UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31,June 30, 2023
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________ to _____________
Commission File Number: 000-56148
TRAQIQ, INC.
(Exact Name of Registrant as Specified in Its Charter)
| California | 30-0580318 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
| (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)
Securities registered pursuant to Section 12(b) of the Act: None.
| Title of Each Class | Trading Symbol | Name of Each Exchange on which registered | ||
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.0001 par value per share
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act ☐ Yes ☒ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒☐ Yes ☐☒ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☐ Yes ☒ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non- accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, “non-accelerated filer”, “smaller reporting company” and “emerging growth” in Rule 12b-2 of the Exchange Act.
| Large Accelerated filer ☐ | Accelerated filer ☐ | |
| Non-accelerated filer ☐ | Smaller reporting company ☒ | |
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
The number of shares of the Registrant’s common stock, $0.0001 par value per share, outstanding as of May 17,October 6, 2023, was .
| Documents incorporated by reference: | None |
TRAQIQ, INC
INDEX
| Page | ||
| PART I - FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 4 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 30 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |
| Item 4. | Controls and Procedures | |
| PART II - OTHER INFORMATION | 35 | |
| Item 1. | Legal Proceedings | |
| Item 1A. | Risk Factors | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 35 |
| Item 3. | Defaults Upon Senior Securities | |
| Item 4. | Mine Safety Disclosures | |
| Item 5. | Other Information | 36 |
| Item 6. | Exhibits | 36 |
| Signatures | ||
| 2 |
FORWARD-LOOKING STATEMENTS
Except for any historical information contained herein, the matters discussed in this quarterly report on Form 10-Q contain certain “forward-looking statements’’ within the meaning of the federal securities laws. This includes statements regarding our future financial position, economic performance, results of operations, business strategy, budgets, projected costs, plans and objectives of management for future operations, and the information referred to under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
These forward-looking statements generally can be identified by the use of forward-looking terminology, such as “may,’’ “will,’’ “expect,’’ “intend,’’ “estimate,’’ “anticipate,’’ “believe,’’ “continue’’ or similar terminology, although not all forward-looking statements contain these words. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, you are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although we believe that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements. Important factors that may cause actual results to differ from projections include, for example:
| ● | the success or failure of management’s efforts to implement our business plan; | |
| ● | our ability to fund our operating expenses; | |
| ● | our ability to compete with other companies that have a similar business plan; | |
| ● | the effect of changing economic conditions impacting our plan of operation; and | |
| ● | our ability to meet the other risks as may be described in future filings with the Securities and Exchange Commission (the “SEC”). |
Unless otherwise required by law, we also disclaim any obligation to update our view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made in this quarterly report on Form 10-Q.
When considering these forward-looking statements, you should keep in mind the cautionary statements in this quarterly report on Form 10-Q and in our other filings with the SEC. We cannot assure you that the forward-looking statements in this quarterly report on Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may prove to be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time-frame, or at all.
| 3 |
Item 1. Financial Statements
| 4 |
TRAQIQ, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31,JUNE 30, 2023 (UNAUDITED) AND DECEMBER 31, 2022
IN USD
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 139,573 | $ | 1,312 | ||||
| Accounts receivable, net | 65,869 | - | ||||||
| Prepaid expenses and other current assets | 11,025 | 65,148 | ||||||
| Inventory | 359,845 | - | ||||||
| Total Current Assets | 576,312 | 66,460 | ||||||
| Fixed assets, net | 1,156 | - | ||||||
| Intangible assets, net | 10,446,668 | - | ||||||
| Goodwill | 7,292,885 | - | ||||||
| Total Non-current Assets | 17,740,709 | - | ||||||
| TOTAL ASSETS | $ | 18,317,021 | $ | 66,460 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| LIABILITIES | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 932,348 | $ | 226,178 | ||||
| Contract liabilities | 311,544 | - | ||||||
| Accrued payroll and related taxes | 118,750 | 24,221 | ||||||
| Derivative liability | 112,333,348 | 216,593 | ||||||
| - | 400,000 | |||||||
| Notes payable | 3,607,480 | 751,886 | ||||||
| Convertible notes payable, net of discounts | 162,094 | 63,781 | ||||||
| Total Current Liabilities | 117,465,564 | 1,682,659 | ||||||
| Total Liabilities | 117,465,564 | 1,682,659 | ||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Convertible preferred stock, par value $, shares authorized: | - | - | ||||||
| Preferred stock, par value, $, Series A Convertible Preferred, shares issued and outstanding | - | - | ||||||
| Preferred stock, par value, $, Series B Convertible Preferred, and shares issued and outstanding, respectively | 147 | 22 | ||||||
| Preferred stock value | 147 | 22 | ||||||
| Common stock, par value, $, shares authorized, and issued and outstanding, respectively | 3,394 | 1,810 | ||||||
| Additional paid in capital | 30,234,923 | 15,904,755 | ||||||
| Accumulated deficit | (129,387,007 | ) | (17,522,786 | ) | ||||
| Accumulated other comprehensive income | - | - | ||||||
| Total Stockholders’ Deficit | (99,148,543 | ) | (1,616,199 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 18,317,021 | $ | 66,460 | ||||
TRAQIQ, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022 (UNAUDITED)
IN USD
| 2023 | 2022 | |||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| REVENUE | $ | 65,040 | $ | 522 | ||||
| COST OF REVENUES | 37,216 | 11,416 | ||||||
| GROSS PROFIT | 27,824 | (10,894 | ) | |||||
| OPERATING EXPENSES | ||||||||
| Salaries and salary related costs | 170,530 | 100,016 | ||||||
| Professional fees | 31,951 | 88,051 | ||||||
| Rent expense | 473 | 610 | ||||||
| Depreciation and amortization expense | 409,788 | - | ||||||
| General and administrative expenses | 112,242 | 27,309 | ||||||
| Total Operating Expenses | 724,984 | 215,986 | ||||||
| OPERATING LOSS | (697,160 | ) | (226,880 | ) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Change in fair value of derivative liability | (16,828,293 | ) | - | |||||
| Derivative expense | (94,183,461 | ) | - | |||||
| Interest expense, net of interest income | (156,562 | ) | (464,180 | ) | ||||
| Other income | 1,255 | - | ||||||
| Total other expense | (111,167,061 | ) | (464,180 | ) | ||||
| NET LOSS FROM CONTINUING OPERATIONS, BEFORE PROVISION FOR INCOME TAXES | (111,864,221 | ) | (691,060 | ) | ||||
| Provision for income taxes – continuing operations | - | - | ||||||
| NET LOSS FROM CONTINUING OPERATIONS | (111,864,221 | ) | (691,060 | ) | ||||
| NET LOSS FROM DISCONTINUED OPERATIONS, BEFORE PROVISION FOR INCOME TAXES | - |
(6,861,234 | ) | |||||
| Provision for income taxes – discontinued operations | - | 5,679 | ||||||
| NET LOSS FORM DISCONTINUED OPERATIONS | - | (6,866,913 | ) | |||||
| NET LOSS | (111,864,221 | ) | (7,557,973 | ) | ||||
| NET INCOME ATTRIBUTABLE TO PRIOR NON-CONTROLLING INTEREST | - | 1,305 | ||||||
| NET LOSS ATTRIBUTABLE TO CONTROLLING INTEREST | $ | (111,864,221 | ) | $ | (7,559,278 | ) | ||
| Other comprehensive loss | ||||||||
| Foreign currency translations adjustment | - | 103,298 | ||||||
| Comprehensive loss | $ | (111,864,221 | ) | $ | (7,455,980 | ) | ||
| Basic and diluted loss from continuing operations per share | $ | (3.38 | ) | $ | (0.17 | ) | ||
| Basic and diluted loss from discontinued operations per share | $ | - | $ | (1.65 | ) | |||
| Basic and diluted net loss per share | $ | (3.38 | ) | $ | (1.81 | ) | ||
| Weighted average common shares outstanding - basic and diluted | 33,060,136 | 4,173,008 | ||||||
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 236,815 | $ | 26,650 | ||||
| Accounts receivable, net | 885,628 | 517,583 | ||||||
| Subscription receivable | - | 200,000 | ||||||
| Other receivables | 11,763 | 1,241 | ||||||
| Prepaid expenses and other current assets | 194,087 | 128,689 | ||||||
| Inventory | 455,088 | - | ||||||
| Total Current Assets | 1,783,381 | 874,163 | ||||||
| Property and equipment, net | 5,626,744 | 5,643,941 | ||||||
| Intangible assets, net | 11,192,378 | 687,500 | ||||||
| Goodwill | 6,650,621 | - | ||||||
| Other assets | 8,251 | 8,251 | ||||||
| Operating lease right-of-use asset, net | 1,717,736 | 194,112 | ||||||
| Total Non-current Assets | 25,195,730 | 6,533,804 | ||||||
| TOTAL ASSETS | $ | 26,979,111 | $ | 7,407,967 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| LIABILITIES | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 2,455,803 | $ | 736,658 | ||||
| Customer deposits | 312,544 | - | ||||||
| Accrued payroll and related taxes | 192,995 | 50,983 | ||||||
| Derivative liability | 209,519 | - | ||||||
| Convertible notes payable, net of discounts | 2,393,020 | - | ||||||
| Convertible notes payable, net of discounts – related party | 445,117 | - | ||||||
| Notes payable, net of discounts | 3,878,700 | 1,098,158 | ||||||
| Notes payable, net of discounts – related party | 653,470 | - | ||||||
| Operating lease liability, current | 349,651 | 95,243 | ||||||
| Total Current Liabilities | 10,890,819 | 1,981,042 | ||||||
| Notes payable, net of current portion and discounts | 2,539,824 | 2,785,531 | ||||||
| Operating lease liability, net of current portion | 1,437,237 | 115,290 | ||||||
| Total Non-current Liabilities | 3,977,061 | 2,900,821 | ||||||
| Total Liabilities | 14,867,880 | 4,881,863 | ||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Member’s equity | - | 2,526,104 | ||||||
| Preferred stock, shares authorized: | ||||||||
| Preferred stock, par value, $, Series A Convertible Preferred, and shares issued and outstanding | - | - | ||||||
| Preferred stock, par value, $, Series B Convertible Preferred, and shares issued and outstanding, respectively | 147 | - | ||||||
| Preferred stock, par value, $, Series C Convertible Preferred, and shares issued and outstanding, respectively | 70 | - | ||||||
| Preferred stock value | 70 | - | ||||||
| Common stock, par value, $, shares authorized, and issued and outstanding, respectively | 3,425 | - | ||||||
| Additional paid in capital | 35,676,238 | - | ||||||
| Accumulated deficit | (23,568,649 | ) | - | |||||
| Total Stockholders’ Equity | 12,111,231 | 2,526,104 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 26,979,111 | $ | 7,407,967 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 5 |
TRAQIQ, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022 (UNAUDITED)
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| For the Six Months Ended | For the Three Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | $ | 2,961,572 | $ | 1,569,853 | $ | 1,827,245 | $ | 919,738 | ||||||||
| Cost of Revenues | 2,741,058 | 1,650,046 | 1,544,103 | 917,209 | ||||||||||||
| Gross Profit (Loss) | 220,514 | (80,193 | ) | 283,142 | 2,529 | |||||||||||
| Operating Expenses | ||||||||||||||||
| Salary and salary related costs | 618,647 | 204,374 | 429,330 | 107,390 | ||||||||||||
| Stock-based compensation | 5,588,207 | - | 5,588,207 | - | ||||||||||||
| Professional fees | 924,671 | 23,447 | 729,892 | 7,817 | ||||||||||||
| Depreciation and amortization | 248,540 | - | 241,665 | - | ||||||||||||
| General and administrative expenses | 414,052 | 124,847 | 282,401 | 62,564 | ||||||||||||
| Total Operating Expenses | 7,794,117 | 352,668 | 7,271,496 | 177,771 | ||||||||||||
| OPERATING LOSS | (7,573,603 | ) | (432,861 | ) | (6,988,354 | ) | (175,242 | ) | ||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||
| Change in fair value of derivative liability | 9,652 | - | 9,652 | - | ||||||||||||
| Interest expense, net of interest income | (438,832 | ) | (74,610 | ) | (359,180 | ) | (43,056 | ) | ||||||||
| Other income | 103,421 | 660,837 | 103,121 | (122,463 | ) | |||||||||||
| Goodwill impairment | (15,669,287 | ) | - | (15,669,287 | ) | - | ||||||||||
| Total other income (expense) | (15,995,046 | ) | 586,227 | (15,915,694 | ) | (165,519 | ) | |||||||||
| Net income (loss) before provision for income taxes | (23,568,649 | ) | 153,366 | (22,904,048 | ) | (340,761 | ) | |||||||||
| Provision for income taxes | - | - | - | - | ||||||||||||
| Net income (loss) | $ | (23,568,649 | ) | $ | 153,366 | $ | (22,904,048 | ) | $ | (340,761 | ) | |||||
| Net income (loss) per share | ||||||||||||||||
| Basic and diluted | $ | ) | $ | N/A | $ | ) | $ | N/A | ||||||||
| Weighted-average common shares outstanding | ||||||||||||||||
| Basic and diluted | N/A | N/A | ||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 6 |
TRAQIQ, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)(DEFICIENCY)
FOR THE THREESIX MONTHS ENDED MARCH 31,JUNE 30, 2023 AND 2022 (UNAUDITED)
IN USD
| Shares | Amount | Shares | Amount | Shares | Amount | Common | Deficit | Income (Loss) | Interest | Total | ||||||||||||||||||||||||||||||||||
| Additional | Accumulated | |||||||||||||||||||||||||||||||||||||||||||
| Series A Preferred | Series B Preferred | Common Stock | Paid-In Capital - | Accumulated | Other Comprehensive | Non-controlling | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Common | Deficit | Income (Loss) | Interest | Total | ||||||||||||||||||||||||||||||||||
| Balance – January 1, 2022 | - | $ | - | - | $ | - | 4,171,638 | $ | 417 | $ | 6,508,931 | $ | (8,953,768 | ) | $ | 30,605 | $ | (4,488 | ) | $ | (2,418,303 | ) | ||||||||||||||||||||||
| Fractional share adjustment | - | - | - | - | 1,370 | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Stock-based compensation on granting of options | - | - | - | - | - | - | 18,223 | - | - | - | 18,223 | |||||||||||||||||||||||||||||||||
| Stock-based compensation for restricted stock grants (shares not issued) | - | - | - | - | - | - | 33,208 | - | - | - | 33,208 | |||||||||||||||||||||||||||||||||
| Warrants earned for acquisition of Mimo | - | - | - | - | - | - | 410,112 | - | - | - | 410,112 | |||||||||||||||||||||||||||||||||
| Net loss for the three months ended March 31, 2022 | - | - | - | - | - | - | - | (917,348 | ) | 103,298 | (1,305 | ) | (815,355 | ) | ||||||||||||||||||||||||||||||
| Balance – March 31, 2022 | - | - | - | - | 4,173,008 | 417 | 6,970,474 | (9,871,116 | ) | 133,903 | (5,793 | ) | (2,772,115 | ) | ||||||||||||||||||||||||||||||
| Balance – January 1, 2023 | - | - | 220,135 | 22 | 18,103,039 | 1,810 | 15,904,755 | (17,522,786 | ) | - | - | (1,616,199 | ) | |||||||||||||||||||||||||||||||
| Balance | - | - | 220,135 | 22 | 18,103,039 | 1,810 | 15,904,755 | (17,522,786 | ) | - | - | (1,616,199 | ) | |||||||||||||||||||||||||||||||
| Shares issued to settle debt | - | - | - | - | 150,000 | 15 | 1,740 | - | - | - | 1,755 | |||||||||||||||||||||||||||||||||
| Shares issued as consideration for the acquisition of Recoup | - | - | 1,250,000 | 125 | 15,686,926 | 1,569 | 14,278,880 | - | - | - | 14,280,574 | |||||||||||||||||||||||||||||||||
| Share-based compensation for restricted stock grants (shares not issued) | - | - | - | - | - | - | 49,548 | - | - | - | 49,548 | |||||||||||||||||||||||||||||||||
| Net loss for the three months ended March 31, 2023 | - | - | - | - | - | - | - | (111,864,221 | ) | - | - | (111,864,221 | ) | |||||||||||||||||||||||||||||||
| Balance – March 31, 2023 | - | $ | - | 1,470,135 | $ | 147 | 33,939,965 | $ | 3,394 | $ | 30,234,923 | $ | (129,387,007 | ) | $ | - | $ | - | $ | (99,148,543 | ) | |||||||||||||||||||||||
| Balance | - | $ | - | 1,470,135 | $ | 147 | 33,939,965 | $ | 3,394 | $ | 30,234,923 | $ | (129,387,007 | ) | $ | - | $ | - | $ | (99,148,543 | ) | |||||||||||||||||||||||
| Members’ Equity | Series A Preferred Stock | Series B Preferred Stock | Series C Preferred Stock | Common Stock | Additional paid-in | Accumulated | ||||||||||||||||||||||||||||||||||||||||||
| (Deficiency) | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | capital | deficit | Total | |||||||||||||||||||||||||||||||||||||
| Balance - January 1, 2023 | $ | 2,526,104 | - | - | - | - | - | $ | - | - | $ | - | $ | - | $ | - | $ | 2,526,104 | ||||||||||||||||||||||||||||||
| Settlement of note due to contribution | 170,000 | - | - | - | - | - | - | - | - | - | - | 170,000 | ||||||||||||||||||||||||||||||||||||
| Net loss | (664,601 | ) | - | - | - | - | - | - | - | - | - | (664,601 | ) | |||||||||||||||||||||||||||||||||||
| Balance - March 31, 2023 | 2,031,503 | - | - | - | - | - | - | - | - | - | - | 2,031,503 | ||||||||||||||||||||||||||||||||||||
| Effect of reverse acquisition | (2,031,503 | ) | - | - | 1,470,135 | 147 | 630,900 | 63 | 33,952,778 | 3,395 | 30,088,068 | (664,601 | ) | 27,395,569 | ||||||||||||||||||||||||||||||||||
| Share-based compensation | - | - | - | - | - | 70,100 | 7 | 300,000 | 30 | 5,588,170 | - | 5,588,207 | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | (22,904,048 | ) | (22,904,048 | ) | |||||||||||||||||||||||||||||||||||
| Balance - June 30, 2023 | $ | - | - | $ | - | 1,470,135 | $ | 147 | 701,000 | $ | 70 | 34,252,778 | $ | 3,425 | $ | 35,676,238 | $ | (23,568,649 | ) | $ | 12,111,231 | |||||||||||||||||||||||||||
| Members’ | Series A Preferred Stock | Series B Preferred Stock | Series C Preferred Stock | Common Stock | Additional paid-in | Accumulated | ||||||||||||||||||||||||||||||||||||||||||
| Equity | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | capital | deficit | Total | |||||||||||||||||||||||||||||||||||||
| Balance - January 1, 2022 | $ | (2,038,379 | ) | - | - | - | - | - | $ | - | - | $ | - | $ | - | $ | - | $ | (2,038,379 | ) | ||||||||||||||||||||||||||||
| Net income | 494,127 | - | - | - | - | - | - | - | - | - | 494,127 | |||||||||||||||||||||||||||||||||||||
| Balance - March 31, 2022 | (1,544,252 | ) | - | - | - | - | - | - | - | - | - | - | (1,544,252 | ) | ||||||||||||||||||||||||||||||||||
| Balance | (1,544,252 | ) | - | - | - | - | - | - | - | - | - | - | (1,544,252 | ) | ||||||||||||||||||||||||||||||||||
| Net loss | (340,761 | ) | - | - | - | - | - | - | - | - | - | - | (340,761 | ) | ||||||||||||||||||||||||||||||||||
| Net (income) loss | (340,761 | ) | - | - | - | - | - | - | - | - | - | - | (340,761 | ) | ||||||||||||||||||||||||||||||||||
| Balance - June 30, 2022 | $ | (1,885,013 | ) | - | $ | - | - | $ | - | - | $ | - | - | $ | - | $ | - | $ | - | $ | (1,885,013 | ) | ||||||||||||||||||||||||||
| Balance | $ | (1,885,013 | ) | - | $ | - | - | $ | - | - | $ | - | - | $ | - | $ | - | $ | - | $ | (1,885,013 | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 7 |
TRAQIQ, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREESIX MONTHS ENDED MARCH 31,JUNE 30, 2023 AND 2022
IN USD
| 2023 | 2022 | |||||||
| Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOW FROM OPERTING ACTIVIITES | ||||||||
| Net loss | $ | (111,864,221 | ) | $ | (917,348 | ) | ||
| Adjustments to reconcile net loss to net cash (used in) operating activities | ||||||||
| Change in non-controlling interest | - | (1,305 | ) | |||||
| Bank service charges capitalized to defaulted debt principal | 4,073 | - | ||||||
| Bad debt expense | 52,110 | - | ||||||
| Forgiveness of debt | - | (15,401 | ) | |||||
| Depreciation and amortization | 250,994 | 24,914 | ||||||
| Lease cost, net of repayment | - | 1,807 | ||||||
| Foreign currency (gain) loss | - | (11,092 | ) | |||||
| Stock-based compensation | 49,548 | 51,431 | ||||||
| Change in fair value of derivative liability and derivative expense | 111,011,754 | (8,190 | ) | |||||
| Fees paid in debt financing | - | 3,250 | ||||||
| Amortization of discounts and convertible options on debt | 158,794 | 292,777 | ||||||
| Gain on sale of assets | - | (8 | ) | |||||
| Changes in assets and liabilities | ||||||||
| Accounts receivable | (117,979 | ) | 45,052 | |||||
| Prepaid expenses and other current assets | 54,123 | 21,712 | ||||||
| Inventory | 19,873 | |||||||
| Accounts payable, accrued expenses and deferred taxes | 93,957 | 84,422 | ||||||
| Accrued payroll and payroll taxes | 94,529 | 6,557 | ||||||
| Accrued duties and taxes | - | 22,034 | ||||||
| Total adjustments | 111,671,776 | 517,960 | ||||||
| Net cash (used in) operating activities | (192,445 | ) | (399,388 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITES | ||||||||
| Cash received in acquisition of Recoup | (150,000 | ) | - | |||||
| Acquisition of fixed assets | - | (25,574 | ) | |||||
| Net cash (used in) provided by investing activities | (150,000 | ) | (25,574 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITES | ||||||||
| Increase in cash overdraft | - | 48,400 | ||||||
| Proceeds from convertible notes | 705,000 | - | ||||||
| Repayments of convertible notes | (60,480 | ) | - | |||||
| Proceeds from long-term debt - related parties | - | 205,836 | ||||||
| Repayment of long-term debt - related parties | - | (63,973 | ) | |||||
| Proceeds from notes payable | - | 344,652 | ||||||
| Repayments of note payable | (163,814 | ) | (58,615 | ) | ||||
| Net cash provided by financing activities | 480,706 | 476,300 | ||||||
| NET INCREASE IN CASH AND RESTRICTED CASH | 138,261 | 51,338 | ||||||
| CASH AND RESTRICTED CASH - BEGINNING OF PERIOD | 1,312 | 170,528 | ||||||
| CASH AND RESTRICTED CASH - END OF PERIOD | $ | 139,573 | $ | 221,866 | ||||
| CASH PAID DURING THE PERIOD FOR: | ||||||||
| Interest expense | $ | 986 | $ | 7,991 | ||||
| Income taxes | $ | - | $ | 5,679 | ||||
| SUMMARY OF NON-CASH ACTIVITIES: | ||||||||
| Right of use asset for lease liability | - | 331,154 | ||||||
| Original issue discount recognized on new convertible notes | 221,000 | - | ||||||
| Shares issued for debt settlement | 1,755 | - | ||||||
| Acquisition of Recoup: | ||||||||
| Inventory | $ | 379,718 | $ | - | ||||
| Fixed assets | 1,196 | - | ||||||
| Intangible assets | 10,697,622 | - | ||||||
| Accounts payable and accrued expenses | (612,213 | ) | - | |||||
| Customer deposits | (311,544 | ) | - | |||||
| Current portion - long-term debt | (3,017,090 | ) | - | |||||
| Total net assets acquired | 7,137,689 | - | ||||||
| Consideration paid in cash | (150,000 | ) | ||||||
| Consideration per Share Exchange Agreement | (14,280,574 | ) | - | |||||
| Total Consideration | (14,280,574 | ) | - | |||||
| Goodwill | $ | (7,292,885 | ) | $ | - | |||
| 2023 | 2022 | |||||||
| Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOW FROM OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | (23,568,649 | ) | $ | 153,366 | |||
| Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities | ||||||||
| Goodwill impairment | 15,669,287 | - | ||||||
| Employee retention credit | - | 422,845 | ||||||
| Forgiveness of debt | (91,804 | ) | (812,305 | ) | ||||
| Stock-based compensation | 5,588,207 | - | ||||||
| Depreciation and amortization | 368,556 | 134,420 | ||||||
| Change in fair value of derivative liability and derivative expense | (9,652 | ) | - | |||||
| Amortization of discounts and convertible options on debt | 80,281 | - | ||||||
| Loss on sale of assets | - | 151,767 | ||||||
| Changes in assets and liabilities | ||||||||
| Accounts receivable | 1,293 | 21,487 | ||||||
| Subscription receivable | 200,000 | - | ||||||
| Prepaid expenses and other current assets | (47,583 | ) | (39,860 | ) | ||||
| Other receivables | (10,522 | ) | (88,777 | ) | ||||
| Inventory | (39,042 | ) | - | |||||
| Other assets | - | 1,000 | ||||||
| Right-of-use asset | 111,711 | 40,323 | ||||||
| Accounts payable and accrued expenses | 919,472 | 160,201 | ||||||
| Customer deposits | 1,000 | - | ||||||
| Accrued payroll and payroll taxes | 120,935 | 14,207 | ||||||
| Operating lease liability | (58,980 | ) | (41,718 | ) | ||||
| Total adjustments | 1,198,284 | 66,863 | ||||||
| Net cash (used in) provided by operating activities | (765,490 | ) | 116,956 | |||||
| CASH FLOWS FROM INVESTING ACTIVITES | ||||||||
| Net cash received in reverse acquisition | 69,104 | - | ||||||
| Acquisition of property and equipment | (173,626 | ) | (1,347,989 | ) | ||||
| Proceeds from disposal of fixed assets | 281,819 | |||||||
| Net cash (used in) investing activities | (104,522 | ) | (1,066,170 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITES | ||||||||
| Proceeds from convertible notes | 980,000 | - | ||||||
| Repayments of convertible notes | (62,003 | ) | - | |||||
| Proceeds from convertible notes – related party | 300,000 | - | ||||||
| Proceeds from notes payable – related party | 653,470 | 259,000 | ||||||
| Repayments of note payables – related parties | - | (73,780 | ) | |||||
| Proceeds from notes payable | - | 1,348,157 | ||||||
| Repayments of note payable | (791,290 | ) | (326,484 | ) | ||||
| Net cash provided by financing activities | 1,080,177 | 1,206,893 | ||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 210,165 | 257,679 | ||||||
| CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | 26,650 | 33,579 | ||||||
| CASH AND CASH EQUIVALENTS - END OF PERIOD | $ | 236,815 | $ | 291,258 | ||||
| CASH PAID DURING THE PERIOD FOR: | ||||||||
| Interest expense | $ | 227,590 | $ | 64,101 | ||||
| Income taxes | $ | - | $ | - | ||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Non-cash transactions related to reverse acquisition | $ | 27,162,222 | - | |||||
| Settlement of note payable | $ | 170,000 | - | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 8 |
TRAQIQ, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN USD)
(UNAUDITED)
NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS
TraQiQ, Inc. (along(“TraQiQ” or along with its wholly owned subsidiaries, referred to herein as the “Company”) was incorporatedis engaged in the Statefull-service solution of California on September 9, 2009 as Thunderclap Entertainment,waste management. The Company is based out of Troy, Michigan and offers a comprehensive package of waste reduction, collection, recycling, and technology-enabled solutions to support customer demand. The Company operates two distinct lines of business. The Company’s wholly-owned subsidiary, Titan Trucking, LLC (“Titan”), is a non-hazardous solid waste management company providing waste and recycling collection and transportation services for industrial generators, commercial contractors and transfer station operators in Michigan. Titan maintains a fleet of roll off and tractor trailer trucks to perform its services. The Company’s wholly-owned subsidiary Recoup Technologies, Inc. (“Recoup”), provides technology-enabled solutions for food waste processing, including onsite digestors for food waste along with cloud-based software tracking and analytics solutions.
