary financial transactions. The audit committee pre-approves all services provided by our independent registered public accounting firm. All of the above services and fees were reviewed and approved by the audit committee before the services were rendered.

 

44

 

 

PART IV

 

Item 15.Exhibits, Financial Statement Schedules.

Item 15.Exhibits, Financial Statement Schedules.

 

1. Reference is made to the Report of Independent Registered Public Accounting Firm, the Consolidated Financial Statements and the Notes to Consolidated Financial Statements under Item 8 of Part II appearing on pages F-1 through F-30F-59 hereto, which are incorporated herein by reference.

 

2. Financial Statement Schedules:

 

None.

 

3. Exhibit Index.

 

The following is a list of exhibits filed as part of this Annual Report:

 

Number of
Exhibits		 Description of Exhibits
3.12.1 

Composite CopyAgreement of Plan and Merger, dated as of November 7, 2019, by and among the Certificate of Incorporation of the Company, as amended to date (Incorporatedparties named therein (incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement2.1 to our Current Report on Form S-8 (File No. 333-199752),8-K, filed with the Securities and Exchange Commission on October 31, 2014)

November 13, 2019).
   
3.22.2 Amended and Restated Agreement and Plan of Merger, dated as of April 15, 2020, by and among the parties named therein (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 21, 2020).
2.3Agreement and Plan of Merger, dated as of May 10, 2022, by and among the parties named therein (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 17, 2022).
2.4*Securities Purchase Agreement, dated as of February 9, 2023, by and among MICT, Inc., MICT Fintech Limited, Tingo Foods PLC and Dozy Mmobousi.
2.5*Senior Secured Promissory Note, dated as of February 9, 2023, by amd among MICT, Inc. and MICT Fintech Limited
3.1Amended and Restated Certificate of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 17, 2022).
3.2Amended and Restated Bylaws of the Company (Incorporated by reference to Exhibit 3.5 of Amendment No. 2 to our Registration Statement on Form S-1 (File No. 333-185470), filed with the Securities and Exchange Commission on March 18, 2013).
   
4.1 Common Stock PurchaseForm of Warrant dated June 30, 2016Agreement (Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 1, 2016)March 4, 2021).
   
4.2 Common Stock PurchaseForm of Series A Warrant dated October 28, 2016Agreement (Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on November 1, 2016)February 16, 2021).
   
4.3 Amendment to Stock PurchaseForm of Series B Warrant dated June 30, 2016Agreement (Incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on November 1, 2016)February 16, 2021).
   
4.4 Common Stock PurchaseForm of Warrant dated December 22, 2016Agreement (Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on December 23, 2016)March 4, 2021).
   
10.14.5 

ConsultingForm of Placement Agent Warrant Agreement dated August 12, 2009, between D.L. Capital Ltd. and Enertec Systems 2001 Ltd. (Incorporated by reference to Exhibit 4.2 to our AnnualCurrent Report on Form 10-K for the fiscal year ended December 31, 2009,8-K filed with the Securities and Exchange Commission on March 31, 2010) +

4, 2021).
   
10.24.6* 

First AmendmentDescription of the Registrant’s Securities Registered Pursuant to Consulting Agreement, dated asSection 12 of October 1, 2011, between D.L. Capital and Enertec Systems 2001 Ltd. (Incorporated by reference to our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 29, 2012) +

Act of 1934, as Amended.


Number of
Exhibits		 Description
10.310.1 

Management and Consulting Services Agreement, dated November 26, 2012, between D.L. Capital Ltd. and the Registrant (Incorporated by reference to Exhibit 10.3 of Amendment No. 1 to our registration statement on Form S-1 (File No. 333-185470), filed with the Securities and Exchange Commission on February 8, 2013) +

10.4

Management and Consulting Services Agreement, dated February 8, 2013, between Micronet Ltd. and D.L. Consulting Group (1998) Ltd. (English Translation) (Incorporated by reference to Exhibit 10.4 of Amendment No. 1 to our registration statement on Form S-1 (File No. 333-185470), filed with the Securities and Exchange Commission on February 8, 2013) +

10.5

Amended and Restated Note and Warrant Purchase Agreement, dated as of September 7, 2012, by and between the Registrant and UTA Capital LLC (Incorporated by reference to our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2012, filed with the Securities and Exchange Commission on November 19, 2012)

10.11

2012 Stock Incentive Plan, as amended to date (Incorporated by reference to Exhibit AB to our Proxy Statement on Schedule 14A (File No. 001-35850) filed with the Securities and Exchange Commission on September 10, 2015)November 8, 2018) +

   
10.1210.2 

2014 Stock Incentive Plan (Incorporated by reference to Exhibit “C” to our Proxy Statement (File No. 001-35850), filed with the Securities and Exchange Commission on August 26, 2014) +

   
10.1310.3 

Amendment to 2014 Stock Incentive Plan (Incorporated by reference to Exhibit “A” to our Proxy Statement (File No. 001-35850), filed with the Securities and Exchange Commission on November 8, 2018) +

10.4Form of Stock Option Agreement (Incorporated by reference to Exhibit 10.3 of our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2014, filed with the Securities and Exchange Commission on November 6, 2014

2014.

 45 

10.1410.5 Special Personal EmploymentForm of Primary Security Agreement (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 24, 2020).
10.6Form of Primary Registration Rights Agreement (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 24, 2020).
10.7Form of Securities Purchase Agreement, dated November 7, 2012,as of April 15, 2020, by and between Micronet Ltd.the Company and Tali Dinar (English Translation)the Purchasers listed therein (Incorporated by reference to Exhibit 10.18 of Amendment No. 210.1 to our registration statementCurrent Report on Form S-1 (File No. 333-185470),8-K, filed with the Securities and Exchange Commission on April 21, 2020).
10.8Form of Exchange Agreement (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 10, 2020).
10.9Form of Exchange Agreement (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 16, 2020).
10.10Form of Securities Purchase Agreement (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on November 4, 2020).
10.11Form of Placement Agency Agreement (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on November 4, 2020).
10.12Form of Conversion Agreement (Incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 18, 2020).
10.132020 Equity Incentive Plan (Incorporated by reference to Exhibit 10.5 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 18, 2020).
10.14*Amendment to 2020 Equity Incentive Plan.


Number of
Exhibits		Description
10.15Form of Securities Purchase Agreement (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 16, 2021).
10.16Form of Securities Purchase Agreement (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on March 18, 2013) +4, 2021).
   
10.1510.17 

Personal Employment Agreement by and between the Company and Darren Mercer, dated October 1, 2011, between Tali Dinar and Enertec Electronics Ltd. (English Translation) (IncorporatedMay 10, 2022.

10.18Form of Loan Agreement (incorporated by reference to Exhibit 10.19 of Amendment No. 22.1 to our registration statementCurrent Report on Form S-1 (File No. 333-185470),8-K, filed with the Securities and Exchange Commission on March 18, 2013) 

May 17, 2022).
   
10.1610.19 

SummaryLetter of material terms of a December 17, 2012 bank loanFriedman LLP, to Enertec Electronics Ltd. (Incorporated by reference to Exhibit 10.20 of Amendment No. 2 to our Registration Statement on Form S-1 (File No. 333-185470), filed with the Securities and Exchange Commission on March 18, 2013) 

dated October 7, 2022
   

10.17

10.20*		 ShareholderForm of All Assets Debenture Agreement, dated March 17, 2013, between Enertec Electronics Ltd.Tingo Foods PLC and Shlomo Shalev (English Translation) (Incorporated by reference to Exhibit 10.21 of Amendment No. 2 to our registration statement on Form S-1 (File No. 333-185470), filed with the Securities and Exchange Commission on March 18, 2013)Dozy Mmobuosi
   
10.1821.1* 

Summary of Loan Undertaking, dated May 29, 2014, by and between Micronet Ltd. and First International Bank of Israel. (Incorporated by reference to Exhibit 10.18 of our Post-Effective Amendment No. 1 to our Registration Statement on Form S-1 (File No. 333-185470), filed with the Securities and Exchange Commission on June 12, 2014)

10.19*

Employment Agreement dated April 22, 2015 between the Company, Enertec Electronics Ltd. and Eyal Leibovitz. 

21.1

List of Subsidiaries (Incorporated by reference to our Annual Report on Form 10-K, for the fiscal year ended December 31, 2013, filed with the Securities and Exchange Commission on March 19, 2014)

Subsidiaries.
   
23.1* 

Consent of Ziv Haft, BDO member firm 

Brightman Almagor Zohar & Co.
   
31.1*23.2* 

Consent of Friedman LLP.

31.1*Certification by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act

Act.
   
31.2* 

Certification by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act 

Act.
   
32.1** 

Certification by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code

Code.
   
32.2** 

Certification by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code 

Code.
   
101*101.INS* The following materials from the Registrant, formatted inInline XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2016 and December 31, 2015, (ii) Consolidated Statements of Income for Years Ended December 31, 2015 and 2014, (iii) Consolidated Statements of Comprehensive Income for Years Ended December 31, 2016 and 2015, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Changes in Equity, and (vi) Notes to Consolidated Financial Statements.Instance Document

* Filed herewith

** Furnished herewith

+ Indicates management contract or compensatory plan or arrangement.

Item 16.10-K Summary.

None.

 46 
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
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*Filed herewith

**Furnished herewith

+Indicates management contract or compensatory plan or arrangement.

Item 16. 10-K Summary.

None.


 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 MICRONET ENERTEC TECHNOLOGIES,TINGO GROUP, INC.
  
Date: March 31, 20162023By:/s/ David LucatzDarren Mercer
 Name:David LucatzDarren Mercer
 Title:Chairman, President and
Chief Executive Officer
(Principal Executive Officer)

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature Title Date
     
/s/ David LucatzDarren Mercer Chairman, President and Chief Executive Officer,
Director		March 31, 2023
Darren Mercer(Principal Executive Officer) 
/s/ Kevin ChenChief Financial OfficerMarch 31, 20172023
David LucatzKevin Chen(Principal Financial Officer)
/s/ Robert BentonDirectorMarch 31, 2023
Robert Benton    
     
/s/ Oren HarariKenneth Denos Chief Financial Officer)Director March 31, 20172023
MOren HarariKen Denos    
     
/s/ Jeffrey P. BialosSir David Trippier, R.D., J.P., D.L.  Director March 31, 20172023
Jeffrey P. BialosSir David Trippier, R.D., J.P., D.L.    
     
/s/ Miki BalinJohn McMillan Scott  Director March 31, 20172023
Miki BalinJohn McMillan Scott     
     
/s/ Chezy (Yehezkel) OfirJohn Brown Director March 31, 20172023
Chezy (Yehezkel) OfirJohn Brown
    

 

47

 

 

MICRONET ENERTEC TECHNOLOGIESTINGO GROUP, INC.

 

2016 CONSOLIDATED FINANCIAL STATEMENTS

 

TABLE OF CONTENTS

 

Report of Independent Registered Public Accounting Firm Brightman Almagor Zohar & Co. (PCAOB ID 1197)F-2
Report of Independent Registered Public Accounting Firm Friedman LLP, PCAOB #711F-4
Consolidated Balance Sheets as of December 31, 2016,2022 and December 31, 20152021F-3F-6
Consolidated Statements of IncomeOperations for the Years Ended December 31, 20162022 and 20152021F-5F-8
Consolidated Statements of Comprehensive IncomeLoss for the Years Ended December 31, 20152022 and 20162021F-6F-9
Statements of Changes in Temporary Equity and Stockholders’ Equity for the Years Endedyears ended December 31, 20162022 and 20152021F-7F-10
Consolidated Statements of Cash FlowsF-8F-11
Notes to Consolidated Financial StatementsF-10F-14

The amounts are stated in U.S. dollars ($).

 

F-1


 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To Thethe shareholders and the Board of Directors and Stockholders of Micronet Enertec Technologies,Tingo Group, Inc.

 

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheetssheet of Micronet Enertec Technologies,Tingo Group, Inc. (the “Company”) and its subsidiaries as of December 31, 2016 and 2015, and2022, the related consolidated statements of income,operations, comprehensive income,loss, changes in temporary equity and stockholders’ equity and cash flows for the years then ended. year ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on thesethe Company’s financial statements based on our audits.audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our auditsaudit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included considerationAs part of our audit, we are required to obtain an understanding of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company'sCompany’s internal control over financial reporting. Accordingly, we express no such opinion. An

Our audit also includesincluded performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements, assessingstatements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provideaudit provides a reasonable basis for our opinion.

 

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.


Determine the Accounting Acquirer and Evaluate the Valuation and Balance Sheet Presentation of the Consideration – Acquisition of Tingo Mobile Ltd – Refer to Note 13 to the Financial Statements

Critical Audit Matter Description

As described in Note 13 to the financial statements, in May 2022 the Company entered into an Agreement and Plan of Merger with Tingo, Inc. On December 1, 2022, Tingo Group, Inc. completed the merger with a total consideration paid by Tingo Group, Inc to the shareholders of Tingo, Inc. by cash, shares of common stock of Tingo Group, Inc. as well as shares of Series A and B Preferred Stock of Tingo Group, Inc. convertible into common stock upon certain conditions as determined in the Agreement and Plan of Merger. As result of the merger, the Company was determined to be the accounting acquirer and started to consolidate Tingo Mobile Ltd. as of December 1, 2022.

Management estimated the fair value of consideration at the acquisition date using the Tingo, Inc.’s market value (Level 2 observable input) at the date of the transaction instead of the market value of the Company in accordance with ASC 820 – “Fair Value Measurement” or ASC 820. Management considered that the market value of Tingo Inc. at that date, better reflects the fair value of the consideration then measuring the fair value of the consideration using the Company own shares as they determine that its share price at the acquisition date may not be representative of fair value. Management also estimated the fair value of the redeemable preferred stock at the acquisition date to be approximately $553 million and recognized it outside of permanent equity. The provisional purchase price allocation included a software intangible asset of $90.1 million, trade names and trademarks intangible asset of $54.5 million, farmer cooperative intangible asset of $24.8 million and goodwill of $ 81.5 million.

The principal considerations for our determination that performing procedures relating to the determination of the accounting acquirer and evaluating the valuation and balance sheet presentation of the consideration in the acquisition of Tingo Mobile Ltd. is a critical audit matter, are: (i) the complexity of the accounting guidance and significant judgement exercised by the Company’s management in assessing the accounting treatment of this transaction, specifically, when determining the accounting acquirer and when developing the fair value estimates of the consideration and its presentation in the financial statements, (ii) high degree of auditor judgement, subjectivity, and effort in performing procedures on evaluating management conclusion on the accounting acquirer and evaluating management’s significant judgement related to the use of Level 2 observable inputs; and (iii) the audit effort involved the use of professionals with specialized skills and knowledge.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the determination of the accounting acquirer and evaluating the valuation and presentation of the consideration in the acquisition of Tingo Mobile Ltd. included the following, among others:

●We read the Agreement and Plan of Merger to identify and assess the relevant terms and conditions to evaluate the appropriateness of management’s accounting treatment.

●With the assistance of our technical accounting specialist, we evaluated management’s assessment and conclusion that Tingo Group Inc. is the accounting acquirer and will be the one to consolidate Tingo Mobile Ltd. financial statements from the date of the transaction.

●We assessed and evaluated, with the assistance of our fair value specialists, management’s market value valuation technique used to determine the fair value of the consideration paid in accordance with ASC 820 and the determination of the category within the fair value hierarchy (categorizes into three levels);

●We assessed and evaluated the appropriateness of management presentation of the consideration as equity and the portion classified outside permanent equity by considering the terms in the Agreement and Plan of Merger; and

●

We evaluated the completeness and accuracy of the transaction disclosures based on ASC 805-10-50 “Business Combinations” by comparing management’s disclosures to information obtained from our other audit procedures.

/s/ Brightman Almagor Zohar & Co.

Brightman Almagor Zohar & Co.

Certified Public Accountants

A Firm in the Deloitte Global Network

Tel Aviv, Israel

March 31, 2023

We have served as the Company’s auditor since 2022.


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Tingo Group, Inc. (formerly known as MICT, Inc.)

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Tingo Group, Inc. (formerly known as MICT, Inc., the “Company”) as of December 31, 2021, and the related consolidated statements of operations, comprehensive loss, changes in equity and cash flows for the year ended December 31, 2021, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries as of December 31, 2016 and 2015,2021, and the results of theirits operations and theirits cash flows for each of the two years periodyear ended December 31, 2016,2021, in conformity with accounting principles generally accepted in the United States of America.

 

Tel Aviv, IsraelBasis for Opinion

March

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation related to business combinations

Description of Critical Audit Matter

As discussed in Note 1 to the consolidated financial statements, the Company consummated several business combinations during the year ended December 31, 20172021, including Magpie Securities Limited, Guangxi Zhongtong Insurance Agency Co., Ltd, Beijing Yibao Technology Co., Ltd and All Weather Insurance Agency Co., Ltd.

 


We identified the audit of valuation related to those business combinations as a critical audit matter because of the significant estimates and assumptions management used. Performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort.

How We Addressed the Matter in Our Audit

The primary procedures we performed to address these critical audit matters included the following:

●We obtained an understanding and evaluated the reasonableness of management’s process for developing the discounted cash flows. We evaluated the reasonableness of management’s significant assumptions used in developing such discounted cash flows, such as future projections of revenue growth rates and profitability, and estimated working capital needs by testing the underlying data used by the management in its analyses to compare to historical and other industry data, as well as validating certain assertions with data internal to the management and from other sources.

●With the assistance of our valuation specialists, we evaluated the reasonableness of the valuation methodology and discount rates by testing the source information underlying the determination of the discount rates and the mathematical accuracy of the calculation, and developing a range of independent estimates and comparing those to the discount rates selected by management.

Long-Lived Assets and Goodwill Impairment Assessment

Description of Critical Audit Matter

As discussed in Note 2 to the consolidated financial statements, the Company assesses the recoverability of its long-lived assets based on the undiscounted future cash flow and recognizes an impairment loss when the estimated undiscounted future cash flow expected to result from the use of the assets plus the net proceeds expected from disposition of the asset, if any, are less than the carrying value of the assets. The Company measures a goodwill impairment using a single step impairment model, whereby the impairment equals the difference between the carrying amount and the estimated fair value of the specified reporting units in their entirety.

We identified the impairment assessment for long-lived assets and goodwill as a critical audit matter because of the significant estimates and assumptions management used. Performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort.

How We Addressed the Matter in Our Audit

The primary procedures we performed to address these critical audit matters included the following:

 /s/ Ziv Haft
●

Ziv Haft

Certified Public Accountants (Isr.)

BDO Member Firm

We obtained an understanding and evaluated the reasonableness of management’s process for developing the discounted cash flows. We evaluated the reasonableness of management’s significant assumptions used in developing such discounted and undiscounted cash flows, such as future projections of revenue growth rates and profitability, and estimated working capital needs by testing the underlying data used by the management in its analyses to compare to historical and other industry data, as well as validating certain assertions with data internal to the management and from other sources.

 

 F-2●With the assistance of our valuation specialists, we evaluated the reasonableness of the valuation methodology and discount rates by testing the source information underlying the determination of the discount rates and the mathematical accuracy of the calculation, and developing a range of independent estimates and comparing those to the discount rates selected by management.

/s/ Friedman LLP

We served as the Company’s auditor from July 2021 through October 2022.

New York, New York

June 17, 2022


 

 

MICRONET ENERTEC TECHNOLOGIES, INC.

TINGO GROUP, Inc.

CONSOLIDATED BALANCE SHEETS

(In Thousands, except Share and Par Value data)Data)

 

  

December 31,

2016

  

December 31,

2015

 
ASSETS      
Current assets:      
Cash and cash equivalents $668  $2,361 
Restricted cash  4,488   4,135 
Marketable securities  2,978   5,643 
Trade accounts receivable, net  11,558   12,353 
Inventories  5,758   7,457 
Other accounts receivable  899   1,585 
Total current assets  26,349   33,534 
         
Property and equipment, net  1,641   1,816 
Intangible assets and others, net  2,381   3,297 
Long term deposit  86   30 
Goodwill  1,466   1,466 
Total long term assets  5,574   6,609 
         
Total assets $31,923  $40,143 
  December 31,
2022		  December 31,
2021		 
ASSETS      
Current assets:      
Cash  and cash equivalents $500,316  $96,619
Trade accounts receivable, net  11,541   17,879 
Related party receivables  13,491   5,134 
Other current assets  5,828   7,865
Total current assets  531,176   127,497 
         
Property and equipment, net  855,125   677 
Intangible assets, net  
185,407
   21,442 
Goodwill  
101,247
   19,788 
Right of use assets under operating lease  2,260   1,921 
Long-term deposit and other non-current assets  514   824 
Deferred tax assets  3,661   1,764 
Restricted cash escrow  2,233   2,417 
Micronet Ltd. equity method investment  735   1,481 
Total long-term assets  1,151,182   50,314 
         
Total assets $1,682,358  $177,811 

 

F-3

 

 

MICRONET ENERTEC TECHNOLOGIES, INC.TINGO GROUP, Inc.

