NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN
US$)
(UNAUDITED)
NOTE
1 – ORGANIZATION AND NATURE OF OPERATIONS
TraQiQ,
Inc. (along with its wholly owned subsidiaries, referred to herein as the “Company”) was incorporated in the State of California
on September 9, 2009 as Thunderclap Entertainment, Inc. On July 14, 2017, Thunderclap Entertainment, Inc. changed its name to TraQiQ,
Inc. On July 19, 2017, the Company entered into a Share Exchange Agreement (“Share Exchange”) with the stockholders of OmniM2M,
Inc. (“OmniM2M”) and TraQiQ Solutions, Inc. dba Ci2i Services, Inc. (formerly Ci2i Services, Inc. – amended November
6, 2019) (“Ci2i”) whereby the stockholders of Omni and Ci2i exchanged all of their respective shares, representing 100% ownership
in OmniM2M and Ci2i in exchange for 12,000,000 shares of the Company’s common stock, respectively. The OmniM2M Shareholders and
the Ci2i Shareholders have each been issued their respective 12,000,000 shares on a pro rata basis based on their respective holdings
in OmniM2M and Ci2i in the Share Exchange Agreement. The Share Exchange was accounted for as a reverse merger whereas Ci2i is considered
the accounting acquirer and TraQiQ,Inc. is considered the accounting acquiree. For accounting purposes, the acquisition of Omni is recorded
at historical cost in accordance with Accounting Standard Codification (“ASC”) 805-50-25-2 as this is considered an acquisition
of entities under common control as the management of the Company and Omni control the activities of the respective companies. Prior
to the merger with Ci2i and acquisition of Omni, the Company was considered a shell company under Rule 12b-2 of the Exchange Act. On
December 1, 2017, The Company entered into a Share Purchase Agreement (the “Share Exchange Agreement”) with Ajay Sikka (“Sikka”),
the sole shareholder of Transport IQ, Inc. whereby Sikka agreed to sell all of the shares in TransportIQ, Inc. (“TransportIQ”)
in exchange for $18,109, in the form of cancellation of all of the debt of TransportIQ that is owed to the Company. The transaction became
effective upon the execution of the Share Exchange Agreement by Sikka and the Company; and Transport IQ, Inc, is now a wholly-owned subsidiary
of the Company. Because TransportIQ was commonly controlled and owned, the transaction was recorded at the historical carrying value
of TransportIQ’s assets and liabilities.
Overview
of the Company
With
operations concentrated in India, Southeast Asia and Latin America, the Company helps businesses in emerging markets leverage the “gig”
or task economy by providing both technology solutions and a network of workers required to fulfill those tasks. The Company provides
software as a service that enables clients to build and manage a network of contract task workers. This platform can also be used by
business clients to manage their employees who are performing services, such as PC repair or food delivery. In addition, with the recent
acquisition of Mimo Technologies Private Limited (“Mimo”), Mimo operates a network of over 14,000 task workers in India who
make deliveries, collect payments, do background verifications, and fulfill tasks across the supply chain, as needed by business clients
to deliver their products and services to their respective markets and customers.
TraQSuite
is a cloud based software platform with a revenue model based on initial and transaction-based licensing fees as well as consulting fees.
Licensees pay an initial per-module fee that varies depending on the number of modules that are licensed. This fee is typically $10,000
per module. Customers are also billed on a per-user or per-transaction basis every month. User fees range from a $75 per month fee for
the administrator to $5 per month for regular users. Transaction fees averages about $1 per transaction, with discounts for higher volumes.
Most customers also pay initial consulting fees upfront for integration of TraQSuite with their legacy software and training of their
employees in the use of TraQSuite.
The
Company’s TraQSuite software platform powers the last mile distribution network, allowing business users to target customers, facilitate
and validate transactions, track and manage task workers, manage funds and run a distribution network. Key features of the TraQSuite
software include:
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Last
Mile delivery: TraQSuite’s Last-Mile software module enables a business to manage thousands of task workers across
multiple geographies to deliver products and services to the users. The software platform, operating through mobile apps, allows
for data sharing, delivery validation, geo-tagging and know-your-customer (KYC) requirements and can even measure customer satisfaction.
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Transact:
TraQSuite enables task workers to facilitate transactions by meeting the end customers. They can collect payments via credit
cards, smart-phone swipes, SMS messages or cash. Both banked and unbanked users can buy products and services and pay with their
mobile devices.
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Target:
TraQSuite enables customer transactions to be rewarded with loyalty credits, tokens or points that can be redeemed by the customer
for free products, discounts and benefits. The software analyzes these transactions and purchase behaviors by using leading AI models
and can deliver real time, automated and targeted offers and recommendations for additional purchases and customer retention.
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The
Mimo delivery and task service in India runs on the TraQSuite platform and performs deliveries and fulfills tasks for some of the largest
businesses in India. Mimo provides delivery and pickup services for the banking and insurance industry, performing verifications, field
investigations for loan requests, business verification, employment verification, collection of documents and customer data and assistance
in filling out forms for banks. Mimo works with microfinance institutions to collect cash, such as loan payments, convert cash to digital
forms such as debit cards, and conduct data collection and surveys. For consumer goods companies, Mimo does promotional marketing, last
mile (hyper-local) delivery, merchant onboarding or activation, store audits, and route optimization for delivery.
The
Company’s strategy is to grow the business through a combination of organic growth and strategic investments that bring new functionality
and revenue streams to the Company. The plan is to enhance the functionality of our existing products, increase sales in the Indian market
and entry into new emerging markets. The Company has a presence in India, Southeast Asia and Latin America, and recently added new customers
in Australia, New Zealand and parts of Africa.
TraQiQ
Solutions, Inc.
Ci2i
is a services company founded in 1998 that develops and deploys intelligent technologies and products in order to meet the demand for
sustainable, integrated solutions. Ci2i’s primary focus has been in the analytics and intelligence segments. The Company is investing
significantly in building products in the area of supply chain and last mile delivery.
Ci2i’s
cloud solutions and analytics services comprise software development, program management, project management, and business analytics
services.
TraQiQ
Solutions Private Limited
On
May 16, 2019, the Company entered into a Share Exchange Agreement with Mann-India Technologies Private Ltd., an Indian Corporation (“Mann”).
On January 2, 2020, Mann changed its name to TraQiQ Solutions Private Limited (“TRAQ Pvt Ltd”). Pursuant to the Share Exchange
Agreement with Mann, the Company acquired 100% of the shares of Mann and assumed certain net liabilities in exchange for warrants exercisable
over a five-years to purchase 1,329,272 shares of common stock of the Company valued at $268. The warrants will be exercisable as follows:
(i) 100,771 warrants immediately; (ii) 859,951 warrants exercisable one-year after the date of closing, which was extended to March 31,
2021; and (iii) 368,550 warrants exercisable two-years after the date of closing. This transaction is being recorded as a business combination
under ASC 805.
The
warrants that are exercisable in one-year and two-years are conditioned upon TRAQ Pvt Ltd. achieving certain revenue figures and pre-tax
profit percentages. TRAQ Pvt Ltd. must achieve target revenue of $1.1 million (US$) and pre-tax profit of 25% (US$). Should TRAQ Pvt
Ltd. be unable to achieve these criteria, the warrants will be reduced proportionately. A total of 419,127 of these warrants were cancelled
effective May 16, 2021 as a result of these criteria not being achieved.
Mann-India
Private limited was renamed to TraQiQ Solutions Private Limited shortly after acquisition by TraQiQ Inc.