On July 14, 2017, Thunderclap Entertainment, Inc. changed its name to TraQiQ, Inc. On JulyMay 19, 2017,2023, the Company entered intocompleted its acquisition of Titan and Titan’s wholly owned subsidiary, Senior Trucking, LLC (“Senior”). In accordance with ASC 805 - Business Combinations (“ASC 805”), the transaction was treated as a Share Exchange Agreement (“Share Exchange”)reverse acquisition for financial reporting purposes, with TraQiQ treated as the legal acquirer and Titan treated as the accounting acquirer. TraQiQ remains the continuing registrant and reporting company . Accordingly, the historical financial and operating data of the Company, which covers periods prior to the closing date of the Titan Merger, reflects the assets, liabilities, and results of operations for Titan and does not reflect the assets, liabilities and results of operations of TraQiQ for the periods prior to May 19, 2023 (Note 3 – Business Combinations).
March 31, 2023 Financial Statements
In connection with the stockholders of OmniM2M, Inc. (“OmniM2M”) and TraQiQ Solutions, Inc. dba Ci2i Services, Inc. (formerly Ci2i Services, Inc. – amended November 6, 2019) (“Ci2i”) whereby the stockholders of Omni and Ci2i exchanged all of their respective shares, representing % ownership in OmniM2M and Ci2i in exchange for sharespreparation of the Company’s common stock, respectively.condensed consolidated financial statements, (collectively, “the financial statements”) as of June 30, 2023, the Company identified errors in its previously-issued financial statements as of and for the period ending March 31, 2023. Management determined that these financial statements incorrectly accounted for the January 5, 2023, acquisition of the Recoup digester business assets as a business combination instead of as an asset acquisition under the guidance enumerated in FASB ASC 805. The OmniM2M Shareholdersresult of the change was to remove goodwill previously recorded ($7.2 million) as part of the transaction and allocate that value to the intellectual property intangible asset. The Company also determined that the Black-Scholes model used to previously value the derivative liability was not appropriate and subsequently utilized a Monte Carlo pricing model, to more appropriately reflect the variability in the derivative. This resulted in a $112 million reduction of the derivative liability at March 31, 2023. The Company’s management and the Ci2i Shareholders have each beenaudit committee of the Company’s Board of Directors concluded that due to the correction of the errors that were discovered, the previously issued their respective shares on a pro rata basis based on their respective holdings in OmniM2Munaudited financial statements and Ci2iother financial information contained in the Share Exchange Agreement. The Share Exchange was accountedCompany’s Quarterly Reports on Forms 10-Q for as a reverse merger whereas Ci2i is considered the accounting acquirer and TraQiQ,Inc. is considered the accounting acquiree. For accounting purposes, the acquisition of Omni is recorded at historical cost in accordance with Accounting Standard Codification (“ASC”) 805-50-25-2 as this is considered an acquisition of entities under common control as the management of the Company and Omni control the activities of the respective companies. Prior to the merger with Ci2i and acquisition of Omni, the Company was considered a shell company under Rule 12b-2 of the Exchange Act. On December 1, 2017, The Company entered into a Share Purchase Agreement (the “Share Exchange Agreement”) with Ajay Sikka (“Sikka”), the sole shareholder of Transport IQ, Inc. whereby Sikka agreed to sell all of the shares in TransportIQ, Inc. (“TransportIQ”) in exchange for $, in the form of cancellation of all of the debt of TransportIQ that is owed to the Company. The transaction became effective upon the execution of the Share Exchange Agreement by Sikka and the Company; and Transport IQ, Inc, is now a wholly-owned subsidiary of the Company. Because TransportIQ was commonly controlled and owned, the transaction was recorded at the historical carrying value of TransportIQ’s assets and liabilities.fiscal period ended March 31, 2023 should no longer be relied upon.
The Financial Industry Regulatory AuthorityCompany’s acquisition of Titan on March 18, 2022, approvedMay 19, 2023 (Note 3 – Business Combinations) (the “Titan Merger”) was treated as a reverse 1acquisition under ASC 805 for 8 stock splitfinancial reporting purposes, with TraQiQ as the legal acquirer and Titan as the accounting acquirer. Titan’s historical consolidated financial statements have replaced TraQiQ’s historical consolidated financial statements with respect to periods prior to the completion of the Company’s common shares. The reverse split was effective on March 21, 2022. The common shares and common share equivalents as well asTitan Merger. Therefore, management believes the per-share amounts have been retroactively restated in accordance with ASC 855-10-25 andaccounting errors identified do not impact the loss per share figures have been retroactively restated in accordance with ASC 260-10-55-12.historical consolidated financial statements presented herein.
Going Concern
On January 5,The Company’s consolidated financial statements as of June 30, 2023 and December 31, 2022 are prepared using accounting principles generally accepted in the United States of America (“GAAP”), which contemplates continuation of the Company consummatedas a going concern. This contemplates the transactions contemplated byrealization of assets and liquidation of liabilities in the Asset Purchase Agreement dated asordinary course of December 30, 2022 (the “Purchase Agreement”) among Renovare Environmental, Inc. (“REI”) and BioHiTech America, LLC (“BHT” and, together with REI, the “Renovare Sellers”) and us, pursuant to which the Renovare Sellers sold and assigned to us, and we purchased and assumed from the Renovare Sellers, (a) certain assets related to the business of (i) aerobic digestion technology solutions for the disposal of food waste at the point of generation and (ii) data analytics with respect to food waste (collectively, the “Digester Business”) and (b) certain specified liabilities of the Renovare Sellers. The Company intends for the Digester Business to be one of our principal businesses going forward, and the Company intends to supplement our current business through the acquisition of complementary businesses.
Overview of the Company
Our mission is to reduce the environmental impact of the waste management industry through the development and deployment of cost-effective technology solutions. Our suite of technologies includes on-site biological processing equipment for food waste and proprietary real-time data analytics tools to reduce food waste generation. These proprietary solutions may enable certain businesses and municipalities of all sizes to lower disposal costs while having a positive impact on the environment. When used individually or in combination, we believe that our solutions can reduce the carbon footprint associated with waste transportation, repurpose non-recyclable plastics, and significantly reduce landfill usage. As we continue to expand our waste management business we plan to discontinue or spin off the remaining portions of the legacy business.
For the six months ended June 30, 2023, the Company had a net loss of $23,568,649.The working capital of the Company currently markets an aerobic digestion technology solution forwas a deficit of $9,107,438as of June 30, 2023 (deficit of $1,106,879as of December 31, 2022). These conditions raise substantial doubt about the disposal of food waste at the point of generation. Its line of Revolution Series Digesters has been described as self-contained, robotic digestive systems that we believe are as easyCompany’s ability to installcontinue as a standard dishwasher with no special electrical or plumbing requirements. Units range in size depending upon capacity, withgoing concern for a period of time within one year after that date that the smallest unit approximately the size of a residential washing machine. The digesters utilize a biological process to convert food waste into a liquid that we believe is safe to discharge down an ordinary drain. This process can result in a substantial reduction in costs for customers including cruise lines, restaurants, retail stores, hospitals, hotel/hospitality companies and governmental units by eliminating the transportation and logistics costs associated with food waste disposal. The Company also expects the process reduce the greenhouse gases associated with food-waste transportation and decomposition in landfills that have been linked to climate change. The Company offers its Revolution Series Digesters in several sizes targeting small- to mid-sized food waste generation sites thatfinancial statements are often more economical than traditional disposal methods. The Revolution Series Digesters are manufactured and assembled in the United States.issued.
Management’s plans include raising capital through issuances of equity and debt securities, and minimizing operating expenses of the business to improve the Company’s cash burn rate. In July 2023, the Company converted $1,944,000 of principal and $126,323 of accrued interest related to its outstanding convertible note payables into common stock, resulting in the extinguishment of almost all of the Company’s convertible note embedded derivative liabilities (Note 16 – Subsequent Events). In addition, the Company has been successful in attracting substantial capital from investors interested in the current public status of the Company that has been used to support its ongoing cash outlays (Note 16 – Subsequent Events). The Company believes, but cannot guarantee, it will continue to be able to attract capital from outside sources as it pursues a move to a national stock exchange. The Company has engaged a qualified investment bank to assist in the uplisting of its common stock and simultaneous raise of capital. In addition, the Company’s revenue continues to grow and management expects the Company to shrink its net losses over the upcoming quarters through organic and acquisitive growth. The Company has identified a plan to decrease expenses going forward to reduce its cash burn.
| 9 |
In an effort to expand the capabilities of its digesters, the Company developed a sophisticated Internet of Things (“IoT”) technology platform to provide its customers with transparency into their internal and supply chain waste generation and operational practices. This patented process collects weight related data from the digesters to deliver real-time data that provides valuable information that when analyzed, can improve efficiency, and validate corporate sustainability efforts. The Company provides its IoT platform through a SaaS (“Software as a Service”) model that is either bundled in its rental agreements or sold through a separate annual software license. The Company continues to add new capacity sizes to its line of Revolution Series Digesters to meet customer needs.
Legacy Business
TraQiQ Solutions Private Limited
On May 16, 2019, the Company entered into a Share Exchange Agreement with Mann-India Technologies Private Ltd., an Indian Corporation (“Mann”). On January 2, 2020, Mann changed its name to TraQiQ Solutions Private Limited (“TRAQ Pvt Ltd”). Pursuant to the Share Exchange Agreement with Mann, the Company acquired % of the shares of Mann and assumed certain net liabilities in exchange for warrants exercisable over a -years to purchase shares of common stock of the Company valued at $. The warrants will be exercisable as follows: (i) warrants immediately; (ii) warrants exercisable one-year after the date of closing, which was extended to March 31, 2021; and (iii) warrants exercisable two-years after the date of closing. This transaction is being recorded as a business combination under ASC 805. There were of these warrants exercised during 2021 and warrants remain outstanding as of March 31, 2022.
The warrants that are exercisable in one-year and two-years are conditioned upon TRAQ Pvt Ltd. achieving certain revenue figures and pre-tax profit percentages. TRAQ Pvt Ltd. must achieve target revenue of $ million (US$) and pre-tax profit of % (US$). Should TRAQ Pvt Ltd. be unable to achieve these criteria, the warrants will be reduced proportionately. A total of of these warrants were cancelled effective May 16, 2021 as a result of these criteria not being achieved.
Mann-India Private limited was renamed to TraQiQ Solutions Private Limited shortly after acquisition by TraQiQ Inc.
TRAQ Pvt Ltd. was established in May 2000 and is headquartered in New Delhi, India. TRAQ Pvt Ltd. is a leading software development company which, with the advent of technology, has evolved as a mature and fast-growing company committed to provide reliable and cost-effective software solutions across industries all over the world.
TRAQ Pvt Ltd. has its own experienced team of software developers dedicated towards developing various kinds of customized software.
TraQ Pvt Ltd. has been doing business around the world for over 15 years, with particular emphasis on Latin America and India. The customer list includes large enterprise Finance and Insurance companies across Latin America. The company’s product portfolio has evolved rapidly and now includes enterprise ready solutions for payment processing, mobile wallets, micro lending solutions and digital transformation.
On December 30, 2022, the Company entered into an Assignment of Stock (the “TSP Agreement”) with TraQiQ Solutions Private Ltd. (“TSP”) and LR, pursuant to which the Company sold, assigned and transferred to LR and LR purchased from the Company, all of the equity interests in TSP in exchange for nominal consideration of $.
Rohuma, LLC
On January 22, 2021, the Company entered into a Share Exchange Agreement with Rohuma, LLC, a Delaware limited liability company (“Rohuma”) and its members, whereby the Rohuma members agreed to exchange all of their respective membership interests in Rohuma in exchange for shares of common stock, of which the first tranche of shares were issued on March 1, 2021 totaling shares, with the remaining value reflected as contingent consideration until the shares vest at which time they will be issued. The transaction was valued at $ ($ per share). The Company as of March 31, 2022, determined that the second tranche of shares () met the criteria to be issued, and the value of $ was reclassified from contingent consideration to Obligation to Issue Common Stock. Rohuma has an Indian affiliate that is owned % by Rohuma and by its founding member.
Rohuma dba Kringle.ai was a California based software solutions company that enabled digital and mobile commerce by providing enterprise class applications that cover loyalty and rewards products, payments, online ordering, distribution logistics for retail and more. Kringle analyzed customers’ omni-channel behaviors and transactions. Using AI for digital commerce, Kringle was able to deliver real time, automated 1:1 recommendations and personalized content across all customer touch points.
On December 30, 2022, the Company entered into an Assignment of Units (the “Rohuma Agreement”, and, together with the MTP Agreement and the TSP Agreement, the “Disposition Agreements”) with Rohuma LLC (“Rohuma”) and Happy Kompany LLC (“Happy”) pursuant to which the Company sold, assigned and transferred to Happy, and Happy purchased from the Company, all of the equity interests in Rohuma in exchange for nominal consideration of $. Pursuant to the Rohuma Agreement, the Company assumed the liabilities of Rohuma with respect to two loans with Paypal/Loanbuilder in an aggregate principal amount of $ plus any accumulated interest and fees.
Mimo Technologies Private Limited
On February 17, 2021, the Company entered into a Share Exchange Agreement with Mimo Technologies Private Ltd., and Indian corporation (“Mimo”) and its shareholders, whereby the Mimo shareholders agreed to exchange all of their respective shares in Mimo in exchange for warrants to purchase shares of the Company’s common stock. Of these warrants, were earned at the date of acquisition, with the remaining expected to be earned over the next two years from grant based on revenue goals for Mimo. The warrants have a term of and an exercise price of $ and value in the amount of $, of which $ is reflected in additional paid in capital, with the remaining $ reflected as contingent consideration. The Company as of March 31, 2022, determined that the criteria for vesting of the second tranche of warrants was satisfied and reclassified $ from contingent consideration to additional paid in capital. In addition to the issuance of the warrants, TRAQ Pvt Ltd, wrote off $ in amounts due from a note receivable, $ in accounts receivable and $ in a debenture from Mimo. In addition, a cash payment was made to one of the minority shareholders of Mimo in the amount of $.
TraQiQ operated the Mimo delivery and task service in India. This service ran on the TraQSuite platform. Mimo had 14,000+ independent contractors across India performing deliveries and fulfilling tasks for the largest corporations in the country. Our team at Mimo used a sophisticated technology platform and a smartphone app to get their tasks completed. This was coupled with a verification and billing system that allowed customers of all sizes to leverage this distribution infrastructure.
Mimo offered a broad set of services. These offerings could be classified into three broad categories:
Mimo assisted the delivery and pickup segment of the banking and insurance industry by performing verifications, field investigations for loan requests, business verifications and employment verification, and also collected documents, assisted in filling forms for banks, and completed data collection from customers.
Mimo worked with microfinance institutions to collect cash, such as loan payments, convert cash to digital means like debit cards, and conduct data collection and surveys.
For consumer goods companies, Mimo did promotional marketing, Last mile (hyper-local) delivery, merchant onboarding or activation, store audits, and route optimization for delivery. Mimo provided efficient end-to-end transshipment logistics. The framework managed and optimized last-mile delivery & e-commerce logistics across the entire distribution chain with transparency and seamless integration.
During the COVID-19 pandemic, Mimo leveraged video as a platform for verification and document delivery.
There were also data digitization tasks being done by Mimo task workers across the country. In a country like India where there are over 20 languages and multiple dialects, the task workers converted paper documents into electronic form in the same language or translated them into another language.
Mimo provided delivery and task worker solutions across India. Mimo works with Banking, Financial, Logistics and Distribution companies, to take their products and services to semi-urban and rural India. Mimo trained the agents in each Product or Service through an online and classroom training platform. The company powered the gig economy task workers throughout the country and provided a very valuable source of employment for young people who may or may not have a high school diploma.
On December 30, 2022, the Company entered into an Assignment of Stock (the “MTP Agreement”) with Mimo Technologies Private Ltd. (“MTP”) and Lathika Regunathan (“LR”), pursuant to which the Company sold, assigned and transferred to LR, and LR purchased from the Company, all of the Company’s equity interests in MTP in exchange for nominal consideration of $.
TraQSuite is a cloud based software platform with a revenue model based on initial and transaction-based licensing fees as well as consulting fees. Licensees pay an initial per-module fee that varies depending on the number of modules that are licensed.
The Company’s TraQSuite software platform powers the last mile distribution network, allowing business users to target customers, facilitate and validate transactions, track and manage task workers, manage funds and run a distribution network. Key features of the TraQSuite software include:
The Mimo delivery and task service in India runs on the TraQSuite platform and performs deliveries and fulfills tasks for some of the largest businesses in India. Mimo provides delivery and pickup services for the banking and insurance industry, performing verifications, field investigations for loan requests, business verification, employment verification, collection of documents and customer data and assistance in filling out forms for banks. Mimo works with microfinance institutions to collect cash, such as loan payments, convert cash to digital forms such as debit cards, and conduct data collection and surveys. For consumer goods companies, Mimo does promotional marketing, last mile (hyper-local) delivery, merchant onboarding or activation, store audits, and route optimization for delivery.
Continuing Operations
Recoup Technologies, Inc.
Recoup Technologies, Inc. provides cutting-edge solutions based on patented technologies, to measure, analyze and manage the waste management process. Recoup’s products divert food waste from landfill, reduce costs, improve operations, and minimize negative environmental impact for organizations across the world. The company offers Products (Digestors) that convert food waste into grey water discharge that is safe to enter sewage systems. The company also provides accurate real-time information to eliminate the uncertainty about where food waste occurs, how much is being wasted and its associated value. A waste tracking process forecasts accurate supply chain and inventory needs, standardizes best practices for production, and improves future planning for the prevention of waste.
TraQiQ Solutions, Inc.
Ci2i was a services company founded in 1998 that developed and deployed intelligent technologies and products in order to meet the demand for sustainable, integrated solutions. Ci2i’s primary focus has been in the analytics and intelligence segments. The Company was investing significantly in building products in the area of supply chain and last mile delivery.
Ci2i’s cloud solutions and analytics services comprised software development, program management, project management, and business analytics services.
NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensedunaudited 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 responsibleGAAP for their integrity and objectivity. In their opinion, suchinterim financial information includesand with the instructions to Rule 8-03 of Regulation S-X. Accordingly, they do not include all the information and notes for complete financial statements. In the opinion of management, all adjustments (consistent of normal recurring accruals and adjustments) considered necessary for a fair presentation at such date andof 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 31, 2023. Interim results of operationshave been included. Results for the three months ended March 31, 2023 areinterim periods should not necessarilybe considered indicative of future results to be expected for thea full year. The Company adopted a December 31 fiscal year-end for financial statement purposes.
Principles of Consolidation and Basis of Accounting
The consolidated financial statements include the accounts of TraQiQ, Inc.Inc and its wholly-ownedwholly owned subsidiaries. All intercompany balancesmaterial inter-company accounts and transactions have been eliminated in consolidation.
eliminated. The Company applies the guidance of Topic 810 Consolidation of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)Company’s policy is to determine whether and how to consolidate another entity. Pursuant to ASC paragraph 810-10-15-10, all majority-owned subsidiaries—all entities in which a parent has a controllingprepare its consolidated financial interest—are consolidated except when control does not rest with the parent.
Pursuant to ASC paragraph 810-10-15-8, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree.
In accordance with ASC 810-10-45, the Company has deconsolidated the subsidiaries of MTP, Rohuma and TSP as a result of the nonreciprocal transfer (spinoff). As a result of the deconsolidation the Company has recognized a loss from discontinued operations of $6,866,913statements on the consolidated statementsaccrual basis of operations for the three months ending March 31, 2022.accounting, whereby revenue is recognized when earned and expenses are recognized when incurred.
Noncontrolling Interests
In accordance with ASC 810-10-45 Noncontrolling Interests in Consolidated Financial Statements, the Company classifies noncontrolling interests as a component of equity within the consolidated balance sheet. In January 2021, the acquisition of Rohuma resulted in a less than 1% non-controlling interest of the Indian affiliate of that company.In February 2021, the acquisition of Mimo resulted in a less than 1% non-controlling interest of that company. On December 30, 2022, the Company sold its equity interest in Rohuma and Mimo.
Use ofAccounting Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect thecertain reported amounts of assets and liabilities and disclosuredisclosures of contingent assets and liabilities at the date of the consolidated 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.period. Actual results could differ from thosethese estimates.
Foreign Currency TransactionsBusiness Combinations
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. The functional currency of the deconsolidated subsidiary TRAQ Pvt Ltd. was 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
Under the guidance enumerated in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not considered a business and is accounted for as an asset acquisition at which point, the acquirer measures the assets acquired based on their cost, which is allocated on a relative fair value basis.
Certain prior period amounts have been reclassified to conform with current period presentation with no effect onBusiness combinations are accounted for utilizing the fair value of consideration determined by the Company’s management and external specialists. The Company recognizes estimated fair values of the tangible and intangible assets acquired and liabilities assumed as of the acquisition date. Goodwill is recognized as any excess in fair value over the net loss, totalvalue of assets acquired and liabilities equity or cash flows.assumed.
Cash and Cash Equivalentscash equivalents
CashThe Company considers all highly-liquid money market funds and cash equivalents include cash on hand and oncertificates of deposit at banking institutions as well as all highly liquid short-term investments with original maturities of 90 days or less than three months to be cash equivalents. The Company maintains its cash balances with various banks. The balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of $139,573 and $1,312 as of March 31,June 30, 2023 and December 31, 2022, respectively.the Company had no amounts above this amount.
Accounts Receivable, and Concentration of Credit Risknet
Accounts receivables are recorded at the amount the Company expects to collect on the balance outstanding at year-end. Management closely monitors outstanding balances during the year and allocates an allowance account if appropriate. The Company estimates and records a provision for its expected credit losses related to its financial instruments, including its trade receivables and contract assets. The Company considers historical collection rates, the current financial status of its customers, macroeconomic factors, and other industry-specific factors when evaluating for current expected credit losses. Forward-looking information is also considered in the evaluation of current expected credit losses. However, because of the short time to the expected receipt of accounts receivable, the Company believes that the carrying value, net of expected losses, approximates fair value and therefore, relies more on historical and current analysis of such financial instruments.
The Company considers accounts receivable, netAs of allowance for returns and doubtful accounts, to be fully collectible. The allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses and economic conditions. Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts are uncollectible.
