The discussion and analysis of our financial condition and results of operations
are based on our condensed consolidated financial statements, which we have
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these condensed consolidated
financial statements requires us to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the condensed consolidated financial
statements, as well as the reported revenues and expenses during the reporting
periods. On an ongoing basis, we evaluate estimates and judgments, including
those described in greater detail below. We base our estimates on historical
experience and on various other factors that we believe are reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
As used in this "Management's Discussion and Analysis of Financial Condition and
Results of Operation," except where the context otherwise requires, the term
"we," "us," "our," or "the Company," refers to the business of TraqIQ Inc.
The following presentation of management's discussion and analysis of our
financial condition and results of operations should be read in conjunction with
our condensed consolidated financial statements, the accompanying notes thereto
and other financial information appearing elsewhere in this quarterly report on
Form 10-Q. This section and other parts of this quarterly report on Form 10-Q
contain forward-looking statements that involve risks and uncertainties. See
"Forward-Looking Statements."
Overview
TraQiQ, Inc. (along with its wholly owned subsidiaries, referred to herein as
the "Company") was incorporated in the State of California on September 9, 2009
as Thunderclap Entertainment, Inc. On July 14, 2017, Thunderclap Entertainment,
Inc. changed its name to TraQiQ, Inc. On July 19, 2017, the Company entered into
a Share Exchange Agreement ("Share Exchange") with the stockholders of OmniM2M,
Inc. ("OmniM2M") and TraQiQ Solutions, Inc. dba Ci2i Services, Inc. (formerly
Ci2i Services, Inc. - amended November 6, 2019) ("Ci2i") whereby the
stockholders of Omni and Ci2i exchanged all of their respective shares,
representing 100% ownership in OmniM2M and Ci2i in exchange for 1,500,000 shares
of the Company's common stock, respectively. The OmniM2M Shareholders and the
Ci2i Shareholders have each been issued their respective 1,500,000 shares on a
pro rata basis based on their respective holdings in OmniM2M and Ci2i in the
Share Exchange Agreement. The Share Exchange was accounted for as a reverse
merger whereas Ci2i is considered the accounting acquirer and TraQiQ,Inc. is
considered the accounting acquiree. For accounting purposes, the acquisition of
Omni is recorded at historical cost in accordance with Accounting Standard
Codification ("ASC") 805-50-25-2 as this is considered an acquisition of
entities under common control as the management of the Company and Omni control
the activities of the respective companies. Prior to the merger with Ci2i and
acquisition of Omni, the Company was considered a shell company under Rule 12b-2
of the Exchange Act. On December 1, 2017, The Company entered into a Share
Purchase Agreement (the "Share Exchange Agreement") with Ajay Sikka ("Sikka"),
the sole shareholder of Transport IQ, Inc. whereby Sikka agreed to sell all of
the shares in TransportIQ, Inc. ("TransportIQ") in exchange for $18,109, in the
form of cancellation of all of the debt of TransportIQ that is owed to the
Company. The transaction became effective upon the execution of the Share
Exchange Agreement by Sikka and the Company; and Transport IQ, Inc, is now a
wholly-owned subsidiary of the Company. Because TransportIQ was commonly
controlled and owned, the transaction was recorded at the historical carrying
value of TransportIQ's assets and liabilities.
The Financial Industry Regulatory Authority on March 18, 2022, approved a
reverse 1 for 8 stock split of the Company's common shares. The reverse split
was effective on March 21, 2022. The common shares and common share equivalents
as well as the per-share amounts have been retroactively restated in accordance
with ASC 855-10-25 and the loss per share figures have been retroactively
restated in accordance with ASC 260-10-55-12.
Overview of the Company
With operations concentrated in India, Southeast Asia and Latin America, the
Company helps businesses in emerging markets leverage the "gig" or task economy
by providing both technology solutions and a network of workers required to
fulfill those tasks. The Company provides software as a service that enables
clients to build and manage a network of contract task workers. This platform
can also be used by business clients to manage their employees who are
performing services, such as PC repair or food delivery. In addition, with the
recent acquisition of Mimo Technologies Private Limited ("Mimo"), Mimo operates
a network of over 14,000 task workers in India who make deliveries, collect
payments, do background verifications, and fulfill tasks across the supply
chain, as needed by business clients to deliver their products and services to
their respective markets and customers.
