UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

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

 

For the fiscal year ended December 31, 2020 

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

 

For the transition period from                   to

 

Commission file number 000-56148

 

TraQiQ Inc.

(Exact name of registrant as specified in its charter)

 

California		30-0580318
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

 

14205 SE 36th Street, Suite 100

Bellevue, WA 98006

(Address of principal executive offices)

 

Registrant’s telephone number, including area code: (425) 818-0560

 

Securities registered pursuant to Section 12(b) of the Act: None.

 

Title of Each Class		Trading Symbol		Name of Each Exchange on which registered

 

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

Common Stock, $.0001 par value per share

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act [  ] Yes [X] No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [  ] Yes [X] No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [  ] No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [  ] Yes [X] No

 

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

 

Large Accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer [  ]	Smaller reporting company [X]
	Emerging growth company [X]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [  ] Yes [X] No

 

The number of shares of the Registrant’s common stock, $0.0001 par value per share, outstanding as of March 17, 2021, was 30,830,237.

 

Documents incorporated by reference:

None

 

 

 

TABLE OF CONTENTS

GENERAL INFORMATION

 

	PART I
Item 1.	Business	1
Item 1A.	Risk Factors	3
Item 1B.	Unresolved Staff Comments	8
Item 2.	Properties	8
Item 3.	Legal Proceedings	8
Item 4.	Mine Safety Disclosures	8
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	8
Item 6.	Selected Financial Data	9
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	16
Item 8.	Financial Statements and Supplementary Data	16
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	16
Item 9A.	Controls and Procedures	16
Item 9B.	Other Information	18
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	18
Item 11.	Executive Compensation	20
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	22
Item 13.	Certain Relationships and Related Transactions, and Director Independence	24
Item 14.	Principal Accountant Fees and Services	25
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	26
Item 16.	Form 10-K Summary	26
SIGNATURES		27

 

 

 

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.

 

 

Emerging Growth Company Status

 

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act enacted in April 2012, and, for as long as we continue to be an “emerging growth company,” we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more; (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement; (iii) the date on which we have issued more than $1 billion in non-convertible debt during the prior three year period; and (iv) the date on which we are deemed to be a “large accelerated filer.” We may take advantage of the extended transition period until the first to occur of the date we (i) are no longer an “emerging growth company” or (ii) affirmatively and irrevocably opt out of the extended transition period. Consequently, our financial statements may not be comparable to companies that comply with public company effective dates.

 

PART I

 

Item 1. Business

 

Overview

 

TraQiQ, Inc. (along with its wholly owned subsidiaries, referred to herein as the “Company”) was incorporated in the State of California on September 9, 2009 as Thunderclap Entertainment, Inc. On July 14, 2017, Thunderclap Entertainment, Inc. changed its name to TraQiQ, Inc. On July 19, 2017, the Company entered into a Share Exchange Agreement (“Share Exchange”) with the stockholders of OmniM2M, Inc. (“OmniM2M”) and TraQiQ Solutions, Inc. dba Ci2i Services, Inc. (formerly Ci2i Services, Inc. – amended November 6, 2019) (“Ci2i”) whereby the stockholders of OmniM2M and Ci2i agreed to exchange all of their respective shares, representing 100% ownership in OmniM2M and Ci2i in exchange for 12,000,000 shares of the Company’s common stock, respectively. The OmniM2M Shareholders and the Ci2i Shareholders have each been issued their respective 12,000,000 shares on a pro rata basis based on their respective holdings in OmniM2M and Ci2i in the Share Exchange Agreement. The Share Exchange was accounted for as a reverse merger whereas Ci2i is considered the accounting acquirer and TraQiQ, Inc. is considered the accounting acquiree. For accounting purposes, the acquisition of 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 the Securities Exchange Act of 1934, as amended (the “Exchange Act”). On December 1, 2017, The Company entered into a Share Purchase Agreement (the “Share Exchange Agreement”) with Ajay Sikka (“Sikka”), the sole shareholder of Transport IQ, Inc. whereby Sikka agreed to sell all of the shares in TransportIQ, Inc. (“TransportIQ”) in exchange for $18,109, in the form of cancellation of all of the debt of TransportIQ that is owed to the Company. The transaction became effective upon the execution of the Share Exchange Agreement by Sikka and the Company; and Transport IQ, Inc, is now a wholly-owned subsidiary of the Company. Because TransportIQ was commonly controlled and owned, the transaction was recorded at the historical carrying value of TransportIQ’s assets and liabilities.

 

On May 16, 2019, the Company entered into a Share Exchange Agreement with Mann-India Technologies Private Ltd., an Indian Corporation (“Mann”). On January 2, 2020, Mann changed its name to TRAQIQ Solutions Private Limited (“TRAQ Pvt Ltd”). Pursuant to the Share Exchange Agreement with Mann, the Company acquired 100% of the shares of Mann and assumed certain net liabilities in exchange for warrants exercisable over a five-years to purchase 1,329,272 shares of common stock of the Company valued at $268. The warrants will be exercisable as follows: (i) 100,771 warrants immediately; (ii) 859,951 warrants exercisable one-year after the date of closing, which was extended to March 31, 2021; and (iii) 368,550 warrants exercisable two-years after the date of closing. This transaction is being recorded as a business combination under ASC 805.

 

On December 19, 2019, the name of Ci2i Services, Inc was changed to TraQiQ Solutions, Inc.

 

Effective December 31, 2020, TraQiQ Solutions, Inc. 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.

 

 

TraQiQ Solutions, Inc.

 

TraQiQ Solutions, Inc. (TraQSol) was formed about over 15 years ago and has most recently been providing technology solutions, predominantly in the business intelligence and data analytics arenas. The Company has been a vendor to Microsoft for over 10 years and has done work with many Microsoft product and business groups, including Microsoft Azure and Microsoft Media planning. Ci2i has worked closely with customers where a wide variety of analytics solutions were built.

 

TraQSol’s cloud solutions and analytics services comprise software development, program management, project management, and business analytics services.

 

TRAQIQ Solutions Private Ltd. (fka Mann-India Technologies Pvt Ltd)

 

Pursuant to the Share Exchange Agreement with TRAQ Pvt Ltd., the Company acquired 100% of the shares of TRAQ Pvt Ltd. and assumed certain net liabilities in exchange for warrants exercisable over a five-years to purchase 1,329,272 shares of common stock of the Company valued at $268. The warrants will be exercisable as follows: (i) 100,771 warrants immediately upon closing; (ii) 859,951 warrants exercisable one-year after the date of closing, extended to March 31, 2021); and (iii) 368,550 warrants exercisable two-years after the date of closing. This transaction is being recorded as a business combination under ASC 805.

 

Mann-India Private limited was renamed to TraQiQ Solutions Private Limited shortly after acquisition by TraQiQ Inc.

 

The warrants that are exercisable in one-year (which were extended to March 31, 2021) and two-years are conditioned upon TRAQ Pvt Ltd. achieving certain revenue figures and pre-tax profit percentages. TRAQ Pvt Ltd. must achieve target revenue of $1.1 million (US$) and pre-tax profit of 25% (US$). Should TRAQ Pvt Ltd. be unable to achieve these criteria, the warrants will be reduced proportionately.

 

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.

 

TraQSuite is a distribution platform that allows users to setup task-based networks rapidly – target customers, facilitate/validate transactions, track/manage task workers, manage funds and run the entire distribution network. It includes the following functions:

 

Targeting

 

TraQSuite analyzes your customers’ omni-channel behaviors and transactions. Using artificial intelligence technology, the software analyzes online activity and delivers real-time, automated recommendations and personalized content, including such items as personalized, always-updated coupons, funds, tickets and loyalty cards.

 

Transactions

 

The digital transactions functions of the software enable users to manage and control finances and virtually store and use financial assets including G2P, B2P, welfare, salary, cards and micro banking like loans and insurance. The software includes back-end payment processing and a front-end digital wallet that allows users with and without bank accounts to buy products and services and pay with their mobile devices, settling transactions across multiple vendors, currencies and locations.

 

 

Last mile

 

The Last-Mile software module is designed to allow logistics and delivery operations to manage large numbers of workers in multiple locations that are delivering products and services to users. It both tracks the task workers and provides validation for the transactions. The mobile applications enable data sharing and validation and also measure customer satisfaction.

 

Integration

 

TraQSuite also includes software designed to integrate the TraQSuite tools with existing business software.

 

Learning

 

TraQLearn is eLearning software that includes modules and dashboards for students, teachers and administrators and tools to help with targeted learning.

 

Item 1A. Risk Factors

 

Risk Factors Related to Our Business

 

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.

 

Because our operating company has a limited operating history, 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, our business would be significantly harmed.

 

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. If we do not generate 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 manage our anticipated post-Share Exchange Agreement growth effectively, our business could be adversely affected.

 

We anticipate that a significant expansion of our operations and addition of operating subsidiaries, including one in the United States, and new personnel will be required in all areas of our operations in order to implement our post-Share Exchange business plan. 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 have taken preliminary steps to put this structure in place. However, there is no assurance that we will be able to successfully manage this anticipated rapid growth. A failure to manage our growth effectively could materially and adversely affect our ability to market our crowd funding platform in multiple venues.

 

Increasing competition within our emerging industry could have an impact on our business prospects.

 

The Industrial Internet of Things market is an emerging industry 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. Although we anticipate that our portfolio of products and related revenue stream sources are broad, increasing competition may have a negative impact on our profit margins.

 

Our business is subject to risks generally associated with fluctuating economic tendencies in the capital markets.

 

The demand for our products can change over time due to fluctuations in the global and local economies and in the related capital requirements of small and medium-sized enterprises. These fluctuations could negatively impact our future revenue streams.

 

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 trademark, copyright, service mark and trade secret laws, confidentiality procedures, license agreements and contractual provisions to establish and protect our proprietary rights. Despite these precautions, third parties could copy or otherwise obtain and use our technology without authorization or develop similar technology independently. We also pursue the registration of our domain names, trademarks, and service marks in the United States. We cannot assure you that the protection of our proprietary rights will be adequate or that our competitors will not 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.

 

We cannot assure you that third parties will not 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 crowd funding market increases and functionalities increasingly overlap, companies such as ours 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 obtain such royalty or license agreements or obtain them on terms acceptable to us.

 

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.

 

Although we expect that the proceeds from the offering we completed will be sufficient to implement our business plan, there can be no assurance that we will not require additional capital. The raising of additional capital could result in dilution to our stockholders. In addition, there is no assurance that we will be able to obtain additional capital if we need it, or that if available, it will be available to us on favorable or reasonable terms. 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 that will need to be evaluated frequently. Section 404 of the Sarbanes-Oxley Act requires public companies to conduct an annual review and evaluation of their internal controls. 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.

