| BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of Presentation The
accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”) and the regulations of the United States Securities and Exchange Commission.
The condensed consolidated financial statements and accompanying notes are the representations of the Company’s management, who
are responsible for their integrity and objectivity. In their opinion, such financial information includes all adjustments considered
necessary for a fair presentation at such date and the operating results and cash flows for such periods. These
condensed consolidated financial statements should be read in conjunction with a reading of the Company’s consolidated financial
statements and notes thereto included in Form 10-K filed with the SEC on March 31, 2022. Interim results of operations for the nine months
ended September 30, 2022 are not necessarily indicative of future results for the full year. Consolidation The
consolidated financial statements include the accounts of TraQiQ, Inc. and its wholly-owned subsidiaries. All intercompany balances and
transactions have been eliminated in consolidation. The
Company applies the guidance of Topic 810 Consolidation Pursuant
to ASC paragraph 810-10-15-8, the usual condition for a controlling financial interest is ownership of a majority voting interest, and,
therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting
shares of another entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of
ownership, for example, by contract, lease, agreement with other stockholders, or by court decree. Noncontrolling
Interests In
accordance with ASC 810-10-45 Noncontrolling Interests in Consolidated Financial Statements, Use
of Estimates The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting periods. These estimates include, but are not limited to, management’s
estimate of provisions required for non-collectible accounts receivable, depreciative lives of our assets, determination of technological
feasibility, and valuation allowances of our deferred tax assets. Actual results could differ from those estimates. Foreign
Currency Transactions The
Company accounts for foreign currency transactions in accordance with ASC 830, “Foreign Currency Matters” (“ASC 830”),
specifically the guidance in subsection ASC 830-20, “Foreign Currency Transactions”. The U.S. dollar is the functional and
reporting currency for the Company and its subsidiaries other than TRAQ Pvt Ltd. whose functional currency is the Indian Rupee. Pursuant
to ASC 830, monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at exchange rates in effect
at the balance sheet date, with the resulting gains or losses upon settlement reported in foreign exchange gain (loss) in the computation
of net income (loss). Gains or losses resulting from translation adjustments are reported under accumulated other comprehensive income
(loss). Reclassification Certain
prior period amounts have been reclassified to conform with current period presentation with no effect on the Company’s net loss,
total assets, liabilities equity or cash flows. Cash
and Cash Equivalents Cash
and cash equivalents include cash on hand and on deposit at banking institutions as well as all highly liquid short-term investments
with original maturities of 90 days or less of $ 63,343 56,329 Restricted
Cash The
Company’s restricted cash balance consists of time deposits with financial institutions which are valued at cost and approximate
fair value. Interest earned on these deposits in included in interest income. The carrying value of our restricted cash at September
30, 2022 and December 31, 2021 was $ 104,228 114,199 Accounts
Receivable and Concentration of Credit Risk The
Company considers accounts receivable, net of allowance for returns and doubtful accounts, to be fully collectible. The allowance is
based on management’s estimate of the overall collectability of accounts receivable, considering historical losses and economic
conditions. Based on these same factors, individual accounts are charged off against the allowance when management determines those individual
accounts are uncollectible. Credit
extended to customers is generally uncollateralized. Past-due status is based on contractual terms. Management has determined that an
allowance of $ 262,962 193,535 Property
and Equipment and Long-Lived Assets Fixed
assets are stated at cost. Depreciation on fixed assets are computed using the straight-line method over the estimated useful lives of
the assets, which range from three ten years FASB
Codification Topic 360 “Property, Plant and Equipment” (ASC 360), requires that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The application of ASC 360 has not materially affected the Company’s reported earnings,
financial condition or cash flows. Intangible
assets with definite useful lives are stated at cost less accumulated amortization. Intangible assets represent purchased intangible
assets of TRAQ Pvt Ltd., and Mimo which includes customer relationships and trademarks. The Company amortizes these intangible assets
on a straight-line basis over their estimated useful lives of up to 15 The
Company has adopted Accounting Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying
the Test for Goodwill Impairment 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 Capitalized
Software Costs In
accordance with the relevant FASB accounting guidance regarding the development of software to be sold, leased, or marketed, the Company
expenses such costs as they are incurred until technological feasibility has been established, at and after which time these costs are
capitalized until the product is available for general release to customers. Once the technological feasibility is established per ASC
