Titan Environmental Solutions Inc 10-Q for FY2021 Q3
Titan Environmental Solutions Inc. (TESI)
About this 10-Q
Titan Environmental Solutions Inc filed this 10-Q on November 12, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $789.7K
- up 262.5% from $217.86K a year earlier
- Net loss
- $1.78M
- compared with a net loss of $175.83K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________ to _____________
Commission
File Number:
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
| (Address of Principal Executive Office) | (Zip Code) |
(Registrant’s Telephone Number, Including Area Code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None.
| Title of Each Class | Trading Symbol | Name of Each Exchange on which registered | ||
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.0001 par value per share
(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. ☒
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). ☐ Yes ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non- accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, “non-accelerated filer”, “smaller reporting company” and “emerging growth” in Rule 12b-2 of the Exchange Act.
| Large Accelerated filer ☐ | 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. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒
The number of shares of the Registrant’s common stock, $0.0001 par value per share, outstanding as of November 11, 2021, was .
| Documents incorporated by reference: | None |
TRAQIQ, INC
INDEX
| Page | ||
| PART I - FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 4 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 33 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 39 |
| Item 4. | Controls and Procedures | 40 |
| PART II - OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 41 |
| Item 1A. | Risk Factors | 41 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 41 |
| Item 3. | Defaults Upon Senior Securities | 41 |
| Item 4. | Mine Safety Disclosures | 41 |
| Item 5. | Other Information | 41 |
| Item 6. | Exhibits | 41 |
| Signatures | 42 | |
| 2 |
FORWARD-LOOKING STATEMENTS
Except for any historical information contained herein, the matters discussed in this quarterly report on Form 10-Q contain certain “forward-looking statements’’ within the meaning of the federal securities laws. This includes statements regarding our future financial position, economic performance, results of operations, business strategy, budgets, projected costs, plans and objectives of management for future operations, and the information referred to under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
These forward-looking statements generally can be identified by the use of forward-looking terminology, such as “may,’’ “will,’’ “expect,’’ “intend,’’ “estimate,’’ “anticipate,’’ “believe,’’ “continue’’ or similar terminology, although not all forward-looking statements contain these words. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, you are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although we believe that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements. Important factors that may cause actual results to differ from projections include, for example:
| ● | the success or failure of management’s efforts to implement our business plan; | |
| ● | our ability to fund our operating expenses; | |
| ● | our ability to compete with other companies that have a similar business plan; | |
| ● | the effect of changing economic conditions impacting our plan of operation; and | |
| ● | our ability to meet the other risks as may be described in future filings with the Securities and Exchange Commission (the “SEC”). |
Unless otherwise required by law, we also disclaim any obligation to update our view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made in this quarterly report on Form 10-Q.
When considering these forward-looking statements, you should keep in mind the cautionary statements in this quarterly report on Form 10-Q and in our other filings with the SEC. We cannot assure you that the forward-looking statements in this quarterly report on Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may prove to be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time-frame, or at all.
| 3 |
Item 1. Financial Statements
| 4 |
TRAQIQ, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2021 (UNAUDITED) AND DECEMBER 31, 2020
IN US$
| SEPTEMBER 30, | DECEMBER 31, | |||||||
| 2021 | 2020 | |||||||
| (UNAUDITED) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Note receivable - related party | - | |||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Fixed assets, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | - | |||||||
| Restricted cash | ||||||||
| Long-term investment | ||||||||
| Right-of-use asset | ||||||||
| Other assets | ||||||||
| Total Non-current Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| LIABILITIES | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Cash overdraft | ||||||||
| Accrued payroll and related taxes | ||||||||
| Accrued taxes and duties payable | ||||||||
| Deferred revenue | - | |||||||
| Derivative liability | - | |||||||
| Contingent consideration - Rohuma | - | |||||||
| Contingent consideration - Mimo | - | |||||||
| Current portion - lease liability | ||||||||
| Current portion - long-term debt - related parties | ||||||||
| Current portion - long-term debt | ||||||||
| Current portion - convertible notes payable, net of discounts | - | |||||||
| Current portion - convertible debt - long-term debt - related and unrelated parties | ||||||||
| Total Current Liabilities | ||||||||
| Long-term debt, net of current portion | ||||||||
| Long-term debt - related parties, net of current portion | - | |||||||
| Lease liability, net of current portion | ||||||||
| Total Non-current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | - | - | ||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Preferred stock, par value, $, shares authorized, Series A Convertible Preferred, and shares issued and outstanding, respectively | - | |||||||
| Common stock, par value, $, shares authorized, and issued and outstanding, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Subscription receivable | ( | ) | - | |||||
| Accumulated other comprehensive income (loss) | ||||||||
| Total Stockholders’ Equity (Deficit) before Non-controlling Interest | ( | ) | ( | ) | ||||
| Non-controlling interest | ( | ) | - | |||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 5 |
TRAQIQ, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
IN US$
| NINE MONTHS ENDED | THREE MONTHS ENDED | |||||||||||||||
| SEPTEMBER 30, | SEPTEMBER 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| REVENUE | $ | $ | $ | $ | ||||||||||||
| COST OF REVENUE | ||||||||||||||||
| GROSS PROFIT | ||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Salaries and salary related costs | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Rent expense | ||||||||||||||||
| Depreciation and amortization expense | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| OPERATING LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Change in fair value of derivative liability | ( | ) | ||||||||||||||
| Derivative expense | ( | ) | ( | ) | ||||||||||||
| Gain on sale of assets | ||||||||||||||||
| PPP forgiveness and other income | ||||||||||||||||
| Interest expense, net of interest income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET LOSS BEFORE PROVISION FOR INCOME TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST | ||||||||||||||||
| NET LOSS ATTRIBUTABLE TO CONTROLLING INTEREST | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive loss | ||||||||||||||||
| Foreign currency translations adjustment | ( | ) | ||||||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding - basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 6 |
TRAQIQ, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
IN US $
| Additional | Accumulated | |||||||||||||||||||||||||||||||||||||||
| Series A Preferred | Common Stock | Paid-In Capital - | Accumulated | Subscription | Other Comprehensive | Non-controlling | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Common | Deficit | Receivable | Income (Loss) | Interest | Total | |||||||||||||||||||||||||||||||
| Balance - January 1, 2020 | $ | $ | $ | $ | ( | ) | $ | - | $ | $ | $ | ( | ) | |||||||||||||||||||||||||||
| Conversion of Series A Preferred Stock to Common Stock | ||||||||||||||||||||||||||||||||||||||||
| Conversion of Series A Preferred Stock to Common Stock, shares | ||||||||||||||||||||||||||||||||||||||||
| Shares issued for exercise of warrants | ||||||||||||||||||||||||||||||||||||||||
| Shares issued for exercise of warrants, shares | ||||||||||||||||||||||||||||||||||||||||
| Shares of stock issued for cash | ||||||||||||||||||||||||||||||||||||||||
| Shares of stock issued for cash , shares | ||||||||||||||||||||||||||||||||||||||||
| Shares of stock issued for conversion of notes payable and accrued interest | ||||||||||||||||||||||||||||||||||||||||
| Shares of stock issued for conversion of notes payable and accrued interest, shares | ||||||||||||||||||||||||||||||||||||||||
| Shares of stock issued for services rendered | ||||||||||||||||||||||||||||||||||||||||
| Shares of stock issued for services rendered, shares | ||||||||||||||||||||||||||||||||||||||||
| Shares of stock issued for providing note payable | ||||||||||||||||||||||||||||||||||||||||
| Shares of stock issued for providing note payable, shares | ||||||||||||||||||||||||||||||||||||||||
| Shares of stock issued for acquisition of Rohuma (first tranche) | ||||||||||||||||||||||||||||||||||||||||
| Shares of stock issued for acquisition of Rohuma (first tranche), shares | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation on granting of options | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensatuon for restricted stock grants (shares not issued) | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation - warrants granted for consulting | ||||||||||||||||||||||||||||||||||||||||
| Warrants earned for acquisition of Mimo | ||||||||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | ( | ) | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||||
| Balance - March 31, 2020 | ( | ) | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | ( | ) | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||||
| Balance - June 30, 2020 | ( | ) | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | ( | ) | - | - | ( | ) | |||||||||||||||||||||||||||||
| Balance - September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||
| Balance - January 1, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | ||||||||||||||||||||||||||||
| Shares of stock issued for cash | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Shares of stock issued for conversion of notes payable and accrued interest | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Shares of stock issued for services rendered | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Shares of stock issued for acquisition of Rohuma (first tranche) | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Stock-based compensation on granting of options | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Stock-based compensation - warrants granted for consulting | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Warrants earned for acquisition of Mimo | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | ( | ) | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance - March 31, 2021 | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||||||||
| Shares of stock issued for cash | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Shares of stock issued for services rendered | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Shares of stock issued for providing note payable | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Stock-based compensation on granting of options | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Stock-based compensatuon for restricted stock grants (shares not issued) | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | ( | ) | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance - June 30, 2021 | ( | ) | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance | ( | ) | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Conversion of Series A Preferred Stock to Common Stock | ( | ) | ( | ) | ( | ) | - | - | - | - | - | |||||||||||||||||||||||||||||
| Shares issued for exercise of warrants | - | - | - | - | ( | ) | - | - | - | |||||||||||||||||||||||||||||||
| Shares of stock issued for services rendered | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Stock-based compensation - warrants granted for consulting | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Stock-based compensation on granting of options | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Stock-based compensatuon for restricted stock grants (shares not issued) | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | ( | ) | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance - September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 7 |
TRAQIQ, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
IN US$
| 2021 | 2020 | |||||||
| CASH FLOW FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash (used in) operating activities | ||||||||
| Change in non-controlling interest | ( | ) | - | |||||
| Bad debt expense | - | |||||||
| Forgiveness of debt | ( | ) | - | |||||
| Depreciation and amortization | ||||||||
| Lease cost, net of repayment | ||||||||
| Foreign currency (gain) loss | ( | ) | ||||||
| Stock-based compensation | - | |||||||
| Common stock issued for services rendered | - | |||||||
| Change in fair value of derivative liability and derivative expense | - | |||||||
| Amortization of discounts on debt | - | |||||||
| Gain on sale of assets | ( | ) | - | |||||
| Changes in assets and liabilities | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Other assets | - | - | ||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Accrued payroll and payroll taxes | ||||||||
| Accrued duties and taxes | ||||||||
| Total adjustments | ||||||||
| Net cash (used in) operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Cash received in acquisition of Mimo | - | |||||||