 

Risks Relating to our Securities

 

There is not now, and there may not ever be, an active market for the Company’s Common Stock.

 

TraQiQ’s stock is trading on the OTC exchange. However, trading activity is very limited. This limited liquidity could present a number of different challenges in the future.

 

Our stock trading may be extremely sporadic. For example, several days may pass before any shares may be traded. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations of the price of, our Common Stock. Accordingly, investors must assume they may have to bear the economic risk of an investment in our Common Stock for an indefinite period of time. There can be no assurance that a more active market for the Common Stock will develop, or if one should develop, there is no assurance that it will be sustained. This severely limits the liquidity of our Common Stock and would likely have a material adverse effect on the market price of our Common Stock and on our ability to raise additional capital.

 

We cannot assure you that the Common Stock will become liquid or that it will be listed on a securities exchange.

 

Until our Common Stock is listed on a national securities exchange such as the New York Stock Exchange or the Nasdaq Stock Market, if ever, we expect our Common Stock to remain eligible for quotation on the OTC Markets. In that venue, however, an investor may find it difficult to obtain accurate quotations as to the market value of our Common Stock. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons in the public market. Consequently, such regulations may deter broker-dealers from recommending or selling our Common Stock, which may further affect the liquidity of the Common Stock. This would also make it more difficult for us to raise capital.

 

 

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.

 

The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise 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; and
●	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.

 

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

 

●	Obtain financial information and investment experience objectives of the person; and
●	make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth:

 

●	the basis on which the broker or dealer made the suitability determination; and
●	that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

 

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of common stock and cause a decline in the market value of stock.

 

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

 

The price of our Common Stock may become volatile, which could lead to losses by investors and costly securities litigation.

 

The trading price of our Common Stock is likely to be highly volatile and could fluctuate in response to factors such as:

 

● actual or anticipated variations in our operating results;

 

● announcements of developments by us or our competitors;

 

● announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

 

● adoption of new accounting standards affecting our Company’s industry;

 

 

● additions or departures of key personnel;

 

● sales of our Common Stock or other securities in the open market; and

 

● other events or factors, many of which are beyond our control.

 

The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been initiated against the company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management’s attention and resources, which could harm our business and financial condition.

 

We do not anticipate dividends to be paid on our Common Stock, and investors may lose the entire amount of their investment.

 

Cash dividends have never been declared or paid on the Common Stock, and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their shares. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment.

 

If securities analysts do not initiate coverage or continue to cover our Common Stock or publish unfavorable research or reports about our business, this may have a negative impact on the market price of our common stock.

 

The trading market for the Common Stock will depend on the research and reports that securities analysts publish about our business and the Company. We do not have any control over these analysts. There is no guarantee that securities analysts will cover the Common Stock. If securities analysts do not cover the Common Stock, the lack of research coverage may adversely affect its market price. If we are covered by securities analysts, and our stock is the subject of an unfavorable report, our stock price and trading volume would likely decline. If one or more of these analysts ceases to cover the Company or fails to publish regular reports on the Company, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.

 

You may experience dilution of your ownership interests because of the future issuance of additional shares of the Common Stock.

 

In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders and the purchasers of Common Stock offered hereby. We are currently authorized to issue an aggregate of 310,000,000 shares of capital stock consisting of 300,000,000 shares of Common Stock, par value $0.0001, and 10,000,000 shares of preferred stock, par value $0.0001, with preferences and rights to be determined by our Board of Directors. We authorized 50,000 shares of our Preferred Stock as Series A and 50,000 shares are issued and outstanding. As of the date of this Report, there are 30,830,237 shares of our Common Stock issued and outstanding and 50,000 shares of our Series A Preferred Stock issued and outstanding. We may also issue additional shares of our Common Stock or other securities that are convertible into or exercisable for our Common Stock in connection with hiring or retaining employees, future acquisitions, future sales of securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of our Common Stock may create downward pressure on the trading price of the Common Stock. There can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with any capital raising efforts, including at a price (or exercise prices) below the price at which shares of the Common Stock will be initially quoted on the OTC Markets.

 

Pandemics including COVID-19 may adversely affect our business.

 

The recent 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.

 

 

Our ability to access the capital markets and maintain existing operations is unknown during the COVID-19 pandemic. Any such limitation on available financing and how we conduct business with our customers and vendors would adversely affect our business.

 

Item 1B. Unresolved Staff Comments

 

None.

 

Item 2. Properties

 

We do not own any property. As of the date of this annual report, we lease space for our main corporate office at 14205 S.E. 36th St., Suite 100, Bellevue, WA 98006. We will consider leasing additional office space after our public listing is completed.

 

Our subsidiary, TRAQ Pvt Ltd. also leases space in India that expires in October 2027.

 

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.

 

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 year ended December 31, 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, 2020:
First Quarter		$	-			$	-
Second Quarter		$	-			$	-
Third Quarter		$	-			$	-
Fourth Quarter		$	1.00			$	0.25

 

Holders of our Common Stock

 

As of March 17, 2021, there were approximately 66 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 October 19, 2020, the Company granted options for 1,750,000 shares of common stock under the Company’s stock option plan to Ajay Sikka at an option price of $0.0055 without registration under the Securities Act, and 2,180,000 options at a strike price of $0.005 to other directors in the United States as well as employees in India. See Item 12 for additional information. 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. The United States based grantees are sophisticated in business and investment matters.

 

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.

 

Overview

 

TraQiQ, Inc. (along with its wholly owned subsidiaries, referred to herein as the “Company”) was incorporated in the State of California on September 9, 2009 as Thunderclap Entertainment, Inc. On July 14, 2017, Thunderclap Entertainment, Inc. changed its name to TraQiQ, Inc. On July 19, 2017, the Company entered into a Share Exchange Agreement (“Share Exchange”) with the stockholders of OmniM2M, Inc. (“OmniM2M”) and TraQiQ Solutions, Inc. dba Ci2i Services, Inc. (formerly Ci2i Services, Inc. – amended November 6, 2019) (“Ci2i”) whereby the stockholders of OmniM2M and Ci2i agreed to exchange all of their respective shares, representing 100% ownership in OmniM2M and Ci2i in exchange for 12,000,000 shares of the Company’s common stock, respectively. The OmniM2M Shareholders and the Ci2i Shareholders have each been issued their respective 12,000,000 shares on a pro rata basis based on their respective holdings in OmniM2M and Ci2i in the Share Exchange Agreement. The Share Exchange was accounted for as a reverse merger whereas Ci2i is considered the accounting acquirer and TraQiQ, Inc. is considered the accounting acquiree. For accounting purposes, the acquisition of 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 the Securities Exchange Act of 1934, as amended (the “Exchange Act”). On December 1, 2017, The Company entered into a Share Purchase Agreement (the “Share Exchange Agreement”) with Ajay Sikka (“Sikka”), the sole shareholder of Transport IQ, Inc. whereby Sikka agreed to sell all of the shares in TransportIQ, Inc. (“TransportIQ”) in exchange for $18,109, in the form of cancellation of all of the debt of TransportIQ that is owed to the Company. The transaction became effective upon the execution of the Share Exchange Agreement by Sikka and the Company; and Transport IQ, Inc, is now a wholly-owned subsidiary of the Company. Because TransportIQ was commonly controlled and owned, the transaction was recorded at the historical carrying value of TransportIQ’s assets and liabilities.

 

 

Ci2i is an innovative and growth-oriented services company founded in 1998 that develops and deploys intelligent technologies and products in order to meet the demand for sustainable, integrated solutions to contemporary business needs. The 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. Pursuant to the Share Exchange Agreement with TRAQ Pvt Ltd., the Company acquired 100% of the shares of TRAQ Pvt Ltd. and assumed certain net liabilities in exchange for warrants exercisable over a five-years to purchase 1,329,272 shares of common stock of the Company valued at $268. The warrants will be exercisable as follows: (i) 100,771 warrants immediately upon closing; (ii) 859,951 warrants exercisable one-year after the date of closing; and (iii) 368,550 warrants exercisable two-years after the date of closing. This transaction is being recorded as a business combination under ASC 805.

 

The warrants that are exercisable in one-year and two-years are conditioned upon TRAQ Pvt Ltd. achieving certain revenue figures and pre-tax profit percentages. TRAQ Pvt Ltd. must achieve target revenue of $1.1 million (US$) and pre-tax profit of 25% (US$). Should TRAQ Pvt Ltd. be unable to achieve these criteria, the warrants will be reduced proportionately.

 

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.

 

Going Concern

 

The Company has an accumulated deficit of $2,504,893 and a working capital deficit of $2,851,721 as of December 31, 2020 compared to a working capital deficit of $2,697,036 as of December 31, 2019. 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.

 

In May 2019, the Company acquired 100% of the shares of TRAQ Pvt Ltd. and assumed certain net liabilities in exchange for warrants exercisable over a five-years to purchase 1,329,272 shares of common stock of the Company valued at $268. This acquisition will assist the Company in operations and cash flow.

 

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.

 

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.

 

 

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’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.

 

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.

 

 

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 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).

 

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.

 

The Company files income tax returns in the U.S. federal tax jurisdiction and various state 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.

 

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.

 

 

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, 2020 as Compared to the Year Ended December 31, 2019

 

Revenues

 

For the year ended December 31, 2020 compared to December 31, 2019, the Company’s revenues increased by $329,217, or 48%, from $680,732 in 2019 to $1,009,949 in 2020 due to the Company’s lack of trucking revenue being generated in TransportIQ offset by the revenues generated in TRAQ Pvt Ltd. post-acquisition in May 2019. The Company will continue to focus on and move towards an analytics model (solutions revenue) which is expected to bring in more revenue and higher profitability.

 

Cost of Sales

 

For the year ended December 31, 2020 compared to December 31, 2019, the Company’s cost of revenues increased by $115,206, or 27%, from $431,363 in 2019 to $546,569 in 2020 due to the Company’s lack of support services being incurred to accommodate the trucking services in TransportIQ offset by the cost of revenues generated in TRAQ Pvt Ltd. post-acquisition in May 2019. The Company will continue to move towards an analytics model which is expected to bring in more revenue and higher profitability.

 

Operating Expenses

 

For the year ended December 31, 2020 compared to December 31, 2019, the Company’s salary and salary related costs increased by $169,643, or 148%, from $114,615 in 2019 to $284,258 in 2020 due to the salary and salary related costs of TRAQ Pvt Ltd. post-acquisition in May 2019.

 

During the year ended December 31, 2020, compared to 2019, the Company’s professional fees decreased by $86,345, or 30%, from $287,775 in 2019 to $201,430 in 2020. Our professional fees increased in 2019 compared to 2020 due the professional fees of TRAQ Pvt Ltd. post-acquisition in May 2019 and filing a Regulation A+. In 2020 we limited our professional fees due to cash flow issues.