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TraQSuite is a cloud based software platform with a revenue model based on
initial and transaction-based licensing fees as well as consulting fees.
Licensees pay an initial per-module fee that varies depending on the number of
modules that are licensed. This fee is typically $10,000 per module. Customers
are also billed on a per-user or per-transaction basis every month. User fees
range from a $75 per month fee for the administrator to $5 per month for regular
users. Transaction fees averages about $1 per transaction, with discounts for
higher volumes. Most customers also pay initial consulting fees upfront for
integration of TraQSuite with their legacy software and training of their
employees in the use of TraQSuite.
The Company's TraQSuite software platform powers the last mile distribution
network, allowing business users to target customers, facilitate and validate
transactions, track and manage task workers, manage funds and run a distribution
network. Key features of the TraQSuite software include:
? Last Mile delivery: TraQSuite's Last-Mile software module enables a business
to manage thousands of task workers across multiple geographies to deliver
products and services to the users. The software platform, operating through
mobile apps, allows for data sharing, delivery validation, geo-tagging and
know-your-customer (KYC) requirements and can even measure customer
satisfaction.
? Transact: TraQSuite enables task workers to facilitate transactions by meeting
the end customers. They can collect payments via credit cards, smart-phone
swipes, SMS messages or cash. Both banked and unbanked users can buy products
and services and pay with their mobile devices.
? Target: TraQSuite enables customer transactions to be rewarded with loyalty
credits, tokens or points that can be redeemed by the customer for free
products, discounts and benefits. The software analyzes these transactions and
purchase behaviors by using leading AI models and can deliver real time,
automated and targeted offers and recommendations for additional purchases and
customer retention.
The Mimo delivery and task service in India runs on the TraQSuite platform and
performs deliveries and fulfills tasks for some of the largest businesses in
India. Mimo provides delivery and pickup services for the banking and insurance
industry, performing verifications, field investigations for loan requests,
business verification, employment verification, collection of documents and
customer data and assistance in filling out forms for banks. Mimo works with
microfinance institutions to collect cash, such as loan payments, convert cash
to digital forms such as debit cards, and conduct data collection and surveys.
For consumer goods companies, Mimo does promotional marketing, last mile
(hyper-local) delivery, merchant onboarding or activation, store audits, and
route optimization for delivery.
The Company's strategy is to grow the business through a combination of organic
growth and strategic investments that bring new functionality and revenue
streams to the Company. The plan is to enhance the functionality of our existing
products, increase sales in the Indian market and entry into new emerging
markets. The Company has a presence in India, Southeast Asia and Latin America,
and recently added new customers in Australia, New Zealand and parts of Africa.
TraQiQ Solutions, Inc.
Ci2i is a services company founded in 1998 that develops and deploys intelligent
technologies and products in order to meet the demand for sustainable,
integrated solutions. Ci2i's primary focus has been in the analytics and
intelligence segments. The Company is investing significantly in building
products in the area of supply chain and last mile delivery.
Ci2i's cloud solutions and analytics services comprise software development,
program management, project management, and business analytics services.
36
TraQiQ Solutions Private Limited
On May 16, 2019, the Company entered into a Share Exchange Agreement with
Mann-India Technologies Private Ltd., an Indian Corporation ("Mann"). On January
2, 2020, Mann changed its name to TraQiQ Solutions Private Limited ("TRAQ Pvt
Ltd"). Pursuant to the Share Exchange Agreement with Mann, the Company acquired
100% of the shares of Mann and assumed certain net liabilities in exchange for
warrants exercisable over a five-years to purchase 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 12,813 warrants remain
outstanding as of September 30, 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 $1.1 million (US$) 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.
TRAQ Pvt Ltd. has its own experienced team of software developers dedicated
towards developing various kinds of customized software.
TraQ Pvt Ltd. has been doing business around the world for over 15 years, with
particular emphasis on Latin America and India. The customer list includes large
enterprise Finance and Insurance companies across Latin America. The company's
product portfolio has evolved rapidly and now includes enterprise ready
solutions for payment processing, mobile wallets, micro lending solutions and
digital transformation.