CONSOLIDATED BALANCE SHEETS

(In Thousands, except Share and Par Value data)Data)

  

December 31,

2016

  

December 31,

2015

 
LIABILITIES AND EQUITY      
       
Short term bank credit and current portion of long term bank loans $9,993  $11,012 
Short term credit from others and current portion of long term loans from others  3,114   1,037 
Trade accounts payable  4,130   5,710 
Other accounts payable  2,383   2,484 
Total current liabilities  19,620   20,243 
         
Long term loans from banks  1,093   1,978 
Long term loan from others  188   375 
Finance lease  -   22 
Accrued severance pay, net  57   52 
Deferred tax liabilities, net  7   17 
Total long term liabilities  1,345   2,444 
         
Stockholders’ Equity:        
Preferred stock; $.001 par value, 5,000,000 shares authorized, none issued and outstanding        
Common stock; $.001 par value, 25,000,000 shares authorized, 6,385,092 and 5,865,221 shares issued and outstanding as of December 31, 2016 and 2015, respectively.  6   6 
Additional paid in capital  8,748   7,812 
Accumulated other comprehensive income  11   (196)
Retained earnings (loss)  (1,990)  3,817 
Micronet Enertec stockholders' equity  6,775   11,439 
         
Non-controlling interests  4,183   6,017 
         
Total equity  10,958   17,456 
         
Total Liabilities and equity $31,923  $40,143 

 

F-4

   December 31,
2022		    December 31,
2021  		 
LIABILITIES TEMPORARY EQUITY AND EQUITY      
       
Short-term loan $460  $1,657 
Trade accounts payable  11,092   14,416 
Deposit held on behalf of clients  2,528   3,101 
Related party payables  57,506   4 
Current operating lease liability  1,215   1,298 
Other current liabilities  192,594   4,914 
Total current liabilities  265,395   25,390 
         
Long term loan  377   - 
Long term operating lease liability  905   691 
Deferred tax liabilities  89,597   3,952 
Accrued severance pay  50   56 
Total long-term liabilities  90,929   4,699 
         
Commitment and Contingencies (Note 18)  -   - 
         
Temporary equity        
Preferred stock Series B subject to redemption: $0.001 par value, 33,687.21 shares authorized and 0 shares issued and outstanding as of December 31, 2022 and 2021, respectively.  553,035   - 
         
Stockholders’ Equity:        

Preferred stock Series A: $0.001 par value, 2,604.28 shares authorized and 0 shares issued and outstanding as of December 31, 2022 and 2021, respectively.

  

3

   - 
Common stock; $0.001 par value, 425,000,000 shares authorized, 157,599,882 and 122,435,576 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively  158   122 
Additional paid in capital  889,579   220,786 
Accumulated other comprehensive loss  4,367   (414)
Accumulated deficit  (123,463)  (76,394)
TINGO GROUP, Inc. stockholders’ equity  770,644   144,100 
         
Non-controlling interests  2,355   3,622 
         
Total stockholders’ equity  772,999   147,722 
         
Total liabilities, temporary equity and stockholders’ equity $1,682,358  $177,811 


 

 

MICRONET ENERTEC TECHNOLOGIES, INC.

TINGO GROUP, Inc.

CONSOLIDATED STATEMENTS OF INCOMEOPERATIONS

(In Thousands, Except Share and EarningsLoss Per Share data)Data)

  Year ended
December 31,		 
  2016  2015 
       
Revenues $22,748  $23,587 
Cost of revenues  18,598   16,284 
Gross profit  4,150   7,303 
Operating expenses:        
Research and development  2,320   2,453 
Selling and marketing  1,941   1,530 
General and administrative  5,933   4,723 
Amortization of intangible assets  926   1,118 
Total operating expenses  11,120   9,824 
Loss from operations  (6,970)  (2,521)
         
Finance expense, net  672   610 
Loss before provision for income taxes  (7,642)  (3,131)
Taxes on income (benefit)  (129)  (81)
Net loss  (7,513)  (3,050)
Net loss attributable to non-controlling interests  1,706   583 
Net loss attributable to Micronet Enertec $(5,807) $(2,467)
Loss per share attributable to Micronet Enertec:        
Basic $(0.97) $(0.42)
Weighted average common shares outstanding:        
Basic  5,966,622   5,861,630 

 

F-5
  Year ended December 31, 
  2022  2021 
Revenues $146,035  $55,676 
Cost of revenues  81,243   46,456 
Gross profit  64,792   9,220 
Operating expenses:        
Research and development  1,689   889 
Selling and marketing  11,140   6,814 
General and administrative  58,165   36,488 
Amortization of intangible assets  5,590   2,925 
Total operating expenses  76,584   47,116 
Loss from operations  (11,792)  (37,896)
         
Equity in net loss of Micronet  -   (1,934)
Loss from decrease in holding percentage in former VIE  -   (1,128)
Other income, net  2,151   1,261 
Finance income (expense), net  (750)  395 
Loss before income tax expense (benefit)  (10,391)  (39,302)
Income tax expense (benefit)  37,474   (1,791)
Net loss  after provision for income taxes  (47,865)  (37,511)
Gain (loss) from equity investment  (746)  353 
Net loss  (48,611)  (37,158)
Net loss attributable to non-controlling stockholders  (1,542)  (730)
Net loss attributable to TINGO GROUP $(47,069) $(36,428)
Loss per share attributable to TINGO GROUP:        
Basic and diluted loss per share $(0.36) $(0.32)
Weighted average common shares outstanding:        
Basic and diluted  129,345,764   112,562,199 


 

 

MICRONET ENERTEC TECHNOLOGIES, INC.

TINGO GROUP, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMELOSS

(In Thousands)Thousands, except Share and Par Value Data)

 

  Year ended
December 31,		 
  2016  2015 
Net loss $(7,513) $(3,050)
Other comprehensive Income (loss), net of tax:        
Currency translation adjustment  79   (27)
         
Total comprehensive loss  (7,434)  (3,077)
         
Comprehensive loss attributable to the non-controlling interests  1,834   89 
         
Comprehensive loss attributable to Micronet Enertec $(5,600) $(2,988)
  Year ended
December 31,		 
  2022  2021 
       
Net loss $(48,611) $(37,158)
Other comprehensive loss, net of tax:        
Currency translation adjustment  4,781   (218)
         
Total comprehensive loss $(43,830) $(37,376)
         
Comprehensive loss attributable to the non-controlling stockholders $(1,267) $(926)
         
Comprehensive loss attributable to TINGO GROUP $(42,563) $(36,450)

 

F-6

 

 

MICRONET ENERTEC TECHNOLOGIES, INC.

TINGO GROUP, Inc.

STATEMENTS OF CHANGES IN TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY

(In Thousands, Except Numbers of Shares)

 

  Common Stock  

Additional

Paid-in

  Retained  Accumulated Other Comprehensive  Non-controlling  Total Stockholders’ 
  Shares(*)  Amount  Capital  Earnings  Income  Interest  Equity 
Balance, December 31, 2013  5,831,246  $6  $8,053  $8,423  $1,389  $7,727  $25,598 
Shares issued to service provider  25,000   -   94   -   -   -   94 
Stock based compensation  -   -   308   -   -   -   308 
Comprehensive loss  -   -   -   (2,139)  (1,064)  (825)  (4,028)
Acquisition of non-controlling interest  -   -   (950)  -   -   (773)  (1,723)
Balance, December 31, 2014  5,856,246  $6  $7,505  $6,284  $325  $6,129  $20,249 
Shares issued to service provider  8,975   -   30   -   -   -   30 
Stock based compensation  -   -   306   -   -   -   306 
Comprehensive loss  -   -   -   (2,467)  (521)  (89)  (3,077)
Acquisition of non-controlling interest  -   -   (29)  -   -   (23)  (52)
Balance, December 31, 2015  5,865,221  $6  $7,812  $3,817  $(196) $6,017  $17,456 
Shares issued to service provider  13,500   -   26   -   -   -   26 
Stock based compensation  -   -   268   -   -   -   268 
Issuance of warrants  -   -   62   -   -   -   62 
Comprehensive loss  -   -       (5,807)  207   (1,834)  (7,434)
Issuance of shares, net  506,371   -   580   -   -   -   580 
Balance, December 31, 2016  6,385,092   6   8,748   (1,990)  11   4,183   10,958 
  Common Stock  Additional
Paid-in		  Accumulated  Accumulated
Other
Comprehensive		  Capital
reserve
related to
transaction
with the
Minority		  Non- controlling  Total
Stockholders’		 
  Amount  Shares  Capital  Deficit  Loss  stockholders  Interest  Equity 
Balance, December  31, 2020  68   68,757,450   102,333   (39,966)  (196)  (174)  3,631   65,696 
Shares issued to service providers and employees  7   7,010,020   9,869   -   -   -   -   9,876 
Stock based compensation  -   -   711   -   -   -   -   711 
Exercising options for employees and consultants      60,000   80   -   -   -   -   80 
Net loss  -   -   -   (36,428)  -   -   (730)  (37,158)
Other comprehensive loss  -   -   -   -   (218)  174   (197)  (241)
Loss of control of subsidiary  -   -   -   -   -   -   (2,989)  (2,989)
Minority interest- Zhongtong Insurance                          3,232   3,232 
Initially consolidated entity                          675   675 
Issuance of shares upon November 2020 Securities Purchase Agreement  3   2,400,000   2,673   -   -   -   -   2,676 
Issuance of shares upon February 2021 Purchase Agreement  23   22,471,904   53,977   -   -   -   -   54,000 
Issuance of shares upon March 2021 Securities Purchase Agreement  19   19,285,715   48,671   -   -   -   -   48,690 
Exercising warrants  2   2,450,487   2,472   -   -   -   -   2,474 
Balance, December 31, 2021  122   122,435,576   220,786   (76,394)  (414)  -   3,622   147,722 

 

  Preferred stock  Series B subject to redemption  Preferred stock
Series A		  Common Stock  Additional Paid-in   Accumulated  Accumulated
Other
Comprehensive		  Non-
controlling		  Total
Stockholders’		 
  Amount  Shares  Amount  Shares  Amount  Shares  Capital  Deficit  Income (Loss)  Interest  Equity 
Balance, December 31, 2021  -   -   -   -   122   122,435,576   220,786   (76,394)  (414)  3,622   147,722 
Shares issued to service providers and employees  -   -   -   -   10   9,380,631   6,407   -   -   -   6,417 
Stock based compensation  -   -   -   -       -   208   -   -   -   208 
Net loss  -   -   -   -   -   -   -   (47,069)  -   (1,542)  (48,611)
Tingo transaction  553,035   33,687   3   2,604   26   25,783,675   662,178               662,207 
Other comprehensive (loss)/income  -   -        -   -   -   -   -   -   4,781   275   5,056 
Balance, December 31, 2022  553,035   33,687   3   2,604   158   157,599,882   889,579   (123,463)  4,367   2,355   772,999 

F-7

 

 

MICRONET ENERTEC TECHNOLOGIES, INC.

TINGO GROUP, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)Thousands, except Share and Par Value Data)

  Year ended
December 31,		 
  2016  2015 
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss $(7,513) $(3,050)
         
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  1,369   1,599 
Marketable securities  27   176 
Change in fair value of derivatives, net  (37)  (8)
Change in deferred taxes, net  (104)  (195)
Accrued interests on bank loans  251   (18)
Amortization of note discount  24   - 
Stock based compensation and shares issued to service providers  294   336 
         
Changes in operating assets and liabilities:        
Decrease in trade accounts receivable  908   1,798 
Decrease (Increase) in inventories  1,767   (799)
Increase in accrued severance pay, net  5   23 
Decrease (increase) in other accounts receivable  727   (146)
Decrease in trade accounts payable  (1,580)  (1,878)
Decrease in other accounts payable  (86)  (160)
Net cash used in operating activities $(3,948) $(2,322)

 

F-8
  Year ended
December 31,		 
  2022  2021 
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss $(48,611) $(37,158)
         
Adjustments to reconcile net loss to net cash used in operating activities:        
Loss (gain) on previously held equity in Micronet  -   1,934 
Loss from decrease in holding percentage in former VIE  -   1,128 
Equity in net (income) loss from equity method investment  746   (353)
Provision for doubtful accounts  618   2,574 
Depreciation and amortization  39,766   3,088 
Shares issued to service providers and employees  6,417   9,876 
Stock-based compensation for employees and consultants  208   711 
Loss from disposal of property and equipment  -   21 
Changes in operating assets and liabilities:        
Other non-current assets  -   - 
Change in deferred taxes, net  28,759   (2,539)
Change in long-term deposit and other non-current assets  311   (542)
Change in right of use assets  1,311   486 
Change in lease liabilities  (1,518)  (479)
Change in restricted cash escrow  184   - 
Change in accrued interest due to related party  (266)  (163)
Increase (decrease) in trade accounts receivable, net  7,747   (19,579)
Increase (decrease) in other current assets  1,685   (3,189)
Increase (decrease) in trade accounts payable  (2,234)  13,846 
Increase (decrease) in deposit held on behalf of clients  (573)  3,101 
Accrued interest and exchange rate differences on loans from others  (59)  - 
Increase (decrease) in other current liabilities  11,520   (4,099)
Net cash provided by (used in) operating activities $46,011  $(31,336)
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchase of intangible assets, net  -   (520)
Net cash acquired through business combination - Magpie Securities Limited (Appendix B)  -   1,834 
Payment on business acquired - Beijing Fucheng (Appendix A)  -   (4,891)
Net cash acquired on an variable interest entity acquired - Guangxi Zhongtong (Appendix E)  -   460 
Loan provided to related party  (791)  (4,265)
Loan provided to Tingo Inc pursuant to the merger agreement  (23,700)  - 
Receipt of loan from related party (Micronet)  534   - 
Net cash acquired on an variable interest entity acquired – All Weather (Appendix D)  -   1,560 
Purchase of property and equipment  (39,645)  (689)
Cash received from disposal of property and equipment  -   124 
Acquisition of Tingo Mobile, Inc (Appendix F)  430,563   - 
Deconsolidation of Micronet (Appendix C)  -   (2,466)
Net cash provided by (used in) investing activities $366,961  $(8,853)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Cash received from issuance of shares by a subsidiary  -   - 
Receipt of short- term loans from banks and others  144   1,657 
Receipt of loan from affiliate company  -   220 
Repayment of bank loans and others  (859)  (195)
Repayment on loan to related party  (10,000)  - 
Proceeds from issuance of shares and warrants  -   105,366 
Proceeds from exercise of warrants  -   2,474 
Proceeds from exercise of options  -   80 
Net cash provided by (used in) financing activities $(10,715) $109,602 
         
TRANSLATION ADJUSTMENT OF CASH AND RESTRICTED CASH  1,256   97 
         
NET CHANGE IN CASH AND RESTRICTED CASH  403,513   69,510 
         
Cash  and cash equivalents and restricted cash at the beginning of the year  99,036   29,526 
         
Cash  and cash equivalents and restricted cash at end of the year $502,549  $99,036
         
Supplemental disclosure of cash flow information:        
Amount paid during the period for:        
         
Interest $6  $44 
Taxes $535  $146 


 

MICRONET ENERTEC TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

  Year ended
December 31,		 
  2016  2015 
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchase of property and equipment  (241)  (367)
Restricted cash  (353)  246 
Marketable securities  2,638   586 
Net cash provided by (used in) investing activities $2,044  $465 
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Short term bank credit  (1,167)  3,298 
Receipt of loan from others  1,957   1,412 
Receipt of long-term loan from banks  -   59 
Repayment of long term bank loans  (915)  (3,685)
Acquisition of non-controlling interest  -   (52)
Repayment of loan from others  (164)  - 
Repayment of long-term notes  -   (1,000)
Issuance of warrants  62   - 
Issuance of shares, net  580   - 
Net cash provided by financing activities $353  $32 
         
NET CASH DECREASE IN CASH AND CASH EQUIVALENTS  (1,551)  (1,825)
         
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD  2,361   4,211 
TRANSLATION ADJUSTMENT OF CASH AND CASH EQUIVALENTS  (142)  (25)
CASH AND CASH EQUIVALENTS AT END OF PERIOD $668  $2,361 
         
Supplemental disclosure of cash flow information:        
Amount paid during the period for:        
         
Interest $250  $217 
Taxes $99  $164 

 

F-9

The following table provides a reconciliation of cash and restricted cash reported within the balance sheets that sum to the total of the same amounts shown in the statements of cash flows:

  Year ended
December 31,		 
  2022  2021 
Cash and cash equivalent at end of the year $500,316  $96,619 
Restricted cash escrow at end of the year  2,233   2,417 
Cash, cash equivalent and restricted cash escrow at end of the year $502,549  $99,036 

Appendix A: Beijing Fucheng

  February 10,
2021		 
Net working capital $106 
Property and equipment  26 
Current liabilities  (55)
Intangible assets  4,814 
Cash $4,891 

Appendix B: Magpie Securities Limited

  February 26,
2021		 
Net working capital $206 
Investment and loan to Magpie  (2,947)
Property and equipment  24 
Current liabilities  (19)
Intangible assets  902 
Cash $(1,834)

Appendix C: Deconsolidation of Micronet Ltd.

  May 9,
2021		 
Working capital other than cash $(3,849)
Finance lease  33 
Accrued severance pay, net  96 
Translation reserve  134 
Micronet Ltd.investment in fair value  1,128 
Non-controlling interests  2,990 
Net loss from loss of control  1,934 
Cash $2,466 


 

 

Appendix D: All Weather Insurance Agency

  July 1,
2021		 
Net working capital $(1,665)
Property and equipment  153 
Right of use assets  208 
Lease liabilities  (258)
Intangible assets  903 
Deferred Tax liability  (226)
Minority interest  (675)
Cash $(1,560)

Appendix E: Guangxi Zhongtong Insurance Agency Co., Ltd:

  October 21,
2021		 
Net working capital $152 
Property and equipment  13 
Intangible assets  2,174 
Goodwill  (153)
Deferred Tax liability  (544)
Minority interest  (3,230)
Loss on equity interest  1,128 
Net cash provided by acquisition $(460)

Appendix F :Acquisition of Tingo

  December 1,
2022		 
Net working capital $(256,181)
Property and equipment  844,764 
Intangible assets  169,559 
Goodwill  81,459 
Deferred Tax liability  (54,923)
Investment in fair value  (1,215,241)
Net cash provided by acquisition $(430,563)

The accompanying notes are an integral part of the consolidated financial statements 


MICRONET ENERTEC TECHNOLOGIES, INC

TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands)Thousands, except Share and Par Value Data)

 

NOTE 1 — DESCRIPTION OF BUSINESS

 

Overview

 

A.TINGO GROUP, Inc. (“TINGO GROUP” or the “Company”) 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 acquisition of Tingo Mobile Limited (“Tingo Mobile”), we” “Micronet Enertec” 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”), which are located mainly in Africa, Southeast Asia and the Middle East. The Company’s business has changed materially since December 1, 2022, following the completion of two material acquisitions of Tingo Mobile and Tingo Foods.

We currently operate in 3 segments (i) Verticals and Technology, comprising of our operations in China where we have 3 VIEs through which we operate, mainly, our business of insurance brokerage (see Notes 9, 10, 11, and 12).; (ii) Online Stock Trading, comprising mainly the operation of Magpie Securities Limited (“Magpie”) through which we operate the business of online stock trading, located mainly in Hong Kong and Singapore; (iii) Comprehensive Platform Service which includes the operations of Tingo Mobile described above and includes the operations of Tingo Mobile for the month of December.

Since July 1, 2020, following the completion of TINGO GROUP’s acquisition of GFH Intermediate Holdings Ltd or “the Company”Intermediate (the “GFHI Acquisition”) the Company 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 to compliment TINGO GROUP’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, TINGO GROUP 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 business-to-business (“B2B”) and business-to-business-to-consumer (“B2B2C”) and business -to-consumer (“B2C”) and financial services/products, the technology for which is highly adaptable for other applications and markets.

Following GFH Intermediate Holdings Ltd’s (“Intermediate”) acquisition of Magpie, a Hong Kong securities and investment services firm, on February 26, 2021 and the subsequent receipt of regulatory approval from the Hong Kong Securities and Futures Commission, Magpie is licensed to deal in securities, futures and options, and also undertake the business of securities advisory services and asset management.

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. The technology of Magpie Invest allows the platform to connect to all major stock exchanges. 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. TINGO GROUP’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 to a B2B, white-label and payment services strategy in respond to the significant 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 contract for differences (“CFDs”), including CFDs on commodities prices and crypto-currency prices.


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

On December 1, 2022, the Company acquired Tingo Mobile, an agri-fintech business based in Nigeria, from Tingo Inc., a U.S.-based DelawareNevada corporation was formed on January 31, 2002. We changed our corporate name from Lapis Technologies, Inc.(“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 (“Tingo Merger Agreement”), TMNA contributed its ownership of Tingo Mobile to Micronet Enertec Technologies, Inc.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.

 

We operate through two Israel-based companies, Enertec Systems 2001 Ltd (“Enertec”),As of December  31, 2022, Tingo Mobile had approximately 9.3 million subscribers using its mobile phones and Nwassa payment platform. Tingo Mobile believes that Nwassa payment platform is Africa’s leading digital agriculture ecosystem that empowers rural farmers and agri-businesses by using proprietary technology to enable access to markets in which they operate. The Nwassa payment platform also has an escrow structure that creates trust between buyers and sellers. Tingo Mobile’s system provides real-time pricing, straight from the farms, eliminating middlemen. Users’ customers pay for produce bought using available pricing on our Nwassa payment platform. The Nwassa payment platform is paperless, verified and matched against a smart contract. Data is efficiently stored on the blockchain.

The Nwassa payment platform has created an escrow solution that secures the buyer, where funds are not released to its subscribers until fulfilment. The Nwassa payment platform also facilitates trade financing, ensuring that banks and other lenders compete to provide credit to its subscribers.  

Pursuant to the Tingo Merger Agreement, TMNA transferred its ownership of Tingo Mobile to Tingo BVI Sub, which was then merged with and into MICT Fintech, a wholly-owned subsidiary of Tingo Group Holdings, LLC, a Delaware limited liability company and Micronet Ltda wholly-owned subsidiary of TINGO GROUP (“Micronet”TGH”).

On December 1, 2022 (the “Tingo Closing”), pursuant to certain joinder agreements, TGH and MICT Fintech were added as parties to the Tingo Merger Agreement, and TINGO GROUP completed the merger of Tingo BVI Sub with and into MICT Fintech (the “Tingo Combination”).

Liquidity

The Company has been incurring losses in which we held 62.9%2022 and 2021. The loss from operations were US$11,792 and US$37,896 as of December 31, 20162022 and are controlled by us.2021, respectively. The net cash in operating activities was US$46,011 for the year ended December 31, 2022 and US$31,336 net cash used in operating activities for the years ended December 31, 2021.