 

For the year ended December 31, 2020 compared to December 31, 2019, the Company’s rent expense increased by $12,982, or 15%, from $88,863 in 2019 to $101,845 in 2020. We have re-worked our lease arrangement with the landlord of TRAQ Pvt Ltd and reduced our leased space considerably as of December 31, 2020 and anticipate this to be much less moving forward in 2021. The increase in 2020 was attributable to a full year of rent expense in 2020 rather than seven and a half months in 2019.

 

For the year ended December 31, 2020 compared to December 31, 2019, the Company’s depreciation and amortization expense increased $5,148, or 12%, from $42,840 in 2019 to $47,988 in 2020. The increase was the result of the depreciation and amortization expense on the fixed and intangible assets acquired in the TRAQ Pvt Ltd. Acquisition of twelve months in 2020 and seven and a half months in 2019.

 

 

For the year ended December 31, 2020 compared to December 31, 2019, the Company’s general and administrative expenses increased by $21,908, or 14%, from $160,919 in 2019 to $182,827 in 2020 primarily due to the lowering of overhead expenses in TransportIQ as the Company is moving towards an analytics model offset by the general and administrative expenses of TRAQ Pvt Ltd. post-acquisition in May 2019 and having a full year of administrative expenses for TRAQ Pvt Ltd rather than seven and a half months in 2019.

 

Interest Expense, net

 

For the year ended December 31, 2020 compared to December 31, 2019, the Company’s interest expense, net of interest income increased by $78,216, or 31%, from $250,164 in 2019 to $328,380 in 2020 due to higher levels of debt in 2020.

 

Forgiveness of Debt and Other Income

 

For the year ended December 31, 2020 compared to December 31, 2019, the Company’s forgiveness of debt and other income increased by $20,798 or 38%, from $55,450 in 2019 to $76,248 in 2020 due to forgiveness of payables in TRAQ Pvt Ltd in 2020 and due to PPP loan forgiveness of $24,640 in 2020.

 

Included in other income is $417,148 in 2019 for the recognized bargain purchase gain.

 

Net Loss

 

For the year ended December 31, 2020 compared to December 31, 2019, the Company’s net loss increased by $384,700, or 172%, from $223,209 in 2019 to $607,909 in 2020 due to the increase in activity in TRAQ Pvt Ltd as we incurred one year of activity in 2020 rather than seven and a half months in 2019, as well as the added interest expense due to the increase in debt we incurred in 2020.

 

Liquidity and Capital Resources

 

As of December 31, 2020, current assets were $1,101,439 and current liabilities outstanding amounted to $3,953,160 which resulted in a working capital deficit of $2,851,721. As of December 31, 2019, current assets were $818,830 and current liabilities outstanding amounted to $3,515,866 which resulted in a working capital deficit of $2,697,036.

 

Net cash used in operating activities was $187,164 for the year ended December 31, 2020 compared to $516,509 in 2019. Cash used in operations for 2020 and 2019 was the primarily related to the loss in operations offset by the bargain purchase gain in 2019, increases in accounts payable and accrued expenses and the changes in accounts receivable due to the lack of adequate cash flow of the Company.

 

The only investing activities for the year ended December 31, 2019, related to the cash and restricted cash of $234 and $185,399, respectively acquired in the TRAQ Pvt Ltd. acquisition and some acquisitions of fixed assets related to TRAQ Pvt Ltd. of $3,417. In the year ended December 31, 2020, the investing activities related to the advance in the form of a note receivable in the amount of $227,877. In 2020 and 2019 we had acquisitions of fixed assets of $3,709 and $3,417, respectively.

 

Net cash provided by financing activities for the year ended December 31, 2020 was $285,433 compared to the year ended December 31, 2019 of $523,667. The cash provided by financing activities was the result of the issuance of long-term debt, including related parties, convertible notes from related and unrelated parties, offset by repayments on long term-debt which include related parties, as well as the decreases in our cash overdraft in both years.

 

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

 

None.

 

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, 2020, 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.

 

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, 2020, 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.

 

PART III

 

Item 10. Directors, Executive Officers, and Corporate Governance;

 

The following persons are our executive officers and directors as of March 17, 2021 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		Date of Appointment
Ajay Sikka		54		Chairman of the Board, Director, Chief Executive Officer, President & Chief Financial Officer		July 19, 2017
James DuBois		57		Director		February 2, 2018
Greg Rankich		47		Director		May 11, 2019

 

Business Experience

 

The following is a brief description of the business experience of our executive officers and directors:

 

Ajay Sikka, Chairman and Director, President and Chief Financial Officer

 

Ajay Sikka, age 54, was appointed to our Board as its Chairman and the Board appointed him as our Chief Executive Officer, President, Chief Financial and Accounting Officer on July 19, 2017. From May 2014 to the 2020, Mr. Sikka has 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. That company was sold in 2004. 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.

 

 

James DuBois, Director

 

James DuBois, age 57, is a member of our Board and was appointed to our Board on February 2, 2018. Mr. Dubois, currently serves as Global IT Advisor and Board Member at Expeditors International of 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 roles, directing IT modernization through corporate growth, turnaround, acquisitions integrations and divestitures.

 

Greg Rankich, Director

 

Greg Rankich, age 47, is a member of our Board and was appointed to our Board on May 11, 2019. Mr. Rankich, from May 2018 to present, is the 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. From January 2017 to present, Mr. Rankich also serves 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. From July 2013 to present, Mr. Rankich serves as an Advisory Board Member of Ro Health, which is a rapidly growing medical staffing and home health agency. Ro Health 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 that employs best-in-class business and technology professionals who are focused on improving business performance for clients of all types and sizes. 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.

 

Involvement in Certain Legal Proceedings

 

Except as set forth in the director and officer biographies above, to the Company’s knowledge, during the past ten (10) years, none of the Company’s directors, executive officers, promoters, control persons, or nominees has been:

 

	●	the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
	●	convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
	●	subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
	●	found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law.

 

Committees of the Board of Directors

 

Our Board of Directors has no committees. We do not have a standing nominating, compensation or audit committee. Accordingly, we do not have an audit committee financial expert serving on an audit committee.

 

 

Corporate Governance

 

Board Independence

 

We currently have three directors serving on our board of directors. Our Board of Directors has adopted the definition of “independence” as described in NASDAQ Rule 5605(a)(2). Independent directors would not include anyone who, within the past three years, was employed by us or any of our parents or subsidiaries or any of their family members; or any director who is, or who has a family member who is, a controlling shareholder. Our board of directors has determined that no directors meet the independence requirements. We may obtain independent directors in the future but there is no assurance that we will do so.

 

Code of Business Conduct and Ethics

 

In September 30, 2009, we adopted a Code of Ethics and Business Conduct which is applicable to our employees and which also includes a Code of Ethics for our chief executive and principal financial officers and any persons performing similar functions. A code of ethics is a written standard designed to deter wrongdoing and to promote:

 

	●	honest and ethical conduct,
	●	full, fair, accurate, timely and understandable disclosure in regulatory filings and public statements,
	●	compliance with applicable laws, rules and regulations,
	●	the prompt reporting violation of the code, and
	●	accountability for adherence to the code.

 

A copy of our Code of Business Conduct and Ethics has been filed with the Securities and Exchange Commission as Exhibit 14.1 to our registration statement, which is incorporated herein. We will provide a copy of the Code of Ethics to any person without charge, upon request. The request for a copy can be made in writing to TraQiQ, Inc., 14205 S.E. 36th St., Suite 100, Bellevue, WA 98006, Attention: Ajay Sikka, CEO.

 

Nominations for Directors

 

During 2020, 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, 2020, James DuBois and Greg Rankich, Directors of the Company, failed to file Form 3 reports of their initial holdings of Company stock. In addition, Ajay Sikka, James DuBois and Greg Rankich failed to file Form 4 reports following the issuance to them of options to purchase common stock pursuant to the 2020 Equity Incentive Plan.

 

Item 11. Executive Compensation

 

Summary Executive Compensation Table

 

The following table shows, for the years ended December 31, 2020 and 2019, 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 ($) (e)				Option Awards ($) (f)				Non-Equity Incentive Plan Compensation ($) (g)				Nonqualified Deferred Compensation Earnings ($) (h)				All Other Compensation ($) (i)				Total ($) (j)
Ajay Sikka,			2019			$	105,700				-				-				-				-				-				-			$	105,700
CEO, CFO and Director			2020			$	132,646				-				-			$	340,600				-				-				-			$	473,246

 

 

In November 2020, Mr Sikka executed an Employment Agreement with the Company. He is to receive an annual salary of $180,000 and options on up to 1.75 million shares. Of these 1.25 million shares are to vest based on performance over five years with milestones. The remaining 500,000 options are service-based vesting with 250,000 over four years, and 250,000 over one-year. In 2020 and 2019, Mr. Sikka received a salary of $132,646 and $105,700, respectively.

 

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 1,750,000 and 0 during the years ended December 31, 2020 and 2019, respectively.

 

Outstanding Equity Awards At Fiscal Year-End For 2020 (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

312,500

1,437,500

$

0.055

10/19/2030

-

-

 

(1)

Of Mr. Sikka’s options, options with respect to 250,000_shares will vest on October 19, 2021, options with respect to 250,000 shares will vest in equal parts on October 19 of each of the years 2021, 2022, 2023 and 2024, and options with respect to 1,250,000 shares will vest based on company performance, as determined by the board of directors.

 

Employment Agreements

 

On October 19, 2020, the Board of Directors of the Company approved the compensation plan for the CEO, Ajay Sikka. Mr. Sikka executed a five year employment agreement dated on the same date that provides for an annual salary of $180,000, and granted Mr. Sikka 1,500,000 stock options under the Company’s 2020 Equity Incentive Plan. 250,000 of these stock options vest over four years, with the remaining 1,250,000 options vesting upon a set of criteria which include annual revenue, business growth and stock performance.

 

Director Compensation

 

Directors of the Company receive no compensation other than the opportunity to receive option awards. Directors received the following grants.

 

In the table below, we have set forth information regarding compensation for 2020 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.

 

 

2020 Director Compensation Table

 

		Fees Earned or				Stock				Option				All Other
Name		Paid in Cash				Awards				Awards				Compensation				Total
James DuBois		$	-			$	-			$	48,777				-			$	48,777
Greg Rankich		$	-			$	-			$	39,022				-			$	39,022

 

In the following table we have set forth information regarding options held by each named director as of December 31. 2020. Options vest on the dates shown.

 

Name

Number of Shares Underlying Options #

Option Exercise Price $

Option Expiration Date

Option Vesting Date

James DuBois

250,000

$

0.005

10/19/2030

October 19. 2021

Greg Rankich

200,000

$

0.005

10/19/2030

October 19, 2021 (50% and October 19, 2022 (50%)

 

Directors’ and Officers’ Liability Insurance

 

The Company may obtain directors’ and officers’ liability insurance insuring its directors and officers against liability for acts or omissions in their capacities as directors or officers in the near future, subject to certain exclusions. Such insurance also insures the Company against losses which we may incur in indemnifying our officers and directors.