Rohuma, LLC
On January 22, 2021, the Company entered into a Share Exchange Agreement with
Rohuma, LLC, a Delaware limited liability company ("Rohuma") and its members,
whereby the Rohuma members agreed to exchange all of their respective membership
interests in Rohuma in exchange for 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 effective March 31, 2022, determined that the
second tranche of shares (133,024) met the criteria to be issued, and the value
of $851,353 was reclassified from contingent consideration to stockholders'
equity. Rohuma has an Indian affiliate that is owned 99% by Rohuma and 1% by its
founding member. Rohuma controls this entity and the 1% ownership by the member
is now less than 1% upon acquisition by the Company. This amount is reflected as
a non-controlling interest.
Rohuma dba Kringle.ai is a California based software solutions company that
enables digital and mobile commerce by providing enterprise class applications
that cover loyalty and rewards products, payments, online ordering, distribution
logistics for retail and more. Kringle analyzes customers' omni-channel
behaviors and transactions. Using AI for digital commerce, Kringle is able to
deliver real time, automated 1:1 recommendations and personalized content across
all customer touch points.
37
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 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
effective 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 operates the Mimo delivery and task service in India. This service runs
on the TraQSuite platform. Mimo has 14,000+ independent contractors across India
performing deliveries and fulfilling tasks for the largest corporations in the
country. Our team at Mimo uses a sophisticated technology platform and a
smartphone app to get their tasks completed. This is coupled with a verification
and billing system that allows customers of all sizes to leverage this
distribution infrastructure.
Mimo offers a broad set of services. These offerings can be classified into
three broad categories:
? Data collection and client verification (surveys, verification, on-boarding),
? Cash management & handling services, and
? Distribution and demand generation (order fulfilment, demand generation,
delivery services for e-commerce companies)
Mimo assists the delivery and pickup segment of the banking and insurance
industry by performing verifications, field investigations for loan requests,
business verifications and employment verification, and also collects documents,
assists in filling forms for banks, and completes data collection from
customers.
Mimo works with microfinance institutions to collect cash, such as loan
payments, convert cash to digital means like debit cards, and conduct data
collection and surveys.
For consumer goods companies, Mimo does promotional marketing, Last mile
(hyper-local) delivery, merchant onboarding or activation, store audits, and
route optimization for delivery. Mimo provides efficient end-to-end
transshipment logistics. The framework manages and optimizes last-mile delivery
& e-commerce logistics across the entire distribution chain with transparency
and seamless integration.
Mimo is currently in the planning stages to provide food, alcohol & medicine
deliveries as well.
During the COVID-19 pandemic, Mimo leveraged video as a platform for
verification and document delivery. Now, the task workers include people who are
in the field on bikes and trucks, people on a video screen, as well as people on
the phone.
There are also data digitization tasks being done by Mimo task workers across
the country. In a country like India where there are over 20 languages and
multiple dialects, the task workers convert paper documents into electronic form
in the same language or translate them into another language.
Mimo provides delivery and task worker solutions across India. Mimo works with
Banking, Financial, Logistics and Distribution companies, to take their products
and services to semi-urban and rural India. Mimo trains the agents in each
Product or Service through an online and classroom training platform. The
company powers the gig economy task workers throughout the country and provides
a very valuable source of employment for young people who may or may not have a
high school diploma.
38
Going Concern
The Company has an accumulated deficit of $12,455,033 as of September 30, 2022
and a working capital deficit of $11,362,830, as of September 30, 2022, and a
working capital deficit of $9,844,269 as of December 31, 2021. As a result of
these factors, management has determined that there is substantial doubt about
the Company ability to continue as a going concern.
These consolidated financial statements of the Company have been prepared
assuming that the Company will continue as a going concern, which contemplates,
among other things, the realization of assets and the satisfaction of
liabilities in the normal course of business over a reasonable period. The
consolidated financial statements of the Company do not include any adjustments
that may result from the outcome of the uncertainties.
The Company has recently filed a Registration Statement on Form S-1 and engaged
an investment banker to undertake an offering of approximately $15,000,000. The
investment banker has assisted the Company in raising a bridge round of debt
financing in the amount of $1,200,000, which is net of original issue discount
of $240,000. Management intends to use the funds received from the capital raise
to grow both organically and inorganically by pursuing potential synergistic
companies as well as invest in technology and human capital for their existing
operations. The Company's ability to close on this potential offering to raise
additional capital is unknown. Obtaining additional financing, including
approximately $1,594,000 in the nine months ended September 30, 2022, and the
successful development of the Company's contemplated plan of operations,
ultimately, to profitable operations, are necessary for the Company to continue
operations.
