Company Quick10K Filing
Quick10K
TraqIQ
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-08-04 M&A, Exhibits
8-K 2019-05-16 Enter Agreement, Sale of Shares, Exhibits
8-K 2019-05-11 Officers
8-K 2019-01-28 Accountant, Exhibits
8-K 2018-04-15 Officers
8-K 2017-12-01 Enter Agreement, Exhibits
RGIN Regenicin 9
EQUR E-Qure 2
INFOR Infor 0
MOZO M101 0
RVA Reva Medical 0
SFOR Strikeforce Technologies 0
JACC JACC Studios 0
TFVR Timefirevr 0
CNHC CNH Industrial Capital 0
ASIM Asia Interactive Media 0
TCE 2019-06-30
Note 1 - Organization and Nature of Operations
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies
Note 3: Acquisition of Mann
Note 4: Cash and Restricted Cash
Note 5: Property and Equipment
Note 6: Intangible Assets
Note 7: Long-Term Investment
Note 8: Current Portion - Long-Term Debt Related Parties
Note 9: Long-Term Debt
Note 10: Current Portion - Convertible Debt - Related and Unrelated Parties
Note 11: Stockholders' Deficit
Note 12: Operating Lease
Note 13: Concentrations
Note 14: Contingency
Note 15: Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex31-1.htm
EX-31.2 ex31-2.htm
EX-32.1 ex32-1.htm
EX-32.2 ex32-2.htm

TraqIQ Earnings 2019-06-30

TCE 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended June 30, 2019

 

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

 

For the transition period from _____________ to _____________

 

Commission File Number: 333-172658

 

TRAQIQ, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

California   30-0580318
(State or Other Jurisdiction of
Incorporation or Organization)
  (I.R.S. Employer
Identification No.)
     
14205 SE 36th Street, Suite 100, Bellevue, WA   98006
(Address of Principal Executive Office)   (Zip Code)

 

(425) 818-0560

(Registrant’s Telephone Number, Including Area Code)

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

As of August 30, 2019, there were 27,297,960 shares of the registrant’s common stock, $0.0001 par value, outstanding.

 

 

 

 
 

 

TRAQIQ, INC

INDEX

 

    Page
PART I - FINANCIAL INFORMATION  
     
Item 1. Financial Statements 4
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 26
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 30
     
Item 4. Controls and Procedures 31
     
PART II - OTHER INFORMATION  
     
Item 1. Legal Proceedings 32
     
Item 1A. Risk Factors 32
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 32
     
Item 3. Defaults Upon Senior Securities 32
     
Item 4. Mine Safety Disclosures 32
     
Item 5. Other Information 32
     
Item 6. Exhibits 32
     
Signatures 33

 

 2 
 

 

FORWARD-LOOKING STATEMENTS

 

Except for any historical information contained herein, the matters discussed in this quarterly report on Form 10-Q contain certain “forward-looking statements’’ within the meaning of the federal securities laws. This includes statements regarding our future financial position, economic performance, results of operations, business strategy, budgets, projected costs, plans and objectives of management for future operations, and the information referred to under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

These forward-looking statements generally can be identified by the use of forward-looking terminology, such as “may,’’ “will,’’ “expect,’’ “intend,’’ “estimate,’’ “anticipate,’’ “believe,’’ “continue’’ or similar terminology, although not all forward-looking statements contain these words. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, you are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although we believe that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements. Important factors that may cause actual results to differ from projections include, for example:

 

  the success or failure of management’s efforts to implement our business plan;
     
  our ability to fund our operating expenses;
     
  our ability to compete with other companies that have a similar business plan;
     
  the effect of changing economic conditions impacting our plan of operation; and
     
  our ability to meet the other risks as may be described in future filings with the Securities and Exchange Commission (the “SEC”).

 

Unless otherwise required by law, we also disclaim any obligation to update our view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made in this quarterly report on Form 10-Q.

 

When considering these forward-looking statements, you should keep in mind the cautionary statements in this quarterly report on Form 10-Q and in our other filings with the SEC. We cannot assure you that the forward-looking statements in this quarterly report on Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may prove to be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time-frame, or at all.

 

 3 
 

 

Item 1. Financial Statements Page No.
   
Condensed Consolidated Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018 5
   
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Six and Three Months Ended June 30, 2019 and 2018 (unaudited) 6
   
Condensed Consolidated Statement of Changes in Stockholders’ Deficit for the Six Months Ended June 30, 2019 and Year Ended December 31, 2018 (unaudited) 7
   
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018 (unaudited) 8
   
Notes to Condensed Consolidated Financial Statements (unaudited) 9

 

 4 
 

 

TRAQIQ, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

IN US$

 

   JUNE 30, 2019   DECEMBER 31, 2018 
   (UNAUDITED)     
         
ASSETS          
Current Assets:          
Cash  $2,687   $2,347 
Accounts receivable, net   625,758    11,459 
Prepaid expenses and other current assets   175,328    - 
           
Total Current Assets   803,773    13,806 
           
Fixed assets, net   66,825    - 
Intangible assets, net   1,029,819    - 
Restricted cash   188,741    - 
Long-term investment   43,009    - 
Right-of-use asset   565,721    - 
Other assets   38,633    - 
           
Total Non-current Assets   1,932,748    - 
           
TOTAL ASSETS  $2,736,521   $13,806 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
LIABILITIES          
Current Liabilities:          
Accounts payable and accrued expenses  $795,078   $531,120 
Cash overdraft   392,216    - 
Accrued payroll and related taxes   328,868    - 
Accrued taxes and duties payable   67,705    - 
Deferred revenues   3,162    - 
Current portion - lease liability   120,645    - 
Current portion - long-term debt - related parties   1,165,009    845,236 
Current portion - long-term debt   89,821    54,801 
Current portion - convertible debt - long-term debt - related and unrelated parties   241,334    241,334 
           
Total Current Liabilities   3,203,838    1,672,491 
           
Long-term debt, net of current portion   23,110    - 
Lease liability, net of current portion   456,597    - 
Deferred tax liabilities, net   148,227    - 
           
Total Non-current Liabilities   627,934    - 
           
Total Liabilities   3,831,772    1,672,491 
           
Commitments and contingencies   -    - 
           
STOCKHOLDERS’ DEFICIT          
Preferred stock, par value, $0.0001, 10,000,000 shares authorized, Series A Convertible Preferred, 50,000 and 50,000 shares issued and outstanding, respectively   5    5 
Common stock, par value, $0.0001, 300,000,000 shares authorized, 27,297,960 and 27,297,960 issued and outstanding, respectively   2,730    2,730 
Additional paid in capital   499,267    12,355 
Accumulated deficit   (1,617,871)   (1,673,775)
Accumulated other comprehensive income (loss)   20,618    - 
           
Total Stockholders’ Deficit   (1,095,251)   (1,658,685)
           
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $2,736,521   $13,806 

 

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

 

 5 
 

 

TRAQIQ, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2019 AND 2018

IN US$

 