Credit extended to customers is generally uncollateralized. Past-due status is based on contractual terms. Management has determined that no allowance for returns and doubtful accounts was required for the outstanding accounts receivable as of March 31,June 30, 2023 and December 31, 2022, respectively.the Company allocated $77,690 to the allowance for credit loss. The Company writes off bad debts as they occur during the year.
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Subscriptions Receivable
Subscription receivable consists of units that have been issued with subscriptions that have not yet been settled. As of June 30, 2023 and December 31, 2022, there were $0and $200,000, respectively, in subscriptions that had not yet settled. Subscriptions receivable are carried at cost which approximates fair value.
Inventory
Inventories primarily consist of parts for our digester business purchased for resale. Inventory is stated at the lower of cost (first-in, first-out) or net realizable value. Management reviews the age of inventories for obsolescence and determined that a reserve for obsolescence was not required as of June 30, 2023.
Fixed assets,Property and Equipment, net
Fixed assets areProperty and equipment is stated at cost. Depreciation on fixed assets areis computed primarily using the straight-line method over the estimated useful lives of the assets. Expenditures for repairs and maintenance are charged to expense as incurred. For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in the condensed consolidated statement of operations or the period in which rangethe disposal occurred. The Company utilizes a useful life ranging from three5 to ten25 years for its trailers, tractors, shop equipment, leasehold improvements, and containers..
Management regularly reviews property and equipment for possible impairment. This review occurs annually or more frequently if events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Based on management’s assessment, there were no indicators of impairment of the Company’s property and equipment as of June 30, 2023 and December 31, 2022.
Finite Long-lived Intangible assets, net and Long-lived Assets, Net
Finite long-lived intangible assets are recorded at their estimated fair value at the date of acquisition. Finite long-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Management annually evaluates the estimated remaining useful lives of the finite intangible assets to determine whether events or changes in circumstances warrant a revision to the remaining period of amortization. Titan acquired the finite intangible asset, customer lists, as part of the acquisition of WTI Global, Inc. during the year ended December 31, 2022. The Company also recognized finite intangible intellectual property, noncompete agreement and tradename assets from its reverse acquisition with Titan (Note 3 – Business Combinations).
FASB Codification Topic 360 “Property, Plant and Equipment” (ASC 360), requires thatFinite long-lived assets and certain identifiable intangibles held and used by an entity beare reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The adoptionAn impairment loss is recognized if the sum of ASC 360 has not materially affected the Company’s reported earnings, financial condition orexpected long-term undiscounted cash flows.flows the asset is expected to generate is less than its carrying amount. Any write-downs are treated as permanent reductions in the carrying amount of the respective asset. Management assessed and concluded that no impairment write-down would be necessary for finite long-lived intangible assets as of June 30, 2023 and December 31, 2022.
Intangible assets with definite useful lives are stated at cost less accumulated amortization. Intangible assets represent purchased intangible assets of Recoup. The Company amortizes these intangible assets on a straight-line basis over their estimated useful lives, as stated below:.
SCHEDULE OF FINITE LONG-LIVED INTANGIBLE AND LONG-LIVED ASSET CATEGORIESASSETS ESTIMATED USEFUL LIFE
| Finite Long-lived Intangible | Estimated Useful Life | |
| 10 Years | ||
| 10 Years | ||
| Noncompete agreement | 5 Years | |
| Tradenames | 10 Years | |
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 three months ended March 31, 2023. Management has determined that impairment of long-lived assets is required for the retrospective presentation of the three months ended March 31, 2022 as a result of the discontinued operations. Please see Note 8 – Intangible Assets and Note 9 - Goodwill.
Due to the Company’s acquisition of Recoup and the resulting recognition of goodwill from the acquisition, the Company plans on analyzing goodwill for impairment for each future reporting period.
InventoryGoodwill
Inventories consistGoodwill represents the excess of the company’s waste-management Digester units, Digesteracquisition price of a business over the fair value of identified net assets of that business. Goodwill has an indefinite lifespan and is not amortized. We evaluate goodwill for impairment at least annually and record an impairment charge when the carrying amount of a reporting unit spare parts, andwith goodwill exceeds the biological fuel used for the functioningfair value of the Digester units. Inventories are measured at the lower of weighted average cost or market value. Write-downsreporting unit. The Company has two reporting units, Titan and write-offs of inventory are charged to cost of revenues.
Contract Liabilities
Advance payments in the form of customer deposits for goods to be sold, or services to be performed, are recorded by the Company as contract liabilities. Deferred revenue recognized during the company’s revenue recognition process is also recorded as contract liabilities. As a result of the January 5, 2023 acquisition of Recoup, the Company assumed $14,465 of deferred revenue and $297,079 of customer deposit liabilities without acquiring the associated cash deposits. Please See Note 6 – Acquisition of Recoup Technologies, Inc.
Revenue RecognitionRecoup.
The Company records revenue basedassesses qualitative factors to determine if it is necessary to conduct a quantitative goodwill impairment test. If deemed necessary, a quantitative assessment of the reporting unit’s fair value is conducted and compared to its carrying value in order to determine the impairment charge. Due to the reverse acquisition with Titan, the Company recognized goodwill of $22,319,908 for the Recoup reporting unit on the condensed consolidated balance sheet (Note 3 - Business Combinations). As a five-step model in accordance with ASC 606, Revenue from Contracts with Customers, which requireresult of the historical net losses of TraQiQ, the Company concluded it was more likely than not that we:the fair value of the reporting unit was less than it’s carrying amount. Therefore, the Company performed an impairment assessment of the goodwill.
1. Identify the contract with a customer;
2. Identify the performance obligations in the contract;
3. Determine the transaction priceThe fair value of the contract;Recoup reporting unit was estimated using an income approach and included assumptions related to estimates of future revenue and operating expenses, long-term growth rates, a technology obsolescence rate, and a discount rate. As of June 30, 2023, the quantitative impairment test indicated a fair value of the reporting unit that was lower than it’s carrying value, and as a result, the goodwill was impaired with an impairment expense of $15,669,287 (Note 6 - Goodwill).
Leases
4. Allocate the transaction price to the performance obligations in the contract;
5. Recognize revenue when the performance obligations are met or delivered.
When revenue is earned based on product sales, such as sales of digester equipment and parts, solid recovered fuel and recycled materials, the Company’s performance obligations are satisfied at the point in time when products are shipped to the customer, which is when the customer has title and control. Therefore, the Company’s contracts have a single performance obligation (shipment of product). The Company primarily receives fixed consideration for sales of products.
When revenue is earned based on receipt of disposal waste, the Company’s performance obligations are satisfied at the point in time when disposal waste products are received from the customer, which is when the Company has title and control. Therefore, the Company’s contracts have a single performance obligation (receipt of disposal waste).
When revenue is earned on services, such as management advisory fees and digester maintenance and repair services, fees are recognized over the period the services are performed based on service milestones.
The following is a summary of revenue for the three months ended March 31, 2023 and 2022, disaggregated by type for continuing operations:
SUMMARY OF DISAGGREGATION OF REVENUE
| 2023 | 2022 | |||||||
| Professional Services Revenue | $ | - | $ | - | ||||
| Sale of goods | 64,611 | - | ||||||
| Software Solution Revenue | 429 | 522 | ||||||
| Revenue | $ | 65,040 | $ | 139,308 | ||||
The following is a summary of revenue for the three months ended March 31, 2023 and 2022, disaggregated by type for discontinuing operations:
SUMMARY OF DISAGGREGATION OF REVENUE
| 2023 | 2022 | |||||||||
| Professional Services Revenue | (a) | $ | - | $ | 234,189 | |||||
| Sale of goods | - | - | ||||||||
| Software Solution Revenue | - | 112,697 | ||||||||
| Revenue | $ | - | $ | 346,886 | ||||||
CostsThe Company assesses whether a contract is or contains a lease at inception of Revenuesthe contract and recognizes right-of-use assets (“ROU”) and corresponding lease liabilities at the lease commencement date. The lease term is used to calculate the lease liability, which includes options to extend or terminate the lease when it is reasonably certain that the option will be exercised. The leases the Company currently holds do not have implicit borrowing rates, therefore the Company utilizes its incremental borrowing rate to measure the ROU assets and liabilities. Operating lease expense is generally recognized on a straight-line basis over the lease term. All leases that have lease terms of one year or less are considered short-term leases, and therefore are not recorded through a ROU or liability.
CostsThe Company has elected to apply the practical expedient to not separate the lease and non-lease components of revenues provided consista contract, which ultimately results in a higher amount of total lease payments being included within the present value calculation of the cost of goods sold, and IT support costs such as data processing costs, costs to maintain the Company’s proprietary databases, hardware and software expense associated with transaction processing systems and exchanges, and computer network expense.lease liability.
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.
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Uncertain Tax PositionsLoan Origination Fees
The Company follows ASC 740-10, “Accounting for Uncertainty in Income Taxes”. This requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. Management evaluates their tax positions on an annual basis.
TraQiQ, Inc.and TraQiQ Solutions, Inc, file a consolidated income tax return in the U.S. federal tax jurisdiction and various state tax jurisdictions. Recoup files a tax return in the U.S. federal tax jurisdiction and the U.S. State of Delaware. Rohuma US, part of the discontinued operations, files a separate tax return in the U.S. federal tax jurisdiction and various state tax jurisdictions. The remainder of the discontinued operations, TRAQ Pvt Ltd. and Mimo file separate individual income tax returns in the India tax jurisdictions.
The U.S. federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were filed. The India tax returns of the Company are subject to examination by the India Income Tax Department and India state taxing authority, generally for 12 months after the relevant tax year, and 24 months after the relevant tax year in case transfer pricing provisions are applicable.
Fair Value of Financial Instruments
ASC 825, “Financial Instruments,” requiresLoan origination fees represent loan fees, inclusive of original issue discounts, relating to convertible note payables and note payables granted to the Company. 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 becauseamortizes loan origination fees over the life of the short-term maturitynote (Note 9 – Note Payables and Note 10 – Convertible Note Payables). Amortization expense of those instruments.loan issuance fees for the six months ended June 30, 2023 and 2022 was $70,997 and $0, respectively. The net amounts of $642,654 and $93,744 were netted against the outstanding notes payable as of June 30, 2023 and December 31, 2022, respectively.
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.cash and cash equivalents.
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,and cash equivalents, short-term notes payable, accounts payable and accrued expenses. The carrying value of long-term debt approximates fair value, as the variable interest rates approximate current market rates. The Company measured its derivative liabilities at fair value on a recurring basis using level 3 inputs.
Derivative FinancialConvertible Instruments
The Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with the FASB ASC Topic 815 “Derivatives are recorded onand Hedging” (“ASC 815”). The accounting treatment of derivative financial instruments requires that the consolidatedCompany record embedded conversion options and any related freestanding instruments at their fair values as of the inception date of the agreement and at fair value as of each subsequent 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 changesdate. Any change in fair value recognizedis recorded in earnings each period as non-operating, non-cash income or expense. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of changethe date of the event that caused the reclassification. Embedded conversion options and any related freestanding instruments are recorded as a separate component of other income/expense. Fair values for exchange-traded securities and derivatives arediscount to the host instrument. The Company allocates proceeds based on quoted market prices. the relative fair values of the debt and equity components.
Valuations derived from various models are subject to ongoing internal and external verification and review. ModelThe Company determined the fair value of the derivative liability as of June 30, 2023 using the Black-Scholes pricing model for its derivative liability from warrants and a Monte Carlo pricing model for its derivative liabilities from convertible note payables. The inputs used incorporate market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involvesinvolve management’s judgmentjudgement and may impact net income (loss).
With the issuance of the July 2017 FASB ASU 2017-11, “Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815),” which addresses the complexity of accounting for certain financial instruments with down round features, the Company has chosen the early adopt retroactively the amendments in Part I of the standard whereby fair value derivative liabilities previously recognized were derecognized in the current and comparative periods. Under the amendments included in this update, the Company is no longer required to record changes in fair value during the period of change as a separate component of other income (expense) in the consolidated Statements of Operations.
The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, “Debt—Debt with Conversion and Other Options”), including related EPS guidance (in Topic 260).
The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect.
Under current GAAP, an equity-linked financial instrument with a down round feature that otherwise is not required to be classified as a liability under the guidance in Topic 480 is evaluated under the guidance in Topic 815, “Derivatives and Hedging,” to determine whether it meets the definition of a derivative. If it meets that definition, the instrument (or embedded feature) is evaluated to determine whether it is indexed to an entity’s own stock as part of the analysis of whether it qualifies for a scope exception from derivative accounting.
Generally, for warrants and conversion options embedded in financial instruments that are deemed to have a debt host (assuming the underlying shares are readily convertible to cash or the contract provides for net settlement such that the embedded conversion option meets the definition of a derivative), the existence of a down round feature results in an instrument not being considered indexed to an entity’s own stock. This results in a reporting entity being required to classify the freestanding financial instrument or the bifurcated conversion option as a liability, which the entity must measure at fair value initially and at each subsequent reporting date.
The amendments in this Update revise the guidance for instruments with down round features in Subtopic 815-40, “Derivatives and Hedging—Contracts in Entity’s Own Equity,” which is considered in determining whether an equity-linked financial instrument qualifies for a scope exception from derivative accounting. An entity still is required to determine whether instruments would be classified in equity under the guidance in Subtopic 815-40 in determining whether they qualify for that scope exception. If they do qualify, freestanding instruments with down round features are no longer classified as liabilities and embedded conversion options with down round features are no longer bifurcated.
For entities that present EPS in accordance with Topic 260, and when the down round feature is included in an equity-classified freestanding financial instrument, the value of the effect of the down round feature is treated as a dividend when it is triggered and as a numerator adjustment in the basic EPS calculation. This reflects the occurrence of an economic transfer of value to the holder of the instrument, while alleviating the complexity and income statement volatility associated with fair value measurement on an ongoing basis. Convertible instruments are unaffected by the Topic 260 amendments in this Update.
Those amendments in Part I of this Update are a cost savings relative to current GAAP. This is because, assuming the required criteria for equity classification in Subtopic 815-40 are met, an entity that issued such an instrument no longer measures the instrument at fair value at each reporting period (in the case of warrants) or separately accounts for a bifurcated derivative (in the case of convertible instruments) on the basis of the existence of a down round feature. For convertible instruments with embedded conversion options that have down round features, applying specialized guidance such as the model for contingent beneficial conversion features rather than bifurcating an embedded derivative also reduces cost and complexity. Under that specialized guidance, the issuer recognizes the intrinsic value of the feature only when the feature becomes beneficial instead of bifurcating the conversion option and measuring it at fair value each reporting period.
The amendments in Part II of this Update replace the indefinite deferral of certain guidance in Topic 480 with a scope exception. This has the benefit of improving the readability of the Codification and reducing the complexity associated with navigating the guidance in Topic 480.
For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in Part 1 of this Update should be applied in either of the following ways:
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The amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting effect.
Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (EPS) include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable pursuant to the exercise of stock options and warrants. Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive for periods presented.
Related Party Transactions
Parties are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management, members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company may deal where one-party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. All transactions shall be recorded at fair value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected as compensation or distribution to related parties depending on the transaction.
Segment ReportingRevenue Recognition
The Company records revenue based on a five-step model in accordance with FASB ASC 606, Revenue from Contracts with Customers, which requires the following:
For purposes of segment disclosures, two or more operating segments should be grouped only if1. Identify the segments meet all the requirements of paragraph 280-10-50-11, including the requirements for similar economic characteristics.contract with a customer.
Approximately 99%2. Identify the performance obligations in the contract.
3. Determine the transaction price of the contract.
4. Allocate the transaction price to the performance obligations in the contract.
5. Recognize revenue when the performance obligations are met or delivered.
The Company’s operating revenues are primarily generated from fees charged for the collection and disposal of waste. Revenues are recognized at a point in time immediately after completion of disposal of waste at a landfill or transfer station. Revenues from collection operations are influenced by factors such as collection frequency, type of collection furnished, type and volume or weight of the waste collected, distance to the disposal facility or material recovery facility and disposal costs. Fees charged at transfer stations are generally based on the weight or volume of waste deposited, including the cost of loading, transporting, and disposing of the solid waste at a disposal site. The fees charged for services generally include environmental, fuel charge and regulatory recovery fees, which are intended to pass through to customers direct and indirect costs incurred. For waste collection and disposal services the Company invoices its customers with standard 30-day payment terms without any significant financing terms.
The Company also recognizes operating revenues from its product sales, such as sales of digester equipment and parts. Performance obligations from product sales are satisfied at the point in time when products are shipped to the customer, which is when the customer has title and control. Therefore, the Company’s product sale contracts have a single performance obligation (shipment of product). The Company primarily receives fixed consideration for sales of products. When revenue is earned on digester equipment related services, such as management advisory fees and digester maintenance and repair services, fees are recognized as the services are performed based on service milestones. For product sales, the Company invoices its customers with standard 30-day payment terms without any significant financing terms.
The following is a summary of revenue disaggregated by type for the six and three months ended June 30, 2023 and 2022:
SUMMARY OF DISAGGREGATION OF REVENUE
| Six Months Ended | Three Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Product sales | $ | 184,175 | $ | - | $ | 184,139 | $ | - | ||||||||
| Waste collection and disposal | 2,777,397 | 1,569,853 | 1,643,106 | 919,738 | ||||||||||||
| Total revenue | $ | 2,961,572 | $ | 1,569,853 | $ | 1,827,245 | $ | 919,738 | ||||||||
Concentration Risk
The Company performs a regular review of customer activity and associated credit risks.
As of June 30, 2023, two customers accounted for approximately 43% of accounts receivable. As of December 31, 2022, one customer accounted for approximately 63% of accounts receivable.
During the six months ended June 30, 2023, one customer accounted for approximately 42% of total revenues generated. During the six months ended June 30, 2022, one customer accounted for approximately 55% of total revenues generated. During the three months ended June 30, 2023, one customer accounted for approximately 34% of total revenues generated. During the three months ended June 30, 2022, one customer accounted for approximately 53% of total revenues generated.
The Company maintains positive customer relationships and continually expands its customer base, mitigating the impact of any potential concentration risks that exist.
Basic net (loss) income per common share is computed by dividing net (loss) income by the weighted average number of vested common shares outstanding during the period. Diluted net income per common share is computed by dividing net income by the weighted average number vested of common shares, plus the net impact of common shares (computed using the treasury stock method), if dilutive, resulting from the exercise of dilutive securities. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. As of June 30, 2023 and December 31, 2022, the Company excluded the common stock equivalents summarized below, which entitle the holders thereof to ultimately acquire shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive.
| Six Months Ended | Six Months Ended | |||||||
| June 30, | June 30, | |||||||
| 2023 | 2022 | |||||||
| Series B preferred stock | 147,013,500 | - | ||||||
| Series C preferred stock | 7,010,000 | - | ||||||
| Restricted stock awards | 5,005,000 | - | ||||||
| Warrants | 108,734 | - | ||||||
| Convertible notes | 127,031,864 | - | ||||||
| Total common stock equivalents | 286,169,098 | - | ||||||
As further described in Note 3, under applicable accounting principles, the historical financial results of Titan prior to May 19, 2023 replace the historical financial statements for the period prior to May 19, 2023. Titan’s equity structure, prior to the combination with the TraQiQ, was a limited liability company, resulting in all components of equity attributable to the members being reported within Member’s Equity. Given that Titan was a limited liability company, net loss prior to the reverse acquistion is not applicable for purposes of calculating loss per share.
| 13 |
Income Taxes and Uncertain Tax Positions
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.
The Company follows FASB 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. files a tax return in the U.S. federal tax jurisdiction and various state tax jurisdictions. Prior to the sale of its subsidiary TraQiQ Solutions, Inc., (Note 16 – Subsequent Events) TraQiQ Inc. and TraQiQ Solutions Inc filed a consolidated tax return in the U.S. federal tax jurisdiction and various state tax jurisdictions. Recoup files a tax return in the U.S. federal tax jurisdiction and the State of Delaware. Prior to the Titan Merger, Titan, with consent from its shareholders, had elected under the Internal Revenue Code to be an “S” corporation. In lieu of corporation income taxes, the shareholders of an “S” corporation are taxed on their proportionate share of the Company’s revenuetaxable income. For U.S. federal income tax purposes, the Titan Merger qualified as a tax-free “reorganization”. Therefore, following the Titan Merger, Titan is generated from its Recoup subsidiary. to be taxed as a “C” corporation in the U.S. federal tax jurisdiction and in various state tax jurisdictions.
The Company believes that no segment reporting is required as all remaining operations outsideU.S. federal and state income tax returns of the Recoup subsidiary is immaterial.Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were filed.
Advertising and Marketing Costs
Costs associated with advertising are charged to expense as occurred. For the three and six months ended June 30, 2023 and 2022, the advertising and marketing costs were $12,560 and $13,908 and $1,209 and $1,654, respectively.
Recently Issued Accounting Standards
There were updates recentlyThe Company has reviewed the recent accounting pronouncements issued mostby the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC and determined that these pronouncements do not have a material impact on the Company’s current or anticipated consolidated financial statement presentation or disclosures.
Recently Adopted Accounting Standards
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (“ASU 2016-13”), which represent technical correctionsrequires the measurement of expected credit losses for financial instruments carried at amortized cost, such as accounts receivable, held at the reporting date based on historical experience, current conditions, and reasonable forecasts. The main objective of this ASU is to provide financial statement users with more decision-useful information about the accounting literature or applicationexpected credit losses on financial instruments and other commitments to specific industries or transactions that areextend credit held by a reporting entity at each reporting date. The Company adopted this ASU as of January 1, 2023. The adoption did not expected to have a material impact on the Company’s financial position, resultsstatements.
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of operationsbeneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective for smaller reporting companies with fiscal years beginning after December 15, 2023 and should be applied on a full or cash flows.
modified retrospective basis, with early adoption permitted. The Company adopted ASU 2020-06 effective January 1, 2023. The adoption of ASU 2020-06 did not have an impact on the Company’s financial statements.
NOTE 4:3 – GOING CONCERN
The Company has an accumulated deficit of $129,387,007 as of March 31, 2023 and a working capital deficit of $116,889,252, as of March 31, 2023, and a working capital deficit of $1,682,659 as of December 31, 2022. As a result of these factors, management has determined that there is substantial doubt about the Company ability to continue as a going concern.
These consolidated financial statements of the Company have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties. The Company’s continuation as a going concern is contingent upon its ability to obtain additional financing and generate revenue and cash flow to meet its obligations on a timely basis. Management intends to seek additional funding through debt or equity financing during the next twelve months to source new inventory and generate revenue from product sales.
NOTE 5: DISCONTINUED OPERATIONSBUSINESS COMBINATIONS
As discussed in Note 1, the Company sold Rohuma, Mimo and TSP in December of 2022. Additionally, the Company is shifting operations to waste management. As such, these businesses are reported as discontinued operations for the three months ended March 31, 2022. As required, the Company has retrospectively recast its consolidated statements of operations and balance sheets for all periods presented. The retrospective recast of the company’s income statement and balance sheet for the quarter ended March 31, 2022 resulted in a loss on discontinued operations of $6,866,913 for the quarter ended March 31, 2022. The Company has not segregated the cash flows of this business in the consolidated statements of cash flows. Management was also required to make certain assumptions and apply judgment to determine historical expenses related to the discontinued operations presented in prior periods. Unless noted otherwise, discussion in the Notes to Consolidated Financial Statements refers to the Company’s continuing operations.Titan Trucking, LLC Reverse Acquisition
The following table presentsCompany, the Company’s subsidiary Titan Merger Sub Corp. (“Merger Sub”), Titan and the owners of Titan (“Titan owners”) entered into a reconciliationmerger agreement (the “Titan Merger Agreement”) on May 19, 2023 (the “acquisition date”). Pursuant to the terms of the major financial lines constitutingTitan Merger Agreement, Merger Sub was merged with and into Titan on the resultsacquisition date with Titan surviving as a wholly-owned subsidiary of operations for discontinued operationsthe Company (the “Titan Merger”). For U.S. federal income tax purposes, the Titan Merger qualified as a tax-free “reorganization”. Under the terms of the Titan Merger Agreement, the Company agreed to pay the Titan owners shares of the Company’s Series C Preferred Stock. Concurrent to the net income (loss)Titan Merger, the Company’s chief executive officer and one of the Company’s directors resigned from discontinued operations presented separatelytheir respective positions and a new chief executive officer, chief operating officer and chief financial officer were appointed. Additionally, the new chief executive officer and chief operating officer were both appointed as directors of the Company. The Company additionally agreed to issue stock compensation in the consolidated statementform of operations forshares of the three months ended March 31, 2022:Company’s Series C Preferred Stock to the new chief executive officer (Note 14 – Stock-Based Compensation).