 

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, 2021, 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.

 

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 32,733,193 total common shares issued and outstanding after giving effect to the Share Exchange Agreement, inclusion of stock options, warrants, shares issuable upon the conversion of notes payable and of Series A Preferred Stock, that are convertible into common stock and the percentage of Series A Preferred Stock is based on the 50,000 shares issued and outstanding. Each share of preferred stock is convertible into 85% of the average closing price of the common stock over the last 20 trading days immediately preceding the conversion.

 

 

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.

 

Title of Class		Name and Address of Beneficial Owner		Shares				Percent of Class
Preferred A Stock		Ajay Sikka(1) 14205 S.E. 36th St., Suite 100 Bellevue, WA 98006			50,000				100.00	%
Preferred Stock		All Officers and Directors as a Group (1 person)			50,000				100.00	%
Common Stock		Ajay Sikka 14205 S.E. 36th St., Suite 100 Bellevue, WA 98006			15,512,484				49.85	%
Common Stock		James DuBois(2), 11208 248 Ave NE, Redmond, WA 98053			29,412				0.10	%
Common Stock		Greg Rankich			-				-
Common Stock		All Officers and Directors as a Group (3 persons)			15,541,896				49.95	%
5% or Greater
Common Stock		Virandra Sikka 14205 S.E. 36th St., Suite 100 Bellevue, WA 98006			3,264,412				10.60	%
Common Stock		Swarn Thiara 6704 126th Street SE, Snohomish, WA 98296			2,600,000				8.44	%
Common Stock		Dharam Vir Sikka(4) 235 140th Avenue NE, Bellevue, WA 98005			1,933,862				6.26	%

 

(1)	Ajay Sikka is our controlling shareholder. Under the terms of the Series A Preferred Stock, he is entitled to 50,000 votes of common stock for each share of Series A Preferred Stock, thereby effectively giving him, in addition to his 15,512,484 common share votes (which includes 312,500 stock options, 45,600 shares that are convertible from the Series A Preferred Stock), an additional 2,500,000,000 common share votes.
(2)	Represents 29,412 shares issuable upon the conversion of a note payable
(3)	Represents 1,823,568 common shares and 110,294 common shares from the conversion of $93,750 in convertible notes.

 

Changes in Control

 

Except for matters described in this Current Report regarding the Share Exchange Agreement and our Series A Preferred Stock, 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 us.

 

 

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, 2020. Our shareholders have not approved this plan.

 

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			-				-				-
Equity compensation plans not approved by security holders			3,930,000			$	0.0052				1,570,000
Total			3,930,000			$	0.0052				1,570,000

 

Item 13. Certain Relationships and Related Transactions and Director Independence

 

Certain Relationships and Related Party Transactions

 

Except as described below, and the past two years, there have been no transactions, whether directly or indirectly, between Ajay Sikka and any of our officers or former officers, directors or former directors or their family members.

 

The details for amount due to related parties were as follows:

 

		2020				2019
December 31,
Amount due from related parties:
Ajay Sikka(1)		$	1,718,277			$	1,221,737
Kunaal Sikka(2)			15,000				15,000
Swarm Singh(3)			45,000				45,000
Satinder Thiara(4)			57,000				57,000
Dharam Sikka(5)			75,000				75,000
James DuBois(6)			20,000				20,000
Total		$	1,930,277			$	1,433,737

 

(1)	These advances from the CEO are unsecured, due on demand and bear interest at 15% annually.
(2)	Unsecured promissory note from Kunaal Sikka, the CEO’s son, dated September 13, 2018, in the amount of $15,000, at 12% annual interest maturing on December 31, 2019. On December 31, 2019 this note was in default and the interest changed to 18% per annum.
(3)	Note payable to Swarn Singh, father-in-law of the CEO, entered into January 2017 ($25,000) and February 2017 ($20,000), at interest rate of 15% annually (1.25% monthly). These are unsecured loans and both loans mature December 31, 2019. On December 31, 2019 these notes were in default and the interest changed to 21% annually (1.75% monthly).
(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 matures December 31, 2019 at interest rate of 15% annually (1.25% monthly). The May 1, 2018 note is in default and the interest rate changed to 21% annually (1.75% monthly).
(5)	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., On December 31, 2019 these notes were in default and the interest changed to 10% per annum.
(6)	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, On December 31, 2019 these notes were in default and the interest changed to 10% per annum

 

 

Item 14. Principal Accounting Fees and Services.

 

The aggregate fees incurred for each of the last two years for professional services rendered by AJSH & Co LLP (“AJSH”) the independent registered public accounting firm 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. The Company engaged AJSH on February 1, 2020. The fees billed by AJSH relating to the audits for the years ended December 31, 2020 and 2019 were:

 

		Audit Fees				Audit Related Fees				Tax Fees				All Other Fees				Total
2020		$	27,500			$	-			$	-			$	-			$	27,500
2019		$	30,000			$	-			$	-			$	-			$	30,000

 

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, 2020 and 2019.

 

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, 2020 and 2019.

 

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, 2020 and 2019.

 

All Other Fees

 

Other fees billed for products or services provided by the Company’s principal accountant during the years ended December 31, 2020 and 2019.

 

 

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.

 

Exhibits

The following exhibits are filed or incorporated by reference as a part of this report:

 

 

				Incorporated by Reference
Exhibit Number		Description	Filed Herewith	Form	Period Ending	Exhibit	Filing Date
3.1		Articles of Incorporation, as amended	X
3.2		Bylaws		S-1		3.2	3/7/2011
4.1(a)		Note Purchase Agreement and Note, dated July 19, 2017 between the Company and Donald P. Hateley		8-K/A		4.1(a)	8/24/2017
4.1(b)		Note Purchase Agreement and Note, dated July 19, 2017 between the Company and Alena Borisova		8-K/A		4.1(b)	8/24/2017
4.1(c)		Description of Capital Stock	X
4.2(a)		Certificate of Determination for Series A Preferred		8-K		4.2(a)	8/3/2017
4.2(b)		Series A Stock Purchase Agreement dated August 1, 2017		8-K		4.2(b)	8/3/2017
10.1		Share Exchange Agreement dated July 19, 2017, fully executed on August 3, 2017		8-K/A		10.1	8/24/2017
10.2		TraQiQ, Inc. 2020 Equity Incentive Plan	X
21		Subsidiaries of the Registrant	X
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act	X
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act	X
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
32.2		Certification of Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X

 

101.INS XBRL Instance Document *

101.SCH XBRL Taxonomy Extension Schema Document *

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document *

101.DEF XBRL Taxonomy Extension Definition Linkbase Document *

101.LAB XBRL Taxonomy Extension Label Linkbase Document *

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document *

 

Item 16. Form 10-K Summary

 

None.

 

 

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 22, 2021	By:	/s/ Ajay Sikka
	Name:	Ajay Sikka
	Title:	Chairman of the Board of Directors & Chief Executive Officer
		(Principal Executive Officer)
Date: March 22, 2021	By:	/s/ Ajay Sikka
	Name:	Ajay Sikka
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)
Date: March 22, 2021	By:	/s/ James DuBois
	Name:	James DuBois
	Title:	Director
Date: March 22, 2021	By:	/s/ Greg Rankich
	Name:	Greg Rankich
	Title:	Director

 

 

FINANCIAL STATEMENTS

 

Report of Independent Registered Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2020 and 2019	F-3
Consolidated Statements of Operations for the Years Ended December 31, 2020 and 2019	F-4
Consolidated Statement of Stockholders’ Deficit for the Years Ended December 31, 2020 and 2019	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019	F-6
Notes to Consolidated Financial Statements	F-7

 

 

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/ AJSH & Co LLP

 

We have served as the Company’s auditor since 2019.

 

New Delhi, India

March 22, 2021

 

 

TRAQIQ, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2020 AND 2019

IN US$

 

		DECEMBER 31,				DECEMBER 31,
		2020				2019
ASSETS
Current Assets:
Cash		$	29,658			$	9,094
Accounts receivable, net			521,618				602,155
Note receivable - related party			227,877				-
Prepaid expenses and other current assets			322,286				207,581
Total Current Assets			1,101,439				818,830
Fixed assets, net			36,373				48,681
Intangible assets, net			444,584				477,824
Restricted cash			28,746				182,627
Long-term investment			40,603				41,617
Right-of-use asset			126,118				537,268
Other assets			3,196				32,639
Total Non-current Assets			679,620				1,320,656
TOTAL ASSETS		$	1,781,059			$	2,139,486
LIABILITIES AND STOCKHOLDERS’ DEFICIT
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses		$	1,163,505			$	883,845
Cash overdraft			188,721				427,890
Accrued payroll and related taxes			327,084				291,586
Accrued taxes and duties payable			46,577				50,623
Current portion - lease liability			8,779				122,343
Current portion - long-term debt - related parties			1,843,399				1,306,737
Current portion - long-term debt			133,761				191,508
Current portion - convertible debt - long-term debt - related and unrelated parties			241,334				241,334
Total Current Liabilities			3,953,160				3,515,866
Long-term debt - related parties, net of current portion			-				32,000
Long-term debt, net of current portion			59,856				19,202
Lease liability, net of current portion			125,219				432,800
Total Non-current Liabilities			185,075				484,002
Total Liabilities			4,138,235				3,999,868
Commitments and contingencies			-				-
STOCKHOLDERS’ DEFICIT
Preferred stock, par value, $0.0001, 10,000,000 shares authorized, Series A Convertible Preferred, 50,000 and 50,000 shares issued and outstanding, respectively			5				5
Common stock, par value, $0.0001, 300,000,000 shares authorized, 27,297,960 and 27,297,960 issued and outstanding, respectively			2,730				2,730
Additional paid in capital			117,261				12,623
Accumulated deficit			(2,504,893	)			(1,896,984	)
Accumulated other comprehensive income (loss)			27,721				21,244
Total Stockholders’ Deficit			(2,357,176	)			(1,860,382	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	1,781,059			$	2,139,486

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

TRAQIQ, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

IN US$

 