   SIX MONTHS ENDED   THREE MONTHS ENDED 
   JUNE 30,   JUNE 30, 
   2019   2018   2019   2018 
                 
REVENUE  $138,358   $161,568   $132,793   $71,782 
COST OF REVENUE   90,467    170,185    86,396    76,916 
GROSS PROFIT (LOSS)   47,891    (8,617)   46,397    (5,134)
                     
OPERATING EXPENSES                    
Salaries and salary related costs   33,559    17,203    32,959    967 
Professional fees   75,349    85,654    28,506    23,552 
Rent expense   17,967    1,857    17,682    592 
Depreciation and amortization expense   10,695    -    10,695    - 
General and administrative expenses   46,187    42,912    30,137    19,576 
                     
Total Operating Expenses   183,757    147,626    119,979    44,687 
                     
OPERATING LOSS   (135,866)   (156,243)   (73,582)   (49,821)
                     
OTHER INCOME (EXPENSE)                    
Bargain purchase gain   304,160    -    304,160    - 
Interest expense, net of interest income   (98,718)   (62,096)   (54,668)   (21,800)
Total other income (expense)   205,442    (62,096)   249,492    (21,800)
                     
NET INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES   69,576    (218,339)   175,910    (71,621)
                     
Provision for income taxes   13,672    -    13,004    - 
                     
NET INCOME (LOSS)  $55,904   $(218,339)  $162,906   $(71,621)
                     
Other comprehensive income (loss)                    
Foreign currency translation adjustment   

15,502

    

-

    

15,502

    

-

 

Comprehensive income (loss)

  $

71,406

   $

(218,339

)  $

178,408

   $

(71,621

)
                     
Net income (loss) per share – basic  $0.00   $(0.01)  $0.01   $(0.00)
                     
Net income (loss) per share – diluted  $0.00   $(0.01)  $0.01   $(0.00)
                     
Weighted average common shares outstanding - basic   27,297,960    27,297,960    27,297,960    27,297,960 
                     
Weighted average common shares outstanding - diluted   27,322,960    27,297,960    27,347,960    27,297,960 

 

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

 

 6 
 

 

TRAQIQ, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND YEAR ENDED DECEMBER 31, 2018

IN US $

 

   Series A Preferred   Common Stock  

Additional

Paid-In

Capital -

   Accumulated  

Accumulated

Other

Comprehensive

     
   Shares   Amount   Shares   Amount   Common   Deficit   Income (Loss)   Total 
                                 
Balance - December 31, 2017   50,000   $5    27,297,960   $2,730   $12,355   $(1,275,914)  $-   $(1,260,824)
                                         
Net loss for the period   -    -    -    -    -    (146,718)   -    (146,718)
                                         
Balance - March 31, 2018   50,000    5    27,297,960    2,730    12,355    (1,422,632)   -    (1,407,542)
                                         
Net loss for the period   -    -    -    -    -    (71,621)   -    (71,621)
                                         
Balance - June 30, 2018   50,000    5    27,297,960    2,730    12,355    (1,494,253)   -    (1,479,163)
                                         
Net loss for the period   -    -    -    -    -    (114,528)   -    (114,528)
                                         
Balance - September 30, 2018   50,000    5    27,297,960    2,730    12,355    (1,608,781)   -    (1,593,691)
                                         
Net loss for the year   -    -    -    -    -    (64,994)   -    (64,994)
                                         
Balance - December 31, 2018   50,000    5    27,297,960    2,730    12,355    (1,673,775)   -    (1,658,685)
                                         
Net loss for the period   -    -    -    -    -    (107,002)   -    (107,002)
                                         
Balance - March 31, 2019   50,000    5    27,297,960    2,730    12,355    (1,780,777)   -    (1,765,687)
                                         
Acquisition of Mann-India   -    -    -    -    486,912    -    5,116    492,028 
                                         
Net income for the period   -    -    -    -    -    162,906    15,502    178,408 
                                         
Balance - June 30, 2019   50,000   $5    27,297,960   $2,730   $499,267   $(1,617,871)  $20,618   $(1,095,251)

 

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

 

 7 
 

 

TRAQIQ, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018

IN US$

 

   2019   2018 
CASH FLOW FROM OPERATING ACTIVITIES          
Net income (loss)  $55,904   $(218,339)
Adjustments to reconcile net income (loss) to net cash used in operating activities          
Amortization of debt discount   -    15,139 
Bargain purchase gain   (304,160)   - 
Bad debt expense   

14,311

    - 
Depreciation and amortization   10,695    - 
Lease cost, net of repayment   2,880    - 
Foreign currency (gain) loss   (277)   - 
Deferred tax provision   9,104    - 
Changes in assets and liabilities          
Accounts receivable   (121,591)   1,433 
Prepaid expenses and other current assets   48,589    (17,618)
Other assets   (4,276)   - 
Accounts payable and accrued expenses   81,607    72,660 
Accrued payroll and payroll taxes   3,239    - 
Accrued duties and taxes   940    - 
Deferred revenue   (456)   - 
Total adjustments   (259,395)   71,614 
Net cash used in operating activities   (203,491)   (146,725)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Cash received in acquisition of Mann   234    - 
Restricted cash received in acquisition of Mann   185,399    - 
Net cash provided by investing activities   185,633    - 
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Decrease in cash overdraft   (78,801)   - 
Proceeds from long-term debt - related parties   326,273    108,244 
Repayment of long-term debt - related parties   (6,500)   - 
Proceeds from long-term debt   13,000    - 
Repayments of long-term debt   (47,033)   (1,873)
Proceeds from convertible notes - related and unrelated parties   -    40,000 
Net cash provided by financing activities   206,939    146,371 
           
NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH   189,081    (354)
           
CASH AND RESTRICTED CASH - BEGINNING OF PERIOD   2,347    1,718 
           
CASH AND RESTRICTED CASH - END OF PERIOD  $191,428   $1,364 
           
CASH PAID DURING THE PERIOD FOR:          
Interest expense  $13,177   $1,750 
Income taxes  $-   $- 
           
SUMMARY OF NON-CASH ACTIVITIES:          
 Acquisition of Mann:          
 Accounts receivable  $506,951   $- 
 Prepaid and other current assets   215,191    - 
 Right-of-use asset   576,566    - 
 Fixed assets   68,260    - 
 Other assets   37,950    - 
 Investment   42,248    - 
 Intangible assets   1,019,580    - 
 Accounts payable and accrued expenses   (173,498)   - 
 Accrued payroll and related taxes   (325,629)   - 
 Accrued duties and taxes   (66,765)   - 
 Lease liability   (585,207)   - 
 Deferred revenue   (3,618)   - 
 Deferred tax liability   (140,143)   - 
 Long-term debt   (90,314)   - 
 Cash overdraft   (471,017)   - 
 Accumulated other comprehensive income (loss)   (5,116)   - 
 Cash   234    - 
 Restricted cash   185,399    - 
           
 Total net assets acquired   791,072    - 
           
 Consideration per Share Exchange Agremeent   486,912    - 
           
 Goodwill/(Bargain Purchase Gain)  $(304,160)  $- 

 

The accompanying notes are an integral part of these financial statements

 

 8 
 

 

TraqIQ, Inc.