SCHEDULE OF DISCONTINUED OPERATIONS
| Rohuma | Mimo | TSP | Total | |||||||||||||
| March 31, 2022 | March 31, 2022 | March 31, 2022 | March 31, 2022 | |||||||||||||
| REVENUE | $ | 48,085 | $ | 64,652 | $ | 234,189 | $ | 346,886 | ||||||||
| COST OF REVENUE | 79,065 | 145,960 | 135,687 | 360,712 | ||||||||||||
| GROSS PROFIT (LOSS) | (31,020 | ) | (81,308 | ) | 98,502 | (13,826 | ) | |||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Salaries and salary related costs | 104,263 | - | 17,556 | 121,819 | ||||||||||||
| Professional fees | 4,617 | 18,621 | 3,190 | 26,428 | ||||||||||||
| Rent expense | 442 | - | 755 | 1,197 | ||||||||||||
| Depreciation and amortization expense | - | 11,644 | 2,145 | 14,840 | ||||||||||||
| General and administrative expenses | 4,502 | 5,809 | 17,385 | 27,696 | ||||||||||||
| Total Operating Expenses | 114,875 | 36,074 | 41,031 | 191,980 | ||||||||||||
| OPERATING (LOSS) INCOME | (145,895 | ) | (117,382 | ) | 57,471 | (205,806 | ) | |||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Loss from impairment of intangible assets | - | (776,263 | ) | - | (776,263 | ) | ||||||||||
| Loss from impairment of goodwill | (3,519,869 | ) | (2,343,188 | ) | - | (5,863,057 | ) | |||||||||
| Interest expense, net of interest income | (2,126 | ) | (2,509 | ) | (14,280 | ) | (18,915 | ) | ||||||||
| Other income | 154 | 45 | 2,608 | 2,807 | ||||||||||||
| Total other income (expense) | (3,521,841 | ) | (3,121,915 | ) | (11,672 | ) | (6,655,428 | ) | ||||||||
| INCOME (LOSS) FROM DISTCONTINUED OPERATIONS, BEFORE PROVISION FOR INCOME TAXES | (3,667,736 | ) | (3,239,297 | ) | 45,799 | (6,861,234 | ) | |||||||||
| Provision for income taxes – discontinued operations | 367 | - | 5,312 | 5,679 | ||||||||||||
| LOSS INCOME FROM DISTCONTINUED OPERATIONS | $ | (3,668,103 | ) | $ | (3,239,297 | ) | $ | 40,487 | $ | (6,866,913 | ) | |||||
The following table presents a reconciliation of Rohuma, Mimo, and TSP net cash flow from operating, investing and financing activities for the periods indicated below:
| March 31, 2022 | ||||
| Net cash (used in) provided by operating activities - discontinued operations | $ | 409,295 | ||
| Net cash (used in) provided by investing activities - discontinued operations | $ | - | ||
| Net cash provided by (used in) financing activities - discontinued operations | $ | (468,293 | ) | |
| 14 |
NOTE 6: ACQUISITION OF RECOUP TECHNOLOGIES, INC.
On January 5, 2023, pursuant to an asset purchase agreement, dated December 30, 2022, we completedIn accordance with ASC 805 – Business Combinations, the acquisition of Recoup Technologies, Inc., and its digester business assets (“Recoup” or the “Digester business”), from Renovare Environmental, Inc (“REI”), BioHiTech America, LLC (“BHT” and together with REI, the “Renovare Sellers”) for a purchase price of $18,371,421 consisting of the following:
SCHEDULE OF BUSINESS ACQUISITION
| Type of Consideration | Number of Shares | Fair Value | ||||||||
| Cash | $ | 150,000 | ||||||||
| Issuance of common stock | a. | 15,686,926 | $ | 1,592,318 | ||||||
| Issuance of series – B preferred stock | b. | 1,250,000 | $ | 12,688,256 | ||||||
| Liabilities assumed: | ||||||||||
| Michaelson Capital Senior Note | c. | $ | 3,017,090 | |||||||
| Accounts Payable and accrued expenses | $ | 612,213 | ||||||||
| Contract liabilities | $ | 311,544 | ||||||||
| Total consideration | $ | 18,371,421 | ||||||||
The acquisition of RecoupTitan Merger was accounted for as a business combination in accordancereverse acquisition with Titan being deemed the acquisition method underaccounting acquirer of TraQiQ. Titan, as the guidance in ASC 805-10 and 805-20. Accordingly,accounting acquirer, recorded the total purchase consideration was allocated to intangible assets acquired based on their respective estimated fair values. The acquisition method of accounting requires, among other things, that assets acquired and liabilities assumed if any, in a business purchase combination be recognizedof TraQiQ at their fair values as of the acquisition date. The process for estimatingTitan’s historical consolidated financial statements have replaced TraQiQ’s historical consolidated financial statements with respect to periods prior to the fair valuescompletion of identifiable intangible assetsthe Titan Merger with retroactive adjustments to Titan’s legal capital to reflect the legal capital of TraQiQ. TraQiQ remains the continuing registrant and certain tangible assets requiresreporting company.
Titan was deemed to be the useaccounting acquirer based on the following facts and circumstances: (1) the Titan owners owned approximately 65% of the voting interests of the combined company immediately following the transaction; (2) the Titan Merger resulted in significant estimates and assumptions, including estimating future cash flows, developing appropriate discount rates, estimatingchanges to the costs, and timing.combined company’s Board of Directors; (3) the Titan Merger resulted in significant changes to the management of the combined company.
The allocationCompany accounted for the Titan Merger as a reverse acquisition using acquisition accounting. Because the Titan Merger qualifies as a reverse acquisition and given that Titan was a private company at the time of the purchase price in connection withTitan Merger and therefore its value was not readily determinable, the fair value of the merger consideration was deemed to be equal to quoted market capitalization of the Company at the acquisition of Recoupdate. The purchase consideration was calculated as follows:
SCHEDULE OF ALLOCATION OF PURCHASE PRICE IN CONNECTION WITH ACQUISITION OF RECOUPCONSIDERATION
| Description | Fair Value | Weighted Average Useful Life (Years) | |||||
| Fixed assets – truck | $ | 1,196 | 7 | ||||
| Inventory | 379,718 | ||||||
| Intellectual property | 10,333,144 | 10 | |||||
| Tradenames | 285,863 | 10 | |||||
| Noncompete agreement | 78,615 | 5 | |||||
| Goodwill | 7,292,885 | Indefinite | |||||
| $ | 18,371,421 | ||||||
| TraQiQ, Inc. market capitalization at closing | $ | 27,162,222 | ||
| Total purchase consideration | $ | 27,162,222 |
IntellectualThe Company recorded all tangible and intangible assets and liabilities at their preliminary estimated fair values on the acquisition date. The Company is currently in the process of finalizing the estimated fair values with a third-party specialist. The following represents the allocation of the estimated purchase consideration:
SCHEDULE OF TANGIBLE AND INTANGIBLE ASSETS ACQUIRED AND LIABILITIES ASSUMED AT THEIR PRELIMINARY ESTIMATED FAIR VALUES
| Preliminary | ||||
| Estimated | ||||
| Description | Fair Value | |||
| Assets: | ||||
| Cash | $ | 69,104 | ||
| Accounts receivable | 369,338 | |||
| Prepaid expenses and other current assets | 17,893 | |||
| Inventory | 416,046 | |||
| Fixed assets | 1,134 | |||
| Intangible assets | 10,681,477 | |||
| Goodwill | 22,319,908 | |||
| Assets acquired total | $ | 33,874,900 | ||
| Liabilities: | ||||
| Accounts payable and accrued expenses | $ | (1,009,993 | ) | |
| Customer deposits | (311,544 | ) | ||
| Accrued payroll and related taxes | (21,077 | ) | ||
| Derivative liability | (219,171 | ) | ||
| Convertible notes payable | (1,466,382 | ) | ||
| Convertible notes payable – related parties | (102,851 | ) | ||
| Notes payable | (3,579,160 | ) | ||
| Notes payable – related parties | (2,500 | ) | ||
| Liabilities acquired total | $ | (6,712,678 | ) | |
| Net fair value of assets (liabilities) | $ | 27,162,222 | ||
The Company assessed the fair values of the tangible and intangible assets and liabilities and the amount of goodwill to be recognized as of the acquisition date. Fair values are preliminary and were based on management’s estimates and assumptions. The intangible assets acquired were specific to the Company’s Recoup subsidiary.
| 15 |
The preliminary fair value of the intellectual property intangible asset was measured at fair value using the multiple periods excess earnings method (“MPEEM”). Significant inputs used to measure the fair value include an estimated useful life of ten (10) years, an estimate of projected revenue and costs associated with existing customers, an estimated technology obsolescence adjustment, and a discount rate of 19.8%.
Tradenames were measured atThe preliminary fair value of the tradenames intangible asset was measured using the relief from royalty method. Significant inputs used to measure the fair value include an estimated projected revenue from the tradename, a pre-tax royalty rate of1%, and a discount rate of 19.8%.
The preliminary fair value of the noncompete agreement intangible asset was measured at fair value with a discounted cash flow analysis that compared projected cash flows during the noncompete agreement period with and without the agreement. Significant inputs used to measure the fair value include an estimate of time for the sellerparties involved to identify the product, bring in the technology, and start the manufacturing process. As well as the estimated risk that the Sellerparties involved would chosechoose to compete without the agreement in place and a discount rate of 19.8%. The noncompete agreement prevents the Renovare Sellersparties involved from directly or indirectly, engage,engaging in, or be interested in, any business or entity that engages in any business substantially similar to the Recoup Digester business for a period of five (5) years following the closing date of the acquisition.years.
Goodwill of $7,292,885 arising from the acquisition of Recoup consisted of new customer relationships for the Company, access to new product market opportunities and expected growth opportunities, and the residual value after all identifiable intangible assets were valued.opportunities. Total acquisition costs for the acquisition of Recoup incurred were $86,116approximately $450,000 recorded as a component of General and administrativeprofessional fees expenses. Due to the Company’s acquisition of Recoup and the resulting recognition of goodwill from the acquisition, the Company plans on analyzing goodwill for impairment for each future reporting period.
The approximate revenue and gross profit for TraQiQ (excluding the acquired business as a standalone entity per ASC 805operations of Titan) from January 5,May 19, 2023 to March 31,through June 30, 2023 was $64,611184,175 and $29,15885,587, respectively.
Pro Forma Information
The results of operations of Recoup will be included in the Company’s consolidated financial statements as of the date of acquisition through the current period end. The following supplemental pro-forma financial information approximate combined financial information assumes that the acquisition had occurred at the beginning of the three months ended March 31, 2023 and the year ended December 31, 2022:
SCHEDULE OF SUPPLEMENTAL PRO-FORMA FINANCIAL INFORMATION
| Six Months Ended | Year Ended | |||||||
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Total revenue | $ | 3,330,079 | $ | 4,204,694 | ||||
| Net loss | $ | (3,835,160 | ) | $ | (24,337,792 | ) | ||
| Pro forma loss per common share | $ | (0.11 | ) | $ | (5.52 | ) | ||
| Pro forma weighted average number of common shares basic and diluted | 33,959,755 | 4,410,595 | ||||||
| Pro forma weighted average number of common shares basic | 33,959,755 | 4,410,595 | ||||||
The pro forma combined results of operations for the year ended December 31, 2022, include stock-based compensation of $and goodwill impairment expense of $15,669,287. The pro forma combined results of operations are not necessarily indicative of the results of operations that actually would have occurred, nor are they necessarily indicative of future consolidated results.
NOTE 4 – PROPERTY AND EQUIPMENT, NET
Fixed assets consist of the following as of June 30, 2023 and December 31, 2022:
SCHEDULE OF PRO FORMA INFORMATION FOR BUSINESS ACQUISITIONPROPERTY AND EQUIPMENT, NET
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Revenue | $ | 64,611 | $ | 1,298,611 | ||||
| Net Income (Loss) | $ | (40,105 | ) | $ | (1,514,247 | ) | ||
| Earnings (Loss) per common share, basic | $ | (0.00 | ) | $ | (0.36 | ) | ||
| Earnings (Loss) per common share, diluted | $ | (0.00 | ) | $ | (0.36 | ) | ||
| Weighted average common shares outstanding – basic and diluted | 30,060,136 | 4,173,008 | ||||||
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Containers | $ | 1,520,886 | $ | 1,397,311 | ||||
| Trucks and tractors | 4,138,215 | 4,086,968 | ||||||
| Trailers | 1,197,357 | 1,197,357 | ||||||
| Shop equipment | 40,380 | 40,380 | ||||||
| Leasehold improvements | $ | 19,589 | $ | 19,589 | ||||
| Property and equipment, gross | 6,916,427 | 6,741,605 | ||||||
| Less accumulated depreciation | (1,289,683 | ) | (1,097,664 | ) | ||||
| Net book value | $ | 5,626,744 | $ | 5,643,941 | ||||
Depreciation expenses for the three and six months ended June 30, 2023 were $97,162 and $191,956. Depreciation expenses for the three and six months ended June 30, 2022 were $67,372 and $134,420, respectively.
On June 10, 2022, Titan entered into an asset purchase agreement with Century Waste Management (“Century”) for consideration of approximately $1,805,420. The entire purchase price agreement was allocated as fair value to the equipment acquired; no goodwill or intangible assets were determined to be transferred as part of the sale. In order to fund the asset purchase from Century, Titan entered into several private equipment financing agreements (Note 9 – Notes Payable).
NOTE 5 – INTANGIBLES, NET
Intangible assets consisted of the following as of June 30, 2023 and December 31, 2022:
SCHEDULE OF INTANGIBLE ASSETS
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Customer Lists | $ | 687,500 | $ | 687,500 | ||||
| Intellectual Property | 10,333,144 | - | ||||||
| Tradenames | 275,447 | - | ||||||
| Noncompete Agreement | 72,886 | - | ||||||
| Intangible assets, gross | 72,886 | - | ||||||
| Less: accumulated amortization | (176,599 | ) | - | |||||
| Net book value | $ | 11,192,378 | $ | 687,500 | ||||
| Intangible assets, net | $ | 11,192,378 | $ | 687,500 | ||||
| 16 |
NOTE 8: INTANGIBLE ASSETS
The Company’sAmortization expense from intangible assets are as follows:was $176,599
and $SCHEDULE OF INTANGIBLE ASSETS0
March 31, 2023 | December 31, 2022 | |||||||
| Intellectual property | $ | 10,333,144 | $ | - | ||||
| Non-compete agreement | 78,615 | - | ||||||
| Tradenames | 285,863 | - | ||||||
| Intangible assets, gross | 285,863 | - | ||||||
| Less: accumulated amortization | (250,954 | ) | - | |||||
| Net | $ | 10,446,668 | $ | - | ||||
| Intangible assets, net | $ | 10,446,668 | $ | - | ||||
Amortization expense due to for the amortization of intangiblessix months ended June 30, 2023 and 2022, respectively, and $169,724 and $0 for the three months ended March 31,June 30, 2023 and 2022.
On December 9, 2022, Titan entered into a purchase agreement with WTI Global, Inc. (the “seller” or “WTI”) for consideration of approximately $687,500 in exchange for intangible assets. The entire purchase consideration was allocated as fair value to the customer lists acquired from the seller. The $250,954687,500 was funded through a combination of a note payable to the seller of $170,000 and an equity infusion from a member of Titan for $0517,500, respectively.. See Note 9 and 10 for further details.
As a result of December 31, 2022,the Titan Merger, the Company did not have anyrecorded $10,333,144 of intellectual property, $275,447 of tradenames, and a $72,886 noncompete agreement on the acquisition date (Note 3 – Business Combinations).
Future amortization expense from intangible assets as theyof June 30, 2023 were previously all held by Rohuma, Mimo and TSP, and as they were fully impaired upon the disposal as Rohuma, Mimo and TSP. For the three months ended March 31, 2022, for the purposes of the retrospective presentation of the continuing operations, the Company fully impaired the Rohuma, Mimo and TSP intangible assets; resulting in impairment expense of $follows:
776,263, which is included in net loss from discontinued operations, before the provisions for income taxes, on the consolidated statements of operations and comprehensive loss.SCHEDULE OF FUTURE AMORTIZATION EXPENSE
| December 31, | ||||
| For the Year Ended, | ||||
| December 31, | ||||
| Remainder of 2023 | $ | 597,597 | ||
| 2024 | 1,188,698 | |||
| 2025 | 1,185,450 | |||
| 2026 | 1,185,450 | |||
| 2027 | 1,185,450 | |||
| Thereafter | 5,849,733 | |||
| Total remaining amortization expense | $ | 11,192,378 | ||
NOTE 9:6 – GOODWILL
The Company has two reporting units, Titan and Recoup. As of March 31,June 30, 2023 all goodwill was held by Recoup. The Company’s goodwill was $7,292,885 as of March 31, 2023. As ofand December 31, 2022, the Company did not have any goodwill due to its disposal of Rohuma, Mimo, for both reporting units was $0and TSP.$0, respectively. Due to the Company’s acquisition of RecoupTitan Merger and the resulting recognition of goodwill from the reverse acquisition, the Company plansrecognized goodwill of $22,319,908for the Recoup reporting unit on analyzingthe Titan Merger acquisition date.
As a result of the historical net losses of TraQiQ, the Company concluded it was more likely than not that the fair value of the reporting unit was less than it’s carrying amount. Therefore, the Company performed an impairment assessment of the goodwill.
The fair value of the Recoup reporting unit was estimated using an income approach and included assumptions related to estimates of future revenue and operating expenses, long-term growth rates, a technology obsolescence rate, and a discount rate. As of June 30, 2023, the quantitative impairment test indicated a fair value of the reporting unit that was lower than it’s carrying value, and as a result, the goodwill forwas impaired with an impairment for each future reporting period.expense of $15,669,287.
NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Detail of accounts payable and accrued expenses as of June 30, 2023, and 2022 was as follows:
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Accounts payable | $ | 2,020,250 | $ | 669,231 | ||||
| Credit card payable | 160,767 | 29,454 | ||||||
| Accrued interest | 122,886 | 12,298 | ||||||
| Accrued expenses and other payables | 151,900 | 25,675 | ||||||
| Total accounts payable and accrued expenses | $ | 2,455,803 | $ | 736,658 | ||||
NOTE 8 – LEASES
As of June 30, 2023, Titan maintains two leases classified as operating leases. Leases with an initial term of 12 months or less or leases that are immaterial are not included on the consolidated balance sheets.
For the three months ended March 31, 2023 thereTitan has a 62-month lease in Troy, Michigan which expires on January 15, 2025. The monthly payments were no indicators of impairment noted. For the quarter ended March 31, 2022, for the purposes of the retrospective presentation of the disposal of Rohuma and Mimo, the Company fully impaired the Rohuma and Mimo goodwill resulting in impairment expense ofinitiated on February 15, 2020 at $5,863,0578,251, which is included in net loss from discontinued operations, before the provisions for income taxes, after a 2-month rent abatement period. Straight rent was calculated at $8,479 per month. The total remaining operating lease expenses through expected termination date on the consolidated statements of operations and comprehensive loss.lease are approximately $161,000.
On April 1, 2023, Titan entered into a 60-month lease in Detroit, Michigan, with a related party through common ownership, which expires on March 31, 2028. The lease has the option to renew for an additional 5 years given proper notice. The monthly payments were initiated on May 1, 2023 after a 1-month rent abatement period. Straight rent was calculated at $33,564 per month. The total remaining operating lease expenses expected through termination date on the lease are approximately $1,913,200. The supplemental cash flow impact of the right-of-use asset exchanged for new lease obligations was $1,635,335.
SCHEDULE OF WEIGHTED AVERAGE REMAINING LEASE TERMS AND DISCOUNT RATES
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Weighted average remaining lease term (in years) | 4.46 | 2.08 | ||||||
| Weighted average discount rate | 7.92 | % | 7.57 | % | ||||
| 17 |
Future minimum lease payments required under operating leases on an undiscounted cash flow basis as of June 30, 2023 were as follows:
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS UNDER OPERATING LEASES
| For the Year Ended, | |||||
| December 31, | |||||
| Remainder of 2023 | $ | 229,096 | |||
| 2024 | 508,481 | ||||
| 2025 | 421,498 | ||||
| 2026 | 427,670 | ||||
| 2027 | 443,707 | ||||
| Thereafter | 112,968 | ||||
| Total minimum lease payments | 2,143,420 | ||||
| Less: imputed interest | (356,532 | ) | |||
| Present value of future minimum lease payments | 1,786,888 | ||||
| Current operating lease liabilities | $ | 349,651 | |||
| Non-current operating lease liabilities | $ | 1,437,237 | |||
The Company had operating lease expenses of $152,333 and $50,745 for the six months ended June 30, 2023 and 2022, respectively, and $124,780 and $25,879 for the three months ended June 30, 2023 and 2022, respectively. The Company records operating lease expense as a component of general and administrative expenses on the statement of operations.
NOTE 9 – NOTES PAYABLE
The Company borrows funds from various creditors to finance its equipment, operations, and acquisitions. The collateralized loans below are secured by interest in the financed equipment.