TRAQ
Pvt Ltd. was established in May 2000 and is headquartered in New Delhi, India. TRAQ Pvt Ltd. is a leading software development company
which, with the advent of technology, has evolved as a mature and fast-growing company committed to provide reliable and cost-effective
software solutions across industries all over the world.
TRAQ
Pvt Ltd. has its own experienced team of software developers dedicated towards developing various kinds of customized software.
TraQ
Pvt Ltd. has been doing business around the world for over 15 years, with particular emphasis on Latin America and India. The customer
list includes large enterprise Finance and Insurance companies across Latin America. The company’s product portfolio has evolved
rapidly and now includes enterprise ready solutions for payment processing, mobile wallets, micro lending solutions and digital transformation.
Rohuma,
LLC
On
January 22, 2021, the Company entered into a Share Exchange Agreement with Rohuma, LLC, a Delaware limited liability company (“Rohuma”)
and its members, whereby the Rohuna members agreed to exchange all of their respective membership interests in Rohuma in exchange for
4,292,220 shares of common stock, of which the first tranche of shares were issued on March 1, 2021 totaling 2,562,277 shares, with the
remaining value reflected as contingent consideration until the shares vest at which time they will be issued. The transaction was valued
at $3,433,776 ($0.80 per share). Rohuma has an Indian affiliate that is owned 99% by Rohuma and 1% by its founding member. Rohuma controls
this entity and the 1% ownership by the member is now less than 1% upon acquisition by the Company. This amount is reflected as a non-controlling
interest.
Rohuma
dba Kringle.ai is a California based software solutions company that enables digital and mobile commerce by providing enterprise class
applications that cover loyalty and rewards products, payments, online ordering, distribution logistics for retail and more. Kringle
analyzes customers’ omni-channel behaviors and transactions. Using AI for digital commerce, Kringle is able to deliver real time,
automated 1:1 recommendations and personalized content across all customer touch points.
Mimo
Technologies Private Limited
On
February 17, 2021, the Company entered into a Share Exchange Agreement with Mimo Technologies Private Ltd., and Indian corporation (“Mimo”)
and its shareholders, whereby the Mimo shareholders agreed to exchange all of their respective shares in Mimo in exchange for warrants
to purchase 1,367,539 shares of the Company’s common stock. Of these warrants, 820,524 were earned at the date of acquisition,
with the remaining 547,015 expected to be earned over the next two years from grant based on revenue goals for Mimo. The warrants have
a term of three years and an exercise price of $0.001 and value in the amount of $1,640,447, of which $984,268 is reflected in additional
paid in capital, with the remaining $656,179 reflected as contingent consideration. In addition to the issuance of the warrants, TRAQ
Pvt Ltd, wrote off $258,736 in amounts due from a note receivable, $123,778 in accounts receivable and $40,354 in a debenture from Mimo.
In addition, a cash payment was made to one of the minority shareholders of Mimo in the amount of $22,338. The Company acquired over
99% of Mimo with the remaining percentage of less than 1% reflected as a non-controlling interest.
TraQiQ
operates the Mimo delivery and task service in India. This service runs on the TraQSuite platform. Mimo has 14,000+ independent contractors
across India performing deliveries and fulfilling tasks for the largest corporations in the country. Our team at Mimo uses a sophisticated
technology platform and a smartphone app to get their tasks completed. This is coupled with a verification and billing system that allows
customers of all sizes to leverage this distribution infrastructure.
Mimo
offers a broad set of services. These offerings can be classified into three broad categories:
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Data
collection and client verification (surveys, verification, on-boarding),
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Cash
management & handling services, and
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Distribution
and demand generation (order fulfilment, demand generation, delivery services for e-commerce companies)
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Mimo
assists the delivery and pickup segment of the banking and insurance industry by performing verifications, field investigations for loan
requests, business verifications and employment verification, and also collects documents, assists in filling forms for banks, and completes
data collection from customers.
Mimo
works with microfinance institutions to collect cash, such as loan payments, convert cash to digital means like debit cards, and conduct
data collection and surveys.
For
consumer goods companies, Mimo does promotional marketing, Last mile (hyper-local) delivery, merchant onboarding or activation, store
audits, and route optimization for delivery. Mimo provides efficient end-to-end transshipment logistics. The framework manages and optimizes
last-mile delivery & e-commerce logistics across the entire distribution chain with transparency and seamless integration.
Mimo
is currently in the planning stages to provide food, alcohol & medicine deliveries as well.
During
the COVID-19 pandemic, Mimo leveraged video as a platform for verification and document delivery. Now, the task workers include people
who are in the field on bikes and trucks, people on a video screen, as well as people on the phone.
There
are also data digitization tasks being done by Mimo task workers across the country. In a country like India where there are over 20
languages and multiple dialects, the task workers convert paper documents into electronic form in the same language or translate them
into another language.
Mimo
provides delivery and task worker solutions across India. Mimo works with Banking, Financial, Logistics and Distribution companies, to
take their products and services to semi-urban and rural India. Mimo trains the agents in each Product or Service through an online and
classroom training platform. The company powers the gig economy task workers throughout the country and provides a very valuable source
of employment for young people who may or may not have a high school diploma.
NOTE
2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”) and the regulations of the United States Securities and Exchange Commission.
The condensed consolidated financial statements and accompanying notes are the representations of the Company’s management, who
are responsible for their integrity and objectivity. In their opinion, such financial information includes all adjustments considered
necessary for a fair presentation at such date and the operating results and cash flows for such periods.
These
condensed consolidated financial statements should be read in conjunction with a reading of the Company’s consolidated financial
statements and notes thereto included in Form 10-K filed with the SEC on March 22, 2021. Interim results of operations for the nine months
ended September 30, 2021 are not necessarily indicative of future results for the full year.
Consolidation
The
condensed consolidated financial statements include the accounts of TraQiQ, Inc. and its wholly-owned subsidiaries. All intercompany
balances and transactions have been eliminated in consolidation.
The
Company applies the guidance of Topic 810 Consolidation of the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) to determine whether and how to consolidate another entity. Pursuant to ASC paragraph 810-10-15-10,
all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—are consolidated except
when control does not rest with the parent.
Pursuant
to ASC paragraph 810-10-15-8, the usual condition for a controlling financial interest is ownership of a majority voting interest, and,
therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting
shares of another entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of
ownership, for example, by contract, lease, agreement with other stockholders, or by court decree.
Noncontrolling
Interests
In
accordance with ASC 810-10-45 Noncontrolling Interests in Consolidated Financial Statements, the Company classifies noncontrolling
interests as a component of equity within the consolidated balance sheet. In January 2021, the acquisition of Rohuma resulted in a less
than 1% non-controlling interest of the Indian affiliate of that company. In February 2021, the acquisition of Mimo resulted in a less
than 1% non-controlling interest of that company.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting periods. These estimates include, but are not limited to, management’s
estimate of provisions required for non-collectible accounts receivable, depreciative lives of our assets, determination of technological
feasibility, and valuation allowances of our deferred tax assets. Actual results could differ from those estimates.
Foreign
Currency Transactions
The
Company accounts for foreign currency transactions in accordance with ASC 830, “Foreign Currency Matters” (“ASC 830”),
specifically the guidance in subsection ASC 830-20, “Foreign Currency Transactions”. The U.S. dollar is the functional and
reporting currency for the Company and its subsidiaries other than TRAQ Pvt Ltd. whose functional currency is the Indian Rupee. Pursuant
to ASC 830, monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at exchange rates in effect
at the balance sheet date, with the resulting gains or losses upon settlement reported in foreign exchange gain (loss) in the computation
of net income (loss). Gains or losses resulting from translation adjustments are reported under accumulated other comprehensive income
(loss).