| Cash received in acquisition of Rohuma | - | |||||||
| Acquisition of Mimo | ( | ) | - | |||||
| Advances of note receivable - related party | - | ( | ) | |||||
| Acquisition of fixed assets | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Increase in cash overdraft | ( | ) | ||||||
| Proceeds from the issuance of common stock | - | |||||||
| Proceeds from convertible notes | - | |||||||
| Repayment of convertible notes | ( | ) | - | |||||
| Proceeds from long-term debt - related parties | ||||||||
| Repayment of long-term debt - related parties | ( | ) | ( | ) | ||||
| Proceeds from long-term debt | ||||||||
| Repayments of long-term debt | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH | ( | ) | ||||||
| CASH AND RESTRICTED CASH - BEGINNING OF PERIOD | ||||||||
| CASH AND RESTRICTED CASH - END OF PERIOD | $ | $ | ||||||
| CASH PAID DURING THE PERIOD FOR: | ||||||||
| Interest expense | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| SUMMARY OF NON-CASH ACTIVITIES: | ||||||||
| Acquisition of Rohuma: | ||||||||
| Accounts receivable | $ | $ | ||||||
| Prepaid and other current assets | - | |||||||
| Fixed assets | - | |||||||
| Intellectual property | ||||||||
| Tradenames | ||||||||
| Investment | - | |||||||
| Accounts payable and accrued expenses | ( | ) | - | |||||
| Accrued payroll and related taxes | ||||||||
| Accrued duties and taxes | ( | ) | - | |||||
| Long-term debt - related parties | ( | ) | - | |||||
| Long-term debt | ( | ) | - | |||||
| Cash overdraft | ( | ) | - | |||||
| Comprehensive income | ||||||||
| Cash | - | |||||||
| Total net liabilities acquired | ( | ) | - | |||||
| Consideration per Share Exchange Agreement | - | |||||||
| Goodwill/(Bargain Purchase Gain) | $ | $ | ||||||
| Acquisition of Mimo Technologies: | ||||||||
| Accounts receivable | $ | $ | ||||||
| Prepaid and other current assets | - | |||||||
| Fixed assets | - | |||||||
| Intellectual property | - | |||||||
| Tradenames | - | |||||||
| Accounts payable and accrued expenses | ( | ) | - | |||||
| Accrued payroll and related taxes | ( | ) | - | |||||
| Accrued duties and taxes | ( | ) | - | |||||
| Long-term debt - related parties | ( | ) | - | |||||
| Long-term debt | ( | ) | - | |||||
| Comprehensive income | ( | ) | - | |||||
| Cash | - | |||||||
| Total net liabilities acquired | ( | ) | - | |||||
| Consideration per Share Exchange Agreement | - | |||||||
| Goodwill/(Bargain Purchase Gain) | $ | $ | ||||||
| Common stock issued for conversion of long-term debt, related and unrelated parties | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 8 |
TRAQIQ, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN US$)
(UNAUDITED)
NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS
TraQiQ, Inc. (along with its wholly owned subsidiaries, referred to herein as the “Company”) was incorporated in the State of California on September 9, 2009 as Thunderclap Entertainment, Inc. On July 14, 2017, Thunderclap Entertainment, Inc. changed its name to TraQiQ, Inc. On July 19, 2017, the Company entered into a Share Exchange Agreement (“Share Exchange”) with the stockholders of OmniM2M, Inc. (“OmniM2M”) and TraQiQ Solutions, Inc. dba Ci2i Services, Inc. (formerly Ci2i Services, Inc. – amended November 6, 2019) (“Ci2i”) whereby the stockholders of Omni and Ci2i exchanged all of their respective shares, representing ownership in OmniM2M and Ci2i in exchange for shares of the Company’s common stock, respectively. The OmniM2M Shareholders and the Ci2i Shareholders have each been issued their respective shares on a pro rata basis based on their respective holdings in OmniM2M and Ci2i in the Share Exchange Agreement. The Share Exchange was accounted for as a reverse merger whereas Ci2i is considered the accounting acquirer and TraQiQ,Inc. is considered the accounting acquiree. For accounting purposes, the acquisition of Omni is recorded at historical cost in accordance with Accounting Standard Codification (“ASC”) 805-50-25-2 as this is considered an acquisition of entities under common control as the management of the Company and Omni control the activities of the respective companies. Prior to the merger with Ci2i and acquisition of Omni, the Company was considered a shell company under Rule 12b-2 of the Exchange Act. On December 1, 2017, The Company entered into a Share Purchase Agreement (the “Share Exchange Agreement”) with Ajay Sikka (“Sikka”), the sole shareholder of Transport IQ, Inc. whereby Sikka agreed to sell all of the shares in TransportIQ, Inc. (“TransportIQ”) in exchange for $, in the form of cancellation of all of the debt of TransportIQ that is owed to the Company. The transaction became effective upon the execution of the Share Exchange Agreement by Sikka and the Company; and Transport IQ, Inc, is now a wholly-owned subsidiary of the Company. Because TransportIQ was commonly controlled and owned, the transaction was recorded at the historical carrying value of TransportIQ’s assets and liabilities.
Overview of the Company
With operations concentrated in India, Southeast Asia and Latin America, the Company helps businesses in emerging markets leverage the “gig” or task economy by providing both technology solutions and a network of workers required to fulfill those tasks. The Company provides software as a service that enables clients to build and manage a network of contract task workers. This platform can also be used by business clients to manage their employees who are performing services, such as PC repair or food delivery. In addition, with the recent acquisition of Mimo Technologies Private Limited (“Mimo”), Mimo operates a network of over 14,000 task workers in India who make deliveries, collect payments, do background verifications, and fulfill tasks across the supply chain, as needed by business clients to deliver their products and services to their respective markets and customers.
TraQSuite
is a cloud based software platform with a revenue model based on initial and transaction-based licensing fees as well as consulting fees.
Licensees pay an initial per-module fee that varies depending on the number of modules that are licensed. This fee is typically $
The Company’s TraQSuite software platform powers the last mile distribution network, allowing business users to target customers, facilitate and validate transactions, track and manage task workers, manage funds and run a distribution network. Key features of the TraQSuite software include:
| ● | Last Mile delivery: TraQSuite’s Last-Mile software module enables a business to manage thousands of task workers across multiple geographies to deliver products and services to the users. The software platform, operating through mobile apps, allows for data sharing, delivery validation, geo-tagging and know-your-customer (KYC) requirements and can even measure customer satisfaction. | |
| ● | Transact: TraQSuite enables task workers to facilitate transactions by meeting the end customers. They can collect payments via credit cards, smart-phone swipes, SMS messages or cash. Both banked and unbanked users can buy products and services and pay with their mobile devices. | |
| ● | Target: TraQSuite enables customer transactions to be rewarded with loyalty credits, tokens or points that can be redeemed by the customer for free products, discounts and benefits. The software analyzes these transactions and purchase behaviors by using leading AI models and can deliver real time, automated and targeted offers and recommendations for additional purchases and customer retention. |
The Mimo delivery and task service in India runs on the TraQSuite platform and performs deliveries and fulfills tasks for some of the largest businesses in India. Mimo provides delivery and pickup services for the banking and insurance industry, performing verifications, field investigations for loan requests, business verification, employment verification, collection of documents and customer data and assistance in filling out forms for banks. Mimo works with microfinance institutions to collect cash, such as loan payments, convert cash to digital forms such as debit cards, and conduct data collection and surveys. For consumer goods companies, Mimo does promotional marketing, last mile (hyper-local) delivery, merchant onboarding or activation, store audits, and route optimization for delivery.
The Company’s strategy is to grow the business through a combination of organic growth and strategic investments that bring new functionality and revenue streams to the Company. The plan is to enhance the functionality of our existing products, increase sales in the Indian market and entry into new emerging markets. The Company has a presence in India, Southeast Asia and Latin America, and recently added new customers in Australia, New Zealand and parts of Africa.
TraQiQ Solutions, Inc.
Ci2i is a services company founded in 1998 that develops and deploys intelligent technologies and products in order to meet the demand for sustainable, integrated solutions. Ci2i’s primary focus has been in the analytics and intelligence segments. The Company is investing significantly in building products in the area of supply chain and last mile delivery.
Ci2i’s cloud solutions and analytics services comprise software development, program management, project management, and business analytics services.
TraQiQ Solutions Private Limited
On May 16, 2019, the Company entered into a Share Exchange Agreement with Mann-India Technologies Private Ltd., an Indian Corporation (“Mann”). On January 2, 2020, Mann changed its name to TraQiQ Solutions Private Limited (“TRAQ Pvt Ltd”). Pursuant to the Share Exchange Agreement with Mann, the Company acquired of the shares of Mann and assumed certain net liabilities in exchange for warrants exercisable over a -years to purchase shares of common stock of the Company valued at $. The warrants will be exercisable as follows: (i) warrants immediately; (ii) warrants exercisable one-year after the date of closing, which was extended to March 31, 2021; and (iii) warrants exercisable two-years after the date of closing. This transaction is being recorded as a business combination under ASC 805.
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The warrants that are exercisable in one-year and two-years are conditioned upon TRAQ Pvt Ltd. achieving certain revenue figures and pre-tax profit percentages. TRAQ Pvt Ltd. must achieve target revenue of $ million (US$) and pre-tax profit of (US$). Should TRAQ Pvt Ltd. be unable to achieve these criteria, the warrants will be reduced proportionately. A total of of these warrants were cancelled effective May 16, 2021 as a result of these criteria not being achieved.
Mann-India Private limited was renamed to TraQiQ Solutions Private Limited shortly after acquisition by TraQiQ Inc.
TRAQ Pvt Ltd. was established in May 2000 and is headquartered in New Delhi, India. TRAQ Pvt Ltd. is a leading software development company which, with the advent of technology, has evolved as a mature and fast-growing company committed to provide reliable and cost-effective software solutions across industries all over the world.
TRAQ Pvt Ltd. has its own experienced team of software developers dedicated towards developing various kinds of customized software.
TraQ Pvt Ltd. has been doing business around the world for over 15 years, with particular emphasis on Latin America and India. The customer list includes large enterprise Finance and Insurance companies across Latin America. The company’s product portfolio has evolved rapidly and now includes enterprise ready solutions for payment processing, mobile wallets, micro lending solutions and digital transformation.
Rohuma, LLC
On January 22, 2021, the Company entered into a Share Exchange Agreement with Rohuma, LLC, a Delaware limited liability company (“Rohuma”) and its members, whereby the Rohuna members agreed to exchange all of their respective membership interests in Rohuma in exchange for shares of common stock, of which the first tranche of shares were issued on March 1, 2021 totaling shares, with the remaining value reflected as contingent consideration until the shares vest at which time they will be issued. The transaction was valued at $ ($ per share). Rohuma has an Indian affiliate that is owned by Rohuma and by its founding member. Rohuma controls this entity and the ownership by the member is now less than upon acquisition by the Company. This amount is reflected as a non-controlling interest.
Rohuma dba Kringle.ai is a California based software solutions company that enables digital and mobile commerce by providing enterprise class applications that cover loyalty and rewards products, payments, online ordering, distribution logistics for retail and more. Kringle analyzes customers’ omni-channel behaviors and transactions. Using AI for digital commerce, Kringle is able to deliver real time, automated 1:1 recommendations and personalized content across all customer touch points.
Mimo Technologies Private Limited
On
February 17, 2021, the Company entered into a Share Exchange Agreement with Mimo Technologies Private Ltd., and Indian corporation (“Mimo”)
and its shareholders, whereby the Mimo shareholders agreed to exchange all of their respective shares in Mimo in exchange for warrants
to purchase shares of the Company’s common stock. Of these warrants, were earned at the date of acquisition,
with the remaining expected to be earned over the next two years from grant based on revenue goals for Mimo. The warrants have
a term of three years and an exercise price of $ and value in the amount of $, of which $ is reflected in additional
paid in capital, with the remaining $ reflected as contingent consideration. In addition to the issuance of the warrants, TRAQ
Pvt Ltd, wrote off $
TraQiQ operates the Mimo delivery and task service in India. This service runs on the TraQSuite platform. Mimo has 14,000+ independent contractors across India performing deliveries and fulfilling tasks for the largest corporations in the country. Our team at Mimo uses a sophisticated technology platform and a smartphone app to get their tasks completed. This is coupled with a verification and billing system that allows customers of all sizes to leverage this distribution infrastructure.