The Company’s notes payables balance as of June 30, 2023 and December 31, 2022 consisted of the following:
SCHEDULE OF LONG-TERM DEBT
| June 30, | December 31, | |||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||
| Current | Non-current | Current | Non-current | |||||||||||||||||
| Loans: | ||||||||||||||||||||
| WTI Global Inc. | (a) | $ | - | $ | - | $ | 170,000 | $ | - | |||||||||||
| Collateralized Loans: | ||||||||||||||||||||
| Peoples United | (b) | 81,865 | - | 177,539 | - | |||||||||||||||
| M&T Bank | (c) | 127,377 | 256,112 | 121,927 | 321,192 | |||||||||||||||
| Daimler Truck | (d) | 63,320 | 21,293 | 74,873 | 53,429 | |||||||||||||||
| Ascentium Capital | (e) | 156,303 | 508,868 | 152,467 | 587,991 | |||||||||||||||
| Balboa Capital | (f) | 40,815 | 158,534 | 38,895 | 179,433 | |||||||||||||||
| Blue Bridge Financial | (g) | 11,043 | 45,263 | 10,394 | 50,951 | |||||||||||||||
| Financial Pacific | (h) | 30,454 | 117,669 | 29,187 | 133,220 | |||||||||||||||
| M2 Equipment | (i) | 41,275 | 156,955 | 39,527 | 178,039 | |||||||||||||||
| Meridian Equipment | (j) | 26,730 | 99,931 | 25,518 | 113,606 | |||||||||||||||
| Navitas | (k) | 38,286 | 139,199 | 36,791 | 158,723 | |||||||||||||||
| Pawnee | (l) | 43,639 | 171,386 | 41,480 | 193,759 | |||||||||||||||
| Signature | (m) | 76,797 | 335,803 | 73,973 | 374,921 | |||||||||||||||
| Trans Lease | (n) | 42,540 | 135,783 | 40,524 | 157,569 | |||||||||||||||
| Verdant | (o) | 45,727 | 146,170 | 44,324 | 169,390 | |||||||||||||||
| Western Equipment | (p) | 43,059 | 164,597 | 41,186 | 186,605 | |||||||||||||||
| Issued prior to Titan Merger: | ||||||||||||||||||||
| Michaelson Capital | (q) | 2,732,090 | - | - | - | |||||||||||||||
| Loanbuilder | (r) | 113,777 | 145,563 | - | - | |||||||||||||||
| Individual | (s) | 25,000 | - | - | - | |||||||||||||||
| Kabbage Loans | (t) | 64,544 | - | - | - | |||||||||||||||
| Baxter Credit Union | (u) | 99,995 | - | - | - | |||||||||||||||
| Related Parties: | ||||||||||||||||||||
| Titan Holdings 2 | (v) | 653,470 | - | - | - | |||||||||||||||
| Total outstanding principal | $ | 4,558,106 | $ | 2,603,126 | $ | 1,118,605 | $ | 2,858,828 | ||||||||||||
| Less: discounts | $ | (25,936 | ) | $ | (63,302 | ) | $ | (20,447 | ) | $ | (73,297 | ) | ||||||||
| Total notes payable | $ | 4,532,170 | $ | 2,539,824 | $ | 1,098,158 | $ | 2,785,531 | ||||||||||||
| Less: Notes payable – related parties | $ | 653,470 | - | - | - | |||||||||||||||
| Notes payable | $ | 3,878,700 | $ | 2,539,824 | $ | 1,098,158 | $ | 2,785,531 | ||||||||||||
| 18 |
| (a) | On December 15, 2022, Titan entered into a $170,000 promissory note agreement with WTI Global Inc. (“WTI”) at a 7% per annum interest rate. The promissory note was issued as consideration for the acquisition of intangible assets from WTI (Note 5 – Intangible Assets). On February 1, 2023, WTI agreed to cancel the promissory note in exchange for an ownership interest in the Company. The cancellation was recorded on the condensed consolidated balance sheet as an equity contribution (See Note 13 – Stockholders’ Equity). |
| (b) | On December 10, 2021, Titan entered into a collateralized loan agreement for $354,876 with Peoples United Bank at a 5.75% per annum interest rate. The loan has a maturity date of November 10, 2023 and requires monthly payments of $16,614. |
| (c) | Titan entered into a collateralized loan on December 23, 2022 with M&T Bank which matures on February 23, 2025. The loan has an interest rate of 8.78% and the Company remits monthly payments of $13,000 with a balloon payment at maturity of $176,497. |
| (d) | On February 12, 2018, Titan entered into a collateralized loan agreement with Daimler Trucks for $131,940, with a maturity date of May 14, 2023. Titan made monthly payments of $2,487 towards principal and interest. Interest accrued at a rate of 4.95% per annum. As of June 30, 2023 this loan had been fully paid off. On June 3, 2019, Titan entered into another collateralized loan agreement with Daimler Trucks for $160,601, with a maturity date of September 3, 2024. Titan makes monthly payments of $2,795 towards principal and interest. Interest accrues at a rate of 6% per annum. On June 14, 2019, Titan entered into another collateralized loan agreement with Daimler Trucks for $155,740, with a maturity date of September 29, 2024. Titan makes monthly payments of $2,762 towards principal and interest. Interest accrues at a rate of 6% per annum. |
| (e) | On May 5, 2022, Titan entered into an equipment financing agreement with Ascentium Capital for $250,000, which matures on May 5, 2027. Titan makes monthly payments of $4,812 towards principal and interest. Interest accrues at a rate of 5.82% per annum. On May 10, 2022, Titan entered into an equipment financing agreement with Ascentium Capital for $259,646, which matures on May 10, 2027. The Company makes monthly payments of $4,753 towards principal and interest. Interest accrues at a rate of 3.75% per annum. On June 5, 2022, Titan entered into an equipment financing agreement with Ascentium Capital for $311,795, which matures on June 5, 2027. Titan makes monthly payments of $5,935 towards principal and interest. Interest accrues at a rate of 5.36% per annum. |
| (f) | On August 13, 2022, Titan entered into a collateralized loan agreement with Balboa Capital for $230,482, which matures five years from the commencement date. Titan makes monthly payments of $4,860 towards principal and interest. Interest accrues at a rate of 9.68% per annum. |
| (g) | On August 11, 2022, Titan entered into an equipment finance agreement with Blue Bridge Financial for $64,539, which matures five years from the commencement date. Titan makes monthly payments of $1,442 towards principal and interest. Interest accrues at a rate of 12.18% per annum. |
| (h) | On July 15, 2022, Titan entered into an equipment financing agreement with Financial Pacific for $74,841, which matures five years from commencement. Titan makes monthly payments of $1,585 towards principal and interest. Interest accrues at a rate of 9.87% per annum. On October 15, 2022, Titan entered into an additional equipment financing agreement with Financial Pacific for $95,127, which matures five years from commencement. Titan makes monthly payments of $1,906 towards principal and interest. Interest accrues at a rate of 7.49% per annum. |
| (i) | On August 10, 2022, Titan entered into an equipment financing agreement with M2 Equipment for $230,000, which matures five years from commencement. Titan makes monthly payments of $4,739 towards principal and interest. Interest accrues at a rate of 8.68% per annum. |
| (j) | On August 16, 2022, Titan entered into an equipment financing agreement with Meridian for $149,076, which matures five years from commencement. Titan makes monthly payments of $3,118 towards principal and interest. Interest accrues at a rate of 9.32% per annum. |
| 19 |
| (k) | On July 23, 2022, Titan entered into an equipment financing agreement with Navitas for $, which matures five years from commencement. Titan makes monthly payments of $ towards principal and interest. Interest accrues at a rate of per annum. |
| (l) | On August 15, 2022, Titan entered into an equipment financing agreement with Pawnee Leasing Corp. for $248,157, which matures five years from commencement. Titan makes monthly payments of $5,296 towards principal and interest. Interest accrues at a rate of 10.19% per annum. |
| (m) | On June 22, 2022, Titan entered into a collateralized loan agreement with Signature Bank for $284,951, which matures six years from commencement. Titan makes monthly payments of $4,849 towards principal and interest. Interest accrues at a rate of 6.93% per annum. On September 15, 2022, Titan entered into a collateralized loan agreement with Signature Bank for $191,250, which matures five years from commencement. Titan makes monthly payments of $3,901 towards principal and interest. Interest accrues at a rate of 8.25% per annum. |
| (n) | On August 20, 2022, Titan entered into a collateralized loan agreement with Trans Lease, Inc. for $210,750, which matures five years from commencement. Titan makes monthly payments of $4,838 towards principal and interest. Interest accrues at a rate of 9.75% per annum. |
| (o) | On April 27, 2022, Titan entered into a collateralized debt agreement with Verdant Commercial Capital for $241,765, which matures five years from commencement. Titan makes monthly payments of $4,702 towards principal and interest. Interest accrues at a rate of 6.25% per annum. |
| (p) | On August 15, 2022, Titan entered into an equipment financing agreement with Western Equipment Capital for $240,726, which matures five years from commencement. Titan makes monthly payments of $4,989 towards principal and interest. Interest accrues at a rate of 8.93% per annum. |
| Note Payables issued prior to Titan Merger: | |
| (q) | On January 5, 2023 the Company completed its asset acquisition of the Recoup Digester Assets and as part of the consideration, assumed the liabilities of a $3,017,090 Secured Promissory Note owed to Michaelson Capital Special Finance Fund II, L.P. (“Michaelson”). The Company and Michaelson agreed to amend and restate the Secured Promissory Note, as well as sign a related Forbearance Agreement (together known as the “Michaelson Note”). The Michaelson Note has a 12% per annum interest rate. The Michaelson Note has the following terms: (1) the Company is to make monthly interest payments for the interest amounts owed, (2) the Company is to make monthly principal payments of $35,000, (3) the Company is to make a $250,000 principal repayment due as of December 31, 2023, and (4) the Company is to repay all other outstanding amounts owed by December 31, 2023. |
| (r) | Between January 14, 2022 and July 6, 2022 the Company signed four loan agreements with the Loanbuilder service of Paypal, Inc (the “Loanbuilder Notes”). Three of the four Loanbuilder Notes were settled prior to May 19, 2023. The remaining note (“Loanbuilder – 3”) was in default on May 19, 2023. On May 19, 2023, the outstanding liabilities owed due to the Loanbuilder Notes was $299,710, inclusive of $50,599 owed due to Loanbuilder – 3. On June 15, 2023, the Company agreed to settle Loanbuilder – 3. In accordance with ASC 470-60, “Troubled Debt Restructuring by Debtors” each of the Loanbuilder notes is accounted for as a troubled debt restructuring due to their respective settlement agreements. As a result of the Loanbuilder - 3 settlement, the Company recorded a net gain on extinguishment of debt of $25,299 in the consolidated statement of operations for the three and six months ending June 30, 2023. Additionally, the Company agreed to pay the lender $6,325 in four monthly payments beginning in June 2023. Excluding the Loanbuilder -3 repayments, and as of June 30, 2023, the Company has 34 remaining required monthly repayments of $6,046 and 22 remaining required monthly repayments of $1,545 for the other Loanbuilder Notes. |
| (s) | On May 16, 2022, the Company issued a $25,000 promissory note (the “Individual Note”) with an individual private investor. The Individual Note has an annual interest rate of 12% per annum and matures on December 31, 2023, at which time all principal and accrued interest is owed. In the event of default, the promissory note incurs additional interest of 0.5% on all outstanding principal and interest owed. |
| (t) | On September 28, 2022 and September 29, 2022 the Company agreed to two Kabbage Funding Loan Agreements (together known as the “Kabbage Loans”) owed to American Express National Bank. The Kabbage Loans had an initial principal value of $120,800 and as of May 19, 2023 had a principal amount of $77,748. Each loan includes a cost of capital interest expense of $4,077 and is to be repaid in nine monthly repayments of $3,658, followed by nine monthly payments of $35,507. |
| (u) | The Company signed a revolving loan with Baxter Credit Union, which was renewed on April 26, 2023, with a principal liability of $99,995. The loan has an annual interest rate of 8.50% and a maturity date of July 30, 2023, at which point all principal and accrued interest is due and payable. |
| Related Parties: | |
| (v) | Titan continually borrows from Titan Holdings 2, a stockholder of the Company, as working capital needs arise. The loan is due on demand and accrues interest at a rate of 10.5% per annum. |
Interest expense on these notes for the six and three months ended June 30, 2023 was $213,720and $136,367, respectively. Interest expense on these notes for the six and three months ended June 30, 2022 was $78,391 and $46,838, respectively.
Principal maturities for the next five years and thereafter as of June 30, 2023 were as follows:
SCHEDULE OF PRINCIPAL MATURITIES OF NOTES PAYABLE
| Remainder of 2023 | $ | 4,090,960 | |||
| 2024 | 915,197 | ||||
| 2025 | 935,069 | ||||
| 2026 | 747,646 | ||||
| 2027 | 442,419 | ||||
| Thereafter | 29,941 | ||||
| Total principal payments | $ | 7,161,232 | |||
| Less: debt discounts | (89,238 | ) | |||
| Total notes payable | $ | 7,071,994 |
Paycheck Protection Program Note Forgiveness
Titan applied for and received loans from the Paycheck Protection Program (the “PPP”) in the amounts of $406,152 and $406,152, received on May 5, 2020 and February 1, 2021, respectively. On January 31, 2022 and March 21, 2022, Titan received notices that the entire balances of the loans plus any accrued interest were forgiven and recorded a gain on forgiveness of $812,304 during the year ended December 31, 2022 included in other income in the condensed consolidated statement of operations.
NOTE 10 – CONVERTIBLE NOTES PAYABLES
NOTE 10: CONVERTIBLE NOTES PAYABLE
AsThe Company’s convertible notes as of March 31,June 30, 2023 and December 31, 2022 the Company had the following convertible notes outstanding, all of which are current liabilities. Any convertible notes payable that were repaid or converted in 2022, are not listed, and details of which can be found in our Form 10-K filed March 31, 2022:as follows:
SCHEDULE OF CONVERTIBLE NOTES OUTSTANDINGPAYABLES
March 31, 2023 | December 31, 2022 | |||||||||
| Evergreen Capital Management LLC - 5 | (a) | $ | 48,000 | $ | 48,000 | |||||
| Evergreen Capital Management LLC - 4 | (b) | 480,000 | - | |||||||
| Evergreen Capital Management LLC - 6 | (c) | 150,000 | - | |||||||
| Evergreen Capital Management LLC - 7 | (d) | 12,000 | - | |||||||
| GS Capital | (e) | 51,541 | 112,021 | |||||||
| Chambers | (f) | 60,000 | - | |||||||
| Eleven 11 Management LLC - 1 | (g) | 84,000 | - | |||||||
| Eleven 11 Management LLC – 2 | (h) | 60,000 | - | |||||||
| Cavalry Fund – 1 | (i) | 120,000 | - | |||||||
| Cavalry Fund – 2 | (j) | 140,000 | - | |||||||
| Cavalry Fund – 3 | (k) | 100,000 | - | |||||||
| Keystone Capital – 1 | (l) | 90,000 | - | |||||||
| Keystone Capital – 2 | (m) | 30,000 | - | |||||||
| Total Convertible Notes Payable | $ | 1,425,541 | $ | 160,021 | ||||||
| Less: Discounts | (1,263,447 | ) | (96,240 | ) | ||||||
| Convertible Notes Payable | $ | 162,094 | $ | 63,781 | ||||||
| Current | Non-current | Current | Non-current | |||||||||||||||||
| June 30, | December 31, | |||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||
| Current | Non-current | Current | Non-current | |||||||||||||||||
| Issued prior to Titan Merger | ||||||||||||||||||||
| Evergreen – 2022 | (a) | $ | 48,000 | $ | - | $ | - | $ | - | |||||||||||
| Evergreen – 2023 | (b) | 834,000 | - | - | - | |||||||||||||||
| GS Capital | (c) | - | - | - | - | |||||||||||||||
| Chambers | (d) | 60,000 | - | - | - | |||||||||||||||
| Eleven 11 | (e) | 114,000 | - | - | - | |||||||||||||||
| Calvary Fund | (f) | 468,000 | - | - | - | |||||||||||||||
| Keystone Capital | (g) | 180,000 | - | - | - | |||||||||||||||
| Diagonal Lending | (h) | 52,006 | - | - | - | |||||||||||||||
| Seven Knots | (i) | 60,000 | - | - | - | |||||||||||||||
| Issued prior to Titan Merger – Related Parties: | ||||||||||||||||||||
| Sikka | (j) | 120,000 | - | - | - | |||||||||||||||
| Miller | (k) | 60,000 | - | - | - | |||||||||||||||
| Convertible Notes Payable: | ||||||||||||||||||||
| Calvary Fund – Bridge Notes | (l) | 604,000 | - | - | - | |||||||||||||||
| Evergreen – Bridge Note | (m) | 604,000 | - | - | - | |||||||||||||||
| Related Parties: | ||||||||||||||||||||
| Miller – Bridge Note | (n) | 240,000 | - | - | - | |||||||||||||||
| Titan 5 – Bridge Note | (o) | 120,000 | - | - | - | |||||||||||||||
| Total outstanding principal | $ | 3,564,006 | $ | - | $ | - | $ | - | ||||||||||||
| Less: discounts | $ | (725,869 | ) | $ | - | $ | - | $ | - | |||||||||||
| Total convertible notes payable | $ | 2,838,137 | $ | - | $ | - | $ | - | ||||||||||||
| Convertible notes payable – related parties | $ | 445,117 | $ | - | $ | - | $ | - | ||||||||||||
| Convertible notes payable | $ | 2,939,020 | $ | - | $ | - | $ | - | ||||||||||||
| 21 |
| Issued prior to Titan Merger: | ||
| (a) | On October | |
| (b) |
| |
| On | ||
| (d) | On February 16, 2023 the Company issued a 20% original issue discount Senior Secured Promissory Note (the “Chambers Note”) to the James D. Chambers Living Trust (“Chambers”) with a principal amount of $60,000. The Chambers Note has an annual interest rate of 10% per annum and a maturity date of February 28, 2024. The Chambers Note also contains a conversion feature, enabling it to convert into shares of the Company’s common stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. |
Interest expense on these notes for the three months ended March 31, 2023 is $22,757Subsequent Events). Amortization of debt and original issue discounts was $158,794 for the three months ended March 31, 2023.
NOTE 11: LONG-TERM DEBT - RELATED PARTIES
The following is a summary of the current portion - long-term debt - related parties as of March 31, 2023 and December 31, 2022:
SCHEDULE OF LONG-TERM DEBT RELATED PARTIES
March 31, 2023 | December 31, 2022 | |||||||||
| Note payable - Director | (a) | $ | - | $ | 400,000 | |||||
| Long-term debt related parties | - | 400,000 | ||||||||
| Current portion of long-term debt related parties | - | (400,000 | ) | |||||||
| Long-term debt – related parties | $ | - | $ | - | ||||||
|
Interest expense on these notes for the three months ended March 31, 2023 and 2022 was $ and $, respectively.
NOTE 12: NOTES PAYABLE
The following is a summary of the notes payable as of March 31, 2023 and December 31, 2022. Any long-term debt that was repaid or converted in 2022, is not listed, and the details of those notes can be found in our Form 10-K filed March 31, 2023:
SCHEDULE OF LONG-TERM DEBT
March 31, 2023 | December 31, 2022 | |||||||||
| Baxter Credit Union | (a) | $ | 99,976 | $ | 100,305 | |||||
| Diagonal Lending (FKA Sixth Street Lending), net of discounts of $13,930 | (b) | 72,791 | 116,086 | |||||||
| Loan Builder | (c) | 92,059 | 92,059 | |||||||
| Loan Builder #2 | (d) | 50,599 | 50,559 | |||||||
| Loan Builder #3 | (e) | 155,074 | 155,053 | |||||||
| Individual | (f) | 25,000 | 25,000 | |||||||
| Kabbage Loan | (g) | 79,325 | 101,271 | |||||||
| Forward Finance | (h) | 31,042 | 31,042 | |||||||
| Celtic | (i) | 84,524 | 80,511 | |||||||
| Michaelson Capital | (j) | 2,917,090 | - | |||||||
| Total | $ | 3,607,480 | $ | 751,886 | ||||||
| Long term debt | $ | 3,607,480 | $ | 751,886 | ||||||
| Current portion | (3,607,480 | ) | (751,886 | ) | ||||||
| Long-term debt, net of current portion | $ | - | $ | - | ||||||
| (e) | On |
| 22 |
| Between February 16, 2023 and April 26, 2023 the Company issued four 20% original issue discount Senior Secured Promissory Notes (the “Cavalry Fund Notes”) to Cavalry Fund I LP (“Cavalry”). | |
| (g) | |
| (h) | On |
| (i) | On |
| Issued prior to Titan Merger – Related Parties: | |
| (j) | On
|
| (k) | On May 12, 2023, the Company |
| 23 |
| Convertible Notes Payable: | |
| (l) | On May 19, 2023 and June 16, 2023 the Company |
| (m) | On May 19, 2023 |
| Related Parties: | |
| (n) | On June 13, 2023 the Company sold and issued a 20% original issue discount Senior Secured Promissory Note (the “Miller Bridge Note”) to Glen Miller, the Company’s chief executive officer. The Miller Bridge Note has a principal amount of $240,000. The Miller Bridge Note has an annual interest rate of 10% per annum and was |
| (o) | On June 13, 2023 the Company sold and |
Convertible note payables principal maturities for the next five years and thereafter as of June 30, 2023 were as follows:
SCHEDULE OF MATURITIES OF LONG TERM DEBT
| Remainder of 2023 | $ | 580,006 | |||
| 2024 | 2,984,000 | ||||
| 2025 | - | ||||
| 2026 | - | ||||
| 2027 | - | ||||
| Total principal payments | 3,564,006 | ||||
| Less: debt discounts | (725,869 | ) | |||
| Total convertible notes payable | $ | 2,838,137 |
NOTE 11 – DERIVATIVE LIABILITIES
The Company has issued certain convertible notes payable that contain conversion options with variable settlement features which make their conversion options a derivative liability. The conversion option derivatives are embedded in their respective note payables and for accounting purposes have been bifurcated from the host instruments. Please see Note 10 – Convertible Notes Payable for more information.
Interest expenseOn February 12, 2021, TraQiQ granted warrants (the “Platinum Point Warrants”) that have a term of three-years and an exercise price of $11.60 to Platinum Point Capital, LLC. The warrants granted contain certain price protections, that make the value of the warrants a derivative liability.
| 24 |
The fair value of each convertible note embedded derivative is estimated using a Monte Carlo valuation model. The model used a “with or without” scenario analysis. Changes to the inputs used in the model could produce a significantly higher or lower fair value. The following assumptions were used as of June 30, 2023 and December 31, 2022:
SCHEDULE OF VALUATION ASSUMPTIONS
Six Months Ended 2023 | Year Ended December 31, 2022 | |||||||
| Expected term (years) | 0.584 – 0.597 | - | ||||||
| Expected volatility | 412.6 | % | - | |||||
| Expected dividend yield | 0.00 | % | - | |||||
| Risk-free interest rate | % | |||||||
The fair value of the Platinum Point Warrants derivative liability is estimated using a Black-Scholes valuation model with a stock price of $11.60. Changes to the inputs used in the model could produce a significantly higher or lower fair value. The following assumptions were used as of June 30, 2023 and December 31, 2022:
SCHEDULE OF VALUATION ASSUMPTIONS
Six Months Ended 2023 | Year Ended December 31, 2022 | |||||||
| Expected term (years) | 0.622 | - | ||||||
| Expected volatility | 875 | % | - | |||||
| Expected dividend yield | 0.00 | % | - | |||||
| Risk-free interest rate | 5.40 | % | - | |||||
The derivative liabilities as of June 30, 2023 and December 31, 2022 are as follows:
SCHEDULE OF DERIVATIVE LIABILITIES
June 30, 2023 | December 31, 2022 | |||||||
| Fair value of the Evergreen – 2022 conversion options | $ | 4,077 | $ | - | ||||
| Fair value of the Evergreen – 2023 conversion options | 70,830 | |||||||
| Fair value of the Platinum Point Warrants (25,000 warrants) | 39,999 | - | ||||||
| Fair value of the Chambers conversion option | 5,096 | - | ||||||
| Fair value of the Eleven 11 conversion option | 9,682 | - | ||||||
| Fair value of the Calvary Fund conversion option | 39,747 | - | ||||||
| Fair value of the Keystone Capital conversion option | 15,287 | - | ||||||
| Fair value of the Diagonal Lending conversion option | 4,417 | - | ||||||
| Fair value of the Seven Knots conversion option | 5,096 | - | ||||||
| Fair value of the Sikka conversion option | 10,192 | - | ||||||
| Fair value of the Miller conversion option | 5,096 | - | ||||||
| $ | 209,519 | $ | - | |||||
Activity related to the derivative liabilities for the six months ended June 30, 2023 is as follows:
SCHEDULE OF ACTIVITY RELATED TO DERIVATIVE LIABILITIES
| Beginning balance as of December 31, 2022 | $ | - | ||
| Warrants/conversion option – derivative liabilities recognized due to reverse acquisition | 219,172 | |||
| Change in fair value of warrants/conversion option - derivative liabilities | (9,652 | ) | ||
| Ending balance as of June 30, 2023 | $ | 209,519 |
NOTE 12 – BENEFIT PLAN
Titan offers a 401(k) plan. Employees are eligible to participate in the plan on these notesthe first day of the month following the date of hire. Employees may defer up to $22,500 per year. Titan is required to contribute on behalf of each eligible participating employee. Titan will match 50% of the participants deferral not to exceed 3% of employee compensation. Employees will share in the matching contribution regardless of the amount of service completed during the plan year. Employees will become 100% vested in the employer matching contributions after one year of service.
Employer contributions for the three and six months ended March 31,June 30, 2023 and 2022 arewere $128,6422,967 and $9,7615,825, respectively.respectively, and $2,875 and $5,398, respectively for the three and six months ended June 30, 2022.
NOTE 13:13 – STOCKHOLDERS’ EQUITY (DEFICIT)
As further described in Note 3 – Business Combination, under applicable accounting principles, the historical financial results of Titan prior to May 19, 2023 has replaced the historical financial statements of TraQiQ for the period prior to May 19, 2023. Titan’s equity structure, prior to the combination with the TraQiQ, was a limited liability company, resulting in all components of equity attributable to the members being reported within Member’s Equity.
As of June 30, 2023 and December 31, 2022, the Company was authorized to issue a total of shares of its Preferred Stock in one or more series.
Members’ Equity
As of December 31, 2022, Titan had members’ equity of $2,526,104. Each Member had voting rights based on and proportionate to such Member’s Membership interest.
On February 1, 2023, in exchange for the settlement of the $170,000 WTI promissory note, a 2.254% membership interest in Titan was granted to the seller of WTI (Note 9 – Notes Payable).
Series A Convertible Preferred Stock
As of March 31,June 30, 2023, and December 31, 2022, there are Series A Convertible Preferred shares issued and outstanding.
Each outstanding share of Series A Convertible Preferred Stock is convertible into the number of shares of the Company’s common stock (the “Common Stock”) determined by dividing the Stated Value by the Conversion Price as defined below, at the option of any Series A Convertible Preferred Stock shareholder in whole or in part, at any time commencing no earlier than six (6) months after the issuance date; provided that any conversion under this section must be made during the ten (10) day period immediately following the date on which the corporation files with the Securities and Exchange Commission any periodic report on form 10-Q, 10-K or the equivalent form; provided further that, any conversion under this Section IV: (a) shall be for a minimum Stated Value of $ of Series A Convertible Preferred Stock.
The Conversion Price for each share of Series A Convertible Preferred Stock in effect on any Conversion Date shall be (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”).
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Series B Convertible Preferred Stock
As of March 31,June 30, 2023, and December 31, 2022, there were and shares of Series B Preferred Stock issued and outstanding, respectively. Subsequent to June 30, 2023, all outstanding shares of the Company’s Series B Preferred Stock were exchanged for the Company’s Series A Rights (Note 16 – Subsequent Events).
Each outstanding share of Series B Convertible Preferred Stock iswas convertible into the shares of the Company’s common stock at any time commencing after the issuance date. Series B Convertible Stock hashad no voting rights. Upon any liquidation, dissolution, or winding-up of the Corporation,Company, whether voluntary or involuntary (a “Liquidation”), the Series B Holders shall bewere entitled to receive out of the assets of the Corporation,Company, whether capital or surplus, the same amount that a holder of Common Stock would receive if the Series B Preferred were fully converted. Except for stock dividends or distributions for, Series B Holders arewere entitled to receive, and the Company shallwas required to pay, dividends on shares of Series B Preferred equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as, and if such dividends are paid on shares of the Common Stock. No other dividends shallwere required to be paid on shares of Series B Preferred.
On DecemberSeries CPreferred Stock
As of June 30, 2022, the Company exchanged outstanding debt securities of the Company with unpaid principal and interest in the amount of $2023, there were 13,002,729shares of its common stockSeries C Preferred Stock issued and shares of its Series B Preferred stock.outstanding, respectively.
On January 5, 2023, pursuant to an asset purchase agreement, dated December 30, 2022, we completed the acquisitionEach outstanding share of Recoup Technologies, Inc., and its digester business assets (“Recoup” or the “Digester business”), from Renovare Environmental, Inc (“REI”), BioHiTech America, LLC (“BHT” and together with REI, the “Renovare Sellers”). The consideration for the Recoup acquisiton included the issuance of shares of its Series BC Convertible Preferred Stock valued at $12,688,256.
Common Stock
As of March 31, 2023, and December 31, 2022, the Company has and shares issued and outstanding, respectively. 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.
During the year ended December 31, 2022, there was shares offered as commitment shares as additional consideration for the purchase of a convertible note.
On December 30, 2022, the Company exchanged outstanding debt securities of the Company with unpaid principal and interest in the amountpar value of $ for shares of its common stock and shares of its Series B Preferred stock.
Between October 1, 2022 and December 31, 2022, options were exercisedis convertible into shares of the Company’s common stock at any time commencing after the issuance date. The Series C Convertible Stock has voting rights equivalent to the voting rights of the common stock the holder would receive upon conversion. Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), the Series C Holders shall be entitled to receive on a pro-rata basis, the first $1,000 out of the assets of the Company, whether capital or surplus, before any distribution of such assets is made or set aside for no consideration.the holders of the of common stock and any other stock of the Company ranking junior to the Series C Preferred Stock. Upon issuance,any Liquidation, the remaining $Series C Holders shall be entitled to receive out of stock-based compensation was expensed.the assets of the Company, whether capital or surplus, the same amount that a holder of common stock would receive if the Series C Preferred were fully converted. Except for stock dividends or distributions for, Series C Holders are entitled to receive, and the Company shall pay, dividends on shares of Series C Preferred equal (on an as-if-converted-to-Common-stock basis) to and in the same form as dividends actually paid on shares of the common stock when, as, and if such dividends are paid on shares of the common stock. No other dividends shall be paid on shares of Series C Preferred.