Reclassification
Certain
prior period amounts have been reclassified to conform with current period presentation with no effect on the Company’s net loss,
total assets, liabilities equity or cash flows.
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 $400,410 and $29,658 as of September 30, 2021 and December 31, 2020, 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 September
30, 2021 and December 31, 2020 was $114,575 and $28,746, 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 an
allowance of $229,034 and $0 was required for the outstanding accounts receivable as of September 30, 2021 and December 31, 2020, respectively.
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 September 30, 2021 and December 31, 2020.
Capitalized
Software Costs
In
accordance with the relevant FASB accounting guidance regarding the development of software to be sold, leased, or marketed, the Company
expenses such costs as they are incurred until technological feasibility has been established, at and after which time these costs are
capitalized until the product is available for general release to customers. Once the technological feasibility is established per ASC
985-20, the Company capitalizes costs associated with the acquisition or development of major software for internal and external use
in the balance sheet.
Costs
incurred to enhance the Company’s software products, after general market release of the services using the products, is expensed
in the period they are incurred.
The
Company only capitalizes subsequent additions, modifications or upgrades to internally developed software to the extent that such changes
allow the software to perform a task it previously did not perform. The Company expenses software maintenance and training costs as incurred.
The Company acquired $146,065 in software costs in the Mimo transaction.
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.
TraQSuite
is a cloud based software platform with a revenue model based on initial and transaction-based licensing fees as well as consulting fees.
Licensees pay an initial per-module fee that varies depending on the number of modules that are licensed. This fee is typically $10,000
per module. Customers are also billed on a per-user or per-transaction basis every month. User fees range from a $75 per month fee for
the administrator to $5 per month for regular users. Transaction fees averages about $1 per transaction, with discounts for higher volumes.
Most customers also pay initial consulting fees upfront for integration of TraQSuite with their legacy software and training of their
employees in the use of TraQSuite.
The
following is a summary of revenue for the nine months ended September 30, 2021 and 2020, disaggregated by type:
SUMMARY OF DISAGGREGATION OF REVENUE
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2021
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2020
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Professional Services Revenue
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$
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921,343
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$
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670,019
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Sale of goods
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787,150
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-
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Software Solution Revenue
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400,594
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69,158
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$
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2,109,087
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$
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739,177
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Costs
of Services Provided
Costs
of services provided consist of purchase of goods, data processing costs, customer support costs including personnel costs to maintain
the Company’s proprietary databases, costs to provide customer call center support, hardware and software expense associated with
transaction processing systems and exchanges, telecommunication and computer network expense, and occupancy costs associated with facilities
where these functions are performed. Depreciation expense is not included in costs of services provided.
Lease
Obligations
The
Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”)
assets, current portion of operating lease liabilities and operating lease liabilities, less current portion in the Company’s consolidated
balance sheets.
ROU
assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s
obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date
based on the present value of lease payments over the lease term. For leases in which the rate implicit in the lease is not readily determinable,
the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value
of lease payments.
Lease
terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease
expense for operating lease arrangements is recognized on a straight-line basis over the lease term. The Company has lease agreements
with lease and non-lease components, which are accounted for separately.
Income
Taxes
Income
taxes are accounted under the asset and liability method. The current charge for income tax expense is calculated in accordance with
the relevant tax regulations applicable to entity. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Deferred tax assets are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion
or all of the deferred tax assets will not be realized.
Uncertain
Tax Positions
The
Company follows ASC 740-10, “Accounting for Uncertainty in Income Taxes”. This requires recognition and measurement of uncertain
income tax positions using a “more-likely-than-not” approach. Management evaluates their tax positions on an annual basis.
TraQiQ,
Inc.and TraQiQ Solutions, Inc, file a consolidated income tax return and Rohuma US files a separate tax return in the U.S. federal tax
jurisdiction and various state tax jurisdictions. TRAQ Pvt Ltd. as well as Mimo and Rohuma India file separate individual income tax
returns in the India tax jurisdictions. The U.S. federal and state income tax returns of the Company are subject to examination by the
IRS and state taxing authorities, generally for three years after they were filed. The India tax returns of are subject to examination
by the India Income Tax Department and India state taxing authority, generally for 12 months after the relevant tax year, 24 months after
the relevant tax year in case transfer pricing provisions are applicable.
Fair
Value of Financial Instruments
ASC
825, “Financial Instruments,” requires the Company to disclose estimated fair values for its financial instruments.
The carrying amount of cash, accounts receivable, prepaid and other current assets, accounts payable and accrued expenses, stockholder
advances, short term financing and convertible debt approximate fair value because of the short-term maturity of those instruments. The
Company does not utilize derivative instruments.
Fair
Value Measurements
ASC
820 “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosure about fair value measurements.
The
following provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into
Levels 1 to 3 based on the degree to which fair value is observable:
Level
1- fair value measurements are those derived from quoted prices (unadjusted in active markets for identical assets or liabilities);
Level
2- fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level
3- fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
Financial
instruments classified as Level 1 - quoted prices in active markets include cash.
These
consolidated financial instruments are measured using management’s best estimate of fair value, where the inputs into the determination
of fair value require significant management judgment to estimation. Valuations based on unobservable inputs are highly subjective and
require significant judgments. Changes in such judgments could have a material impact on fair value estimates.
In
addition, since estimates are as of a specific point in time, they are susceptible to material near-term changes. Changes in economic
conditions may also dramatically affect the estimated fair values.
Fair
value estimates discussed herein are based upon certain market assumptions and pertinent information available to management for the
respective periods. The respective carrying value of certain financial instruments approximated their fair values due to the short-term
nature of these instruments. These financial instruments include cash, investments, short-term notes payable, accounts payable and accrued
expenses.
Derivative
Financial Instruments
Derivatives
are recorded on the consolidated balance sheet at fair value. The conversion features of the convertible instruments are embedded derivatives
and are separately valued and accounted for on the consolidated balance sheet with changes in fair value recognized during the period
of change as a separate component of other income/expense. Fair values for exchange-traded securities and derivatives are based on quoted
market prices. Valuations derived from various models are subject to ongoing internal and external verification and review. Model
used incorporate market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involves management’s
judgment and may impact net income (loss).
With
the issuance of the July 2017 FASB ASU 2017-11, “Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic
480) Derivatives and Hedging (Topic 815),” which addresses the complexity of accounting for certain financial instruments with
down round features, the Company has chosen the early adopt retroactively the amendments in Part I of the standard whereby fair value
derivative liabilities previously recognized were derecognized in the current and comparative periods. Under the amendments included
in this update, the Company is no longer required to record changes in fair value during the period of change as a separate component
of other income (expense) in the consolidated Statements of Operations.
The
amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features)
with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments,
a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s
own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding
equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair
value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments
require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature
when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS.
Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for
contingent beneficial conversion features (in Subtopic 470-20, “Debt—Debt with Conversion and Other Options”),
including related EPS guidance (in Topic 260).
The
amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented
as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect.
Under
current GAAP, an equity-linked financial instrument with a down round feature that otherwise is not required to be classified as a liability
under the guidance in Topic 480 is evaluated under the guidance in Topic 815, “Derivatives and Hedging,” to determine
whether it meets the definition of a derivative. If it meets that definition, the instrument (or embedded feature) is evaluated to determine
whether it is indexed to an entity’s own stock as part of the analysis of whether it qualifies for a scope exception from derivative
accounting.