Mimo offers a broad set of services. These offerings can be classified into three broad categories:
| ● | Data collection and client verification (surveys, verification, on-boarding), | |
| ● | Cash management & handling services, and | |
| ● | Distribution and demand generation (order fulfilment, demand generation, delivery services for e-commerce companies) |
Mimo assists the delivery and pickup segment of the banking and insurance industry by performing verifications, field investigations for loan requests, business verifications and employment verification, and also collects documents, assists in filling forms for banks, and completes data collection from customers.
Mimo works with microfinance institutions to collect cash, such as loan payments, convert cash to digital means like debit cards, and conduct data collection and surveys.
For consumer goods companies, Mimo does promotional marketing, Last mile (hyper-local) delivery, merchant onboarding or activation, store audits, and route optimization for delivery. Mimo provides efficient end-to-end transshipment logistics. The framework manages and optimizes last-mile delivery & e-commerce logistics across the entire distribution chain with transparency and seamless integration.
Mimo is currently in the planning stages to provide food, alcohol & medicine deliveries as well.
During the COVID-19 pandemic, Mimo leveraged video as a platform for verification and document delivery. Now, the task workers include people who are in the field on bikes and trucks, people on a video screen, as well as people on the phone.
There are also data digitization tasks being done by Mimo task workers across the country. In a country like India where there are over 20 languages and multiple dialects, the task workers convert paper documents into electronic form in the same language or translate them into another language.
Mimo provides delivery and task worker solutions across India. Mimo works with Banking, Financial, Logistics and Distribution companies, to take their products and services to semi-urban and rural India. Mimo trains the agents in each Product or Service through an online and classroom training platform. The company powers the gig economy task workers throughout the country and provides a very valuable source of employment for young people who may or may not have a high school diploma.
NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the regulations of the United States Securities and Exchange Commission. The condensed consolidated financial statements and accompanying notes are the representations of the Company’s management, who are responsible for their integrity and objectivity. In their opinion, such financial information includes all adjustments considered necessary for a fair presentation at such date and the operating results and cash flows for such periods.
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These condensed consolidated financial statements should be read in conjunction with a reading of the Company’s consolidated financial statements and notes thereto included in Form 10-K filed with the SEC on March 22, 2021. Interim results of operations for the nine months ended September 30, 2021 are not necessarily indicative of future results for the full year.
Consolidation
The condensed consolidated financial statements include the accounts of TraQiQ, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
The Company applies the guidance of Topic 810 Consolidation of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) to determine whether and how to consolidate another entity. Pursuant to ASC paragraph 810-10-15-10, all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—are consolidated except when control does not rest with the parent.
Pursuant to ASC paragraph 810-10-15-8, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree.
Noncontrolling Interests
In accordance with ASC 810-10-45 Noncontrolling Interests in Consolidated Financial Statements, the Company classifies noncontrolling interests as a component of equity within the consolidated balance sheet. In January 2021, the acquisition of Rohuma resulted in a less than 1% non-controlling interest of the Indian affiliate of that company. In February 2021, the acquisition of Mimo resulted in a less than 1% non-controlling interest of that company.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. These estimates include, but are not limited to, management’s estimate of provisions required for non-collectible accounts receivable, depreciative lives of our assets, determination of technological feasibility, and valuation allowances of our deferred tax assets. Actual results could differ from those estimates.
Foreign Currency Transactions
The Company accounts for foreign currency transactions in accordance with ASC 830, “Foreign Currency Matters” (“ASC 830”), specifically the guidance in subsection ASC 830-20, “Foreign Currency Transactions”. The U.S. dollar is the functional and reporting currency for the Company and its subsidiaries other than TRAQ Pvt Ltd. whose functional currency is the Indian Rupee. Pursuant to ASC 830, monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at exchange rates in effect at the balance sheet date, with the resulting gains or losses upon settlement reported in foreign exchange gain (loss) in the computation of net income (loss). Gains or losses resulting from translation adjustments are reported under accumulated other comprehensive income (loss).
Reclassification
Certain prior period amounts have been reclassified to conform with current period presentation with no effect on the Company’s net loss, total assets, liabilities equity or cash flows.
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Cash and Cash Equivalents
Cash
and cash equivalents include cash on hand and on deposit at banking institutions as well as all highly liquid short-term investments
with original maturities of 90 days or less of $
Restricted Cash
The
Company’s restricted cash balance consists of time deposits with financial institutions which are valued at cost and approximate
fair value. Interest earned on these deposits in included in interest income. The carrying value of our restricted cash at September
30, 2021 and December 31, 2020 was $
Accounts Receivable and Concentration of Credit Risk
The Company considers accounts receivable, net of allowance for returns and doubtful accounts, to be fully collectible. The allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses and economic conditions. Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts are uncollectible.
Credit
extended to customers is generally uncollateralized. Past-due status is based on contractual terms. Management has determined that an
allowance of $
Property and Equipment and Long-Lived Assets
Fixed
assets are stated at cost. Depreciation on fixed assets are computed using the straight-line method over the estimated useful lives of
the assets, which range from to
FASB Codification Topic 360 “Property, Plant and Equipment” (ASC 360), requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The application of ASC 360 has not materially affected the Company’s reported earnings, financial condition or cash flows.
Intangible
assets with definite useful lives are stated at cost less accumulated amortization. Intangible assets represent purchased intangible
of TRAQ Pvt Ltd. which includes customer relationships and trademarks. The Company amortizes these intangible assets on a straight-line
basis over their estimated useful lives of
The Company has adopted Accounting Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment. The adoption of this ASU did not have a material impact on our consolidated financial statements. The Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets.
The Company will assess the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable at the time they do have intangible assets. Factors the Company considers to be important which could trigger an impairment review include the following:
1. Significant underperformance relative to expected historical or projected future operating results;
2. Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and
3. Significant negative industry or economic trends.
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When
the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above
indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company
records an impairment charge. The Company will measure any impairment based on a projected discounted cash flow method using a discount
rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment
is required in determining whether an indicator of impairment exists and in projecting cash flows. Management has determined that
Capitalized Software Costs
In accordance with the relevant FASB accounting guidance regarding the development of software to be sold, leased, or marketed, the Company expenses such costs as they are incurred until technological feasibility has been established, at and after which time these costs are capitalized until the product is available for general release to customers. Once the technological feasibility is established per ASC 985-20, the Company capitalizes costs associated with the acquisition or development of major software for internal and external use in the balance sheet.
Costs incurred to enhance the Company’s software products, after general market release of the services using the products, is expensed in the period they are incurred.
The
Company only capitalizes subsequent additions, modifications or upgrades to internally developed software to the extent that such changes
allow the software to perform a task it previously did not perform. The Company expenses software maintenance and training costs as incurred.
The Company acquired $
Revenue Recognition
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), specifically ASC 606-10-50-12. This standard provides a single set of guidelines for revenue recognition to be used across all industries and requires additional disclosures. The updated guidance introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted the updated guidance effective January 1, 2018 using the full retrospective method, however the new standard did not have a material impact on its consolidated financial position and consolidated results of operations, as it did not change the manner or timing of recognizing revenue.
Professional Service Revenue
TRAQ Pvt Ltd. derives a large part of its revenues from professional and support services, which includes revenue generated from software development projects and associated fees for consulting, implementation, training, and project management provided to customers using their systems. Revenue from arrangements with customers is recognized based on the Company’s satisfaction of distinct performance obligations identified in each agreement, generally at a point in time as discussed in ASC 606. In instances where multiple performance obligations are identified, the Company allocates the transaction price to each performance obligation based on relative selling prices of each distinct product or service, and recognizes revenue related to each performance obligation at the points in time that each performance obligation is satisfied. The Company’s performance obligation includes providing customization of software’s, selling of licenses, where the Company typically satisfies its performance obligations prior to the submission of invoices to the customer for such services. The Company’s performance obligation for consulting and technical support is delivered on as the work is being performed, which is satisfied prior to invoicing.
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The Company generally collects payment within 30 to 60 days of completion of the performance obligation and there are no agency relationships.
Software development arrangements involving significant customization, modification or production are accounted for in accordance with the appropriate technical accounting guidance issued by the FASB using the percentage-of- completion method. The Company recognizes revenue using periodic reported actual hours worked as a percentage of total expected hours required to complete the project arrangement and applies the percentage to the total arrangement fee.
Unbilled revenue represents earnings in excess of billings as at the end of the reporting period. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from revenues in the statements of operations.
TRAQ Pvt Ltd. has deferred the revenue and costs attributable to certain process transition activities with respect to its customers where such activities do not represent the culmination of a separate earnings process. Such revenue and costs are subsequently recognized ratably over the period in which the related services are performed. Further, the deferred costs are limited to the amount of the deferred revenues.
TRAQ Pvt Ltd. has now started offering an integrated solution for supply chain and last mile. This product called “TraQSuite” is now offered in multiple markets as a cloud-based subscription offering. This is a significant improvement from the earlier professional services business.
Software Solution Revenue
Revenue from arrangements with customers is recognized based on the Company’s satisfaction of distinct performance obligations identified in each agreement, generally at a point in time as discussed in ASC 606. In instances where multiple performance obligations are identified, the Company allocates the transaction price to each performance obligation based on relative selling prices of each distinct product or service, and recognizes revenue related to each performance obligation at the points in time that each performance obligation is satisfied. The Company’s performance obligation includes providing connectivity to software, generally through a monthly subscription, where the Company typically satisfies its performance obligations prior to the submission of invoices to the customer for such services. The Company’s performance obligation for hardware components that are purchased by the customer in connection with the solution is delivery of the purchased device, which is satisfied prior to invoicing. The Company provides a twelve-month warranty on their hardware. All units deployed by the Company are past the twelve-month period, thus the Company has not accrued for a warranty liability. The Company generally collects payment within 30 to 60 days of completion of the performance obligation and there are no agency relationships.
TraQSuite
is a cloud based software platform with a revenue model based on initial and transaction-based licensing fees as well as consulting fees.
Licensees pay an initial per-module fee that varies depending on the number of modules that are licensed. This fee is typically $
The following is a summary of revenue for the nine months ended September 30, 2021 and 2020, disaggregated by type:
SUMMARY OF DISAGGREGATION OF REVENUE
| 2021 | 2020 | |||||||
| Professional Services Revenue | $ | $ | ||||||
| Sale of goods | ||||||||
| Software Solution Revenue | ||||||||
| $ | $ | |||||||
Costs of Services Provided
Costs of services provided consist of purchase of goods, data processing costs, customer support costs including personnel costs to maintain the Company’s proprietary databases, costs to provide customer call center support, hardware and software expense associated with transaction processing systems and exchanges, telecommunication and computer network expense, and occupancy costs associated with facilities where these functions are performed. Depreciation expense is not included in costs of services provided.
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Lease Obligations
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liabilities and operating lease liabilities, less current portion in the Company’s consolidated balance sheets.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. For leases in which the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
Lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating lease arrangements is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for separately.
Income Taxes
Income taxes are accounted under the asset and liability method. The current charge for income tax expense is calculated in accordance with the relevant tax regulations applicable to entity. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Uncertain Tax Positions
The Company follows ASC 740-10, “Accounting for Uncertainty in Income Taxes”. This requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. Management evaluates their tax positions on an annual basis.
TraQiQ, Inc.and TraQiQ Solutions, Inc, file a consolidated income tax return and Rohuma US files a separate tax return in the U.S. federal tax jurisdiction and various state tax jurisdictions. TRAQ Pvt Ltd. as well as Mimo and Rohuma India file separate individual income tax returns in the India tax jurisdictions. The U.S. federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were filed. The India tax returns of are subject to examination by the India Income Tax Department and India state taxing authority, generally for 12 months after the relevant tax year, 24 months after the relevant tax year in case transfer pricing provisions are applicable.