On December 1, 2022,May 19, 2023, pursuant to the terms of the Titan Merger Agreement, the Company issuedcompleted the Titan Merger. Under the terms of the Titan Merger Agreement, the Company agreed to pay the Titan owners shares of the Company’s Series C Preferred Stock as consideration. The Company accounted for the Titan Merger as a reverse acquisition using acquisition accounting. Because the Titan Merger qualifies as a reverse acquisition and given that Titan was a private company at the time of the Titan Merger and therefore its common stock in exchange for vested restricted stock awards valuedvalue was not readily determinable, the fair value of the merger consideration was deemed to be equal to quoted market capitalization of the Company at $393,703the acquisition date (Note 3 – Business Combinations).
DuringConcurrent to the three months ended December 31, 2022,Titan Merger, the Company’s chief executive officer and one of the Company’s directors resigned from their respective positions and a new chief executive officer, chief operating officer and chief financial officer were appointed. The Company agreed to issue stock compensation in the form of shares of the Company’s Series C Preferred Stock to the new chief executive officer (Note 14 – Stock-Based Compensation). Subsequent to June 30, 2023, the Company and the chief executive officer signed a cancellation agreement and the Series C Preferred Stock shares were rescinded (Note 16 – Subsequent Events).
Common Stock
As of June 30, 2023 and the Company had shares issued and outstanding, respectively. As of June 30, 2023, there were shares of common stock authorized.
Under the terms of the Company’s articles of incorporation, holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders, including the election of directors, and do not have cumulative voting rights. The holders of outstanding shares of common stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends at such times and in such amounts as the Company’s board of directors from time to time may determine. The common stock is not entitled to pre-emptive rights and is not subject to conversion or redemption. Upon liquidation, dissolution or winding up of the Company, the assets legally available for distribution to stockholders are distributable ratably among the holders of common stock after payment of liquidation preferences, if any, on any outstanding payment of other claims of creditors. The rights, preferences and privileges of holders of common stock are subject to and may be adversely affected by the rights of the holders of shares of outstanding preferred stock and any series of preferred stock the Company may designate and issue in the future.
Subsequent to June 30, 2023, the Company issued shares of its common stock in exchange for warrants for no consideration.due to vested restricted stock awards (Note 16 – Subsequent Events).
During the three months ended June 30, 2022, 179,506 shares were issued in the exercise of warrants for $143 (which is included in subscription receivable as the cash was received in July 2022), and shares issued for the second tranche of shares for the Rohuma purchase valued at $ which was included in contingent consideration.
During the three months ended March 31, 2022, the Company did not issue any shares, however, 1,370 shares were added as a fractional adjustment when the reverse stock split occurred.
On January 5, 2023, pursuant to an asset purchase agreement, dated December 30, 2022, we completed the acquisition of Recoup Technologies, Inc., and its digester business assets (“Recoup” or the “Digester business”), from Renovare Environmental, Inc (“REI”), BioHiTech America, LLC (“BHT” and together with REI, the “Renovare Sellers”). The consideration for the Recoup acquisiton included the issuance of shares of Common Stock valued at $1,592,318.
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Common Stock Warrants
The following schedule summarizes the changes in the Company’s common stock warrants:
SCHEDULE OF CHANGES IN COMMON STOCK WARRANTS
| Weighted | Weighted | |||||||||||||||||||
| Warrants Outstanding | Average | Average | ||||||||||||||||||
| Number | Exercise | Remaining | Aggregate | Exercise | ||||||||||||||||
| Of | Price | Contractual | Intrinsic | Price | ||||||||||||||||
| Shares | Per Share | Life | Value | Per Share | ||||||||||||||||
| Balance at December 31, 2022 | 121,547 | $ | - | years | $ | 273 | $ | 8.31 | ||||||||||||
| Warrants granted | - | $ | - | - | $ | - | $ | - | ||||||||||||
| Warrants exercised | - | $ | - | - | $ | $ | ||||||||||||||
| Warrants expired/cancelled | - | $ | - | - | $ | $ | ||||||||||||||
| Balance at March 31, 2023 | 121,547 | $ | - | years | $ | 60,706 | $ | 1.12 | ||||||||||||
| Exercisable at March 31, 2023 | 119,721 | $ | - | years | $ | 58,438 | $ | 1.13 | ||||||||||||
| Balance at December 31, 2021 | 437,691 | $ | - | years | $ | 1,185,798 | $ | 5.36 | ||||||||||||
| Warrants granted | - | $ | - | - | - | $ | - | |||||||||||||
| Warrants exercised/exchanged | - | $ | - | - | $ | |||||||||||||||
| Warrants expired/cancelled | - | $ | - | - | $ | |||||||||||||||
| Balance at March 31, 2022 | 437,691 | $ | - | years | $ | 1,151,551 | $ | 5.38 | ||||||||||||
| Exercisable at March 31, 2022 | 412,050 | $ | - | years | $ | 1,022,268 | $ | 5.71 | ||||||||||||
Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each option/warrant is estimated using the Black-Scholes valuation model. The following assumptions were used for the three months ended March 31, 2023 and year ended December 31, 2022:
|
| |||||||
In June 2022, there were 44,554 warrants exercised for $143. In addition, in June 2022, 12,500 warrants that had previously been granted to a consultant were cancelled.
In December 2022, there were 134,952 warrants exercised for $0. In addition, in December 2022, 124,138 warrants that had previously been granted to a consultant were cancelled.
On November 23, 2020, the Board of Directors of the Company approved the 2020 Equity Incentive Plan.
Options
On October 19, 2020, the Company granted stock options to board members, advisory board members, employees and consultants. The options have a -year term, and are both service-based grants, as well as performance-based grants. As of March 31, 2023 all of the options had vested, and had been either exercised or had expired.
Stock based compensation expense from options for the three months ended March 31, 2023 and 2022 were $ and $, respectively. As of March 31, 2023, there remains $ of unrecognized stock-based compensation from options.
SUMMARY OF STOCK OPTION
Three Months Ended March 31, 2023 | Year Ended December 31, 2022 | |||||||||||||||
| Number | Weighted Average Exercise Price | Number | Weighted Average Exercise Price | |||||||||||||
| Beginning balance | - | $ | - | 491,250 | $ | 0.0416 | ||||||||||
| Granted | - | - | - | - | ||||||||||||
| Exercised | - | - | (394,065 | ) | - | |||||||||||
| Forfeited | - | - | (97,185 | ) | 0.01 | |||||||||||
| Expired | - | - | - | - | ||||||||||||
| Ending balance | - | $ | - | - | $ | - | ||||||||||
| Intrinsic value of options | $ | - | - | $ | - | |||||||||||
| Weighted Average Remaining Contractual Life (Years) | - | - | ||||||||||||||
Restricted Stock Awards
On November 23, 2020, the Board of Directors of the Company approved the 2020 Equity Incentive Plan.
On January 1, 2023, the Company granted restricted stock awards to board members pursuant to the 2020 Equity Incentive Plan. The awards vest over a -year term and are compensation for the board members’ service.
On January 1, 2023, the Company granted restricted stock awards to a director pursuant to the 2020 Equity Incentive Plan. The awards vest over a -month term and are compensation for the director’s service.
On January 1, 2023, the Company granted restricted stock awards to the CEO. The awards were granted as a sign-on bonus. of the restricted stock awards vested after a -month term, which ended on March 31, 2023.
On March 22, 2023, the Company granted restricted stock awards to a director pursuant to the 2020 Equity Incentive Plan. The awards have a -year term and are compensation for the director’s service.
SCHEDULE OF RESTRICTED STOCK AWARDS ACTIVITY
| Weighted | ||||||||||||
| Weighted | Average | |||||||||||
| Average | Remaining | |||||||||||
| Number | Grant Date | Contractual | ||||||||||
| Shares | Fair Value | Term (years) | ||||||||||
| Nonvested at December 31, 2021 | - | $ | - | - | ||||||||
| Granted | - | $ | - | |||||||||
| Shares vested | - | $ | - | |||||||||
| Forfeitures | - | $ | - | |||||||||
| Nonvested at March 31, 2022 | - | $ | - | - | ||||||||
| Nonvested at December 31, 2022 | - | $ | - | - | ||||||||
| Granted | 13,330,000 | $ | 0.20 | |||||||||
| Shares vested | 905,000 | $ | 0.01 | |||||||||
| Forfeitures | - | $ | ||||||||||
| Nonvested at March 31, 2023 | 12,425,000 | $ | 0.21 | 2.34 | ||||||||
| Vested and unreleased | 905,000 | |||||||||||
| Outstanding at March 31, 2023 | 13,330,000 | 0.20 | 2.34 | |||||||||
Stock based compensation expense from restricted stock awards for the three months ended March 31, 2023 and 2022 were $ and $, respectively. As of March 31, 2023, there remains $ of unrecognized stock-based compensation from restricted stock awards. The total fair value of restricted shares that vested during the three months ended March 31, 2023 and 2022 was $ and $, respectively.
| Weighted | Weighted | |||||||||||||||||||
| Warrants Outstanding | Average | Average | ||||||||||||||||||
| Number | Exercise | Remaining | Aggregate | Exercise | ||||||||||||||||
| Of | Price | Contractual | Intrinsic | Price | ||||||||||||||||
| Shares | Per Share | Life | Value | Per Share | ||||||||||||||||
| Balance at December 31, 2022 | - | $ | - | $ | - | $ | - | |||||||||||||
| Warrants acquired concurrent with the Titan Merger | 108,734 | – | 57,296 | 8.31 | ||||||||||||||||
| Warrants granted | - | $ | - | - | $ | - | $ | - | ||||||||||||
| Warrants exercised | - | $ | - | - | $ | - | $ | - | ||||||||||||
| Warrants expired/cancelled | - | $ | - | - | $ | - | $ | - | ||||||||||||
| Balance at June 30, 2023 | 108,734 | $ | – | $ | 57,296 | $ | 8.31 | |||||||||||||
| Exercisable at June 30, 2023 | 106,907 | $ | – | $ | 54,389 | $ | 9.45 | |||||||||||||
| Balance at December 31, 2021 | - | $ | - | $ | - | $ | - | |||||||||||||
| Warrants granted | - | $ | - | $ | - | $ | - | |||||||||||||
| Warrants exercised/exchanged | - | $ | - | $ | - | $ | - | |||||||||||||
| Warrants expired/cancelled | - | $ | - | $ | - | $ | - | |||||||||||||
| Balance at June 30, 2022 | - | $ | - | $ | - | $ | - | |||||||||||||
| Exercisable at June 30, 2022 | - | $ | - | $ | - | $ | - | |||||||||||||
The TraQiQ 2020 Equity Incentive Plan was initially approved by the TraQiQ Board of Directors on November 23, 2020.
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SCHEDULE OF RESTRICTED STOCK AWARDS ACTIVITY
| Weighted | ||||||||||||
| Weighted | Average | |||||||||||
| Average | Remaining | |||||||||||
| Number | Grant Date | Contractual | ||||||||||
| Shares | Fair Value | Term (years) | ||||||||||
| Nonvested at December 31, 2021 | - | $ | - | - | ||||||||
| Granted | - | $ | - | - | ||||||||
| Shares vested | - | $ | - | - | ||||||||
| Forfeitures | - | $ | - | - | ||||||||
| Nonvested at March 31, 2022 | - | - | - | |||||||||
| Granted | - | $ | - | - | ||||||||
| Shares vested | - | $ | - | - | ||||||||
| Forfeitures | - | $ | - | - | ||||||||
| Nonvested at June 30, 2022 | - | $ | - | - | ||||||||
| Nonvested at December 31, 2022 | - | $ | - | - | ||||||||
| Granted | - | $ | - | - | ||||||||
| Shares vested | - | $ | - | - | ||||||||
| Forfeitures | - | $ | - | - | ||||||||
| Nonvested at March 31, 2023 | - | $ | - | - | ||||||||
| Acquired concurrent with the Titan Merger (vested and unreleased) | 1,405,000 | $ | 0.01 | - | ||||||||
| Acquired concurrent with the Titan Merger (unvested) | 3,600,000 | $ | 0.01 | 2.62 | ||||||||
| Granted | - | $ | - | - | ||||||||
| Shares vested | 600,000 | $ | 0.01 | - | ||||||||
| Forfeitures | - | $ | - | - | ||||||||
| Outstanding (nonvested) at June 30, 2023 | 3,000,000 | $ | 0.01 | 1.95 | ||||||||
| Outstanding (vested and unreleased) at June 30, 2023 | 2,005,000 | $ | 0.01 | - | ||||||||
| Total outstanding at June 30, 2023 | 5,005,000 | $ | 0.01 | 2.51 | ||||||||
As of June 30, 2023, there were shares of common stock related to restricted stock grants that were vested and unissued. Subsequent to June 30, 2023, the Company signed a Cancellation of Restricted Stock Grants Agreement with Sikka and two directors which rescinded and annulled of the vested and unreleased shares and the unvested shares (Note 16 – Subsequent Events). Consequently, the obligation to issue shares was eliminated.
Stock-based compensation from restricted stock awards for the three and six months ended June 30, 2023 and 2022 was $and $, respectively. As of June 30, 2023, there remains $of unrecognized stock-based compensation from restricted stock awards. The total fair value of restricted shares that vested during the six months ended June 30, 2023 and 2022 was $and $, respectively. The fair value of the vested and unreleased shares on the date of the Titan Merger was $.
On June 15, 2021the Titan Merger acquisition date, the Company issued a $awarded promissory note to a director with a maturity date of December 12, 2021 (“the director note”). The director note did not bear interest however the director received two tranches of shares of CommonSeries C Preferred Stock each for lending this amount. Underthat vested immediately to its chief executive officer, and as a result recorded $ of stock-based compensation (Note 13 – Stockholders’ Equity). Subsequent to June 30, 2023, the terms of the director note if the note was repaid by the maturity date, one of the two tranches of shares was to be returned. The Company and the director extendedchief executive officer signed a cancellation agreement and the maturitySeries C Preferred Stock shares were rescinded (Note 16 – Subsequent Events).
The fair value of the Series C Preferred Stock is determined using observable inputs (level 2 fair value measurement) with a market approach technique. The main input for the Series C Preferred Stock fair value was the price of the Company’s common stock as of the date of this notethe grant.
NOTE 15 – CONTINGENCIES
From time to June 14, 2022, however the note was not repaid and the company was considered to be in default on the director note. On December 30, 2022, the director,time, the Company is involved in routine litigation that arises in the ordinary course of business. The Company is in an ongoing lawsuit with Wolverine Transfer Station over a contractual dispute and Evergreen Capital Management, LLC (“Evergreen”) signed a note purchase agreement (the “Evergreen note purchase”). In accordance withproperty damages. Wolverine is countersuing the Evergreen note purchase, Evergreen purchased the director noteCompany for losses from the director, andcancellation of contractual obligations. It is the company issued sharesposition of its Common Stock to the director for a value of $17,555. Please See Note 13 – Stockholders’ equity (Deficiency). Pursuant to the Evergreen note purchase the Company exchangedthat net losses arising from Wolverine’s claims are not estimable nor probable at the director note with Evergreen for a secured convertible promissory note (“Evergreen – 4”) which was issued on December 30, 2022 and has a maturity datetime of December 31, 2023.this filing.
On July 5, 2022,NOTE 16 – SUBSEQUENT EVENTS
Subsequent events were evaluated through October 6, 2023, which is the Company entered into a 11% OID Senior Secured Promissory Note (the “GS Capital Note”) with GS Capital Partners LLC (“GS Capital”) indate the amount of $144,000 (including a $14,000 Original Issue Discount). The GS Capital Note has a term of twelve months maturing on July 5, 2023. It accrues interest at a rate of 12% per year. The GS Capital Note also has a conversion feature, enabling itfinancial statements were available to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to 86% of the lowest trading price of the Company’s Common Stock for the 12 Trading Days immediately preceding the delivery of a notice of conversion.be issued. There are certain price protections, which make the conversion option a derivative liability.were no subsequent events other than those described below:
Sale and Issuance of Convertible Notes Payables and Related Party Convertible Notes Payable
Between July 7, 2023 and August 3, 2023 the Company issued and sold ten 20% original issue discount promissory notes to eight different parties. The promissory notes all have an annual interest rate of 10% per annum, have maturity dates ranging from July 7, 2024 to August 7, 2024, and have principal amounts ranging from $70,500 to $600,000. In total the ten promissory notes have a principal amount of $1,938,000. The promissory notes all contain identical “rollover rights” conversion features that enable the holders to convert all or part of the promissory notes’ principal and accrued interest in the event of a public offering or private placement of the Company’s equity, equity linked, or debt securities into purchase consideration for said public or private offering.
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On February 12, 2021,August 2, 2023, the Company grantedissued and sold one 25,00020 warrants (the “Platinum Point Warrants”) that have a term% original issue discount promissory note to the Company’s chief executive officer. The promissory note has an annual interest rate of 10% per annum, a maturity date of threeJuly 24, 2024-years and an exercise pricea principal amount of $16.00240,000. The promissory note contains a “rollover rights” conversion feature that enables the holder to convert all or part of the promissory note’s principal and accrued interest in the event of a public offering or private placement of the Company’s equity, equity linked, or debt securities into purchase consideration for said public offering.
Sale of the Company’s Subsidiary Traqiq Solutions, Inc (“Ci2i”)
On July 28, 2023, the Company, its wholly owned subsidiary Traqiq Solutions, Inc. (“Ci2i”), and Ajay Sikka (“Sikka”), a director of the Company and its former chief executive officer, signed an Assignment of Stock Agreement (the “Assignment Agreement”). Under the terms of the Assignment Agreement, the Company assigned and transferred to Sikka all of the rights, title, and interests in the issued and outstanding equity interests of Ci2i in exchange for consideration of $1. The Company additionally assumed from Ci2i loans and short-term debts valued at $209,587 plus fees and interest.
Exchange of Debt and Equity Instruments for Series A and Series B Rights to Receive Instruments
The Company’s Series A Rights to Receive Common Stock (“Series A Rights”) obligate the Company to issue Common Stock (“Series A Right Shares”) to the holder without any additional consideration. The number of Series A Right Shares is fixed, and is only subject to customary non-price based ratable adjustments, such as stock splits, stock combinations and the like. The Series A Rights are exercisable immediately. The Series A Rights expire five years after the issuance date. The Series A Rights require the Company to hold in reserve the total number of shares of Common Stock that would need to be exercised in order meet the obligations of the Series A Rights.
The Company’s Series B Rights to Receive Common Stock (“Series B Rights”) obligate the Company to issue Common Stock (“Series B Right Shares”) to the holder without any additional consideration. The number of Series B Right Shares is fixed and is only subject to customary non-price based ratable adjustments, such as stock splits, stock combinations and the like. The Company’s Series B Rights are exercisable upon the earlier of (1) December 31, 2023 or (2) the initial date on which the Company’s Common Stock is listed for trading on the New York Stock Exchange, NYSE American, the Nasdaq Global Select Market, Nasdaq Capital Markets, or the Nasdaq Global Market. The Series B Rights expire five years after the issuance date. The Series B Rights require the Company to hold in reserve the total number of shares of Common Stock that would need to be exercised in order meet the obligations of the Series A Rights.
Between October 21, 2022 and May 12, 2023, the Company issued original issue discount promissory notes with a combined principal value of $1.9 million to five accredited investors, including a note of the original principal amount of $60,000 to Platinum Point Capital, LLC.the Company’s chief executive officer (Note 10 – Convertible Notes Payable). These notes had maturity dates of approximately one year, had an annual interest rate of 10% per annum, and were convertible only upon an event of default. The warrants granted contain certain price protections,notes’ conversion features each contained a variable settlement feature that make the value of the warrantswas determined to be a derivative liability. As a result of a separate issuance of warrants on September 17, 2021, the exercise price of the Platinum Point warrants was reduced to $11.60liability (Note 11 - Derivative Liabilities).
On March 3,July 17, 2023, the Company entered into a 20% OID Senior Secured PromissoryExchange Agreements (the “Note Exchange Agreements”), with these five noteholders. Under the terms of the Note (“Keystone – 1”Exchange Agreements, the notes (approximately $1.94 million of outstanding principal and accrued interest) have been cancelled. In exchange the Company has issued to the former noteholders Series A Rights dated as of July 17, 2023.
On July 17, 2023, the Company also entered into Exchange Agreements (the “Series B Preferred Exchange Agreements”) with Keystone Capital Partners. (“Keystone”)two accredited investors, including Sikka. Pursuant to the Series B Preferred Exchange Agreements, such investors exchanged shares of the Company’s Series B Convertible Preferred Stock into an aggregate of Series A Rights dated as of July 17, 2023. Pursuant to the Series B Preferred Exchange Agreement Sikka also exchanged shares of the Company’s common stock and a payment of receivable from the Company for unreimbursed advances in the amount of $90,000100,000 (including a $15,000 Original Issue Discount). Keystone – 1 has a maturity datefor an aggregate of . It accrues interest at a rate of 10% per year. Keystone - 1 also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.0157,000,000 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability.additional Series A Rights dated July 17, 2023.
On March 21,July 20, 2023, the Company entered into a 20% OID Senior Secured Promissory Note (“Keystone – 2”an Exchange Agreement (the “REI Exchange Agreement”) with Keystone Capital Partners.Renovare Environmental, Inc. (“Keystone”REI”) in the amount of $30,000 (including a $5,000 Original Issue Discount). Keystone – 2 has a maturity date of February 28, 2024. It accrues interest at a rate of 10% per year. Keystone - 2 also has a conversion feature, enabling itpursuant to convert intowhich REI exchanged shares of the Company’s Common Stock upon default. The conversion price is equal to the lowerand shares of (1) $Series B Preferred Stock for per share or (2)Series A Rights dated July 20, 2023 and % of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability. Series B Rights dated July 20, 2023.
On March 14, 2023,The transactions contemplated by the Note Exchange Agreement, Series B Preferred Exchange Agreement, and REI Exchange Agreement are together referred to as the “Rights Exchanges”. Subsequent to the preceding transactions, the Company entered into a 20% OID Senior Secured Promissory Note (“Cavalry - 1”) with Cavalry Fund. (“Cavalry”) in the amount of $had (including a $Series A Rights and Original Issue Discount). Cavalry - 1 has a maturity date of February 28, 2024. It accrues interest at a rate of 10% per year. Cavalry - 1 also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability.
On February 16, 2023, the Company entered into a 20% OID Senior Secured Promissory Note (“Cavalry – 2”) with Cavalry Fund. (“Cavalry”) in the amount of $150,000 (including a $30,000 Original Issue Discount). Cavalry – 2 has a maturity date of February 28, 2024. It accrues interest at a rate of 10% per year. Cavalry - 2 also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability.
On March 14, 2023, the Company entered into a 20% OID Senior Secured Promissory Note (“Cavalry – 3”) with Cavalry Fund. (“Cavalry”) in the amount of $120,000 (including a $20,000 Original Issue Discount). Cavalry – 3 has a maturity date of February 28, 2024. It accrues interest at a rate of 10% per year. Cavalry - 3 also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability.
On February 14, 2023, the Company entered into a 20% OID Senior Secured Promissory Note (“Eleven 11 – 1”) with Eleven 11 Management LLC. (“Eleven 11”) in the amount of $60,000 (including a $10,000 Original Issue Discount). Eleven 11 – 1 has a maturity date of February 14, 2024. It accrues interest at a rate of 10% per year. Eleven 11 - 1 also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price shall be equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability.
On March 14, 2023, the Company entered into a 20% OID Senior Secured Promissory Note (“Eleven 11 – 2”) with Eleven 11 Management LLC. (“Eleven 11”) in the amount of $54,000 (including a $9,000 Original Issue Discount). Eleven 11 – 2 has a maturity date of February 28, 2024. It accrues interest at a rate of 10% per year. Eleven 11 - 2 also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability.Series B Rights issued and outstanding.
Cancellation of Restricted Stock Awards and Series C Preferred Stock
Prior to June 30, 2023 the Company awarded shares of restricted stock to Sikka and two of its directors. On September 13, 2023, the Company signed a Cancellation of Restricted Stock Grants Agreement with Sikka and each of the directors. As a result, all shares of restricted stock, including vested and unreleased shares, were rescinded and annulled.
Prior to June 30, 2023, the Company awarded shares of series C preferred stock to the Company’s chief executive officer as stock compensation. On September 28, 2023, the Company and the chief executive officer signed a cancellation agreement and the Series C Preferred Stock shares were rescinded and cancelled.
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On October 21, 2022, the Company entered into a 20% OID Senior Secured Promissory Note (“Evergreen – 5”) with Evergreen Capital Management, LLC (“Evergreen”) in the amount of $48,000 (including a $8,000 Original Issue Discount). Evergreen - 5 has a maturity of twelve months to July 21, 2023. It accrues interest at a rate of 10% per year. Evergreen - 5 also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to 75% of the price per share at which the common stock of the Company is sold to the public in a qualified offering. There are certain price protections, which make the conversion option a derivative liability.
On January 4, 2023, the Company entered into a 20% OID Senior Secured Promissory Note (“Evergreen – 6”) with Evergreen Capital Management, LLC (“Evergreen”) in the amount of $180,000 (including a $30,000 Original Issue Discount). Evergreen - 6 has a maturity of twelve months ending on January 4, 2024. It accrues interest at a rate of 10% per year. Evergreen - 6 also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability.
