Titan Environmental Solutions Inc 10-K for FY2021
Titan Environmental Solutions Inc. (TESI)
About this 10-K
Titan Environmental Solutions Inc filed this 10-K on March 31, 2022, covering the fiscal year ended December 31, 2021 (FY2021).
Headline figures
Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.71M
- up 168.6% from $1.01M a year earlier
- Net loss
- $6.45M
- compared with a net loss of $607.91K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| Documents incorporated by reference: |
TABLE OF CONTENTS
GENERAL INFORMATION
FORWARD-LOOKING STATEMENTS
Certain statements discussed in Item 1 (Business), Item 1A (Risk Factors), Item 3 (Legal Proceedings), Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations), and elsewhere in this Annual Report on Form 10-K as well as in other materials and oral statements that the Company releases from time to time to the public constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements concerning management’s expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters involve significant known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of results to differ materially from any future results, performance or achievements discussed or implied by such forward-looking statements. Such risks, uncertainties and other important factors are discussed in Item 1A (Risk Factors) and Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations). In addition, these statements constitute the Company’s cautionary statements under the Private Securities Litigation Reform Act of 1995. It should be understood that it is not possible to predict or identify all such factors.
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 annual report on Form 10-K.
When considering these forward-looking statements, you should keep in mind the cautionary statements in this annual report on Form 10-K and in our other filings with the SEC. We cannot assure you that the forward-looking statements in this annual report on Form 10-K 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.
PART I
Item 1. Business
Overview
TraQiQ 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 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 OmniM2M and Ci2i agreed to exchange all of their respective shares, representing 100% ownership in OmniM2M and Ci2i in exchange for 1,500,000 shares of the Company’s common stock, respectively. The OmniM2M Shareholders and the Ci2i Shareholders were issued their respective 1,500,000 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. Accordingly, the consolidated financial statements included the accounts of Ci2i for all periods presented and the accounts of TraQiQ, Inc. and OmniM2M, which was acquired by the Company on July 19, 2017 since the date of acquisition. For accounting purposes, the acquisition of OmniM2M 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 OmniM2M control the activities of the respective companies. Prior to the merger with Ci2i and acquisition of OmniM2M, the Company was considered a shell company under Rule 12b-2 of Exchange Act. On December 1, 2017, the Company entered into a Share Purchase Agreement with Ajay Sikka (“Sikka”), the sole shareholder of Transport IQ, Inc. whereby Sikka sold 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 was owed to the Company. The transaction became effective upon the execution of the 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.
The Financial Industry Regulatory Authority on March 18, 2022, approved a reverse 1 for 8 stock split of the Company’s common shares. The reverse split was effective on March 21, 2022. The common shares and common share equivalents as well as the per-share amounts have been retroactively restated in accordance with ASC 855-10-25 and the loss per share figures have been retroactively restated in accordance with ASC 260-10-55-12.
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.
On May 16, 2019, the Company entered into a Share Exchange Agreement with TRAQIQ Solutions Private Limited (TraQ Pvt Ltd), formerly known as Mann-India Technologies Pvt Ltd. Pursuant to the agreement, the Company acquired 100% of the shares of TRAQ Pvt Ltd. and assumed certain net liabilities in exchange for warrants exercisable over five-years to purchase up to 166,159 shares of common stock of the Company valued at $268 at an exercise price of $0.0008. The warrants are exercisable as follows: (i) 12,596 warrants immediately upon closing; (ii) 107,494 warrants exercisable one-year after the date of closing; and (iii) 46,069 warrants exercisable two-years after the date of closing. This transaction is being recorded as a business combination under ASC 805.
The warrants that are exercisable in one-year and two-years were conditioned upon TRAQ Pvt Ltd. achieving certain revenue figures and pre-tax profit percentages. For the warrants to become exercisable, TRAQ Pvt Ltd. was required to achieve target revenue of $1.1 million and pre-tax profit of 25% in 2019 and 2020, respectively, with the amount of such warrants becoming exercisable reduced proportionally to the extent TRAQ Pvt Ltd. failed to achieve these targets. A total of 52,391 of these warrants were cancelled effective May 16, 2021 as a result of these criteria not being achieved. There were 56,400 of these warrants exercised during 2021 and 57,368 warrants remain outstanding as of December 31, 2021.
Effective December 31, 2020, Ci2i acquired the net assets of OmniM2M and TransportIQ, and then dissolved those entities in January 2021. The value of those transactions were for the assumed liabilities of Omni and TransportIQ, and no cash was exchanged.
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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 Rohuma members agreed to exchange all of their respective membership interests in Rohuma in exchange for up to 536,528 shares of common stock, of which the first tranche of 320,285 shares was issued upon closing on March 1, 2021, with the remaining value reflected as contingent consideration until the shares vest at which time they will be issued. Issuance of the remaining shares is contingent upon Rohuma achieving certain revenue targets for the calendar years 2021 and 2022. The Company is making final determination on the revenue targets to ascertain that the second tranche of shares should be issued. The transaction was valued at $3,433,776 ($6.40 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.
On February 17, 2021, the Company entered into a Share Exchange Agreement with Mimo Technologies Private Ltd., an Indian corporation (“Mimo”), and its shareholders, whereby the Mimo shareholders exchanged all of their respective shares in Mimo for warrants to purchase up to 170,942 shares of the Company’s common stock. Of these warrants, 102,565 were earned at the date of acquisition, with the remaining 68,377 warrants to be earned during the remainder of 2021 and 2022 subject to Mimo meeting certain revenue goals for 2021 and 2022. The Company is making final determination on the revenue targets to ascertain that the second tranche of warrants should be vested. The warrants have a term of three years and an exercise price of $0.008 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, the Company made a cash payment 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.
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.
Our Company
With current operations concentrated in India, Southeast Asia, and Latin America, we are servicing business supply chains with last mile delivery and mobile commerce. We help businesses in emerging markets leverage the gig economy with a two-prong approach as follows: 1) We offer our software as a service so our customers can build their own delivery networks and 2) We currently offer our network of over 14,000 task workers in India through our Mimo network, with plans to expand this network into other geographic regions within our current operating footprint.
The Company has 110 employees focused primarily on software development and Mimo network operations, and a strategic planning team comprised of industry consultants who are looking at ways to further disrupt the supply chain across major industry segments. TraQiQ is continually looking at innovative ways to meet customer requirements faster, utilizing artificial intelligence (“AI”) tools to improve the customer experience by trying to predict their requirements in advance, while also regularly experimenting with new hardware technology like drones to improve deliveries. As we identify areas of both improvement and opportunity, our technology team works rapidly to meet those requirements.
With a strong team in place, a proven software solution, and an expanding network, as well as a customer base with global operations, TraQiQ expects to expand into two new countries in the next twelve months. These markets will be in South East Asia and Latin America, where the company already has a presence, and for which this contemplated expansion will be facilitated by and accelerated, in part, with anticipated proceeds from the proposed offering.
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Market opportunity
The gig economy has grown over the last decade with the introduction of notable digital platforms such as Lyft, Uber, DoorDash Ola, Grab, Swiggy, Dunzo, and Task Rabbit, among others. With the rise of technology-enabled gig work platforms, more than 200 million people are now considered part of the global gig workforce, according to data from Mastercard Incorporated and Statista Inc.
With the growth of e-commerce, availability of task workers, and changes in general consumer behaviors in favor of “on-demand” products and services, we believe many businesses are increasingly moving towards, or participating in, a gig or task-based model. ASSOCHAM (India), projects the gig sector to grow to $455 billion (a cumulative annual growth rate of 17%) by 2024 in India and has the potential to expand at least two times the pre-pandemic estimates. ASSOCHAM (India) also estimates that India is likely to have 350 million gig jobs by 2025 (growing from the current 15 million as of May 2021), presenting a significant opportunity for job seekers to capitalize and adapt to the changing work dynamics.
Ernst & Young estimates that the e-pharma market in India will grow to $18 billion by 2023. We believe the COVID-19 pandemic may have accelerated this growth. Companies such as Amazon and Reliance have entered the medicine delivery market in India. TraQiQ’s Mimo service is preparing to enter the medicine delivery market in India.
In India, gig employment is not a novel concept. With its enormous informal economy and casual workers, India has long had the equivalent of gig work in both urban and rural areas, ranging from temporary agricultural workers to daily-wage construction laborers to delivery personnel. What has changed in recent years is the use of technology to match and expand on-demand services.
In the current world where so many people are ordering products ranging from food and drinks to medicine to socks online, we believe the “Last Mile” task worker represents a very valuable asset. This is the one and only direct connection to the customer for businesses fulfilling orders online. TraQiQ believes that “Last Mile” task workers are the only way for a business to establish a two-way relationship with the end customer to exchange information, money, transaction data and the actual goods.
This is where TraQiQ adds value, and it starts long before the actual delivery. The company’s technology helps our business-to-business customers with deliveries, assists with the financial transactions, and helps to build a long-term customer relationship via the Loyalty and Rewards program.
We believe the gig-economy model provides significant benefits for everyone within the gig eco-system:
| ● | The consumer gets instant gratification by, for example, receiving their food within an hour of ordering it. | |
| ● | The employers can minimize their costs and have flexibility to increase or decrease their workforce on demand. | |
| ● | Employees/contractors can have flexibility and opportunity, with the full control over their jobs, hours and who they work with provided by gig jobs. |
We believe the gig economy helps companies, employees, and the economy, with benefits that go beyond traditional conceptions of convenience, on-demand availability, and flexibility. This is due to the underlying economic factors that platform-enabled gig work addresses at scale, as well as the collateral advantages it can provide, which can lead to a virtuous expansion cycle.
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Our Products and Services
TraQSuite
TraQSuite is a software platform that powers the Last Mile distribution network. TraQSuite users can:
| ● | target customers, | |
| ● | facilitate and validate transactions, | |
| ● | track and manage task workers, and | |
| ● | manage funds and run the entire distribution network. |
Key features of TraQSuite include:
| ● | Last Mile delivery: TraQSuite’s Last-Mile software module enables a complete distribution engine. It is designed to manage thousands of task workers across multiple geographies to deliver products and services to the users. The mobile apps enable data sharing, validation, and measure customer satisfaction. The software platform allows for delivery validation, geo-tagging and know-your-customer (KYC) requirements. | |
| ● | Transact: TraQSuite enables a task worker to facilitate a transaction by meeting the end customer. 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 device. The multi-party settlement engine enables all members of the eco-system to settle their transactions across all vendors, currencies, and geographies. | |
| ● | Target: TraQiQ enables customer transactions to be rewarded with Loyalty Credits, tokens or points. These rewards can be redeemed by the customer for free products, discounts and benefits. TraQSuite analyzes these transactions and purchase behaviors by using leading AI models. TraQiQ can deliver real time, automated and targeted offers and recommendations for additional purchases and customer retention. |
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.
Mimo Delivery and Task Services
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) |
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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 and 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 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.
Revenue for the Mimo services is entirely based on the number of deliveries or other tasks that are performed. The customer is typically charged a fee of $3-$5 depending upon the geography, duration of task and distance that the task associate must travel. Two thirds of the fee is shared with the task associate, and one-third is retained by Mimo. While this revenue model has worked well in India where the services are currently offered, we may adjust it as needed as the service is offered in other geographic areas.
Customers
TraQiQ’s geographic focus is emerging and smaller economies. These are markets where we believe the barriers to entry are lower and the market potential is high.
TraQiQ is serving or has serviced a variety of large customers over the years. Some of our representative customers, most of which we are currently serving, include:
| ● | Railtel, one of the largest broadband infrastructure providers in India, which owns and operates a nationwide fiber network that runs alongside train tracks across India and for which Mimo collects subscriber payments. | |
| ● | Multiple large banking and finance industry customers, such as Hero Finance Corp, Yes bank, Aditya Birla group, ICICI bank, Ratnakar bank and Edelweiss Finance, for whom Mimo does deliveries and pickup of financial documents. | |
| ● | Companies such as Facebook, for whom TraQiQ has done surveys, Verify360, for whom TraQiQ has done background verifications, and Jio, for whom the company facilitates SIM activation. | |
| ● | Companies such as Unilever Cambodia, Ben & Jerry’s, Lakme and others in Southeast Asia and Australia/New Zealand, for whom TraQiQ facilitates contactless ice cream delivery with a unique wallet and customer retention program, cosmetics products loyalty programs, and virtual point of sale (POS) systems for remote delivery. | |
| ● | A white-labelled delivery service in New Zealand, for whom TraQiQ provided a complete software platform. | |
| ● | Companies in Latin America such as Seguros Bolivar, Panafoto, and BBVA, for whom TraQiQ provides FinTech products and solutions. |
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Although our strategy is to expand our business operations and customer base through our 2021 acquisitions of Rohuma and Mimo, most of our revenue has come historically from a few customers. For the year ended December 31, 2021, we had two major customers comprising 50% of our revenues, and at December 31, 2021 five customers represented 93% of our accounts receivable. For the year ended December 31, 2020 and at the end of that year, these customers accounted for 85% of our revenues and our accounts receivable, respectively. We do not believe that the risk associated with these customers will have an adverse effect on our business in the future.
Growth Strategy
Our gross revenue grew by 50% from 2019 to 2020 to reach the $1 million mark. By the end of the second quarter of 2021, our gross revenue had already equaled our gross revenue for the entire 2020 calendar year. In addition to our significant presence in India, Southeast Asia and Latin America, we have recently announced new customers in Australia, New Zealand and parts of Africa.
Our strategy is to grow our business through a combination of organic growth and strategic investments that bring new functionality and revenue streams to the company. We plan to enhance the functionality of our existing products, increase sales in the Indian market and enter into new emerging markets. Our data currently shows that within the first six months our business customers have an average increase of transactions of approximately 20%, and their customer’s transactions through our software increase by 15-20% over that period.