Notes to Condensed Consolidated Financial Statements

(IN US$)

(Unaudited)

 

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

 

TraqIQ, Inc. (along with its wholly owned subsidiaries, referred to herein as the “Company”) was incorporated in the State of California on September 9, 2009 as Thunderclap Entertainment, Inc. On July 14, 2017, Thunderclap Entertainment, Inc. changed its name to TraqIQ, Inc. On July 19, 2017, the Company entered into a Share Exchange Agreement (“Share Exchange”) with the stockholders of OmniM2M, Inc. (“OmniM2M”) and Ci2i Services, Inc. (“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. Accordingly, the condensed consolidated financial statements included the accounts of Ci2i for all periods presented and the accounts of TraqIQ, Inc. and Omni, which was acquired by the Company on July 19, 2017 since the date of acquisition. 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.

 

Ci2i is an innovative and growth-oriented services company founded in 1998 that develops and deploys intelligent technologies and products in order to meet the demand for sustainable, integrated solutions to contemporary business needs. Ci2i is a consulting services company that provides marketing and technical services to its clients. These services are delivered both on a Project and a Time & Materials basis. The primary focus has been in the Analytics and Intelligence segments. The Company typically does not own any IP, as all the work is done on behalf of the clients.

 

OmniM2M was formed in 2014 and is an innovative and growth-oriented company that develops and deploys “Internet of Things” (IoT) and “Mobile to Mobile” (M2M) products in order to meet the demand for sustainable, integrated solutions to contemporary business needs.

 

TransportIQ was formed in the State of Nevada on September 8, 2017. TransportIQ is long haul trucking carrier business that comprises contract drivers and owner operators. TransportIQ’s customers include leading third-party logistics and supply chain management providers such as C.H. Robinson. TransportIQ plans to differentiate itself from traditional carriers through the adoption of new technologies that can help TransportIQ create competitive advantages in the transportation industry, including:

 

  Industrial Internet of Things (IIoT) tracking devices
  Data Analytics software that can help dispatchers improve efficiency and profitability
  Blockchain transaction software to improve efficiencies with third party logistics companies

 

The Company’s Offering Statement on Form 1-A filed with the Securities and Exchange Commission was approved on February 25, 2019 with an effective date of February 27, 2019.

 

 9 
 

 

On May 16, 2019, the Company entered into a Share Exchange Agreement with Mann-India Technologies Private Ltd., an Indian Corporation (“Mann”). 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 $486,912 (an average of $0.3663 per share). The warrants will be exercisable as follows: (i) 100,771 warrants immediately upon closing (value of $36,912); (ii) 859,951 warrants (value of $315,000) exercisable one-year after the date of closing; and (iii) 368,550 warrants (value of $135,000) 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 Mann achieving certain revenue figures and pre-tax profit percentages. Mann must achieve target revenue of $1.1 million (US$) and pre-tax profit of 25% (US$). Should Mann be unable to achieve these criteria, the warrants will be reduced proportionately.

 

Mann was established in May 2000 and is headquartered in New Delhi, India. Mann is a leading software development company with which 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.

 

Mann has its own experienced team of software developers dedicated towards developing various kinds of customized software.

 

Mann’s provides services in the following areas: technology consultancy; business analytics and intelligence; enterprise mobility; enterprise application integration; crypto currency and blockchain implementation; software factory; and IT modernization.

 

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 25, 2019. Interim results of operations for the six months ended June 30, 2019 are not necessarily indicative of future results for the full year.

 

Forward Stock Split

 

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.

 

Consolidation

 

The consolidated financial statements include the accounts of TraqIQ, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. These estimates include, but are not limited to, management’s estimate of provisions required for non-collectible accounts receivable, depreciative lives of our assets, determination of technological feasibility, and valuation allowances of our deferred tax assets. Actual results could differ from those estimates.

 

 10 
 

 

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 Mann 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. The Company has no cash equivalents as of June 30, 2019 and December 31, 2018.

 

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 June 30, 2019 and December 31, 2018 was $188,741 and $0, 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 $70,273 and $0, respectively was required for the outstanding accounts receivable as of June 30, 2019 and December 31, 2018.

 

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 assets and internally generated intangible assets of Mann which includes developed technology, software and international databases. The Company amortizes these intangible assets on a straight-line basis over their estimated useful lives. 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.

 

 11 
 

 

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 June 30, 2019 and December 31, 2018.

 

Capitalized Software Costs

 

In accordance with the relevant FASB accounting guidance regarding the development of software to be sold, leased, or marketed, the Company expenses such costs as they are incurred until technological feasibility has been established, at and after which time these costs are capitalized until the product is available for general release to customers. Once the technological feasibility is established per ASC 985-20, the Company capitalizes costs associated with the acquisition or development of major software for internal and external use in the balance sheet. Costs incurred to enhance the Company’s software products, after general market release of the services using the products, is expensed in the period they are incurred. The Company only capitalizes subsequent additions, modifications or upgrades to internally developed software to the extent that such changes allow the software to perform a task it previously did not perform. The Company expenses software maintenance and training costs as incurred. The Company has not capitalized any cost for software development for the six months ended June 30, 2019 and 2018, respectively. All capitalized software costs of the Company were acquired from Mann.

 

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.

 

 12 
 

 

Trucking Revenue

 

The Company’s contracts with customers are generally on a purchase order basis and represent a single stand-alone performance obligation to transport property on behalf of a customer at a pre-determined rate. The performance obligation is satisfied at the point in time in which the delivery of property is complete and the Company generally collect payment within 30 days of delivery. Accordingly, revenue for each contract is recognized when the Company’s performance obligation is complete. There are no agency relationships in any if the services related to the trucking sector.

 

Professional Service Revenue

 

Mann generally derives 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 represent 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.

 

Mann 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.

 

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.

 

 13 
 

 

The following is a summary of revenue for the six months ended June 30, 2019 and 2018, disaggregated by type:

 

   2019   2018 
Trucking Revenue  $-   $143,752 
Professional Services Revenue   129,913    - 
Software Solution Revenue   8,445    17,816 
   $138,358   $161,568 

 

Costs of Services Provided

 

Costs of services provided consist of data processing costs, customer support costs including personnel costs to maintain the Company’s proprietary databases, costs to provide customer call center support, hardware and software expense associated with transaction processing systems and exchanges, telecommunication and computer network expense, and occupancy costs associated with facilities where these functions are performed. Depreciation expense is not included in costs of services provided.

 

Lease Obligations

 

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liabilities and operating lease liabilities, less current portion in the Company’s unaudited 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., Ci2i, OmniM2M and TransportIQ file a consolidated income tax return in the U.S. federal tax jurisdiction and various state tax jurisdictions. Mann files income tax returns in all India tax jurisdictions. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were filed. The India tax returns of Mann 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.

 

 14 
 

 

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.

 

 15 
 

 

Derivative Financial Instruments

 

Derivatives are recorded on the consolidated balance sheet at fair value. The conversion features of the convertible instruments are embedded derivatives and are separately valued and accounted for on the consolidated balance sheet with changes in fair value recognized during the period of change as a separate component of other income/expense. Fair values for exchange-traded securities and derivatives are based on quoted market prices. The pricing model we use for determining the fair value of our derivatives are binomial pricing models. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involves management’s judgment and may impact net income (loss).