985-20, the Company capitalizes costs associated with the acquisition or development of major software for internal and external use
in the balance sheet. Costs
incurred to enhance the Company’s software products, after general market release of the services using the products, is expensed
in the period they are incurred. The
Company only capitalizes subsequent additions, modifications or upgrades to internally developed software to the extent that such changes
allow the software to perform a task it previously did not perform. The Company expenses software maintenance and training costs as incurred. Revenue
Recognition In
May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), specifically ASC 606-10-50-12. This standard
provides a single set of guidelines for revenue recognition to be used across all industries and requires additional disclosures. The
updated guidance introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer
of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services. The Company adopted the updated guidance effective January 1, 2018 using the full retrospective method,
however the new standard did not have a material impact on its consolidated financial position and consolidated results of operations,
as it did not change the manner or timing of recognizing revenue. Professional
Service Revenue TRAQ
Pvt Ltd. derives a large part of its revenues from professional and support services, which includes revenue generated from software
development projects and associated fees for consulting, implementation, training, and project management provided to customers using
their systems. Revenue from arrangements with customers is recognized based on the Company’s satisfaction of distinct performance
obligations identified in each agreement, generally at a point in time as discussed in ASC 606. In instances where multiple performance
obligations are identified, the Company allocates the transaction price to each performance obligation based on relative selling prices
of each distinct product or service, and recognizes revenue related to each performance obligation at the points in time that each performance
obligation is satisfied. The Company’s performance obligation includes providing customization of software’s, selling of
licenses, where the Company typically satisfies its performance obligations prior to the submission of invoices to the customer for such
services. The Company’s performance obligation for consulting and technical support is delivered on as the work is being performed,
which is satisfied prior to invoicing. The
Company generally collects payment within 30 to 60 days of completion of the performance obligation and there are no agency relationships. Software
development arrangements involving significant customization, modification or production are accounted for in accordance with the appropriate
technical accounting guidance issued by the FASB using the percentage-of- completion method. The Company recognizes revenue using periodic
reported actual hours worked as a percentage of total expected hours required to complete the project arrangement and applies the percentage
to the total arrangement fee. Unbilled
revenue represents earnings in excess of billings as at the end of the reporting period. Sales taxes collected from customers and remitted
to governmental authorities are accounted for on a net basis and therefore are excluded from revenues in the statements of operations. TRAQ
Pvt Ltd. has deferred the revenue and costs attributable to certain process transition activities with respect to its customers where
such activities do not represent the culmination of a separate earnings process. Such revenue and costs are subsequently recognized ratably
over the period in which the related services are performed. Further, the deferred costs are limited to the amount of the deferred revenues. TRAQ
Pvt Ltd. has now started offering an integrated solution for supply chain and last mile. This product called “TraQSuite”
is now offered in multiple markets as a cloud-based subscription offering. This is a significant improvement from the earlier professional
services business. Software
Solution Revenue Revenue
from arrangements with customers is recognized based on the Company’s satisfaction of distinct performance obligations identified
in each agreement, generally at a point in time as discussed in ASC 606. In instances where multiple performance obligations are identified,
the Company allocates the transaction price to each performance obligation based on relative selling prices of each distinct product
or service, and recognizes revenue related to each performance obligation at the points in time that each performance obligation is satisfied.
The Company’s performance obligation includes providing connectivity to software, generally through a monthly subscription, where
the Company typically satisfies its performance obligations prior to the submission of invoices to the customer for such services. The
Company’s performance obligation for hardware components that are purchased by the customer in connection with the solution is
delivery of the purchased device, which is satisfied prior to invoicing. The Company provides a twelve-month warranty on their hardware.
All units deployed by the Company are past the twelve-month period, thus the Company has not accrued for a warranty liability. The Company
generally collects payment within 30 to 60 days of completion of the performance obligation and there are no agency relationships. TraQSuite
is a cloud based software platform with a revenue model based on initial and transaction-based licensing fees as well as consulting fees.