 

MicronetThe Company’s primary resources of cash has been its ability to generate cash from operating activities, obtain capital financing from equity interest investors and borrow funds on favorable economic terms to fund its general operations and capital expansion needs. The Company’s ability to continue as a going concern is dependent on management’s ability to successfully execute its business plan, which includes increasing revenue while controlling operating cost and expenses to generate positive operating cash flows and obtaining funds from outside sources of financing to generate positive financing cash flows. As of December 31, 2022 and 2021, the Company’s balance of cash and cash equivalents was $500,316 and $96,619, respectively.

The Company believes its existing cash will be sufficient to fund its anticipated operating cash requirements for at least twelve months following the date of this filing.

The Company’s operations and business may still be subject to adverse effect due to the unprecedented conditions surrounding the spread of COVID-19 throughout North America, Israel, China and the world. Although currently the COVID-19 (due to the measures implemented to reduce the spread of the virus) have not had a publicly traded companymaterial adverse effect on the Tel Aviv Stock Exchange and operatesCompany consolidated financial reports; there can be no assurance that Company’s financial reports will not be affected in the growing commercial Mobile Resource Management (“MRM”) market. Micronet through both its Israelifuture from COVID-19 or resulting from restrictions and U.S. operational offices designs, develops, manufacturesother government actions.


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and sells rugged mobile computing devicesPar Value Data)

Variable Interest Entities (VIEs)

We currently conduct our insurance broker business in China using 3 VIEs (see Notes 9, 10, 11 and 12). The Company consolidates certain VIEs for which it is the primary beneficiary. VIEs consist of certain operating entities not wholly owned by the Company. See Note 2 for more information on the Company’s accounting policies related to the consolidation of VIEs.

The assets and liabilities of the Company’s VIEs that provide fleet operators and field workforces with computing solutions in challenging work environments. Micronet’s vehicle cabin installed and portable tablets increase workforce productivity and enhance corporate efficiency by offering computing power and communication capabilities that provide fleet operators with visibility into vehicle location, fuel usage, speed and mileage. Micronet’s customers consist primarily of application service providers and solution providers specializingwere included in the MRM market.Company’s consolidated balance sheets are as follows:

 

  December 31,
2022		  December 31,
2021		 
Current assets:      
Cash $3,690  $1,260 
Accounts receivable, net  6,823   2,462 
Related parties  2,001   - 
Other current assets  2,278   4,550 
Total current assets  14,792   8,272 
         
Property and equipment, net  176   208 
Intangible assets  5,712   5,718 
Long-term prepaid expenses  48   48 
Right of use assets  711   530 
Restricted cash  1,479   1,632 
Deferred tax assets  793   369 
Total long-term assets  8,919   8,505 
         
Total assets $23,711  $16,777 
         
Current liabilities:        
Short term loan from others $286  $1,155 
Trade accounts payable  4,817   697 
Related party  4,002   4,583 
Operating lease short term liability  230   - 
Other current liabilities  4,515   2,401 
Total current liabilities  13,850   8,836 
         
Long-term liabilities:        
Long term loan  377   - 
Lease liability  257   106 
Deferred tax liability  224   224 
Total long-term liabilities  858   330 
         
Total liabilities $14,708  $9,166 

Enertec operates


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

Revenues, loss from operations and net loss of the VIEs that were included in the Defense and Aerospace markets and designs, develops, manufactures and supplies various customized military computer-based systems, simulators, automatic test equipment and electronic instruments. Enertec’s solutions and systemsCompany’s consolidated statements of operations are designed according to major aerospace integrators’ requirements and are integrated by them into critical systems such as command and control, missile fire control, maintenance of military aircraft and missiles for use by the Israeli Air Force and Navy and by foreign defense entities.follows:

 

  Year ended December 31, 
  2022  2021 
  USD
in thousands		  USD
in thousands		 
       
Revenues $51,841  $19,683 
Loss from operations $(1,531) $(1,883)
Net loss $(541) $(526)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying consolidated financial statements arehave been prepared in accordance with generally accepted accounting principles in the United States of AmericaGenerally Accepted Accounting Principles (“U.S. GAAP”). applied on a consistent basis.

 

Principle of Consolidation

The consolidated financial statements include the financial statements of the Company, its subsidiaries and its wholly owned subsidiaries. All significant inter-companyvariable interest entities (“VIEs”). Inter-company transactions and balances among the Company and its subsidiaries are eliminated upon consolidation. As the Company has both the power to direct the activities of the entities that most significantly impact its economic performance and the right to receive benefits or the obligation to absorb losses of the entities that could potentially be significant to the entities, the Company is considered the primary beneficiary of VIEs. (see Notes 9, 10, 11 and 12).

 

Functional CurrencyNoncontrolling Interest

 

Noncontrolling interest (“NCI”) reflect the portion of income or loss and the corresponding equity attributable to third-parties in certain consolidated subsidiaries that are not 100% owned by the Company. Noncontrolling interest is presented as a separate component in our consolidated statements of operation. NCI is allocated a share of income or loss in the respective consolidated subsidiaries in proportion to their relative ownership interest.

Functional currency and Exchange Rate Income (Loss)

The functional currency of Micronet Enertec is the U.S. dollar. The functional currency of certain subsidiariesour foreign entities is their local currency. TheFor these foreign entities, we translate their financial statements of those companies are included in consolidation, based on translation into U.S. dollars. Assets and liabilities are translated at year-end-exchange rates, while revenues and expenses are translated at monthlydollars using average exchange rates duringfor the year. Differencesperiod 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 translationthe conversion of transaction currency to functional currency are presented in the consolidated statements ofcharged or credited to other comprehensive income.income (expense), net.

 

F-10

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)The exchange rate used for conversion Nigerian Naira and RMB to USD is presented below:

 

Currency December 31,
2022		  December 31,
2021		 
Naira  448.55   412.49 
RMB  6.8972   6.3726 

Use of EstimateEstimates

 

The preparation of theconsolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilitiesdisclosures. These estimates and disclosure of contingent assetsassumptions take into account historical and liabilities atforward-looking factors that the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods.Company believes are reasonable. Actual results could differ significantly from those estimates.

 

Principles of Consolidation


 

The consolidated financial statements comprise the Company

TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and its subsidiaries. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its operating activities. In assessing control, legal and contractual rights, are taken into account. The consolidated financial statements of subsidiaries are included in the consolidated financial statements from the date that control is achieved until the date that control is lost. Intercompany transactions and balances are eliminated upon consolidation.Par Value Data)

 

Cash and Cash Equivalents

 

Cash and cash equivalents are considered by the Company to be highly-liquidconsist of cash, bank deposits, money market funds and high liquid short-term investments including inter-alia, short-term deposits with banks, of which do not exceedinsignificant interest rate risk and original maturities of three months or less.

Restricted Cash

The Company, as an insurance broker, is required to reserve 10% of its registered capital in cash held in an escrow bank account pursuant to the China Insurance Regulatory Commission (“CIRC”) rules and regulations. As of December 31, 2022 and 2021, restricted cash amounted to $2,233 and $2,417 respectively.

Accounts receivable, net

Accounts receivables are recorded at amounts billed to customers, net of an allowance for doubtful accounts. Trade accounts receivable are recorded at invoiced amounts. On a periodic basis, management evaluates its accounts receivable and determines whether to provide an allowance or if any accounts should be written off. The allowance is determined based on specific analysis of each customer account receivable’s aging, assessment of its related risk and ability of the customer to make the required payment. In addition, in accordance with ASC 326, “Financial Instruments - Credit Losses”, an allowance is maintained for estimated forward-looking losses resulting from possible inability of customers to make required payments (current expected losses). The amount of the allowance is determined principally on the basis of past collection experience and known financial factors regarding specific customers. Trade accounts receivables are written off against the allowance when it becomes evident that collection will not occur. As of December 31, 2022 and December 31, 2021, allowance for expected credit losses was $3,012 and $2,606, respectively.

Financial Instruments

The Company accounts for debt and equity issuances as either equity-classified or liability-classified instruments based on an assessment of the instruments specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of depositissuance of the instruments and whichas of each subsequent quarterly period end date while the instruments are not restricted.outstanding.

 

Investments in Marketable Securities

Management determinesFor issued or modified instruments that meet all of the appropriatecriteria for equity classification, the instruments are required to be recorded as a component of its investmentsadditional paid-in capital at the time of purchaseissuance. For issued or modified instruments that do not meet all the criteria for equity classification, the instruments are required to be recorded at their initial fair value on the date of issuance, and reevaluates such determinations at each balance sheet date. Investments in marketable securities are classified as “trading,” and unrealized gains or losses are reporteddate thereafter. Changes in the statementestimated fair value of income.the instruments are recognized as a non-cash gain or loss on the statements of operations.

 

Revenue Recognition

The Company’s subsidiary Enertec enters into long-term fixed-price contracts with customers to manufacture test systems, simulators, and airborne applications. Revenues on these long-term fixed-price contracts are recognized under the percentage-of-completion method. In using the percentage of completion method, revenues are generally recorded based on the percentage of cost incurred to date on a contract relative to the estimated total expected contract cost. Management uses historical experience, project plans and an assessment of the risks and uncertainties inherent in the arrangement to establish the total estimated costs. The percentage of completion is established by the costs incurred to date as a percentage of the estimated total costs of each contract (cost-to-cost method). Contract costs include all direct material and labor costs.

The Company recognizes revenues on a project when persuasive evidence of an arrangement exists, recoverability is probable, and project costs are incurred. The Company recognizes anticipated contract losses, if any, in the period in which they first became evident. As of December 31, 2016, approximately $4,805 (on December 31, 2015: $4,500) of the accounts receivable balance was unbilled due to the customers’ payment terms.

Revenues from the sales of MRM products are recognized when persuasive evidence of an arrangement exists; delivery has occurred, consideration is fixed and determinable; and collection of the resulting receivable is reasonably assured. The title and risk of loss passes to the customer, delivery has occurred and acceptance is satisfied as the product leaves the Company premises.

Allowance for Doubtful Accounts

The Company establishes an allowance for doubtful accounts to ensure trade and financing receivables are not overstated due to uncollectability. The allowance for doubtful accounts was based on specific receivables, which their collection, in the opinion of Company’s management, is in doubt. Trade receivables are charged off in the period in which they are deemed to be uncollectible. As of December 31, 2016 and 2015, the allowance for doubtful accounts amounted to $563 and $1,288, respectively.

F-11

 

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

 

Reclassifications

Certain balance sheet amounts and cash flow have been reclassified to comfort with the current year presentation.

Inventories

Inventories of raw materials are stated at the lower of cost (first-in, first-out basis) or realizable value. Cost of work in process comprise direct materials, direct production costs and an allocation of production overheads based on normal operating capacity.

Property and Equipment

 

Property and equipment are stated at cost, net of accumulated depreciation.depreciation and amortization. Depreciation and amortization is calculated by the straight-line method over their estimated useful lives. Annual ratesUseful lives of depreciation are as follows:

 

Leasehold improvementsCategory Useful Life
Machinery and equipment3-7 years
Furniture and fixtures3-14 years
Transportation equipment4-7 years
Leasehold improvementsOver the shorter of the lease term or the life of the assets
Machinery andComputer equipment 7-143 years
Furniture and fixturesBuildings 10-1420 years
Transportation equipmentOffice Equipment 75 years
Computer equipmentPlant & Machinery 4 years
Mobile Devices3 years
Site Installations4 years

 

Stock Based Compensation

 

The Company applies the provisions of ASC Topic 718 “Compensation - Stock Compensation”, under which employees’ share-based awards are recognized based on the grant-date fair values. The Company estimates the fair value of stock-based compensation awards granted using the grant date fair value of the awards.

Stock-based compensation expense is recognized evenly over the vesting period. The Company accounts for stock based compensation under the fair market value method under which compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.forfeitures as they occur. For stock options, fair value is determined using an option-pricing model that takes into account the stock price at the grant date, the exercise price, the expected life of the option, the volatility of the underlying stock, the expected dividends on it, and the risk-free interest rate over the expected life of the option.

 

Cost of revenues

Cost of revenues are from our Comprehensive Platform Service and also from our Chinese’s companies Verticals and technology segment. Our Cost of revenues expenses consist primarily from commission costs and depreciation Expense.

Research and Development Costs

 

Research and development costs are charged to statementsfrom our online stock trading platform segment and also from our Chinese’s companies Verticals and technology segment. Our research and development expenses consist primarily of incomeexpenditures for consulting fees, compensation, and salary costs and expensed as incurred net of grants from the Israel Innovation Authority (IIA)(formerly knownunless these costs qualify for capitalization as the Israel Office of the Chief Scientist of the Ministry of Economy .internal-use software development costs.

 

LossEarnings (Loss) per Share

 

BasicIn accordance with FASB ASC 260, “Earnings Per Share,” the basic net earningsloss per share areis computed based onby dividing the net loss attributable to ordinary shareholders by the weighted average number of ordinary shares of common stock outstanding during each year.

the period. Basic net loss per share excludes the dilutive effect of stock options or warrants. The calculation of the basic and diluted earnings per share is the same for all periods presented, as the effect of the potential common shares equivalents is anti-dilutive due to the Company’s net loss position for all periods presented.

 

F-12


 

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

Leases

 

Long-Lived AssetsThe Company as Lessee: Operating lease right-of-use assets (“ROU assets”) represent the Company’s right to use an underlying asset for the lease term and Intangiblelease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets

Intangible assets that and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Because the rate implicit on most of the Company’s leases are not consideredreadily determinable, the Company’s incremental borrowing rate is used based on the information available at the commencement date in determining the present value of lease payments. The lease terms may include options to have an indefinite useful life are amortized usingextend or terminate the lease when it is reasonably certain that the Company will exercise such options. Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense

ROU assets are reviewed for impairment when indicators of impairment are present. ROU assets from operating leases are subject to the impairment guidance in ASC 360, Property, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets.

The Company recognized no impairment of ROU assets as of December 31, 2022 and December 31, 2021.

The operating lease is included in right-of-use assets and lease liability on the consolidated balance sheets.

The Company as Lessor: We evaluate all agreements entered into or modified that convey to others the use of property or equipment for a term to determine whether the agreement is or contains a lease. The underlying assets associated with these agreements are evaluated for future use beyond the lease term. We have elected the non-lease component separation practical expedient for all classes of assets where we are the lessor.

We entered into agreement with standard terms to lease mobile phones to the customers for 1 year. Under the agreement the right and ownership of the mobile phones shall remain with the Company (Lessor). Lessor has the exclusive right to terminate the agreement in whole or part. The agreement has lease and non lease component. The lease component is accounted as operating lease and income is recognized on a straight-line basis over the lease term as a revenue and certain non-lease components may be accounted for under the revenue recognition guidance in ASC Topic 606, Revenue from Contracts with Customers, or ASC Topic 606. See the “Revenue Recognition”.

The Company follows ASC No 842, Leases starting from the January 1, 2021.

Investments

The Company accounts for its equity investment over which it has significant influence but does not own a majority equity interest or otherwise control, using the equity method. The Company adjusts the carrying amount of the investment and recognizes investment income or loss for its share of the earnings or loss of the investee after the date of investment. The Company assesses its equity investment for other-than-temporary impairment by considering factors including, but not limited to, current economic and market conditions, operating performance of the entity, including current earnings trends and undiscounted cash flows, and other entity-specific information. The fair value determination, particularly for investments in a privately held entity, requires judgment to determine appropriate estimates and assumptions. Changes in these estimates and assumptions could affect the calculation of the fair value of the investment and determination of whether any identified impairment is other-than-temporary.

As of December 31, 2022, the Company owned 31.47% of shares in Micronet which was accounted for under equity method.

As of December 31, 2022, the Company owned 24% of the shares in Beijing Fucheng and controlled the remaining 76% through contractual arrangements as discussed in Note 1. The Company consolidates Beijing Fucheng.


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

Fair value measurement

ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

●Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

●Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

●Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Financial instruments included in current assets and current liabilities are reported in the consolidated balance sheets at face value or cost, which approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest.

Intangible assets

The Company’s intangible assets with definite useful lives primarily consist of licensed software, Technology, Trade name/ trademarks, Customer relationship and Farmer Cooperative. The Company amortizes its intangible assets with definite useful lives over their estimated useful lives and reviews all the intangible assets for frequent impairment indicators on quarterly basis. The Company typically amortizes its intangible assets with definite useful lives on a straight-line basis over the shorter of the contractual terms or the estimated useful lives. The Company evaluates property and equipment and purchaseddid not record any impairment of intangible assets with finiteas of December 31, 2022 and December 31, 2021.

Intangible assets are stated at cost less accumulated amortization. Amortization is computed using the straight-line method over the estimated useful lives for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flow and recognizes an impairment loss when theassets. The estimated undiscounted future cash flow expected to result from the use of the asset plus the net proceeds expected from disposition of the asset, if any,useful lives are less than the carrying value of the asset. When the Company identifies an impairment, it reduces the carrying amount of the asset to its estimated fair value based on a discounted cash flow approach or, when available and appropriate, to comparable market values. During the years ended December 31, 2016 and 2015, no indicators of impairment have been identified.as follows:

 

Useful Life
License & softwareindefinite useful life and some of them for 10 years and some of them for 6 years
Technology know-how6 years
Trade name/ trademarksindefinite useful life and some of them for 5 years and some of them for 10 years
Customer relationship5-10 years
Farmer cooperative8 years


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

Goodwill

 

Goodwill represents the excess of the purchase price over the estimated fair value of the identifiable net assets acquired in the acquisition of a business combination overbusiness. We test goodwill for impairment annually in the fourth quarter and when events or changes in circumstances indicate that the fair value of net tangiblea reporting unit with goodwill has been reduced below its carrying value. Events that could indicate impairment and intangible assets acquired. Goodwill istrigger an interim impairment assessment include, but are not amortized, but rather is subjectlimited to, current economic and market conditions, including a decline in market capitalization, a significant adverse change in legal factors, business climate, operational performance of the business or key personnel, and an annual impairment test.adverse action or assessment by a regulator. The Company has determined that there are two operating segments: Mobile Resource Management and Defense and Aerospace. Thereporting units for purposes of testing goodwill was allocatedfor impairment.

In testing goodwill for impairment, the Company has the option to onefirst consider qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit which includedis less than its carrying value. Such qualitative factors include industry and market considerations, economic conditions, entity-specific financial performance and other events, such as changes in management, strategy and primary customer base. If based on the MRM division. The goodwill impairment tests are conducted in two steps. In the first step, the Company determinesCompany’s qualitative assessment it is more likely than not that the fair value of the reporting unit. Ifunit is less than its carrying amount, quantitative impairment testing is required. However, if the net book valueCompany concludes otherwise, quantitative impairment testing is not required. The results of the reporting unit exceeds its fair value,Company’s qualitative goodwill impairment test performed on the Company would then performfirst business day of fourth quarter for fiscal years 2022 and 2021 did not indicate any impairments.

Temporary Equity

Equity instruments that are redeemable for cash or other assets are classified as temporary equity if the second stepinstrument is redeemable, at the option of the impairment test which requires allocationholder, at a fixed or determinable price on a fixed or determinable date or upon the occurrence of an event that is not solely within the control of the reporting unit’s fair value of all of its assets and liabilities in a manner similar to an acquisition cost allocation, with any residual fair value being allocated to goodwill. The impliedissuer.

Redeemable equity instruments are initially carried at the relative fair value of the goodwillequity instrument at the issuance date, which is then comparedsubsequently adjusted at each balance sheet date if the instrument is currently redeemable or probable of becoming redeemable. The Series B Preferred Stock issued in connection with the acquisition of Tingo Mobile described in Note 3 were classified as temporary equity in the accompanying financial statements.

Business Combinations

We allocate the purchase consideration to the carryingidentifiable net assets acquired, including intangible assets and liabilities assumed, based on estimated fair values at the date of the acquisition. The excess of the fair value of the purchase consideration over the fair value of the identifiable assets and liabilities, if any, is recorded as goodwill. During the measurement period, which is up to determine impairment, if any.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.

 

Comprehensive Income (Loss)Determining the fair value of assets acquired and liabilities assumed requires significant judgment, including the selection of valuation methodologies including the income approach, the cost approach, and the market approach. Significant assumptions used in those methodologies include, but are not limited to, the expected values of the underlying metric, the systematic risk embedded in the underlying metric, the volatility of the underlying metric, the risk-free rate, and the counterparty risk. The use of different valuation methodologies and assumptions is highly subjective and inherently uncertain and, as a result, actual results may differ materially from estimates.

 

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 220-10, “Reporting Comprehensive Income,” requires


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

Revenue Recognition

The Company follows ASC 606 “Revenue from Contracts with Customers” and recognizes revenue when it transfers the control of promised goods or services to customers in an amount that reflects the consideration the Company expects to reportbe entitled to in its consolidated financial statements, in addition to its net income, comprehensive income (loss), which includes all changes in equity during a period from non-owner sources including, as applicable, foreign currency items, and other items.exchange for those goods or services.

 

The Company’s other comprehensive income for all periods presentedrevenues from the insurance segment are generated from providing insurance brokerage services or insurance agency services on behalf of insurance carriers.

Our performance obligation to the insurance carrier is satisfied and commission revenue is recognized at a point in time when an insurance policy becomes effective. The Company provides customers with information regarding services and commission charge from the customers on a monthly basis. Performance obligation is satisfied at a point in time when the requested information is delivered to the customer.

In accordance with ASC 606-10-55, Revenue Recognition: Principal Agent Considerations, the Company reports revenue on a gross or net basis based on management’s assessment of whether the Company acts as a principal or agent in the transaction. To the extent the Company acts as the principal, revenue is reported on a gross basis. To the extent the Company acts as the agent, revenue is reported on a net basis. The determination of whether the Company act as a principal or an agent in a transaction is based on an evaluation of whether the Company controls the good or service prior to transfer to the customer.

The Company reports its insurance revenue net of amounts due to the insurance companies as the Company is not the primary obligor in the relevant arrangements, the Company does not finalize the pricing, and does not bear any risk related to the translation from functional currency to the presentation currency.insurance policies.