Fair Value of Financial Instruments
ASC 825, “Financial Instruments,” requires the Company to disclose estimated fair values for its financial instruments. The carrying amount of cash, accounts receivable, prepaid and other current assets, accounts payable and accrued expenses, stockholder advances, short term financing and convertible debt approximate fair value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments.
Fair Value Measurements
ASC 820 “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosure about fair value measurements.
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The following provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which fair value is observable:
Level 1- fair value measurements are those derived from quoted prices (unadjusted in active markets for identical assets or liabilities);
Level 2- fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3- fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Financial instruments classified as Level 1 - quoted prices in active markets include cash.
These consolidated financial instruments are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment to estimation. Valuations based on unobservable inputs are highly subjective and require significant judgments. Changes in such judgments could have a material impact on fair value estimates.
In addition, since estimates are as of a specific point in time, they are susceptible to material near-term changes. Changes in economic conditions may also dramatically affect the estimated fair values.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management for the respective periods. The respective carrying value of certain financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash, investments, short-term notes payable, accounts payable and accrued expenses.
Derivative Financial Instruments
Derivatives are recorded on the consolidated balance sheet at fair value. The conversion features of the convertible instruments are embedded derivatives and are separately valued and accounted for on the consolidated balance sheet with changes in fair value recognized during the period of change as a separate component of other income/expense. Fair values for exchange-traded securities and derivatives are based on quoted market prices. Valuations derived from various models are subject to ongoing internal and external verification and review. Model used incorporate market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involves management’s judgment and may impact net income (loss).
With the issuance of the July 2017 FASB ASU 2017-11, “Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815),” which addresses the complexity of accounting for certain financial instruments with down round features, the Company has chosen the early adopt retroactively the amendments in Part I of the standard whereby fair value derivative liabilities previously recognized were derecognized in the current and comparative periods. Under the amendments included in this update, the Company is no longer required to record changes in fair value during the period of change as a separate component of other income (expense) in the consolidated Statements of Operations.
The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, “Debt—Debt with Conversion and Other Options”), including related EPS guidance (in Topic 260).
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The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect.
Under current GAAP, an equity-linked financial instrument with a down round feature that otherwise is not required to be classified as a liability under the guidance in Topic 480 is evaluated under the guidance in Topic 815, “Derivatives and Hedging,” to determine whether it meets the definition of a derivative. If it meets that definition, the instrument (or embedded feature) is evaluated to determine whether it is indexed to an entity’s own stock as part of the analysis of whether it qualifies for a scope exception from derivative accounting.
Generally, for warrants and conversion options embedded in financial instruments that are deemed to have a debt host (assuming the underlying shares are readily convertible to cash or the contract provides for net settlement such that the embedded conversion option meets the definition of a derivative), the existence of a down round feature results in an instrument not being considered indexed to an entity’s own stock. This results in a reporting entity being required to classify the freestanding financial instrument or the bifurcated conversion option as a liability, which the entity must measure at fair value initially and at each subsequent reporting date.
The amendments in this Update revise the guidance for instruments with down round features in Subtopic 815-40, “Derivatives and Hedging—Contracts in Entity’s Own Equity,” which is considered in determining whether an equity-linked financial instrument qualifies for a scope exception from derivative accounting. An entity still is required to determine whether instruments would be classified in equity under the guidance in Subtopic 815-40 in determining whether they qualify for that scope exception. If they do qualify, freestanding instruments with down round features are no longer classified as liabilities and embedded conversion options with down round features are no longer bifurcated.
For entities that present EPS in accordance with Topic 260, and when the down round feature is included in an equity-classified freestanding financial instrument, the value of the effect of the down round feature is treated as a dividend when it is triggered and as a numerator adjustment in the basic EPS calculation. This reflects the occurrence of an economic transfer of value to the holder of the instrument, while alleviating the complexity and income statement volatility associated with fair value measurement on an ongoing basis. Convertible instruments are unaffected by the Topic 260 amendments in this Update.
Those amendments in Part I of this Update are a cost savings relative to current GAAP. This is because, assuming the required criteria for equity classification in Subtopic 815-40 are met, an entity that issued such an instrument no longer measures the instrument at fair value at each reporting period (in the case of warrants) or separately accounts for a bifurcated derivative (in the case of convertible instruments) on the basis of the existence of a down round feature. For convertible instruments with embedded conversion options that have down round features, applying specialized guidance such as the model for contingent beneficial conversion features rather than bifurcating an embedded derivative also reduces cost and complexity. Under that specialized guidance, the issuer recognizes the intrinsic value of the feature only when the feature becomes beneficial instead of bifurcating the conversion option and measuring it at fair value each reporting period.
The amendments in Part II of this Update replace the indefinite deferral of certain guidance in Topic 480 with a scope exception. This has the benefit of improving the readability of the Codification and reducing the complexity associated with navigating the guidance in Topic 480.
For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in Part 1 of this Update should be applied in either of the following ways:
| 1. | retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the statement of financial position as of the beginning of the first fiscal year and interim period(s) in which the pending content that links to this paragraph is effective; or | |
| 2. | retrospectively to outstanding financial instruments with a down round feature for each prior reporting period presented in accordance with the guidance on accounting changes in paragraphs 250-10-45-5 through 45-10. |
| 17 |
The amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting effect.
Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (EPS) include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable pursuant to the exercise of stock options and warrants. Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive for periods presented.
Related Party Transactions
Parties are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management, members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company may deal where one-party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. All transactions shall be recorded at fair value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected as compensation or distribution to related parties depending on the transaction.
Retirement Benefits to Employees
Defined Contribution Plan
In India, the employees receive benefits from a provident fund, where the employer and employees each make monthly contributions to the plan at a pre-determined rate to the Regional Provident Fund Commissioner. Employer’s contributions to the fund is charged as an expense in the Statements of Operations.
Defined Benefit Plan
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, TRAQ Pvt Ltd. provides for a lump sum payment to eligible employees, at retirement or termination of employment based on the last drawn salary and years of employment with the Company. Current service costs for defined benefit plans are accrued in the period to which they relate. The liability in respect of defined benefit plans is calculated annually by TRAQ Pvt Ltd. TRAQ Pvt Ltd. records annual amounts relating to its defined benefit plans based on calculations that incorporate various actuarial and other assumptions, including discount rates, mortality, assumed rates of return, compensation increases and turnover rates. TRAQ Pvt Ltd. reserves its assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when it is appropriate to do so. TRAQ Pvt Ltd.’s obligation in respect of the gratuity plan, which is a defined benefit plan, is provided for based on actuarial valuation.
Other Long-Term Employee Benefits
TRAQ Pvt Ltd.’s net obligation in respect of leave encashment is the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any related assets is deducted. The discount rate is based on the prevailing market yields of Indian government securities at the reporting date that have maturity dates approximating the terms of TRAQ Pvt Ltd.’s obligations. The calculation is performed using the projected unit credit method. Any actuarial gains or losses are recognized.
| 18 |
Investments
The Company’s investments are in debt and equity instruments. These investments are accounted for in accordance with ASC 320 Investments – Debt Securities and ASC 321 Investments – Equity Securities. Interest earned under such investments are included in interest income.
Segment Reporting
For purposes of segment disclosures, two or more operating segments should be grouped only if the segments meet all the requirements of paragraph 280-10-50-11, including the requirements for similar economic characteristics.
As a result, all operating units perform similar services, and approximately 99% of the Company’s revenue is generated from its Indian subsidiary. The Company believes that no segment reporting is required as all remaining operations outside of the Indian subsidiary is immaterial.
Recently Issued Accounting Standards
There were updates recently issued, most of which represent technical corrections to the accounting literature or application to specific industries or transactions that are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
Going Concern
The
Company has an accumulated deficit of $
These consolidated financial statements of the Company have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties.
The
Company has recently filed a Registration Statement on Form S-1 and engaged an investment banker to undertake an offering of approximately
$
NOTE 3: ACQUISITIONS
TRAQ PVT LTD
On May 16, 2019, the Company entered into a Share Exchange Agreement with Mann-India Technologies Private Ltd., an Indian Corporation. On January 2, 2020, the name of this company was changed to TRAQIQ Solutions Private Limited. Pursuant to the Share Exchange Agreement with TRAQ Pvt Ltd., the Company acquired of the shares of TRAQ Pvt Ltd. and assumed certain net liabilities) in exchange for warrants exercisable over a -years to purchase shares of common stock of the Company valued at $. The warrants will be exercisable as follows: (i) warrants immediately upon closing; (ii) warrants exercisable one-year after the date of closing, which was extended to March 31, 2021; and (iii) warrants exercisable two-years after the date of closing.
The warrants that are exercisable in one-year and two-years are conditioned upon TRAQ Pvt Ltd. achieving certain revenue figures and pre-tax profit percentages. TRAQ Pvt Ltd. must achieve target revenue of $ million (US$) and pre-tax profit of (US$). Should TRAQ Pvt Ltd. be unable to achieve these criteria, the warrants will be reduced proportionately. A total of of these warrants were cancelled effective May 16, 2021 as a result of these criteria not being achieved.
| 19 |
The Company acquired the assets and liabilities noted below in exchange for the warrants noted herein and accounted for the acquisition in accordance with ASC 805. As a result, total consideration was equal to the value of the warrants of $, as stated in the agreement, and the Company recognized a gain on bargain purchase in the amount of $.
ROHUMA
On January 22, 2021, the Company entered into a Share Exchange Agreement with Rohuma, LLC, a Delaware limited liability company (“Rohuma”) and its members, whereby the Rohuna members agreed to exchange all of their respective membership interests in Rohuma in exchange for shares of common stock, of which the first tranche of shares were issued on March 1, 2021 totaling shares, with the remaining value reflected as contingent consideration until the shares vest at which time they will be issued. The transaction was valued at $ ($ per share). Rohuma has an Indian affiliate that is owned % by Rohuma and % by its founding member. Rohuma controls this entity and the % ownership by the member is now less than % upon acquisition by the Company. This amount is reflected as a non-controlling interest.
The Company acquired the assets and liabilities noted below in exchange for the shares noted herein and accounted for the acquisition in accordance with ASC 805.
SCHEDULE OF BUSINESS ACQUISITION
| Cash | $ | |||
| Accounts receivables, net | ||||
| Prepaid expenses and other current assets | ||||
| Fixed assets | ||||
| Intellectual property | ||||
| Tradenames | ||||
| Investment | ||||
| Accrued payroll and related taxes | ||||
| Accounts payable and accrued expenses | ( | ) | ||
| Accrued duties and taxes | ( | ) | ||
| Cash overdraft | ( | ) | ||
| Comprehensive income | ||||
| Debt- related parties | ( | ) | ||
| Debt | ( | ) | ||
| $ | ( | ) |
The
difference between the net liabilities acquired of $
MIMO TECHNOLOGIES
On
February 17, 2021, the Company entered into a Share Exchange Agreement with Mimo Technologies Private Ltd., and Indian corporation (“Mimo”)
and its shareholders, whereby the Mimo shareholders agreed to exchange all of their respective shares in Mimo in exchange for warrants
to purchase shares of the Company’s common stock. Of these warrants, were earned at the date of acquisition,
with the remaining expected to be earned over the next two years from grant based on revenue goals for Mimo. The warrants have
a term of three years and an exercise price of $ and value in the amount of $, of which $ is reflected in additional
paid in capital, with the remaining $ reflected as contingent consideration. In addition to the issuance of the warrants, TRAQ
Pvt Ltd, wrote off $
| 20 |
The Company acquired the assets and liabilities noted below in exchange for the warrants noted herein and accounted for the acquisition in accordance with ASC 805.