		YEARS ENDED
		DECEMBER 31,
		2020				2019
REVENUE		$	1,009,949			$	680,732
COST OF REVENUE			546,569				431,363
GROSS PROFIT (LOSS)			463,380				249,369
OPERATING EXPENSES
Salaries and salary related costs			284,258				114,615
Professional fees			201,430				287,775
Rent expense			101,845				88,863
Depreciation and amortization expense			47,988				42,840
General and administrative expenses (including stock-based compensation)			182,827				160,919
Total Operating Expenses			818,348				695,012
OPERATING LOSS			(354,968	)			(445,643	)
OTHER INCOME (EXPENSE)
Bargain purchase gain			-				417,148
PPP forgiveness and other income			76,248				55,450
Interest expense, net of interest income			(328,380	)			(250,164	)
Total other income (expense)			(252,132	)			222,434
NET LOSS BEFORE PROVISION FOR INCOME TAXES			(607,100	)			(223,209	)
Provision for income taxes			809				-
NET LOSS		$	(607,909	)		$	(223,209	)
Other comprehensive income (loss)
Foreign currency translations adjustment			6,477				21,244
Comprehensive income (loss)		$	(601,432	)		$	(201,965	)
Net loss per share - basic and diluted		$	(0.02	)		$	(0.01	)
Weighted average common shares outstanding - basic and diluted			27,297,960				27,297,960

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

TRAQIQ, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

IN US $

 

																		Additional								Accumulated
		Series A Preferred								Common Stock								Paid-In Capital -				Accumulated				Other Comprehensive
		Shares				Amount				Shares				Amount				Common				Deficit				Income (Loss)				Total
Balance - December 31, 2018			50,000			$	5				27,297,960			$	2,730			$	12,355			$	(1,673,775	)		$	-			$	(1,658,685	)
Acquisition of Mann-India			-				-				-				-				268				-				5,116				5,384
Net loss for the year			-				-				-				-				-				(223,209	)			16,128				(207,081	)
Balance - December 31, 2019			50,000				5				27,297,960				2,730				12,623				(1,896,984	)			21,244				(1,860,382	)
Stock-based compensation on granting of options			-				-				-				-				104,638				-				-				104,638
Net loss for the year			-				-				-				-				-				(607,909	)			6,477				(601,432	)
Balance - December 31, 2020			50,000			$	5				27,297,960			$	2,730			$	117,261			$	(2,504,893	)		$	27,721			$	(2,357,176	)

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

TRAQIQ, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

IN US$

 

		2020				2019
CASH FLOW FROM OPERTING ACTIVIITES
Net loss		$	(607,909	)		$	(223,209	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Bargain purchase gain			-				(417,148	)
Bad debt expense			-				60,460
Forgiveness of debt			(64,725	)			(55,450	)
Depreciation and amortization			47,987				42,840
Lease cost, net of repayment			6,297				13,226
Foreign currency loss			29,588				18,882
Stock-based compensation			104,638				-
Changes in assets and liabilities
Accounts receivable			65,816				(153,492	)
Prepaid expenses and other current assets			(144,600	)			12,019
Other assets			28,647				(4,823	)
Accounts payable and accrued expenses			293,943				238,873
Accrued payroll and payroll taxes			55,967				(29,669	)
Accrued duties and taxes			(2,813	)			(15,395	)
Deferred revenue			-				(3,623	)
Total adjustments			420,745				(293,300	)
Net cash (used in) operating activities			(187,164	)			(516,509	)
CASH FLOWS FROM INVESTING ACTIVITES
Cash received in acquisition of Mann			-				234
Restricted cash received in acquisition of Mann			-				185,399
Advances of note receivable - related party			(227,877	)			-
Acquisition of fixed assets			(3,709	)			(3,417	)
Net cash (used in) provided by investing activities			(231,586	)			182,216
CASH FLOWS FROM FINANCING ACTIVITES
(Decrease) in cash overdraft			(228,745	)			(36,691	)
Proceeds from long-term debt - related parties			554,940				593,201
Repayment of long-term debt - related parties			(42,100	)			(104,841	)
Proceeds from long-term debt			197,540				143,600
Repayments of long-term debt			(196,202	)			(71,602	)
Net cash provided by financing activities			285,433				523,667
NET (DECREASE) INCREASE IN CASH AND RESTRICTED CASH			(133,317	)			189,374
CASH AND RESTRICTED CASH - BEGINNING OF PERIOD			191,721				2,347
CASH AND RESTRICTED CASH - END OF PERIOD		$	58,404			$	191,721
CASH PAID DURING THE PERIOD FOR:
Interest expense		$	84,830			$	11,782
Income taxes		$	1,609			$	-
SUMMARY OF NON-CASH ACTIVITIES:
Acquisition of Mann:
Accounts receivable		$	-			$	506,951
Prepaid and other current assets			-				216,956
Right-of-use asset			-				576,566
Fixed assets			-				68,260
Other assets			-				37,950
Investment			-				42,248
Customer relationships			-				448,800
Tradename			-				49,799
Accounts payable and accrued expenses			-				(173,197	)
Accrued payroll and related taxes			-				(325,629	)
Accrued duties and taxes			-				(66,765	)
Lease liability			-				(585,207	)
Deferred revenue			-				(3,618	)
Long-term debt			-				(90,314	)
Cash overdraft			-				(471,017	)
Cash			-				234
Restricted cash			-				185,399
Total net assets acquired			-				417,416
Consideration per Share Exchange Agreement			-				268
Goodwill/(Bargain Purchase Gain)		$	-			$	(417,148	)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

TRAQIQ, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020 AND 2019

 

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 100% ownership in OmniM2M and Ci2i in exchange for 12,000,000 shares of the Company’s common stock, respectively. The OmniM2M Shareholders and the Ci2i Shareholders have each been issued their respective 12,000,000 shares on a pro rata basis based on their respective holdings in OmniM2M and Ci2i in the Share Exchange Agreement. The Share Exchange was accounted for as a reverse merger whereas Ci2i is considered the accounting acquirer and TraQiQ,Inc. is considered the accounting acquiree. For accounting purposes, the acquisition of Omni is recorded at historical cost in accordance with Accounting Standard Codification (“ASC”) 805-50-25-2 as this is considered an acquisition of entities under common control as the management of the Company and Omni control the activities of the respective companies. Prior to the merger with Ci2i and acquisition of Omni, the Company was considered a shell company under Rule 12b-2 of the Exchange Act. On December 1, 2017, The Company entered into a Share Purchase Agreement (the “Share Exchange Agreement”) with Ajay Sikka (“Sikka”), the sole shareholder of Transport IQ, Inc. whereby Sikka agreed to sell all of the shares in TransportIQ, Inc. (“TransportIQ”) in exchange for $18,109, in the form of cancellation of all of the debt of TransportIQ that is owed to the Company. The transaction became effective upon the execution of the Share Exchange Agreement by Sikka and the Company; and Transport IQ, Inc, is now a wholly-owned subsidiary of the Company. Because TransportIQ was commonly controlled and owned, the transaction was recorded at the historical carrying value of TransportIQ’s assets and liabilities.

 

TraQiQ Solutions, Inc.

 

This entity was formed about over 15 years ago and has most recently been providing technology solutions, predominantly in the business intelligence and data analytics arenas. The Company has been a vendor to Microsoft for over 10 years and has done work with many Microsoft product and business groups, including Microsoft Azure and Microsoft Media planning. Ci2i has worked closely with customers where a wide variety of analytics solutions were built.

 

Ci2i’s cloud solutions and analytics services comprise software development, program management, project management, and business analytics services.

 

 

On May 16, 2019, the Company entered into a Share Exchange Agreement with Mann-India Technologies Private Ltd., an Indian Corporation (“Mann”). On January 2, 2020, Mann changed its name to TRAQIQ Solutions Private Limited (“TRAQ Pvt Ltd”). Pursuant to the Share Exchange Agreement with Mann, the Company acquired 100% of the shares of Mann and assumed certain net liabilities in exchange for warrants exercisable over a five-years to purchase 1,329,272 shares of common stock of the Company valued at $268. The warrants will be exercisable as follows: (i) 100,771 warrants immediately; (ii) 859,951 warrants exercisable one-year after the date of closing, which was extended to March 31, 2021; and (iii) 368,550 warrants exercisable two-years after the date of closing. This transaction is being recorded as a business combination under ASC 805.

 

The warrants that are exercisable in one-year and two-years are conditioned upon TRAQ Pvt Ltd. achieving certain revenue figures and pre-tax profit percentages. TRAQ Pvt Ltd. must achieve target revenue of $1.1 million (US$) and pre-tax profit of 25% (US$). Should TRAQ Pvt Ltd. be unable to achieve these criteria, the warrants will be reduced proportionately.

Mann-India Private limited was renamed to TraQiQ Solutions Private Limited shortly after acquisition by TraQiQ Inc.

 

The warrants that are exercisable in one-year (which were extended to March 31, 2021) and two-years are conditioned upon TRAQ Pvt Ltd. achieving certain revenue figures and pre-tax profit percentages. TRAQ Pvt Ltd. must achieve target revenue of $1.1 million (US$) and pre-tax profit of 25% (US$). Should TRAQ Pvt Ltd. be unable to achieve these criteria, the warrants will be reduced proportionately.

 

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.

 

TraQSuite is a distribution platform that allows users to setup task-based networks rapidly – target customers, facilitate/validate transactions, track/manage task workers, manage funds and run the entire distribution network. It includes the following functions:

 

Targeting

 

TraQSuite analyzes your customers’ omni-channel behaviors and transactions. Using artificial intelligence technology, the software analyzes online activity and delivers real-time, automated recommendations and personalized content, including such items as personalized, always-updated coupons, funds, tickets and loyalty cards.

 

Transactions

 

The digital transactions functions of the software enable users to manage and control finances and virtually store and use financial assets including G2P, B2P, welfare, salary, cards and micro banking like loans and insurance. The software includes back-end payment processing and a front-end digital wallet that allows users with and without bank accounts to buy products and services and pay with their mobile devices, settling transactions across multiple vendors, currencies and locations.

 

Last mile

 

The Last-Mile software module is designed to allow logistics and delivery operations to manage large numbers of workers in multiple locations that are delivering products and services to users. It both tracks the task workers and provides validation for the transactions. The mobile applications enable data sharing and validation and also measure customer satisfaction.

 

Integration

 

TraQSuite also includes software designed to integrate the TraQSuite tools with existing business software.

 

Learning

 

TraQLearn is eLearning software that includes modules and dashboards for students, teachers and administrators and tools to help with targeted learning.

 

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. These acquisitions did not constitute accounting for discontinued operations under ASC 205 as the two entities were acquired by a subsidiary of the Company and were not disposed of.

 

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.

 

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 $29,658 and $9,094 as of December 31, 2020 and December 31, 2019, respectively.

 

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, 2020 and December 31, 2019 was $28,746 and $182,627, respectively. The balances consist of time deposits pledged with financial institutions for a Line of Credit facility taken from Andhra Bank, issuance of overdraft limit.

 

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 no allowance was required for the outstanding accounts receivable as of December 31, 2020 and December 31, 2019.

 

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 three to ten years.

 

FASB Codification Topic 360 “Property, Plant and Equipment” (ASC 360), requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The application of ASC 360 has not materially affected the Company’s reported earnings, financial condition or cash flows.