Results of Operations
Results of Operations and Financial Condition for the Nine Months Ended
September 30, 2022 as Compared to the Nine Months Ended September 30, 2021
Revenues
For the nine months ended September 30, 2022 compared to September 30, 2021, the
Company's revenues decreased by $923,361, or 44%, from $2,109,087 in 2021 to
$1,185,726 in 2022. The decrease is the result of the sale of goods in TraQ
Solutions from 2021 to 2022 as well as the reduction of contracts in Rohuma and
Mimo.
Cost of Revenues
For the nine months ended September 30, 2022 compared to September 30, 2021, the
Company's cost of revenues decreased by $568,998, or 34%, from $1,664,570 in
2021 to $1,095,572 in 2022. The decrease is the result of the purchase of goods
in TraQ Solutions, offset by increased direct costs on some of the Mimo and
Rohuma contracts which lead to lower profitability in these new engagements.
Operating Expenses
For the nine months ended September 30, 2022 compared to September 30, 2021, the
Company's salary and salary related costs increased by $37,671, or 8%, from
$492,362 in 2021 to $530,033 in 2022 due to 2022 having a full nine months with
Rohuma and Mimo as compared to 2021 when there was not a full nine months as
those entities were acquired in 2021.
For the nine months ended September 30, 2022 compared to September 30, 2021, the
Company's professional fees decreased by $282,286, or 48%, from $585,422 in 2021
to $303,136 in 2022. Our professional fees decreased in 2022 compared to 2021
due to the acquisitions of Rohuma and Mimo where the Company incurred legal and
auditing costs for these companies for SEC reporting purposes.
For the nine months ended September 30, 2022 compared to September 30, 2021, the
Company's rent expense increased by $7,954, or 34%, from $23,521 in 2021 to
$31,475 in 2022 due to the renewal of a lease in 2022.
For the nine months ended September 30, 2022 compared to September 30, 2021, the
Company's depreciation and amortization expense increased $32,057, or 59%, from
$54,490 in 2021 to $86,547 in 2022. The increase was the result of the
depreciation and amortization expense on the fixed and intangible assets
acquired in the Rohuma and Mimo acquisitions.
39
For the nine months ended September 30, 2022 compared to September 30, 2021, the
Company's general and administrative expenses decreased by $2,537,536, or 88%,
from $2,893,036 in 2021 to $355,500 in 2022 primarily due to the cutbacks in
travel and stock based compensation expenses.
Interest Expense
For the nine months ended September 30, 2022 compared to September 30, 2021, the
Company's interest expense increased by $667,184, or 106%, from $627,720 in 2021
to $1,294,904 in 2022 due to higher levels of debt in 2022 mostly related to
related-party debt, and the Evergreen notes as well as the amortization of
discounts on the debt instruments.
Changes in Fair Value of Derivative Liabilities
For the nine months ended September 30, 2022 compared to September 30, 2021, the
Company's change in the fair value of the derivative liability increased by
$179,565, or 21%, from a loss of $850,221 in 2021 to $670,656 in 2022 due to the
changes in the share price over the period September 30, 2022 compared to
September 30, 2021.
Net Loss
For the nine months ended September 30, 2022 compared to September 30, 2021, the
Company's net loss decreased by $1,777,250, from $(5,283,413) in 2021 to
$(3,506,163) in 2022 due to the changes noted herein.
Results of Operations and Financial Condition for the Three Months Ended
September 30, 2022 as Compared to the Three Months Ended September 30, 2021
Revenues
For the three months ended September 30, 2022 compared to September 30, 2021,
the Company's revenues decreased by $359,968, or 46%, from $789,699 in 2021 to
$429,731 in 2022. The decrease is the result of the sale of goods in TraQ
Solutions from 2021 to 2022 as well as the reduction of contracts in Rohuma and
Mimo.
Cost of Revenues
For the three months ended September 30, 2022 compared to September 30, 2021,
the Company's cost of revenues decreased by $302,991, or 46%, from $652,542 in
2021 to $349,551 in 2022. The decrease is the result of the purchase of goods in
TraQ Solutions, offset by increased direct costs on some of the Mimo and Rohuma
contracts which lead to lower profitability in these new engagements.