 

With the issuance of the July 2017 FASB ASU 2017-11, “Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815),” which addresses the complexity of accounting for certain financial instruments with down round features, the Company has chosen the early adopt retroactively the amendments in Part I of the standard whereby fair value derivative liabilities previously recognized were derecognized in the current and comparative periods. Under the amendments included in this update, the Company is no longer required to record changes in fair value during the period of change as a separate component of other income (expense) in the consolidated Statements of Operations.

 

The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, “Debt—Debt with Conversion and Other Options”), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect.

 

Under current GAAP, an equity-linked financial instrument with a down round feature that otherwise is not required to be classified as a liability under the guidance in Topic 480 is evaluated under the guidance in Topic 815, “Derivatives and Hedging,” to determine whether it meets the definition of a derivative. If it meets that definition, the instrument (or embedded feature) is evaluated to determine whether it is indexed to an entity’s own stock as part of the analysis of whether it qualifies for a scope exception from derivative accounting. Generally, for warrants and conversion options embedded in financial instruments that are deemed to have a debt host (assuming the underlying shares are readily convertible to cash or the contract provides for net settlement such that the embedded conversion option meets the definition of a derivative), the existence of a down round feature results in an instrument not being considered indexed to an entity’s own stock. This results in a reporting entity being required to classify the freestanding financial instrument or the bifurcated conversion option as a liability, which the entity must measure at fair value initially and at each subsequent reporting date.

 

The amendments in this Update revise the guidance for instruments with down round features in Subtopic 815-40, “Derivatives and Hedging—Contracts in Entity’s Own Equity,” which is considered in determining whether an equity-linked financial instrument qualifies for a scope exception from derivative accounting. An entity still is required to determine whether instruments would be classified in equity under the guidance in Subtopic 815-40 in determining whether they qualify for that scope exception. If they do qualify, freestanding instruments with down round features are no longer classified as liabilities and embedded conversion options with down round features are no longer bifurcated.

 

 16 
 

 

For entities that present EPS in accordance with Topic 260, and when the down round feature is included in an equity-classified freestanding financial instrument, the value of the effect of the down round feature is treated as a dividend when it is triggered and as a numerator adjustment in the basic EPS calculation. This reflects the occurrence of an economic transfer of value to the holder of the instrument, while alleviating the complexity and income statement volatility associated with fair value measurement on an ongoing basis. Convertible instruments are unaffected by the Topic 260 amendments in this Update.

 

Those amendments in Part I of this Update are a cost savings relative to current GAAP. This is because, assuming the required criteria for equity classification in Subtopic 815-40 are met, an entity that issued such an instrument no longer measures the instrument at fair value at each reporting period (in the case of warrants) or separately accounts for a bifurcated derivative (in the case of convertible instruments) on the basis of the existence of a down round feature. For convertible instruments with embedded conversion options that have down round features, applying specialized guidance such as the model for contingent beneficial conversion features rather than bifurcating an embedded derivative also reduces cost and complexity. Under that specialized guidance, the issuer recognizes the intrinsic value of the feature only when the feature becomes beneficial instead of bifurcating the conversion option and measuring it at fair value each reporting period.

 

The amendments in Part II of this Update replace the indefinite deferral of certain guidance in Topic 480 with a scope exception. This has the benefit of improving the readability of the Codification and reducing the complexity associated with navigating the guidance in Topic 480.

 

For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in Part 1 of this Update should be applied in either of the following ways:

 

  1. retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the statement of financial position as of the beginning of the first fiscal year and interim period(s) in which the pending content that links to this paragraph is effective; or
     
  2. retrospectively to outstanding financial instruments with a down round feature for each prior reporting period presented in accordance with the guidance on accounting changes in paragraphs 250-10-45-5 through 45-10.

 

The amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting effect.

 

Earnings (Loss) Per Share of Common Stock

 

Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (EPS) include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable pursuant to the exercise of stock options and warrants. Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive for periods presented. An uncertain number of shares underlying convertible debt have been excluded from the computation of loss per share because their impact was anti-dilutive.

 

Related Party Transactions

 

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

 

 17 
 

 

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, Mann 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 Mann. Mann 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. Mann 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. Mann’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

 

Mann’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 Mann’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.

 

Recently Issued Accounting Standards

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses. The standard requires a financial asset (including trade receivables) measured at amortized cost basis to be presented at the net amount expected to be collected. Thus, the income statement will reflect the measurement of credit losses for newly-recognized financial assets as well as the expected increases or decreases of expected credit losses that have taken place during the period. This standard will be effective for the calendar year ending December 31, 2020. The Company is currently in the process of evaluating the impact of adoption of this ASU on the financial statements.

 

There were other 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 $1,617,870 and a working capital deficit of $2,400,065, as of June 30, 2019, and a working capital deficit of $1,658,685 as of December 31, 2018. As a result of these factors, management has determined that there is substantial doubt about the Company ability to continue as a going concern.

 

 18 
 

 

These condensed 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 of time. The condensed consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties.

 

In May 2019, the Company acquired 100% of the shares of 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 $486,912 (an average of $0.3663 per share). This acquisition will assist the Company in operations and cash flow.

 

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

 

NOTE 3: ACQUISITION OF MANN

 

On May 16, 2019, the Company entered into a Share Exchange Agreement with Mann-India Technologies Private Ltd., an Indian Corporation (“Mann”). 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 $486,912 (an average of $0.3663 per share). The warrants will be exercisable as follows: (i) 100,771 warrants immediately upon closing (value of $36,912); (ii) 859,951 warrants (value of $315,000) exercisable one-year after the date of closing; and (iii) 368,550 warrants (value of $135,000) exercisable two-years after the date of closing.

 

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

 

The Company acquired the assets and liabilities noted below in exchange for the warrants noted herein and accounted for the acquisition in accordance with ASC 805. As a result, total consideration was equal to the value of the warrants of $486,912, as stated in the agreement, and the Company recognized a gain on bargain purchase in the amount of $304,160. In accordance with ASC 805-20-50-4A, based on the book values which approximate fair values at the effective date of acquisition, the purchase price was recorded as follows:

 

Cash (including restricted cash of $185,399)  $185,633 
Accounts receivables, net   506,951 
Prepaid expenses and other current assets   215,191 
Right-of-use asset   576,566 
Fixed assets   68,260 
Intangible assets   1,019,580 
Investment   42,248 
Other assets   37,950 
Accounts payable and accrued expenses   (173,498)
Accrued payroll and related taxes   (325,629)
Accrued duties and taxes   (66,765)
Lease liability   (585,207)
Deferred revenue   (3,618)
Deferred tax liability   (140,143)
Cash overdraft   (471,017)
Long-term debt – related parties   (61,358)
Long-term debt   (28,956)
Accumulated other comprehensive income (loss)   (5,116)
   $791,072 

 

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Note that the initial accounting for the business combination is currently incomplete, as fair value amounts are still being determined, therefore all amounts presented herein are provisional and subject to final review and adjustment:

 

The intangible assets represent software development costs that are being amortized over ten years.