SCHEDULE OF BUSINESS ACQUISITION
| Cash | $ | |||
| Accounts receivables, net | ||||
| Prepaid expenses and other current assets | ||||
| Fixed assets | ||||
| Intellectual property | ||||
| Tradenames | ||||
| Accounts payable and accrued expenses | ( | ) | ||
| Accrued payroll and related taxes | ( | ) | ||
| Accrued duties and taxes | ( | ) | ||
| Comprehensive income | ( | ) | ||
| Debt – related parties | ( | ) | ||
| Debt | ( | ) | ||
| $ | ( | ) |
The
difference between the net liabilities acquired of $(
The following table shows pro-forma results for the nine months ended September 30, 2021 and 2020 as if the acquisition had occurred on January 1, 2020. These unaudited pro forma results of operations are based on the historical financial statements and related notes of Rohuma, Mimo and the Company.
SCHEDULE OF PROFORMA FOR BUSINESS ACQUISITION
For the nine months ended September 30, 2021 | For the nine months ended September 30, 2020 | |||||||
| Revenues | $ | $ | ||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Net income (loss) per share | $ | ( | ) | $ | ( | ) | ||
NOTE 4: CASH AND RESTRICTED CASH
Cash and restricted cash are as follows:
SCHEDULE OF CASH AND RESTRICTED CASH
September 30, 2021 | December 31, 2020 | |||||||
| Cash on hand | $ | $ | ||||||
| Bank balances | ||||||||
| Restricted cash | ||||||||
| Total | $ | $ | ||||||
ASU
2016-18, “Statements of Cash Flows” (Topic 230) was adopted by the Company in 2017. In accordance with this standard, restricted
cash and restricted cash equivalents is included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period
total amounts shown on the Statements of Cash Flows. During the nine months ended September 30, 2021 and the year ended December 31,
2020 there were
| 21 |
NOTE 5: FIXED ASSETS
The Company’s property and equipment is as follows:
SCHEDULE OF PROPERTY AND EQUIPMENT
| September 30, 2021 | December 31, 2020 | Estimated Life | ||||||||
| Property and equipment – TRAQ Pvt Ltd. | $ | $ | ||||||||
| Property and equipment – Rohuma US | ||||||||||
| Property and equipment – Rohuma India | ||||||||||
| Property and Equipment – Mimo Technologies | ||||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||||
| Net | $ | $ | ||||||||
Depreciation
expense for the nine months ended September 30, 2021 and 2020 was $
NOTE 6: INTANGIBLE ASSETS
The Company’s intangible assets are as follows:
SCHEDULE OF INTANGIBLE ASSETS
September 30, 2021 | December 31, 2020 | |||||||
| Customer relationships | $ | $ | ||||||
| Intellectual property | - | |||||||
| Tradenames | ||||||||
| Software | - | |||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Net | $ | $ | ||||||
Amortization
expense for the nine months ended September 30, 2021 and 2020 was $
NOTE 7: GOODWILL
The Company’s goodwill consists of the following:
SCHEDULE OF GOODWILL
September 30, 2021 | December 31, 2020 | |||||||
| Rohuma | $ | $ | ||||||
| Mimo Technologies | ||||||||
| Net | $ | $ | ||||||
For
the period ended September 30, 2021, there were
NOTE 8: LONG-TERM INVESTMENT
The Company’s long-term investment is as follows:
SCHEDULE OF LONG-TERM INVESTMENT
September 30, 2021 | December 31, 2020 | |||||||
| Equity Security – Compulsorily Convertible Debenture | $ | $ | ||||||
| 22 |
The
investment the Company had in a
In
addition, there was an investment acquired in the acquisition of Rohuma US for $
NOTE 9: NOTE RECEIVABLE
The Company’s notes receivable is as follows:
SCHEDULE OF NOTE RECEIVABLE
| September 30, 2021 | December 31, 2020 | |||||||
| MIMO Technologies PVT Ltd | $ | - | $ | |||||
The
Company entered into a note receivable with a related party in the amount of
NOTE 10: CONVERTIBLE NOTES PAYABLE
As of September 30, 2021 and December 31, 2020, the Company had the following convertible notes outstanding, all are current liabilities:
SCHEDULE OF CONVERTIBLE NOTES OUTSTANDING
| September 30, 2021 | December 31, 2020 | |||||||||||
| GS Capital | (a) | $ | $ | - | ||||||||
| Platinum Point Capital | (b) | - | ||||||||||
| Evergreen Capital Management LLC | (c) | - | ||||||||||
| Total Convertible Notes Payable | $ | $ | - | |||||||||
| Less: Discounts | ( | ) | - | |||||||||
| $ | $ | - | ||||||||||
| (a) | ||
| (b) | ||
| (c) |
Interest
expense on these notes for the nine months ended September 30, 2021 and 2020 are $
| 23 |
NOTE 11: LONG-TERM DEBT RELATED PARTIES
The following is a summary of the current portion - long-term debt - related parties as of September 30, 2021 and December 31, 2020:
SCHEDULE OF LONG-TERM DEBT RELATED PARTIES
| September 30, 2021 | December 31, 2020 | |||||||||||
| Unsecured advances - CEO | (a) | $ | $ | |||||||||
| Notes payable - Satinder Thiara | (b) | |||||||||||
| Promissory note – Kunaal Sikka | (c) | |||||||||||
| Notes payable – Swarn Singh | (d) | |||||||||||
| Note payable - Chaudhary | (e) | |||||||||||
| Note payable - Director | (g) | - | ||||||||||
| Advances – former CEO of Mimo Technologies | (f) | - | ||||||||||
| Current portion of long-term debt related parties | ( | ) | ( | ) | ||||||||
| Long-term debt – related parties | $ | $ | - | |||||||||
| (a) | ||
| (b) | ||
| (c) | ||
| (d) | ||
| (e) | ||
| (f) | ||
| (g) |
Interest
expense on these notes for the nine months ended September 30, 2021 and 2020 are $
| 24 |
NOTE 12: LONG-TERM DEBT
The following is a summary of the long-term debt as of September 30, 2021 and December 31, 2020:
SCHEDULE OF LONG-TERM DEBT
September 30, 2021 | December 31, 2020 | |||||||||||
| Other debt – in default | (a) | $ | $ | |||||||||
| Yukti Securities Private Limited | (b) | - | ||||||||||
| Noor Qazi | (c) | - | - | |||||||||
| Auto loan – ICICI Bank | (d) | |||||||||||
| Baxter Credit Union | (e) | |||||||||||
| UGECL | (f) | |||||||||||
| USA Bank PPP | (g) | - | ||||||||||
| Loan Builder | (h) | - | ||||||||||
| Satin | - | |||||||||||
| SBA - Rohuma | - | |||||||||||
| Total | $ | $ | ||||||||||
| Current portion | ( | ) | ( | ) | ||||||||
| Long-term debt, net of current portion | $ | $ | ||||||||||
| (a) | |
| (b) | |
| (c) | |
| (d) | |
| (e) | |
| (f) | |
| (g) | |
| (h) |
Interest
expense on these notes for the nine months ended September 30, 2021 and 2020 are $
| 25 |
The following is a summary of current portion - convertible debt - related and unrelated parties as of September 30, 2021 and December 31, 2020:
SUMMARY OF CARRYING VALUE OF CONVERTIBLE DEBT
| September
30, 2021 |
December
31, 2020 |
|||||||||||
| Face value of notes – related party | (a) | $ | $ | |||||||||
| Face value of notes – unrelated parties | (a) | |||||||||||
| Excess of the fair value of shares issuable over the face value of the convertible notes | (a) | |||||||||||
| $ | $ | |||||||||||
| (a) | In
connection with the reverse merger in July 2017, the Company and two stockholders, who had provided related party advances to the
Company, agreed to exchange their related party advances for | |
During
the year ended December 31, 2018, the Company received additional proceeds from a related party of $
The remaining notes and all accrued interest were paid in October 2021. As the notes were settled in cash, no additional conversion premium is due. |
Interest
expense on these notes for the nine months ended September 30, 2021 and 2020 are $
The Company has calculated the stock-settled liability in accordance with ASC 835-30 which establishes the monetary value at settlement of these instruments at fair value.
| 26 |
NOTE 14: STOCKHOLDERS’ EQUITY (DEFICIT)
Series A Convertible Preferred Stock
On
July 19, 2017, the Company approved the issuance of shares of its Series A Convertible Preferred Stock to its CEO and, on August
1, 2017, the Company sold and issued the shares of its Series A Convertible Preferred Stock to its CEO at a price of $ per
share for $
Each outstanding share of Series A Convertible Preferred Stock is convertible into the number of shares of the Company’s common stock (the “Common Stock”) determined by dividing the Stated Value by the Conversion Price as defined below, at the option of any Series A Convertible Preferred Stock shareholder in whole or in part, at any time commencing no earlier than six (6) months after the issuance date; provided that any conversion under this section must be made during the ten (10) day period immediately following the date on which the corporation files with the Securities and Exchange Commission any periodic report on form 10-Q, 10-K or the equivalent form; provided further that, any conversion under this Section IV: (a) shall be for a minimum Stated Value of $ of Series A Convertible Preferred Stock.
The
Conversion Price for each share of Series A Convertible Preferred Stock in effect on any Conversion Date shall be
On
September 22, 2021, the CEO converted all shares of Series A Convertible Preferred Stock at the conversion price of $ per
share into
Common Stock
As of September 30, 2021, the Company has shares issued and outstanding.
During
the three months ended September 30, 2021, the Company (a) issued common shares in conversion of
During
the three months ended June 30, 2021, the Company (a) issued shares of common stock for services valued at $
During
the three months ended March 31, 2021, the Company (a) issued shares of common stock for $
There were shares issued in the nine months ended September 30, 2020.
On April 12, 2018, the Company amended its Articles of Incorporation to forward split all outstanding shares of common stock such that all issued and outstanding shares of Common Stock shall be automatically combined and reclassified such that each share of Pre-Forward Split Stock shall be combined and reclassified into four shares of Common Stock. The number of shares for all periods presented has been retroactively restated to reflect the forward split.
| 27 |
Common Stock Warrants
The following schedule summarizes the changes in the Company’s common stock warrants:
SCHEDULE OF COMMON STOCK WARRANTS
| Weighted | Weighted | |||||||||||||||||||
| Warrants Outstanding | Average | Average | ||||||||||||||||||
| Number | Exercise | Remaining | Aggregate | Exercise | ||||||||||||||||
| Of | Price | Contractual | Intrinsic | Price | ||||||||||||||||
| Shares | Per Share | Life | Value | Per Share | ||||||||||||||||
| Balance at December 31, 2019 | $ | years | $ | $ | ||||||||||||||||
| Warrants granted | $ | - | - | $ | ||||||||||||||||
| Warrants exercised | $ | - | - | $ | ||||||||||||||||
| Warrants expired/cancelled | $ | - | - | $ | ||||||||||||||||
| Balance at December 31, 2020 | $ | years | $ | $ | ||||||||||||||||
| Warrants granted | $ - | - | $ | |||||||||||||||||
| Warrants exercised/exchanged | ( | ) | $ | - | - | $ | ||||||||||||||
| Warrants expired/cancelled | ( | ) | $ | - | - | $ | ||||||||||||||
| Balance at September 30, 2021 | $ - | years | $ | $ | ||||||||||||||||
| Exercisable at September 30, 2021 | $ - | years | $ | $ | ||||||||||||||||
SCHEDULE OF EACH OPTION WARRANT ESTIMATED USING THE BLACK-SCHOLES VALUATION MODEL
| Nine Months Ended September 30, 2021 | Year Ended December 31, 2020 | |||||||
| Expected term | ||||||||
| Expected volatility | - | % | ||||||
| Expected dividend yield | ||||||||
| Risk-free interest rate | % | |||||||
On May 16, 2019, the Company entered into a Share Exchange Agreement with Mann-India Technologies Private Ltd., an Indian Corporation. Pursuant to the Share Exchange Agreement, the Company acquired % of the shares of TRAQ Pvt Ltd. and assumed certain net liabilities in exchange for warrants exercisable over a -years to purchase shares of common stock of the Company valued at $. The warrants will be exercisable as follows: (i) warrants immediately upon closing; (ii) warrants exercisable one-year after the date of closing, which was extended to March 31, 2021; and (iii) warrants exercisable two-years after the date of closing. The value of the transaction totaled $ and is reflected as an increase to additional paid in capital. A total of of these warrants were cancelled effective May 16, 2021 as a result of these criteria not being achieved.