We believe we can continue to grow the Mimo network of task workers in India and are currently evaluating markets in Southeast Asia & Latin America for launching the Mimo service, as well. We plan to go live in at least two new markets within the next twelve months.
As hardware technology evolves, TraQiQ’s strategy is to provide additional delivery services by adding drones, e-bikes and robotic carts. The company has already had conversations with e-bike companies to equip the Mimo delivery team with electric bikes in the future.
Environmental, Social, and Governance (ESG) Matters
TraQiQ’s Mimo service provides jobs across India. Most of the people who are doing deliveries and performing tasks are not college educated. Based on our records, over 70% of our current task workers do not have a high school diploma. While many of them start with Mimo to supplement their other wages, they migrate towards spending most of their time with Mimo. Mimo gives them an opportunity to earn reasonable wages and they make their own hours. We believe many of these people would have a tough time finding jobs elsewhere due to lack of educational credentials. Many of them have grown into corporate roles at Mimo like trainers and supervisors.
Markets
In addition to its significant presence in India, Southeast Asia and Latin America, TraQiQ has recently added new customers in Australia, New Zealand and parts of Africa. Management regards Africa as having substantial growth potential. According to World Mobile Ltd., approximately 66% of sub-Saharan Africans do not have a banking relationship, but Plug and Play Tech Center estimates there are over 525 million smart phones in use in that area. We believe these customers would be likely candidates for phone-based mobile payment systems.
Competition
TraQiQ competes to some extent with several Last mile service providers with established global names as well as other service providers that are established brands in India. Unlike TraQiQ, many of these companies market directly to consumers rather than to other businesses. However, several of these competitors have significantly greater resources and name recognitions than TraQiQ.
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TraQiQ’s Mimo service has a business-to-business (“B2B”) focus. This inherently results in longer term relationships with clients. We believe this, in turn, has a direct impact on longer term profitability. Mimo also has a deeper focus on semi-urban and rural areas, which we believe is a significant competitive advantage, as we believe most of our competitors have continued to focus on the larger cities. However, there is no assurance we will compete successfully or achieve profitability in the future.
We believe Mimo’s technology has some unique elements that provide strong differentiation. There are significant machine learning algorithms that power the service, enabling optimal route planning, reducing time to get a task done and minimizing agent productivity. There are modules in service that enable trackability and audit of all service elements.
We also compete with companies offering multiple software products. Larger companies have had software solutions for field-force management for a long time or have extended their products to include workforce management. Similarly, there are multiple fintech companies that offer products to facilitate transactions and payments. In the loyalty & rewards segment, there are also several companies with either a global or regional following.
TraQiQ believes its software solution is improved by its service network. We believe running a large-scale service provides a unique advantage to TraQiQ, as the real-time feedback from running the service enables the company to make continuous improvements to its software. In addition, TraQiQ goes beyond just the Last mile delivery. By providing a robust set of fintech and analytics solutions, TraQiQ provides a one-stop-shop for customers and partners.
Employees and Human Capital Resources
As of December 31, 2021 TraQiQ had a total of 110 full time employees. Approximately 100 of these employees are based in India. None of our employees is represented by a labor union, and we consider our company culture and employee relations to be strong.
In addition, we have independent contractor relationships with approximately 14,000 “gig” workers throughout India who primarily provide delivery services and other tasks for business customers.
Intellectual Property
To date, TraQiQ has not obtained any patents on the software it has developed or registered any of its trademarks. Instead, the company protects its intellectual property rights by relying on national and local statutory and common law rights in the jurisdictions in which it operates, as well as contractual restrictions. TraQiQ enters into confidentiality and invention assignment agreements with its technical employees and contractors, and confidentiality agreements with third parties who perform technical services. Although the company is not aware that its software or trademarks infringe the patents or trademarks of any other party, it may face allegations by third parties, including its competitors, that aspects of its software or trademarks infringe their trademarks, copyrights, patents and other intellectual property rights in a particular jurisdiction.
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Item 1A. Risk Factors
General Risks Relating to Our Business, Operations of Financial Condition
We have a limited operating history and are subject to the risks encountered by early-stage companies.
Our company has a limited operating history, and you should consider and evaluate our operating prospects in light of the risks and uncertainties frequently encountered by early-stage companies in rapidly evolving markets. For us, these risks include:
| ● | risks that we may not have sufficient capital to achieve our growth strategy; | |
| ● | risks that we may not develop our product and service offerings in a manner that enables us to be profitable and meet our customers’ requirements; | |
| ● | risks that our growth strategy may not be successful; and | |
| ● | risks that fluctuations in our operating results will be significant relative to our revenues. |
These risks are described in more detail below. Our future growth will depend substantially on our ability to address these and the other risks described in this section. If we do not successfully address these risks, we will be unable to sustain our business growth to date and you could lose your investment.
Our operating losses and working capital deficiency raise substantial doubt about our ability to continue as a going concern. If we do not continue as a going concern, investors could lose their entire investment.
Our operating losses and working capital deficiency raise substantial doubt about our ability to continue as a going concern. We have an accumulated deficit of $(8,953,768) as of December 31, 2021. We may never achieve profitability. If we do not generate sufficient revenues, do not achieve profitability and do not have other sources of financing for our business, we may have to curtail or cease our development plans and operations, which could cause investors to lose the entire amount of their investment.
If we are unable to integrate our acquisitions or manage the growth of those companies effectively, our business could be adversely affected.
Our business has grown mostly through acquisition of other companies, both in the United States and in India. These companies, particularly in India, are currently expanding rapidly. Our future operating results depend to a large extent on our ability to manage this expansion and growth successfully. For us to continue to manage such growth, we must put in place legal and accounting systems, and implement human resource management and other tools. We may be unable to successfully manage this anticipated rapid growth. A failure to manage our growth effectively could materially and adversely affect our business.
Increasing competition within our emerging industry could have an impact on our business prospects.
The artificial intelligence, mobile payment and “gig” worker markets are emerging industries where new competitors are entering the market frequently. These competing companies may have significantly greater financial and other resources than we have and may have been developing their products and services longer than we have been developing ours, and we may be unable to successfully compete.
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Our current and future operations are subject to certain risks that are unique to operating in a foreign country.
We currently have international operations in India, Latin America, and Africa, among other places, and have a large concentration of employees and task workers in India. Therefore, we are exposed to risks inherent in international business operations. The risks of doing business in foreign countries include the following:
| ● | changing regulatory or taxation policies, including changes in tax policies that have been proposed by the current United States administration that may affect the taxation of foreign earnings; | |
| ● | currency exchange risks; | |
| ● | changes in diplomatic relations or hostility from local populations; | |
| ● | seizure of our property by the government or restrictions on our ability to transfer our property or earnings out of the foreign country; | |
| ● | potential instability of foreign governments, which might result in losses against which we are not insured; | |
| ● | difficulty in protecting our intellectual property from infringement in certain foreign countries; and | |
| ● | difficulty of enforcing agreements and collecting receivables through some foreign legal systems. |
Exchange rates may cause future losses in our international operations.
Because we own assets in foreign countries and derive revenue from our international operations, we may incur currency translation losses due to changes in the values of foreign currencies and in the value of the United States dollar. We cannot predict the effect of exchange rate fluctuations upon future operating results.
We may not be able to adequately protect our proprietary technology, and our competitors may be able to offer similar products and services, which would harm our competitive position.
Our success depends in part upon our proprietary technology. We rely primarily on national and local statutory and common law rights in the jurisdictions in which we operate, as well as contractual restrictions, to establish and protect our proprietary rights, but to date we have not sought or obtained any patents on our proprietary technology or registered any of our trademarks. Despite the precautions we have taken, third parties could copy or otherwise obtain and use our technology without authorization or develop similar technology independently. The protection of our proprietary rights may be inadequate or our competitors may independently develop similar technology, duplicate our products and services or design around any intellectual property rights we hold.
If third parties claim that we infringe their intellectual property, it may result in costly litigation.
Third parties may claim our current or future products infringe their intellectual property rights. Any such claims, with or without merit, could cause costly litigation that could consume significant management time. As the number of product and services offerings in the artificial intelligence, mobile payments and task worker markets increases and functionalities increasingly overlap, we may become increasingly subject to infringement claims. Such claims also might require us to enter into royalty or license agreements. If required, we may not be able to enter into such royalty or license agreements or obtain them on terms acceptable to us.
Pandemics including COVID-19 may adversely affect our business.
The unprecedented events related to COVID-19, the disease caused by the novel coronavirus (SARS-CoV-2), have had significant health, economic, and market impacts and may have short-term and long-term adverse effects on our business that we cannot predict as the global pandemic continues to evolve. The extent and effectiveness of responses by governments and other organizations also cannot be predicted. During 2021 and 2020, COVID-19 forced us to suspend Last Mile deliveries and other task worker activities for a period of time, and we shifted some of those activities to a virtual, remote-service model until in-person activities could resume safely. The effects of the pandemic may have a particular effect on our business as a result of our extensive operations in India and other emerging markets, where vaccines are less available. While we continue to have the option to shift to virtual activities if necessary, it is unclear whether and to what extent future impacts of COVID-19 or other pandemics will have an adverse effect on our profitability and growth strategy.
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We may need additional financing. Any limitation on our ability to obtain such additional financing could have a material adverse effect on our business, financial condition and results of operations.
We may need to raise additional capital, which we may be unable to obtain on favorable or reasonable terms, or at all. If we raise additional capital, it could result in dilution to our stockholders. Any limitation on our ability to obtain additional capital as and when needed could have a material adverse effect on our business, financial condition and results of operations.
If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and investors’ views of us.
Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort. Section 404 of the Sarbanes-Oxley Act requires public companies to conduct an annual review and evaluation of their internal controls. The Company’s internal control over financial reporting and disclosure controls and procedures were ineffective as of December 31, 2021. Our failure to maintain the effectiveness of our internal controls in accordance with the requirements of the Sarbanes-Oxley Act could have a material adverse effect on our business. We could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on the price of our common stock. In addition, if our efforts to comply with new or changed laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.
Our revenue is currently concentrated in a small number of customers.
Although our strategy is to expand our business operations and customer base through our 2021 acquisitions of Rohuma and Mimo, most of our revenue has come historically from a few customers. For the year ended December 31, 2021, we had two major customers comprising 50% of our revenues, and at December 31, 2021 and five customers represented 93% of our accounts receivable. For the year ended December 31, 2020 and at the end of that year, these customers accounted for 85% of our revenues and our accounts receivable, respectively. A loss of the business from these customers or any difficulty collecting our accounts receivable from them could have a material adverse effect on our business, financial condition and results of operations.
Risks Relating to our Common Stock
One shareholder controls a majority of the voting power of our common stock, and his interest may conflict with those of investors.
Our Chairman of the Board of Directors, Chief Executive Officer and President, Ajay Sikka, beneficially owns shares representing a majority of our common stock. He therefore is in a position to exercise substantial influence over the outcome of all matters submitted to a vote of our shareholders, including the election of directors.
We may be unsuccessful in having our common stock listed on the Nasdaq Stock Market.
We have applied to have our common stock listed on the Nasdaq Capital Market under the symbol “TRIQ.” Our application has not yet been approved, and there can be no assurance that it will be approved. If it is approved and our common stock is listed, we may not be able to meet the continued listing requirements of the Nasdaq Stock Market, which require, among other things, a minimum closing price of our common stock and a minimum market capitalization. If we are unable to satisfy the requirements of the Nasdaq Capital Market for continued listing, our common stock would be subject to delisting from that market, and we might or might not be eligible to list our shares on another Nasdaq market. A delisting of our common stock from the Nasdaq Capital Market, particularly if we did not qualify to be listed on another Nasdaq market, could negatively impact us by, among other things, reducing the liquidity and market price of our common stock.
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The difficulties associated with any attempt to gain control of our company could adversely affect the price of our common stock.
Ajay Sikka has substantial influence over the decision as to whether a change in control will occur for our company. There are also provisions contained in our articles of incorporation, by-laws and California law that could make it more difficult for a third party to acquire control of TraQiQ. These restrictions and limitations could adversely affect the trading price of our common stock.
There is currently not an active liquid trading market for the Company’s common stock.
Our common stock is quoted on the OTC Markets QB tier under the symbol “TRIQ”. However, there is currently no regular active trading market in our common stock. Although there are periodic volume spikes from time to time, a consistent, active trading market may not develop. Whether or not in the future our common stock is listed on the Nasdaq Capital Market, there is no assurance an active trading market for our common stock will develop or be sustained or that we will remain eligible for continued listing on the Nasdaq Capital Market. If an active market for our common stock develops, there is a significant risk that our stock price may fluctuate in the future in response to any of the following factors, some of which are beyond our control:
| ● | variations in our quarterly operating results; | |
| ● | announcements that our revenue or income are below analysts’ expectations; | |
| ● | general economic downturns; | |
| ● | sales of large blocks of our common stock; or | |
| ● | announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments. |
You may experience dilution of your ownership interest due to future issuance of our securities.
We are currently authorized to issue 300,000,000 shares of common stock and 10,000,000 shares of preferred stock. We may issue additional shares of common stock or other securities that are convertible into or exercisable for common stock in future public offerings or private placements for capital raising purposes or for other business purposes, or upon conversion or exercise of outstanding options, warrants, or preferred stock. The future issuance of a substantial amount of common stock, or the perception that such an issuance could occur, could adversely affect the prevailing market price of our common shares. A decline in the price of our common stock could make it more difficult to raise funds through future offerings of our common stock or securities convertible into common stock.
Our board of directors may issue and fix the terms of shares of our preferred stock without stockholder approval, which could adversely affect the voting power of holders of our common stock or any change in control of our company.
Our articles of incorporation authorize the issuance of up to 10,000,000 shares of “blank check” preferred stock, with such designation rights and preferences as may be determined from time to time by the board of directors. Of these authorized shares, 50,000 shares have been designated Series A Preferred Stock but none of them are currently outstanding. Our board of directors is empowered, without shareholder approval, to create additional series and issue additional shares of preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of our common stock. In the event of such issuances, the preferred stock could be used, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company.