 

The difference between the net assets acquired of $791,072, and the consideration paid (in the form of warrants) of $486,912 represents a bargain purchase gain of $304,160.

 

Since the acquisition Mann has recorded $129,913 in revenues and a profit of $296,418 (inclusive of a bargain purchase gain of $304,160) that are included in consolidated results.

 

The following table shows pro-forma results for the six months June 30, 2019 and year ended December 31, 2018 as if the acquisition had occurred on January 1, 2018. These unaudited pro forma results of operations are based on the historical financial statements and related notes of Mann and the Company.

 

  

For the

six months ended

June 30, 2019

  

For the

year ended

December 31, 2018

 
Revenues  $270,920   $1,236,665 
Net income (loss)  $76,365   $(726,273)
Net income (loss) per share  $0.00   $(0.03)

 

NOTE 4: CASH AND RESTRICTED CASH

 

Cash and restricted cash is as follows:

 

  

June 30, 2019

(unaudited)

  

December 31,

2018

 
Cash on hand  $325   $- 
Bank balances   2,362    2,347 
Restricted cash   188,741    - 
Total  $191,428   $2,347 

 

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 six months ended June 30, 2019 and year ended December 31, 2018, there were no cash equivalents.

 

NOTE 5: PROPERTY AND EQUIPMENT

 

The Company’s property and equipment is as follows:

 

   June 30, 2019 (unaudited)  

December 31,

2018

   Estimated Life
            
Furniture and fixtures  $173,609   $     -   10 years
Office equipment   31,534    -   5 years
Vehicles   63,487    -   8 years
Computer equipment   400,347    -   3-6 years
    668,977    -    
Less: accumulated depreciation   (602,152)   -    
              
Net  $66,825   $-    

 

Depreciation expense for the six months ended June 30, 2019 and 2018 was $2,641 and $0, respectively.

 

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NOTE 6: INTANGIBLE ASSETS

 

The Company’s intangible assets are as follows:

 

   June 30, 2019 (unaudited)   December 31,
2018
   Estimated Life
            
Developed Technology  $1,757,635   $      -   10 years
              
Less: accumulated amortization   (727,816)   -    
              
Net  $1,029,819   $-    

 

Amortization expense for the six months ended June 30, 2019 and 2018 was $8,054 and $0, respectively.

 

NOTE 7: LONG-TERM INVESTMENT

 

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

 

   June 30, 2019 (unaudited)   December 31, 2018 
           
Equity Security – Compulsorily Convertible Debenture  $43,009   $        - 

 

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

 

NOTE 8: CURRENT PORTION - LONG-TERM DEBT RELATED PARTIES

 

The following is a summary of the current portion - long-term debt - related parties as of June 30, 2019 and December 31, 2018:

 

      June 30, 2019 (unaudited)   December 31, 2018 
Unsecured advances - CEO  (a)  $1,048,009   $728,236 
              
Notes payable - Satinder Thiara  (b)   57,000    57,000 
              
Promissory note – Kunaal Sikka  (c)   15,000    15,000 
              
Notes payable – Swarn Singh  (d)   45,000    45,000 
              
      $1,165,009   $845,236 

 

  (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. For the six months ended June 30, 2019, the Company repaid $6,500 and the CEO made additional advances of $326,273, Interest expense on this loan for the six months ended June 30, 2019 and 2018 was $64,913 and $47,008. Accrued interest on this loan at June 30, 2019 (unaudited) and December 31, 2018 is $354,844 and $289,931, respectively.

 

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  (b) Notes payable to Satinder Thiara entered into May 25, 2016 ($22,000) which is due on demand, December 13, 2016 ($10,000) which is due on demand, and May 1, 2018 ($25,000) which matures December 31, 2019 at interest rate of 15% annually (1.25% monthly). These are unsecured loans. Interest expense on these loans for the six months ended June 30, 2019 and 2018 was $4,275 and $3,025, respectively. Accrued interest on these loans at June 30, 2019 (unaudited) and December 31, 2018 is $18,648 and $14,373, respectively. Satinder Thiara is a shareholder of the Company and the CEO’s wife.
     
  (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%. Interest expense on these loans for the six months ended June 30, 2019 and 2018 was $900 and $0, respectively. Accrued interest on these loans at June 30, 2019 (unaudited) and December 31, 2018 is $1,440 and $540, respectively.
     
  (d) Note payable to Swarn Singh, father-in-law of the CEO, entered into January 2017 ($25,000) and February 2017 ($20,000) at interest rate of 15% annually (1.25% monthly). These are unsecured notes. Interest expense on these loans for the six months ended June 30, 2019 and 2018 was $3,375 and $3,375, respectively. Accrued interest on these loans at June 30, 2019 (unaudited) and December 31, 2018 is $16,595 and $13,220, respectively. Both notes are due December 31, 2019.

 

The entire balance is reflected as a current liability as the amounts are either due on demand or within the next twelve months.

 

NOTE 9: LONG-TERM DEBT

 

The following is a summary of the long-term debt as of June 30, 2019 and December 31, 2018:

 

      June 30, 2019 (unaudited)   December 31, 2018 
Promissory notes - Kabbage  (a)  $11,977   $36.687 
Promissory notes – Loan Builder  (b)   2,791    12,114 
Other debt – in default  (c)   6,000    6,000 
Yukti Securities Private Limited  (d)   4,816    - 
Lathika Regunathan  (e)   5,307    - 
Noor Qazi  (f)   52,254    - 
Auto loan – ICICI Bank  (g)   29,786    - 
Total     $112,931   $54,801 
Current portion      (89,821)   (54,801) 
Long-term debt, net of current portion     $23,110   $- 

 

  (a) Multiple monthly loan agreements with Kabbage. Each of these loans has a six-month duration with interest and fees spread over the 6 months.
     
  (b) Business loan agreement with LoanBuilder in August 2018 in the amount of $18,000, payable in 52 weekly payments of $409, including interest.
     
  (c) Note payable to an individual for $7,500, issued in May 2018 as consideration for services, due in June 2018, and bearing no interest. During the year ended December 31, 2018, the Company made a payment of $1,500 against the note and the Company has withheld payment of the remaining amount pending receipt of amounts due from the service provider.

 

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  (d) Loan payable to Yukti Securities Private Limited is an unsecured loan which is due on demand.
     
  (e) Unsecured loan from Lathika Regunathan, individual, is due on demand.
     
  (f) Unsecured loan from Noor Qazi, individual, is due on demand.
     
  (g) Loan payable with ICICI Bank, secured by the vehicle the loan was taken for. Payments are monthly at $752, through maturity in May 2023. Of the amount outstanding, the following represents the maturity: Current (2019-2020) - $6,676; 2020-2021 - $7,288; 2021-2022 - $7,952; and 2022-2023 - $7,870.