On
February 16, 2021, the Company entered into several stock purchase agreements for the issuance of shares for cash in the amount
of $
On
February 17, 2021, the Company entered into a Share Exchange Agreement with Mimo Technologies Private Ltd., and Indian corporation (“Mimo”)
and its shareholders, whereby the Mimo shareholders agreed to exchange all of their respective shares in Mimo in exchange for warrants
to purchase shares of the Company’s common stock. Of these warrants, were earned at the date of acquisition,
with the remaining expected to be earned over the next two years from grant based on revenue goals for Mimo. The warrants have
a term of three years and an exercise price of $ and value in the amount of $, of which $ is reflected in additional
paid in capital, with the remaining $ reflected as contingent consideration. In addition to the issuance of the warrants, TRAQ
Pvt Ltd, wrote off $
| 28 |
On
March 8, 2021, the Company entered into a consulting agreement to provide advisory services regarding strategic planning. The agreement
is for a term of one-year. The agreement calls for payments to be paid monthly in the amount of $ and the issuance of stock at the
commencement of the agreement for
On
February 12, 2021, in connection with the Platinum Point Capital note, the Company granted warrants with a term of
On
September 17, 2021, the Company granted warrants with a term of
Options
On November 23, 2020, the Board of Directors of the Company approved the 2020 Equity Incentive Plan.
On October 19, 2020, the Company granted stock options to board members, advisory board members, employees and consultants. The options have a -year term, and are both service based grants, as well as performance-based grants. Stock-based compensation for the year ended December 31, 2020 was $, and the unrecognized stock-based compensation for these grants as of December 31, 2020 is $. Of the options granted, only have been vested through December 31, 2020.
In the nine months ended September 30, 2021, an additional options vested for a total vested amount of at September 30, 2021.
In the nine months ended September 30, 2021, the Company recognized $ in stock-based compensation.
SUMMARY OF STOCK OPTION
Nine Months Ended September 30, 2021 | Year Ended December 31, 2020 | |||||||||||||||
| Number | Weighted Average Exercise Price | Number | Weighted Average Exercise Price | |||||||||||||
| Beginning balance | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Forfeited | ||||||||||||||||
| Expired | ||||||||||||||||
| Ending balance | $ | $ | ||||||||||||||
| Intrinsic value of options | $ | $ | ||||||||||||||
| Weighted Average Remaining Contractual Life (Years) | ||||||||||||||||
NOTE 15: OPERATING LEASE
The
Company has adopted ASU No. 2016-02, Leases (Topic 842), as of January 1, 2019 and will account for their lease in terms of the
right of use assets and offsetting lease liability obligations for this new lease under this pronouncement. In accordance with ASC 842
- Leases, effective January 1, 2019, the Company up until May 16, 2019 did not have any long-term lease commitments. On May 17, 2019
with the Company’s acquisition of TRAQ Pvt Ltd., recorded a lease right of use asset and a lease liability at present value of
$
The Company has chosen to implement this standard using the modified retrospective model approach with a cumulative-effect adjustment, which does not require the Company to adjust the comparative periods presented when transitioning to the new guidance on January 1, 2019. The Company has also elected to utilize the transition related practical expedients permitted by the new standard. The modified retrospective approach provides a method for recording existing leases at adoption and in comparative periods that approximates the results of a modified retrospective approach.
| 29 |
The
lease right of use asset of in the original amount of $
During
the year ended December 31, 2020, the Company renegotiated their leases with the landlord for TRAQ Pvt Ltd. As a result of this renegotiation,
the Company vacated one of their two leases, and as a result, impaired $
As
of September 30, 2021, the value of the unamortized lease right of use asset is $
SCHEDULE OF REMAINING LEASE OBLIGATION
| Remaining Lease Obligation by calendar year (undiscounted cash flows) | ||||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total lease payments | ||||
| Less: Imputed interest | ||||
| Present value of lease liabilities | $ | |||
For
the nine months ended September 30, 2021 and 2020 the Company recorded rent expense of $
NOTE 16: DERIVATIVE LIABILITIES
On
January 19, 2021, the Company entered into a 12% Convertible Promissory Note with GS Capital Partners, LLC (the “GS Note”)
in the amount of $
On
February 12, 2021, the Company entered into a 10% Convertible Promissory Note with Platinum Point Capital, LLC (the “Platinum Note”).
The Platinum Note has a maturity of -year.
On
September 17, 2021, the Company entered into a 20% OID Senior Secured Promissory Note with Evergreen Capital Management LLC (the “Evergreen
1”). The Evergreen 1 has a maturity of nine months to June 17, 2022. The Evergreen 1 accrues interest at a rate of 10% per year.
| 30 |
Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each warrant is estimated using the Black-Scholes valuation model. The following assumptions were used in September 30, 2021 and December 31, 2020:
SCHEDULE OF VALUATION ASSUMPTIONS
| Nine Months Ended September 30, 2021 | Year Ended December 31, 2020 | |||||||
| Expected term | ||||||||
| Expected volatility | % | |||||||
| Expected dividend yield | ||||||||
| Risk-free interest rate | % | |||||||
The Company’s derivative liabilities are as follows:
SCHEDULE OF DERIVATIVE LIABILITIES
| September 30, 2021 | December 31, 2020 | |||||||
| Fair value of the GS Capital conversion option | $ | $ | ||||||
| Fair value of the Platinum Point conversion option | ||||||||
| Fair value of the Platinum Point warrants ( | ||||||||
| Fair value of the Evergreen 1 conversion option | ||||||||
| Fair value of the Evergreen 1 warrants ( | ||||||||
| $ | $ | |||||||
Activity related to the derivative liabilities for the period ended September 30, 2021 is as follows:
SCHEDULE OF ACTIVITY RELATED TO DERIVATIVE LIABILITIES
| Beginning balance as of December 31, 2020 | $ | |||
| Issuances of warrants/conversion option – derivative liabilities | ||||
| Change in fair value of warrants/conversion option - derivative liabilities | ||||
| Ending balance as of September 30, 2021 | $ |
There were no derivative liabilities prior to January 2021.
nOTE 17: CONCENTRATIONS
During
the nine months ended September 30, 2021 and 2020, the Company had two major customers comprising
The Company does not believe that the risk associated with these customers or vendors will have an adverse effect on the business.
nOTE 18: CONTINGENCY
During
the year ended December 31, 2018, the Company charged an independent truck driver approximately $
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nOTE 19: COMMITMENTS AND CONTINGENCIES
Commitments and contingencies in respect of TRAQ Pvt Ltd;
| (i) | TRAQ
Pvt Ltd had applied for compounding of the TDS liability for the assessment year 2014-2015 and 2015-2016 in accordance with Indian
Income Tax Laws. However, | |
| (ii) | TRAQ
Pvt Ltd has outstanding Gratuity for $ | |
| (iii) | There are numerous interpretative issues relating to the Indian Supreme Court (SC) judgment dated February 28, 2019, on Provident Fund (PF) on the inclusion of allowances for the purpose of PF contribution as well as its applicability. The impact has been recorded in the nine months ended September 30, 2021 Consolidated Financial Statements. | |
| (iv) | TRAQ Pvt Ltd has delayed in complying with provisions related to Foreign Direct Investment and Transfer of Shares to Non-resident as per the Master Circulars and notification issued by Reserve Bank of India, therefore, is liable for imposition of penalty. Since the amount of the penalty for the same is not ascertainable, no effect was given in the Consolidated Financial Statements. | |
| (v) | Prior
to its acquisition in May 2019, TRAQ Pvt Ltd, had provided a guarantee in favor of State Bank of India for $ |
nOTE 20: SUBSEQUENT EVENTS
On
October 6, 2021, Platinum converted $
On
October 8, 2021, the Company entered into a
As
a commission on this note, the Company granted to the investment bankers,
On
October 15, 2021, the Company entered into a
As
a commission on this note, the Company granted to the investment bankers,
On
October 18, 2021, the Company made their final payment to GS Capital for their convertible note. With that final payment made, GS Capital
returned
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
As used in this “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” except where the context otherwise requires, the term “we,” “us,” “our,” or “the Company,” refers to the business of TraqIQ Inc.
The following presentation of management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements, the accompanying notes thereto and other financial information appearing elsewhere in this quarterly report on Form 10-Q. This section and other parts of this quarterly report on Form 10-Q contain forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements.”
Overview
TraQiQ, Inc. (along with its wholly owned subsidiaries, referred to herein as the “Company”) was incorporated in the State of California on September 9, 2009 as Thunderclap Entertainment, Inc. On July 14, 2017, Thunderclap Entertainment, Inc. changed its name to TraQiQ, Inc. On July 19, 2017, the Company entered into a Share Exchange Agreement (“Share Exchange”) with the stockholders of OmniM2M, Inc. (“OmniM2M”) and TraQiQ Solutions, Inc. dba Ci2i Services, Inc. (formerly Ci2i Services, Inc. – amended November 6, 2019) (“Ci2i”) whereby the stockholders of Omni and Ci2i exchanged all of their respective shares, representing 100% ownership in OmniM2M and Ci2i in exchange for 12,000,000 shares of the Company’s common stock, respectively. The OmniM2M Shareholders and the Ci2i Shareholders have each been issued their respective 12,000,000 shares on a pro rata basis based on their respective holdings in OmniM2M and Ci2i in the Share Exchange Agreement. The Share Exchange was accounted for as a reverse merger whereas Ci2i is considered the accounting acquirer and TraQiQ,Inc. is considered the accounting acquiree. For accounting purposes, the acquisition of Omni is recorded at historical cost in accordance with Accounting Standard Codification (“ASC”) 805-50-25-2 as this is considered an acquisition of entities under common control as the management of the Company and Omni control the activities of the respective companies. Prior to the merger with Ci2i and acquisition of Omni, the Company was considered a shell company under Rule 12b-2 of the Exchange Act. On December 1, 2017, The Company entered into a Share Purchase Agreement (the “Share Exchange Agreement”) with Ajay Sikka (“Sikka”), the sole shareholder of Transport IQ, Inc. whereby Sikka agreed to sell all of the shares in TransportIQ, Inc. (“TransportIQ”) in exchange for $18,109, in the form of cancellation of all of the debt of TransportIQ that is owed to the Company. The transaction became effective upon the execution of the Share Exchange Agreement by Sikka and the Company; and Transport IQ, Inc, is now a wholly-owned subsidiary of the Company. Because TransportIQ was commonly controlled and owned, the transaction was recorded at the historical carrying value of TransportIQ’s assets and liabilities.