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We do not expect to pay dividends.
We do not anticipate that we will declare or pay any dividends in the foreseeable future. Consequently, you will only realize an economic gain on your investment in our common stock if the price appreciates, which may not occur. You should not purchase our common stock expecting to receive cash dividends. Since we do not pay dividends, and if an active trading market for our shares does not develop, you may not have any manner to liquidate or receive any payment on your investment. Therefore, our failure to pay dividends may cause you to not see any return on your investment even if we are successful in our business operations. In addition, because we do not pay dividends we may have trouble raising additional funds which could affect our ability to expand our business operations.
Our common stock is subject to the “penny stock” rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.
Our common stock is subject to the “penny stock” rules of the SEC because it has historically had a market price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
| ● | that a broker or dealer approve a person’s account for transactions in penny stocks after compliance with various information collection rules and a suitability evaluation; | |
| ● | the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased; and | |
| ● | the broker or dealer deliver a disclosure schedule prescribed by the SEC. |
If we are successful in our application to list our stock for trading on the Nasdaq Stock Market and we are able to maintain that listing, our stock will cease to be a penny stock. However, if we cease to obtain and maintain that listing, we may again be subject to the penny stock rules. Generally, brokers may be less willing to execute transactions in securities subject to the penny stock rules. In addition, according to the SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. These factors may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our common stock if it were to become subject to the penny stock rules.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
TraQiQ does not own any property. The company has an office with approximately 2,800 square feet that accommodates its 100 employees in India (on a rotational basis), which it occupies under a lease with a term through 2027 (with options to renew for an additional 6 years) and rent of $2,100 per month. In addition, it has Executive/Shared space in Bellevue WA, Santa Monica, CA and Bogota Colombia. Its main corporate mailing address is 14205 S.E. 36th St., Suite 100, Bellevue, WA 98006.
Item 3. Legal Proceedings
From time to time the Company is a party to various legal or administrative proceedings arising in the ordinary course of our business. While any litigation contains an element of uncertainty, we have no reason to believe that the outcome of such proceedings will have a material adverse effect on the financial condition or results of operations of the Company.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock is not listed on any securities exchange, and effective October 27, 2020 is quoted on the OTC Market under the symbol “TRIQ.” Because our common stock is not listed on a securities exchange and its quotations on OTC are limited and sporadic, there is currently no established public trading market for our common stock.
The following table reflects the high closing sales information for our common stock for each fiscal quarter during the fiscal years ended December 31, 2021 and 2020. This information was obtained from OTC and reflects inter-dealer prices without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
COMMON STOCK MARKET PRICE | ||||||||
| HIGH | LOW | |||||||
| FISCAL YEAR ENDED DECEMBER 31, 2021: | ||||||||
| First Quarter | $ | 12.40 | $ | 4.64 | ||||
| Second Quarter | $ | 17.44 | $ | 5.76 | ||||
| Third Quarter | $ | 12.80 | $ | 3.20 | ||||
| Fourth Quarter | $ | 8.00 | $ | 2.08 | ||||
| COMMON STOCK MARKET PRICE | ||||||||
| HIGH | LOW | |||||||
| FISCAL YEAR ENDED DECEMBER 31, 2020: | ||||||||
| First Quarter | $ | - | $ | - | ||||
| Second Quarter | $ | - | $ | - | ||||
| Third Quarter | $ | - | $ | - | ||||
| Fourth Quarter | $ | 8.00 | $ | 2.00 | ||||
Holders of our Common Stock
As of March 24, 2022, there were approximately 88 stockholders of record of our common stock. This number does not include shares held by brokerage clearing houses, depositories or others in unregistered form. The stock transfer agent for our securities is Equity Stock Transfer.
Dividends
The Company has never declared or paid any cash dividends on its common stock. The Company currently intends to retain future earnings, if any, to finance the expansion of its business. As a result, the Company does not anticipate paying any cash dividends in the foreseeable future.
Unregistered Sales of Equity Securities
On January 19, 2021, the Company entered into a 12% Convertible Promissory Note with GS Capital Partners, LLC (the “GS Note”) in the principal amount of $125,000. The GS Note has a maturity date of one-year from issuance and is to be repaid commencing on the fifth month anniversary and every month thereafter in the amount of $20,000. The conversion price of the GS Note is 66% of the lowest closing stock price over the previous 20 trading days. In accordance with the terms of the GS Note, the Company issued 3,250 shares of common stock as a commitment fee and issued 21,250 shares of common stock that are returnable upon repayment of the GS Note in accordance with its terms. These securities were issued as a private offering and sale pursuant to the exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. The Company determined that GS Capital Partners, LLC was sophisticated in business and investment matters. This note was paid off in 2021 and the 21,250 shares were returned to the Company and cancelled.
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On January 22, 2021, the Company issued 536,528 shares of common stock to the owners of Rohuma, LLC, a Delaware limited liability company (“Rohuma”), pursuant to a Share Exchange Agreement between the Company, Rohuma and the owners of Rohuma. Under the Share Exchange Agreement, the 10 Rohuma owners transferred to the Company all of their respective membership interests in Rohuma in exchange for the stock issued by the Company. Each of these sales of securities to the three purchasers located in the United States was consummated pursuant to the exemption from registration in Section 4(a)(2) of the Securities Act of 1933, as amended. These United States based grantees are sophisticated in business and investment matters. To the extent United States securities laws were deemed to apply to the issuance of such shares to the owners in India, each of these sales of securities was also consummated pursuant to the exemption from registration in Section 4(a)(2) of the Securities Act of 1933, as amended, and all of such owners are sophisticated in business and investment matters.
On February 12, 2021, the Company entered into a 10% Convertible Promissory Note with Platinum Point Capital, LLC (the “Platinum Note”) in the principal amount of $400,000. The Platinum Note has a maturity date of one-year from issuance. The Platinum Note is convertible into common stock at a conversion price of greater of (a) $0.08 or (b) 70% of the lowest traded stock price over the previous 15 trading days. The Company granted 25,000 warrants to purchase shares of common stock that have a term of three-years and an exercise price of $16.00 per share with the Platinum Note. These securities were issued as a private offering and sale pursuant to the exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. The Company determined that Platinum Point Capital, LLC was sophisticated in business and investment matters. This note was repaid/converted into shares of common stock in 2021.
On February 16, 2021, the Company sold 71,250 shares of its common stock to six persons for cash at a price of $6.40 per share. The individuals also received 35,625 warrants that have a term of three years at an exercise price of $16.00 per share. These sales of securities were consummated pursuant to the exemption from registration in Section 4(a)(2) of the Securities Act of 1933, as amended. The Company determined that all of these purchasers were sophisticated in business and investment matters.
On February 17, 2021, the Company issued warrants (the “Mimo Warrants”) to purchase 170,942 shares of the Company’s common stock over a period of 5 years, at an exercise price of $0.008 per share, subject to certain conditions. The Warrants were issued pursuant to a Share Exchange Agreement with Mimo Technologies Private Ltd., an Indian corporation (“Mimo”) and its shareholders whereby two of the Mimo shareholders received the Warrants in exchange for all of their respective shares in Mimo and the other Mimo shareholder received cash. Both of the recipients of these warrants are residents of India. To the extent United States securities laws were deemed to apply to the issuance of such warrants, each of these sales of securities was consummated pursuant to the exemption from registration in Section 4(a)(2) of the Securities Act of 1933, as amended, as both of such recipients are sophisticated in business and investment matters.
On February 23, 2021, the Company entered into a services agreement with another company with a portion of the compensation consisting of the issuance of 4,688 shares of common stock valued at $11.20 per share. This issuance of securities was consummated pursuant to the exemption from registration in Section 4(a)(2) of the Securities Act of 1933, as amended. The Company determined that this other company was sophisticated in business and investment matters.
On March 5, 2021, the Company exchanged outstanding debt securities of the Company with unpaid principal and interest in the amount of $224,687 for 33,042 shares of its common stock. These transactions were with a director of the Company and three other individuals who are related to the Company’s chief executive officer. These sales of securities were consummated pursuant to the exemption from registration in Section 3(a)(9) of the Securities Act of 1933, as amended, because it was exclusively with existing security holders of the Company and no commission or other remuneration was given or paid, directly or indirectly, for soliciting such exchange. The sales were also exempt under Section 4(a)(2) of the Securities Act of 1933, as amended, as all of these purchasers were sophisticated in business and investment matters.
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On March 1, 2021, the Company entered into consulting agreements with three individuals with a portion of the compensation consisting of the issuance of 7,688 shares of common stock valued at $9.20 per share at the commencement of the agreements. These sales of securities were consummated pursuant to the exemption from registration in Section 4(a)(2) of the Securities Act of 1933, as amended. The Company determined that these consultants were sophisticated in business and investment matters.
On March 8, 2021, the Company entered into a consulting agreement with another individual with a portion of the compensation consisting of the issuance of 3,125 shares of common stock valued at $6.40 per share at the commencement of the agreement and issuance of a three-year warrant for 12,500 warrants with a strike price of $16.00 per share that vests March 7, 2022. These sales of securities were consummated pursuant to the exemption from registration in Section 4(a)(2) of the Securities Act of 1933, as amended. The Company determined that this consultant was sophisticated in business and investment matters.
On April 5, 2021 the Company granted options for 31,250 shares of common stock under the Company’s stock option plan to Richard Berman, one of the Company’s directors, at an option price of $0.044 without registration under the Securities Act. The options vest over three years. This sale of securities was consummated pursuant to the exemption from registration in Section 4(a)(2) of the Securities Act of 1933, as amended. Mr. Berman is sophisticated in business and investment matters.
On April 29, 2021, the Company sold 4,375 shares of its common stock to a single individual for cash at a price of $8.80 per share. This sale of securities was consummated pursuant to the exemption from registration in Section 4(a)(2) of the Securities Act of 1933, as amended. The Company determined that this purchaser was sophisticated in business and investment matters.
On June 15, 2021, the Company issued (1) its 2021 Promissory Note (the “Note”) to Greg Rankich, a director of the Company, in connection with a $400,000 loan to the Company from Mr. Rankich, and (2) 37,500 shares of its Common Stock, par value $0.0001 per share, to Mr. Rankich, which were valued at $8.00 per share.. In addition, Mr. Rankich granted to the Company an option to redeem up to 18,750 of such shares (as adjusted for stock splits, stock dividends or similar events) at a total cost of $1.00 if the Note is repaid in full (including accrued and unpaid interest) on or prior to its maturity date (without extension). The Note, which does not bear interest, matures and payment of the principal sum is required on or before 180 days after the date of the Note, subject to certain events of default that could result in acceleration of the maturity. The Note may be prepaid by the Company in whole or in part at any time prior to the maturity date without penalty or premium. These securities were issued as a private offering and sale pursuant to the exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. Mr. Rankich is a director of the Company and was the only recipient of securities in this transaction. Rankich represented in connection with the transaction that he has such knowledge and experience in business and financial matters as to be capable of evaluating the merits and risks of the investment in the securities, is able to bear the economic risk of such investment and, at the present time, would be able to afford a complete loss of such investment. Resale of the securities is restricted, and a legend was applied to the share certificates prohibiting sale or transfer without an effective registration statement or an applicable exemption from registration.
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On September 17, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) pursuant to which Evergreen Capital Management, LLC (the “Purchaser”) agreed to purchase at a discount for an aggregate subscription price of $1,200,000 an aggregate of $1,440,000 in principal amount of promissory notes (“Notes”) and Common Stock Purchase Warrants (“Warrants”) for a total of 124,138 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) in three (3) tranches. Pursuant to the Purchase Agreement, (1) the first tranche of $600,000 in subscription amount of Notes (to purchase an aggregate of $720,000 in principal amount of Notes) and Warrants to purchase an aggregate of 62,069 shares of Common Stock was closed upon execution of the Purchase Agreement, (2) the second tranche of $400,000 in subscription amount of Notes (to purchase an aggregate of $480,000 in principal amount of Notes) and Warrants to purchase an aggregate of 41,379 shares of Common Stock will occur within three business days after the filing by the Company of a Registration Statement on Form S-1 (the “Registration Statement”) for the sale of Common Stock that will be listed on a national securities exchange, and (3) the third tranche of $200,000 in subscription amount of Notes (to purchase an aggregate of $240,000 in principal amount of Notes) and Warrants to purchase an aggregate of 20,690 shares of Common Stock will occur, at the option of the Purchaser, which the Purchaser may exercise in its sole discretion, three business days after the receipt by the Company and delivery to the Purchaser of the first comment letter of the Staff of the Securities and Exchange Commission (the “Commission”) relating to the Registration Statement or a letter from the Staff of the Commission to the effect that the Registration Statement will not be reviewed by the Staff of the Commission. In connection with the transactions under the Purchase Agreement, the Company entered into an amendment to its existing Engagement Letter with ThinkEquity, LLC (the “Placement Agent”) pursuant to which the Company agreed to issue to the Placement Agent warrants to purchase Common Stock equal to 8% of the shares of Common Stock issued or underlying the Warrants issued under the Purchase Agreement. These warrants (the “Placement Agent Warrants”) are to have the same terms and conditions, including exercise price and registration rights, as the Warrants issued pursuant to the Purchase Agreement. Each Note, each Warrant, each Placement Agent Warrant and any shares of Common Stock issuable upon conversion of a Note or exercise of a Warrant or Placement Agent Warrant was or will be issued in a transaction exempt from registration under the Securities Act of 1933, as amended, in reliance on Section 4(a)(2) thereof and Rule 506 of Regulation D thereunder. The Purchaser and the Placement Agent have each represented that it is an “accredited investor,” as defined in Regulation D, and has acquired and will be acquiring the securities described herein for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. Resale of the securities is restricted, and a legend appears on the Notes, the Warrants and the Placement Agent Warrants prohibiting sale or transfer without an effective registration statement or an applicable exemption from registration. Accordingly, sale of the Notes, the Warrants and the Placement Agent Warrants and the issuance of shares of Common Stock upon conversion of the Notes or exercise of the Warrants and the Placement Agent Warrants have not been registered under the Securities Act of 1933, as amended.