 

NOTE 10: CURRENT PORTION - CONVERTIBLE DEBT – RELATED AND UNRELATED PARTIES

 

The following is a summary of current portion - convertible debt - related and unrelated parties as of June 30, 2019 and December 31, 2018:

 

      June 30, 2019 (unaudited)   December 31, 2018 
Face value of notes – related party  (a)  $95,000   $95,000 
              
Face value of notes – unrelated parties  (a)   98,077    98,077 
              
Excess of the fair value of shares issuable over the face value of the convertible notes  (a)   48,257    48,257 
              
      $241,334   $241,334 

 

  (a) In connection with the reverse merger in July 2017, the Company and two stockholders, who had provided related party advances to the Company, agreed to exchange their related party advances for 6% Convertible Promissory Notes that were originally due on January 15, 2018 (the “Notes”) in the amount of $68,077. From August 2017 through November 2017, the Company issued additional notes to four different parties (two of which were related parties) in the principal amount of $100,000 ($70,000 to related parties). In January 2018, the holders of the Notes agreed to extend the maturity to April 30, 2018, and in April 2018, agreed to further extend the maturity of certain notes to June or July 2018. During the year ended December 31, 2018, the maturity of the notes were further extended to March 31, 2019 and then again to periods ranging from June 30, 2019 to December 31, 2019. The Notes bear simple interest at 6% unless the Company defaults, which increases the interest rate to 10%. The Holders, at their option, can elect to convert the principal plus any accrued interest, into shares of the Company’s common stock at a conversion rate equal to eighty percent (80%) of the average closing share price as quoted on the OTC Markets for the five (5) trading days prior to the date of conversion. There are two notes that had a maturity date of June 30, 2019. These notes have not been extended and are currently in default. The Company has classified these notes as current liabilities.
     
    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.

 

 23 
 

 

The Company recorded interest expense of $5,745 and $4,875 for the six months ended June 30, 2019 and 2018, respectively for these convertible notes. Accrued interest on the convertible notes was $20,723 and $14,979 at June 30, 2019 (unaudited) and December 31, 2018, respectively.

 

The Company is not currently trading on any exchange and was not for the six months ended June 30, 2019 and year ended December 31, 2018, respectively. The Company does not have a share price and 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 11: STOCKHOLDERS’ DEFICIT

 

Series A Convertible Preferred Stock

 

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

 

Each outstanding share of Series A Convertible Preferred Stock is convertible into the number of shares of the Company’s common stock (the “Common Stock”) determined by dividing the Stated Value by the Conversion Price as defined below, at the option of any Series A Convertible Preferred Stock shareholder in whole or in part, at any time commencing no earlier than six (6) months after the issuance date; provided that any conversion under this section must be made during the ten (10) day period immediately following the date on which the corporation files with the Securities and Exchange Commission any periodic report on form 10-Q, 10-K or the equivalent form; provided further that, any conversion under this Section IV: (a) shall be for a minimum Stated Value of $500 of Series A Convertible Preferred Stock.

 

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

 

Common Stock

 

As of June 30, 2019, the Company has 27,297,960 shares issued and outstanding.

 

On April 12, 2018, the Company amended its Articles of Incorporation to forward split all outstanding shares of common stock such that all issued and outstanding shares of Common Stock shall be automatically combined and reclassified such that each share of Pre-Forward Split Stock shall be combined and reclassified into four shares of Common Stock. The number of shares for all periods presented has been retroactively restated to reflect the forward split.

 

Warrants

 

On May 16, 2019, the Company entered into a Share Exchange Agreement with Mann-India Technologies Private Ltd., an Indian Corporation (“Mann”). 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 $486,912 (an average of $0.3663 per share). The warrants will be exercisable as follows: (i) 100,771 warrants immediately upon closing (value of $36,912); (ii) 859,951 warrants (value of $315,000) exercisable one-year after the date of closing; and (iii) 368,550 warrants (value of $135,000) exercisable two-years after the date of closing. The value of the transaction totaled $486,912 and is reflected as an increase to additional paid in capital.

 

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NOTE 12: 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 Mann, 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 $576,566 will be amortized on a straight-line basis over the term of the lease. For the six months ended June 30, 2019 the Company recorded a rent expense of $17,064. As of June 30, 2019, the value of the unamortized lease right of use asset is $565,721. As of June 30, 2019, the Company’s lease liability was $577,242.

 

Remaining Lease Obligation by calendar year (undiscounted cash flows)        
2019  $59,806 
2020   122,343 
2021   125,670 
2022   131,611 
2023   140,695 
2024   144,520 
2025 and thereafter   163,494 
Total lease payments   888,139 
Less: Imputed interest   310,897 
Present value of lease liabilities  $577,242 

 

nOTE 13: CONCENTRATIONS

 

During the six months ended June 30, 2019 and 2018, the Company had two major customers comprising 93% of revenues and one major customer comprising 90% of revenues, respectively. A major customer is defined as a customer that represents 10% or greater of total revenues. There was 89% and 77% of accounts receivable for three and two customers as of June 30, 2019 and December 31, 2018, respectively.

 

During the six months ended June 30, 2018, approximately 85% of the Company’s cost of sales was incurred through the use of four vendors.

 

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

 

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nOTE 14: 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 15: SUBSEQUENT EVENTS

 

Management has evaluated subsequent events, in accordance with FASB ASC Topic 855, “Subsequent Events”, through the date which the consolidated financial statements were available to be issued and there are no material subsequent events to report.

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

As used in this “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” except where the context otherwise requires, the term “we,” “us,” “our,” or “the Company,” refers to the business of TraqIQ Inc.

 

The following presentation of management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements, the accompanying notes thereto and other financial information appearing elsewhere in this quarterly report on Form 10-Q. This section and other parts of this quarterly report on Form 10-Q contain forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements.”

 

Overview

 

TraqIQ, Inc. (along with its wholly owned subsidiaries, referred to herein as the “Company”) was incorporated in the State of California on September 9, 2009 as Thunderclap Entertainment, Inc. On July 14, 2017, Thunderclap Entertainment, Inc. changed its name to TraqIQ, Inc. On July 19, 2017, the Company entered into a Share Exchange Agreement (“Share Exchange”) with the stockholders of OmniM2M, Inc. (“OmniM2M”) and Ci2i Services, Inc. (“Ci2i”) whereby the stockholders of OmniM2M and Ci2i agreed to exchange all of their respective shares, representing 100% ownership in OmniM2M and Ci2i in exchange for 12,000,000 shares of the Company’s common stock, respectively. The OmniM2M Shareholders and the Ci2i Shareholders have each been issued their respective 12,000,000 shares on a pro rata basis based on their respective holdings in OmniM2M and Ci2i in the Share Exchange Agreement. The Share Exchange was accounted for as a reverse merger whereas Ci2i is considered the accounting acquirer and TraqIQ, Inc. is considered the accounting acquiree. Accordingly, the consolidated financial statements included the accounts of Ci2i for all periods presented and the accounts of TraqIQ, Inc. and OmniM2M, which was acquired by the Company on July 19,2017 since the date of acquisition. For accounting purposes, the acquisition of OmniM2M is recorded at historical cost in accordance with Accounting Standard Codification (“ASC”) 805-50-25-2 as this is considered an acquisition of entities under common control as the management of the Company and OmniM2M control the activities of the respective companies. Prior to the merger with Ci2i and acquisition of OmniM2M, the Company was considered a shell company under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). On December 1, 2017, The Company entered into a Share Purchase Agreement (the “Share Exchange Agreement”) with Ajay Sikka (“Sikka”), the sole shareholder of Transport IQ, Inc. whereby Sikka agreed to sell all of the shares in TransportIQ, Inc. (“TransportIQ”) in exchange for $18,109, in the form of cancellation of all of the debt of TransportIQ that is owed to the Company. The transaction became effective upon the execution of the Share Exchange Agreement by Sikka and the Company; and Transport IQ, Inc, is now a wholly-owned subsidiary of the Company. Because TransportIQ was commonly controlled and owned, the transaction was recorded at the historical carrying value of TransportIQ’s assets and liabilities.