 

Income TaxesThe Company’s revenues from the online stock trading platform are generated from stock trading commission income. Commission revenue is recognized at a point in time when transfer of control occurs. Trade execution performance obligation generally occurs on the trade date because that is when the underlying financial instrument (for a purchase) or purchaser (for a sale) is identified, and the pricing is agreed upon.

 

DeferredThe Company’s revenues from Tingo Mobile’s comprehensive platform service recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company offers customers the ability to lease the phones on one year terms, and purchase data and calls, as well as use of the NWASSA payment platform. As part of these contracts, the Company records revenue . The Company also records depreciation expense on a straight-line basis over the useful life of the phones, which is estimated by management at three years.

The Company exercised judgement in determining in determining the accounting policies related to these transactions, including the following:

●Determination of whether products and services are considered distinct performance obligations that should be accounted for separately versus together, such as phone leases and purchase of data.

●Determination of stand-alone selling prices for each distinct performance obligation and for products and services that are not sold separately.

●The pattern of delivery (i.e., timing of when revenue is recognized) for each distinct performance obligation.

●Estimation of variable consideration when determining the amount of revenue to recognize (i.e., separate items on NWASSA platform)


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

Income Taxes

The Company accounts for income taxes are determined utilizing the “assetusing an asset and liability” method,liability approach as prescribed in ASC 740-10 “Income Taxes” whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and the tax bases of assets and liabilities andliabilities. Deferred taxes are measured using the enacted tax rates and laws that will be in effectanticipated (under applicable law as of the balance sheet date) to apply when the differencesdeferred taxes are expected to reverse. be paid or realized. Deferred tax assets and liabilities, as well as any related valuation allowance, are classified as noncurrent items on the balance sheets.

The Company provides aevaluates the potential realization of its deferred tax assets for each jurisdiction in which the Company operates at each reporting date and establishes valuation allowance,allowances when it’sit is more likely than not that all or a part of its deferred tax assets will not be realizedrealized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income of the same character and in the foreseeable future. Deferredsame jurisdiction. The Company considers all available positive and negative evidence in making this assessment, including, but not limited to, the scheduled reversal of deferred tax liabilities and deferred tax assets are classified as current or non-current based on the expected reversal dates of the specific temporary differences.and projected future taxable income.

 

The Company applied FASB ASC Topic 740-10-25, “Income Taxes,” which provides guidance740-10 prescribes a two-step approach for recognizing and measuring uncertain tax positions. The first step is to evaluate tax positions and prescribes a threshold condition thattaken or expected to be taken in a tax return by assessing whether they are more-likely-than-not sustainable, based solely on their technical merits, upon examination and including resolution of any related appeals or litigation process. The second step is to measure the associated tax benefit of each position must meet for anyas the largest amount that the Company believes is more-likely-than-not realizable. Differences between the amount of thetax benefits of the uncertain tax positiontaken or expected to be taken in its income tax returns and the amount of tax benefits recognized in its financial statements, represent the financial statements. It also provides accounting guidance on derecognizing, classification and disclosure of these uncertainCompany’s unrecognized income tax positions.benefits. The Company’s policy on classification of allis to include interest and penalties related to unrecognized income tax positions, if any, is to present thembenefits as a component of income tax expense.

 

TINGO GROUP and its subsidiaries and VIEs within the jurisdiction of the United States, Israel and China are subject to a tax examination for the most recent three, four and five years, respectively.

Impairment of Long-Lived Assets

The Company reviews long-lived assets and intangible assets on a periodic basis, as well as when such review is required based upon relevant circumstances, to determine whether events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, considering the undiscounted cash flows expected from them. If applicable, the Company recognizes an impairment loss based upon the difference between the carrying amount and the fair value of such assets, in accordance with ASC 360-10 “Property, Plant and Equipment”. As of December 31, 2022, and 2021, no indicators of impairment have been identified.

Comprehensive Income (Loss)

In accordance with ASC 220 “Comprehensive Income”, comprehensive income represents the change in shareholders’ equity during a reporting period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a reporting period except those resulting from investments by owners and distributions to owners. Other comprehensive income (“OCI”) represents gains and losses that are included in comprehensive income but excluded from net profit.

F-13

 

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

Statutory reserves

 

Financial InstrumentsPursuant to the laws applicable to the PRC, PRC entities must make appropriations from after-tax profit to the non-distributable “statutory surplus reserve fund”. Subject to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of 10% of after-tax profit until the aggregated appropriations reach 50% of the registered capital (as determined under accounting principles generally accepted in the PRC (“PRC GAAP”) at each year-end). For foreign invested enterprises and joint ventures in the PRC, annual appropriations should be made to the “reserve fund”. For foreign invested enterprises, the annual appropriation for the “reserve fund” cannot be less than 10% of after-tax profits until the aggregated appropriations reach 50% of the registered capital (as determined under PRC GAAP at each year-end). If the Company has accumulated loss from prior periods, the Company is able to use the current period net income after tax to offset against the accumulate loss.

 

1.

Concentration of credit risks:

Segment reporting

Financial instruments that have the potential to expose the Company to credit risks are mainly cash and cash equivalents, bank deposit accounts, marketable securities and trade receivables.

The Company holds cash and cash equivalents, securities and deposit accounts at large banks in Israel, thereby substantially reducing the risk of loss.

With respect to trade receivables, the risk is limited due to the geographically spreading, nature and size of the entities that constitute the Company’s customer base. The Company assesses the financial position of its customers prior to the engagement with them.

The Company performs ongoing credit evaluations of its customers for the purpose of determining the appropriate allowance for doubtful accounts and generally does not require collateral. An appropriate allowance for doubtful accounts is included in the accounts.

 

2.

Fair value measurement:

ASC Topic 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with management approach,” following the method that management organizes the Company’s reportable segments for which separate financial information is made available to, and evaluated regularly by, the chief operating decision maker (the “CODM”), in allocating resources and in assessing performance.

The Company measures fair value and discloses fair value measurements for financial and non-financial assets and liabilities. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

 

Level 1:Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

The Company’s CODM has been identified as the CEO, who reviews consolidated and each of the segments results when making decisions about allocating resources and assessing performance of the Company.

 

Level 2:Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

Level 3:Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value,Based on management’s assessment, the Company utilizes valuation techniquesdetermined that maximize the use of observable inputsit has three operating segments and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value.therefore three reportable segments as defined by ASC 280.

 

Recent Accounting PronouncementsRecently issued accounting pronouncements

 

In February 2016,May 2019, the FASB issued Accounting StandardsASU 2019-05, which is an update to ASU Update (ASU)No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial Instruments — Credit Losses, and made several consequential amendments to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments — Credit Losses — Available-for-Sale Debt Securities. The amendments in this Update address those stakeholders’ concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement users with decision-useful information. In November 2019, the FASB issued ASU No. 2019-10, which to update the effective date of ASU No. 2016-02 which supersedes the lease accounting guidance in ASC 840, Leases.for private companies, not-for-profit organizations and certain smaller reporting companies applying for credit losses, leases, and hedging standard. The new guidance requires lessees to recognize a right-of-use asset and a lease liability on the balance sheeteffective date for all leases with the exception of short-term leases. For lessees, leases will continue to be classified as either operating or finance leases in the income statement. Lessor accountingthese preparers is similar to the current model but updated to align with certain changes to the lessee model. The amendments are effective for reporting periods (interim and annual)fiscal years beginning after December 15, 2018, with early adoption permitted. The amendments must be adopted using a modified retrospective approach.2022. The Company is currently evaluatingdoes not expect the impactadoption of this ASU would have a material effect on the amended guidance on itsCompany’s consolidated financial statements, but does not except to have material impact.statements.

 

F-14


 

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

 

Recent Accounting Pronouncements (Cont.)

In August 2016,October 2021, the FASB issued Accounting Standards Update (ASU) 2016-15. This update addresses whether to present certain specific cash flow items as operating, investing or financing activities.ASU 2021-08, “Business Combinations”. The amendments arein this Update address how to determine whether a contract liability is recognized by the acquirer in a business combination and resolve the inconsistency of measuring revenue contracts with customers acquired in a business combination by providing specific guidance on how to recognize and measure acquired contract assets and contract liabilities from revenue contracts in a business combination. The amendments in this Update apply to all entities that enter into a business combination within the scope of Subtopic 805-10, Business Combination-Overalls. For public business entities, ASU 2021-08 is effective for reporting periods (interim and annual)fiscal years beginning after December 15, 2017.2022, including interim periods within those fiscal years. Early adoptionapplication is permitted. The amendments willin this Update should be applied retrospectivelyprospectively to each period presented.business combinations occurring on or after the effective date of the amendments. The Company is currently evaluating the impact of the amended guidance on its consolidated financial statements, but does not exceptexpect the adoption of this standard to have a material impact.

In November 2016, the FASB issued Accounting Standards Update (ASU) 2016-18. This updates provides guidance on the classification and presentation of changes in restricted cash or restricted cash equivalents in the statement of cash flows under Topic 230, Statement of Cash Flows. The amendments are effective for reporting periods (interim and annual) beginning after December 15, 2017, with early adoption permitted. The amendments will be applied retrospectively to each period presented. The Company is currently evaluating the impact of the amended guidance on its consolidated financial statements.

 

In May 2014,Except as mentioned above, the FASBCompany does not believe other recently issued ASU No. 2014-09, Revenue from contracts with customers (Topic 606). Underbut not yet effective accounting standards, if currently adopted, would have a material effect on the new standard, revenue is recognized when a customer obtains controlCompany’s consolidated balance sheets, consolidated statements of promised goods or services and is recognized in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenueoperations, comprehensive loss and cash flows arising from contracts with customers. The FASB has recently issued several amendmentsflows.

Reclassification

Certain prior year amounts in the consolidated financial statements and the notes thereto have been reclassified where necessary to conform to the standard, including clarification on accounting for licenses of intellectual property, identifying performance obligations, principal versus agent considerations and other narrow technical corrections.current year presentation. These reclassifications did not affect the prior period total assets, total liabilities, stockholders’ deficit, net loss or net cash used in operating activities.

 

The new revenue standard (and its related amendments) is effective for reporting periods (interim and annual) beginning after December 15, 2017, with early adoption permitted for reporting periods (interim and annual) beginning after December 15, 2016. The standard permits two methods of adoption: retrospectively to each reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). The Company is currently expecting to adopt the standard using the modified retrospective method.

The Company is currently examining whether the control of the goods produced in long term contracts is transferred to the customer overtime.

NOTENote 3 — FAIR VALUE MEASUREMENTS

Items carried at fair value as of December 31, 2016 and 2015 are classified in the table below in one of the three categories described in Note 2. 

  Fair value measurements using input type 
  December 31, 2016 
  Level 1  Level 2  Level 3  Total 
Cash and cash equivalents $668   -   -   668 
Restricted cash  4,488   -   -   4,488 
Marketable securities  2,978   -   -   2,978 
Derivative liability  -   (9)  -   (9)
Derivative liability- phantom option  -   (4)  -   (4)
  $8,134   (13)  -   8,121 

F-15

NOTE 3 — FAIR VALUE MEASUREMENTS (CONT.)

  Fair value measurements using input type 
  December 31, 2015 
  Level 1  Level 2  Level 3  Total 
             
Cash and cash equivalents $2,361  $-  $-  $2,361 
Restricted cash  4,135   -   -   4,135 
Marketable securities  5,643   -   -   5,643 
Derivative liability  -   (41)  -   (41)
   12,139  $(41) $-  $12,098 

NOTE 4 — INVENTORIES

Inventories are stated at the lower of cost or market, computed using the first-in, first-out method. Inventories consist of the following:

  December 31, 
  2016  2015 
Raw materials $5,103  $6,303 
Work in process and finished product  655   1,154 
  $5,758  $7,457 

During 2016, The Company recorded inventory write off at the amount of $953.

NOTE 5 — PROPERTY AND EQUIPMENT, NET

Property and equipment consists of the following as of December 31, 2016 and 2015:

  December 31, 
  2016  2015 
Leasehold improvements $773  $839 
Machinery and equipment  2,083   2,274 
Furniture and fixtures  258   251 
Transportation equipment  141   138 
Computer equipment  1,343   1,234 
   4,598   4,736 
Less accumulated depreciation  (2,957)  (2,920)
  $1,641  $1,816 

Depreciation expenses totaled $443 and $481, for the years ended December 31, 2016 and 2015, respectively. 

During 2016, the Company recorded a reduction of $335 of cost and $335 of accumulated depreciation for leasehold improvements and machinery and equipment no longer in use, resulting in no gain or loss.Stockholders’ Equity

   

F-16

NOTE 6 — INTANGIBLE ASSETS AND OTHERS, NET

Composition:

  Useful life December 31, 
  years 2016  2015 
Original amount:        
Technology 5 $2,010  $2,010 
Customer related intangible assets 3-5  3,470   3,470 
    $5,480  $5,480 
Accumulated amortization:          
Technology 5 $1,154  $752 
Customer related intangible assets 3-5  2,237   1,726 
  5 $3,391  $2,478 
    $2,089  $3,002 
Prepaid lease expenses    205   206 
Deferred tax assets    87   89 
    $2,381  $3,297 

The estimated future amortization of the intangible assets (excluded deferred tax assets and prepaid lease) as of December 31, 2016 is as follows: 

2017  890 
2018  846 
2019  353 
  $2,089 

NOTE 7 - SHORT TERM BANK LOANS:

Composition:

  

Interest rate
as of
December 31,

   Total short-term liabilities 
  2016 Linkage December 31, 
  % basis 2016  2015 
Due to banks 

Prime plus 0.7%-

Prime plus 2.45%

 NIS $9,045  $9,701 
Current portion      948   1,311 
      $9,993  $11,012 

As of December 31, 2016, the Company had short term bank credit of $9,993 comprised as follows: $948 current portion of long term loans and $9,045 of short term bank loans that bear interest of prime plus 0.7% through prime plus 2.45% paid either on a monthly or weekly basis.

As of December 31, 2015, the Company had short term bank credit of $11,012 comprised as follows: $1,311 current portion of long term loans and $9,701 of short term bank loans that bear interest of prime plus 0.7% through prime plus 2.45% paid either on a monthly or weekly basis.

The Company has committed to certain covenants under its bank loans. See also note 15.

The Restricted cash in the balance sheets stands as collateral in favor of the loans.

F-17

NOTE 8 — LONG TERM LOANS FROM BANKS

1. Composition:

  

Interest rate
as of
December 31,

  

Total long-term liabilities,

net of current portion

 
  2016 Linkage December 31, 
  % basis 2016  2015 
Due to banks 

Prime plus 1.25%-

Prime plus 2.45%

 NIS $2,041  $3,289 
Less– current portion      (948)  (1,311)
      $1,093  $1,978 

2. Long-term loans from banks are due as follows:

  December 31, 
  2016  2015 
First year (current portion) $948  $1,311 
Second year  547   903 
Third year  546   538 
Fourth year and thereafter  -   537 
  $2,041  $3,289 

The Company has committed to certain covenants under its bank loans. See also note 15. 

NOTE 9 — LOAN FROM OTHERS

On September 2, 2015, Enertec entered into a Credit Line Agreement with a financing firm, or the Financing Firm, pursuant to which the Financing Firm agreed to grant Enertec a credit line.  The maximum aggregate amount of the Credit Line Agreement is $675 and up to 85% of open trade receivables invoices. The annual interest rate is Prime plus 1.75%. The Credit Line Agreement will expire on April 30, 2017. As of December 31, 2016, Enertec had financed $669 pursuant to the Credit Line Agreement.

On December 30, 2015, the Company entered into a Loan Agreement (the “Meydan Loan”), with Meydan Family Trust No. 3 (“Meydan”), pursuant to which Meydan agreed to loan the Company $750, on certain terms and conditions. The proceeds of the Meydan Loan have been used by the Company for working capital and  general corporate needs. The Meydan loan bears interest at the rate of Libor plus 8% and shall be repaid in 4 equal installments beginning on April 10, 2017.  

On June 30, October 28, and December 22, 2016, the Company and its wholly-owned subsidiary, Enertec Electronics Ltd., entered into a Note Purchase Agreements with YA II, or the Note Purchase Agreements, whereby YA II purchased $600, $500 and $1,000 of notes from the Company, or the Notes, respectively. The outstanding principal balance of the Notes bears interest at 7% per annum. Upon the occurrence of an Event of Default (as defined in the Notes), all amounts payable may be due immediately. In connection with the Note Purchase Agreements, the Company granted to YA II a five-year warrant, or the Warrants, to purchase 252,000 shares of the Company’s common stock at an exercise price of $ 3 per share.

In accordance with the ASC 815-40 The Company analyzed the warrants issued and concluded that they meet the definition of an equity instrument. In accordance with ASC 470 "Debt", the Company allocated the total proceeds between the loan and the warrants based on their relative fair value at the closing date.As a result the Company recorded a discount amount of $62 based on the fair value of each warrant on its grant date.A. Common stock:

 

F-18

NOTE 10 — ACCRUED SEVERANCE PAY, NET

A.Accrued Liability:

The Company is liable for severance pay to its employees pursuant to the applicable local laws prevailing in the respective countries of employment and employment agreements. For Israeli employees, the liability is partially covered by individual managers’ insurance policies under the name of the employee, for which the Company makes monthly payments. The Company may make withdrawals from the managers’ insurance policies only for the purpose of paying severance pay.

The amounts accrued and the amounts funded with managers’ insurance policies are as follows:
  December 31, 
  2016  2015 
Accrued  severance pay $1,585  $1,620 
Less - amount funded  (1,528)  (1,568)
  $57  $52 

NOTE 11 — PROVISION (BENEFIT) FOR INCOME TAXES

A.

Basis of Taxation

The Company’s Israeli subsidiaries are governed by the tax laws of the state of Israel which had a general tax rate of 25% in 2016 and 26.5% in 2015. The Company is entitled to various tax benefits in Israel by virtue of being granted the status of an “Approved Enterprise Industrial Company” as defined by the tax regulations. The benefits include, among other things, a reduced tax rate.

In December 2010, new legislation amending the Law for Encouragement of Capital Investments of 1959 (the “Investment Law”), was adopted. This new legislation became effective as of January 1, 2011 and applies to preferred income produced or generated by a preferred company from the effective date. Under this new legislation, a uniform corporate tax rate applies to all qualifying income of certain Industrial Companies, or Preferred Enterprise (as defined under the Investment Law), as opposed to the previous law’s incentives, which were limited to income from Approved Enterprises and Privileged Enterprises during their benefits period. Under the new legislation, the uniform tax rates are as follows: 2011 and 2012 - 15% (10% in preferred area), 2013 and 2014 - 12.5% (7% in preferred area) and in 2015 and thereafter - 12% (6% in preferred area).

Effective beginning in 2014, the regular Israeli tax rate was 26.5% for Regular Entities and 16% or 9% for  Preferred Enterprises (depending on the location of industry). Both Micronet and Enertec are eligible for the tax rate for Preferred Enterprises. In 2015 and 2016, Micronet was taxed at the 16% rate and Enertec was taxed at the 9% rate.

In December 2016, the Israeli government published the Economic Efficiency Law (2016) (legislative amendments to accomplish budget goals for the years 2017 and 2018). According to such law, in 2017 the general tax rate will decrease by 1% and starting 2018 by 2%; so that the tax rate will be 24% in 2017 and 23% in 2018 and onwards. In addition, the tax rate that applies to Preferred Enterprises in preferred area will be decreased by 1.5% to 7.5% starting January 1, 2017.

B.Provision for Taxes

  Year ended
December 31,		 
  2016  2015 
Current:      
Domestic $-  $- 
Foreign (Israel)  -   181 
   -   181 
         
Taxes related to prior years  (25)  (43)
         
Deferred:        
Deferred taxes, net  (104)  (219)
   Total provision for income taxes $(129) $(81)

F-19

NOTE 11 — PROVISION (BENEFIT) FOR INCOME TAXES (CONT.)

C.The reconciliation of income tax at the U.S. statutory rate to the Company’s effective tax rate as follows:

  2016  2015 
U.S. federal statutory rate  35%  35%
Tax rate difference between U.S. and Israel  (10)%  (8.5)%
Effect of Israeli tax rate benefit  (17.5)%  (14)%
Effect of previous years  -%  (5)%
Change in valuation allowance  -%  (4.9)%
Others  (5.9)%  -%
Effective Tax Rate  1.6%  2.6%

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 December 31, 2016 and 2015, the Company’s deferred taxes were in respect of the following:

  December 31, 
  2016  2015 
Net operating loss carry forward $3,343  $1,668 
Provisions for employee rights and other temporary differences  209   91 
Deferred tax assets before valuation allowance  3,552   1,759 
Valuation allowance  (2,887)  (1,188)
Deferred tax assets  665   571 
Deferred tax liability  7   17 
Deferred tax assets, net $658  $554 

E.

Tax losses

As of December 31, 2016, the Company has a net operating loss carry forward of approximately $4,921, which may be utilized to offset future taxable income for United States federal tax purposes. This net operating loss carry forward begins to expire in 2022.  Since it is more likely than not that the Company will not realize a benefit from this net operating loss carry forward, a 100% valuation allowance has been recorded to reduce the deferred tax asset to its net realizable value.

F.

Tax Assessments

 The Company received final tax assessments in the United States through tax year 2012, and with regard to the Israeli subsidiaries received final tax assessments up until tax year 2012.

G.

Uncertain Tax Position

The Company did not record any liability for income taxes associated with unrecognized tax benefits during 2016 and 2015.

F-20

NOTE 12 — RELATED PARTIES

In November 2012, entities controlled by Mr. Lucatz reached agreements with each of Micronet and the Company for the provision of management and consulting services to Micronet and the Company, respectively.

On November 7, 2012, the board of directors and the audit committee of Micronet approved the entry into a management and consulting services agreement with D.L. Capital Ltd., an entity controlled by Mr. Lucatz, pursuant to which effective November 1, 2012, Mr. Lucatz agreed to devote 60% of his time to Micronet matters for the three year term of the agreement and Micronet agreed to pay the entities controlled by Mr. Lucatz management fees of 65 NIS (approximately $16) on a monthly basis, and cover other monthly expenses. Such agreement was further subject to the approval of Micronet’s shareholders, which was obtained at a special meeting held on January 30, 2013 for that purpose and went into effect following its execution on February 8, 2013.