 

Intangible assets with definite useful lives are stated at cost less accumulated amortization. Intangible assets represent purchased intangible of TRAQ Pvt Ltd. which includes customer relationships and trademarks. The Company amortizes these intangible assets on a straight-line basis over their estimated useful lives of 15 years. OmniM2M has had and currently does have computer software development underway, however, has determined that the costs associated with this development, currently do not meet the requirements for capitalization under ASC 985-20-25. OmniM2M will continue to monitor the development of such software in relationship to the requirements under the ASC in the future to determine if capitalization is warranted.

 

 

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 no impairment of long-lived assets is required for the periods ended December 31, 2020 and December 31, 2019.

 

Capitalized Software Costs

 

In accordance with the relevant FASB accounting guidance regarding the development of software to be sold, leased, or marketed, the Company expenses such costs as they are incurred until technological feasibility has been established, at and after which time these costs are capitalized until the product is available for general release to customers. Once the technological feasibility is established per ASC 985-20, the Company capitalizes costs associated with the acquisition or development of major software for internal and external use in the balance sheet. Costs incurred to enhance the Company’s software products, after general market release of the services using the products, is expensed in the period they are incurred. The Company only capitalizes subsequent additions, modifications or upgrades to internally developed software to the extent that such changes allow the software to perform a task it previously did not perform. The Company expenses software maintenance and training costs as incurred. The Company has not capitalized any cost for software development for the years ended December 31, 2020 and 2019, respectively.

 

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.

 

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.

 

 

The following is a summary of revenue for the years ended December 31, 2020 and 2019, disaggregated by type:

 

		2020				2019
Professional Services Revenue		$	935,214			$	654,374
Software Solution Revenue			74,735				26,358
		$	1,009,949			$	680,732

 

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.

 

Lease Obligations

 

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liabilities and operating lease liabilities, less current portion in the Company’s consolidated balance sheets.

 

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. For leases in which the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating lease arrangements is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for separately.

 

Income Taxes

 

Income taxes are accounted under the asset and liability method. The current charge for income tax expense is calculated in accordance with the relevant tax regulations applicable to entity. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

 

Uncertain Tax Positions

 

The Company follows ASC 740-10, “Accounting for Uncertainty in Income Taxes”. This requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. Management evaluates their tax positions on an annual basis.

 

TraQiQ, Inc., TraQiQ Solutions, OmniM2M and TransportIQ file a consolidated income tax return in the U.S. federal tax jurisdiction and various state tax jurisdictions. TRAQ Pvt Ltd. files income tax returns in all India 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. The India tax returns of TRAQ Pvt Ltd. 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.

 

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. The pricing model we use for determining the fair value of our derivatives are binomial pricing models. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses 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. 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.

 

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.

 

Related Party Transactions

 

Parties are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management, members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company may deal where one-party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. All transactions shall be recorded at fair value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected as compensation or distribution to related parties depending on the transaction.

 

Retirement Benefits to Employees

 

Defined Contribution Plan

 

In India, the employees receive benefits from a provident fund, where the employer and employees each make monthly contributions to the plan at a pre-determined rate to the Regional Provident Fund Commissioner. Employer’s contributions to the fund is charged as an expense in the Statements of Operations.

 

Defined Benefit Plan

 

In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, TRAQ Pvt Ltd. provides for a lump sum payment to eligible employees, at retirement or termination of employment based on the last drawn salary and years of employment with the Company. Current service costs for defined benefit plans are accrued in the period to which they relate. The liability in respect of defined benefit plans is calculated annually by TRAQ Pvt Ltd. TRAQ Pvt Ltd. records annual amounts relating to its defined benefit plans based on calculations that incorporate various actuarial and other assumptions, including discount rates, mortality, assumed rates of return, compensation increases and turnover rates. TRAQ Pvt Ltd. reserves its assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when it is appropriate to do so. TRAQ Pvt Ltd.’s obligation in respect of the gratuity plan, which is a defined benefit plan, is provided for based on actuarial valuation.

 

 

Other Long-Term Employee Benefits

 

TRAQ Pvt Ltd.’s net obligation in respect of leave encashment is the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any related assets is deducted. The discount rate is based on the prevailing market yields of Indian government securities at the reporting date that have maturity dates approximating the terms of TRAQ Pvt Ltd.’s obligations. The calculation is performed using the projected unit credit method. Any actuarial gains or losses are recognized.

 

Investments

 

The Company’s investments are in debt and equity instruments. These investments are accounted for in accordance with ASC 320 Investments – Debt Securities and ASC 321 Investments – Equity Securities. Interest earned under such investments are included in interest income.

 

Segment Reporting

 

For purposes of segment disclosures, two or more operating segments should be grouped only if the segments meet all the requirements of paragraph 280-10-50-11, including the requirements for similar economic characteristics.

 

As a result, all operating units perform similar services, and approximately 99% of the Company’s revenue is generated from its Indian subsidiary. The Company believes that no segment reporting is required as all remaining operations outside of the Indian subsidiary is immaterial.

 

Recently Issued Accounting Standards

 

There were updates recently issued, most of which represent technical corrections to the accounting literature or application to specific industries or transactions that are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

 

Going Concern

 

The Company has an accumulated deficit of $2,504,893 and a 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. As a result of these factors, management has determined that there is substantial doubt about the Company ability to continue as a going concern.

 

These consolidated financial statements of the Company have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties.

 

In May 2019, the Company acquired 100% of the shares of TRAQ Pvt Ltd. and assumed certain net liabilities in exchange for warrants exercisable over a five-years to purchase 1,329,272 shares of common stock of the Company. This acquisition will assist the Company in operations and cash flow.

 

 

The Company plans to raise additional capital to carry out its business plan. The Company’s ability to raise additional capital through future equity and debt securities issuances is unknown. Obtaining additional financing and the successful development of the Company’s contemplated plan of operations, ultimately, to profitable operations, are necessary for the Company to continue operations.

 

NOTE 3: ACQUISITION OF TRAQ PVT LTD.

 

On May 16, 2019, the Company entered into a Share Exchange Agreement with Mann-India Technologies Private Ltd., an Indian Corporation. On January 2, 2020, the name of this company was changed to TRAQIQ Solutions Private Limited. Pursuant to the Share Exchange Agreement with TRAQ Pvt Ltd., the Company acquired 100% of the shares of TRAQ Pvt Ltd. and assumed certain net liabilities) in exchange for warrants exercisable over a five-years to purchase 1,329,272 shares of common stock of the Company valued at $268. The warrants will be exercisable as follows: (i) 100,771 warrants immediately upon closing; (ii) 859,951 warrants exercisable one-year after the date of closing, which was extended to March 31, 2021; and (iii) 368,550 warrants exercisable two-years after the date of closing.

 

The warrants that are exercisable in one-year and two-years are conditioned upon TRAQ Pvt Ltd. achieving certain revenue figures and pre-tax profit percentages. TRAQ Pvt Ltd. must achieve target revenue of $1.1 million (US$) and pre-tax profit of 25% (US$). Should TRAQ Pvt Ltd. be unable to achieve these criteria, the warrants will be reduced proportionately.

 

The Company acquired the assets and liabilities noted below in exchange for the warrants noted herein and accounted for the acquisition in accordance with ASC 805. As a result, total consideration was equal to the value of the warrants of $268, as stated in the agreement, and the Company recognized a gain on bargain purchase in the amount of $417,148. In accordance with ASC 805-20-50-4A, based on the book values which approximate fair values at the effective date of acquisition, the purchase price was recorded as follows:

 

Cash (including restricted cash of $185,399)		$	185,633
Accounts receivables, net			506,951
Prepaid expenses and other current assets			216,956
Right-of-use asset			576,566
Fixed assets			68,260
Customer relationships			448,800
Tradenames			49,799
Investment			42,248
Other assets			37,950
Accounts payable and accrued expenses			(173,197	)
Accrued payroll and related taxes			(325,629	)
Accrued duties and taxes			(66,765	)
Lease liability			(585,207	)
Deferred revenue			(3,618	)
Cash overdraft			(471,017	)
Debt – related parties			(61,273	)
Debt			(29,041	)
		$	417,416

 

The customer relationships and tradenames are being amortized over fifteen years.

 

The difference between the net assets acquired of $417,416, and the consideration paid (in the form of warrants) of $268 represents a bargain purchase gain of $417,148.

 

 

 

The following table shows pro-forma results for the year December 31, 2019 as if the acquisition had occurred on January 1, 2019. These unaudited pro forma results of operations are based on the historical financial statements and related notes of TRAQ Pvt Ltd. and the Company.

 

		For the year ended December 31, 2019
Revenues		$	1,143,606
Net income (loss)		$	(166,533	)
Net income (loss) per share		$	(0.01	)

 

NOTE 4: CASH AND RESTRICTED CASH

 

Cash and restricted cash are as follows:

 

		December 31, 2020				December 31, 2019
Cash on hand		$	141			$	252
Bank balances			29,517				8,842
Restricted cash			28,746				182,627
Total		$	58,404			$	191,721

 

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, 2020 and December 31, 2019, there were no cash equivalents.

 

NOTE 5: FIXED ASSETS

 

The Company’s property and equipment is as follows:

 

		December 31, 2020				December 31, 2019				Estimated Life
Property and equipment – TRAQ Pvt Ltd.		$	638,587			$	650,621			3 - 10 years
Less: accumulated depreciation			(602,214	)			(601,940	)
Net		$	36,373			$	48,681

 

Depreciation expense for the years ended December 31, 2020 and 2019 was $14,747 and $22,065, respectively.

 

NOTE 6: INTANGIBLE ASSETS

 

The Company’s intangible assets are as follows:

 

		December 31, 2020				December 31, 2019
Customer relationships		$	448,800			$	448,800
Tradenames			49,799				49,799
Less: accumulated amortization			(54,015	)			(20,775	)
Net		$	444,584			$	477,824

 

Amortization expense for the years ended December 31, 2020 and 2019 was $33,240 and $20,775, respectively.

 

 

NOTE 7: LONG-TERM INVESTMENT

 

The Company’s long-term investment is as follows:

 

		December 31, 2020				December 31, 2019
Equity Security – Compulsorily Convertible Debenture		$	40,603			$	41,617

 

The investment the Company has in a 1% Compulsorily Convertible Debenture for the period of seven years are neither to be redeemed by the issuing entity nor are redeemable at the option of the investor, therefore this has been considered an equity security. The Company has elected to measure the equity security at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

 

NOTE 8: NOTE RECEIVABLE

 

The Company’s notes receivable is as follows:

 

		December 31, 2020				December 31, 2019
MIMO Technologies PVT Ltd		$	227,877			$	-

 

The Company entered into a note receivable with a related party in the amount of 15,037,263 INR (approximately $170,000 US$) dated April 1, 2020 with no stated maturity date. The note bears interest at 13% per annum. Further, the Company provided additional amounts on October 5, 2020, to bring the total outstanding to 16,647,264 INR ($227,877 US$) as of December 31, 2020.