Operating Expenses
For the three months ended September 30, 2022 compared to September 30, 2021,
the Company's salary and salary related costs slightly decreased by $12,352, or
7%, from $183,349 in 2021 to $170,997 in 2022.
For the three months ended September 30, 2022 compared to September 30, 2021,
the Company's professional fees decreased by $203,644, or 68%, from $298,134 in
2021 to $94,490 in 2022. Our professional fees decreased in 2022 compared to
2021 due to the acquisitions of Rohuma and Mimo where the Company incurred legal
and auditing costs for these companies for SEC reporting purposes.
40
For the three months ended September 30, 2022 compared to September 30, 2021,
the Company's rent expense increased by $6,967, or 87%, from $8,010 in 2021 to
$14,977 in 2022 due to the renewal of a lease in 2022.
For the three months ended September 30, 2022 compared to September 30, 2021,
the Company's depreciation and amortization expense increased $19,572, or 112%,
from $17,471 in 2021 to $37,043 in 2022. The increase was the result of the
depreciation and amortization expense on the fixed and intangible assets
acquired in the Rohuma and Mimo acquisitions.
For the three months ended September 30, 2022 compared to September 30, 2021,
the Company's general and administrative expenses decreased by $1,240,473, or
91%, from $1,365,067 in 2021 to $124,594 in 2022 primarily due to the cutbacks
in travel and stock based compensation expenses.
Interest Expense
For the three months ended September 30, 2022 compared to September 30, 2021,
the Company's interest expense increased by $51,930, or 20%, from $264,542 in
2021 to $316,472 in 2022 due to higher levels of debt in 2022 mostly related to
related-party debt, and the Evergreen notes as well as the amortization of
discounts on the debt instruments.
Changes in Fair Value of Derivative Liabilities
For the three months ended September 30, 2022 compared to September 30, 2021,
the Company's change in the fair value of the derivative liability increased by
$838,695, or 242%, from a gain of $345,911 in 2021 to a loss of $492,784 in 2022
due to the changes in the share price over the period September 30, 2022
compared to September 30, 2021.
Net Loss
For the three months ended September 30, 2022 compared to September 30, 2021,
the Company's net loss decreased by $275,059, from $(1,782,740) in 2021 to
$(1,507,681) in 2022 due to the changes noted herein.
Liquidity and Capital Resources
As of September 30, 2022, current assets were $551,624 and current liabilities
outstanding amounted to $11,914,454 which resulted in a working capital deficit
of $11,362,830. As of December 31, 2021, current assets were $980,747 and
current liabilities outstanding amounted to $10,825,016 which resulted in a
working capital deficit of $9,844,269.
Net cash used in operating activities was $1,737,531 for the nine months ended
September 30, 2021 compared to $1,048,120 in 2022. Cash used in operations for
2022 and 2021 was the primarily related to the loss in operations offset by
increases and decreases in accounts payable and accrued expenses and the changes
in accounts receivable due to the lack of adequate cash flow of the Company as
well as non-cash charges related to stock-based compensation and the changes in
the derivative liabilities.
The only investing activities for the nine months ended September 30, 2022 and
2021, related to the acquisitions of fixed assets related to the Company's
Indian subsidiaries, as well as in 2021 the amount of cash received (paid) in
the acquisitions of Rohuma and Mimo Technologies.
Net cash provided by financing activities for the nine months ended September
30, 2021 consisted of proceeds from the issuance of common stock of $494,500 and
convertible notes of $1,115,000, along with proceeds received from related party
notes of $1,449,394 and $50,331 in proceeds from long-term debt. The Company
repaid $781,326 in related party notes, $80,000 in convertible notes and
$153,706 in long-term debt during the nine months ended September 30, 2021.
During the nine months ended September 30, 2022 the financing activities
consisted of proceeds from long-term debt of $753,750, convertible notes of
$130,000, and related party notes of $609,997, off set by payments on long-term
debt of $270,135 and payments of related party notes of $193,672. In addition,
for the nine months ended September 30, 2022 and 2021 there were increases in
the cash overdraft of $27,902 and $45,258, respectively.
Off-Balance Sheet Arrangements
We have no off-balance sheet financing arrangements.
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