On November 26, 2012, D.L. Capital Ltd. entered into a management and consulting services agreement with the Company, effective November 1, 2012, which provides that we will pay the entities controlled by Mr. Lucatz: (i) management fees of $13 on a monthly basis, and cover other monthly expenses, (ii) an annual bonus of 3% of the amount by which the annual EBITDA for such year exceeds the average annual EBITDA for 2011 and 2010, and (iii) a one-time bonus of 0.5% of the purchase price of any acquisition or capital raising transaction, excluding the public offering contemplated at such time, completed by us during the term of the agreement.

Transactions with related parties

  

Year ended

December 31,

 
  2016  2015 
Consulting fee paid to controlling shareholder $386  $383 
Stock based compensation granted to controlling shareholder  89   107 
Total $475  $490 

NOTE 13 — SHAREHOLDER'S EQUITY

A.Common stock:

Common Stockstock 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:

 

F-21

As part of the consideration paid by TINGO GROUP 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 TINGO GROUP 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 TINGO GROUP common stock upon stockholders approval. If stockholders have not approved the conversion of the Series A Preferred Stock into TINGO GROUP common stock by June 30, 2023 (the “Trigger Date”), then, TINGO GROUP will issue to TMNA stocks to cause TMNA to own 27% of the total issued and outstanding membership interests of TGH. See also Note 13.

C. Temporary equity:

As part of the consideration paid by TINGO GROUP to TMNA at the closing of the Tingo Merger on December 1, 2022, the Company issued 33,687.21 shares of Series B preferred stock convertible into 336,872,138 shares of TINGO GROUP common stock equal to approximately 35% of the total issued and outstanding common stock immediately prior to Closing. The Series B preferred stocks will be convertible to TINGO GROUP common stock upon approval by Nasdaq of the change of control of TINGO GROUP and upon the approval of TINGO GROUP’s stockholders. If such shareholder 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 TINGO GROUP 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. See also Note 13. 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 shareholders or Nasdaq approval of the change in control application of Tingo Group, they are required to be presented outside of Stockholders’ Equity and therefore were presented as temporary equity on the face of the Consolidated Balance Sheets.


 

TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

C. Stock Option Plan:

 

NOTE 13 — SHAREHOLDER'S EQUITY (CONT.)

B.Stock Option Plan:

Pursuant to our2012 plan. Our 2012 Stock Incentive Plan (the “2012 Incentive Plan”) was initially adopted by 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, and approved at the Company’s Annual Meetingup to 5,000,000 shares of Shareholders in October 2015, the board of directors isour Common Stock, are currently authorized to award stockbe 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 to our officers, directors, employees and certain others, up to a total of 1,000,000 shares of Common Stock, subject to adjustments in the event of a stock split, stock dividend, recapitalization or similar capital change. Stock based compensation amounted to $268 and $306 for the years ended December 31, 2016 and 2015, respectively.

The exercise price of the options granted under the (“2012 Stock Incentive Plan is set by the board of directors and will not be less than the closing sale price on NASDAQ at the grant date.  As of December 31, 2016, 254,000 stock options remain available for future awards under the 2012 Stock Incentive Plan. Under the 2012 Stock Incentive Plan, unless determined otherwise by the board, options generally vest over a two or three year period from the date of grant and expire 10 years after the grant date. Unvested options are forfeited 90 days following the termination of employment. Any options that are forfeited before expiration become available for future grants.

On July 17, 2014 the Company adopted the 2014 Stock Incentive Plan pursuant to which the board of directors is authorized to issue stock options, restricted stock and other awards to officers, directors, employees, consultants and other service providers. The board of directors has reserved 100,000Options”), shares of the Company's CommonCompany’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 TINGO GROUP, Inc., 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 Stock, for issuance pursuant(the “Options”), (ii) shares of the Company’s Stock, with or without restrictions, or (iii) any other Stock-based award, granted to awards that may be madea Grantee or an Optionee (as such terms are defined below hereunder) under the Plan and any Stock issued pursuant to the exercise thereof. Stock awards and the grant of Options to purchase shares of Stock, or the issue of each of the above under sub-sections (i) - (iii) shall be referred as the “Award(s).

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 Stock Incentive Plan. The 2014 StockPlan, which was terminated when the 2020 Incentive Plan was approved by our stockholders. Generally, shares of common stock reserved for awards under the stockholders on September 30, 2014.  As of December 31, 2016, 52,525 stock options remain2020 Incentive Plan that lapse or are canceled (other than by exercise) will be added back to the share reserve available for future awardsawards. However, shares of common stock tendered in payment for an award or shares of 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 2014 Stock2020 Incentive Plan.

 

The following table summarizes information about stock options outstanding and exercisable as of December 31, 2016: 2022:

 

Options Outstanding  Options Exercisable 
Number
Outstanding on
December 31,
2016		  Weighted Average
Remaining
Contractual Life		  Number
Exercisable on
December 31,
2016		  Exercise Price 
   Years     $ 
 20,000   6.5   20,000   4.3 
 586,000   8   579,333   4.3 
 140,000   8.5   46,667   4.3 
 746,000       646,000     
Options Outstanding  Options Exercisable 
Number
Outstanding on
December 31,
2022		  Weighted Average
Remaining
Contractual Life		  Number
Exercisable on
December 31,
2022		  Exercise Price 
   Years     $ 
 125,000   8.5   125,000   1.41 
 370,000   8.5   277,500   1.81 
 95,000   8.5   31,667   2.49 
 590,000       434,167     

 

  2016  2015 
  Number of
Options		  Weighted Average Exercise Price  Number of
Options		  Weighted Average Exercise Price 
     $     $ 
Options outstanding at the beginning of year  746,000   4.30   606,000   4.3 
Changes during the year:                
Granted  -   -   140,000   4.3 
Exercised  -   -   -   - 
Forfeited  -   -   -   - 
                 
Options outstanding at end of year  746,000   4.3   746,000   4.3 
Options exercisable at year-end  646,000   4.3   397,334     
Weighted-average fair value of options granted  during the year $-     $1.09     

F-22

 

 

NOTE 13 — SHAREHOLDER'S EQUITY (CONT.)TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

B. Stock Option Plan - (continued):

 

B.Stock Option Plan- (continued):
  Year ended
December  31, 2022		  Year ended
December 31, 2021		 
  Number of Options  Weighted
Average
Exercise
Price		  Number of Options  Weighted
Average
Exercise
Price		 
             
Options outstanding at the beginning of period:  1,558,000  $1.74   1,158,000  $2.24 
Changes during the period:                
Granted  -  $-   740,000  $1.97 
Exercised  -  $-   (60,000) $1.35 
Forfeited  (968,000) $1.68   (280,000) $1.41 
                 
Options outstanding at the end of the period  590,000  $1.83   1,558,000  $1.74 
Options exercisable at the end of the period  434,167  $1.74   1,118,000  $1.57 

 

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: 2015 – 39%; risk-free interest rate: 2015 – 1.9%; and expected life: 2015- 6.5 years.Company has warrants outstanding as follows:

 

  Warrants
Outstanding		  Average
Exercise
Price		  Remaining
Contractual
Life		 
Balance, December 31, 2021  62,863,879  $2.854   4.5 
Granted  -  $-   - 
Forfeited  -  $-   - 
Exercised  -  $-   - 
Balance, December 31, 2022  62,863,879  $2.854   4.25 

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 for featureforfeiture 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: 2022 and 2021-87.2%-100.4%; risk-free interest rate: 2022 and for 2021-0.99%-1.64%; and expected life: 2022 and for 2021-6.5-10 years.

The Company uses the simplified method to compute the expected option term for options granted.

 

C.Issuance of  common stock:

 

TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In April 2013,Thousands, except Share and Par Value Data)

On November 2, 2020 the Company closedentered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain investors for the purpose of raising $25.0 million in gross proceeds for the Company (the “Offering”). Pursuant to the terms of the Purchase Agreement, the Company sold, in a registered direct offering, an underwritten public offeringaggregate of 1,863,000 shares10,000,000 units (each, a “Unit”), with each Unit consisting of Common Stock,one share of the Company’s common stock and warrantsone warrant to purchase 931,500 shares0.8 of one share of Common Stock at an offeringa purchase price of $5.00$2.50 per Unit. The warrants are exercisable nine months after the date of issuance at an exercise price of $3.12 per share and $0.01 per warrant.will expire five years following the date the warrants become exercisable. The closing of the sale of Units pursuant to the. Purchase Agreement occurred on November 4, 2020. By December 31, 2020, the Company had received a total of $22.325 million in gross proceeds pursuant to Offering and issued in the aggregate, 7,600,000 Units. The remaining gross proceeds, in the additional aggregate amount of $2.675 million, were received by the Company on March 1, 2021 and in consideration for such proceeds, the Company issued the remaining 2,400,000 units.

On February 11, 2021, the Company announced that it had entered into a securities purchase agreement (the “February Purchase Agreement”) with certain institutional investors for the sale of (i) 22,471,904 shares of common stock, (ii) 22,471,904 Series A warrants haveto purchase 22,471,904 shares of common stock and (iii) 11,235,952 Series B warrants to purchase 11,235,952 shares of common stock at a per share exercisecombined purchase price of $6.25, are exercisable immediately, and expire on April 29, 2018. The warrants include only standard anti-dilution provisions.$2.67 (the “February Offering”). The gross proceeds to the Company includingfrom the underwriter’s exercise of its over-allotment option,February Offering were $9,324 before deductionexpected to be approximately $60.0 million. The Series A warrants will be exercisable nine months after the date of issuance, costshave an exercise price of $1,921 payable by$2.80 per share and will expire five and one-half years from the Company.date of issuance. The sharesSeries B warrants will be exercisable nine months after the date of issuance, have an exercise price of $2.80 per share and warrants began trading onwill expire three and one-half years from the NASDAQ Capital Market on April 24, 2013 under the symbols “MICT” and “MICTW,” respectively.date of issuance. The Company analyzedreceived net proceeds of $54.0 million on February 16, 2021 after deducting the accounting treatment of the sharesplacement agent’s fees and warrants and classified as equity according to the appropriate accounting guidance.other expenses.

 

In May 2015,On March 2, 2021, the Company issued 8,975 restricted shares to a service provider under the 2014 Stock Incentive Plan. An expense of $30 was recorded at the grant date based on the market price of the issued shares on the grant date.

In April 2016, the Company issued 13,500 restricted shares to a service provider under the 2014 Stock Incentive Plan. An expense of $26 was recorded at the grant date based on the market price of the issued shares on the grant date.

On June 30, 2016, we entered into a Standby Equity Distribution Agreement, or the SEDA,securities purchase agreement (the “March Purchase Agreement”) with YA II PV Ltd., or YA II, a Cayman Island exempt limited partnership and an affiliate of Yorkville Advisors Global, LLC,certain investors for the salepurpose of upraising approximately $54.0 million in gross proceeds for the Company. Pursuant to $2.39 millionthe terms of the March Purchase Agreement, the Company agreed to sell, in a registered direct offering, an aggregate of 19,285,715 shares of the Company’s common stock, par value $0.001 per share, at a purchase price of $2.675 per share and in a concurrent private placement, warrants to purchase an aggregate of 19,285,715 shares of common stock, at a purchase price of $0.125 per warrant, for a combined purchase price per share and warrant of $2.80 which was priced at the market under Nasdaq rules. The warrants are immediately exercisable at an exercise price of $2.80 per share, subject to adjustment, and expire five years after the issuance date. The closing date for the transaction consummated under the March Purchase Agreement was on March 4, 2021. The Company received net proceeds of $48.69 million on March 4, 2021, after deducting the placement agent’s fees and other expenses.

On May 17, 2021, the Company’s Board of Directors (the “Board”) unanimously approved a grant of fully vested 6,000,000 shares of common stock to Mr. Darren Mercer, the Company’s Chief Executive Officer. The issuance of the shares was pursuant to the Company’s long term incentive plan as previously approved by the stockholders and negotiated in connection with the Company’s acquisition of Global Fintech Holdings Limited. The Board unanimously agreed to issue the shares in recognition of Mr. Mercer’s direct contribution to achieving numerous key deliverables including: (i) the completion of several acquisitions, including those of Fucheng Insurance and Magpie; (ii) obtaining regulatory approval from the Hong Kong SFC regarding the acquisition of Magpie; (iii) the execution of several major commercial contracts and partnerships, including with a number of major insurance agents and one of China’s largest payment service providers; (iv) the execution of an exclusive partnership with the Shanghai Petroleum and Natural Gas Trading Center to which allows TINGO GROUP to provide financial services to its customers; (v) the successful launch of the insurance business in December 2020 and the delivery of significant revenues and revenue growth in Q1 2021; and (vi) the completion of capital raises totaling in excess of $140 million and broadening the Company’s institutional investor base.


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

On May 17, 2021, the Board unanimously approved a grant of fully vested 300,000 shares of common stock of the Company to Richard Abrahams, Magpie’s Chief Executive Officer.

Our 2012 Incentive Plan was initially adopted by 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. On May 17, 2021, May 23, 2021 and June 28, 2021, the Company granted an aggregate of 125,000, 370,000 and 245,000 respectively, options under the 2012 Incentive Plan, with an exercise price of $1.41, $1.81 and $2.49, respectively, of which 433,667 options vested and 150,000 options expired as of December 31, 2022. This resulted in a stock-based compensation expense of approximately $208,079 recorded for the twelve months ended December 31, 2022, based on a fair value determined using a Black-Scholes model.

On March 22, 2021, 20,000 shares of common stock were issued to an employee who exercised their options at an exercise price of $1.41.

In September 2021, the Board unanimously approved a grant of 87,000 fully vested shares of common stock of the Company to some of our employees.

On September 13, 2021, 40,000 shares of common stock were issued to an employee who exercised their options at an exercise price of $1.32.

On September 28, 2021, The Company granted 823,020 shares of common stock of the Company to China Strategic Investments Limited.

On May 10, 2022, The Company granted 1,659,500 shares of common stock of the Company to Cushman Holdings Limited, an unrelated third party, as an introducer fee for TMNA.

On May 10, 2022, The Company granted 858,631 shares of common stock of the Company to China Strategic Investments Limited, an unrelated third party, in connection with the GFHI acquisition as discussed in Note

On May 10, 2022, The Company granted 612,500 shares of common stock of the Company to some of our directors and employees. The shares were issued pursuant to the 2020 Incentive Plan.

On May 10, 2022, the Company’s Board unanimously approved a grant of fully vested 4,000,000 shares of common stock to Mr. Darren Mercer. The shares were issued under the Company’s long term incentive plan as such long term incentive plan previously approved by the stockholders and negotiated in connection with the Company’s acquisition of Global Fintech Holdings Limited. The Board unanimously agreed to issue the shares in recognition of Mr. Mercer’s direct contribution to achieving numerous key deliverables including: (i) the execution of several major commercial contracts and partnerships, including with a number of major insurance agents and one of China’s largest payment service providers; (ii) entered into an Agreement and Plan of Merger with Tingo.


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

On December 1, 2022, The Company granted 2,000,000 shares of common stock of the Company to Mr. Wei Qi, the company consultant, who has a professional business development goal as part of his agreement with the company. The shares were issued pursuant to the 2020 Incentive Plan.

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 TINGO GROUP that were negotiated in October 2022, and also the value Mr Mercer is delivering to the growth of TINGO GROUP.

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 4 — 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 
  December 31, 2021 
(USD in thousands) Level 1  Level 2  Level 3  Total 
Cash and cash equivalents $96,619        -           -  $96,619 
Total $96,619   -   -  $96,619 


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

NOTE 5 — PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following:

  December 31, 
(USD in thousands) 2022  2021 
Building $29,256  $- 
Land  8,097   - 
Office furniture and equipment  577   431 
Site installations  176,150   - 
Cell phones  1,258,902   - 
Machinery and equipment  9,408   153 
Leasehold improvement  225   203 
Transportation equipment  688   415 
   1,483,303   1,202 
Less accumulated depreciation and amortization  (628,178)  (525)
PROPERTY AND EQUIPMENT, NET $855,125  $677 

Depreciation and amortization expenses totaled $34,176 and $163 for the years ended December 31, 2022 and 2021, respectively.

NOTE 6 — INTANGIBLE ASSETS, NET

Composition:

  Useful
life		 December 31,  December 31, 
(USD in thousands) years 2022  2021 
Original amount:        
Technology know-how 6 $11,490  $11,490 
Trade name/trademarks Indefinite or
5-8 years		  55,507   923 
Customer relationship 5-10 years  4,802   4,802 
Farmer Cooperative 6 years  24,811   - 
License Indefinite or
10 years		  8,498   8,498 
Software 5-6 years  90,332   172 
     195,440   25,885 
Accumulated amortization:          
Technology know-how    (4,788)  (2,873)
trade name/ trademarks    (859)  (174)
Customer related intangible assets    (2,288)  (1,355)
Farmer Cooperative    (345)  - 
License    (235)  (39 
Software    (1,518)  (2)
     (10,033)  (4,443)
INTANGIBLE ASSETS, NET   $185,407  $21,442 

The estimated future amortization of the intangible assets (excluded of deferred tax assets) as of December 31, 2022 is as follows:

(USD in thousands)   
2023 $29,765 
2024  29,765 
2025  29,257 
2026  27,791 
2027 onward  61,910 
Total $178,028 


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

NOTE 7 — EQUITY INVESTMENT IN MICRONET

As of March 31, 2021, the Company held 50.31% of Micronet’s issued and outstanding shares. On May 9, 2021, following the exercise of options by minority stockholders, the Company’s ownership interest was diluted to 49.88% and as a result the Company is no longer required to consolidate Micronet’s operating results in its financial statements. From May 9, 2021, the Company accounted for the investment in Micronet in accordance with the equity method. The company recognized a loss in 2021 from deconsolidation of Micronet in the amount of $1,934.

On June 16, 2021, Micronet announced that it had completed a public equity offering on the TASE. Pursuant to the offering, Micronet sold an aggregate number of 18,400 securities units (the “Units”) at a price of 14.6 NIS per Unit with each Unit consisting of 100 ordinary shares, 25 series A options and 75 series B options, resulting in the issuance of 1,840,000 ordinary shares, 460,000 series A options and 1,380,000 series B options. Micronet raised total gross proceeds of 26,864,000 NIS (approximately $8,290,000) in the Offering. The Company did not participate in the Offering, and, as a result, the Company’s ownership interest was further diluted to 31.47% of the outstanding ordinary shares of Micronet and 30.54% on a fully diluted basis as of December 31, 2022.

Purchased identifiable intangible assets are amortized on a straight-line basis over their respective useful lives. The table set forth below summarizes the estimates of the fair value of assets acquired and liabilities assumed and resulting gain on bargain purchase.

On November 13, 2019, the Company and Micronet executed a three-year commitmentconvertible loan agreement pursuant to which the Company agreed to loan to Micronet $500,000 (the “Convertible Loan”). The Convertible Loan bears interest at a rate of 3.95% calculated and paid on a quarterly basis. In addition, the Convertible Loan, if not converted, shall be repaid in four equal installments, the first of such installment payable following the fifth quarter after the issuance of the Convertible Loan, with the remaining three installments due on each subsequent quarter thereafter, such that the Convertible Loan shall be repaid in full upon the lapse of 24 months from its issuance. In addition, the outstanding principal balance of the Convertible Loan, and all accrued and unpaid interest, is convertible at the Company’s option, at a conversion price equal to 0.38 NIS per Micronet share. Pursuant to the convertible loan agreement, Micronet also agreed to issue the Company an option to purchase one of Micronet’s ordinary shares for each ordinary share that it issued as a result of a conversion of the Convertible Loan at an exercise price of 0.60 NIS per share, exercisable for a period of 15 months. On July 5, 2020, the Company had a reverse split where the price of the Convertible Loan changed from 0.08 NIS per Micronet share into 5.7 NIS per Micronet share. The option’s exercise price changed from 0.6 NIS per share to 9 NIS per Micronet share.

On January 1, 2020, the Convertible Loan was approved at a general meeting of the Micronet shareholders and as a result, the Convertible Loan and the transactions contemplated thereby became effective. The loan was repaid on January 4, 2022.

On August 13, 2020, TINGO GROUP Telematics extended to Micronet an additional loan in the aggregate amount of $175 (the “Loan Sum”) which governed the existing outstanding intercompany debt. The loan does not bear any interest and has a term of twelve months. The Loan Sum was granted for the purpose of supporting Micronet’s working capital and general corporate needs. The loan was repaid on August 25, 2021.

NOTE 8 — GFH Intermediate Holdings Ltd Acquisition

On July 1, 2020, TINGO GROUP completed its acquisition of GFHI pursuant to the previously announced agreement and plan of merger (the “Merger Agreement”) entered into on November 7, 2019 by and between TINGO GROUP, Micronet, GFHI, Global Fintech Holding Ltd, a British Virgin Islands company and the sole shareholder of GFHI, and TINGO GROUP Merger Subsidiary Inc., a British Virgin Islands company and a wholly owned subsidiary of TINGO GROUP, as amended and restated on April 15, 2020. As described in the Merger Agreement, upon consummation of the acquisition, the outstanding share of GFHI were cancelled in exchange for a convertible promissory note in the principal amount of $25,000 issued to GFH by TINGO GROUP. This note has been converted into 22,727,273 shares of common stock of TINGO GROUP at a conversion price of $1.10 per share. As a result of the acquisition goodwill and intangible assets were created.

As of the date of this annual report, COVID-19 and the resulting government regulations enacted in China and elsewhere have not had a material adverse effect on GFHI financial reports; however, there can be no assurance that GFHI financial reports will not be affected in the future from COVID-19 or resulting government actions.