Item 6. Selected Financial Data.
As a smaller reporting company, the Company is not required to file selected financial data.
Item 7. 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 financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these 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 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.
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Overview
TraQiQ 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 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 OmniM2M and Ci2i agreed to exchange all of their respective shares, representing 100% ownership in OmniM2M and Ci2i in exchange for 1,500,000 shares of the Company’s common stock, respectively. The OmniM2M Shareholders and the Ci2i Shareholders were issued their respective 1,500,000 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. Accordingly, the consolidated financial statements included the accounts of Ci2i for all periods presented and the accounts of TraQiQ, Inc. and OmniM2M, which was acquired by the Company on July 19, 2017 since the date of acquisition. For accounting purposes, the acquisition of OmniM2M 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 OmniM2M control the activities of the respective companies. Prior to the merger with Ci2i and acquisition of OmniM2M, the Company was considered a shell company under Rule 12b-2 of Exchange Act. On December 1, 2017, the Company entered into a Share Purchase Agreement with Ajay Sikka (“Sikka”), the sole shareholder of Transport IQ, Inc. whereby Sikka sold 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 was owed to the Company. The transaction became effective upon the execution of the 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.
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.
On May 16, 2019, the Company entered into a Share Exchange Agreement with TRAQIQ Solutions Private Limited (TraQ Pvt Ltd), formerly known as Mann-India Technologies Pvt Ltd. Pursuant to the agreement, the Company acquired 100% of the shares of TRAQ Pvt Ltd. and assumed certain net liabilities in exchange for warrants exercisable over five-years to purchase up to 166,159 shares of common stock of the Company valued at $268 at an exercise price of $0.0008. The warrants are exercisable as follows: (i) 12,596 warrants immediately upon closing; (ii) 107,494 warrants exercisable one-year after the date of closing; and (iii) 46,069 warrants exercisable two-years after the date of closing. This transaction is being recorded as a business combination under ASC 805.
The warrants that are exercisable in one-year and two-years were conditioned upon TRAQ Pvt Ltd. achieving certain revenue figures and pre-tax profit percentages. For the warrants to become exercisable, TRAQ Pvt Ltd. was required to achieve target revenue of $1.1 million and pre-tax profit of 25% in 2019 and 2020, respectively, with the amount of such warrants becoming exercisable reduced proportionally to the extent TRAQ Pvt Ltd. failed to achieve these targets. A total of 52,391 of these warrants were cancelled effective May 16, 2021 as a result of these criteria not being achieved. There were 56,400 of these warrants exercised during 2021 and 57,368 warrants remain outstanding as of December 31, 2021.
Effective December 31, 2020, Ci2i acquired the net assets of OmniM2M and TransportIQ, and then dissolved those entities in January 2021. The value of those transactions were for the assumed liabilities of Omni and TransportIQ, and no cash was exchanged.
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 Rohuma members agreed to exchange all of their respective membership interests in Rohuma in exchange for up to 536,528 shares of common stock, of which the first tranche of 320,285 shares was issued upon closing on March 1, 2021, with the remaining value reflected as contingent consideration until the shares vest at which time they will be issued. Issuance of the remaining shares is contingent upon Rohuma achieving certain revenue targets for the calendar years 2021 and 2022. The Company is making final determination on the revenue targets to ascertain that the second tranche of shares should be issued.
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The transaction was valued at $3,433,776 ($6.40 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.
On February 17, 2021, the Company entered into a Share Exchange Agreement with Mimo Technologies Private Ltd., an Indian corporation (“Mimo”), and its shareholders, whereby the Mimo shareholders exchanged all of their respective shares in Mimo for warrants to purchase up to 170,942 shares of the Company’s common stock. Of these warrants, 102,565 were earned at the date of acquisition, with the remaining 68,377 warrants to be earned during the remainder of 2021 and 2022 subject to Mimo meeting certain revenue goals for 2021 and 2022. The Company is making final determination on the revenue targets to ascertain that the second tranche of warrants should be vested. The warrants have a term of three years and an exercise price of $0.008 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, the Company made a cash payment 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.
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.
Going Concern
The Company has an accumulated deficit of $8,953,768 and a working capital deficit of $9,844,269 as of December 31, 2021, compared to a working capital deficit of $3,168,246 as of December 31, 2020. The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations, which it has not been able to accomplish to date, and/or obtain additional financing from its stockholders and/or other third parties.
Our consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next fiscal year. The continuation of the Company as a going concern is dependent upon the ability of the Company to obtain necessary equity or debt financing to continue operations, successfully locating and negotiating with other business entities for potential acquisition and /or acquiring new clients to generate revenues. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties.
In order to further implement its business plan and satisfy its working capital requirements, the Company will need to raise additional capital. There is no guarantee that the Company will be able to raise additional equity or debt financing at acceptable terms, if at all.
There is no assurance that the Company will ever be profitable. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in the notes to our consolidated financial statements. Those material accounting estimates that we believe are the most critical to an investor’s understanding of our financial results and condition are discussed immediately below and are particularly important to the portrayal of our financial position and results of operations and require the application of significant judgment by our management to determine the appropriate assumptions to be used in the determination of certain estimates.
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Consolidation
The 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.
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.
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.
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Professional Service Revenue
TRAQ Pvt Ltd. generally 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 and the 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. 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.
Revenue From Sales of Goods
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. The performance obligations are satisfied upon shipment of the merchandise being sold.
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Costs of Services Provided
Costs of services provided consist of 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.
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 the Indian subsidiaries 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).
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 the Company’s tax positions on an annual basis.
The Company files income tax returns in the U.S. federal tax jurisdiction and various state and foreign tax jurisdictions. The 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. Foreign income tax returns are subject to examination by foreign taxing authorities.
Fair Value of Financial Instruments
ASC 825, “Financial Instruments,” requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Company’s financial instruments: The carrying amount of cash, accounts receivable, prepaid and other current assets, accounts payable and accrued expenses, stockholder advances, and short-term financing approximate fair value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments.
Earnings (Loss) Per Share of Common Stock
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. An uncertain number of shares underlying convertible debt have been excluded from the computation of loss per share because their impact was anti-dilutive.
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.
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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.
Results of Operations and Financial Condition for the Year Ended December 31, 2021 as Compared to the Year Ended December 31, 2020
Revenues
For the year ended December 31, 2021 compared to December 31, 2020, the Company’s revenues increased by $1,702,351, or 169%, from $1,009,949 in 2020 to $2,712,300 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 the addition of new customers in TRAQ Solutions, Inc.
Cost of Sales
For the year ended December 31, 2021 compared to December 31, 2020, the Company’s cost of revenues increased by $1,657,201, or 303%, from $546,569 in 2020 to $2,203,770 in 2021. The increase is the result of the acquisitions of Rohuma and Mimo as well as added direct labor for TRAQ Pvt Ltd, and due to the costs related to our sale of goods of approximately $938,000 in 2021. The Company experienced lower gross profitability in these new engagements, as they ramped up personnel post-COVID.
Operating Expenses
For the year ended December 31, 2021 compared to December 31, 2020, the Company’s salary and salary related costs increased by $1,447,153, or 509%, from $284,258 in 2020 to $1,731,411 in 2021 due to the acquisitions of Rohuma and Mimo as well as increases to management salaries including its CEO.
During the year ended December 31, 2021 compared to December 31, 2020, the Company’s professional fees increased by $613,402, or 305%, from $201,430 in 2020 to $814,832 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, public offering expenses and the preparation of the annual report.
For the year ended December 31, 2021 compared to December 31, 2020, the Company’s rent expense decreased by $69,758, or 68%, from $101,845 in 2020 to $32,087 in 2021 due to TRAQ Pvt Ltd. renegotiating their leases in December 2020, reducing their space due to COVID.
For the year ended December 31, 2021 compared to December 31, 2020, the Company’s depreciation and amortization expense increased $30,220, or 63%, from $47,988 in 2020 to $78,208 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 year ended December 31, 2021 compared to December 31, 2020, the Company’s general and administrative expenses increased by $2,621,799, or 1434%, from $182,827 in 2020 to $2,804,626 in 2021 primarily due to the acquisitions of Rohuma and Mimo as well as expenses related to stock-based compensation of $2,433,150.
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Interest Expense
For the year ended December 31, 2021 compared to December 31, 2020, the Company’s interest expense increased by $997,576, or 304%, from $328,380 in 2020 to $1,325,956 in 2021 due to higher levels of debt in 2021.
Derivative Liabilities
For the year ended December 31, 2021 compared to December 31, 2020, the Company’s change in the fair value of the derivative liability and derivative expense increased by $1,077,387, from $0 in 2020 to $1,077,387 in 2021 due to the convertible promissory notes and related warrants being classified as derivative liabilities and the changes in the share price over the year ended December 31, 2021. In addition the Company recognized a gain on extinguishment of derivative liabilities of $1,089,675 in 2021 versus $0 in 2020.
Forgiveness of Debt and Other Income
For the year ended December 31, 2021 compared to December 31, 2020, the Company’s forgiveness of debt and other income decreased by $65,294 or 86%, from $76,248 in 2020 to $10,954 in 2021 due to forgiveness of payables in TRAQ Pvt Ltd in 2020 and due to PPP loan forgiveness of $24,640 in 2020. In addition, the Company recognized a loss on the settlement of debt of $108,411 in 2021 and $0 in 2020, respectively.
Net Loss
For the year ended December 31, 2021 compared to December 31, 2020, the Company’s net loss increased by $5,845,454, from $(607,909) in 2020 to $(6,453,363) in 2021 due to the changes noted herein.
Liquidity and Capital Resources
As of December 31, 2021, current assets were $980,747 and current liabilities outstanding amounted to $10,825,016 which resulted in a working capital deficit of $9,844,269. As of December 31, 2020, current assets were $784,914 and current liabilities outstanding amounted to $3,953,160 which resulted in a working capital deficit of $3,168,246.
Net cash used in operating activities was $3,163,103 for the year ended December 31, 2021 compared to $187,164 in 2020. Cash used in operating activities for 2021 and 2020 was 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, the change in the fair value of the derivative liabilities, gains and losses on extinguishment and settlement of debt and the amortization of discounts related to our debt instruments.
Net cash provided by (used in) investing activities was $20,941 for the year ended December 31, 2021 compared to ($231,586) in the year ended December 31, 2020. Cash provided by (used in) investing activities for 2021 and 2020, related to the advance in the form of a note receivable in the amount of $227,877 and $3,417 in fixed asset additions in 2020 compared to cash paid for acquisitions of $21,825 and cash received in acquisitions of companies of $48,789 as well as acquisitions of fixed assets of $6,023 in 2021.
Net cash provided by financing activities for the year ended December 31, 2021 consisted of proceeds from the issuance of common stock and warrants of $494,545 and convertible notes of $1,715,000, along with proceeds received from related party notes of $2,986,125 and $50,331 in proceeds from issuance of long-term debt. The Company repaid $1,292,397 in related party notes, $515,615 in convertible notes and $214,242 in long-term debt during the year ended December 31, 2021. During the year ended December 31, 2020 the financing activities consisted of proceeds from related party and unrelated party notes of $752,480 as well as repayments of long-term debt to both related and unrelated parties of $238,302. The Company had an increase (decrease) of its cash overdraft of $30,539 and ($228,745).
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On January 19, 2021, the Company issued a 12% Convertible Promissory Note to GS Capital Partners, LLC (the “GS Note”) in the principal amount of $125,000. The GS Note has a maturity date of one-year from issuance and is to be repaid commencing on the fifth monthly anniversary and every month thereafter in the amount of $20,000. In the event of a payment default, the GS Note will be convertible into common stock at a conversion price of 66% of the lowest closing stock price over the previous 20 trading days. There are certain price protections for GS Capital Partners, LLC under the terms of the GS Note, which make the conversion option a derivative liability. The Company recorded an original issue discount in the amount of $10,000 and $5,000 was paid out of the proceeds for legal fees. In accordance with the terms of the GS Note, the Company issued 3,250 shares of common stock as a commitment fee and issued 21,250 shares of common stock that are returnable upon the Company repaying the GS Note in accordance with its terms. This note was paid off in 2021.
On February 12, 2021, the Company issued a 10% Convertible Promissory Note to Platinum Point Capital, LLC (the “Platinum Note”) in the principal amount of $400,000. The Platinum Note has a maturity date of one-year from issuance. The Platinum Note is convertible into common stock a conversion price of the greater of (a) $0.08 or (b) 70% of the lowest traded stock price over the previous 15 trading days, provided that the conversion price will not exceed $8.00. There are certain price protections for Platinum Point Capital, LLC under the terms of the Platinum Note, which make the conversion option a derivative liability. The Company granted 25,000 warrants to purchase shares of common stock that have a term of three-years and an exercise price of $2.00 per share with the Platinum Note. The warrants granted with the Platinum Note also contain certain price protections that make the value of the warrants a derivative liability. The Company and Platinum Point Capital, LLC entered into an amendment to exclude the Mimo warrants granted on February 17, 2021 from the price protections. In accordance with the terms of the Platinum Note, the Company issued 7,500 shares of common stock as a commitment fee. This note was repaid/ converted into shares of common stock in 2021.
Off-Balance Sheet Arrangements
We have no off-balance sheet financing arrangements.
Contractual Obligations
Not required for a smaller reporting company.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not required for a smaller reporting company.