 

 26 
 

 

Ci2i is an innovative and growth-oriented services company founded in 1998 that develops and deploys intelligent technologies and products in order to meet the demand for sustainable, integrated solutions to contemporary business needs. Ci2i is a consulting services company that provides marketing and technical services to its clients. These services are delivered both on a Project and a Time & Materials basis. The primary focus has been in the Analytics and Intelligence segments. The Company typically does not own any IP, as all the work is done on behalf of the clients.

 

OmniM2M was formed in 2014 and is an innovative and growth-oriented company that develops and deploys “Internet of Things” (IoT) and “Mobile to Mobile” (M2M) products in order to meet the demand for sustainable, integrated solutions to contemporary business needs.

 

TransportIQ was formed in the State of Nevada on September 8, 2017. TransportIQ is long haul trucking carrier business that comprises contract drivers and owner operators. TransportIQ’s customers include leading third-party logistics and supply chain management providers such as C.H. Robinson. TransportIQ plans to differentiate itself from traditional carriers through the adoption of new technologies that can help TransportIQ create competitive advantages in the transportation industry, including:

 

  Industrial Internet of Things (IIoT) tracking devices
  Data Analytics software that can help dispatchers improve efficiency and profitability
  Blockchain transaction software to improve efficiencies with third party logistics companies

 

On May 16, 2019, the Company entered into a Share Exchange Agreement with Mann-India Technologies Private Ltd., an Indian Corporation (“Mann”). 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 $486,912 (an average of $0.3663 per share). The warrants will be exercisable as follows: (i) 36,912 warrants immediately upon closing (value of $36,912); (ii) 859,951 warrants (value of $315,000) exercisable one-year after the date of closing; and (iii) 368,550 warrants (value of $135,000) 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 Mann achieving certain revenue figures and pre-tax profit percentages. Mann must achieve target revenue of $1.1 million (US$) and pre-tax profit of 25% (US$). Should Mann be unable to achieve these criteria, the warrants will be reduced proportionately.

 

Going Concern

 

The Company has an accumulated deficit of $1,617,871 and a working capital deficit of $2,400,065, as of June 30, 2019, and a working capital deficit of $1,658,685 as of December 31, 2018. As a result of these factors, Management has determined that there is substantial doubt about the Company ability to continue as a going concern.

 

Our condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next fiscal year. The continuation of the Company as a going concern is dependent upon the ability of the Company to obtain necessary equity or debt financing to continue operations, successfully locating and negotiating with other business entities for potential acquisition and /or acquiring new clients to generate revenues.

 

In May 2019, the Company acquired 100% of the shares of 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 $486,912 (an average of $0.3663 per share). This acquisition will assist the Company in operations and cash flow.

 

 27 
 

 

In order to further implement its business plan and satisfy its working capital requirements, the Company will need to raise additional capital. There is no guarantee that the Company will be able to raise additional equity or debt financing at acceptable terms, if at all.

 

There is no assurance that the Company will ever be profitable. These condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

 

Results of Operations

 

Results of Operations and Financial Condition for the Three Months Ended June 30, 2019 as Compared to the Three Months Ended June 30, 2018

 

Revenues

 

For the three months ended June 30, 2019 compared to June 30, 2018, the Company’s revenues increased by $61,011, or 85%, from $71,782 in 2018 to $132,793 in 2019 due to the Company’s lack of trucking revenue being generated in TransportIQ offset by the revenues generated in Mann post-acquisition in May 2019. The Company will continue to focus move towards an analytics model (solutions revenue) which is expected to bring in more revenue and higher profitability.

 

Cost of Revenues

 

For the three months ended June 30, 2019 compared to June 30, 2018, the Company’s cost of revenues increased by $9,480, or 12%, from $76,916 in 2018 to $86,396 in 2019 due to the Company’s lack of support services being incurred to accommodate the trucking services in TransportIQ offset by the cost of revenues generated in Mann post-acquisition in May 2019. The Company will continue to move towards an analytics model which is expected to bring in more revenue and higher profitability.

 

Operating Expenses

 

For the three months ended June 30, 2019 compared to June 30, 2018, the Company’s salary and salary related costs increased by $31,992, or 3,308%, from $967 in 2018 to $32,959 in 2019 due to the salary and salary related costs of Mann post-acquisition in May 2019.

 

During the three months ended June 30, 2019 compared to June 30, 2018, the Company’s professional fees increased by $4,954, or 21%, from $23,552 in 2018 to $28,506 in 2019. Our professional fees increased in 2019 compared to 2018 due the professional fees of Mann post-acquisition in May 2019.

 

For the three months ended June 30, 2019 compared to June 30, 2018, the Company’s rent expense increased by $17,090, or 2,887%, from $592 in 2018 to $17,682 in 2019 due to not renewing their office space in an effort to reduce their overhead and utilizing a virtual office offset by the rent expense of Mann post-acquisition in May 2019.

 

For the three months ended June 30, 2019 compared to June 30, 2018, the Company’s depreciation and amortization expense increased $10,695, from $0 in 2018 to $10,695 in 2019. The increase was the result of the depreciation and amortization expense on the fixed and intangible assets acquired in the Mann acquisition.

 

For the three months ended June 30, 2019 compared to June 30, 2018, the Company’s general and administrative expenses increased by $10,561, or 54%, from $19,576 in 2018 to $30,137 in 2019 primarily due to the lowering of overhead expenses in TransportIQ as the Company is moving towards an analytics model offset by the general and administrative expenses of Mann post-acquisition in May 2019.

 

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Interest Expense

 

For the three months ended June 30, 2019 compared to June 30, 2018, the Company’s interest expense increased by $32,868, or 151%, from $21,800 in 2018 to $54,668 in 2019 due to higher levels of debt in 2019 and due to the debt incurred with respect to the Mann acquisition in May 2019.

 

Provision for Income Taxes

 

For the three months ended June 30, 2019 compared to June 30, 2018, the Company’s provision for income taxes increased by $13,004, from $0 in 2018 to $13,004 in 2019 mostly due to the Mann acquisition in May 2019.

 

Net Income (Loss)

 

For the three months ended June 30, 2019 compared to June 30, 2018, the Company’s net income (loss) increased by $234,527, from $(71,621) in 2018 to $162,906 in 2019 due to the reduction of overhead expenses of due to the reduction of services related to TransportIQ offset by the increase in expenditures related to Mann post-acquisition in May 2019, offset by the bargain purchase gain recognized in the acquisition of Mann of $304,160.