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

Purchased identifiable intangible assets are amortized on a straight-line basis over their respective useful lives. The table set forth below summarizes the estimates of the fair value of assets acquired and liabilities assumed and resulting gain on bargain purchase. In addition, the following table summarizes the allocation of the preliminary purchase price as of the acquisition date:

GFH Intermediate Holdings LTD, Purchase Price Allocation

(USD in thousands)

Total share consideration (1) $32,050 
Total Purchase Consideration $32,050 
Less:    
Intangible assets - trade name/ trademarks $580 
Intangible assets - developed technology  11,490 
Intangible assets - Customer database (2)  4,500 
Deferred Tax liability (3)  (4,308)
Fair value of net assets acquired $12,262 
Goodwill value (4) $19,788 

(1)The purchase consideration represented the fair value of the convertible promissory notes that were converted into common stock of TINGO GROUP.
(2)The customer database value is based on the cost to recreate, as indicated by management.
(3)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 26%.
(4)The goodwill is not deductible for tax purposes.

NOTE 9 — VIE’S AGREEMENTS

The Company consolidates certain VIEs as it is the primary beneficiary since it has both the power to direct the activities of the VIEs that most significantly impact the VIE’s economic performance and has the right to receive benefits or the obligation to absorb losses of the VIEs that could potentially be significant to the VIEs which are derived from various agreements described below.

VIE agreements with Guangxi Zhongtong Insurance Agency Co., Ltd (Guangxi Zhongtong):

On January 1, 2021, Bokefa Petroleum and Gas Co. Ltd., our wholly foreign-owned enterprise (“WFOE”), Guangxi Zhongtong, and nominee shareholders of Guangxi Zhongtong entered into six agreements, described below, pursuant to which Bokefa is deemed to have controlling financial interest and be the primary beneficiary of Guangxi Zhogntong. Therefore, Guangxi Zhongtong is deemed a VIE of Bokefa:

Loan Agreement

Pursuant to this agreement, Bokefa agreed to provide loans to the nominee shareholders of Guangxi Zhongtong. The term of the loan shall start from the date when the loan is actually paid, until the date on which the loan is repaid in full. The agreement shall terminate when the shareholders repay the loan. The loan should be used solely for Guangxi Zhongtong’s operating expenses and should be exclusively repaid by transferring shares of Guangxi Zhongtong to Bokefa when PRC Law permits.

Exclusive Option Agreement

The effective term of the agreement is unlimited and the agreement shall terminate upon the transfer of all the equity interest of Guangxi Zhongtong to Bokefa in accordance with relevant laws and provisions as provided in the agreement, or upon written notice by Bokefa to shareholders. In consideration of Bokefa’s loan arrangement, the shareholders have agreed to grant Bokefa an exclusive option to purchase their equity interest. Distribution of residual profits, if any, are restricted without the approval of Bokefa. Upon request by Bokefa, Guangxi Zhongtong is obligated to distribute profits to the shareholders of Guangxi Zhongtong, who must remit such profits to Bokefa immediately. Guangxi Zhongtong and its shareholders are required to act in a manner that is in the best interest of Bokefa with regards to Guangxi Zhongtong’s business operation.

Equity Pledge Agreement

The agreement will be terminated upon such date when the other agreements have been terminated. Pursuant to the agreement, the nominee shareholders pledged all their equity interest in Guangxi Zhongtong to Bokefa as security for the obligations in the other agreements. Bokefa has the right to receive dividends on the pledged shares, and all shareholders are required to act in a manner that is in the best interest of Bokefa.


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

Business Cooperation Agreement

The agreement is effective until terminated by both parties. Guangxi Zhongtong and its shareholders agree that the legal person, directors, general manager and other senior officers of Guangxi Zhongtong should be appointed or elected by Bokefa. Guangxi Zhongtong and its shareholders agree that all the financial and operational decisions for Guangxi Zhongtong will be made by Bokefa.

Exclusive Service Agreement

The effective term of this agreement is for one year and it can be extended an unlimited number of times if agreed by both parties. Bokefa agrees to provide exclusive technical consulting and support services to Guangxi Zhongtong and Guangxi Zhongtong agrees to pay service fees to Bokefa.

Entrustment and Power of Attorney Agreement

The shareholders of Guangxi Zhongtong agreed to entrust all the rights to exercise their voting power and any other rights as shareholders of Guangxi Zhongtong to Bokefa. The shareholders of Guangxi Zhongtong have each executed an irrevocable power of attorney to appoint Bokefa as their attorney-in-fact to vote on their behalf on all matters requiring shareholder approval.

On August 23, 2021, Beijing Yibao Technology Co., Ltd(“Beijing Yibao”), Guangxi Zhongtong , and two shareholders of Guangxi Zhongtong entered into a capital increase agreement pursuant to which Beijing Yibao would invest approximately RMB30,000 ($4,700) into Guangxi Zhongtong. On October 21, 2021, Beijing Yibao transferred the total investment funds of  RMB30,000 ($4,700)  to Guanxi Zhongtong, and 60% of the shares were issued to Beijing Yibao. The capital increase transaction was closed accordingly on October 21, 2021. As a result of the transaction, Beijing Yibao now holds a sixty percent (60%) equity interest in Guangxi Zhongtong and is the controlling shareholder. As a condition of the closing, the previous agreements consummated on January 1, 2021 per the GZ Frame Work Loan became null and void, and the loan lent to the shareholders under the GZ Frame Work Loan agreement should be fully repaid by the shareholders before December 31, 2023.

VIE agreements with Beijing Fucheng Lianbao Technology Co., Ltd. (Beijing Fucheng):

On December 31, 2020, as amended on August 25, 2021, Bokefa, Beijing Fucheng, and the shareholders of Beijing Fucheng entered into six agreements, described below, pursuant to which Bokefa is deemed to have a controlling financial interest and be the primary beneficiary of Beijing Fucheng. Therefore, Beijing Fucheng is deemed a VIE of Bokefa.

Loan Agreement

Pursuant to this agreement, Bokefa agreed to provide loans to the registered shareholders of Beijing Fucheng. The term of the loan under this agreement shall start from the date when the loan is actually paid and shall continue until the shareholders repay all the loan in accordance with this agreement. The agreement shall terminate when the shareholders repay the loan. The loan should be used solely for Beijing Fucheng’s operating expenses, and should be exclusively repaid by transferring shares of Beijing Fucheng to Bokefa when PRC Law permits.  

Exclusive Option Agreement

The effective term of the agreement is unlimited and the agreement shall terminate upon the transfer of all of the equity interest of Bejing Fucheng to Bokefa in accordance with relevant laws and provisions as provided in the agreement, or upon written notice by Bokefa to the shareholders. In consideration for Bokefa’s loan arrangement, the shareholders have agreed to grant Bokefa an exclusive option to purchase their equity interest. Distribution of residual profits, if any, is restricted without the approval of Bokefa. Upon request by Bokefa, Beijing Fucheng is obligated to distribute profits to the shareholders of Beijing Fucheng, who must remit those profits to Bokefa immediately. Beijing Fucheng and its shareholders are required to act in a manner that is in the best interest of Bokefa with regards to Beijing Fucheng’s business operations.

Equity Pledge Agreement

The agreement will be terminated at the date when the other agreements have been terminated. Pursuant to the agreement, the shareholders pledged all their equity interest in Beijing Fucheng to Bokefa as security for their obligations under the agreements. Bokefa has the right to receive dividends on the pledged shares, and all shareholders are required to act in a manner that is in the best interest of Bokefa.

Business Cooperation Agreement

The agreement is effective until terminated by both parties. Beijing Fucheng and its shareholders agree that the legal person, directors, general manager and other senior officers of Beijing Fucheng should be appointed or elected by Bokefa. Beijing Fucheng and its shareholders agree that all financial and operational decisions of Beijing Fucheng will be made by Bokefa.


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

Exclusive Service Agreement

The effective term of this agreement is for one year and it can be extended an unlimited number of times if agreed by both parties. Bokefa agrees to provide exclusive technical consulting and support services to Beijing Fucheng and Beijing Fucheng agrees to pay service fees to Bokefa.

Entrustment and Power of Attorney Agreement

The shareholders of Beijing Fucheng agreed to entrust all the rights to exercise their voting power and any other rights as shareholders of Beijing Fucheng to Bokefa. The shareholders of Beijing Fucheng have each executed an irrevocable power of attorney to appoint Bokefa as their attorney-in-fact to vote on their behalf on all matters requiring shareholder approval. The agreement is effective until deregistration of Beijing Fucheng.

VIE agreements with All Weather Insurance Agency Co., Ltd. (All Weather):

On July 1, 2021, Bokefa, All Weather., and nominee shareholders of All Weather entered into six agreements, described below, pursuant to which Bokefa is deemed to have a controlling financial interest and be the primary beneficiary of All Weather. All Weather., Ltd.is deemed a VIE of Bokefa.

Loan Agreement

Pursuant to this agreement, Bokefa agreed to provide loans to the nominee shareholders of All Weather. The term of the loan is one year and shall start from the date when the loan is actually paid. The agreement shall terminate when the shareholders repay the loan. The loan should be used solely by All Weather for operating expenses, and should be exclusively repaid by transferring shares of All Weather to Bokefa when PRC Law permits.

Exclusive Option Agreement

The effective term of the agreement is unlimited and the agreement shall terminate upon the transfer of all of the equity interest of All Weather to Bokefa in accordance with relevant laws and provisions in the agreement, or upon written notice by Bokefa to the shareholders. In consideration for Bokefa’s loan arrangement, the shareholders have agreed to grant Bokefa an exclusive option to purchase their equity interest. Distribution of residual profits, if any, is restricted without the approval of Bokefa. Upon request by Bokefa, All Weather is obligated to distribute profits to the shareholders of All Weather, who must remit the profits to Bokefa immediately. All Weather and its shareholders are required to act in a manner that is in the best interest of Bokefa with regard to All Weather’s business operations.

Equity Pledge Agreement

The agreement will be terminated at the date when the other agreements have been terminated. Pursuant to the agreement, the nominee shareholders pledged all of their equity interest in All Weather to Bokefa as security for their obligations pursuant to the other agreements. Bokefa has the right to receive dividends on the pledged shares, and all shareholders are required to act in a manner that is in the best interest of Bokefa.

Business Cooperation Agreement

The agreement is effective until terminated by both parties. All Weather and its shareholders agree that the legal person, directors, general manager and other senior officers of All Weather should be appointed or elected by Bokefa. All Weather and its shareholders agree that all the financial and operational decisions of All Weather will be made by Bokefa.

Exclusive Service Agreement

The effective term of this agreement is for one year and it can be extended an unlimited number of times if agreed by both parties. Bokefa agrees to provide exclusive technical consulting and support services to All Weather and All Weather agrees to pay service fees to Bokefa.

Entrustment and Power of Attorney Agreement

The shareholders of All Weather agreed to entrust all their rights to exercise their voting power and any other rights as shareholders of All Weather to Bokefa. The shareholders of All Weather have each executed an irrevocable power of attorney to appoint Bokefa as their attorney-in-fact to vote on their behalf on all matters requiring shareholder approval. The agreement is effective until the deregistration of All Weather.


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

VIE agreements with Tianjin Dibao Technology Development Co. Ltd. (Tianjin Dibao):

On April 2, 2022, Zheng Zhong Energy, Tianjin Dibao , and nominee shareholder of Tianjin Dibao entered into six agreements, described below, pursuant to which Zheng Zhong Energy is deemed to have a controlling financial interest and be the primary beneficiary of Tianjin Dibao. Tianjin Dibao is deemed a VIE of Zheng Zhong Energy.

Loan Agreement

Pursuant to this agreement, Zheng Zhong Energy agreed to provide loans to the shareholder of Tianjin Dibao. The term of the loan shall start from the date when the loan is actually paid. The agreement shall terminate when the shareholder repay the loan. The loan should be used solely to purchase Tianjin Dibao’s 76% equity, and should be exclusively repaid by transferring shares of Tianjin Dibao to Zheng Zhong Energy when PRC Law permits.

Exclusive Option Agreement

The effective term of the agreement is unlimited and the agreement shall terminate upon the transfer of all of the equity interest of Tianjin Dibao to Zheng Zhong Energy in accordance with relevant laws and provisions in the agreement, or upon written notice by Zheng Zhong Energy to the shareholder. In consideration for Zheng Zhong Energy’s loan arrangement, the shareholder have agreed to grant Zheng Zhong Energy an exclusive option to purchase their equity interest. Distribution of residual profits, if any, is restricted without the approval of Zheng Zhong Energy. Upon request by Zheng Zhong Energy, Tianjin Dibao is obligated to distribute profits to the shareholder of Tianjin Dibao, who must remit the profits to Zheng Zhong Energy immediately. Tianjin Dibao and its shareholder are required to act in a manner that is in the best interest of Zheng Zhong Energy with regard to Tianjin Dibao’s business operations.

Equity Pledge Agreement

The agreement will be terminated at the date when the other agreements have been terminated. Pursuant to the agreement, the nominee shareholder pledged all of their equity interest in Tianjin Dibao to Zheng Zhong Energy as security for their obligations pursuant to the other agreements. Zheng Zhong Energy has the right to receive dividends on the pledged shares, and all shareholders are required to act in a manner that is in the best interest of Zhengzhong Energy.

Business Cooperation Agreement

The agreement is effective until terminated by both parties. Tianjin Dibao and its shareholders agree that the legal person, directors, general manager and other senior officers of Tianjin Dibao should be appointed or elected by Zheng Zhong Energy. Tianjin Dibao and its shareholder agree that all the financial and operational decisions of Tianjin Dibao will be made by Zheng Zhong Energy.

Exclusive Service Agreement

The effective term of this agreement is for one year and it can be extended an unlimited number of times if agreed by both parties. Zheng Zhong Energy agrees to provide exclusive technical consulting and support services to Tianjin Dibao and Tianjin Dibao agrees to pay service fees to Zheng Zhong Energy.

Entrustment and Power of Attorney Agreement

The shareholder of Tianjin Dibao agreed to entrust all their rights to exercise their voting power and any other rights as shareholder of Tianjin Dibao to Zheng Zhong Energy. The shareholder of Tianjin Dibao have each executed an irrevocable power of attorney to appoint Zheng Zhong Energy as their attorney-in-fact to vote on their behalf on all matters requiring shareholder approval. The agreement is effective until the deregistration of Tianjin Dibao.


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

NOTE 10 — BEIJING FUCHENG LIANBAO TECHNOLOGY CO., LTD TRANSACTION

On February 10, 2021, the Company closed a transaction pursuant to which it acquired (via Beijing Fucheng in which it holds 24% and engaged in a VIE structure) all of the shares of Beijing Yibao Technology Co., Ltd., and, indirectly, its wholly-owned subsidiary Beijing Fucheng Insurance Brokerage Co., Ltd. (the “Fucheng Insurance Transaction”).

The table set forth below summarizes the estimates of the fair value of assets acquired and liabilities assumed. In addition, the following table summarizes the allocation of the preliminary purchase price as of the acquisition date:

Beijing Fucheng Lianbao Technology Co., Ltd transaction, Purchase Price Allocation

(USD in thousands)    
Total cash consideration $5,711 
Total purchase consideration $5,711 
Less:    
Net working capital $926 
Property and equipment  26 
Intangible assets - License  4,814 
Current liabilities  (55)
Fair value of net assets acquired $5,711 

Since we started consolidating Beijing Fucheng Lianbao reports from February 10, 2021, the pro forma numbers are immaterial and therefore we did not present them.

NOTE 11 — Guangxi Zhongtong Insurance Agency Co., Ltd Acquisition

On January 1, 2021, we entered into a transaction through Bokefa, with the shareholders of Guangxi Zhongtong Insurance Agency Co., Ltd (“Guangxi Zhongtong”), a local Chinese entity with business and operations in the insurance brokerage business. Pursuant to the transaction, we granted loans to Guangxi Zhongtong’s shareholders through a frame work loan (the “GZ Frame Work Loan”) the amount of up to RMB 40,000 (approximately $6,125) (“GZ Frame Work Loan Amount”) which is designated, if exercised, to be used as a working capital loan for Guangxi Zhongtong. As of December 31, 2022, only RMB 8,010 (approximately $1,243) was drawn down from the GZ Frame Work Loan for working capital and approximately $919 was drawn down for loans to shareholders of Guangxi Zhongtong (as stipulated in the agreement). In consideration for the GZ Frame Work Loan, the parties entered into various additional agreements which include: (i) a pledge agreement pursuant to which the shareholders have pledged their shares for the benefit of  Bokefa in order to secure the GZ Frame work Loan Amount  (ii) an exclusive option agreement pursuant to which Bokefa has an exclusive option to purchase the entire issued and outstanding common shares of Guangxi Zhongtong from the shareholders (“Option Agreement”) under such terms set forth therein (which include an exercise price not less than the maximum GZ Frame Work Loan Amount and the right to convert the GZ Frame Work Loan Amount into the purchased shares) (iii) an entrustment agreement and power of attorney agreement pursuant to which the shareholders irrevocably entrusted and appointed Tianjin Bokefa as their proxy and trustee to exercise on their behalf any and all rights under applicable law and the articles of association of Guangxi Zhongtong in the shareholder’s equity interest in Guangxi Zhongtong (iv) a business cooperation agreement and a master exclusive service agreement which grants Bokefa rights related to Guangxi Zhongtong’s business and operations in order to secure repayment of the GZ Frame Work Loan Amount.


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value data)

This transaction was structured pursuant to a Variable Interest Entity, Structure (in which we do not hold the shares). As such, and given our direct ownership in Bokefa and its contractual arrangements with Guangxi Zhongtong, we are regarded as Guangxi Zhongtong’s controlling entity and primary beneficiary of Guangxi Zhongtong business. We have, therefore, consolidated the financial position and operating results of Guangxi Zhongtong using the fair value of the assets and liabilities of Guangxi Zhongtong.

Beijing Fucheng Lianbao Technology Co., Ltd is an entity incorporated on December 29, 2020, in which Bokefa owns 24% equity interest with the remaining 76% controlled by Bokefa through VIE agreements. On February 10, 2021, Beijing Fucheng acquired all of the shares of Beijing Yibao Technology Co., Ltd., which holds 100% of the equity interest in Beijing Fucheng Insurance Brokerage Co., Ltd. (“Fucheng Insurance”). Fucheng Insurance is a Chinese insurance brokerage agency and a nation-wide licensed entity which offers insurance brokerage services for a broad range of insurance products. Fucheng Insurance, through their nationwide license, will give us the flexibility to offer and create tailor-made insurance products, leverage customers directly or through distribution partners and procure better deals with both our existing and new insurance company partners. Fucheng Insurance further enables us to accelerate the onboarding of new agents onto our platforms all throughout China. It also creates the opportunity to promote our business through some of China’s biggest online portals, which will provide business-to-business-to-consumer (B2B2C) as well as business-to-consumer (B2C) channels. When Fucheng Insurance initiates its nationwide rollout of its mobile application, it will facilitate access to those portals’ large customer bases which will also offer TINGO GROUP’S full suite of insurance products. Beijing Fucheng shares were acquired for approximately $5,700, and funded through the Company.

On October 21, 2021, Yibao transferred such funds and the transaction closed. As a result of the transaction, Yibao now holds a sixty percent (60%) equity interest in Guangxi Zhongtong and is the controlling shareholder. As a condition of the Closing, the previous agreements consummated on January 1, 2021 per the Frame Work Loan became null and void.

Purchased identifiable intangible assets are amortized on a straight-line basis over their respective useful lives. The table set forth below summarizes the estimates of the fair value of assets acquired and liabilities assumed. In addition, the following table summarizes the allocation of the preliminary purchase price as of the acquisition date:

Guangxi Zhongtong Insurance Agency Co., Ltd, Purchase Price Allocation

(USD in thousands)

Total cash consideration $- 
Total Purchase Consideration $- 
Less:    
Debt-free net working capital $613 
Property and equipment  13 
Intangible assets - Licenses  1,926 
Intangible assets - customer relationship (1)  248 
Deferred Tax liability (2)  (544)
Fair value of net assets acquired $2,256 
Fair value of the Noncontrolling interest $(3,231)
Gain on equity interest  1,128 
Equity investment  - 
Change in investment  (2,103)
Bargain gain from acquisition $(153)

(1)The customer database value is based on the cost to recreate, as indicated by management.
(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 26%.


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

NOTE 12 — ALL WEATHER TRANSACTION

On July 1, 2021, we entered into a transaction through Bokefa, with the shareholders of All Weather, a local Chinese entity with business and operations in the insurance brokerage business. Pursuant to the transaction, we granted loans to All Weather’s shareholders through a frame work loan (the “AW Frame Work Loan”) the amount of up to RMB 30,000 (approximately $4,700) (“AW Frame Work Loan Amount”) which is designated, if exercised, to be used as a working capital loan for All Weather. As of December 31, 2022, RMB 30,000 (approximately $4,700) was drawn down from the AW Frame Work Loan for working capital. In consideration for the AW Frame Work Loan, the parties entered into various additional agreements which include: (i) a pledge agreement pursuant to which the shareholders have pledged their shares for the benefit of  Bokefa in order to secure the AW Frame work Loan Amount  (ii) an exclusive option agreement pursuant to which Bokefa has an exclusive option to purchase the entire issued and outstanding common shares of All Weather from the shareholders (“Option Agreement”) under such terms set forth therein (iii) an entrustment agreement and power of attorney agreement pursuant to which the shareholders irrevocably entrusted and appointed Bokefa as their proxy and trustee to exercise on their behalf any and all rights under applicable law and the articles of association of All Weather in the shareholder’s equity interest in All Weather (iv) a business cooperation agreement and a master exclusive service agreement which grants Bokefa rights related to All Weather’s business and operations in order to secure repayment of the AW Frame Work Loan Amount.

This transaction was structured pursuant to a Variable Interest Entity Structure (in which we do not hold the shares). As such, and given our direct ownership in Bokefa and its contractual arrangements with All Weather, we are regarded as All Weather’s controlling entity and primary beneficiary of All Weather’s business. We have, therefore, consolidated the financial position and operating results of All Weather into our consolidated financial statements, using the fair value of the assets and liabilities of All Weather.