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
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|
|
|
|
|
|
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 $7,784,336 and a working capital deficit of $8,546,369, as of September 30, 2021, and a working
capital deficit of $2,851,721 as of December 31, 2020. As a result of these factors, management has determined that there is substantial
doubt about the Company ability to continue as a going concern.
These
consolidated financial statements of the Company have been prepared assuming that the Company will continue as a going concern, which
contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over
a reasonable period. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome
of the uncertainties.
The
Company has recently filed a Registration Statement on Form S-1 and engaged an investment banker to undertake an offering of approximately
$15,000,000. The investment banker has assisted the Company in raising a bridge round of debt financing through October 15, 2021 in the
amount of $1,200,000, which is net of original issue discount of $240,000. Management intends to use the funds received from the capital
raise to grow both organically and inorganically by pursuing potential synergistic companies as well as invest in technology and human
capital for their existing operations. The Company’s ability to close on this potential offering to raise additional capital is
unknown. Obtaining additional financing and the successful development of the Company’s contemplated plan of operations, ultimately,
to profitable operations, are necessary for the Company to continue operations.
NOTE
3: ACQUISITIONS
TRAQ
PVT LTD
On
May 16, 2019, the Company entered into a Share Exchange Agreement with Mann-India Technologies Private Ltd., an Indian Corporation. On
January 2, 2020, the name of this company was changed to TRAQIQ Solutions Private Limited. Pursuant to the Share Exchange Agreement with
TRAQ Pvt Ltd., the Company acquired 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. A total of 419,127 of these warrants were cancelled
effective May 16, 2021 as a result of these criteria not being achieved.
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.
ROHUMA
On
January 22, 2021, the Company entered into a Share Exchange Agreement with Rohuma, LLC, a Delaware limited liability company (“Rohuma”)
and its members, whereby the Rohuna members agreed to exchange all of their respective membership interests in Rohuma in exchange for
4,292,220 shares of common stock, of which the first tranche of shares were issued on March 1, 2021 totaling 2,562,277 shares, with the
remaining value reflected as contingent consideration until the shares vest at which time they will be issued. The transaction was valued
at $3,433,776 ($0.80 per share). Rohuma has an Indian affiliate that is owned 99% by Rohuma and 1% by its founding member. Rohuma controls
this entity and the 1% ownership by the member is now less than 1% upon acquisition by the Company. This amount is reflected as a non-controlling
interest.
The
Company acquired the assets and liabilities noted below in exchange for the shares noted herein and accounted for the acquisition in
accordance with ASC 805.
SCHEDULE OF BUSINESS ACQUISITION
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|
|
|
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Cash
|
|
$
|
6,027
|
|
|
Accounts receivables, net
|
|
|
4,179
|
|
|
Prepaid expenses and other current assets
|
|
|
8,943
|
|
|
Fixed assets
|
|
|
4,512
|
|
|
Intellectual property
|
|
|
-
|
|
|
Tradenames
|
|
|
-
|
|
|
Investment
|
|
|
1,440
|
|
|
Accrued payroll and related taxes
|
|
|
-
|
|
|
Accounts payable and accrued expenses
|
|
|
(58,153
|
)
|
|
Accrued duties and taxes
|
|
|
(2,688
|
)
|
|
Cash overdraft
|
|
|
(2,980
|
)
|
|
Comprehensive income
|
|
|
-
|
|
|
Debt- related parties
|
|
|
(37,776
|
)
|
|
Debt
|
|
|
(10,000
|
)
|
|
Net assets and liabilities acquired
|
|
$
|
(86,496
|
)
|
The
difference between the net liabilities acquired of $86,496,
and the consideration paid (in the form of shares, inclusive of contingent consideration of $1,383,954)
of $3,520,272
represents goodwill. The Company had an independent
valuation consultant perform an impairment test and it was determined that no impairment exists on the goodwill as of September 30, 2021.
MIMO
TECHNOLOGIES
On
February 17, 2021, the Company entered into a Share Exchange Agreement with Mimo Technologies Private Ltd., and Indian corporation (“Mimo”)
and its shareholders, whereby the Mimo shareholders agreed to exchange all of their respective shares in Mimo in exchange for warrants
to purchase 1,367,539 shares of the Company’s common stock. Of these warrants, 820,524 were earned at the date of acquisition,
with the remaining 547,015 expected to be earned over the next two years from grant based on revenue goals for Mimo. The warrants have
a term of three years and an exercise price of $0.001 and value in the amount of $1,640,447, of which $984,268 is reflected in additional
paid in capital, with the remaining $656,179 reflected as contingent consideration. In addition to the issuance of the warrants, TRAQ
Pvt Ltd, wrote off $258,736 in amounts due from a note receivable, $123,778 in accounts receivable and $40,354 in a debenture from Mimo.
In addition, a cash payment was made to one of the minority shareholders of Mimo in the amount of $22,338. The Company acquired over
99% of Mimo with the remaining percentage of less than 1% reflected as a non-controlling interest.
The
Company acquired the assets and liabilities noted below in exchange for the warrants noted herein and accounted for the acquisition in
accordance with ASC 805.
SCHEDULE OF BUSINESS ACQUISITION
|
|
|
|
|
|
|
Cash
|
|
$
|
43,851
|
|
|
Accounts receivables, net
|
|
|
58,692
|
|
|
Prepaid expenses and other current assets
|
|
|
272,872
|
|
|
Fixed assets
|
|
|
153,186
|
|
|
Intellectual property
|
|
|
508,669
|
|
|
Tradenames
|
|
|
169,556
|
|
|
Accounts payable and accrued expenses
|
|
|
(708,833
|
)
|
|
Accrued payroll and related taxes
|
|
|
(104,750
|
)
|
|
Accrued duties and taxes
|
|
|
(28,213
|
)
|
|
Comprehensive income
|
|
|
(42,735
|
)
|
|
Debt – related parties
|
|
|
(343,118
|
)
|
|
Debt
|
|
|
(236,712
|
)
|
|
Net assets and liabilities
acquired
|
|
$
|
(257,535
|
)
|
The
difference between the net liabilities acquired of $(257,535),
and the consideration paid (in the form of cash and warrants, net of adjustments for the note payable and accounts payable of Mimo with
TRAQ Pvt Ltd) of $2,085,653 represents
goodwill in the amount of $2,343,188.The
Company’s has determined no impairment of the goodwill exists as of September 30, 2021.
The
following table shows pro-forma results for the nine months ended September 30, 2021 and 2020 as if the acquisition had occurred on January
1, 2020. These unaudited pro forma results of operations are based on the historical financial statements and related notes of Rohuma,
Mimo and the Company.
SCHEDULE OF PROFORMA FOR BUSINESS ACQUISITION
|
|
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For the
nine months ended September 30, 2021
|
|
|
For the
nine months ended
September 30, 2020
|
|
|
Revenues
|
|
$
|
2,145,049
|
|
|
$
|
1,075,450
|
|
|
Net income (loss)
|
|
$
|
(5,335,349
|
)
|
|
$
|
(711,754
|
)
|
|
Net income (loss) per share
|
|
$
|
(0.17
|
)
|
|
$
|
(0.03
|
)
|
NOTE
4: CASH AND RESTRICTED CASH
Cash
and restricted cash are as follows:
SCHEDULE OF CASH AND RESTRICTED CASH
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
Cash on hand
|
|
$
|
109
|
|
|
$
|
141
|
|
|
Bank balances
|
|
|
400,301
|
|
|
|
29,517
|
|
|
Restricted cash
|
|
|
114,575
|
|
|
|
28,746
|
|
|
Total
|
|
$
|
514,985
|
|
|
$
|
58,404
|
|
ASU
2016-18, “Statements of Cash Flows” (Topic 230) was adopted by the Company in 2017. In accordance with this standard, restricted
cash and restricted cash equivalents is included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period
total amounts shown on the Statements of Cash Flows. During the nine months ended September 30, 2021 and the year ended December 31,
2020 there were no cash equivalents.