Item 8. Financial Statements and Supplementary Data
Our consolidated financial statements and notes thereto and the report of our independent registered public accounting firm, are set forth starting on page F-1 of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
On April 5, 2021, the Board of Directors of TraQiQ, Inc. approved the dismissal of AJSH & Co LLP (“AJSH”) as the Company’s independent registered public accounting firm. The Company filed a Current Report on Form 8-K on April 6, 2021 reporting on this event and stating that (1) the reports of AJSH on the Company’s consolidated financial statements for the fiscal years ended December 31, 2020 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles; (2) during the fiscal years ended December 31, 2019 and December 31, 2020, there were no “disagreements” (as defined in Item 304(a)(1)(iv) of Regulation S-K and related instructions) with AJSH on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements if not resolved to the satisfaction of AJSH would have caused AJSH to make reference thereto in its reports on the consolidated financial statements for such years; and (3) during the fiscal years ended December 31, 2019 and December 31, 2020, there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K).
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On April 5, 2021, the Board approved the appointment of T R Chadha & Co LLP (“TRC”) as the Company’s new independent registered public accounting firm, effective immediately, to perform independent audit services for the fiscal year ending December 31, 2021. During the fiscal years ended December 31, 2019 and December 31, 2020 neither the Company, nor anyone on its behalf, consulted TRC regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered with respect to the consolidated financial statements of the Company, and no written report or oral advice was provided to the Company by TRC that was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue; or (ii) any matter that was the subject of a “disagreement” (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a “reportable event” (as that term is defined in Item 304(a)(1)(v) of Regulation S-K).
Item 9A. Controls and Procedures
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. |
Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13a-15(f). Management conducted an evaluation of the effectiveness of the internal control over financial reporting as of December 31, 2021, using the criteria established in Internal Control – Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. As a result of management’s assessment, management has determined that there are material weaknesses due to the lack of segregation of duties and, due to the limited resources based on the size of the Company. Due to the material weaknesses management concluded that as of December 31, 2021, the Company’s internal control over financial reporting was ineffective. In order to address and resolve the weaknesses, the Company will endeavor to locate and appoint additional qualified personnel to the board of directors and pertinent officer positions as the Company’s financial means allow. To date, the Company’s limited financial resources have not allowed the Company to hire the additional personnel necessary to address the material weaknesses.
Management’s Annual Report on Internal Control Over Financial Reporting
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
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 Company’s last fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) 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. |
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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PART III
Item 10. Directors, Executive Officers, and Corporate Governance;
The following persons are our executive officers and directors as of March 31, 2022 and hold the positions set forth opposite their respective names. The members of the Board of Directors serve until the next annual meeting and a successor is appointed and qualified, or until resignation or removal.
| Name | Age | Position | ||
| Ajay Sikka | 54 | Chairman of the Board, Director, Chief Executive Officer and President | ||
| James DuBois | 57 | Director | ||
| Greg Rankich | 47 | Director | ||
| Richard J. Berman | 79 | Director | ||
| Lathika Regunathan | 43 | President of Mimo Technologies | ||
| Sandeep Soni | 51 | President of Kringle.ai | ||
| Michael Pollack | 55 | Interim Chief Financial Officer |
Business Experience
The following is a brief description of the business experience of our executive officers and directors:
Ajay Sikka, Chairman and Director and President
Ajay Sikka was appointed to our Board as its Chairman and the Board appointed him as our Chief Executive Officer, President and Chief Financial Officer on July 19, 2017. From May 2014 to 2020, Mr. Sikka served as Chief Executive Officer of OmniM2M, Inc., an IIoT hardware, software and services company. From March 2011 to the present, Mr. Sikka has also served as Chief Executive Officer of TraQiQ Solutions, Inc. a technology provider that is focused on providing software products, services and support to enterprise customers, including Microsoft, Staples, Accenture, and Pactera. From April 2004 to Feb 2011, Mr. Sikka served as Senior Director at Microsoft Corp. in Redmond, Washington, where he worked in multiple teams, including Law & Corporate affairs, Central IT, and Business Strategy. He also managed Microsoft’s CloudCRM team that provided Customer Relationship Management (CRM) services within Microsoft. From April 2000 to March 2004, Mr. Sikka served as Chief Executive Officer of IndiaHQ Solutions, Inc., a content provider (Websites, newspapers, Yellow pages) for the South Asian community. From April 1996 to April 2000, Mr. Sikka served as Group Manager at Microsoft Corp. in Redmond, Washington where he drove Microsoft’s internet business and content management initiatives with telecommunications and Internet service providers. He arrived at Microsoft subsequent to Microsoft’s purchase of Vermeer, that made the FrontPage product. Mr. Sikka is an active angel investor and board of director member for startup companies and new ventures in the Seattle area.
Mr. Sikka is the founder and Chief Executive Officer of TraQiQ, with extensive software development and sales experience, as well as experience in the South Asian community. He offers the board an inside view of the company’s finances and operations. His service as a board member of other small companies also provides him with insight into the issues facing other small companies, which are valuable to the company.
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James DuBois, Director
James DuBois is a member of our Board and was appointed to our Board on February 2, 2018. Since 2016, Mr. Dubois, has served as Global IT Advisor and Board Member at Expeditors International, a global logistics company headquartered in Seattle, Washington. Mr. Dubois has guided IT and business transformation, corporate governance, customer-focused strategic product/services development, security, and risk management. While at Microsoft, as CIO and Chief Information Security Officer from 2014 to 2017, he was involved with directing IT modernization through corporate growth, turnaround, acquisitions integrations and divestitures.
Mr. DuBois has extensive experience in global IT operations as well as corporate governance matters, which assists TraQiQ in formulating and executing its growth strategy. He offers the board a strategic perspective on aspects of the software industry’s future.
Greg Rankich, Director
Greg Rankich is a member of our Board and was appointed to our Board on May 11, 2019. Since May 2018, Mr. Rankich has been co-founder and partner at Better U Today, which is a program designed to provide a simple and straightforward approach to help people achieve their ideal weight through food, education and lifestyle changes. Since January 2017, Mr. Rankich has also served as the managing partner of Kirkland REI, LLC which is a private real estate investment and management firm that focuses on four primary asset classes: Single Residential Properties, Multi-Family Properties, Commercial Properties and Land Acquisition. Since July 2013, Mr. Rankich has served as an Advisory Board Member of Ro Health, which is a rapidly growing medical staffing and home health agency that supplies clients and patients with healthcare providers that are kind and caring. From July 2005 to May 2018, Mr. Rankich served as the Chief Executive Officer of Xtreme Consulting Group, Inc. an $80 million in revenue international services firm focused on improving business performance. Digital Intelligence Systems acquired Xtreme on May 11, 2018. Prior to founding Xtreme, Mr. Rankich held many roles within Microsoft Corporation. In 2010, Mr. Rankich was a finalist for Ernst & Young “Entrepreneur of the Year” award. He is an active member of company boards and advisory panels and is also involved in numerous charities and non-profits in the northwest. Mr. Rankich graduated with a B.A. in International Business and a M.B.A. from Washington State University.
Mr. Rankich’s business background and management experience is valuable to the company as it continues to grow and expand its employee and “gig worker” base.
Richard Berman, Director
Richard Berman’s business career spans over 35 years of venture capital, senior management, and merger & acquisitions experience. In the past five years, Berman has served as a director of many public and private companies. Currently, he is a director of five public companies - Cryoport Inc., a cold chain logistics company, Comsovereign Holding Corp., a U.S.-based developer of 4G LTE advanced and 5G communication systems, BioVie Inc., a clinical-stage drug development company, Advaxis Inc., a clinical-stage biotechnology company, and Cuentas, Inc., a provider of mobile banking and payment solutions serving Latino and Hispanic consumers. Over the last decade he has served on the board of five companies that have reached over one billion in market capitalization - Cryoport, Advaxis, EXIDE, Internet Commerce Corporation, and Ontrak (Catasys). Previously, Berman worked at Goldman Sachs; was Senior Vice President of Bankers Trust Company, where he started the M&A and Leveraged Buyout Departments. Subsequently, he created the largest battery company in the world in the 1980’s, by merging Prestolite, General Battery and Exide to form Exide Technologies (XIDE); helped create SoHo, NYC by developing five buildings. He advised on over $4 billion M&A transactions, completing over 300 deals. Berman is a past director of the Stern School of Business of NYU where he obtained his B.S. and M.B.A. degrees. He also has U.S. and foreign law degrees from Boston College and the Hague Academy of International Law, respectively.
Mr. Berman provides the board with insights from his extensive experience in the purchase, sale and financing of businesses, his experience in financial and operational issues affecting organizations, and his knowledge of legal issues relevant to TraQiQ’s operations.
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Lathika Regunathan, President of Mimo Technologies
Besides working in finance, technology and software development in India, Lathika has worked extensively in the Latin-American markets. Beginning in 2017, he was the Founder & President at Mimo Technologies Pvt Ltd., which was subsequently acquired by TraQiQ. Prior to that time, he served as Founder & President at Mann-India Technologies Pvt Ltd, a software solutions and services company focused on the Latin American markets that was also subsequently acquired by TraQiQ. At Mimo, Lathika brings to the table a firm understanding of mobile payment strategy, team management and management consultancy.
Sandeep Soni, President of Kringle.ai
Since 2018, Mr. Soni has served as Founder and President of Rohuma LLC, building loyalty and rewards programs for other businesses. This company was acquired by TraQiQ in 2021. From 2013 to 2018, Mr. Soni served as Chief Operating Officer for Unique Business Systems, where he was responsible for global business, project management and technology development. From 2017 to the present, Mr. Soni has also served as a board member of the Blank Center for Entrepreneurship, headquartered in Boston, Massachusetts, and he previously served as a board member for other banking and public companies. Mr. Soni has on the past run a $4 billion business as chief executive officer of Citigroup’s Consumer Business unit across several countries with responsibility for credit cards, mortgages, insurance and loan products. Mr. Soni has been involved in M&A, early-stage investments and also managed a Special Situation fund helping invest and turn around companies.
Michael Pollack CPA, Interim Chief Financial Officer
Mr. Pollack joined the Company as interim Chief Financial Officer in September 2021. Mr. Pollack has been a partner in a certified public accounting firm for the past fifteen years and specializes in accounting and auditing for small public companies. Mr. Pollack has approximately 35 years of experience in public accounting and consulting to over 100 publicly traded and 250 private companies. Mr. Pollack has also held CFO and Controller positions in an array of industries. Mr. Pollack graduated from the University of Maryland with a Bachelor of Arts in Economics. Mr. Pollack is a member of the American Institute of Certified Public Accountants, as well as licensed to practice in New Jersey, and New York.
Family Relationships
There are no family relationships among any of our directors or executive officers.
Corporate Governance
Code of Business Conduct and Ethics
TraQiQ has adopted a Code of Ethics and Business Conduct to document the ethical principles and conduct we expect from our employees, officers and directors. The Code of Ethics and Business Conduct is applicable to our employees and also includes a Code of Ethics for our chief executive and principal financial officers and any persons performing similar functions. A copy of our Code of Ethics and Business Conduct is available in the Investors section of our website (www.traqiq.com). We will provide a copy of the Code of Ethics to any person without charge, upon request to TraQiQ, Inc., 14205 S.E. 36th St., Suite 100, Bellevue, WA 98006, Attention: Ajay Sikka, CEO.
Audit Committee
The Audit Committee’s primary responsibility is to engage our independent auditors and otherwise to monitor and oversee the audit process. The Audit Committee also undertakes other related responsibilities as detailed in the Audit Committee Charter, including monitoring our internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics, discussing our risk management policies and reviewing and approving or ratifying any related person transactions. A copy of our Audit Committee Charter is available in the Investors section of our website (www.traqiq.com).
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In addition to determining that the members of the Audit Committee are independent directors under the Securities Exchange Act of 1934 and the Nasdaq listing standards, the board of directors has also determined that Richard Berman is an “Audit Committee financial expert” as defined in rules adopted under the Securities Exchange Act of 1934. The members of the Audit Committee are James DuBois, Richard Berman and Greg Rankich, each of whom is an independent director within the meaning of the Nasdaq Stock Market rules. Mr. Berman serves as chair of the Audit Committee.
Nominations for Directors
During 2021, there were no material changes to the procedures by which security holders may recommend nominees to the Company’s board of directors.
Delinquent Section 16(a) Reports
During the year ended December 31, 2021, James DuBois filed a late Form 4 report following the conversion of a promissory note into Company stock.
Item 11. Executive Compensation
Summary Executive Compensation Table
The following table shows, for the years ended December 31, 2021 and 2020, compensation awarded to or paid to, or earned by, our Chief Executive Officer and Chief Financial Officer (the “Named Executive Officers”).
SUMMARY COMPENSATION TABLE
Name and principal position (a) | Year (b) | Salary ($) (c) | Bonus ($) (d) | Stock Awards ($) (e) | Option Awards (1) ($) (f) | Non-Equity Incentive Plan Compensation ($) (g) | Nonqualified Deferred Compensation Earnings ($) (h) | All Other Compensation ($) (i) | Total ($) (j) | |||||||||||||||||||||||||||
| Ajay Sikka, | 2020 | $ | 132,646 | - | - | $ | 340,600 | - | - | - | $ | 473,246 | ||||||||||||||||||||||||
| CEO, CFO (through September 2021) and Director | 2021 | $ | 180,000 | - | $ | 1.078,560 | $ | - | - | - | - | $ | 1,258,560 | |||||||||||||||||||||||
| Michael Pollack, Interim CFO (beginning September 2021) (2) | 2021 | $ | - | - | - | - | - | - | $ | 39,025 | $ | 39,025 | ||||||||||||||||||||||||
| (1) | The fair value of each option awarded is estimated on the date of grant using a Black-Scholes option-pricing model. The expected volatility is based on the Company’s stock having just commenced trading on the grant date. The risk-free interest rate for periods within the life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. In calculating the fair value of the Company’s options on the date of grant during the year ended December 31, 2020, the Company assumed a risk-free interest rate of 0.58%, an expected dividend yield of 0%, an expected life of 2 years and an expected volatility of 100%. |
| (2) | Mr. Pollack is a contracted consultant and is paid through his company KBL, LLP. Amounts represent payments to KBL, LLP for the period September 2021 through December 2021. |
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Employment Agreement
In 2021 and 2020, Mr. Sikka received a salary of $180,000 and $132,646, respectively. In October 2020, the Company entered into an employment agreement with Mr. Sikka. The agreement has a five year term, subject to earlier termination. Under the agreement, he receives an annual salary of $180,000 and was issued options in connection with his service as chief executive officer to purchase up to 187,500 shares of common stock at an exercise price of $0.44 per share. Of these, 156,250 shares are to vest based on performance over five years with milestones. The remaining 31,250 options have service-based vesting over four years. Mr. Sikka also received options on October 19, 2020 for 31,250 shares of common stock in connection with his service on the company’s board of directors at an exercise price of $0.44 per share, which vest over one year from grant.