On February 14, 2023, the Company entered into a 20% OID Senior Secured Promissory Note (“Evergreen – 7”) with Evergreen Capital Management, LLC (“Evergreen”) in the amount of $12,000 (including a $2,000 Original Issue Discount). Evergreen - 7 has a maturity date of February 28, 2024. It accrues interest at a rate of 10% per year. Evergreen - 7 also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability.
On February 16, 2023, the Company entered into a 20% OID Senior Secured Promissory Note (the “Chambers Note”) with James D. Chambers Living Trust (“Chambers”) in the amount of $60,000 (including a $10,000 Original Issue Discount). The Chambers Note has a maturity of twelve months ending on February 28, 2024. It accrues interest at a rate of 10% per year. The Chambers Note also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date. There are certain price protections, which make the conversion option a derivative liability.
Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each warrant is estimated using the Black-Scholes valuation model. The following assumptions were used in March 31, 2022 and December 31, 2021:
SCHEDULE OF VALUATION ASSUMPTIONS
|
| |||||||
The Company’s derivative liabilities are as follows:
SCHEDULE OF DERIVATIVE LIABILITIES
March 31, 2023 | December 31, 2022 | |||||||
| Fair value of the Evergreen 4 conversion option | $ | 66,775 | $ | 58,917 | ||||
| Fair value of the GS Capital conversion option | 74,859 | 157,676 | ||||||
| Fair value of the Platinum Point warrants (25,000 warrants) | 31,223 | - | ||||||
| Fair value of the Keystone 1 conversion option | 7,557,012 | - | ||||||
| Fair value of the Keystone 2 conversion option | 2,506,671 | - | ||||||
| Fair value of the Calvary 1 conversion option | 10,117,180 | - | ||||||
| Fair value of the Calvary 2 conversion option | 10,045,935 | - | ||||||
| Fair value of the Calvary 3 conversion option | 9,999,387 | - | ||||||
| Fair value of the Eleven 11 - 1 conversion option | 5,061,347 | - | ||||||
| Fair value of the Eleven 11 – 2 conversion option | 4,520,708 | - | ||||||
| Fair value of the Evergreen 5 conversion option | 40,928,831 | - | ||||||
| Fair value of the Evergreen 6 conversion option | 15,352,562 | - | ||||||
| Fair value of the Evergreen 7 conversion option | 1,012,268 | - | ||||||
| Fair value of the Chambers conversion option | 5,058,590 | - | ||||||
| Derivative liability | $ | 112,333,348 | $ | 216,593 | ||||
Activity related to the derivative liabilities for the three months ended March 31, 2023 is as follows:
SCHEDULE OF ACTIVITY RELATED TO DERIVATIVE LIABILITIES
| Beginning balance as of December 31, 2022 | $ | 216,593 | ||
| Issuances of warrants/conversion option – derivative liabilities | 95,288,462 | |||
| Extinguishment of derivative liability upon conversion/repayment of convertible notes | - | |||
| Change in fair value of warrants/conversion option - derivative liabilities | 16,828,293 | |||
| Ending balance as of March 31, 2023 | $ | 112,333,348 | ||
nOTE 16: CONCENTRATIONS
A major customer is defined as a customer that represents 10% or greater of total revenues. The Company does not believe that the risk associated with these customers or vendors will have an adverse effect on the business.
SCHEDULE OF CONCENTRATION RISK
Concentration of Revenues
The Company’s concentration of revenue is as follows:
| For the Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Customer A | * | - | 79 | % | ||||
| Customer B | * | - | 21 | % | ||||
| Customer C | 50 | % | * | - | ||||
| Customer D | 19 | % | * | - | ||||
| Customer E | 15 | % | * | - | ||||
Concentration of Accounts Receivable
The Company’s concentration of accounts receivable is as follows:
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nOTE 17: 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. This contingency was assumed by LR upon transfer of all of the Company’s equity interests in Mimo under the MTP Agreement.
nOTE 18: COMMITMENTS AND CONTINGENCIES
The below commitments and contingencies are in respect of TRAQ Pvt Ltd., and following the transfer of all of the Company’s equity interests in TRAQ Pvt Ltd., to LR under the TSP Agreement, the commitments and contingencies were assumed by LR;
The below commitments and contingencies are in respect of Mimo Technologies Pvt Ltd., and following the transfer of all of the Company’s equity interests in Mimo to LR under the MTP Agreement, the commitments and contingencies were assumed by LR;
nOTE 19: SUBSEQUENT EVENTS
On April 19, 2023 the Company agreed to settle its outstanding debt owed under the Celtic Note. The settlement agreement reduced the liability owed by the Company to two payments of $20,000. The first payment was due by April 28, 2023 and has been paid by the company. The second payment is due by May 31, 2023.
On April 28, 2023 the Company agreed to settle its outstanding debt owed under the Forward Finance future sales receipt agreement. The settlement agreement reduced the liability owed by the Company to two payments of $10,950. The first payment was due by May 5, 2023 and has been paid by the company. The second payment is due by May 31, 2023.
On April 1, 2023, the Company entered into a 20% OID Senior Secured Promissory Note with Keystone Capital Partners. (“Keystone”) in the amount of $132,000 (including a $22,000 Original Issue Discount). The note has a maturity date of March 31, 2024. It accrues interest at a rate of 10% per year. The note also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average prices of the five trading days ending on the day immediately prior to the conversion date.
On April 18, 2023, the Company entered into a 20% OID Senior Secured Promissory Note with Keystone Capital Partners. (“Keystone”) in the amount of $60,000 (including a $10,000 Original Issue Discount). The note has a maturity date of April 17, 2024. It accrues interest at a rate of 10% per year. The note also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average prices of the five trading days ending on the day immediately prior to the conversion date.
On April 26, 2023, the Company entered into a 20% OID Senior Secured Promissory Note with Keystone Capital Partners. (“Keystone”) in the amount of $108,000 (including a $18,000 Original Issue Discount). The note has a maturity date of April 30, 2024. It accrues interest at a rate of 10% per year. The note also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average prices of the five trading days ending on the day immediately prior to the conversion date.
On April 1, 2023, the Company entered into a 20% OID Senior Secured Promissory Note with Cavalry Fund I LP. (“Cavalry”) in the amount of $120,000 (including a $20,000 Original Issue Discount). The note has a maturity date of March 31, 2024. It accrues interest at a rate of 10% per year. The note also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average prices of the five trading days ending on the day immediately prior to the conversion date.
On April 26, 2023, the Company entered into a 20% OID Senior Secured Promissory Note with Cavalry Fund I LP. (“Cavalry”) in the amount of $90,000 (including a $18,000 Original Issue Discount). The note has a maturity date of April 30, 2024. It accrues interest at a rate of 10% per year. The note also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average prices of the five trading days ending on the day immediately prior to the conversion date.
On April 5, 2023, the Company entered into a 20% OID Senior Secured Promissory Note with Evergreen Capital Management LLC. in the amount of $54,000 (including a $9,000 Original Issue Discount). The note has a maturity date of March 31, 2024. It accrues interest at a rate of 10% per year. The note also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date.
On April 26, 2023, the Company entered into a 20% OID Senior Secured Promissory Note with Evergreen Capital Management LLC. in the amount of $108,000 (including a $18,000 Original Issue Discount). The note has a maturity date of April 30, 2024. It accrues interest at a rate of 10% per year. The note also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date.
On April 17, 2023, the Company entered into a 20% OID Senior Secured Promissory Note with Seven Knots LLC. in the amount of $60,000 (including a $10,000 Original Issue Discount). The note has a maturity date of April 16, 2024. It accrues interest at a rate of 10% per year. The note also has a conversion feature, enabling it to convert into shares of the Company’s Common Stock upon default. The conversion price is equal to the lower of (1) $0.015 per share or (2) 90% of the average of the two lowest volume-weighted average price of the five trading days ending on the day immediately prior to the conversion date.
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 TraqIQTraQIQ 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 of theOur Company
Our mission
We operate two distinct lines of business. Titan Trucking, LLC is a non-hazardous solid waste management company providing waste and recycling collection and transportation services for industrial generators, commercial contractors and transfer station operators in Michigan. Titan maintains a fleet of roll off and tractor trailer trucks to perform its services. Titan operates in a highly recession resistant industry given the ongoing generation of waste and recyclable materials. Titan’s goal is to reduceprovide our customers with safe and efficient options for the environmental impactdisposal and recycling of their waste streams. Titan has begun to create the infrastructure needed to expand its operations organically and through strategic acquisitions and market development opportunities across the Midwest, Northeast and Southeast regions of the waste management industry through the development and deployment of cost-effective United States. Recoup Technologies, Inc. provides technology solutions. Our suite of technologies includes on-site biological processing equipmentenabled solutions for food waste and proprietary real-time data analytics tools to reduceprocessing including onsite Digestors for food waste generation. These proprietary solutions may enable certain businessesalong with cloud-based software tracking and municipalities of all sizes to lower disposal costs while having a positive impact on the environment. When used individually or in combination, we believe that our solutions can reduce the carbon footprint associated with waste transportation, repurpose non-recyclable plastics, and significantly reduce landfill usage. As we continue to expand our waste management business we plan to discontinue or spin off the remaining portions of the legacy business.analytics solutions.
The Company currently marketsReverse Acquisition with Titan Trucking, LLC
On May 19, 2023, we and our wholly-owned subsidiary, Titan Merger Sub Corp. (“Merger Sub”), entered into an aerobic digestion technology solution forAgreement and Plan of Merger dated as of the disposal of food waste atClosing Date (the “Merger Agreement”), with Titan Trucking, LLC, a Michigan limited liability company (“Titan”), Titan 5, LLC, a Michigan limited liability company (“Titan 5”), Titan National Holdings 2, LLC, a Michigan limited liability company (“Holdings”), Jeffrey Rizzo, an individual (“JR”), William McCauley, an individual (“WM”, and, together with Holdings, Titan 5 and JR, the point of generation. Its line of Revolution Series Digesters has been described“Sellers”), and Jeffrey Rizzo, as self-contained, robotic digestive systems that we believe arethe Seller Representative, pursuant to which, Merger Sub was merged with and into Titan, with Titan continuing as easy to installthe surviving entity and as a standard dishwasher with no special electrical or plumbing requirements. Units range in size depending upon capacity, withwholly-owned subsidiary of our company (the “Titan Merger”).
For U.S. federal income tax purposes, the smallest unit approximatelyTitan Merger qualified as a tax-free “reorganization”. Under the sizeTerms of the Titan Merger Agreement, we agreed to pay the Titan owners 630,900 shares of our Series C Preferred Stock. Concurrent to the Titan Merger, the our chief executive officer and one of our directors resigned from their respective positions and a residential washing machine. The digesters utilize a biological processnew chief executive officer, chief operating officer and chief financial officer were appointed. Additionally, the new chief executive officer and chief operating officer were both appointed as directors of our company. We additionally agreed to convert food waste into a liquid that we believe is safe to discharge down an ordinary drain. This process can result in a substantial reduction in costs for customers including cruise lines, restaurants, retail stores, hospitals, hotel/hospitality companies and governmental units by eliminating the transportation and logistics costs associated with food waste disposal. The Company also expects the process reduce the greenhouse gases associated with food-waste transportation and decomposition in landfills that have been linked to climate change. The Company offers its Revolution Series Digesters in several sizes targeting small- to mid-sized food waste generation sites that are often more economical than traditional disposal methods. The Revolution Series Digesters are manufactured and assembledissue stock compensation in the United States.form of 70,100 shares of our Series C Preferred Stock to the new chief executive officer.
In an effort to expandaccordance with ASC 805 – Business Combinations, the capabilities of its digesters, the Company developed a sophisticated Internet of Things (“IoT”) technology platform to provide its customers with transparency into their internal and supply chain waste generation and operational practices. This patented process collects weight related data from the digesters to deliver real-time data that provides valuable information that when analyzed, can improve efficiency, and validate corporate sustainability efforts. The Company provides its IoT platform through a SaaS (“SoftwareTitan Merger was accounted for as a Service”) model that is either bundled in its rental agreements or sold through a separate annual software license. The Company continuesreverse acquisition with Titan being deemed the accounting acquirer of our company. Titan, as the accounting acquirer, recorded the assets and liabilities of our company at their fair values as of the acquisition date. Titan’s historical consolidated financial statements have replaced our historical consolidated financial statements with respect to add new capacity sizesperiods prior to its linethe completion of Revolution Series Digestersthe Titan Merger with retroactive adjustments to meet customer needs.Titan’s legal capital to reflect the legal capital of our company. We remain the continuing registrant and reporting company.
Legacy Business
TraQiQ Solutions Private Limited
On May 16, 2019,Titan was deemed to be the Company entered into a Share Exchange Agreement with Mann-India Technologies Private Ltd., an Indian Corporation (“Mann”). On January 2, 2020, Mann changed its name to TraQiQ Solutions Private Limited (“TRAQ Pvt Ltd”). Pursuantaccounting acquirer based on the following facts and circumstances: (1) the Titan owners owned approximately 65% of the voting interests of the combined company immediately following the transaction; (2) the Titan Merger resulted in significant changes to the Share Exchange Agreement with Mann,combined company’s Board of Directors; (3) the Company acquired 100%Titan Merger resulted in significant changes to the management of the shares of Mann and assumed certain net liabilities in exchange for warrants exercisable over a five-years to purchase 166,159 shares of common stock of the Company valued at $268. The warrants will be exercisable as follows: (i) 12,596 warrants immediately; (ii) 107,494 warrants exercisable one-year after the date of closing, which was extended to March 31, 2021; and (iii) 46,069 warrants exercisable two-years after the date of closing. This transaction is being recorded as a business combination under ASC 805. There were 56,400 of these warrants exercised during 2021 and 57,368 warrants remain outstanding as of March 31, 2022.combined company.
The warrants that are exercisable in one-year and two-years are conditioned upon TRAQ Pvt Ltd. achieving certain revenue figures and pre-tax profit percentages. TRAQ Pvt Ltd. must achieve target revenue of $1.1 million (US$) and pre-tax profit of 25% (US$). Should TRAQ Pvt Ltd. be unable to achieve these criteria, the warrants will be reduced proportionately. A total of 52,391 of these warrants were cancelled effective May 16, 2021 as a result of these criteria not being achieved.
Mann-India Private limited was renamed to TraQiQ Solutions Private Limited shortly after acquisition by TraQiQ Inc.
TRAQ Pvt Ltd. was established in May 2000 and is headquartered in New Delhi, India. TRAQ Pvt Ltd. is a leading software development company which, with the advent of technology, has evolved as a mature and fast-growing company committed to provide reliable and cost-effective software solutions across industries all over the world.
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TRAQ Pvt Ltd. has its own experienced team of software developers dedicated towards developing various kinds of customized software.
TraQ Pvt Ltd. has been doing business aroundWe accounted for the world for over 15 years, with particular emphasis on Latin AmericaTitan Merger as a reverse acquisition using acquisition accounting. Because the Titan Merger qualifies as a reverse acquisition and India.given that Titan was a private company at the time of the Titan Merger and therefore its value was not readily determinable, the fair value of the merger consideration was deemed to be equal to quoted market capitalization of our company at the acquisition date. The customer list includes large enterprise Finance and Insurance companies across Latin America. The company’s product portfolio has evolved rapidly and now includes enterprise ready solutions for payment processing, mobile wallets, micro lending solutions and digital transformation.purchase consideration is as follows:
| TraQiQ, Inc. market capitalization at closing | $ | 27,162,222 | ||||||
| Total purchase consideration | $ | 27,162,222 |
On December 30, 2022,
We recorded all tangible and intangible assets and liabilities at their preliminary estimated fair values on the Company entered into an Assignment of Stock (the “TSP Agreement”) with TraQiQ Solutions Private Ltd. (“TSP”) and LR, pursuant to whichacquisition date. The following represents the Company sold, assigned and transferred to LR and LR purchased from the Company, allallocation of the equity interests in TSP in exchange for nominal consideration of $1.00.estimated purchase consideration:
| Preliminary | ||||||||
| Estimated | ||||||||
| Description | Fair Value | |||||||
| Assets: | ||||||||
| Cash | $ | 69,104 | ||||||
| Accounts receivable, net | 369,338 | |||||||
| Prepaid expenses and other current assets | 17,893 | |||||||
| Inventory | 416,046 | |||||||
| Fixed assets, net | 1,134 | |||||||
| Intangible assets, net | 10,681,477 | |||||||
| Goodwill | 22,319,908 | |||||||
| $ | 33,874,900 | |||||||
| Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | (1,009,993 | ) | |||||
| Customer deposits | (311,544 | ) | ||||||
| Accrued payroll and related taxes | (21,077 | ) | ||||||
| Derivative liability | (219,171 | ) | ||||||
| Convertible notes payable | (1,466,382 | ) | ||||||
| Convertible notes payable – related parties | (102,851 | ) | ||||||
| Notes payable | (3,579,160 | ) | ||||||
| Notes payable – related parties | (2,500 | ) | ||||||
| $ | (6,712,678 | ) | ||||||
| Net fair value of assets (liabilities) | $ | 27,162,222 | ||||||
Rohuma, LLCResults of Operations and Financial Condition for the Six Months Ended June 30, 2023 as Compared to the Six Months Ended June 30, 2022
On January 22, 2021, the Company entered into a Share Exchange Agreement with Rohuma, LLC, a Delaware limited liability company (“Rohuma”) and its members, whereby the Rohuma members agreed to exchange all of their respective membership interests in Rohuma in exchange for 536,528 shares of common stock, of which the first tranche of shares were issued on March 1, 2021 totaling 320,285 shares, with the remaining value reflected as contingent consideration until the shares vest at which time they will be issued. The transaction was valued at $3,433,776 ($6.40 per share). The Company as of March 31, 2022, determined that the second tranche of shares (134,132) met the criteria to be issued, and the value of $858,445 was reclassified from contingent consideration to Obligation to Issue Common Stock. Rohuma has an Indian affiliate that is owned 99% by Rohuma and 1% by its founding member. Rohuma controls this entity and the 1% ownership by the member is now less than 1% upon acquisition by the Company. This amount is reflected as a non-controlling interest.Revenue
Rohuma dba Kringle.ai was a California based software solutions company that enabled digital and mobile commerce by providing enterprise class applications that cover loyalty and rewards products, payments, online ordering, distribution logistics for retail and more. Kringle analyzed customers’ omni-channel behaviors and transactions. Using AI for digital commerce, Kringle was able to deliver real time, automated 1:1 recommendations and personalized content across all customer touch points.
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| Product sales | $ | 184,175 | $ | - | ||||
| Waste collection and disposal | 2,777,397 | 1,569,853 | ||||||
| Total revenue | $ | 2,961,572 | $ | 1,569,853 | ||||
On DecemberFor the six months ended June 30, 2023 compared to June 30, 2022, our revenues increased by $1,391,719, from $1,569,853 to $2,961,572. The increase was the Company entered into an Assignmentresult of Units (the “Rohuma Agreement”, and, together with the MTP AgreementTitan Merger on May 19, 2023, and the TSP Agreement,resulting increased revenue caused by the “Disposition Agreements”) with Rohuma LLC (“Rohuma”)combined operations of our company and Happy Kompany LLC (“Happy”) pursuantTitan. Additionally, we have continued to whichexpand the Company sold, assigned and transferred to Happy, and Happy purchased from the Company, all of the equity interests in Rohuma in exchange for nominal consideration of $1.00. Pursuant to the Rohuma Agreement, the Company assumed the liabilities of Rohuma with respect to two loans with Paypal/Loanbuilder in an aggregate principal amount of $155,053 plus any accumulated interest and fees.Titan sales operations.
Mimo Technologies Private Limited
On February 17, 2021, the Company entered into a Share Exchange Agreement with Mimo Technologies Private Ltd., and Indian corporation (“Mimo”) and its shareholders, whereby the Mimo shareholders agreed to exchange allCost of their respective shares in Mimo in exchange for warrants to purchase 170,942 shares of the Company’s common stock. Of these warrants, 102,565 were earned at the date of acquisition, with the remaining 68,377 expected to be earned over the next two years from grant based on revenue goals for Mimo. The warrants have a term of three years and an exercise price of $0.008 and value in the amount of $1,640,447, of which $984,268 is reflected in additional paid in capital, with the remaining $656,179 reflected as contingent consideration. The Company as of March 31, 2022, determined that the criteria for vesting of the second tranche of warrants was satisfied and reclassified $410,112 from contingent consideration to additional paid in capital. In addition to the issuance of the warrants, TRAQ Pvt Ltd, wrote off $258,736 in amounts due from a note receivable, $123,778 in accounts receivable and $40,354 in a debenture from Mimo. In addition, a cash payment was made to one of the minority shareholders of Mimo in the amount of $22,338. The Company acquired over 99% of Mimo with the remaining percentage of less than 1% reflected as a non-controlling interest.
TraQiQ operated the Mimo delivery and task service in India. This service ran on the TraQSuite platform. Mimo had 14,000+ independent contractors across India performing deliveries and fulfilling tasks for the largest corporations in the country. Our team at Mimo used a sophisticated technology platform and a smartphone app to get their tasks completed. This was coupled with a verification and billing system that allowed customers of all sizes to leverage this distribution infrastructure.
Mimo offered a broad set of services. These offerings could be classified into three broad categories:
Mimo assisted the delivery and pickup segment of the banking and insurance industry by performing verifications, field investigations for loan requests, business verifications and employment verification, and also collected documents, assisted in filling forms for banks, and completed data collection from customers.
Mimo worked with microfinance institutions to collect cash, such as loan payments, convert cash to digital means like debit cards, and conduct data collection and surveys.Revenue
For consumer goods companies, Mimo did promotional marketing, Last mile (hyper-local) delivery, merchant onboardingthe six months ended June 30, 2023 compared to June 30, 2022, our cost of revenue increased by $1,091,012 or activation, store audits,66%, from $1,650,046 to $2,741,058. The increase was due to the increased revenue-generating activities from our increased sales activities, and route optimization for delivery. Mimo provided efficient end-to-end transshipment logistics. The framework managedfrom the combined operations of our company and optimized last-mile delivery & e-commerce logistics acrossTitan resulting from the entire distribution chain with transparency and seamless integration.Titan Merger.
During the COVID-19 pandemic, Mimo leveraged video as a platform for verification and document delivery.
There were also data digitization tasks being done by Mimo task workers across the country. In a country like India where there are over 20 languages and multiple dialects, the task workers converted paper documents into electronic form in the same language or translated them into another language.
Mimo provided delivery and task worker solutions across India. Mimo works with Banking, Financial, Logistics and Distribution companies, to take their products and services to semi-urban and rural India. Mimo trained the agents in each Product or Service through an online and classroom training platform. The company powered the gig economy task workers throughout the country and provided a very valuable source of employment for young people who may or may not have a high school diploma.
On December 30, 2022, the Company entered into an Assignment of Stock (the “MTP Agreement”) with Mimo Technologies Private Ltd. (“MTP”) and Lathika Regunathan (“LR”), pursuant to which the Company sold, assigned and transferred to LR, and LR purchased from the Company, all of the Company’s equity interests in MTP in exchange for nominal consideration of $1.00.
TraQSuite is a cloud based software platform with a revenue model based on initial and transaction-based licensing fees as well as consulting fees. Licensees pay an initial per-module fee that varies depending on the number of modules that are licensed.
The Company’s TraQSuite software platform powers the last mile distribution network, allowing business users to target customers, facilitate and validate transactions, track and manage task workers, manage funds and run a distribution network. Key features of the TraQSuite software include:
The Mimo delivery and task service in India runs on the TraQSuite platform and performs deliveries and fulfills tasks for some of the largest businesses in India. Mimo provides delivery and pickup services for the banking and insurance industry, performing verifications, field investigations for loan requests, business verification, employment verification, collection of documents and customer data and assistance in filling out forms for banks. Mimo works with microfinance institutions to collect cash, such as loan payments, convert cash to digital forms such as debit cards, and conduct data collection and surveys. For consumer goods companies, Mimo does promotional marketing, last mile (hyper-local) delivery, merchant onboarding or activation, store audits, and route optimization for delivery.
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Continuing Operations
Recoup Technologies, Inc.
Recoup Technologies, Inc. provides cutting-edge solutions based on patented technologies, to measure, analyze and manage the waste management process. Recoup’s products divert food waste from landfill, reduce costs, improve operations, and minimize negative environmental impact for organizations across the world. The company offers Products (Digestors) that convert food waste into grey water discharge that is safe to enter sewage systems. The company also provides accurate real-time information to eliminate the uncertainty about where food waste occurs, how much is being wasted and its associated value. A waste tracking process forecasts accurate supply chain and inventory needs, standardizes best practices for production, and improves future planning for the prevention of waste.
TraQiQ Solutions, Inc.Operating Expenses
Ci2iFor the six months ended June 30, 2023 compared to June 30, 2022, our salary and salary related costs increased by $414,273, or 203%, from $204,374 to $618,647. The increase was a servicesdue to the increased personnel costs associated with the Titan Merger combination of the operations of our company founded in 1998 that developed and deployed intelligent technologiesTitan and products in orderincreases to meet the demand for sustainable, integrated solutions. Ci2i’s primary focus has been in the analytics and intelligence segments. The Company was investing significantly in building products in the areaoperational activity of supply chain and last mile delivery.Titan.