 

NOTE 9: LONG-TERM DEBT RELATED PARTIES

 

The following is a summary of the current portion - long-term debt - related parties as of December 31, 2020 and December 31, 2019:

 

				December 31, 2020				December 31, 2019
Unsecured advances - CEO		(a)		$	1,718,277			$	1,221,737
Notes payable - Satinder Thiara		(b)			57,000				57,000
Promissory note – Kunaal Sikka		(c)			15,000				15,000
Notes payable – Swarn Singh		(d)			45,000				45,000
Note payable - Chaudhary		(e)			8,122				-
					1,843,399				1,338,737
Current portion of long-term debt related parties					(1,843,399	)			(1,306,737	)
Long-term debt – related parties				$	-			$	32,000

 

	(a)	This is an unsecured advance from the CEO originally entered into January 1, 2015. The note bears interest at 15% annually (1.25% monthly) and are due on demand.
	(b)	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).

 

 

	(c)	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 is in default as of December 31, 2019. As a result the interest rate was changed to 18% annually (1.50% monthly).
	(d)	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).
	(e)	Note payable to Sushil Chaudhary dated April 27, 2020 in the amount of 1,100,000 INR (approximately $14,500 US$) due on demand at 13% per annum. This amount was offset by an amount due from the company that Sushil Chaudhary owns in the amount of $8,179.

 

Interest expense on these notes for the years ended December 31, 2020 and 2019 are $228,748 and $170,688, respectively.

 

NOTE 10: LONG-TERM DEBT

 

The following is a summary of the long-term debt as of December 31, 2020 and December 31, 2019:

 

				December 31, 2020				December 31, 2019
Promissory notes - Kabbage		(a)		$	-			$	23,826
Promissory notes – Loan Builder		(b)			-				-
Other debt – in default		(c)			6,000				6,000
Yukti Securities Private Limited		(d)			4,547				4,660
Lathika Regunathan		(e)			-				-
Noor Qazi		(f)			-				50,562
Auto loan – ICICI Bank		(g)			18,539				25,662
Baxter Credit Union		(h)			99,911				100,000
UGECL		(i)			54,563				-
USA Bank PPP		(j)			10,057				-
Total				$	193,617			$	210,710
Current portion					(133,761	)			(191,508	)
Long-term debt, net of current portion				$	59,856			$	19,202

 

	(a)	Multiple monthly loan agreements with Kabbage. Each of these loans has a six-month duration with interest and fees spread over the 6 months.
	(b)	Business loan agreement with LoanBuilder in August 2018 in the amount of $18,000, payable in 52 weekly payments of $409, including interest.
	(c)	Note payable to an individual for $7,500, issued in May 2018 as consideration for services, due in June 2018, and bearing no interest. During the year ended December 31, 2018, the Company made a payment of $1,500 against the note and the Company has withheld payment of the remaining amount pending receipt of amounts due from the service provider.
	(d)	Loan payable to Yukti Securities Private Limited is an unsecured loan which is due on demand.
	(e)	Unsecured loan from Lathika Regunathan, individual, is due on demand. Was repaid in 2019.
	(f)	Unsecured loan from Noor Qazi, individual, is due on demand. Was repaid in December 2020.
	(g)	Loan payable with ICICI Bank, secured by the vehicle the loan was taken for. Payments are monthly at $752, through maturity in May 2023. Of the amount outstanding, the following represents the maturity: Current (2021) $7,183; (2022) $7,837; (2023) $3,519.
	(h)	Revolving loan in the amount of $100,000 at 4% interest per annum due December 30, 2020. The loan was renegotiated for a balance of $99,911 with similar terms at 4% interest per annum and is guaranteed by the CEO of the Company.
	(i)	COVID line of credit from UGECL up to 4,000,000 INR in India, term of 48 months, interest only at 7.5%% annual rate for first 12 months, then 36 equal installments through maturity. Current (2021) $6,063; long-term (2022-2024) $48,500.
	(j)	PPP loan from USA Bank, with interest accruing at 1% per annum. Original amount of $34,697 had $24,640 forgiven in December 2020, with the remaining $10,057 due in five years In February 2021, the Company was notified that the entire balance of the PPP loan has been forgiven.

 

Interest expense on these notes for the years ended December 31, 2020 and 2019 are $6,932 and $12,110, respectively.

 

 

NOTE 11: CURRENT PORTION - CONVERTIBLE DEBT – RELATED AND UNRELATED PARTIES

 

The following is a summary of current portion - convertible debt - related and unrelated parties as of December 31, 2020 and December 31, 2019:

 

				December 31, 2020				December 31, 2019
Face value of notes – related party		(a)		$	95,000			$	95,000
Face value of notes – unrelated parties		(a)			98,077				98,077
Excess of the fair value of shares issuable over the face value of the convertible notes		(a)			48,257				48,257
				$	241,334			$	241,334

 

	(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 6% Convertible Promissory Notes that were originally due on January 15, 2018 (the “Notes”) in the amount of $68,077. From August 2017 through November 2017, the Company issued additional notes to four different parties (two of which were related parties) in the principal amount of $100,000 ($70,000 to related parties). In January 2018, the holders of the Notes agreed to extend the maturity to April 30, 2018, and in April 2018, agreed to further extend the maturity of certain notes to June or July 2018. During the year ended December 31, 2018, the maturity of the notes were further extended to March 31, 2019 and then again to periods ranging from June 30, 2019 to December 31, 2019. The Notes bear simple interest at 6% unless the Company defaults, which increases the interest rate to 10%. The Holders, at their option, can elect to convert the principal plus any accrued interest, 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. There are two notes that had a maturity date of June 30, 2019, with the remaining notes having a maturity date of December 31, 2019. These notes have not been extended and are currently in default. The Company has classified these notes as current liabilities. The Company has accrued the default interest on the two notes from July 1, 2019 through December 31, 2020.
		During the year ended December 31, 2018, the Company received additional proceeds from a related party of $25,000 (from Dharam V. Sikka, father of CEO) pursuant to a convertible note payable issued in May 2018, with the same interest rate and conversion terms as the Notes described above, initially maturing on December 31, 2018, which has been extended to March 31, 2019 and then again to December 31, 2019. Because the Notes are convertible into a variable number of shares of common stock based on a fixed dollar amount, in accordance with ASC Topic 480-10-50-2, the notes are recorded at the fair value of the shares issuable upon conversion. The excess of the fair value of shares issuable over the face value of the Notes is recorded as a discount to the note to be amortized into interest expense over the term of the note.

 

Interest expense on these notes for the years ended December 31, 2020 and 2019 are $19,361 and $12,957, respectively.

 

The Company has calculated the stock-settled liability in accordance with ASC 835-30 which establishes the monetary value at settlement of these instruments at fair value.

 

 

NOTE 12: STOCKHOLDERS’ DEFICIT

 

Series A Convertible Preferred Stock

 

On July 19, 2017, the Company approved the issuance of 50,000 shares of its Series A Convertible Preferred Stock to its CEO and, on August 1, 2017, the Company sold and issued the 50,000 shares of its Series A Convertible Preferred Stock to its CEO at a price of $0.20 per share for $10,000.

 

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 $500 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 (i) eighty five percent (85%) of the average closing bid price of the Common Stock over the twenty (20) trading days immediately preceding the date of conversion, (ii) but no less than par value of the Common Stock. For purposes of determining the closing bid price on any day, reference shall be to the closing bid price for a share of Common Stock on such date on the OTC Markets, as reported on Bloomberg, L.P. (or similar organization or agency succeeding to its functions of reporting prices) (the “Per Share Market Value”).

 

Common Stock

 

As of December 31, 2020, the Company has 27,297,960 shares issued and outstanding.

 

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.

 

Warrants

 

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 100% of the shares of TRAQ Pvt Ltd. and assumed certain net liabilities in exchange for warrants exercisable over a five-years to purchase 1,329,272 shares of common stock of the Company valued at $268. The warrants will be exercisable as follows: (i) 100,771 warrants immediately upon closing; (ii) 859,951 warrants exercisable one-year after the date of closing, which was extended to March 31, 2021; and (iii) 368,550 warrants exercisable two-years after the date of closing. The value of the transaction totaled $268 and is reflected as an increase to additional paid in capital.

 

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 3,930,000 stock options to board members, advisory board members, employees and consultants. The options have a 10-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 $104,638, and the unrecognized stock-based compensation for these grants as of December 31, 2020 is $660,372. Of the 3,930,000 options granted, only 312,500 have been vested through December 31, 2020.

 

The following represents a summary of options as of December 31, 2020 and 2019:

 

		December 31, 2020								December 31, 2019
		Number				Weighted Average Exercise Price				Number				Weighted Average Exercise Price
Beginning balance			-			$	-				-			$	-
Granted			3,930,000				0.0052				-				-
Exercised			-				-				-				-
Forfeited			-				-				-				-
Expired			-				-				-				-
Ending balance			3,930,000			$	0.0052				-			$	-
Intrinsic value of options		$	6,267,475							$	-
Weighted Average Remaining Contractual Life (Years)			9.81

 

NOTE 13: 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 $576,566 and $585,207, respectively. The Company is recording this amount at present value, in accordance with the standard, using an incremental borrowing rate by adjusting the benchmark reference rates with appropriate financing spreads and lease specific adjustments for the effects of collateral. The right of use asset will be composed of the sum of all lease payments plus any initial direct cost and will be straight line amortized over the life of the expected lease term. For the expected term of the lease the Company will use the term of the nine-year lease. This lease will be treated as an operating lease under the new standard.

 

 

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.

 

The lease right of use asset of in the original amount of $592,909 was to be amortized on a straight-line basis over the term of the lease. For the years ended December 31, 2020 and 2019 the Company recorded rent expense of $100,079 and $74,214.

 

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 $333,571 in right-of-use asset and $349,428 in lease liability. The difference has been reflected as forgiveness of debt in the Consolidated Statements of Operations in December 31, 2020.

 

As of December 31, 2020, the value of the unamortized lease right of use asset is $126,118. As of December 31, 2020, the Company’s lease liability was $133,998.

 

Remaining Lease Obligation by calendar year (undiscounted cash flows)
2021		$	26,087
2022			29,091
2023			29,091
2024			30,000
2025			33,455
2026 and thereafter			59,940
Total lease payments			207,663
Less: Imputed interest			73,665
Present value of lease liabilities		$	133,998

 

nOTE 14: CONCENTRATIONS

 

During the years ended December 31, 2020 and 2019, the Company had two major customers comprising 85% of revenues and two major customers comprising 82% of revenues, respectively. A major customer is defined as a customer that represents 10% or greater of total revenues. There was 85% and 67% of accounts receivable two and two customers as of December 31, 2020 and December 31, 2019, respectively.