Grants of Plan-Based Awards Table
On October 9, 2020, the Board of Directors approved the TraQiQ, Inc. Equity Compensation Plan which was adopted on October 11, 2020. Under this plan our named executive officers received grants of 0 and 218,750 during the years ended December 31, 2021 and 2020, respectively.
Outstanding Equity Awards At Fiscal Year-End For 2021 (1)
| Option Awards | Stock Awards | |||||||||||||||||||||
Number of Securities Underlying Unexercised Options (#) | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price | Option Expiration | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested | |||||||||||||||||
| Name | Exercisable | Unexercisable | ($) | Date | (#) | ($) | ||||||||||||||||
| Ajay Sikka | 196,829 | 21,921 | $ | 0.44 | 10/19/2030 | - | - | |||||||||||||||
| (1) | Of Mr. Sikka’s options, options with respect to 31,250 shares vested on October 19, 2021, options with respect to 31,250 shares will vest in equal parts on October 19 of each of the years 2021, 2022, 2023 and 2024, and options with respect to 156,250 shares will vest based on company performance, as determined by the board of directors. |
Director Compensation
Directors of the Company receive no compensation other than the opportunity to receive option awards.
In the table below, we have set forth information regarding compensation for 2021 received by each of our directors who is not an officer of the Company. The dollar amounts in the table below for option awards are the grant date fair market values associated with such awards.
2021 Director Compensation Table
| Fees Earned or | Stock | Option | All Other | |||||||||||||||||
| Name | Paid in Cash | Awards | Awards (1) | Compensation | Total | |||||||||||||||
| James DuBois | $ | — | $ | — | $ | — | — | $ | — | |||||||||||
| Greg Rankich | — | — | — | — | $ | — | ||||||||||||||
| Richard Berman | — | 398,500 | — | — | — | |||||||||||||||
| (1) | The Company granted in January 2021 (12,500 shares) and April 2021 (31,250 shares) restricted common stock that vest over a three-year period. These grants are service-based grants and are being expensed in accordance with ASC 718 ratably over the three-year period. |
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Directors’ and Officers’ Liability Insurance
The Company maintains directors’ and officers’ liability insurance insuring its directors and officers against liability for acts or omissions in their capacities as directors or officers, subject to certain exclusions. Such insurance also insures the Company against losses which we may incur in indemnifying our officers and directors.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee are James DuBois, Richard Berman and Greg Rankich, each of whom is an independent director within the meaning of the Nasdaq Stock Market rules. No member of the Compensation Committee is or was formerly an officer or an employee of the Company. No executive officer of the Company serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of the Company’s board of directors, nor has such an interlocking relationship existed in the past.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following tables set forth certain information regarding the ownership of our common stock as of March 4, 2022, by:
| ● | each director; | |
| ● | each person known by us to own beneficially 5% or more of our Common Stock; | |
| ● | each officer named in the summary compensation table elsewhere in this Current Report on Form 8-K; and | |
| ● | all directors and executive officers as a group. |
There were 4,171,602 shares of our common stock issued and outstanding. The following table shows, as of that date, the number of shares and percentage of our common stock held by each person known to us to own beneficially more than five percent of the issued and outstanding Common Stock, by each of our executive officers and directors, and by our executive officers and directors as a group. Unless otherwise specified, the address of each person listed is: 14205 SE 36th Street, Suite 100, Bellevue, WA 98006.
The amounts and percentages of common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has the right to acquire beneficial ownership within 60 days. Under these rules more than one person may be deemed a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest. The percentages of common stock beneficially owned are calculated on the basis of 4,871,894 total common shares issued and outstanding after giving effect to the Share Exchange Agreement, inclusion of stock options, warrants, and shares issuable upon the conversion of notes payable.
Unless otherwise indicated below, to the best of our knowledge each beneficial owner named in the table has sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable.
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| Common Stock | ||||||||
| Five Percent Shareholders, Directors, Nominee and Certain Executive Officers | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||
| Ajay Sikka | 2,306,345 | (1) | 47.3 | % | ||||
| James DuBois | 35,654 | (2) | * | |||||
| Greg Rankich | 52,427 | (3) | 1.1 | % | ||||
| Richard Berman | 43,750 | (4) | * | |||||
| Virandra Sikka | 408,052 | 8.4 | % | |||||
| Swarn Thiara | 325,000 | 6.7 | % | |||||
| Dharam Vir Sikka | 244,413 | 5.0 | % | |||||
| Lathika Regunathan | 116,316 | (5) | 2.4 | % | ||||
| Sandeep Soni | 211,151 | (6) | 4.3 | % | ||||
| Michael Pollack | — | * | ||||||
| All Executive Officers and Directors as a Group (7 persons) | 2,765,643 | (7) | 56.8 | % | ||||
* Less than 1%.
| (1) | Consists of 2,051,197 shares owned individually, 58,319 shares owned by his spouse and 196,829 shares represented by stock options exercisable currently or within 60 days of March 9, 2022. |
| (2) | Consists of 4,404 shares owned individually, and 31,250 shares represented by stock options exercisable currently or within 60 days of March 9, 2022. |
| (3) | Consists of 37,500 shares owned individually, and 14,927 shares represented by stock options exercisable currently or within 60 days of March 9, 2022. |
| (4) | Consists of restricted stock grants from January and April 2021 which shares have not been issued. These grants vest over a three-year term, subject to forfeiture should service conditions not be satisfied. |
| (5) | Consists of 110,718 shares represented by warrants exercisable currently or within 60 days of March 9, 2022 and 5,598 shares represented by stock options exercisable currently or within 60 days of March 9, 2022. |
| (6) | Consists of 182,419 shares owned individually and 28,732 shares represented by stock options exercisable currently or within 60 days of March 9, 2022. |
| (7) | Includes 388,054 shares represented by stock options or warrants exercisable currently or within 60 days of March 9, 2022. |
Changes in Control
Except for matters described in this Annual Report regarding the Share Exchange Agreement, we are unaware of any contract or other arrangement or provisions of our Articles or Bylaws the operation of which may at a subsequent date result in a change of control of us. There are not any provisions in our Articles or Bylaws, the operation of which would delay, defer, or prevent a change in control of the Company.
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Equity Compensation Plan Information
The following table gives information about our common stock that may be issued upon the exercise of options, warrants and rights under our 2020 Equity Compensation Plan as of December 31, 2021.
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
| (a) | (b) | (c) | ||||||||||
| Equity compensation plans approved by security holders | 491,250 | $ | 0.0416 | 196,250 | ||||||||
| Equity compensation plans not approved by security holders | - | - | - | |||||||||
| Total | 491,250 | $ | 0.0416 | 196,250 | ||||||||
Item 13. Certain Relationships and Related Transactions and Director Independence
Certain Relationships and Related Party Transactions
Except as described below, since January 1, 2021, there have been no transactions, whether directly or indirectly, between the Company and any of our officers or former officers, directors or former directors or their family members or any five percent or greater beneficial stockholder of the Company.
The details for amount due to related parties were as follows as of December 31, 2021:
| December 31, | ||||
| 2021 | ||||
| Amount due to related parties: | ||||
| Ajay Sikka(1) | $ | 2,908,562 | ||
| Kunaal Sikka(2) | 265,000 | |||
| Swarm Singh(3) | 195,000 | |||
| Satinder Thiara(4) | 32,000 | |||
| Dharam Sikka(5) | — | |||
| James DuBois(6) | — | |||
| Greg Rankich(7) | 400,000 | |||
| Former directors and managers of Rohuma and Mimo | 91,901 | |||
| Total | $ | 3,892,463 | ||
| (1) | These advances from the CEO are unsecured, due on demand and bear interest at 15% annually. Mr. Sikka has agreed to convert $2,000,000 in aggregate principal amount of these obligations to common stock prior to the closing of the proposed offering at a conversion price equal to 80% of the proposed public offering price. |
| (2) | Unsecured promissory note from Kunaal Sikka, the CEO’s son, dated September 13, 2018, in the amount of $15,000, maturing on December 31, 2019, and accruing interest at an annual rate of 12%. The note was in default as of December 31, 2019 through June 25, 2021 when the note was extended until December 31, 2022. As a result the interest rate was changed to 18% annually (1.50% monthly) through June 25, 2021 and then changed to 6% annually. |
| Unsecured promissory note from Kunaal Sikka, the CEO’s son, dated December 15, 2021, in the amount of $250,000, maturing on December 31, 2022, and accruing interest at an annual rate of 15%. |
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| (3) | Note payable to Swarn Singh, father-in-law of the CEO, entered into January 3, 2017 ($25,000) and February 1, 2017 ($20,000) at interest rate of 15% annually (1.25% monthly). These are unsecured notes. Both notes were due December 31, 2019. The notes are in default as of December 31, 2019. As a result the interest rate was changed to 21% annually (1.75% monthly). |
Unsecured promissory note to Swarn Singh, father-in-law of the CEO, dated December 15, 2021, in the amount of $150,000, maturing on December 31, 2022, and accruing interest at an annual rate of 15%. | |
| (4) | Notes payable to Satinder Thiara entered into May 25, 2016 ($22,000) which is due December 31, 2021, December 13, 2016 ($10,000) which is due December 31, 2021, and May 1, 2018 ($25,000) which matured December 31, 2019 at interest rate of 15% annually (1.25% monthly). These are unsecured loans. The May 1, 2018 note is in default as of December 31, 2019. As a result the interest rate was changed to 21% annually (1.75% monthly). The May 1, 2018 note that matured December 31, 2019 was converted along with $12,392 in accrued interest into 5,499 shares of common stock on March 5, 2021. |
| (5) | The Company entered into convertible notes with Dharam V. Sikka, father of CEO, pursuant to a convertible note payable issued in August 2017 ($20,000), November 2017 ($30,000) and May 2018 ($25,000), with an interest rate of 6% and conversion terms as the Notes described above, maturing on December 31, 2019 and is convertible into shares of the Company’s common stock at a conversion rate equal to eighty percent (80%) of the average closing share price as quoted on the OTC Markets for the five (5) trading days prior to the date of conversion., These notes were converted into common stock in March 2021. |
| (6) | The Company entered into a convertible note with James DuBois, a director of the Company in November 2017 in the amount of $20,000, at a 6% annual interest rate and conversion terms as the Notes described in (5) above, initially maturing on July 31, 2018, extended to December 31, 2019, This note was converted into common stock in March 2021. |
| (7) | Note payable to a director dated June 15, 2021 that matured December 12, 2021 in the amount of $400,000. The note does not bear interest however the director received two tranches of 18,750 shares each for lending this amount. If the note is repaid by the maturity date, one of the two tranches of 18,750 shares will be returned. The Company and the director extended the maturity date of this note to June 14, 2022. |
Policy on Future Related Party Transactions
The Company requires that any related party transactions must be approved by a majority of the Company’s independent directors.
Board Independence
Our board of directors currently consists of four members. Of these, our board has determined that three (Mr. DuBois, Mr. Berman and Mr. Rankich) qualify as “independent directors” under the listing standards of The Nasdaq Stock Market, Inc. and do not have any material relationships with TraQiQ that might interfere with their exercise of independent judgment. In addition, TraQiQ is a “Controlled Company” as defined in the Nasdaq listing standards because more than 50% of the company’s voting power is held by one individual. The company is, therefore, pursuant to Nasdaq Marketplace Rule 5615(c)(2), exempt from certain aspects of Nasdaq’s listing standards relating to independent directors. Nevertheless, the company has voluntarily complied with some of such rules, and a majority of the members of the board of directors are “independent directors” under Nasdaq rules.
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Item 14. Principal Accounting Fees and Services.
The aggregate fees incurred for each of the last two years for professional services rendered by TRC for 2021 and AJSH for 2020 the independent registered public accounting firms for the audits of the Company’s annual financial statements included in the Company’s Form 10-K and reviews of financial statements for its quarterly reports (Form 10-Q) are reported below. See Item 9A for further information on the change in the independent registered public accounting firms that took place on April 5, 2021.:
| Audit Fees | Audit Related Fees | Tax Fees | All Other Fees | Total | ||||||||||||||||
| 2021 | $ | 31,300 | $ | - | $ | - | $ | - | $ | 31,300 | ||||||||||
| 2020 | $ | 27,500 | $ | - | $ | - | $ | - | $ | 27,500 | ||||||||||
Audit Fees
The aggregate fees incurred by the Company’s principal accountant for the audit of the Company’s annual financial statements, review of financial statements included in the quarterly reports and other fees that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the years ended December 31, 2021 and 2020.
Audit Related Fees
The aggregate fees billed for professional services that are reasonably related to the performance of the audit or review of the Company’s financial statements but are not reported “Audit Fees” for the years ended December 31, 2021 and 2020.
Tax Fees
The aggregate fees billed for professional services rendered by principal accountant for tax compliance, tax advice and tax planning during the years ended December 31, 2021 and 2020.
All Other Fees
Other fees billed for products or services provided by the Company’s principal accountant during the years ended December 31, 2021 and 2020.