NOTE
5: FIXED ASSETS
The
Company’s property and equipment is as follows:
SCHEDULE OF PROPERTY AND EQUIPMENT
|
|
|
September 30, 2021
|
|
|
December 31, 2020
|
|
|
Estimated
Life
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment – TRAQ Pvt Ltd.
|
|
$
|
629,644
|
|
|
$
|
638,587
|
|
|
3 - 10 years
|
|
Property and equipment – Rohuma US
|
|
|
1,100
|
|
|
|
-
|
|
|
3 - 10 years
|
|
Property and equipment – Rohuma India
|
|
|
7,501
|
|
|
|
-
|
|
|
3 – 10 years
|
|
Property and Equipment – Mimo Technologies
|
|
|
6,886
|
|
|
|
-
|
|
|
3 – 10 years
|
|
Less: accumulated depreciation
|
|
|
(609,308
|
)
|
|
|
(602,214
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
35,823
|
|
|
$
|
36,373
|
|
|
|
Depreciation
expense for the nine months ended September 30, 2021 and 2020 was $13,787 and $11,354, respectively.
NOTE
6: INTANGIBLE ASSETS
The
Company’s intangible assets are as follows:
SCHEDULE OF INTANGIBLE ASSETS
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
448,800
|
|
|
$
|
448,800
|
|
|
Intellectual property
|
|
|
508,669
|
|
|
|
-
|
|
|
Tradenames
|
|
|
219,355
|
|
|
|
49,799
|
|
|
Software
|
|
|
250,916
|
|
|
|
-
|
|
|
Less: accumulated amortization
|
|
|
(200,930
|
)
|
|
|
(54,015
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
1,226,810
|
|
|
$
|
444,584
|
|
Amortization
expense for the nine months ended September 30, 2021 and 2020 was $40,703 and $24,930, respectively.
NOTE
7: GOODWILL
The
Company’s goodwill consists of the following:
SCHEDULE OF GOODWILL
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
|
|
Rohuma
|
|
$
|
3,519,870
|
|
|
$
|
-
|
|
|
Mimo Technologies
|
|
|
2,343,188
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
5,863,058
|
|
|
$
|
-
|
|
For
the period ended September 30, 2021, there were no indicators of impairment noted.
NOTE
8: LONG-TERM INVESTMENT
The
Company’s long-term investment is as follows:
SCHEDULE OF LONG-TERM INVESTMENT
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Security – Compulsorily Convertible Debenture
|
|
$
|
-
|
|
|
$
|
40,603
|
|
The
investment the Company had in a 1% Compulsorily Convertible Debenture for the period of seven years were 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 had
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. The debenture was between TRAQ Pvt Ltd. and Mimo
and was forgiven/written-off prior to the acquisition of Mimo on February 16, 2021.
In
addition, there was an investment acquired in the acquisition of Rohuma US for $1,440.
NOTE
9: NOTE RECEIVABLE
The
Company’s notes receivable is as follows:
SCHEDULE OF NOTE RECEIVABLE
|
|
|
September 30,
2021
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
|
|
|
MIMO Technologies PVT Ltd
|
|
$
|
-
|
|
|
$
|
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. Upon the acquisition of Mimo by the
Company, the balance of $258,736 in the note receivable was reduced to zero and applied towards the purchase of Mimo.
NOTE
10: CONVERTIBLE NOTES PAYABLE
As
of September 30, 2021 and December 31, 2020, the Company had the following convertible notes outstanding, all are current liabilities:
SCHEDULE OF CONVERTIBLE NOTES OUTSTANDING
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
|
GS Capital
|
|
|
(a)
|
|
|
$
|
45,000
|
|
|
$
|
-
|
|
|
Platinum Point Capital
|
|
|
(b)
|
|
|
|
400,000
|
|
|
|
-
|
|
|
Evergreen Capital Management LLC
|
|
|
(c)
|
|
|
|
720,000
|
|
|
|
-
|
|
|
Total Convertible Notes Payable
|
|
|
|
|
|
$
|
1,165,000
|
|
|
$
|
-
|
|
|
Less: Discounts
|
|
|
|
|
|
|
(790,454
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
$
|
374,546
|
|
|
$
|
-
|
|
|
|
(a)
|
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.
Through September 30, 2021, the Company has repaid $80,000 of the GS Note.
|
|
|
|
|
|
|
(b)
|
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 October
6, 2021, Platinum converted $75,000 of their outstanding balance into 405,844 shares of common stock, and then on October 8, 2021,
the Company paid the remaining principal balance of $325,000 along with the accrued interest payable of $25,644 and a prepayment
penalty of $70,129, for a total of $420,773.
|
|
|
|
|
|
|
(c)
|
On
September 17, 2021, the Company entered into a 20% OID Senior Secured Promissory Note with Evergreen Capital Management LLC (the
“Evergreen 1”). The Evergreen 1 has a maturity of nine months to June 17, 2022. The Evergreen 1 accrues interest at a
rate of 10% per year. The conversion price of Evergreen 1 is the lower of (a) $1.45 (“Fixed Conversion Price”) or (b)
upon the occurrence and during the continuation of any Event of Default, if lower, 90% of the average of the two lowest VWAPs for
the five (5) consecutive Trading Day that is immediately prior to the applicable Conversion Date (the “Default Conversion Price”).
There are certain price protections for Evergreen Capital Management LLC under the terms of Evergreen 1, which make the conversion
option a derivative liability. The Company granted 496,552 warrants that have a term of five-years and an exercise price of $1.45
per share with Evergreen 1. The warrants granted with Evergreen 1 also contain certain price protections, that make the value of
the warrants a derivative liability.
|
Interest
expense on these notes for the nine months ended September 30, 2021 and 2020 are $38,208 and $0, respectively. Amortization of debt and
original issue discounts was $253,414 and $0 for the nine months ended September 30, 2021 and 2020, respectively.