Purchased identifiable intangible assets are amortized on a straight-line basis over their respective useful lives. The table set forth below summarizes the estimates of the fair value of assets acquired and liabilities assumed and resulting gain on bargain purchase. In addition, the following table summarizes the allocation of the preliminary purchase price as of the acquisition date:

All Weather, Purchase Price Allocation

(USD in thousands)

Total cash consideration $- 
Total purchase consideration $- 
Less:    
Debt-free net working capital $(105)
Property and equipment  153 
Right of use assets  208 
Lease liabilities  (258)
Intangible assets - licenses (1)  849 
Intangible assets - customer relationship (1)  54 
Deferred Tax liability (2)  (226)
Fair value of net assets acquired $675 
Noncontrolling interest $(675)
Change in investment  (675)
Goodwill $- 

(1)The customer database value is based on the cost to recreate, as indicated by management.
(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 25%.

All Weather’s net revenues and net loss are presented if the acquisition date had occurred at the beginning of the annual reporting period.

  Year ended  Year ended 
  December 31,  December 31, 
  

(Unaudited)

 
(USD in thousands) 2022  2021 
Revenues $146,035  $69,566 
         
Net loss $(47,115) $(36,514)


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

NOTE 13 — TINGO MOBILE LIMITED TRANSACTION

On May 10, 2022, TMNA entered into the Tingo Merger Agreement with MICT Merger Sub, Inc., a Nevada corporation and a wholly owned subsidiary of TINGO GROUP (“Merger Sub”), and TINGO GROUP, Inc., a Delaware corporation (“TINGO GROUP”).

On June 15, 2022, TMNA, Merger Sub and TINGO GROUP entered into an Amended and Restated Agreement and Plan of Merger, following the completion of extensive due diligence by TINGO GROUP and its advisors.

Following the execution of the Amended and Restated Merger Agreement, TINGO GROUP and TMNA explored ways in which the combination of Tingo’s core businesses and TINGO GROUP could be accomplished with the greatest speed and efficiency and on a tax-free basis. Based upon advice from each of the companies’ advisors, the parties negotiated a Second Amended and Restated Merger Agreement, which determined the Merger to be a multi-phase forward-triangular Merger. On October 6, 2022, TINGO GROUP and TMNA, as well as individual representatives of each company’s shareholders, executed the Tingo Merger Agreement

On November 9, 2022, TMNA filed a Definitive Information Statement with the U.S. Securities and Exchange Commission to complete the Tingo Merger.

Pursuant to the Tingo Merger Agreement, TMNA transferred its ownership of Tingo Mobile to Tingo BVI Sub, which was then merged with and into MICT Fintech Limited (“MICT Fintech”), a British Virgin Islands company and a wholly-owned subsidiary of Tingo Group Holdings, LLC, a Delaware limited liability company and a wholly-owned subsidiary of TINGO GROUP (“TGH”)

On December 1, 2022 (the “Tingo Closing”), pursuant to certain joinder agreements, TGH and MICT Fintech were added as parties to the Merger Agreement, and TINGO GROUP completed the merger of Tingo BVI Sub with and into MICT Fintech (the “Tingo Combination”).

Under the terms of the SEDA, the Company may from timeTingo Merger Agreement, TINGO GROUP issued to time, in its discretion, sell newly-issued shares of its common stock to YA II at a discount to market of 1.5%.  The Company expects to issueTMNA (i) 25,783,675 shares of common stock under the SEDA pursuant to its effective Registration Statement on Form S-3 (Registration No. 333-196760), or the Registration Statement. The Company is not obligated to utilize any of the funds available under the SEDA and there are no minimum commitments or minimum use penalties.  The total amountTINGO GROUP, representing approximately 19.9% of funds that ultimately can be raised under the SEDA over the three-year term will depend on the market price for the Company’s common stock and the number of shares actually sold. The SEDA does not impose any restrictions on the Company’s operating activities. During the termof TINGO GROUP’s common stock issued and outstanding; (ii) 2,604.28 shares of Series A Preferred Stock convertible into 26,042,808 shares of TINGO GROUP common stock equal to approximately 20.1% of the SEDA, YA II is prohibited from engagingtotal issued and outstanding TINGO GROUP common stock immediately prior to Tingo Closing; and (iii) 33,687.21 shares of Series B Preferred Stock convertible into 336,872,138 shares of TINGO GROUP common stock equal to approximately 35% of the total issued and outstanding common stock immediately prior to Tingo Closing. The rights of the Series A Preferred Stock and the Series B Preferred Stock are set forth in any short selling or hedgingCertificates of Designation of Preferences, Rights and Limitations that TINGO GROUP filed with the Secretary of State of the State of Delaware on November 30, 2022.

Also, at the Tingo Closing, TINGO GROUP added two individuals appointed by TMNA to TINGO GROUP’s existing board of directors.

Following execution of the Tingo Merger Agreement, TINGO GROUP extended to TMNA a loan in the principal amount of $23,700 with an interest rate of 5% per year (the “Amended Purchaser Loan”), and which amended and restated a previous loan agreement between TINGO GROUP and TMNA dated September 28, 2022, for a principal amount of $3,700.

If all of the transactions contemplated by the Tingo Merger Agreement and related agreements are consummated (including, for the avoidance of doubt, the conversions of the Series A Preferred Stock and Series B Preferred Stock into common stock), which will require further TINGO GROUP stockholder approval and Nasdaq approvals, such transactions would constitute a change of control of TINGO GROUP, as TMNA, would own a majority of the outstanding shares (on an as-converted basis) of TINGO GROUP.

Conversion of Series A Preferred Stock

Subject to stockholder approval, each share of Series A Preferred Stock will be convertible into approximately 10,000 shares of TINGO GROUP Common Stock. If stockholders have not approved the conversion of the Series A Preferred Stock into TINGO GROUP common stock by June 30, 2023 (the “Trigger Date”), then, (i) all issued and outstanding shares of Series A Preferred Stock will be immediately and automatically redeemed by TINGO GROUP, and all accrued and unpaid dividends thereon to the Company’s common stock. Asdate of December 31, 2016,redemption extinguished, in consideration of the Company sold YA IIright to receive an aggregate amount, in respect of 506,371all shares of its common stock for an aggregate saleSeries A Preferred Stock, of $1.00 in cash, and (ii) TINGO GROUP shall, within ten (10) business days following the Trigger Event, cause TINGO GROUP to issue to TMNA the amount of $768 pursuantmembership interests of TGH as needed to cause TMNA to own 27% of the total issued and outstanding membership interests of TGH, subject to the SEDA and underterms of the Registration Statement. The aggregate issuance costs amounted to $188.Series A Preferred Stock Certificate of Designations.

 

F-23

 

 

NOTE 14 — SEGMENT REPORTINGTINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

 

The Company accounts for its segment informationConversion of Series B Preferred Stock

Upon approval by Nasdaq of the change of control of TINGO GROUP and upon the approval of TINGO GROUP’s stockholders, each share of Series B Preferred Stock issued by TINGO GROUP to TMNA shall automatically convert into 10,000 shares of TINGO GROUP common stock in accordance with the provisionsterms of its certificate of designation. If such shareholder or Nasdaq approval is not obtained by June 30, 2023, TMNA shall have the right to (i) cause the Series B Redemption to take place within 90 days; and (ii) cause TINGO GROUP to redeem all of the Series B Preferred Stock in exchange for (x) $666,666,667 or (y) an amount of common stock of TGH equivalent in value to $666,666,667 (reduced from the aggregate value of the Series B Preferred Stock at issuance, which is $1,000,000,000). As the Series B Preferred Stock redemption is contingent upon the approval of shareholders or Nasdaq approval, they are presented outside of Stockholders’ Equity in a total amount of approximately $553 million which reflect their fair value proportion from the consideration.

The Series B Preferred Stock shall have no voting rights, however, the Series B Preferred Stock are entitled to receive dividends and conversion rights. The dividend rate on Series B Preferred Stock shall be the sum of (i) 4% of the Stated Value (as defined in the Series B Certificate of Designation) per share per annum plus (ii) if a dividend was declared and paid on the outstanding shares of Common Stock, an amount equal to the amount each share of Series B Preferred Stock would have received if it had been converted into Common Stock prior to the payment of the dividend, as declared by the Board of Directors. Regarding the conversion rights, upon the occurrence of the Conversion Date as defined within the Series B Certificate of Designation, each outstanding share of Preferred Stock shall be automatically converted into 10,000 shares of Common Stock, which in the aggregate shall be equal to 35.0% of Common Stock outstanding immediately prior to the Tingo Closing.

In accordance with ASC 280-10,805, Business Combinations, at Tingo Closing, the Tingo Merger was accounted as business combinations under which, TINGO GROUP was the acquirer and Tingo BVI Sub and its subsidiaries will be treated as the “acquired” company for financial reporting purposes. Under the acquisition accounting method, the total estimated purchase price was allocated to the identifiable assets acquired and liabilities assumed based on their fair values. The excess of the purchase price over the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed has been recorded as goodwill. Management’s estimate of the fair values of the acquired intangible assets as of December 1, 2022 is preliminary and subject to change and is based on established and accepted valuation techniques performed with the assistance of third-party valuation specialists. Additional information, which existed as of the acquisition date but is yet unknown to the Company may become known to the Company during the remainder of the measurement period, which will not exceed twelve months from the acquisition date. Changes to amounts will be recorded as adjustments to the provisional amounts recognized as of the acquisition date and may result in a corresponding adjustment to goodwill in the period in which new information becomes available. The goodwill that arose from the acquisition consists of synergies expected from integrating Tingo Mobile into the Company’s operations and customer base.

Tingo Mobile, Purchase Price Allocation

Purchased identifiable intangible assets are amortized on a straight-line basis over their respective useful lives. 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:

Total Merger consideration (1) $1,215,241 
Total purchase consideration $1,215,241 
Less:    
Net working capital $170,327 
Property and equipment  844,764 
Intangible – farmer cooperative  24,811 
Intangible – trade names and trade marks  54,576 
Intangible – software  90,172 
Deferred tax liability (2)  (50,868)
  $1,133,782 
Goodwill (3) $81,459 

(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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

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.

NOTE 14 — SEGMENTS

ASC 280, “Segment Reporting” (“ASC 280-10”). ASC 280-10, establishes annual and interim reporting standards for reporting information about operating segments ofon a company. ASC 280-10 requires disclosures of selected segment-related financial information about products, major customers, and geographic areas based onbasis consistent with the Company’s internal accounting methods.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. WeAs a result of our acquisition of GFHI on July 1, 2020 (see Note 8) and Tingo Mobile on December 1, 2022 (see Note 13), 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 twoheld a controlling interest in Micronet, and we have presented our mobile resource management (“MRM”) business operated by Micronet as a separate operating segments: defensesegment. As of May 9, 2021, the Company’s ownership interest was diluted and, aerospaceas a result, we deconsolidated Micronet.

As of December 31, 2022, the Company has 3 segments. This change came with the completion of the Tingo Mobile acquisition on December 1, 2022. 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 conducted by Enertec and MRM conducted by Micronet.

Summarizedor reportable segment since the CODM does not review discrete financial information by segment for the business. The Company recast the information for the fiscal years ended December 31, 2016 and 2015: 2022 to align with this presentation.

 

Summarized financial information by segment forThe activities of each of our reportable segments from which the years ended December 31, 2016, based on the Company’s internal financial reporting system utilized by the Company’s chief operating decision makers, follows: Company earns revenues, records equity earnings or losses and incurs expenses are described below:

 

  Defense and aerospace  Mobile resource management  Consolidated 
Revenues from external customers $9,464  $13,284  $22,748 
Segment operating income (loss)  (983)  (1)   (4,527)   (5,510)
Non allocated expenses          (1,460)
Finance expenses, net          (672)
Consolidated loss before provision for income taxes         $(7,642)
●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.


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

The following table summarizes the financial performance of our operating segments:

  Year ended December 31, 2021 
(USD in thousands) Verticals
and
technology		  Comprehensive platform service  

Corporate
and others
(3)

  Online
stock
trading		  Consolidated 
                
Revenues from external customers $54,932           -   $726   $18  $55,676 
Segment operating loss  (9,604)(1)  -   (20,788)(2)  (7,504)  (37,896)
Other income, net          (1,801)      
(1,801
)
Finance income (expenses), net          395   395     
Loss before provision for income taxes                 $(39,302)

(1)Includes $2,931 of intangible assets amortization, derived from GFHI acquisition.
(2)Includes $926$103 of intangible assets amortization, derived from Micronet consolidation.
(3)Corporate and Micronet Inc. acquisitions.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.

 

  Year ended December 31, 2022 
(USD in thousands) Verticals
and
technology		  Online
stock
trading		  Corporate
and others (3)		  Comprehensive platform service  Consolidated 
Revenues from external customers $57,364  $55      $88,616  $146,035 
Segment operating loss  (12,539)(1)  (9,829)  (26,203)  36,779(2)  (11,792)
Other income, net          2,151       2,151 
Finance income (expenses), net          (750)      (750)
Consolidated loss before income tax benefit                 $(10,391)

Revenue

(1)Includes $2,931 of intangible assets amortization, derived from GFHI acquisition.
(2)

Includes $2,416 of intangible assets amortization, derived from Tingo Mobile acquisition.


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

The following table summarizes the Company’s major customers representing 10% or morefinancial statements of total revenueour balance sheet accounts of the segments:

  As of December 31, 2021 
(USD in thousands) Verticals
and
technology		  Comprehensive
platform
service		  Corporate
and others		  Online
stock
trading		  Consolidated 
                
Assets related to segments $86,474(1) $                -   30,756  $60,581(3) $177,811 
Liabilities related to segments  (23,516)(2)  -   (2,620)  (3,953)  (30,089)
Total equity                 $147,722 

(1)Includes $19,292 of intangible assets and $19,788 goodwill, derived from GFHI’s acquisition.
(2)Includes $3,728 of deferred tax liability, derived from GFHI acquisition.
(3)Includes $1,222 of intangible assets.

  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 Tingo Mobile acquisition.
(5)Includes $50,143 of deferred tax liability, derived from Tingo Mobile acquisition and $553,035 redeemable preferred stock series B.

NOTE 15 — TRADE ACCOUNTS RECEIVABLE, NET

Trade accounts receivable were comprised of the following:

  December 31,  December 31, 
(USD in thousands) 2022  2021 
Trade accounts receivable $14,553  $20,485 
Allowance for doubtful accounts  (3,012)  (2,606)
  $11,541  $17,879 


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

Movement of allowance for doubtful accounts for the yearsfiscal year ended December 31, 20162022 and 2015 were as follows:

  Year ended
December 31,		 
  2016  2015 
Customer A  34%  30%
Customer B  13%  11%

Revenue from customers in the geographic regions based on the location of customers’ headquarters is as follows: 

  Year ended
December 31,		 
  2016  2015 
United States $9,867  $12,116 
Israel  9,645   9,150 
Other  3,236   2,321 
Total $22,748  $23,587 

F-24

NOTE 15 — COMMITMENTS AND CONTINGENCIES

Lease commitments-

Micronet’s short term lease expires in June 2017. Accrual rent fee is approximately $77 perfiscal year including a property management fee. Micronet Inc.'s lease was extended on a month by month basis in May 2016 until either party provides written three month notice to the other. Its accrual rent fee is approximately $200 per year. Enertec’s properties consist of leased combined office and manufacturing facilities used for sales, support, research and development, manufacturing, and our headquarters (management and administrative personnel) and are located in Karmiel, Israel. Annual rent is approximately $237 per year. The lease term expires in June 2021, subject to two five-year extension options and early termination provision after five years, which we hold.

Atended December 31, 2016, total minimum cars and lease rentals under non-cancelable operating leases with an initial or remaining lease term of one year or more2021 are as follows:

 

Year Ending December 31, Amount 
2017 $727 
2018  307 
2019  271 
2020 $237 

Legal proceedings

We are not subject to any pending or threatened legal proceedings, nor is our property the subject of a pending or threatened legal proceeding. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.

Covenants

 ●Enertec has covenanted under its bank loans at June 30 and December 31 of each year, among other things that (1) its shareholder’s equity according to its financial statements will not fall below NIS 17 million, and (2) its shareholder’s equity will not be lower than 30% of the total liabilities on its balance sheet. Enertec has not met all of its bank covenants as of December 31, 2016; As a result the Company reclassified its loans from long-term to short-term liabilities. Certain restricted cash is used as collateral to secure the loans.  
●Enertec Electronics has covenants under its bank loan mainly in respect of separate financial statements equity of not less than 32.5% of total assets. Enertec Electronics has met all of its bank covenants as of December 31, 2016. . The restricted cash stands as collateral for the loan.

●In addition, Micronet has undertaken under its bank loan documents the following financial covenants: (i) a cash and marketable securities balance of not less than 15,000 NIS; (ii) a minimum equity of 30,000 NIS and (iii) total solvency ratio of not less than 30%. Micronet has not met all of its bank covenants as of December 31, 2016. After the end of the reporting period, Micronet repaid all of its loans to the bank.

(USD in thousands) 2022  2021 
Beginning balance $2,606  $5 
Provision  618   2,574 
Exchange rate fluctuation  (212)  32 
Decrease due to deconsolidation of Micronet  -   (5)
  $3,012  $2,606 

 

F-25

NOTE 15 — COMMITMENTS AND CONTINGENCIES (CONT.)

Chief Scientist

In April 2013, Micronet submitted to the Israeli Office of the Chief Scientist of the Ministry of Economy, or OCS, a request for financial support within a framework of a research and development program for a new product. In September 2013, a grant to Micronet in a total amount of NIS 5.5 million (approximately $1.5 million) was approved by the OCS. This grant was provided by the OCS for a period of one year (starting April 2013) at a level of 30% from the aforementioned amount. In addition, during 2014 Micronet received further confirmation for a grant from the OCS in the total amount of NIS 5.5 million (approximately $1.5 million).  This grant was provided by the OCS for a period of one year (starting April 2014) at a level of 40% from the aforementioned amount. In addition, during 2015 Micronet received further confirmation for a grant from the OCS in the total amount of NIS 5.1 million (approximately $1.3 million)  at a level of 40% from the aforementioned amount.  Micronet is obligated to pay royalties to the OCS amounting to 3%-3.5% of the sales of the products and other related revenues generated from such projects linked to the dollar plus Libor interest rate To date, Micronet has received an aggregate of NIS 5.6 million (approximately $1.4) from the OCS under these three grants.

NOTE 16 — SUPPLEMENTARY FINANCIAL STATEMENTS INFORMATION

 

A.Other accounts receivable:Current Assets:

 

  December 31, 
  2016  2015 
Prepaid expenses $128  $311 
Government departments and agencies  65   280 
Deferred  taxes  580   482 
Others  126   512 
  $899  $1,585 
  December 31,  December 31, 
  2022  2021 
(USD in thousands)      
Prepaid expenses $1,019  $1,715 
Advance to suppliers  2,821   2,338
Deposit  287   1,335 
Business advance to employee  -   1,444 
Other receivables  1,701   1,033 
  $5,828  $7,865

 

B.Other Accounts Payable:Current Liabilities:

 

  December 31, 
  2016  2015 
Employees and wage-related liabilities $1,188  $1,188 
Government departments and agencies  409   345 
Accrued expenses  650   705 
Other current liabilities  136   246 
  $2,383  $2,484 
  December 31, 
(USD in thousands) 2022  2021 
Employees and wage-related liabilities $1,064  $500 
expenses payable  5,298   - 
Payment received by customers in advance  15   73 
Accrued expenses  2,431   1,802 
Income tax payable  178,582   365 
Other tax payable  3,267   273 
Advances from employee  1,402   990 
Deposit  383   364 
Due to insurance companies  151   142 
Other  1   405 
  $192,594  $4,914 


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

NOTE 17 — RELATED PARTIES

 

Current assets – related parties

  December 31,  December 31, 
  2022  2021 
(USD in thousands)      
Shareholders of All Weather $4,603  $3,680 
Beijing Fucheng Prospect Technology Co., Ltd  267     
Loan to Tingo Inc.(1)  8,099     
Convertible loan to Micronet (1)  -   535 
Shareholders of Guangxi Zhongtong  522   919 
  $13,491  $5,134 

 F-26(1)Tingo’s loan- as discussed in Note 13.

Current liabilities – related parties

  December 31,  December 31, 
  2022  2021 
(USD in thousands)      
Shareholders of Bokefa Petroleum and Gas $308  $        - 
Shareholders of All Weather  659   4 
Shareholders of Tingo Mobile Limited  56,539   - 
  $57,506  $4 

Darren Mercer, our Chief Executive Officer and a director, presently owns, with certain family members and related parties, approximately one third of the issued and outstanding shares of GFH and is the sole officer and one of three directors of GFH. In addition, prior to the closing the transactions contemplated by the agreement and plan of merger, entered into on November 7, 2019 and amended and restated on April 15, 2020 by and among TINGO GROUP, GFH Intermediate Holdings Ltd., a British Virgin Islands company (“Intermediate”), TINGO GROUP Merger Subsidiary Inc., a British Virgin Islands company and a wholly-owned subsidiary of TINGO GROUP (“Merger Sub”) and GHF as the sole shareholder of Intermediate, pursuant to which the Merger Sub merged with and into Intermediate, with Intermediate continuing as the surviving entity, as a result of which GFH became a wholly owned subsidiary of TINGO GROUP (the “Merger”). Mr. Mercer was the sole officer and director of Intermediate.


 

 

NOTE 16 — SUPPLEMENTARYTINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS INFORMATION (CONT.)