PART IV
Item 15. Exhibits, Financial Statement Schedules
Financial Statements
The financial statements filed as a part of this report are set forth beginning on page F-1.
Financial Statement Schedules
No financial statement schedules are required to be filed with this report.
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Exhibits
The following exhibits are filed or incorporated by reference as a part of this report:
101.INS Inline XBRL Instance Document *
101.SCH Inline XBRL Taxonomy Extension Schema Document *
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document *
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document *
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document *
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document *
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
+ Management contract or compensatory plan.
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| TraQiQ Inc. | ||
| Date: March 31, 2022 | By: | /s/ Ajay Sikka |
| Name: | Ajay Sikka | |
| Title: | Chairman of the Board of Directors & Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: March 31, 2022 | By: | /s/ Michael Pollack |
| Name: | Michael Pollack | |
| Title: | Interim Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
| Date: March 31, 2022 | By: | /s/ James DuBois |
| Name: | James DuBois | |
| Title: | Director | |
| Date: March 31, 2022 | By: | /s/ Greg Rankich |
| Name: | Greg Rankich | |
| Title: | Director | |
| Date: March 31, 2022 | By | /s/ Richard Berman |
| Name: | Richard Berman | |
| Title: | Director | |
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| F-1 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and
Shareholders of TraQiQ Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of TraQiQ, Inc. and its subsidiaries (collectively, the “Company”) as on December 31, 2021, the related consolidated statements of operations, changes in stockholders’ deficit and cash flows, for the year ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Uncertainty
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a accumulated deficit of $8,953,768 and working capital deficit of $9,844,269, that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of financial statement. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| Going concern- refer to note 2 of the financial statements | |||
| Critical audit matter description | The Company raised a substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time. The financial statements for the year under audit have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. See the explanatory paragraph of the opinion paragraph. | ||
| How the Critical Audit Matter was addressed in the Audit | ● | We evaluated whether there is substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time. | |
| ● | We obtained information about management’s plans that are intended to mitigate the effect of such conditions or events, and assess the likelihood that such plans can be effectively implemented. | ||
| ● | We added explanatory paragraph to the audit report | ||
/s/
We have served as the Company’s auditor since April, 2021
March 30, 2022
| F-2 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of TraqIQ, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of TraqIQ, Inc. and its subsidiaries (collectively, the “Company”) as on December 31, 2020 and December 31, 2019, the related consolidated statements of operations, changes in stockholders’ deficit and cash flows, for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and December 31, 2019, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt about the Company Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has an accumulated deficit of $2,504,893 and working capital deficit of $2,851,721 as of December 31, 2020, and a working capital deficit of $2,697,036 as of December 31, 2019. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to this uncertainty are also described in the Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of financial statement. We believe that our audits provide a reasonable basis for our opinion.
| /s/
|
|
| We have served as the Company’s auditor since 2019. | |
| March 22, 2021 |
| F-3 |
TRAQIQ, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2021 AND 2020
IN US$
| DECEMBER 31, | DECEMBER 31, | |||||||
| 2021 | 2020 | |||||||
| 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 | - | |||||||
| Deferred tax assets | - | |||||||
| Right-of-use asset | ||||||||
| Long-term taxes receivable | ||||||||
| 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 | ( | ) | ( | ) | ||||
| 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 consolidated financial statements.
| F-4 |
TRAQIQ, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
IN US$
| 2021 | 2020 | |||||||
| YEARS ENDED | ||||||||
| DECEMBER 31, | ||||||||
| 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 | - | |||||||
| Gain on extinguishment of derivative liability | - | |||||||
| Loss on settlement of debt, net | ( | ) | - | |||||
| 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 consolidated financial statements.
| F-5 |
TRAQIQ, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE Years ENDED DECEMBER 31, 2021 AND 2020
IN US $
| Shares | Amount | Shares | Amount | Common | Deficit | Receivable | Income (Loss) | Interest | Total | |||||||||||||||||||||||||||||||
| 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 | $ | $ | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | ||||||||||||||||||||||||||||
| Stock-based compensation on granting of options | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Net loss for the year | - | - | - | - | - | ( | ) | - | - | ( | ) | |||||||||||||||||||||||||||||
| Balance - December 31, 2020 | ( | ) | - | - | ( | ) | ||||||||||||||||||||||||||||||||||
| Beginning balance | ( | ) | - | - | ( | ) | ||||||||||||||||||||||||||||||||||
| 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) | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Shares of stock issued for providing note payable | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Conversion of Series A Preferred Stock to Common Stock | ( | ) | ( | ) | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Shares issued for exercise of warrants | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Stock-based compensation on granting of options | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Stock-based compensation - warrants granted for consulting | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Stock-based compensation for restricted stock grants (shares not issued) | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Warrants earned for acquisition of Mimo | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Net loss for the year | - | - | - | - | - | ( | ) | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance - December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
TRAQIQ, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
IN US$
| 2021 | 2020 | |||||||
| CASH FLOW FROM OPERTING ACTIVIITES | ||||||||
| 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 | - | |||||||
| Gain on extinguishment of derivative liability | ( | ) | - | |||||
| Loss on settlement of debt | - | |||||||
| 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, accrued expenses and deferred taxes | ||||||||
| Accrued payroll and payroll taxes | ( | ) | ||||||
| Accrued duties and taxes | ( | ) | ( | ) | ||||
| Total adjustments | ||||||||
| Net cash (used in) operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITES | ||||||||
| 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 ACTIVITES | ||||||||
| Increase (decrease) in cash overdraft | ( | ) | ||||||
| Proceeds from the issuance of common stock | - | |||||||
| Proceeds from the exercise of warrants | - | |||||||
| 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 YEAR | ||||||||
| CASH AND RESTRICTED CASH - END OF YEAR | $ | $ | ||||||
| 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 | ||||||||
| Accrued payroll and related taxes | ||||||||
| Investment | - | |||||||
| Accounts payable and accrued expenses | ( | ) | - | |||||
| Accrued duties and taxes | ( | ) | - | |||||
| Long-term debt - related parties | ( | ) | - | |||||
| Long-term debt | ( | ) | - | |||||
| Cash overdraft | ( | ) | - | |||||
| Comprehensive income | ||||||||
| Cash | - | |||||||
| Total net assets 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 assets 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 consolidated financial statements.
| F-7 |
TRAQIQ , INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
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.
The Financial Industry Regulatory Authority on March 18, 2022, approved a reverse 1 for 8 stock split of the Company’s common shares. The reverse split was effective on March 21, 2022. The common shares and common share equivalents as well as the per-share amounts have been retroactively restated in accordance with ASC 855-10-25 and the loss per share figures have been retroactively restated in accordance with ASC 260-10-55-12.
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. |
| F-8 |
| ● | 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. There were of these warrants exercised during 2021 and warrants remain outstanding as of December 31, 2021.
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.
| F-9 |
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 Rohuma 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). The Company is making final determination on the revenue targets to ascertain that the second tranche of shares should be issued. 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. The Company is making final determination on the revenue targets to ascertain that the second tranche of warrants should be vested. 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) |
| F-10 |
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 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.
Consolidation
The 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.
| F-11 |
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.
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 December 31,
2021 and 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 $
| F-12 |
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
assets of TRAQ Pvt Ltd., and Mimo which includes customer relationships and trademarks. The Company amortizes these intangible
assets on a straight-line basis over their estimated useful lives of up to
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.
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.
| F-13 |
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.
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.
| F-14 |
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 $
Revenue From Sales of Goods
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. The performance obligations are satisfied upon shipment of the merchandise being sold.
The following is a summary of revenue for the years ended December 31, 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.
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.
| F-15 |
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.
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.
| F-16 |
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).
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.
| F-17 |
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. |
The amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting effect.
| F-18 |
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, our Indian entities provide 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 the Indian entities. The Indian entities record annual amounts relating to their 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. The Indian entities 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. The Indian entities 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
The Indian entities 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 the Indian entities obligations. The calculation is performed using the projected unit credit method. Any actuarial gains or losses are recognized.
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.
| F-19 |
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
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 Rohuma 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). The Company is making final determination on the revenue targets to ascertain that the second tranche of shares should be issued. 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.
| F-20 |
SCHEDULE OF BUSINESS ACQUISITION
| Cash | $ | |||
| Accounts receivables, net | ||||
| Prepaid expenses and other current assets | ||||
| Fixed assets | ||||
| Tradenames | ||||
| Intellectual property | ||||
| Investment | ||||
| Accounts payable and accrued expenses | ( | ) | ||
| Accrued payroll and related taxes | ||||
| 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. The Company is making final determination on the revenue targets to ascertain that the second tranche of warrants should be vested. In addition to the issuance of the warrants, TRAQ
Pvt Ltd, wrote off $
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 | ( | ) | ||
| $ | ( | ) |
| F-21 |
The
difference between the net liabilities acquired of $(
The following table shows pro-forma results for the years ended December 31, 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 year ended December 31, 2021 | For the year ended December 31, 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
December 31, 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 years ended December 31, 2021 and 2020 there were
NOTE 5: FIXED ASSETS
The Company’s property and equipment is as follows:
SCHEDULE OF PROPERTY AND EQUIPMENT
| December 31, 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 years ended December 31, 2021 and 2020 was $
| F-22 |
NOTE 6: INTANGIBLE ASSETS
The Company’s intangible assets are as follows:
SCHEDULE OF INTANGIBLE ASSETS
December 31, 2021 | December 31, 2020 | |||||||
| Customer relationships | $ | $ | | |||||
| Intellectual property | - | |||||||
| Tradenames | ||||||||
| Software | - | |||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Net | $ | $ | ||||||
Amortization
expense for the years ended December 31, 2021 and 2020 was $
NOTE 7: GOODWILL
The Company’s goodwill consists of the following:
SCHEDULE OF GOODWILL
December 31, 2021 | December 31, 2020 | |||||||
| Rohuma | $ | $ | - | |||||
| Mimo Technologies | ||||||||
| Net | $ | $ | ||||||
For the year ended December 31, 2021, there were no indicators of impairment noted.
NOTE 8: LONG-TERM INVESTMENT
The Company’s long-term investment is as follows:
SCHEDULE OF LONG-TERM INVESTMENT
December 31, 2021 |
December 31, 2020 |
|||||||
| Equity Security – Compulsorily Convertible Debenture | $ | $ | ||||||
The
investment the Company had in a
| F-23 |
NOTE 9: NOTE RECEIVABLE
The Company’s notes receivable is as follows:
SCHEDULE OF NOTE RECEIVABLE
| December
31, 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 December 31, 2021 and 2020, the Company had the following convertible notes outstanding, all are current liabilities:
SCHEDULE OF CONVERTIBLE NOTES OUTSTANDING
| December 31, 2021 | December 31, 2020 | |||||||||
| GS Capital | (a) | $ | $ | - | ||||||
| Platinum Point Capital | (b) | |||||||||
| Evergreen Capital Management LLC | (c) | |||||||||
| Total Convertible Notes Payable | $ | $ | ||||||||
| Less: Discounts | ( | ) | ||||||||
| $ | $ | |||||||||
| (a) | ||
| (b) |
| F-24 |
| (c) |
As
a commission on this note, the Company granted to the investment bankers,
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,
Interest
expense on these notes for the years ended December 31, 2021 and 2020 are $
| F-25 |
NOTE 11: LONG-TERM DEBT RELATED PARTIES
The following is a summary of the current portion - long-term debt - related parties as of December 31, 2021 and 2020:
SCHEDULE OF LONG-TERM DEBT RELATED PARTIES
| December 31, 2021 | December 31, 2020 | |||||||||
| $ | $ | |||||||||
| Unsecured advances - CEO | (a) | $ | $ | |||||||
| Notes payable - Satinder Thiara | (b) | |||||||||
| Promissory notes – Kunaal Sikka | (c) | |||||||||
| Notes payable – Swarn Singh | (d) | |||||||||
| Note payable - Chaudhary | (e) | |||||||||
| Note payable - Director | (g) | |||||||||
| Advances –officers | (f) | |||||||||
| Current portion of long-term debt related parties | ( | ) | ( | ) | ||||||
| Long-term debt – related parties | $ | $ | ||||||||
| (a) | |
| (b) | |
| (c) | |
Unsecured
promissory note from Kunaal Sikka, the CEO’s son, dated December 15, 2021, in the amount of $ | |
| (d) | |
Unsecured
promissory note to Swarn Singh, father-in-law of the CEO, dated December 15, 2021, in the amount of $ | |
| (e) | |
| (f) | |
| (g) |
Interest
expense on these notes for the years ended December 31, 2021 and 2020 are $
| F-26 |
NOTE 12: LONG-TERM DEBT
The following is a summary of the long-term debt as of December 31, 2021 and 2020:
SCHEDULE OF LONG-TERM DEBT
December 31, 2021 | December 31, 2020 | |||||||||
| Other debt – in default | (a) | $ | $ | |||||||
| Yukti Securities Private Limited | (b) | |||||||||
| Auto loan – ICICI Bank | (d) | |||||||||
| Baxter Credit Union | (e) | |||||||||
| UGECL | (f) | |||||||||
| USA Bank PPP | (g) | |||||||||
| Loan Builder | (h) | |||||||||
| Satin | (c) | |||||||||
| 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 years ended December 31, 2021 and 2020 are $
| F-27 |
The following is a summary of current portion - convertible debt - related and unrelated parties as of December 31, 2021 and 2020:
SUMMARY OF CARRYING VALUE OF CONVERTIBLE DEBT
| December 31, 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. | ||
| (a) |
Interest
expense on these notes for the years ended December 31, 2021 and 2020 are $
| F-28 |
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 shares. As a result, as of December 31, 2021, there are Series A Convertible Preferred shares issued and outstanding.
Common Stock
As of December 31, 2021, the Company has shares issued and outstanding.
During the three months ended December 31, 2021, the Company (a) issued common shares in conversion of a convertible note payable; and (b) had common shares returned upon repayment of a convertible note.
