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Acquisition of Traq Pvt Ltd

12 Months Ended

Dec. 31, 2019

NOTE 3: ACQUISITION OF TRAQ PVT LTD.

On May 16, 2019, the Company entered into a Share Exchange Agreement with Mann-India Technologies Private Ltd., an Indian Corporation. On January 2, 2020, the name of this company was changed to TRAQIQ Solutions Private Limited. Pursuant to the Share Exchange Agreement with TRAQ Pvt Ltd., the Company acquired 100% of the shares of TRAQ Pvt Ltd. and assumed certain net liabilities) in exchange for warrants exercisable over a five-years to purchase 1,329,272 shares of common stock of the Company valued at $268. The warrants will be exercisable as follows: (i) 100,771 warrants immediately upon closing; (ii) 859,951 warrants exercisable one-year after the date of closing; and (iii) 368,550 warrants exercisable two-years after the date of closing.

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

The Company acquired the assets and liabilities noted below in exchange for the warrants noted herein and accounted for the acquisition in accordance with ASC 805. As a result, total consideration was equal to the value of the warrants of $268, as stated in the agreement, and the Company recognized a gain on bargain purchase in the amount of $417,148. In accordance with ASC 805-20-50-4A, based on the book values which approximate fair values at the effective date of acquisition, the purchase price was recorded as follows:

Cash (including restricted cash of $185,399)	$	185,633
Accounts receivables, net		506,951
Prepaid expenses and other current assets		216,956
Right-of-use asset		576,566
Fixed assets		68,260
Customer relationships		448,800
Tradenames		49,799
Investment		42,248
Other assets		37,950
Accounts payable and accrued expenses		(173,197	)
Accrued payroll and related taxes		(325,629	)
Accrued duties and taxes		(66,765	)
Lease liability		(585,207	)
Deferred revenue		(3,618	)
Cash overdraft		(471,017	)
Debt – related parties		(61,273	)
Debt		(29,041	)
	$	417,416

The customer relationships and tradenames are being amortized over fifteen years.

The difference between the net assets acquired of $417,416, and the consideration paid (in the form of warrants) of $268 represents a bargain purchase gain of $417,148.

Since the acquisition TRAQ Pvt Ltd. has recorded $654,374 in revenues and a loss of $26,983 that are included in consolidated results.

The following table shows pro-forma results for the years December 31, 2019 and December 31, 2018 as if the acquisition had occurred on January 1, 2018. These unaudited pro forma results of operations are based on the historical financial statements and related notes of TRAQ Pvt Ltd. and the Company.

	For the year ended December 31, 2019			For the year ended December 31, 2018
Revenues	$	1,143,606		$	1,236,665
Net income (loss)	$	(166,533	)	$	(726,273	)
Net income (loss) per share	$	(0.01	)	$	(0.03	)