Licensees pay an initial per-module fee that varies depending on the number of modules that are licensed. This fee is typically $ 10,000 75 5 1 Revenue
From Sales of Goods Revenue
from arrangements with customers is recognized based on the Company’s satisfaction of distinct performance obligations identified
in each agreement, generally at a point in time as discussed in ASC 606. The performance obligations are satisfied upon shipment of the
merchandise being sold. The
following is a summary of revenue for the nine months ended September 30, 2022 and 2021, disaggregated by type: SUMMARY OF DISAGGREGATION OF REVENUE
2022 2021
Professional Services Revenue $ 1,027,046 $ 921,343
Sale of goods 28,805 787,150
Software Solution Revenue 129,875 400,594
$ 1,185,726 $ 2,109,087 Costs
of Services Provided Costs
of services provided consist of purchase of goods, data processing costs, customer support costs including personnel costs to maintain
the Company’s proprietary databases, costs to provide customer call center support, hardware and software expense associated with
transaction processing systems and exchanges, telecommunication and computer network expense, and occupancy costs associated with facilities
where these functions are performed. Depreciation expense is not included in costs of services provided. Lease
Obligations The
Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”)
assets, current portion of operating lease liabilities and operating lease liabilities, less current portion in the Company’s consolidated
balance sheets. ROU
assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s
obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date
based on the present value of lease payments over the lease term. For leases in which the rate implicit in the lease is not readily determinable,
the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value
of lease payments. Lease
terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease
expense for operating lease arrangements is recognized on a straight-line basis over the lease term. The Company has lease agreements
with lease and non-lease components, which are accounted for separately. Income
Taxes Income
taxes are accounted under the asset and liability method. The current charge for income tax expense is calculated in accordance with
the relevant tax regulations applicable to entity. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Deferred tax assets are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion
or all of the deferred tax assets will not be realized. Uncertain
Tax Positions The
Company follows ASC 740-10, “Accounting for Uncertainty in Income Taxes”. This requires recognition and measurement of uncertain
income tax positions using a “more-likely-than-not” approach. Management evaluates their tax positions on an annual basis. TraQiQ,
Inc.and TraQiQ Solutions, Inc, file a consolidated income tax return and Rohuma US files a separate tax return in the U.S. federal tax
jurisdiction and various state tax jurisdictions. TRAQ Pvt Ltd. as well as Mimo and Rohuma India file separate individual income tax
returns in the India tax jurisdictions. The U.S. federal and state income tax returns of the Company are subject to examination by the
IRS and state taxing authorities, generally for three years after they were filed. The India tax returns of are subject to examination
by the India Income Tax Department and India state taxing authority, generally for 12 months after the relevant tax year, 24 months after
the relevant tax year in case transfer pricing provisions are applicable. Fair
Value of Financial Instruments ASC
825, “ Financial Instruments Fair
Value Measurements ASC
820 “ Fair Value Measurements The
following provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into
Levels 1 to 3 based on the degree to which fair value is observable: Level
1- fair value measurements are those derived from quoted prices (unadjusted in active markets for identical assets or liabilities); Level
2- fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level
3- fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based
on observable market data (unobservable inputs). Financial
instruments classified as Level 1 - quoted prices in active markets include cash. These
consolidated financial instruments are measured using management’s best estimate of fair value, where the inputs into the determination
of fair value require significant management judgment to estimation. Valuations based on unobservable inputs are highly subjective and
require significant judgments. Changes in such judgments could have a material impact on fair value estimates. In
addition, since estimates are as of a specific point in time, they are susceptible to material near-term changes. Changes in economic
conditions may also dramatically affect the estimated fair values. Fair
value estimates discussed herein are based upon certain market assumptions and pertinent information available to management for the
respective periods. The respective carrying value of certain financial instruments approximated their fair values due to the short-term
nature of these instruments. These financial instruments include cash, investments, short-term notes payable, accounts payable and accrued
expenses. Derivative
Financial Instruments Derivatives
are recorded on the consolidated balance sheet at fair value. The conversion features of the convertible instruments are embedded derivatives
and are separately valued and accounted for on the consolidated balance sheet with changes in fair value recognized during the period
of change as a separate component of other income/expense. Fair values for exchange-traded securities and derivatives are based on quoted
market prices. Valuations derived from various models are subject to ongoing internal and external verification and review. Model used
incorporate market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involves management’s
judgment and may impact net income (loss). With
the issuance of the July 2017 FASB ASU 2017-11, “Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic
480) Derivatives and Hedging (Topic 815),” 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 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 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 For
entities that present EPS in accordance with Topic 260, and when the down round feature is included in an equity-classified freestanding
financial instrument, the value of the effect of the down round feature is treated as a dividend when it is triggered and as a numerator
adjustment in the basic EPS calculation. This reflects the occurrence of an economic transfer of value to the holder of the instrument,
