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 of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 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 controlling 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 $6,866,913 on the consolidated statements of operations for the three months ending March 31, 2022.

Use of Estimates

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.

Reclassification

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.

Accounts Receivable and Concentration of Credit Risk

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 no allowance for returns and doubtful accounts was required for the outstanding accounts receivable as of March 31, 2023 and December 31, 2022, respectively.

Intangible assets, net and Long-lived Assets

Intangible assets, net and Long-lived Assets

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 adoption 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 Recoup. The Company amortizes these intangible assets on a straight-line basis over their estimated useful lives, as stated below:.

Intangible and Long-Lived Asset Categories		Estimated Useful Life
Intellectual property		10 Years
Non compete agreement		5 Years
Tradenames		10 Years
Goodwill		Indefinite

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.

Contract Liabilities

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.

Costs of Revenues

Costs of Revenues

Costs of revenues provided consist 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.

Uncertain Tax Positions

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 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 Measurements

Fair Value Measurements

ASC 820 “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosure about fair value measurements.

The following provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which fair value is observable:

Level 1- fair value measurements are those derived from quoted prices (unadjusted in active markets for identical assets or liabilities);

Level 2- fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3- fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Financial instruments classified as Level 1 - quoted prices in active markets include cash.

These consolidated financial instruments are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment to estimation. Valuations based on unobservable inputs are highly subjective and require significant judgments. Changes in such judgments could have a material impact on fair value estimates.

In addition, since estimates are as of a specific point in time, they are susceptible to material near-term changes. Changes in economic conditions may also dramatically affect the estimated fair values.

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management for the respective periods. The respective carrying value of certain financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash, investments, short-term notes payable, accounts payable and accrued expenses.

Earnings (Loss) Per Share of Common Stock

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.

Segment Reporting

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.

Approximately 99% of the Company’s revenue is generated from its Recoup subsidiary. The Company believes that no segment reporting is required as all remaining operations outside of the Recoup subsidiary is immaterial.