NOTE
11: LONG-TERM DEBT RELATED PARTIES
The
following is a summary of the current portion - long-term debt - related parties as of September 30, 2021 and December 31, 2020:
SCHEDULE OF LONG-TERM DEBT RELATED PARTIES
|
|
|
|
|
September 30,
2021
|
|
December 31,
2020
|
|
Unsecured advances - CEO
|
|
|
(a)
|
|
|
$
|
2,244,508
|
|
|
$
|
1,718,277
|
|
|
Notes payable - Satinder Thiara
|
|
|
(b)
|
|
|
|
32,000
|
|
|
|
57,000
|
|
|
Promissory note – Kunaal Sikka
|
|
|
(c)
|
|
|
|
15,000
|
|
|
|
15,000
|
|
|
Notes payable – Swarn Singh
|
|
|
(d)
|
|
|
|
45,000
|
|
|
|
45,000
|
|
|
Note payable - Chaudhary
|
|
|
(e)
|
|
|
|
8,650
|
|
|
|
8,122
|
|
|
Note payable - Director
|
|
|
(g)
|
|
|
|
400,000
|
|
|
|
-
|
|
|
Advances – former CEO of Mimo Technologies
|
|
|
(f)
|
|
|
|
122,808
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,867,966
|
|
|
|
1,843,399
|
|
|
Current portion of long-term debt related parties
|
|
|
|
|
|
|
(2,852,966
|
)
|
|
|
(1,843,399
|
)
|
|
Long-term debt – related parties
|
|
|
|
|
|
$
|
15,000
|
|
|
$
|
-
|
|
|
|
(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). The May 1, 2018 note that matured December 31, 2019 was converted along with $12,392 in accrued
interest into 43,990 shares of common stock on March 5, 2021.
|
|
|
|
|
|
|
(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 was in default as of December 31, 2019 through June 25, 2021 when
the note was extended until December 31, 2022. As a result the interest rate was changed to 18% annually (1.50% monthly) through
June 25, 2021 and then changed to 6% annually.
|
|
|
|
|
|
|
(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.
|
|
|
|
|
|
|
(f)
|
Note
payable to Lathika Regunathan dated June 18, 2020 in the amount of 7,650,000 INR (approximately $100,000 US$) interest free and due
on demand.
|
|
|
|
|
|
|
(g)
|
Note
payable to a director dated June 15, 2021 that matures December 12, 2021 in the amount of $400,000. The note does not bear interest
however the director received two tranches of 150,000 shares each for lending this amount. If the note is repaid by the maturity
date, one of the two tranches of 150,000 shares will be returned.
|
Interest
expense on these notes for the nine months ended September 30, 2021 and 2020 are $264,906 and $165,218, respectively.
NOTE
12: LONG-TERM DEBT
The
following is a summary of the long-term debt as of September 30, 2021 and December 31, 2020:
SCHEDULE OF LONG-TERM DEBT
|
|
|
|
|
September 30,
2021
|
|
December 31,
2020
|
|
Other debt – in default
|
|
|
(a)
|
|
|
$
|
6,000
|
|
|
$
|
6,000
|
|
|
Yukti Securities Private Limited
|
|
|
(b)
|
|
|
|
-
|
|
|
|
4,547
|
|
|
Noor Qazi
|
|
|
(c)
|
|
|
|
-
|
|
|
|
-
|
|
|
Auto loan – ICICI Bank
|
|
|
(d)
|
|
|
|
13,009
|
|
|
|
18,539
|
|
|
Baxter Credit Union
|
|
|
(e)
|
|
|
|
99,975
|
|
|
|
99,911
|
|
|
UGECL
|
|
|
(f)
|
|
|
|
53,729
|
|
|
|
54,563
|
|
|
USA Bank PPP
|
|
|
(g)
|
|
|
|
-
|
|
|
|
10,057
|
|
|
Loan Builder
|
|
|
(h)
|
|
|
|
35,616
|
|
|
|
-
|
|
|
Satin
|
|
|
|
|
|
|
98,226
|
|
|
|
-
|
|
|
SBA - Rohuma
|
|
|
|
|
|
|
10,000
|
|
|
|
-
|
|
|
Total
|
|
|
|
|
|
$
|
316,555
|
|
|
$
|
193,617
|
|
|
Current portion
|
|
|
|
|
|
|
(279,601
|
)
|
|
|
(133,761
|
)
|
|
Long-term debt, net of current portion
|
|
|
|
|
|
$
|
36,954
|
|
|
$
|
59,856
|
|
|
(a)
|
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.
|
|
|
|
|
(b)
|
Loan
payable to Yukti Securities Private Limited is an unsecured loan which is due on demand.
|
|
|
|
|
(c)
|
Unsecured
loan from Noor Qazi, individual, is due on demand. Was repaid in December 2020.
|
|
|
|
|
(d)
|
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 (2021-2022) $7,551; (2022-2023) $5,458.
|
|
|
|
|
(e)
|
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.
|
|
|
|
|
(f)
|
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 instalments through maturity. Current (2021) $22,233; long-term (2022-2024) $31,496.
|
|
|
|
|
(g)
|
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.
|
|
|
|
|
(h)
|
$50,000
unsecured loan due in 52 weekly payments of $1,057.94 inclusive of interest at approximately 10%.
|
Interest
expense on these notes for the nine months ended September 30, 2021 and 2020 are $5,550 and $8,867, respectively.
NOTE
13: CURRENT PORTION - CONVERTIBLE DEBT – RELATED AND UNRELATED PARTIES
The
following is a summary of current portion - convertible debt - related and unrelated parties as of September 30, 2021 and December 31,
2020:
SUMMARY OF CARRYING VALUE OF CONVERTIBLE DEBT
|
|
|
|
|
|
September
30,
2021
|
|
|
December
31,
2020
|
|
|
Face
value of notes – related party
|
|
|
(a)
|
|
|
$
|
-
|
|
|
$
|
95,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Face
value of notes – unrelated parties
|
|
|
(a)
|
|
|
|
68,077
|
|
|
|
98,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess
of the fair value of shares issuable over the face value of the convertible notes
|
|
|
(a)
|
|
|
|
17,007
|
|
|
|
48,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
85,084
|
|
|
$
|
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 had not been extended and were in default until June 30, 2021, when the note holders agreed to extend the debt until
October 31, 2021, with no other changes to the notes. The Company has classified these notes as current liabilities. The Company
had accrued the default interest on the two notes from July 1, 2019 through March 4, 2021. On March 5, 2021, the Company converted
$156,250 in convertible notes which includes the excess of the fair value of shares issuable over the face value of the convertible
notes along with $31,046 in accrued interest into 187,296 shares of common stock.
|
|
|
|
|
|
|
|
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.
The
remaining notes and all accrued interest were paid in October 2021. As the notes were settled in cash, no additional conversion premium
is due.
|
Interest
expense on these notes for the nine months ended September 30, 2021 and 2020 are $7,215 and $14,369, 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
14: STOCKHOLDERS’ EQUITY (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”).
On
September 22, 2021, the CEO converted all 50,000 shares of Series A Convertible Preferred Stock at the conversion price of $0.9059 per
share into 55,195 common shares. As a result, as of September 30, 2021, there are no Series A Convertible Preferred shares issued and
outstanding.
Common
Stock
As
of September 30, 2021, the Company has 33,136,975 shares issued and outstanding.
During
the three months ended September 30, 2021, the Company (a) issued 55,195 common shares in conversion of 50,000 Series A Convertible Preferred
Stock; (b) issued 451,205 common shares in the exercise of 451,205 warrants that were exercised for $45; and (c) issued 1,200,000 common
shares to the CEO as bonus compensation valued at $1,078,560.
During
the three months ended June 30, 2021, the Company (a) issued 1,000 shares of common stock for services valued at $1,750. In addition,
the Company recognized $40,222 in stock-based compensation for restricted stock grants to an advisor that vest over a three-year term.
None of the 350,000 shares to this advisor have been issued as of June 30, 2021.; (b) issued 300,000 shares of common stock to a director
for agreeing to lend the Company $400,000 in a promissory note. 150,000 of these shares may be returned to the Company should the note
be repaid by the maturity date of December 12, 2021. These 300,000 shares have a value of $447,000; and (c) issued 35,000 shares for
$38,500.
During
the three months ended March 31, 2021, the Company (a) issued 570,000 shares of common stock for $456,000; (b) 264,338 shares of common
stock for the conversion for $181,250 in convertible notes and $43,438 in accrued interest; (c) 400,000 shares of common stock for services
rendered in the amount of $436,385; and (d) 2,562,277 shares (of a total of 4,292,220 to be issued) for the purchase of Rohuma.