Overview of the Company
With operations concentrated in India, Southeast Asia and Latin America, the Company helps businesses in emerging markets leverage the “gig” or task economy by providing both technology solutions and a network of workers required to fulfill those tasks. The Company provides software as a service that enables clients to build and manage a network of contract task workers. This platform can also be used by business clients to manage their employees who are performing services, such as PC repair or food delivery. In addition, with the recent acquisition of Mimo Technologies Private Limited (“Mimo”), Mimo operates a network of over 14,000 task workers in India who make deliveries, collect payments, do background verifications, and fulfill tasks across the supply chain, as needed by business clients to deliver their products and services to their respective markets and customers.
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TraQSuite is a cloud based software platform with a revenue model based on initial and transaction-based licensing fees as well as consulting fees. Licensees pay an initial per-module fee that varies depending on the number of modules that are licensed. This fee is typically $10,000 per module. Customers are also billed on a per-user or per-transaction basis every month. User fees range from a $75 per month fee for the administrator to $5 per month for regular users. Transaction fees averages about $1 per transaction, with discounts for higher volumes. Most customers also pay initial consulting fees upfront for integration of TraQSuite with their legacy software and training of their employees in the use of TraQSuite.
The Company’s TraQSuite software platform powers the last mile distribution network, allowing business users to target customers, facilitate and validate transactions, track and manage task workers, manage funds and run a distribution network. Key features of the TraQSuite software include:
| ● | Last Mile delivery: TraQSuite’s Last-Mile software module enables a business to manage thousands of task workers across multiple geographies to deliver products and services to the users. The software platform, operating through mobile apps, allows for data sharing, delivery validation, geo-tagging and know-your-customer (KYC) requirements and can even measure customer satisfaction. | |
| ● | Transact: TraQSuite enables task workers to facilitate transactions by meeting the end customers. They can collect payments via credit cards, smart-phone swipes, SMS messages or cash. Both banked and unbanked users can buy products and services and pay with their mobile devices. | |
| ● | Target: TraQSuite enables customer transactions to be rewarded with loyalty credits, tokens or points that can be redeemed by the customer for free products, discounts and benefits. The software analyzes these transactions and purchase behaviors by using leading AI models and can deliver real time, automated and targeted offers and recommendations for additional purchases and customer retention. |
The Mimo delivery and task service in India runs on the TraQSuite platform and performs deliveries and fulfills tasks for some of the largest businesses in India. Mimo provides delivery and pickup services for the banking and insurance industry, performing verifications, field investigations for loan requests, business verification, employment verification, collection of documents and customer data and assistance in filling out forms for banks. Mimo works with microfinance institutions to collect cash, such as loan payments, convert cash to digital forms such as debit cards, and conduct data collection and surveys. For consumer goods companies, Mimo does promotional marketing, last mile (hyper-local) delivery, merchant onboarding or activation, store audits, and route optimization for delivery.
The Company’s strategy is to grow the business through a combination of organic growth and strategic investments that bring new functionality and revenue streams to the Company. The plan is to enhance the functionality of our existing products, increase sales in the Indian market and entry into new emerging markets. The Company has a presence in India, Southeast Asia and Latin America, and recently added new customers in Australia, New Zealand and parts of Africa.
TraQiQ Solutions, Inc.
Ci2i is a services company founded in 1998 that develops and deploys intelligent technologies and products in order to meet the demand for sustainable, integrated solutions. Ci2i’s primary focus has been in the analytics and intelligence segments. The Company is investing significantly in building products in the area of supply chain and last mile delivery.
Ci2i’s cloud solutions and analytics services comprise software development, program management, project management, and business analytics services.
TraQiQ Solutions Private Limited
On May 16, 2019, the Company entered into a Share Exchange Agreement with Mann-India Technologies Private Ltd., an Indian Corporation (“Mann”). On January 2, 2020, Mann changed its name to TraQiQ Solutions Private Limited (“TRAQ Pvt Ltd”). Pursuant to the Share Exchange Agreement with Mann, the Company acquired 100% of the shares of Mann and assumed certain net liabilities in exchange for warrants exercisable over a five-years to purchase 1,329,272 shares of common stock of the Company valued at $268. The warrants will be exercisable as follows: (i) 100,771 warrants immediately; (ii) 859,951 warrants exercisable one-year after the date of closing, which was extended to March 31, 2021; and (iii) 368,550 warrants exercisable two-years after the date of closing. This transaction is being recorded as a business combination under ASC 805.
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The warrants that are exercisable in one-year and two-years are conditioned upon TRAQ Pvt Ltd. achieving certain revenue figures and pre-tax profit percentages. TRAQ Pvt Ltd. must achieve target revenue of $1.1 million (US$) and pre-tax profit of 25% (US$). Should TRAQ Pvt Ltd. be unable to achieve these criteria, the warrants will be reduced proportionately. A total of 419,127 of these warrants were cancelled effective May 16, 2021 as a result of these criteria not being achieved.
Mann-India Private limited was renamed to TraQiQ Solutions Private Limited shortly after acquisition by TraQiQ Inc.
TRAQ Pvt Ltd. was established in May 2000 and is headquartered in New Delhi, India. TRAQ Pvt Ltd. is a leading software development company which, with the advent of technology, has evolved as a mature and fast-growing company committed to provide reliable and cost-effective software solutions across industries all over the world.
TRAQ Pvt Ltd. has its own experienced team of software developers dedicated towards developing various kinds of customized software.
TraQ Pvt Ltd. has been doing business around the world for over 15 years, with particular emphasis on Latin America and India. The customer list includes large enterprise Finance and Insurance companies across Latin America. The company’s product portfolio has evolved rapidly and now includes enterprise ready solutions for payment processing, mobile wallets, micro lending solutions and digital transformation.
Rohuma, LLC
On January 22, 2021, the Company entered into a Share Exchange Agreement with Rohuma, LLC, a Delaware limited liability company (“Rohuma”) and its members, whereby the Rohuna members agreed to exchange all of their respective membership interests in Rohuma in exchange for 4,292,220 shares of common stock, of which the first tranche of shares were issued on March 1, 2021 totaling 2,562,277 shares, with the remaining value reflected as contingent consideration until the shares vest at which time they will be issued. The transaction was valued at $3,433,776 ($0.80 per share). Rohuma has an Indian affiliate that is owned 99% by Rohuma and 1% by its founding member. Rohuma controls this entity and the 1% ownership by the member is now less than 1% upon acquisition by the Company. This amount is reflected as a non-controlling interest.
Rohuma dba Kringle.ai is a California based software solutions company that enables digital and mobile commerce by providing enterprise class applications that cover loyalty and rewards products, payments, online ordering, distribution logistics for retail and more. Kringle analyzes customers’ omni-channel behaviors and transactions. Using AI for digital commerce, Kringle is able to deliver real time, automated 1:1 recommendations and personalized content across all customer touch points.
Mimo Technologies Private Limited
On February 17, 2021, the Company entered into a Share Exchange Agreement with Mimo Technologies Private Ltd., and Indian corporation (“Mimo”) and its shareholders, whereby the Mimo shareholders agreed to exchange all of their respective shares in Mimo in exchange for warrants to purchase 1,367,539 shares of the Company’s common stock. Of these warrants, 820,524 were earned at the date of acquisition, with the remaining 547,015 expected to be earned over the next two years from grant based on revenue goals for Mimo. The warrants have a term of three years and an exercise price of $0.001 and value in the amount of $1,640,447, of which $984,268 is reflected in additional paid in capital, with the remaining $656,179 reflected as contingent consideration. In addition to the issuance of the warrants, TRAQ Pvt Ltd, wrote off $258,736 in amounts due from a note receivable, $123,778 in accounts receivable and $40,354 in a debenture from Mimo. In addition, a cash payment was made to one of the minority shareholders of Mimo in the amount of $22,338. The Company acquired over 99% of Mimo with the remaining percentage of less than 1% reflected as a non-controlling interest.
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TraQiQ operates the Mimo delivery and task service in India. This service runs on the TraQSuite platform. Mimo has 14,000+ independent contractors across India performing deliveries and fulfilling tasks for the largest corporations in the country. Our team at Mimo uses a sophisticated technology platform and a smartphone app to get their tasks completed. This is coupled with a verification and billing system that allows customers of all sizes to leverage this distribution infrastructure.
Mimo offers a broad set of services. These offerings can be classified into three broad categories:
| ● | Data collection and client verification (surveys, verification, on-boarding), | |
| ● | Cash management & handling services, and | |
| ● | Distribution and demand generation (order fulfilment, demand generation, delivery services for e-commerce companies) |
Mimo assists the delivery and pickup segment of the banking and insurance industry by performing verifications, field investigations for loan requests, business verifications and employment verification, and also collects documents, assists in filling forms for banks, and completes data collection from customers.
Mimo works with microfinance institutions to collect cash, such as loan payments, convert cash to digital means like debit cards, and conduct data collection and surveys.
For consumer goods companies, Mimo does promotional marketing, Last mile (hyper-local) delivery, merchant onboarding or activation, store audits, and route optimization for delivery. Mimo provides efficient end-to-end transshipment logistics. The framework manages and optimizes last-mile delivery & e-commerce logistics across the entire distribution chain with transparency and seamless integration.
Mimo is currently in the planning stages to provide food, alcohol & medicine deliveries as well.
During the COVID-19 pandemic, Mimo leveraged video as a platform for verification and document delivery. Now, the task workers include people who are in the field on bikes and trucks, people on a video screen, as well as people on the phone.
There are also data digitization tasks being done by Mimo task workers across the country. In a country like India where there are over 20 languages and multiple dialects, the task workers convert paper documents into electronic form in the same language or translate them into another language.
Mimo provides delivery and task worker solutions across India. Mimo works with Banking, Financial, Logistics and Distribution companies, to take their products and services to semi-urban and rural India. Mimo trains the agents in each Product or Service through an online and classroom training platform. The company powers the gig economy task workers throughout the country and provides a very valuable source of employment for young people who may or may not have a high school diploma.
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Going Concern
The Company has an accumulated deficit of $7,784,336 and a working capital deficit of $8,546,369, as of September 30, 2021, and a working capital deficit of $2,851,721 as of December 31, 2020. As a result of these factors, management has determined that there is substantial doubt about the Company ability to continue as a going concern.
These consolidated financial statements of the Company have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties.
The Company has recently filed a Registration Statement on Form S-1 and engaged an investment banker to undertake an offering of approximately $15,000,000. The investment banker has assisted the Company in raising a bridge round of debt financing in the amount of $1,200,000, which is net of original issue discount of $240,000 through October 15, 2021. Management intends to use the funds received from the capital raise to grow both organically and inorganically by pursuing potential synergistic companies as well as invest in technology and human capital for their existing operations. The Company’s ability to close on this potential offering to raise additional capital is unknown. Obtaining additional financing and the successful development of the Company’s contemplated plan of operations, ultimately, to profitable operations, are necessary for the Company to continue operations.
The Company raised $1,115,000 in the nine months ended September 30, 2021 from the issuance of convertible notes, $1,449,394 from related parties, $50,331 from long-term debt and raised $494,500 through sales of common stock and warrants. The Company repaid $80,000 in convertible notes, $153,706 of long-term debt and $781,326 of related party notes. In addition, the Company acquired two businesses that enhance the Company’s services in both India and the United States.