During
the three months ended September 30, 2021, the Company (a) issued common shares in conversion of Series A Convertible Preferred
Stock; (b) issued common shares in the exercise of 56,400 warrants that were exercised for $
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 year ended December 31, 2020.
| F-29 |
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.
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 December 31, 2021 | $ | - | years | $ | $ | |||||||||||||||
| Exercisable at December 31, 2021 | $ | - | years | $ | $ | |||||||||||||||
SCHEDULE OF EACH OPTION WARRANT ESTIMATED USING THE BLACK-SCHOLES VALUATION MODEL
Year
Ended | Year Ended December 31, | |||||||
| Expected term | ||||||||
| Expected volatility | - | % | ||||||
| Expected dividend yield | ||||||||
| Risk-free interest rate | % | |||||||
| F-30 |
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. The Company is making final determination on the revenue targets to ascertain that the second tranche of warrants should be vested. In addition to the issuance of the warrants, TRAQ
Pvt Ltd, wrote off $
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 shares, and a warrant for warrants with a strike price of $
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
On
October 8, 2021, the Company granted warrants with a term of
On
October 15, 2021, the Company granted warrants with a term of
| F-31 |
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 had been vested through December 31, 2020.
In the year ended December 31, 2021, an additional options vested for a total vested amount of .
In the years ended December 31, 2021 and 2020, the Company recognized $ and $ in stock-based compensation.
SUMMARY OF STOCK OPTION
Year Ended December 31, 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.
| F-32 |
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 December 31, 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 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less: Imputed interest | ||||
| Present value of lease liabilities | $ | |||
For
the years ended December 31, 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.
| F-33 |
On
September 17, 2021, the Company entered into a
On
October 8, 2021, the Company entered into a
On
October 15, 2021, the Company entered into a
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 December 31, 2021 and 2020:
SCHEDULE OF VALUATION ASSUMPTIONS
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |||||||
| Expected term | - | |||||||
| Expected volatility | % | |||||||
| Expected dividend yield | ||||||||
| Risk-free interest rate | % | |||||||
| F-34 |
The Company’s derivative liabilities are as follows:
SCHEDULE OF DERIVATIVE LIABILITIES
| December 31, 2021 | December 31, 2020 | |||||||
| $ | ||||||||
| Fair value of the Platinum Point warrants ( | $ | |||||||
| Fair value of the Evergreen 1 conversion option | ||||||||
| Fair value of the Evergreen 1 warrants ( | ||||||||
| Fair value of the Evergreen 2 conversion option | ||||||||
| Fair value of the Evergreen 2 warrants ( | ||||||||
| Fair value of the Evergreen 3 conversion option | ||||||||
| Fair value of the Evergreen 3 warrants ( | ||||||||
| $ | $ | |||||||
Activity related to the derivative liabilities for the year ended December 31, 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 | ||||
| Extinguishment of derivative liability upon conversion/repayment of convertible notes | ( | ) | ||
| Change in fair value of warrants/conversion option - derivative liabilities | ||||
| Ending balance as of December 31, 2021 | $ |
There were no derivative liabilities prior to January 2021.
nOTE 17: CONCENTRATIONS
During
the years ended December 31, 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 $
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, |
| F-35 |
| (ii) | TRAQ
Pvt Ltd has outstanding Gratuity for $ |
| (iii) | 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. |
| (iv) | Prior
to its acquisition in May 2019, TRAQ Pvt Ltd, had provided a guarantee in favor of State Bank of India for $ |
| (v) | TRAQ
Pvt Ltd has contingent liability of $ |
Commitments and contingencies in respect of Mimo Technologies Pvt Ltd;
| (i) | During
the year, Mimo Technologies Pvt. Ltd. has received funds from TraQiQ Inc, a US company amounting to approximately $ |
| (ii) | Mimo Technologies 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. |
NOTE 20: PROVISION FOR INCOME TAXES
The provision (benefit) for income taxes for the years ended December 31, 2021 and 2020 differs from the amount which would be expected as a result of applying the statutory tax rates to the losses before income taxes due primarily to the valuation allowance to fully reserve net deferred tax assets.
| F-36 |
All United States based entities:
The following table summarizes the significant differences between the U.S. Federal statutory tax rate and the Company’s effective tax rate for financial statement purposes for the years ended December 31, 2021 and 2020:
SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION
| 2021 | 2020 | |||||||
| Federal income taxes at statutory rate | % | % | ||||||
| State income taxes at statutory rate | % | % | ||||||
| Temporary differences | % | % | ||||||
| Permanent differences | ( | )% | ( | )% | ||||
| Change in valuation allowance | ( | )% | ( | )% | ||||
| Totals | % | % | ||||||
Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carry-forwards are expected to be available to reduce taxable income. As the achievement of required future taxable income is uncertain, the Company recorded a valuation allowance.
SCHEDULE OF DEFERRED TAX ASSETS
| As of | As of | |||||||
| December 31, 2021 | December 31, 2020 | |||||||
| Deferred tax assets: | ||||||||
| Net operating losses before non-deductible items | $ | $ | ||||||
| Stock-based compensation | ||||||||
| Depreciation | - | ( | ) | |||||
| Total deferred tax assets | ||||||||
| Less: Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax assets | $ | $ | ||||||
As
of December 31, 2021, the Company has a net operating loss carry forward of $
The Company classifies income tax penalties and interest, if any, as part of other general and administrative expenses in the accompanying consolidated statements of operations. The Company did not expense any penalties or interest during the years ended December 31, 2021 or 2020 and did not accrue any penalties or interest as of December 31, 2021 or 2020.
| F-37 |
India based entity:
Significant components of deferred tax liabilities as at December 31, 2021 and 2020:
SCHEDULE OF DEFERRED TAX ASSETS
| As of December 31, 2021 | As of December 31, 2020 | |||||||
| Deferred Tax Assets: | ||||||||
| Difference between book and tax base of fixed assets | $ | $ | ||||||
| Provision for gratuity | ||||||||
| Provision for leave encashment | ||||||||
| Operating lease | ||||||||
| NOL carryforward (based on last tax return filed per Indian Income Tax laws) | - | |||||||
| Timing difference on TDS under 40a(ia) | - | |||||||
| MAT credit | - | |||||||
| Deferred Tax Assets | ||||||||
| Net Deferred Tax Assets | ||||||||
| Less: Valuation allowance | ( | ) | ( | ) | ||||
| Net Deferred Tax Asset | $ | $ | ||||||
Deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the financial statement carrying values of assets and liabilities and their respective tax bases.
At
December 31, 2021, the Company performed an analysis of the deferred tax asset valuation allowance due to management’s uncertainty
about its realization. The Company when necessary will record a valuation allowance against this deferred tax asset. Based on the analysis,
the Company has determined that a valuation allowance of the Deferred Tax Assets of $
nOTE 21: EMPLOYEE BENEFIT PLANS
The Company’s Gratuity Plan for all of their Indian based entities provides for lump sum payment to vested employees on retirement or upon termination of employment in an amount based on the respective employee’s salary and years of employment with the Company. Liabilities with regard to the Gratuity Plans are determined by actuarial valuation using the projected unit credit method. Current service costs for the Gratuity Plan are accrued in the year to which they relate. Actuarial gains or losses or prior service costs, if any, resulting from amendments to the plans are recognized and amortized over the remaining period of service of the employees.
| F-38 |
The benefit obligation has been measured as of December 31, 2021. The gratuity plan is unfunded. The following table sets forth the activity of the Gratuity Plans and the amounts recognized in the Company’s financial statements for the year ended December 31, 2021:
SCHEDULE OF EMPLOYEE GRATUITY PLANS
| Year Ended | ||||
| December 31, 2021 | ||||
| Change in projected benefit obligation: | ||||
| Projected benefit obligation as of January 1, 2021 | $ | |||
| Obligation related to acquired companies upon acquisition | ||||
| Service cost | ||||
| Interest cost | ||||
| Benefits paid | ( | ) | ||
| Actuarial gain (loss) on the Obligation | ( | ) | ||
| Effect of exchange rate changes | ( | ) | ||
| $ | ||||
| Projected benefit obligation as of December 31, 2021 | ||||
| Unfunded amount – non-current | $ | |||
| Unfunded amount - current | ||||
| Total accrued liability | $ | |||
| Components of net period benefit costs: | ||||
| Service cost | $ | |||
| Interest cost | ||||
| Actuarial gain (loss) on the Obligation | ( | ) | ||
| $ | ||||
| The weighted average actuarial assumptions used to determine benefit obligations and net periodic gratuity cost are: | ||||
| Discount rate | ||||
| Rate of increase in compensation levels | ||||
The benefit obligation has been measured as of December 31, 2020. The gratuity plan is unfunded. The following table sets forth the activity of the Gratuity Plans and the amounts recognized in the Company’s financial statements for the year ended December 31, 2020:
| Year Ended | ||||
| December 31, 2020 | ||||
| Change in projected benefit obligation: | ||||
| Projected benefit obligation as of January 1, 2020 | $ | |||
| Service cost | ||||
| Interest cost | ||||
| Benefits paid | ( | ) | ||
| Actuarial gain (loss) on the Obligation | ||||
| Effect of exchange rate changes | ( | ) | ||
| $ | ||||
| Projected benefit obligation as of December 31, 2020 | ||||
| Unfunded amount – non-current | $ | |||
| Unfunded amount - current | ||||
| Total accrued liability | $ | |||
| Components of net period benefit costs: | ||||
| Service cost | $ | |||
| Interest cost | ||||
| Actuarial gain (loss) on the Obligation | ||||
| $ | ||||
| The weighted average actuarial assumptions used to determine benefit obligations and net periodic gratuity cost are: | ||||
| Discount rate | ||||
| Rate of increase in compensation levels | ||||
| F-39 |
Leave Encashment:
The other long-term employee benefits has been measured as of December 31, 2021. The following table sets forth the activity of the leave encashment and the amounts recognized in the Company’s financial statements at December 31, 2021:
| Year Ended | ||||
| December 31, 2021 | ||||
| Change in projected benefit obligation: | ||||
| Projected benefit obligation as of January 1, 2021 | $ | |||
| Obligation related to acquired companies upon acquisition | ||||
| Service cost | ||||
| Interest cost | ||||
| Benefits paid | ( | ) | ||
| Actuarial gain (loss) on the Obligation | ( | ) | ||
| Effect of exchange rate changes | ( | ) | ||
| $ | ||||
| Projected benefit obligation as of December 31, 2021 | ||||
| Unfunded amount – non-current | $ | |||
| Unfunded amount - current | ||||
| Total accrued liability | $ | |||
| Components of net period benefit costs: | ||||
| Service cost | $ | |||
| Interest cost | ||||
| Actuarial gain (loss) on the Obligation | ( | ) | ||
| $ | ||||
| The weighted average actuarial assumptions used to determine benefit obligations and net periodic gratuity cost are: | ||||
| Discount rate | ||||
| Rate of increase in compensation levels | ||||
The other long-term employee benefits has been measured as of December 31, 2020. The following table sets forth the activity of the leave encashment and the amounts recognized in TRAQ Pvt Ltd.’s financial statements at December 31, 2020:
| Year Ended | ||||
| December 31, 2020 | ||||
| Change in projected benefit obligation: | ||||
| Projected benefit obligation as of January 1, 2020 | $ | |||
| Service cost | ||||
| Interest cost | ||||
| Benefits paid | ( | ) | ||
| Actuarial gain (loss) on the Obligation | ( | ) | ||
| Effect of exchange rate changes | ( | ) | ||
| $ | ||||
| Projected benefit obligation as of December 31, 2020 | ||||
| Unfunded amount – non-current | $ | |||
| Unfunded amount - current | ||||
| Total accrued liability | $ | |||
| Components of net period benefit costs: | ||||
| Service cost | $ | |||
| Interest cost | ||||
| Actuarial gain (loss) on the Obligation | ( | ) | ||
| $ | ||||
| The weighted average actuarial assumptions used to determine benefit obligations and net periodic gratuity cost are: | ||||
| Discount rate | ||||
| Rate of increase in compensation levels | ||||
nOTE 22: SUBSEQUENT EVENTS
In January 2022 the Company borrowed an additional
$
On February 11, 2022, the Company entered
into a $
On
March 18, 2022, FINRA approved a
| F-40 |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
To the Board of Directors
TraqIQ, Inc.
14205 SE 36th St., Suite 100
Bellevue, WA 98006
We hereby consent to the incorporation in the Form 10-k for the year ended December 31, 2021 of TraqIQ, Inc. (the “Company”) of our report dated March 22, 2021, with respect to the Consolidated financial statements of the Company for the year ended December 31, 2020 and the related notes to the financial statements.
/s/AJSH & Co LLP
Delhi, India
March 30, 2022
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Ajay Sikka, Chief Executive Officer, certify that:
1. I have reviewed this annual report on Form 10-K of TraQiQ Inc.;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;
4. The registrant’s other certifying officers 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 controls 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 annual 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 annual period that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data 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 controls over financial reporting.
| Date: March 31, 2022 | /s/ Ajay Sikka |
| Ajay Sikka | |
Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Michael Pollack, Interim Chief Financial Officer, certify that:
1. I have reviewed this annual report on Form 10-K of TraQiQ Inc.;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;
4. The registrant’s other certifying officers 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 controls 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 annual 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 annual period that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data 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 controls over financial reporting.
| Date: March 31, 2022 | /s/ Michael Pollack |
| Michael Pollack | |
Interim Chief Financial Officer (Principal Financial and Accounting 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 Annual report of TraQiQ Inc. (the “Company”) on Form 10-K for the period ending December 31, 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 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and 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.
| Date: March 31, 2022 | /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 Annual report of TraQiQ Inc. (the “Company”) on Form 10-K for the period ending December 31, 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 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and 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.
| Date: March 31, 2022 | /s/ Michael Pollack |
| Michael Pollack | |
Interim Chief Financial Officer (Principal Financial and Accounting Officer) |