 

Results of Operations and Financial Condition for the Six Months Ended June 30, 2019 as Compared to the Six Months Ended June 30, 2018

 

Revenues

 

For the six months ended June 30, 2019 compared to June 30, 2018, the Company’s revenues decreased by $23,210, or 14%, from $161,568 in 2018 to $138,358 in 2019 due to the Company’s lack of trucking revenue being generated in TransportIQ offset by the revenues generated in Mann post-acquisition in May 2019. The Company will continue to focus move towards an analytics model (solutions revenue) which is expected to bring in more revenue and higher profitability.

 

Cost of Revenues

 

For the six months ended June 30, 2019 compared to June 30, 2018, the Company’s cost of revenues decreased by $79,718, or 47%, from $170,185 in 2018 to $90,467 in 2019 due to the Company’s lack of support services being incurred to accommodate the trucking services in TransportIQ offset by the cost of revenues generated in Mann post-acquisition in May 2019. The Company will continue to move towards an analytics model which is expected to bring in more revenue and higher profitability.

 

Operating Expenses

 

For the six months ended June 30, 2019 compared to June 30, 2018, the Company’s salary and salary related costs increased by $16,356, or 95%, from $17,203 in 2018 to $33,559 in 2019 due to the salary and salary related costs of Mann post-acquisition in May 2019.

 

During the six months ended June 30, 2019 compared to June 30, 2018, the Company’s professional fees decreased by $10,305, or 12%, from $85,654 in 2018 to $75,349 in 2019. Our professional fees decreased in 2019 compared to 2018 due to less legal and accounting services needed as we completed our required filings offset by the professional fees of Mann post-acquisition in May 2019.

 

For the six months ended June 30, 2019 compared to June 30, 2018, the Company’s rent expense increased by $16,110, or 868%, from $1,857 in 2018 to $17,967 in 2019 due to not renewing their office space in an effort to reduce their overhead and utilizing a virtual office offset by the rent expense of Mann post-acquisition in May 2019.

 

For the six months ended June 30, 2019 compared to June 30, 2018, the Company’s depreciation and amortization expense increased $10,695, from $0 in 2018 to $10,695 in 2019. The increase was the result of the depreciation and amortization expense on the fixed and intangible assets acquired in the Mann acquisition.

 

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For the six months ended June 30, 2019 compared to June 30, 2018, the Company’s general and administrative expenses increased by $3,275, or 8%, from $42,912 in 2018 to $46,187 in 2019 primarily due to the lowering of overhead expenses in TransportIQ as the Company is moving towards an analytics model offset by the general and administrative expenses of Mann post-acquisition in May 2019.

 

Interest Expense

 

For the six months ended June 30, 2019 compared to June 30, 2018, the Company’s interest expense increased by $36,622, or 59%, from $62,096 in 2018 to $98,718 in 2019 due to higher levels of debt in 2019 and due to the debt incurred with respect to the Mann acquisition in May 2019.

 

Provision for Income Taxes

 

For the six months ended June 30, 2019 compared to June 30, 2018, the Company’s provision for income taxes increased by $13,672, from $0 in 2018 to $13,672 in 2019 mostly due to the Mann acquisition in May 2019.

 

Net Income (Loss)

 

For the six months ended June 30, 2019 compared to June 30, 2018, the Company’s net income (loss) increased by $274,243, from $(218,339) in 2018 to $55,904 in 2019 due to the reduction of overhead expenses of due to the reduction of services related to TransportIQ offset by the increase in expenditures related to Mann post-acquisition in May 2019, offset by the bargain purchase gain recognized in the acquisition of Mann of $304,160.

 

Liquidity and Capital Resources

 

As of June 30, 2019, current assets were $803,773 and current liabilities outstanding amounted to $3,203,838 which resulted in a working capital deficit of $2,400,065. As of December 31, 2018, current assets were $13,806 and current liabilities outstanding amounted to $1,672,491 which resulted in a working capital deficit of $1,658,685.

 

Net cash used in operating activities was $203,491 for the six months ended June 30, 2019 compared to $146,725 in 2018. Cash used in operations for 2019 and 2018 was the primarily related to the income (loss) in operations offset by the bargain purchase gain, increases in accounts payable and accrued expenses and the changes in accounts receivable due to the lack of adequate cash flow of the Company.

 

The only investing activities for the six months ended June 30, 2019 and 2018, related to the cash and restricted cash of $234 and $185,399, respectively acquired in the Mann acquisition.

 

Net cash provided by financing activities for the six months ended June 30, 2019 was $206,939 compared to the six months ended June 30, 2018 of $146,371. The cash provided by financing activities was the result of the issuance of long-term debt, including related parties, convertible notes from related and unrelated parties, offset by repayments on long term-debt which include related parties.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet financing arrangements.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not required for smaller reporting companies.

 

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Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Based on an evaluation as of the date of the end of the period covered by this report, the Company’s Certifying Officers conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as required by Exchange Act Rule 13a-15. Based on that evaluation, the Company’s Certifying Officers concluded that, because of the disclosed material weaknesses in the Company’s internal control over financial reporting, the Company’s disclosure controls and procedures were ineffective as of the end of the period covered by this report to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Certifying Officers, to allow timely decisions regarding required disclosure. Based upon the evaluation of the disclosure controls and procedures at the end of the period covered by this report, our Certifying Officers concluded that our disclosure controls and procedures were not effective as a result of continuing weaknesses in our internal control over financial reporting principally due to the following:

 

  - We have not established adequate financial reporting processes or monitoring activities to ensure adequate financial reporting and to mitigate the risk of management override, specifically because there are few employees and only two officers with management functions and therefore there is lack of segregation of duties.
     
  - An outside consultant assists in the preparation of the annual and quarterly financial statements and partners with us to ensure compliance with US GAAP and SEC disclosure requirements.
     
  - Outside counsel assists us to review and editing of the annual and quarterly filings and to ensure compliance with SEC disclosure requirements.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the registrant’s principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

(a) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;
   
(b) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and
   
(c) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant’s assets that could have a material effect on the financial statements.

 

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PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not a party to any material litigation, nor, to the knowledge of management, is any litigation threatened against us that may materially affect us.

 

Item 1A. Risk Factors

 

None.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults Upon Senior Securities

 

The Company has two convertible notes that were due June 30, 2019. These have not been extended and are in default.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

(a) Not applicable.

 

(b) During the quarter ended June 30, 2019, there have not been any material changes to the procedures by which security holders may recommend nominees to the Board of Directors.

 

Item 6. Exhibits

 

Exhibit
Number
  Description of Exhibit
     
31.1   Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2   Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1   Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2   Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101.INS   XBRL Instance
     
101.SCH   XBRL Taxonomy Extension Schema
     
101.CAL   XBRL Taxonomy Extension Calculation
     
101.DEF   XBRL Taxonomy Extension Definition
     
101.LAB   XBRL Taxonomy Extension Labels
     
101.PRE   XBRL Taxonomy Extension Presentation

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  TraqIQ, Inc.
     
Date: August 30, 2019 By: /s/ Ajay Sikka
    Ajay Sikka
    Chief Executive Officer and Chief Financial Officer (principal executive officer, principal accounting officer and principal financial officer)

 

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