There
were no shares issued in the nine months ended September 30, 2020.
On
April 12, 2018, the Company amended its Articles of Incorporation to forward split all outstanding shares of common stock such that all
issued and outstanding shares of Common Stock shall be automatically combined and reclassified such that each share of Pre-Forward Split
Stock shall be combined and reclassified into four shares of Common Stock. The number of shares for all periods presented has been retroactively
restated to reflect the forward split.
Common
Stock Warrants
The
following schedule summarizes the changes in the Company’s common stock warrants:
SCHEDULE OF COMMON STOCK WARRANTS
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
Warrants Outstanding
|
|
Average
|
|
|
|
Average
|
|
|
|
Number
|
|
Exercise
|
|
Remaining
|
|
Aggregate
|
|
Exercise
|
|
|
|
Of
|
|
Price
|
|
Contractual
|
|
Intrinsic
|
|
Price
|
|
|
|
Shares
|
|
Per Share
|
|
Life
|
|
Value
|
|
Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
|
|
1,329,272
|
|
|
$
|
0.001
|
|
|
|
4.87 years
|
|
|
$
|
-
|
|
|
$
|
0.001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
$
|
|
|
Warrants exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
$
|
|
|
Warrants expired/cancelled
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
|
|
1,329,272
|
|
|
$
|
0.001
|
|
|
|
3.87 years
|
|
|
$
|
2,125,506
|
|
|
$
|
0.001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants granted
|
|
|
2,506,315
|
|
|
|
$ 0.001-2.00
|
|
|
|
-
|
|
|
|
|
|
|
|
$
|
|
|
Warrants exercised/exchanged
|
|
|
(451,205
|
)
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
$
|
|
|
Warrants expired/cancelled
|
|
|
(419,127
|
)
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2021
|
|
|
2,965,255
|
|
|
|
$ 0.001-2.00
|
|
|
|
2.89 years
|
|
|
$
|
1,640,226
|
|
|
$
|
0.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2021
|
|
|
2,418,239
|
|
|
|
$ 0.001-2.00
|
|
|
|
3.01 years
|
|
|
$
|
1,149,115
|
|
|
$
|
0.77
|
|
Changes
to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each option/warrant is estimated
using the Black-Scholes valuation model. The following assumptions were used for the nine months ended September 30, 2021 and year ended
December 31, 2020:
SCHEDULE OF EACH OPTION WARRANT ESTIMATED USING THE BLACK-SCHOLES VALUATION MODEL
|
|
|
Nine Months Ended
September 30, 2021
|
|
Year Ended December 31,
2020
|
|
Expected term
|
|
|
3 years
|
|
|
|
-
|
|
|
Expected volatility
|
|
|
170-240
|
%
|
|
|
-
|
|
|
Expected dividend yield
|
|
|
-
|
|
|
|
-
|
|
|
Risk-free interest rate
|
|
|
2.00
|
%
|
|
|
-
|
|
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. A total of 419,127 of these warrants were
cancelled effective May 16, 2021 as a result of these criteria not being achieved.
On
February 16, 2021, the Company entered into several stock purchase agreements for the issuance of 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. Of these warrants, 820,524 were earned at the date of acquisition,
with the remaining 547,015 expected to be earned over the next two years from grant based on revenue goals for Mimo. The warrants have
a term of three years and an exercise price of $0.001 and value in the amount of $1,640,447, of which $984,268 is reflected in additional
paid in capital, with the remaining $656,179 reflected as contingent consideration. In addition to the issuance of the warrants, TRAQ
Pvt Ltd, wrote off $258,736 in amounts due from a note receivable, $123,778 in accounts receivable and $40,354 in a debenture from Mimo.
In addition, a cash payment was made to one of the minority shareholders of Mimo in the amount of $22,338. The Company acquired over
99% of Mimo with the remaining percentage of less than 1% reflected as a non-controlling interest.
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.
On
February 12, 2021, in connection with the Platinum Point Capital note, the Company granted 200,000 warrants with a term of three years,
at an exercise price of $2.00. The warrants have price protections, and as a result of the granting of warrants in the Evergreen Capital
Management transaction on September 17, 2021, the exercise price was reduced to $1.45.
On
September 17, 2021, the Company granted 496,552 warrants with a term of five years, at an exercise price of $1.45 to Evergreen Capital
Management LLC with the $720,000 convertible promissory note. As a commission on this note, the Company granted to the investment bankers,
39,724 warrants with the same terms as the Evergreen Capital Management warrants. The Company recognized a commission expense for $37,977
on these warrants. These issuances triggered a price protection clause in the Platinum Point Capital warrants and reduced their exercise
price to $1.45.
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.
In
the nine months ended September 30, 2021, an additional 1,791,020 options vested for a total vested amount of 2,103,520 at September
30, 2021.
In
the nine months ended September 30, 2021, the Company recognized $388,498 in stock-based compensation.
The
following represents a summary of options:
SUMMARY OF STOCK OPTION
|
|
|
Nine Months Ended
September 30, 2021
|
|
Year Ended
December 31, 2020
|
|
|
|
Number
|
|
Weighted
Average
Exercise Price
|
|
Number
|
|
Weighted
Average
Exercise Price
|
|
Beginning balance
|
|
|
3,930,000
|
|
|
$
|
0.0052
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
3,930,000
|
|
|
|
0.0052
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Ending balance
|
|
|
3,930,000
|
|
|
$
|
0.0052
|
|
|
|
3,930,000
|
|
|
$
|
0.0052
|
|
|
Intrinsic value of options
|
|
$
|
3,511,759
|
|
|
|
|
|
|
$
|
6,267,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
|
9.06
|
|
|
|
|
|
|
|
9.81
|
|
|
|
|
|
NOTE
15: OPERATING LEASE
The
Company has adopted ASU No. 2016-02, Leases (Topic 842), as of January 1, 2019 and will account for their lease in terms of the
right of use assets and offsetting lease liability obligations for this new lease under this pronouncement. In accordance with ASC 842
- Leases, effective January 1, 2019, the Company up until May 16, 2019 did not have any long-term lease commitments. On May 17, 2019
with the Company’s acquisition of TRAQ Pvt Ltd., recorded a lease right of use asset and a lease liability at present value of
$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.
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.
As
of September 30, 2021, the value of the unamortized lease right of use asset is $115,492. As of September 30, 2021, the Company’s
lease liability was $126,162.
SCHEDULE OF REMAINING LEASE OBLIGATION
|
|
|
|
|
|
Remaining Lease Obligation by calendar year (undiscounted cash flows)
|
|
|
|
2022
|
|
$
|
12,526
|
|
|
2023
|
|
|
28,593
|
|
|
2024
|
|
|
28,593
|
|
|
2025
|
|
|
29,487
|
|
|
2026
|
|
|
32,882
|
|
|
2027
|
|
|
53,726
|
|
|
Total lease payments
|
|
|
185,807
|
|
|
Less: Imputed interest
|
|
|
59,645
|
|
|
Present value of lease liabilities
|
|
$
|
126,162
|
|
For
the nine months ended September 30, 2021 and 2020 the Company recorded rent expense of $23,521 and $95,151.
NOTE
16: DERIVATIVE LIABILITIES
On
January 19, 2021, the Company entered into a 12% Convertible Promissory Note with GS Capital Partners, LLC (the “GS Note”)
in the amount of $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
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
September 17, 2021, the Company entered into a 20% OID Senior Secured Promissory Note with Evergreen Capital Management LLC (the “Evergreen
1”). The Evergreen 1 has a maturity of nine months to June 17, 2022. The Evergreen 1 accrues interest at a rate of 10% per year.