while alleviating the complexity and income statement volatility associated with fair value measurement on an ongoing basis. Convertible
instruments are unaffected by the Topic 260 amendments in this Update. Those
amendments in Part I of this Update are a cost savings relative to current GAAP. This is because, assuming the required criteria for
equity classification in Subtopic 815-40 are met, an entity that issued such an instrument no longer measures the instrument at fair
value at each reporting period (in the case of warrants) or separately accounts for a bifurcated derivative (in the case of convertible
instruments) on the basis of the existence of a down round feature. For convertible instruments with embedded conversion options that
have down round features, applying specialized guidance such as the model for contingent beneficial conversion features rather than bifurcating
an embedded derivative also reduces cost and complexity. Under that specialized guidance, the issuer recognizes the intrinsic value of
the feature only when the feature becomes beneficial instead of bifurcating the conversion option and measuring it at fair value each
reporting period. The
amendments in Part II of this Update replace the indefinite deferral of certain guidance in Topic 480 with a scope exception. This has
the benefit of improving the readability of the Codification and reducing the complexity associated with navigating the guidance in Topic
480. For
public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an
entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that
includes that interim period. The amendments in Part 1 of this Update should be applied in either of the following ways:
1. retrospectively to outstanding
financial instruments with a down round feature by means of a cumulative-effect adjustment to the statement of financial position
as of the beginning of the first fiscal year and interim period(s) in which the pending content that links to this paragraph is effective;
or
2. retrospectively to outstanding
financial instruments with a down round feature for each prior reporting period presented in accordance with the guidance on accounting
changes in paragraphs 250-10-45-5 through 45-10. The
amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting effect. Earnings
(Loss) Per Share of Common Stock Basic
net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share
(EPS) include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable pursuant
to the exercise of stock options and warrants. Common stock equivalents are not included in the computation of diluted earnings per share
when the Company reports a loss because to do so would be anti-dilutive for periods presented. Related
Party Transactions Parties
are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled
by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management,
members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company
may deal where one-party controls or can significantly influence the management or operating policies of the other to an extent that
one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party
transactions. All transactions shall be recorded at fair value of the goods or services exchanged. Property purchased from a related
party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected
as compensation or distribution to related parties depending on the transaction. Retirement
Benefits to Employees Defined
Contribution Plan In
India, the employees receive benefits from a provident fund, where the employer and employees each make monthly contributions to the
plan at a pre-determined rate to the Regional Provident Fund Commissioner. Employer’s contributions to the fund is charged as an
expense in the Statements of Operations. Defined
Benefit Plan In
accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, our Indian entities provide for a lump sum payment
to eligible employees, at retirement or termination of employment based on the last drawn salary and years of employment with the Company.
Current service costs for defined benefit plans are accrued in the period to which they relate. The liability in respect of defined benefit
plans is calculated annually by the Indian entities. The Indian entities record annual amounts relating to their defined benefit plans
based on calculations that incorporate various actuarial and other assumptions, including discount rates, mortality, assumed rates of
return, compensation increases and turnover rates. The Indian entities reserves its assumptions on an annual basis and makes modifications
to the assumptions based on current rates and trends when it is appropriate to do so. The Indian entities obligation in respect of the
gratuity plan, which is a defined benefit plan, is provided for based on actuarial valuation. Other
Long-Term Employee Benefits The
Indian entities net obligation in respect of leave encashment is the amount of future benefit that employees have earned in return for
their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any
related assets is deducted. The discount rate is based on the prevailing market yields of Indian government securities at the reporting
date that have maturity dates approximating the terms of the Indian entities obligations. The calculation is performed using the projected
unit credit method. Any actuarial gains or losses are recognized. Investments The
Company’s investments are in debt and equity instruments. These investments are accounted for in accordance with ASC 320 Investments
– Debt Securities and ASC 321 Investments – Equity Securities. Interest earned under such investments are included in interest
income. Segment
Reporting For
purposes of segment disclosures, two or more operating segments should be grouped only if the segments meet all the requirements of paragraph
280-10-50-11, including the requirements for similar economic characteristics. As
a result, all operating units perform similar services, and approximately 99% of the Company’s revenue is generated from its Indian
subsidiary. The Company believes that no segment reporting is required as all remaining operations outside of the Indian subsidiary is
immaterial. Recently
Issued Accounting Standards There
were updates recently issued, most of which represent technical corrections to the accounting literature or application to specific industries
or transactions that are not expected to have a material impact on the Company’s financial position, results of operations or cash
flows. Going
Concern The
Company has an accumulated deficit of $ 12,455,033 11,362,830 9,844,269 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 fu |