 

The Company does not believe that the risk associated with these customers or vendors will have an adverse effect on the business.

 

nOTE 15: CONTINGENCY

 

During the year ended December 31, 2018, the Company charged an independent truck driver approximately $190,000 pursuant to its agreement with the driver, which entitled the Company to fees equal to $800 per day for the driver’s failure to return a trailer owned by the Company with the period prescribed by the agreement. The Company has not recognized this as income due to uncertainty of payment and will record as other income during the period in which amounts are collected.

 

NOTE 16: PROVISION FOR INCOME TAXES

 

The provision (benefit) for income taxes for the years ended December 31, 2020 and 2019 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.

 

 

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, 2020 and 2019:

 

		2020				2019
Federal income taxes at statutory rate			21.00	%			21.00	%
State income taxes at statutory rate			7.50	%			7.50	%
Temporary differences			0.38	%			(0.82	)%
Permanent differences			(0.98	)%			(7.41	)%
Change in valuation allowance			(27.90	)%			(20.27	)%
Totals			0.00	%			0.00	%

 

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.

 

		As of				As of
		December 31, 2020				December 31, 2019
Deferred tax assets:
Net operating losses before non-deductible items		$	747,748			$	579,118
Stock-based compensation			28,174				-
Depreciation			(1,616	)			(1,616	)
Total deferred tax assets			774,306				577,502
Less: Valuation allowance			(774,306	)			(577,502	)
Net deferred tax assets		$	-			$	-

 

As of December 31, 2020, the Company has a net operating loss carry forward of $2,777,151 expiring through 2037. The Company has provided a valuation allowance against the full amount of the deferred tax asset due to management’s uncertainty about its realization. Furthermore, the net operating loss carry forward may be subject to further limitation pursuant to Section 382 of the Internal Revenue Code. The valuation allowance was increased by $196,804 in 2020.

 

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, 2020 or December 31, 2019 and did not accrue any penalties or interest as of December 31, 2020 or December 31, 2019.

 

 

India based entity:

 

Significant components of deferred tax liabilities as at December 31, 2020 and 2019 (was acquired May 2019):

 

		As of				As of
		December 31, 2020				December 31, 2019
Deferred Tax Assets:
Difference between book and tax base of fixed assets		$	43,868			$	56,696
Provision for gratuity			27,189				22,253
Provision for leave encashment			11,030				8,598
Operating lease			5,170				2,339
NOL carryforward (based on last tax return filed per Indian Income Tax laws)			43,140				11,404
Timing difference on TDS under 40a(ia)			9,002				-
MAT credit			8,644				8,860
Deferred Tax Assets			148,043				110,150
Net Deferred Tax Assets			148,043				110,150
Less: Valuation allowance			(148,043	)			(110,150	)
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, 2020, 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 provided a valuation allowance against the full amount of said Deferred Tax Assets of $148,043 due to management’s uncertainty about its realization.

 

nOTE 17: EMPLOYEE BENEFIT PLANS

 

TRAQ Pvt Ltd.’s Gratuity Plan 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.

 

 

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		$	85,594
Service cost			10,746
Interest cost			5,595
Benefits paid			(19,033	)
Actuarial gain (loss) on the Obligation			23,761
Effect of exchange rate changes			(2,090	)
		$	104,573
Projected benefit obligation as of December 31, 2020
Unfunded amount – non-current		$	94,023
Unfunded amount - current			10,550
Total accrued liability		$	104,573
Components of net period benefit costs:
Service cost		$	10,746
Interest cost			5,595
Actuarial gain (loss) on the Obligation			23,761
		$	40,102
The weighted average actuarial assumptions used to determine benefit obligations and net periodic gratuity cost are:
Discount rate			5.55% per annum
Rate of increase in compensation levels			10.00 % per annum

 

The benefit obligation has been measured as of December 31, 2019. 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 period May 16, 2019 through December 31, 2019:

 

		Period May 16, 2019 through
		December 31, 2019
Change in projected benefit obligation:
Projected benefit obligation as of May 16, 2019		$	65,550
Service cost			6,982
Interest cost			3,106
Benefits paid			(1,932	)
Actuarial gain (loss) on the Obligation			13,086
Effect of exchange rate changes			(1,198	)
		$	85,594
Projected benefit obligation as of December 31, 2019
Unfunded amount – non-current		$	74,781
Unfunded amount - current			10,813
Total accrued liability		$	85,594
Components of net period benefit costs:
Service cost		$	6,982
Interest cost			3,106
Actuarial gain (loss) on the Obligation			11,888
		$	21,976
The weighted average actuarial assumptions used to determine benefit obligations and net periodic gratuity cost are:
Discount rate			6.70% per annum
Rate of increase in compensation levels			10.00 % per annum

 

 

Leave Encashment:

 

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		$	33,070
Service cost			10,746
Interest cost			5,595
Benefits paid			(2,212	)
Actuarial gain (loss) on the Obligation			(3,969	)
Effect of exchange rate changes			(806	)
		$	42,424
Projected benefit obligation as of December 31, 2020
Unfunded amount – non-current		$	37,306
Unfunded amount - current			5,118
Total accrued liability		$	42,424
Components of net period benefit costs:
Service cost		$	10,746
Interest cost			5,595
Actuarial gain (loss) on the Obligation			(3,969	)
		$	12,372
The weighted average actuarial assumptions used to determine benefit obligations and net periodic gratuity cost are:
Discount rate			5.55% per annum
Rate of increase in compensation levels			10.00 % per annum

 

The other long-term employee benefits has been measured as of December 31, 2019. The following table sets forth the activity of the leave encashment and the amounts recognized in TRAQ Pvt Ltd.’s financial statements at the end of the period May 16, 2019 through December 31, 2019:

 

		Period May 16, 2019 through
		December 31, 2019
Change in projected benefit obligation:
Projected benefit obligation as of May 16, 2019		$	24,243
Service cost			3,646
Interest cost			940
Benefits paid			(919	)
Actuarial gain (loss) on the Obligation			5,617
Effect of exchange rate changes			(457	)
		$	33,070
Projected benefit obligation as of December 31, 2019
Unfunded amount – non-current		$	27,682
Unfunded amount - current			5,388
Total accrued liability		$	33,070
Components of net period benefit costs:
Service cost		$	3,646
Interest cost			940
Actuarial gain (loss) on the Obligation			5,160
		$	9,746
The weighted average actuarial assumptions used to determine benefit obligations and net periodic gratuity cost are:
Discount rate			6.70% per annum
Rate of increase in compensation levels			10.00 % per annum

 

nOTE 18: 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, no amount payable for tax and penalty was confirmed by the Income Tax Department. Further, TRAQ Pvt Ltd has also defaulted for TDS deducted but not paid in time during assessment years 2016-2017 to 2020-2021. Accordingly, there may be a contingent liability in respect of TDS regarding compounding charges, interest, and penalty which is not quantifiable at present, hence not provided in the Consolidated Financial Statements.
	(ii)	TRAQ Pvt Ltd has outstanding Gratuity for $23,971 as of December 31, 2020, towards ex-employees of TRAQ Pvt Ltd; therefore, TRAQ Pvt Ltd is liable for penalty under The Gratuity Act under the Indian Laws and other relevant laws. Since the amount of penalty for default in payment of gratuity is not ascertainable, therefore it is not provided for in the Consolidated Financial Statements. Gratuity of $13,816 has been paid in the month of January 2021.

 

 

	(iii)	There are numerous interpretative issues relating to the Indian Supreme Court (SC) judgment dated February 28, 2019, on Provident Fund (PF) on the inclusion of allowances for the purpose of PF contribution as well as its applicability. Due to a pending decision on the subject review petition and directions from EPFO, the impact for the past period, if any, was not ascertainable and consequently no effect was given in the Consolidated Financial Statements.
	(iv)	TRAQ Pvt Ltd has delayed in complying with provisions related to Foreign Direct Investment and Transfer of Shares to Non-resident as per the Master Circulars and notification issued by Reserve Bank of India, therefore, is liable for imposition of penalty. Since the amount of the penalty for the same is not ascertainable, no effect was given in the Consolidated Financial Statements.
	(v)	Prior to its acquisition in May 2019, TRAQ Pvt Ltd, had provided a guarantee in favor of State Bank of India for $165,813 on March 22, 2014, for Mira Green Tech Private Limited. The State Bank of India is in process of satisfying whether there is any obligation due by TRAQ Pvt Ltd at this time.

 

nOTE 19: SUBSEQUENT EVENTS

 

In January 2021, the Company issued 37,500 shares of common stock valued at $52,500 for services rendered, and in March 2021 the Company issued 61,500 shares of common stock valued at $70,725 for services rendered.

 

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 $125,000. The GS Note has a maturity of one-year 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. 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 26,000 shares of common stock as a commitment fee and issued 170,000 shares of common stock that are returnable upon achievement of the terms of the GS Note.

 

On January 22, 2021, the Company entered into a Share Exchange Agreement with Rohuma, LLC, a Delaware limited liability company (“Rohuma”) and its members, whereby the Rohuna members agreed to exchange all of their respective membership interests in Rohuma in exchange for 4,292,220 shares of common stock, of which the first tranche of shares were issued on March 1, 2021 totaling 2,562,277 shares, with the remaining value reflected as contingent consideration until the shares vest at which time they will be issued. The transaction was valued at $4,335,142 ($1.01 per share).

 

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 one-year. The conversion price of the Platinum Note is the greater of (a) $0.01 or (b) 70% of the lowest closing stock price over the previous 15 trading days. 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 200,000 warrants 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 60,000 shares as a commitment fee.

 

On February 16, 2021, the Company entered into several stock purchase agreements for the issuance of 570,000 shares for cash in the amount of $456,000 (value of $0.80 per share). The individuals also received 285,000 warrants that have a term of three years at an exercise price of $2.00 per share.

 

On February 17, 2021, the Company entered into a Share Exchange Agreement with Mimo Technologies Private Ltd., and Indian corporation (“Mimo”) and its shareholders, whereby the Mimo shareholders agreed to exchange all of their respective shares in Mimo in exchange for warrants to purchase 1,367,539 shares of the Company’s common stock. The warrants have a term of three years and an exercise price of $0.001 and cash in the amount of $22,338.

 

On March 6, the Company converted $181,250 and accrued interest of $43,438 into 264,338 shares of common stock. The conversions were done at fair value. These shares will be issued by the Company in the next few weeks.

 

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 $3,000 and the issuance of stock at the commencement of the agreement for 25,000 shares, and a three-year warrant for 100,000 warrants with a strike price of $2.00 per share that vest March 7, 2022.