(In Thousands, except Share and Par Value Data)

On April 2, 2020, Darren Mercer, current board member of the Company, was appointed, the interim Chief Executive Officer of the Company and was given a fee of $25 per month for his services to the Company. Effective on July 1, 2020 the board of directors approved the following consideration  for Darren Mercer: (i) An annual base fee will be $495 per year and, (ii) a signing bonus of $100 and, (iii) a total annual bonus in accordance with the bonus program adopted by the Company from time-to-time with a target bonus opportunity equal to 100% of the Base Fee, With respect to a Target Bonus for a given year, the Company shall award up to 40% of such Target Bonus, as it so determines, on the basis of Mr.  Mercer’s performance in the first six months of the year and up to the remaining 60% of such Target Bonus on the basis of Mr. Mercer’s performance in the remaining 6 months of the year.  In addition, the Board of Directors may declare and grant a discretionary bonus for Mr. Mercer based on various targets and performance criteria to be established by the Board of Directors. The evaluation of the performance of Mr. Mercer as measured by the applicable targets and the awarding of applicable bonuses, if any, shall be at the sole discretion of the Board of Directors. On December 21, 2020, the board of directors approve additional $200 bonus. The agreement shall end on the third anniversary of the Start Date. The engagement above was formalized in the foam of independent contractor.

 

C.Earnings (loss) per Share:

BasicEffective on October 2021, the board of directors approve Darren Mercer (“Executive”) new employment terms as follows: (i) an annual base salary fee will be $800 and, diluted earnings (losses) per share were computed(ii) a total annual bonus in accordance with the bonus program adopted by the Company from time-to-time. The Target Bonus amount for Executive’s work in the calendar year 2021 shall be $713.  Executive’s Target Bonus opportunities for his work in the calendar years 2022 and 2023 shall be $1,200. The annual bonus under this Section 3(b), if any, shall be payable at the discretion of the Company based on achievement of performance metrics to be established by the average numberBoard for each year, including, for calendar years 2022 and 2023. Such metrics shall include goals based on revenue generated Executive’s consulting businesses.  Executive must be employed by the Company on the date of shares outstandingpayment in order to earn and receive any above, except in the event of termination without Cause or resignation for Good Reason (as such terms are include In the Agreement).  In addition, the Board may declare and grant a discretionary bonus for Executive based on various targets and performance criteria to be established by the Board. The evaluation of the performance of Executive as measured by the applicable targets and the awarding of applicable bonuses, if any, shall be at the sole discretion of the Board. In addition, Executive shall be entitled to Health Insurance If available on commercially reasonable terms, based on a health insurance plan to be determined in the Company’s discretion, Key Man Life Insurance (at the Company sole discretion), up to 35 (thirty-five) days of paid vacation per year, subject to the Company’s vacation policies in effect from time-to-time and to those paid public holidays set by the Company. Executive is also entitled to be reimbursed for reasonable and customary business expenses incurred by Executive during each year.employment subject to all terms and conditions of the Company’s expense policies in effect from time to time and for an expense account of $300 for the purposes of: (i) funding an office and accommodations for use of Executive and (ii) paying Executive additional compensation at the rate of $8.33 per month during the Term, as compensation for the additional expense of living overseas for those months in which Executive works for the Company outside the United Kingdom for at least five days.

 

As of December 31, 2022, Professor Yehezkel (Chezy) Ofir, held options to purchase 30,000 shares, 30,000 options to purchase shares were granted on May 23, 2021 at an exercise price of $1.81 per share. Out of which 22,500 of the options have vested.

As of December 31, 2022, Mr. Robert Benton, held options to purchase 80,000 shares, the options to purchase 80,000 shares were granted to him on May 23, 2021 at an exercise price of $1.81 per share. Out of which 60,000 of the options have vested.

As of December 31, 2022, Mr. John McMillan Scott held options to purchase 160,000 shares, the options to purchase 160,000 shares were granted to him on May 23, 2021 at an exercise price of $1.81 per share. Out of which 120,000 of the options have vested.


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

On October 6, 2022, the Company extended to Tingo Inc a loan in the principal amount of $23,700 with an interest rate of 5% per year, and which shall amend and restate the loan agreement between TINGO GROUP and Tingo dated September 28, 2022, for a principal amount of $3,700 (the “Previous Loan”). Pursuant to the Amended Purchaser Loan. In October 2022, Tingo Inc loan to Tingo mobile an amount of $15,866.The loan shall be due and payable on May 10, 2024 and bear interest at the rate of five percent (5%) per annum .

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 of Directors (the “Board”) unanimously approved a grant of 3,200,000 Fully vested shares of common stock to Mr. Darren Mercer, the Company’s Chief Executive Officer, in recognition of the completion of the acquisition of Tingo Mobile Limited, 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 .

NOTE 18 — 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 December 31, 2022, and the effect these obligations are expected to have on our liquidity and cash flows in future periods.

Contractual Obligation: Total  Less than
1 year		  1-3 year  3-5 year  5+ year 
Office leases commitment  2,246,040   1,287,995   904,174   53,871   - 
Short-term debt obligations Commitment  837,442   460,477   376,965   -   - 
Services Contract Commitment  260,975   260,975   -   -   - 
Total  3,344,457   2,009,447   1,281,139   53,871   - 

Legal Proceedings

The Company is subject to litigation arising from time to time in the ordinary course of its business. There is no open legal proceeding as of December 31, 2022 and as of today. We could be involved in ordinary course litigation.

NOTE 19 — OPERATING LEASES

The following table sets forth the computationprovides a summary of basic and diluted net earnings (losses) per share attributable to Micronet Enertec:leases by balance sheet location:

 

  Year ended
December 31,		 
  2016  2015 
Numerator:      
Amount for basic earnings per share $(5,807) $(2,467)
Effect of dilutive instruments  -   - 
         
Amount for diluted earnings per share  (5,807)  (2,467)
         
Denominator:        
Denominator for basic earnings per share - weighted average of shares  5,966,662   5,861,630 
Basic earnings per share attributed to Micronet Enertec stockholders $(0.97) $(0.42)
Assets/liabilities December 31,  December 31, 
(USD in thousands) 2022  2021 
Assets      
Right-of-use assets $2,260  $1,921 
         
Liabilities        
Lease liabilities- current portion $1,215  $1,298 
Lease liabilities- long term  905   691 
Total Lease liabilities $2,120  $1,989 

 

NOTE 17 — SUBSEQUENT EVENTS


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

The operating lease expenses were as follows:

 

(USD in thousands) Year ended
December 31,		 
  2022  2021 
Operating lease cost $1,222  $1,440 

Maturities of operating lease liabilities were as follows:

(USD in thousands) Year ended
December 31,		 
2023*  1,288 
2024  656 
2025  221 
2026  27 
2027  21 
Thereafter  33 
Total lease payment  2,246 
Less: imputed interest  (126)
Total lease liabilities  2,120 

* Not include operating leases with a term less than one year.

1.Lease term and discount rateOn January, 2017, the Company issued 6,750 restricted shares to a service provider under the 2014 Stock Incentive Plan. An expense of $26 was recorded at the grant date based on the market price of the issued shares on the grant date.December 31,
2022
Weighted-average remaining lease term (years) – operating leases2.23
Weighted average discount rate – operating leases5.70%

 

The Company leases mobile phones that classified as operating leases. The following table summarizes the components of operating lease revenue recognized during the years ended December 31, 2022

2.On February 19, 2017 Micronet Ltd., ("Micronet") our subsidiary in which we have a controlling interest, filled an immediate report in the Tel Aviv Stock Exchange announcing its intention to raise equity funds pursuant to a public offering to be consummated pursuant to Micronet's in effect shelf prospectus effective as of February 2014 (the "Transaction").On February 23, 2017 Micronet filled an immediate report in the Tel Aviv Stock Exchange announcing the results of the Transaction. A total of 6, 100,000 shares of the company common stock in value of NIS 0.1 per share where offered to the public, 5,468,900 shares were sold pursuant to the transaction. The net proceeds from this offering will be approximately NIS 9,844,020.00 million.Year Ended
December 31,
Lease revenue2022
Fixed contractual payments38,847

 

Future fixed contractual lease payments to be received under non-cancelable operating leases in effect as of December 31, 2022, 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  537,753 
2024  - 
2025  - 
2026  - 
2027  - 
Thereafter  - 


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

NOTE 19 — PROVISION FOR INCOME TAXES

3.A.On February 09, 22 and March 15, 2017 the Company offered YA II 39,062, 28,985 and 30,769 sharesBasis of its common stock, respectively, for a total sale amount of $130 pursuant to the SEDA and under the Registration Statement.Taxation

 

United States:

The statutory federal income tax rate in U.S. was 21% in 2021 and in the year ended December 31, 2022 and 2021. As of December 31, 2022 the operating loss carry forward were $60,230, among which there was $5,115 expiring from 2025 through 2037, and the remaining $55,115 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 years ended December 31, 2022 and 2021. As of December 31, 2022 the operating loss carry forward were $8,290, 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 December 31, 2022 the operating loss carry forward was $13,714, which will expire from 2026 through 2027.

Hong Kong:

Our subsidiaries incorporated in Hong Kong, such as Magpie Securities Limited and 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$2,000,000; and 16.5% on any part of assessable profits over HK$2,000,000. 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 December 31, 2022, the tax loss carry forward was $17,243 for Magpie Securities Limited, and the operating loss carry forward was $5,342 for BI Intermediate Limited. Tax losses can be carried forward indefinitely until utilized.


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

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 December 31, 2022, the operating loss carry forward was USD$758 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.

Nigeria:

The Company’s Nigeria subsidiary Tingo Mobile Limited is governed by the tax laws of the Federal Republic of Nigeria which had a corporate tax rate of 30% in the year ended December 31, 2022 and 2021. As of December 31, 2022, the operating loss carry forward were nil, which does not have an expiration date.

TINGO GROUP and its subsidiaries and VIEs within the jurisdiction of the United States, Israel and China are subject to a tax examination for the most recent three, four and five years, respectively.

4.B.On March __ the company's BOD approved a spinoff of the aerospace and defense division of the company into a stand-alone entity. Upon completion, the Company's shareholders will own 100% of the outstanding shares of common stock in the NEW CO, on a pro-rata basis. The spin-off is subject to certain customary conditions. Shareholder approval of the spin-off is not required. The company intend to file a Form 10 and it is pending the SEC approval. Immediately after the distribution becomes effective by the SEC, the NEW CO will be an independent company, which we intend to have the NEWCO stock traded on the OTCQB.Loss before income taxes

 

 Year ended December 31, 
(USD in thousands) 2022  2021 
       
Domestic $(25,346) $(20,157)
Foreign  14,955   (19,145)
Total $(10,391)  (39,302)

 

C.

Provision for Expense (Benefit) Taxes

F-27

 Year ended December 31, 
(USD in thousands) 2022  2021 
Current      
Domestic $330  $81 
Foreign  6,266   484 
Total $6,596   565 
Deferred        
Domestic $(762) $ 
Foreign  31,640   (2,356)
Total $37,474  $(1,791)

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. Deferred tax assets were included in long-term deposit and prepaid expenses, and the Company’s deferred taxes were in respect of the following:

  December 31,  December 31, 
(USD in thousands) 2022  2021 
Deferred tax assets      
Provisions for employee rights and other temporary differences $234  $260 
Provisions for bad debt  753   696 
Net operating loss carry forward  21,839   12,034 
Valuation allowance  (19,165)  (11,226)
Deferred tax assets, net of valuation allowance  3,661   1,764 
Deferred tax liabilities        
Recognition of intangible assets arising from business combinations  (89,597)  (3,952)
Deferred tax assets (liabilities), net $(85,936) $(2,188)


TINGO GROUP, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except Share and Par Value Data)

D.The reconciliation of income tax at the U.S. statutory rate to the Company’s effective tax rate as follows:

  2022  2021 
U.S. federal statutory rate  21%  21%
Change in valuation allowance  (53)%  (16)%
Non-deductible share-based compensation  (9)%  - 
Other expenses non-deductible for tax purposes  (175)%  - 
Difference in foreign tax rates  (24)%  - 
Effective tax rate  (240)%  5%

NOTE 20 — GOODWILL

  Year ended December 31, 2021 
(USD in thousands) Verticals and technology  Comprehensive platform service  Corporate and others (3)  Online stock trading  Consolidated 
                
Balance as of January 1, 2021 $19,788         -  $2,617  $    -  $22,405 
Impairment loss  -   -   -   -   - 
Acquisitions in 2021  -   -   -   -   - 
Loss of control          (2,617)      (2,617)
Forex  -   -   -   -   - 
Balance as of December 31, 2021  19,788   

-

   -      $19,788 

  Year ended December 31, 2022 
(USD in thousands) Verticals and technology  Comprehensive platform service  Corporate and others (3)  Online stock trading  Consolidated 
                
Balance as of January 1, 2022 $19,788   -  $   $          - $19,788 
Impairment loss  -   -   -   -   - 
Acquisitions in 2022  -   81,459         -   -   81,459 
Loss of control          -       - 
Forex  -   -   -   -   - 
Balance as of December 31, 2022  19,788   81,459   -      $101,247 

NOTE 21 — CONDENSED FINANCIAL INFORMATION OF TINGO GROUP, INC (Parent Company)

On December 1, 2022, we acquired Tingo Mobile (see Note 13). Tingo Mobile may generally repatriate capital and associated returns thereon by applying to the Nigerian Central Bank for approval. All transfer of funds to the registrant in the form of cash dividends, loans or advances or in other form is subject to an application and approval process for currency payments out of Nigeria. The cash and cash equivalents under restriction in Tingo Mobile as of December 31, 2022 is $461.7 million. The amount of such restricted net assets exceeds 25% of consolidated net assets as of December 31, 2022.

Basis of presentation

The Tingo Group, Inc. (the “Parent Company”) condensed financial information should be read in conjunction with our consolidated financial statements. The condensed financial statements include the activity of the Parent Company and reflect its subsidiaries using the equity method of accounting. Under the equity method, the investment in consolidated subsidiaries and VIE’s is stated at cost plus equity in undistributed earnings or loss of the consolidated subsidiaries and VIE’s.


TINGO GROUP, Inc.

CONDENSED BALANCE SHEETS

(Parent Company Only)

(In Thousands, except Share and Par Value Data)

  December 31,
2022		  December 31,
2021		 
ASSETS      
Current assets:      
Cash and cash equivalents $14,924  $29,674 
Related party receivables  114,657   107,952 
Other current assets  98   2,308 
Total current assets  129,679   139,934 
         
Other non-current assets  239   600 
Equity method investments  1,200,886   5,062 
Total long-term assets  1,201,125   5,662 
Total assets $1,330,804  $145,596 


TINGO GROUP, Inc.

CONDENSED BALANCE SHEETS

(Parent Company Only)

(In Thousands, except Share and Par Value Data)

  December 31,
2022		  December 31,
2021		 
LIABILITIES TEMPORARY EQUITY AND EQUITY      
Other current liabilities $7,125  $1,496 
Total current liabilities  7,125   1,496 
Redeemable preferred stock Series B: $0.001 par value, 33,687.21 shares authorized and 0 shares issued and outstanding as of December 31, 2022 and 2021, respectively.  553,035   - 
Stockholders’ Equity:        
Redeemable preferred stock Series A: $0.001 par value, 2,604.28 shares authorized and 0 shares issued and outstanding as of December 31, 2022 and 2021, respectively.  3   - 
Common stock; $0.001 par value, 250,000,000 shares authorized, 157,599,882 and 122,435,576 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively  158   122 
Additional paid in capital  889,579   220,786 
Accumulated other comprehensive loss  4,367   (414)
Accumulated deficit  (123,463)  (76,394)
Total equity  770,644   144,100 
Total liabilities temporary equity and equity $1,330,804  $145,596 


TINGO GROUP, Inc.

CONDENSED STATEMENTS OF OPERATIONS

(Parent Company Only)

(In Thousands, Except Share and Loss Per Share Data)

  Year ended
December 31,		 
  2022  2021 
Revenues $-  $- 
Cost of revenues  -   - 
Gross profit  -   - 
Operating expenses:        
General and administrative  25,714   19,136 
Amortization of intangible assets  -   - 
Total operating expenses  25,714   19,136 
Loss from operations  (25,714)  (19,136)
(Loss) gain of controlling equity investment held in Micronet  -   - 
Finance income (expense), net  3,175   1,786 
Loss before income tax expense  (22,539)  (17,350)
Income tax expense  330   81 
Loss after income tax expense  (22,869)  (17,431)
Gain (loss) from equity investment  (24,200)  (18,997)
Net loss $(47,069) $(36,428)
Basic and diluted loss per share $(0.36) $(0.32)
Weighted average common shares outstanding:        
Basic and diluted  129,345,764   112,562,199 


TINGO GROUP, Inc.

CONDENSED STATEMENTS OF CASH FLOWS

(Parent Company Only)

(In Thousands, except Share and Par Value Data)

  Year ended December 31, 
  2022  2021 
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss $(22,869) $(17,431)
Adjustments to reconcile net loss to net cash used in operating activities:        
Shares issued to service providers and employees  6,417   9,876 
Stock-based compensation for employees and consultants  208   711 
Changes in operating assets and liabilities:        
Change in other non-current assets  361   (600)
Change in accrued interest due to related party  (3,312)  (115)
Increase (decrease) in other current assets  2,210   (1,524)
Increase (decrease) in other current liabilities  5,628   (1,992)
Net cash used in operating activities $(11,357) $(11,075)
CASH FLOWS FROM INVESTING ACTIVITIES:        
Loan to related party  (203)  (88,000)
Receipt of loan from related party  30,000   - 
Loan to Tingo Inc pursuant to the merger agreement  (23,700)  - 
Receipt of loan from related party (Micronet)  534   - 
Loan to Tingo Mobile  (10,024)  - 
Net cash used in investing activities $(3,393) $(88,000)
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from issuance of shares and warrants  -   105,366 
Proceeds from exercise of warrants  -   2,474 
Proceeds from exercise of options  -   80 
Net cash provided by financing activities $-  $107,920 
         
TRANSLATION ADJUSTMENT OF CASH  -   - 
         
NET CHANGE IN CASH  (14,750)  8,845 
         
Cash at the beginning of the year  29,674   20,829 
         
Cash at end of the year $14,924  $29,674 


TINGO GROUP, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands, except Share and Par Value Data)

NOTE 22 — SUBSEQUENT EVENTS

On February 2, 2023 (“Effective Date”), 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 TINGO GROUP 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.

Repurchase Payment

Pursuant to the Repurchase Agreements, the Company agreed to repurchase warrants representing an aggregate amount of 28,117,835 shares of its common stock, for which it is paying $0.15 per share on March 3, 2023 and $0.10 per share on May 1, 2023 at an aggregate cost to the Company of $7,029. Additionally, the Company has also entered into Repurchase Agreements with certain other Warrant Holders with respect to an additional 1,064,000 shares, who have agreed to grant TINGO GROUP an option from July 1, 2023 to July 31, 2023 to repurchase their warrants for $0.25 per share upon the exercise of such option. TINGO GROUP’s payment for the repurchase of warrants serves as consideration and full and final settlement of all claims which were or might have been asserted by Warrant Holders arising from the Warrants.

If TINGO GROUP fails to make timely payment under the terms of the Repurchase Agreements, the Warrants shall remain outstanding and be exercisable in full in accordance with their terms, and the Warrant Holders shall retain all rights available under applicable law or equity with respect to the Warrants.

Representations and Warranties

The Repurchase Agreements contain a number of representations and warranties by each of the Company and the Warrant Holders as of the Effective Date. Most material of which the Warrant Holders represent and warrant that they are the sole owner of, and have good, valid and marketable title to the Warrants free of any restrictions, among other representations and warrants. the Company represents and warrants that it has received all necessary consents, approvals, and authorizations to approve its obligations under the Repurchase Agreements, among other representations and warrants. The representations and warranties made by the Company and the Seller are customary for transactions similar to this transaction.

Most Favored Nation

The Company represented and warranted as of the Effective Date that from and after the Effective Date through the respective expiration dates of the Warrants, that none of the terms offered to any other holder of the Company’s warrants (outstanding as of the Effective Date), with respect to any amendment, settlement, repurchase or redemption (whether pursuant to the terms of such warrants or otherwise) of any such warrants (outstanding as of the Effective Date) since the Announcement Time (“Other Warrant Settlement Document”), is or will be more favorable to such holder than those of the Warrant Holders and that the Repurchase Agreements are, without any further action by the Warrant Holders or the Company , deemed amended and modified in an economically and legally equivalent manner such that the Warrant Holders shall receive the benefit of the more favorable terms contained in such Other Warrant Settlement Document.


TINGO GROUP, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands, except Share and Par Value Data)

On February 7, 2023, Yehezkel (Chezy) Ofir tendered his resignation to the board of directors (the “Board”) of the Company, effective immediately. The reason for Mr. Ofir’s resignation is to comply with the terms of the Amended Agreement and Plan of Merger with Tingo, Inc. and Tingo Mobile Limited (“Tingo”), where it was agreed the Board would be comprised of four of the existing directors of the Company and two new directors nominated by Tingo, Inc. and not in connection with any disagreements with the Company on any matter.

On February 9, 2023 (“Effective Date”), TINGO GROUP, Inc. and TINGO GROUP 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 Tingo, Inc., a Nevada corporation. Tingo, Inc.

Given the recent timing of the transaction, the initial accounting for the transaction is incomplete at the time these financial statements were authorized for issuance. Accordingly, not all relevant disclosures are available for this transaction. Tingo Foods started its operational business in September 2022 and generated revenue of more than $400 million dollars (unaudited) during the approximate four-month period ended on December 31, 2022.

As consideration for the Acquisition, TINGO GROUP 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$204,000,000. The Promissory Note is for a terms 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 TINGO GROUP 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 TINGO GROUP and Tingo Foods with a long-term lease with respect to the real property.

On February 14, 2023, TINGO GROUP 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.

On February 23, 2023, the Company filed an amendment to its certificate of incorporation, as amended, with the Secretary of State of Delaware to change its corporate name from “MICT, Inc.” to “Tingo Group, Inc.” . The Name Change was effective as of February 27, 2023. Also effective February 27, 2023 the Company changed its trading symbol on the Nasdaq Capital Market from “MICT” to “TIO” (the “Symbol Change”).

F-59

 

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