The conversion price of Evergreen 1 is the lower of (a) $1.45 (“Fixed Conversion Price”) or (b) upon the occurrence and during
the continuation of any Event of Default, if lower, 90% of the average of the two lowest VWAPs for the five (5) consecutive Trading Day
that is immediately prior to the applicable Conversion Date (the “Default Conversion Price”). There are certain price protections
for Evergreen Capital Management LLC under the terms of Evergreen 1, which make the conversion option a derivative liability. The Company
granted 496,552 warrants that have a term of five-years and an exercise price of $1.45 per share with Evergreen 1. The warrants granted
with Evergreen 1 also contain certain price protections, that make the value of the warrants a derivative liability.
Changes
to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each warrant is estimated using
the Black-Scholes valuation model. The following assumptions were used in September 30, 2021 and December 31, 2020:
SCHEDULE OF VALUATION ASSUMPTIONS
|
|
|
Nine Months
Ended
September 30,
2021
|
|
Year Ended
December 31,
2020
|
|
|
|
|
|
|
|
Expected term
|
|
|
1 year
|
|
|
|
-
|
|
|
Expected volatility
|
|
|
164 - 240
|
%
|
|
|
-
|
|
|
Expected dividend yield
|
|
|
-
|
|
|
|
-
|
|
|
Risk-free interest rate
|
|
|
0.15
|
%
|
|
|
-
|
|
The
Company’s derivative liabilities are as follows:
SCHEDULE OF DERIVATIVE LIABILITIES
|
|
|
September 30,
2021
|
|
December 31,
2020
|
|
Fair value of the GS Capital conversion option
|
|
$
|
186,818
|
|
|
$
|
-
|
|
|
Fair value of the Platinum Point conversion option
|
|
|
902,857
|
|
|
|
-
|
|
|
Fair value of the Platinum Point warrants (200,000 warrants)
|
|
|
134,000
|
|
|
|
-
|
|
|
Fair value of the Evergreen 1 conversion option
|
|
|
332,690
|
|
|
|
-
|
|
|
Fair value of the Evergreen 1 warrants (496,552 warrants
|
|
|
332,690
|
|
|
|
-
|
|
|
|
|
$
|
1,889,055
|
|
|
$
|
-
|
|
Activity
related to the derivative liabilities for the period ended September 30, 2021 is as follows:
SCHEDULE OF ACTIVITY RELATED TO DERIVATIVE LIABILITIES
|
Beginning balance as of December 31, 2020
|
|
$
|
-
|
|
|
Issuances of warrants/conversion option – derivative liabilities
|
|
|
1,038,834
|
|
|
Change in fair value of warrants/conversion option - derivative liabilities
|
|
|
850,221
|
|
|
Ending balance as of September 30, 2021
|
|
$
|
1,889,055
|
|
There
were no derivative liabilities prior to January 2021.
nOTE
17: CONCENTRATIONS
During
the nine months ended September 30, 2021 and 2020, the Company had two major customers comprising 57% of revenues and two major customers
comprising 85% of revenues, respectively. A major customer is defined as a customer that represents 10% or greater of total revenues.
There was 71% and 85% of accounts receivable representing two and two customers as of September 30, 2021 and December 31, 2020, respectively.
The
Company does not believe that the risk associated with these customers or vendors will have an adverse effect on the business.
nOTE
18: CONTINGENCY
During
the year ended December 31, 2018, the Company charged an independent truck driver approximately $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
19: COMMITMENTS AND CONTINGENCIES
Commitments
and contingencies in respect of TRAQ Pvt Ltd;
|
|
(i)
|
TRAQ
Pvt Ltd had applied for compounding of the TDS liability for the assessment year 2014-2015 and 2015-2016 in accordance with Indian
Income Tax Laws. However, 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. The impact has been recorded
in the nine months ended September 30, 2021 Consolidated Financial Statements.
|
|
|
|
|
|
|
(iv)
|
TRAQ
Pvt Ltd has delayed in complying with provisions related to Foreign Direct Investment and Transfer of Shares to Non-resident as per
the Master Circulars and notification issued by Reserve Bank of India, therefore, is liable for imposition of penalty. Since the
amount of the penalty for the same is not ascertainable, no effect was given in the Consolidated Financial Statements.
|
|
|
|
|
|
|
(v)
|
Prior
to its acquisition in May 2019, TRAQ Pvt Ltd, had provided a guarantee in favor of State Bank of India for $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
20: SUBSEQUENT EVENTS
On
October 6, 2021, Platinum converted $75,000 of their outstanding balance into 405,844 shares of common stock, and then on October 8,
2021, the Company paid the remaining principal balance of $325,000 along with the accrued interest payable of $25,644 and a prepayment
penalty of $70,129, for a total of $420,773.
On
October 8, 2021, the Company entered into a 20% OID Senior Secured Promissory Note in the amount of $480,000 (includes $80,000 of Original
Issue Discount) with Evergreen Capital Management LLC (the “Evergreen 2”). The Evergreen 2 has a maturity of nine months
to July 8, 2022. The Evergreen 2 accrues interest at a rate of 10% per year. The conversion price of Evergreen 2 is the lower of (a)
$1.45 (“Fixed Conversion Price”) or (b) upon the occurrence and during the continuation of any Event of Default, if lower,
90% of the average of the two lowest VWAPs for the five (5) consecutive Trading Day that is immediately prior to the applicable Conversion
Date (the “Default Conversion Price”). There are certain price protections for Evergreen Capital Management LLC under the
terms of Evergreen 2, which make the conversion option a derivative liability. The Company granted 331,034 warrants that have a term
of five-years and an exercise price of $1.45 per share with Evergreen 2. The warrants granted with Evergreen 2 also contain certain price
protections, that make the value of the warrants a derivative liability.
As
a commission on this note, the Company granted to the investment bankers, 26,483 warrants with the same terms as the Evergreen Capital
Management warrants. The Company recognized a commission expense for $9,695 on these warrants.
On
October 15, 2021, the Company entered into a 20% OID Senior Secured Promissory Note in the amount of $240,000 (includes $40,000 of Original
Issue Discount) with Evergreen Capital Management LLC (the “Evergreen 3”). The Evergreen 3 has a maturity of nine months
to July 15, 2022. The Evergreen 3 accrues interest at a rate of 10% per year. The conversion price of Evergreen 3 is the lower of (a)
$1.45 (“Fixed Conversion Price”) or (b) upon the occurrence and during the continuation of any Event of Default, if lower,
90% of the average of the two lowest VWAPs for the five (5) consecutive Trading Day that is immediately prior to the applicable Conversion
Date (the “Default Conversion Price”). There are certain price protections for Evergreen Capital Management LLC under the
terms of Evergreen 3, which make the conversion option a derivative liability. The Company granted 165,517 warrants that have a term
of five-years and an exercise price of $1.45 per share with Evergreen 3. The warrants granted with Evergreen 3 also contain certain price
protections, that make the value of the warrants a derivative liability.
As
a commission on this note, the Company granted to the investment bankers, 13,241 warrants with the same terms as the Evergreen Capital
Management warrants. The Company recognized a commission expense for $5,756 on these warrants.
On
October 18, 2021, the Company made their final payment to GS Capital for their convertible note. With that final payment made, GS Capital
returned 170,000 shares of common stock they held as collateral for the convertible note and the share were placed back in treasury.