Ci2i’s cloud solutionsFor the six months ended June 30, 2023 compared to June 30, 2022, our stock based compensation increased by $5,588,207, or 100%, from $0 to $5,588,207. The increase can be attributed primarily to the vesting of restricted stock awards and analytics services comprised software development, program management, project management,to Series C Preferred Stock that was awarded to the chief executive officer on May 19, 2023 and business analytics services.which vested immediately. On September 28, 2023, the Company and the chief executive officer signed a cancellation agreement and the Series C Preferred Stock shares were rescinded and cancelled.
For the six months ended June 30, 2023 compared to June 30, 2022, our professional fees increased by $901,224, or 3,844%, from $23,447 to $924,671. The increase was attributed primarily to consulting, accounting, and legal fees incurred during 2023 related to the Titan Merger and our other acquisition activities.
For the six months ended June 30, 2023 compared to June 30, 2022, our depreciation and amortization expense increased by $248,540 from $0 in June 2022 to $248,540. The increase in depreciation and amortization expense was the result of Titan’s investment in new fixed asset equipment and the intangible assets recognized from the Titan Merger.
For the six months ended June 30, 2023 compared to June 30, 2022, our general and administrative expenses increased by $289,205, or 232%, from $124,847 to $414,051. The increase was primarily due to our increased operational and sales activities, the addition of a new lease, and the Titan Merger.
Going ConcernInterest Expense, net of Interest Income
For the six months ended June 30, 2023 compared to June 30, 2022, our interest expense, net of interest income increased by $364,222, or 488%, from $74,610 to $438,832. The Company has an accumulated deficit of $129,484,933increase was due mainly to a large increase in debt instruments accruing interest on our balance sheet as of March 31, 2023 and a working capital deficit of $116,987,178, as of March 31, 2023, and a working capital deficit of $1,682,659 as of December 31, 2022. As a result of these factors, management has determined that there is substantial doubt about the Company ability to continue as a going concern.
The consolidated financial statements ofTitan Merger. We also issued and sold new debt instruments following the Company have been prepared assuming that the Company will continue as a going concern,Titan Merger, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties. The Company’s continuation as a going concern is contingent upon its ability to obtain additional financing and generate revenue and cash flow to meet its obligations on a timely basis. Management intends to seek additional funding through debt or equity financing during the next twelve months to source new inventory and generate revenue from product sales.increased our interest expense.
Discontinued OperationsNet Loss
As discussed in the consolidated financial statements, the Company sold Rohuma, Mimo and TSP in December of 2022. Additionally, the Company is shifting operations to waste management. As such, these businesses are reported as discontinued operations for the three months ended March 31, 2022. As required, the Company has retrospectively recast its consolidated statements of operations and balance sheets for the consolidated financial statements.
For the six months ended June 30, 2023 compared to June 30, 2022, our net loss increased by $23,722,015 or 15,468% from a net income of $153,366 to a net loss of $23,568,649. The retrospective recastchange in net loss was primarily a result of the company’s income statementimpairment of goodwill of $15,669,287, the increase in stock-based compensation, the increase in professional fees, and balance sheet for the quarter ended March 31, 2022 resulted in a loss on discontinued operations of $6,866,913 for the three months ended March 31, 2022. The Company has not segregated the cash flows of this business in the consolidated statements of cash flows. Management was also required to make certain assumptions and apply judgment to determine historical expenses related to the discontinued operations presented in prior periods. Unless noted otherwise, this discussion and analysis of our financial condition and results of operations refers to the Company’s continuing operations.
The following table presents a reconciliationother effects of the major financial lines constituting the results of operations for discontinued operations to the net income (loss) from discontinued operations presented separately in the consolidated statement of operations for the three months ended March 31, 2022:
| Rohuma | Mimo | TSP | Total | |||||||||||||
| March 31, 2022 | March 31, 2022 | March 31, 2022 | March 31, 2022 | |||||||||||||
| REVENUE | $ | 48,085 | $ | 64,652 | $ | 234,189 | $ | 346,886 | ||||||||
| COST OF REVENUE | 79,065 | 145,960 | 135,687 | 360,712 | ||||||||||||
| GROSS PROFIT (LOSS) | (31,020 | ) | (81,308 | ) | 98,502 | (13,826 | ) | |||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Salaries and salary related costs | 104,263 | - | 17,556 | 121,819 | ||||||||||||
| Professional fees | 4,617 | 18,621 | 3,190 | 26,428 | ||||||||||||
| Rent expense | 442 | - | 755 | 1,197 | ||||||||||||
| Depreciation and amortization expense | - | 11,644 | 2,145 | 14,840 | ||||||||||||
| General and administrative expenses | 4,502 | 5,809 | 17,385 | 27,696 | ||||||||||||
| Total Operating Expenses | 114,875 | 36,074 | 41,031 | 191,980 | ||||||||||||
| OPERATING (LOSS) INCOME | (145,895 | ) | (117,382 | ) | 57,471 | (205,806 | ) | |||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Loss from impairment of intangible assets | - | (776,263 | ) | - | (776,263 | ) | ||||||||||
| Loss from impairment of goodwill | (3,519,869 | ) | (2,343,188 | ) | - | (5,863,057 | ) | |||||||||
| Interest expense, net of interest income | (2,126 | ) | (2,509 | ) | (14,280 | ) | (18,915 | ) | ||||||||
| Other income | 154 | 45 | 2,608 | 2,807 | ||||||||||||
| Total other income (expense) | (3,521,841 | ) | (3,121,915 | ) | (11,672 | ) | (6,655,428 | ) | ||||||||
| LOSS FROM DISTCONTINUED OPERATIONS, BEFORE PROVISION FOR INCOME TAXES | (3,667,736 | ) | (3,239,297 | ) | 45,799 | (6,861,234 | ) | |||||||||
| Provision for income taxes – discontinued operations | 367 | - | 5,312 | 5,679 | ||||||||||||
| LOSS INCOME FROM DISTCONTINUED OPERATIONS | $ | (3,668,103 | ) | $ | (3,239,297 | ) | $ | 40,487 | $ | (6,866,913 | ) | |||||
The following table presents a reconciliation of Rohuma, Mimo, and TSP net cash flows from operating, investing and financing activities for the periods indicated below:
| March 31, 2022 | ||||
| Net cash (used in) provided by operating activities - discontinued operations | $ | 409,295 | ||
| Net cash (used in) provided by investing activities - discontinued operations | $ | - | ||
| Net cash provided by (used in) financing activities - discontinued operations | $ | (468,293 | ) | |
Acquisition of Recoup Technologies, Inc.
On January 5,May 19, 2023 pursuant to an asset purchase agreement, dated December 30, 2022, we completed the acquisition of all of the Digester business assets of Recoup Technologies, Inc. (“Recoup” or the “Digester business”) for a purchase price of $18,371,421 consisting of the following:
| Type of Consideration | Number of Shares | Fair Value | ||||||||
| Cash | $ | 150,000 | ||||||||
| Issuance of common stock | a. | 15,686,926 | $ | 1,592,318 | ||||||
| Issuance of series – B preferred stock | b. | 1,250,000 | $ | 12,688,256 | ||||||
| Liabilities assumed: | ||||||||||
| Michaelson Capital Senior Note | c. | $ | 3,017,090 | |||||||
| Accounts Payable and accrued expenses | $ | 612,213 | ||||||||
| Contract liabilities | $ | 311,544 | ||||||||
| Total consideration | $ | 18,371,421 | ||||||||
The acquisition of Recoup was accounted for as a business combination in accordance with the acquisition method under the guidance in ASC 805-10 and 805-20. Accordingly, the total purchase consideration was allocated to intangible assets acquired based on their respective estimated fair values. The acquisition method of accounting requires, among other things, that assets acquired, and liabilities assumed, if any, in a business purchase combination be recognized at their fair values as of the acquisition date. The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions, including estimating future cash flows, developing appropriate discount rates, estimating the costs, and timing.
The allocation of the purchase price in connection with the acquisition of Recoup was calculated as follows:
| Description | Fair Value | Weighted Average Useful Life (Years) | ||||||
| Fixed assets – truck | $ | 1,196 | 7 | |||||
| Inventory | 379,718 | |||||||
| Intellectual property | 10,333,144 | 10 | ||||||
| Tradenames | 285,863 | 10 | ||||||
| Noncompete agreement | 78,615 | 5 | ||||||
| Goodwill | 7,292,885 | Indefinite | ||||||
| $ | 18,371,421 | |||||||
Goodwill of $7,292,885 arising from the acquisition of Recoup consisted of new customer relationships for the Company, access to new product market opportunities, expected growth opportunities, and the residual value after all identifiable intangible assets were valued. Total acquisition costs for the acquisition of Recoup incurred were $86,116 recorded as a component of General and administrative expenses.
The approximate revenue and gross profit for the acquired business as a standalone entity per ASC 805 from January 5, 2023 to March 31, 2023 was $64,611 and $29,158, respectively.
Results of OperationsTitan Merger.
Results of Operations and Financial Condition for the Three Months Ended March 31,June 30, 2023 as Compared to the Three Months Ended March 31,June 30, 2022
Revenue
| Three Months Ended | ||||||||
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| Product sales | $ | 184,139 | $ | - | ||||
| Waste collection and sales | 1,643,106 | 919,738 | ||||||
| Total revenue | $ | 1,827,245 | $ | 919,738 | ||||
For the three months ended March 31,June 30, 2023 compared to March 31,June 30, 2022, the Company’sour revenues increased by $53,209,$907,507 or 99%, from $522 in Q1 2022$919,738 to $65,040 in Q1 2023.$1,827,245. The increase is the result of the acquisition of RecoupTitan on January 5,May 19, 2023, and the resulting revenue generated by Recoup.
Titan.
Cost of Revenue
For the three months ended March 31,June 30, 2023 compared to March 31,June 30, 2022, the Company’sour cost of revenue increased by $25,800,$626,894, or 226%68%, from $11,416 in Q1 2022$917,209 to $37,216 in Q1 2023.$1,544,103. The increase is due towas the result of the Titan Merger on May 19, 2023, and the resulting increased revenue caused by the implementationcombined operations of our company and Titan. Additionally, we have continued to expand the Recoup acquisition.Titan sales operations.
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Operating Expenses
For the three months ended March 31,June 30, 2023 compared to March 31,June 30, 2022, the Company’sour salary and salary relatedsalary-related costs increased by $70,514,$321,940, or 71%300%, from $100,016$107,390 to $170,530.$429,330. The increase was due to the increased personnel costs associated with implementationthe Titan Merger and increases to the operational activity of the Recoup acquisition.Titan.
For the three months ended March 31,June 30, 2023 compared to March 31,June 30, 2022, the Company’s professional fees decreasedour stock based compensation increased by $56,100,$5,588,207, or 64%100%, from $88,051$0 to $31,951.$5,588,207. The decreaseincrease can be attributed primarily to consulting fees incurred during 2022 in preparation for the disposalvesting of restricted stock awards and to Series C Preferred Stock that was awarded to the Company’s subsidiarieschief executive officer on May 19, 2023 and acquisition.
Forwhich vested immediately. On September 28, 2023, the three months ended March 31, 2023 compared to March 31, 2022, the Company’s depreciation and amortization expense increased by $409,788, from $0 to $409,788. The increase was primarily the result of the acquisition of Recoup’s intangible assetsCompany and the associated amortization ofchief executive officer signed a cancellation agreement and the intangibles.
series C Preferred Stock shares were rescinded and cancelled
For the three months ended March 31,June 30, 2023 compared to March 31,June 30, 2022, our professional fees increased by $722,075, or 9,237%, from $7,817 to $729,892. The increase can be attributed primarily to consulting, accounting, and legal fees incurred during 2023 related to the Company’sTitan Merger and our other acquisition activities.
For the three months ended June 30, 2023 compared to June 30, 2022, our depreciation and amortization expense increased by $241,665 from $0 in June 2022 to $241,665. The increase in depreciation and amortization expense is the result of Titan’s investment in new fixed asset equipment and the intangible assets recognized from the Titan Merger.
For the three months ended June 30, 2023 compared to June 30, 2022, our general and administrative expenses increased by $84,933,$219,837, or 311%351%, from $27,309$62,564 to $112,242.$282,401. The increase was primarily due to our increased insurance expensesoperational and bad debt expensesales activities, the addition of $52,110.a second lease, and the Titan Merger.
Interest Expense, net of Interest Income
For the three months ended March 31,June 30, 2023 compared to March 31,June 30, 2022, the Company’sour interest expense, decreasednet of interest income increased by $307,618,$316,124, or 66%734%, from $464,180$43,056 to $156,562.$359,180. The decreaseincrease was due mainly to a decreaselarge increase in debt instruments accruing interest on our balance sheet as a result of the Company’s Balance sheet.Titan Merger. We have also issued and sold new debt instruments following the Titan Merger, which has resulted in increased interest expense.
Changes in Fair Value of Derivative LiabilitiesNet Loss
For the three months ended March 31,June 30, 2023 compared to March 31,June 30, 2022, the Company’s change in the fair value of the derivative liabilityour net loss increased by $16,828,293,$22,563,287 or 6,621% from $0 in Q1 2022$340,761 to an expense of $16,828,293 in Q1 2023 due to changes in the volatility of the Company’s share price over the period March 31, 2023 compared to March 31, 2022.
Net Loss from Continuing Operations
For the three months ended March 31, 2023 compared to March 31, 2022, the Company’s net loss from continuing operations increased by $111,173,161 from $691,060 in Q1 2022 to $111,864,221 in Q1 2023$22,904,048 due to the changes noted herein.impairment of goodwill of $15,669,287, increase in stock-based compensation, the increase in professional expenses, and the other effects of the May 19, 2023 Titan Merger.
Liquidity and Capital Resources
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. As of March 31,June 30, 2023, current assets were $576,312we had $236,815 in cash and current liabilities outstanding amountedcash equivalents compared to $117,465,564 which resulted in a working capital deficit of $116,889,252. As of$26,650 at December 31, 2022, an increase of $210,162 resulting primarily from net proceeds of debt financings. As of June 30, 2023, we had $0.9 million in accounts receivable compared to $0.5 million at December 31, 2022, an increase of $0.4 million primarily from receivables gained from the Titan Merger.
As of June 30, 2023, we had total current assets were $66,460of $1.8 million and total current liabilities outstanding amountedof $10.9 million, or negative working capital of $9.1 million, compared to $1,682,659 which resultedtotal current assets of $0.9 million and total current liabilities of $2.0 million, or negative working capital of $1.1 million at December 31, 2022. This is a decrease in working capital of $8.0 million over the working capital balance at the end of 2022 driven primarily by the Titan Merger and the private placements of debt securities completed during the six-month period.
As of June 30, 2023, we had undiscounted obligations in the amount of $8.1 million relating to the payment of indebtedness due within one year. We anticipate meeting our cash obligations on our indebtedness that is payable on or prior to June 30, 2024 primarily through the issuance of debt and equity securities, as well as through earnings from operations, including, in particular, those of Titan.
Our future capital requirements for our operations will depend on many factors, including the profitability of our businesses, the number and cash requirements of other acquisition candidates that we pursue, and the costs of our operations. We plan to generate positive cash flow from Titan to address some of our liquidity needs. However, to execute our business plan, service our existing indebtedness, finance our proposed acquisitions and implement our business strategy, we anticipate that we may need to obtain additional financing from time to time and may choose to raise additional funds through public or private equity or debt financings, a bank line of credit, borrowings from affiliates or other arrangements. We cannot be sure that any additional funding, if needed, will be available on terms favorable to us or at all. Furthermore, any additional capital raised through the sale of equity or equity-linked securities may dilute our current stockholders’ ownership in us and could also result in a decrease in the market price of our common stock. The terms of those securities issued by us in future capital transactions may be more favorable to new investors and may include the issuance of warrants or other derivative securities, which may have a further dilutive effect. Furthermore, any debt financing, if available, may subject us to restrictive covenants and significant interest costs. There can be no assurance that we will be able to raise additional capital, when needed, to continue operations in their current form.
During the six months ended June 30, 2023 and 2022, our capital expenditures were $0.2 million and $1.3 million, respectively. During the six months ended June 30, 2023 the Company offset its capital expenditures with approximately $69,000 in cash and cash equivalents from the Titan Merger. During the six months ended June 30, 2022 the Company offset its capital expenditures with $0.3 million from the proceeds from disposal of fixed assets.
We expect our capital expenditures for next 12 months will grow as we continue to expand the Titan operational activity. These capital expenditures will be primarily utilized for equipment needed to generate revenue and for office equipment. We expect to fund such capital expenditures out of our working capital deficit of $1,682,659.capital.
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NetCash Flows
| Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Net cash (used in) provided by operating activities | $ | (765,490 | ) | $ | 116,956 | |||
| Net cash (used in) investing activities | (104,522 | ) | (1,066,170 | ) | ||||
| Net cash provided by financing activities | 1,080,177 | 1,206,893 | ||||||
| Net increase in cash and cash equivalents | $ | 210,165 | $ | 257,679 | ||||
Operating Activities. The net cash used in operating activities was $192,445 for the threesix months ended March 31, 2023 compared to $399,388 for the three months ended March 31, 2022. Cash used in operations for the three months ended March 31,June 30, 2023 was primarily dueused to fund a net loss of $111,864,221, and an increase in accounts receivable of $117,979; offset by a changeapproximately $23.6 million, adjusted for non-cash expenses in the fair valueaggregate amount of approximately $21.5 million. Non-cash expenses were primarily made up of $15.7 million of goodwill impairment and $5.6 million of stock compensation expense. Approximately $1.2 million of cash was generated from net changes in the derivative liabilitylevels of operating assets and derivative expense of $111,011,754, depreciation and amortization expense of $250,994, amortization of discounts and convertible options on debt of $158,794,liabilities, primarily related to an increase in accounts payable and accrued expenses, and deferred taxes of $93,957, and an increase in accrued payroll and payroll taxes, of $94,529.and a decrease in subscription receivable. The cash generated was offset by a decrease in the operating lease liability and an increase in prepaid expenses.
NetThe net cash provided by operating activities for the six months ended June 30, 2022 was primarily used to fund operations for net income of $153,366, adjusted for non-cash expenses in the aggregate amount of approximately $103,000. Approximately $67,000 was generated by net changes in the levels of operating assets and liabilities, primarily related to increases in accounts payable, offset by increases in prepaid expenses, other receivables, and decreases in operating lease liabilities.
Investing Activities. During the six months ended June 30, 2023, our cash used in operationsinvesting activities was composed of the net cash received as a result of the Titan Merger and cash used for the threeacquisition of fixed assets. During the six months ended March 31,June 30, 2022, our cash used in investing activities was due to approximately $1,348,000 used for the acquisition of fixed assets, offset by approximately $282,000 received from the disposal of fixed assets.
Financing Activities. There was $1.0 million in cash generated from financing activities during the six months ended June 30, 2023. This was primarily due to a net lossproceeds from convertible notes of $917,348; offset mainly by amortization$980,000 million, proceeds from notes payable – related parties of discounts$653,000 and proceeds from convertible options on debtnotes – related parties of $292,777, an increase in accounts payable, accrued expenses and deferred taxes of $84,422, stock-based compensation of $51,431, and a decrease in accounts receivable of $45,052.
$300,000. Cash flows used for investing activities for the three months ended March 31, 2022, was limited to the $25,574 acquisition of fixed assets related to the Company’s Indian subsidiaries, which were disposed of in December of 2022 and are considered discontinued operations. Cash flows used in investing activities for the three months ended March 31, 2023 was limited to the cash consideration paid for the acquisition of Recoup of $150,000.
During the three months ended March 31, 2023, the cash flowsprovided from financing activities consisted of convertible note proceeds of $705,000;were offset by payments on$791,000 of repayments of notes payablepayable. There was $1.2 million of $163,814 and payments for convertible notes of $60,480. Netcash generated from financing activities during the six months ended June 30, 2022. The cash provided by financing activities for the three months ended March 31, 2022 consistedwas due to $1,348,000 of proceeds received from long-term debt of $344,652,notes payable, and $259,000 in proceeds received from note payables – related party notes of $205,836. These cash flows wereparties, offset by repayments of $63,973 innote payables of $326,000 and repayments of note payables – related party notesparties of $74,000.
Non-Cash Investing and $58,615 in long-term debt during the three months ended March 31, 2022. In addition, for the three months ended March 31, 2022Financing Activities. We note that there was an increase inapproximately $27 million of non-cash activity related to the cash overdraftrecapitalization of $48,400.equity due to the our reverse merger transaction. Additionally, we settled a note payable as a contribution to equity for $170,000.
Cash Payments for Interest and Income Taxes.The companyWe had $986approximately $228,000 and $7,991$64,000 of cash payments for interest expense for the threesix months ended March 31,June 30, 2023 and 2022, respectively. As well as $0 and $5,679$0 of cash payments for income taxes for the threesix months ended March 31,June 30, 2023 and 2022, respectively.
Off-Balance Sheet Arrangements
We have no off-balance sheet financing arrangements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None.
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 Officersour chief executive officer and our chief financial officer (collectively, our “Certifying Officers”) conducted an evaluation of the effectiveness of the design and operation of the Company’sour disclosure controls and procedures, as required by Exchange Act Rule 13a-15. Based on that evaluation, the Company’sour Certifying Officers concluded that, because of the disclosed material weaknesses in the Company’sour internal control over financial reporting, the Company’sour 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 Companyus in the reports that the Company fileswe file or submitssubmit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.
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Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company’sour 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’sour reports filed under the Exchange Act is accumulated and communicated to management, including the Company’sour 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 | |
| - |
Changes in Internal Control over Financial Reporting
There have been no changeschange in the Company’sour internal control over financial reporting that occurred during the period ended March 31,June 30, 2023 that has materially affected, or is reasonably likely to materially affect, the Company’sour 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. |
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are notFrom time to time, we may become a party to any material litigation nor,and subject to claims incident to the knowledgeordinary course of our business. Although the results of such litigation and claims in the ordinary course of business cannot be predicted with certainty, we believe that the final outcome of such matters will not have a material adverse effect on our business, results of operations or financial condition. Regardless of outcome, litigation can have an adverse impact on us because of defense costs, diversion of management resources and other factors. Currently, there is anyno litigation threatenedpending against usour company that maycould materially affect us.our company other than as follows:
In July 2022, a complaint was filed against our subsidiary, Titan Trucking LLC (“Titan”), in the Circuit Court for Macomb County, Michigan titled Wolverine Transfer and Recycling LLC v. Titan Trucking LLC (Case No. 22-002780-CB) for breach of contract. In the complaint, the plaintiff alleges that Titan has breached a contractual agreement between Titan and the plaintiff pertaining to the transport of certain non-hazardous solid waste or recyclables from plaintiff’s transfer station to the locations identified in the contract. The complaint seeks unspecified damages, attorney and expert fees and other unspecified litigation costs. Titan has denied the claims of the plaintiff, and in May 2023, Titan filed amended counterclaims against the plaintiff alleging that plaintiff breached the contractual agreement by preventing Titan’s performance of its obligations under the agreement by failing to, among things, provide the necessary volumes of materials for shipment and the personnel sufficient to permit Titan to provide its services and by failing to pay certain invoices and to reimburse Titan for equipment damaged by plaintiff’s employees and for overweight trailer tickets. This matter is presently set on the court’s non-jury trial docket. Titan intends to continue to vigorously defend this lawsuit.
As of June 30, 2023, no accruals for loss contingencies have been recorded as the outcome of this litigation is neither probable nor reasonably estimable.
Item 1A. Risk Factors
None.Not required under Regulation S-K for smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.There have been no sales of unregistered securities within the last two years that would be required to be disclosed pursuant to Item 701 of Regulation S-K, with the exception of the following:
Between October 21, 2022 and May 12, 2023, we issued original issue discount promissory notes with a combined principal value of $1.9 million to five accredited investors, including a note of the original principal amount of $60,000 to our chief executive officer. These notes had maturity dates of approximately one year, had an annual interest rate of 10% per annum, and were convertible only upon an event of default. On July 17, 2023, we entered into exchange agreements with these five noteholders. Under the terms of the exchange agreements, the notes (approximately $1.94 million of outstanding principal and accrued interest) were cancelled in exchange for our issuance to the former noteholders of 38,800,764 Series A Rights to Receive Common Stock (“Series A Rights”) dated as of July 17, 2023 ..
On July 17, 2023, we also entered into exchange agreements with two accredited investors, including Ajay Sikka, a director of our company and our former chief executive officer. Pursuant to the exchange agreements, such investors exchanged 220,135 shares of our Series B Convertible Preferred Stock into an aggregate of 22,013,500 Series A Rights dated as of July 17, 2023. Pursuant to the exchange agreement Mr. Sikka, Mr. Sikka also exchanged 5,000,000 shares of our common stock and a receivable of our company for unreimbursed advances in the amount of $100,000 for an aggregate of 7,000,000 additional Series A Rights dated July 17, 2023.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
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Item 5. Other Information
(a) Not applicable.
(b) During the quarter ended March 31,June 30, 2023, there have not been any material changes to the procedures by which security holders may recommend nominees to the Board of Directors.
Item 6. Exhibits
| Exhibit Number | Description of Exhibit | |
| 31.1 | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2 | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | Inline XBRL Instance | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition | |
| 101.LAB | Inline XBRL Taxonomy Extension Labels | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| TraQiQ, Inc. | ||
| Date: | By: | /s/ |
| Chief Executive Officer (principal executive officer) | ||
| Date: | By: | /s/ |
| ||
| Chief Financial Officer (principal financial and accounting officer) | ||
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