Results of Operations
Results of Operations and Financial Condition for the Nine Months Ended September 30, 2021 as Compared to the Nine Months Ended September 30, 2020
Revenues
For the nine months ended September 30, 2021 compared to September 30, 2020, the Company’s revenues increased by $1,369,910, or 185%, from $739,177 in 2020 to $2,109,087 in 2021. The increase is the result of the acquisitions of Rohuma and Mimo as well as improvement in revenues as TRAQ Pvt Ltd. has started to emerge from the effects of COVID which contributed higher revenue and higher profitability and the addition of new customers in TRAQ Solutions, Inc.
Cost of Revenues
For the nine months ended September 30, 2021 compared to September 30, 2020, the Company’s cost of revenues increased by $1,264,850, or 316%, from $399,720 in 2020 to $1,664,570 in 2021. The increase is the result of the acquisitions of Rohuma and Mimo as well as added direct labor for TRAQ Pvt Ltd. The company experienced lower profitability in these new engagements, as they ramped up personnel post-COVID, which they hope to normalize in the next quarter or two.
Operating Expenses
For the nine months ended September 30, 2021 compared to September 30, 2020, the Company’s salary and salary related costs increased by $312,239, or 173%, from $180,123 in 2020 to $492,362 in 2021 due to the acquisitions of Rohuma and Mimo as well as increases to management salaries.
For the nine months ended September 30, 2021 compared to September 30, 2020, the Company’s professional fees increased by $446,605, or 322%, from $138,817 in 2020 to $585,422 in 2021. Our professional fees increased in 2021 compared to 2020 due to the acquisitions of Rohuma and Mimo as well as fees related to the acquisitions of those companies and the preparation of the annual report as well as fees related to the filing of the registration statement which includes the investment banker fees related to the raising of bridge financing.
For the nine months ended September 30, 2021 compared to September 30, 2020, the Company’s rent expense decreased by $71,630, or 75%, from $95,151 in 2020 to $23,521 in 2021 due to TRAQ Pvt Ltd, renegotiating their leases in December 2020 reducing their space due to COVID.
For the nine months ended September 30, 2021 compared to September 30, 2020, the Company’s depreciation and amortization expense increased $18,206, or 50%, from $36,284 in 2020 to $54,490 in 2021. The increase was the result of the depreciation and amortization expense on the fixed and intangible assets acquired in the Rohuma and Mimo acquisitions.
For the nine months ended September 30, 2021 compared to September 30, 2020, the Company’s general and administrative expenses increased by $2,803,663, or 3137%, from $89,373 in 2020 to $2,893,036 in 2021 primarily due to the acquisitions of Rohuma and Mimo as well as expenses related to stock-based compensation.
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Interest Expense
For the nine months ended September 30, 2021 compared to September 30, 2020, the Company’s interest expense increased by $380,558, or 154%, from $247,162 in 2020 to $627,720 in 2021 due to higher levels of debt in 2021 as well as the amortization of discounts on the debt instruments.
Changes in Fair Value of Derivative Liabilities
For the nine months ended September 30, 2021 compared to September 30, 2020, the Company’s change in the fair value of the derivative liability increased by $850,221, from $0 in 2020 to $850,221 in 2021 due to the classification of the convertible promissory notes and related warrants being classified as derivative liabilities and the changes in the share price over the period September 30, 2021.
Net Loss
For the nine months ended September 30, 2021 compared to September 30, 2020, the Company’s net loss increased by $4,844,351, from $(439,062) in 2020 to $(5,283,413) in 2021 due to the changes noted herein.
Results of Operations and Financial Condition for the Three Months Ended September 30, 2021 as Compared to the Three Months Ended September 30, 2020
Revenues
For the three months ended September 30, 2021 compared to September 30, 2020, the Company’s revenues increased by $571,841, or 262%, from $217,858 in 2020 to $789,699 in 2021. The increase is the result of the acquisitions of Rohuma and Mimo as well as improvement in revenues as TRAQ Pvt Ltd. has started to emerge from the effects of COVID which contributed higher revenue and higher profitability and the addition of new customers in TRAQ Solutions, Inc. for some equipment purchases for non-core business activities.
Cost of Revenues
For the three months ended September 30, 2021 compared to September 30, 2020, the Company’s cost of revenues increased by $521,505, or 398%, from $131,037 in 2020 to $652,542 in 2021. The increase is the result of the acquisitions of Rohuma and Mimo as well as added direct labor for TRAQ Pvt Ltd. The Company experienced lower profitability in these new engagements, as they ramped up personnel post-COVID, which they hope to normalize in the next quarter or two. In addition, the Company in 2021 has added cost of sales for the equipment sold for their non-core business activities.
Operating Expenses
For the three months ended September 30, 2021 compared to September 30, 2020, the Company’s salary and salary related costs increased by $97,865, or 114%, from $85,484 in 2020 to $183,349 in 2021 due to the acquisitions of Rohuma and Mimo as well as increases to management salaries.
For the three months ended September 30, 2021 compared to September 30, 2020, the Company’s professional fees increased by $274,452, or 1159%, from $23,682 in 2020 to $298,134 in 2021. Our professional fees increased in 2021 compared to 2020 due to the acquisitions of Rohuma and Mimo as well as fees related to the acquisitions of those companies as well as fees related to the filing of the registration statement which includes the investment banker fees related to the raising of bridge financing.
For the three months ended September 30, 2021 compared to September 30, 2020, the Company’s rent expense decreased by $23,246, or 74%, from $31,256 in 2020 to $8,010 in 2021 due to TRAQ Pvt Ltd, renegotiating their leases in December 2020 reducing their space due to COVID.
For the three months ended September 30, 2021 compared to September 30, 2020, the Company’s depreciation and amortization expense increased $5,993, or 52%, from $11,478 in 2020 to $17,471 in 2021. The increase was the result of the depreciation and amortization expense on the fixed and intangible assets acquired in the Rohuma and Mimo acquisitions.
For the three months ended September 30, 2021 compared to September 30, 2020, the Company’s general and administrative expenses increased by $1,337,113, or 4783%, from $27,954 in 2020 to $1,365,067 in 2021 primarily due to the acquisitions of Rohuma and Mimo as well as expenses related to stock-based compensation.
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Interest Expense
For the three months ended September 30, 2021 compared to September 30, 2020, the Company’s interest expense increased by $182,550, or 223%, from $81,992 in 2020 to $264,542 in 2021 due to higher levels of debt in 2021 as well as the amortization of discounts on the debt instruments.
Changes in Fair Value of Derivative Liabilities
For the three months ended September 30, 2021 compared to September 30, 2020, the Company’s change in the fair value of the derivative liability decreased by $345,911, from $0 in 2020 to $345,911 in 2021 due to the classification of the convertible promissory notes and related warrants being classified as derivative liabilities and the changes in the share price over the period September 30, 2021.
Net Loss
For the three months ended September 30, 2021 compared to September 30, 2020, the Company’s net loss increased by $1,606,912, from $(175,828) in 2020 to $(1,782,740) in 2021 due to the changes noted herein.
Liquidity and Capital Resources
As of September 30, 2021, current assets were $1,785,261 and current liabilities outstanding amounted to $10,331,630 which resulted in a working capital deficit of $8,546,369. As of December 31, 2020, current assets were $1,101,439 and current liabilities outstanding amounted to $3,953,160 which resulted in a working capital deficit of $2,851,721.
Net cash used in operating activities was $105,382 for the nine months ended September 30, 2020 compared to $1,737,531 in 2021. Cash used in operations for 2021 and 2020 was the primarily related to the loss in operations offset by increases and decreases in accounts payable and accrued expenses and the changes in accounts receivable due to the lack of adequate cash flow of the Company as well as non-cash charges related to stock based compensation and the changes in the derivative liabilities.
The only investing activities for the nine months ended September 30, 2021 and 2020, related to the acquisitions of fixed assets related to TRAQ Pvt Ltd. And the amount of cash received (paid) in the acquisitions of Rohuma and Mimo Technologies.
Net cash provided by financing activities for the nine months ended September 30, 2021 consisted of proceeds from the issuance of common stock of $494,500 and convertible notes of $1,115,000, along with proceeds received from related party notes of $1,449,394 and $50,331 in proceeds from long-term debt. The Company repaid $781,326 in related party notes, $80,000 in convertible notes and $153,706 in long-term debt during the nine months ended September 30, 2021. During the nine months ended September 30, 2020 the financing activities consisted of proceeds from related party and unrelated party notes of $348,752 as well as repayments of long-term debt to both related and unrelated parties of $61,638.
Off-Balance Sheet Arrangements
We have no off-balance sheet financing arrangements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on an evaluation as of the date of the end of the period covered by this report, the Company’s Certifying Officers conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as required by Exchange Act Rule 13a-15. Based on that evaluation, the Company’s Certifying Officers concluded that, because of the disclosed material weaknesses in the Company’s internal control over financial reporting, the Company’s disclosure controls and procedures were ineffective as of the end of the period covered by this report to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange 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 the Company’s reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Certifying Officers, to allow timely decisions regarding required disclosure. Based upon the evaluation of the disclosure controls and procedures at the end of the period covered by this report, our Certifying Officers concluded that our disclosure controls and procedures were not effective as a result of continuing weaknesses in our internal control over financial reporting principally due to the following:
| - | We have not established adequate financial reporting processes or monitoring activities to ensure adequate financial reporting and to mitigate the risk of management override, specifically because there are few employees and only two officers with management functions and therefore there is lack of segregation of duties. | |
| - | An outside consultant assists in the preparation of the annual and quarterly financial statements and partners with us to ensure compliance with US GAAP and SEC disclosure requirements. | |
| - | Outside counsel assists us to review and editing of the annual and quarterly filings and to ensure compliance with SEC disclosure requirements. |
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting that occurred during the period ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the registrant’s principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
| (a) | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant; |
| (b) | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and |
| (c) | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant’s assets that could have a material effect on the financial statements. |
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are not a party to any material litigation, nor, to the knowledge of management, is any litigation threatened against us that may materially affect us.
Item 1A. Risk Factors
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
(a) Not applicable.
(b) During the quarter ended September 30, 2021, there have not been any material changes to the procedures by which security holders may recommend nominees to the Board of Directors.
Item 6. Exhibits
| Exhibit Number | Description of Exhibit | |
| 31.1 | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2 | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | Inline XBRL Instance | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition | |
| 101.LAB | Inline XBRL Taxonomy Extension Labels | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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SIGNATURES
Pursuant to the requirements 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.
| TraQiQ, Inc. | ||
| Date: November 12, 2021 | By: | /s/ Ajay Sikka |
| Ajay Sikka | ||
| Chief Executive Officer and Chief Financial Officer (principal executive officer, principal accounting officer and principal financial officer) | ||
| 42 |
Exhibit 31.1
CERTIFICATIONS
I, Ajay Sikka, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2021 of TraQiQ, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 12, 2021 | |
| /s/ Ajay Sikka | |
| Ajay Sikka | |
| Chief Executive Officer | |
| (principal executive officer) |
Exhibit 31.2
CERTIFICATIONS
I, Michael Pollack, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2021 of TraQiQ, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 12, 2021 | |
| /s/ Michael Pollack | |
| Michael Pollack | |
| Interim Chief Financial Officer | |
| (principal financial officer) |
Exhibit 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of TraQiQ, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ajay Sikka, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: November 12, 2021 | /s/ Ajay Sikka |
| Ajay Sikka | |
| Chief Executive Officer | |
| (principal executive officer) |
Exhibit 32.2
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of TraQiQ, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Pollack, Interim Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: November 12, 2021 | /s/ Michael Pollack |
| Michael Pollack | |
| Interim Chief Financial Officer | |
| (principal financial officer) |