The Company’s Principal Executive
Officer and Principal Financial Officer are providing currently dated certifications in connection with this Form 10-Q/A. These
certifications are filed as Exhibits 31.1, 31.2, 32.1 and 32.2.
Notes
to Consolidated Financial Statements
June 30,
2018
(Unaudited)
1. DESCRIPTION OF BUSINESS
TripBorn, Inc. (“TripBorn”
or the “Company”) is a Last Mile eCommerce aggregator that delivers the products
and services to offline consumers using a service agent network in India through our website, www.tripborn.com.
Currently, we operate as a business to business, or B2B, Last Mile Commerce platform that serves business agents and companies
based in India in providing travel and financial services products for their offline customers offering travel reservations
and related travel services and products to travel agents in India through its proprietary internet-based platform at www.tripborn.com.
Tripborn, Inc. (“Company”) was incorporated under
the law of the state of Delaware in January 2010 office is located at 762 Perthshire Pl, Abingdon, MD 21009. The Company provides
Online Travel Agency (OTA) and related services and selling its services to directly to Business customers. The Company primarily
operates in India. Tripborn, Inc. formerly known as PinstripesNYC, Inc was operating as a shell company with nominal or no assets
or operations until December 14, 2015. Tripborn Inc. was known as PinstripesNYC, Inc. until January 2016.
On December 14, 2015, PinstripesNYC, Inc. (the “Registrant”)
executed and agreement and Plan of Merger (the, “Agreement”) with Sunalpha Green Technologies Private Limited (“Sunalpha”).
Sunalpha registered under the Company Act of 1956, India with principle office located at 812, Venus Atlantis Corporate Park, Near
Prahalad Nagar Garden, Satellite, Ahmedabad, Gujarat, India 380 015.
As a result of the Merger, Sunalpha became a wholly owned subsidiary
of the Registrant (Pinstripes NYC Inc.) now Tripborn Inc. and following the consummation of the Merger and giving effect to the
issuance of 76,804,914 Merger Shares by its principle stockholders.
For accounting purposes, Sunalpha was
deemed to be the accounting acquirer in the transaction and, consequently, the transaction was treated as a recapitalization of
the Company. Accordingly, Sunalpha’s assets, liabilities, and results of operations are the historical consolidated financial
statements of the Company and Company’s assets, liabilities and results of operations are consolidated with Tripborn Inc.
effective as of the date of the Merger. No step-up in basis or intangible assets or goodwill was recorded in this transaction.
The acquisition of all of the outstanding shares of common stock of Sunalpha by TripBorn on December 14, 2015 is being accounted
for as a reverse recapitalization.
2. LIQUIDITY AND GOING CONCERN
The Company has reported net loss of
$259,159, accumulated loss of $3,346,742 and negative cash flow from operations of $340,244 as of and for the quarter ended June
30, 2018.
As of June 30, 2018, we had $805,657
in cash and cash equivalents, compared to $1,155,367 as of March 31, 2018. This $ 349,710 decrease in cash is a result in operating
loss generated during the quarter ended June 30, 2018. As of June 30, 2018, we have stockholders’ deficit of $999,368 compared
to a deficit of $741,656 as of March 31, 2018. Our stockholders’ deficit increased as a result of the increase in our
operating losses during the quarter.
The Company’s operations are
subject to number of factors that can affect it operating results and financial conditions. Such factors include, but not limited
to: the continuous enhancement of the current products and services; marketing its new services; continue to invest in new technologies;
change in domestic and foreign regulations; the price of, and demand for, the company’s products and services and its ability
to raise the capital to support its operations.
3. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The consolidated financial statements
and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").
The consolidated financial statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted
Accounting Principles ("GAAP") of the United States.
Principles of Consolidation
The consolidated financial statements include the accounts and
transactions of the Company and its wholly owned subsidiary, Sunalpha Green Technologies Private Limited. All significant inter-company
accounts and transactions are eliminated in consolidation.
Use of Estimates
The preparation of financial statements
in US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and
footnotes thereto, those estimates, and assumptions affect the reported amounts assets, liabilities and disclosure of contingent
assets and liabilities and revenue. Actual results could differ significantly from those estimates.
Our significant estimates include elements
of revenue recognition, the realization of deferred tax assets, amounts that may be due under the tax sharing agreement, impairment
of long-lived assets, goodwill and indefinite-lived intangible assets, costs to be capitalized as well as the useful life of capitalized
software, and contingent liabilities, including taxes related to hotel occupancy. Actual amounts may differ from these estimates.
The use of different estimates or assumptions in determining the fair value of our goodwill,
indefinite-lived and definite-lived intangible assets may result in different values for these assets, which could result in an
impairment or, in the period in which an impairment is recognized, could result in a materially different impairment charge. The
Company has no impairment charge for the quarter ending June 30, 2018.
Revenue Recognition
The Company provides travel products
and services to leisure and corporate travelers in India and abroad. The revenue from rendering these services is recognized at
the time when significant risk and rewards are transferred to the customer. This is generally the case: 1) on the date of departure
for vacation packages, 2) on the date of check in for hotel booking business and 3) on the date of issuance for the sale of airline
tickets.
Air Ticketing. Revenue
from airline tickets is recognized on net commission basis which includes our nonrefundable surcharges and fees to our service
agents. For certain airline transactions, we also receive fees from global distribution systems
partners that control the computer systems through which these reservations are booked.
Vacation Packages. Revenue
from vacation packages, including revenue on airline tickets sold to customers as a part of vacation packages, is accounted for
on the gross basis as we are determined to be the primary obligor in the arrangement i.e., the risks and responsibilities are taken
by us, including the responsibility for delivery of services.
Rail Ticketing. Revenue
from rail ticket reservations is recognized on net basis which includes our nonrefundable surcharges and fees to our service agents.
We recognized revenue on gross basis for railway service setup fees, which is non-refundable and collected from our service agent
at the time of agent enrollment.
Money Transfer.
To our service agent we provide system connectivity using our internet platform so our service agent can perform Money Transfer
services on behalf of their customers. Our internet platform facilitates connectivity between Bank and Service Agent. We recognized
revenue on the net basis, we collect service charge or fees to our service agent for performing the money transfer services for
their customers. Performance linked incentives from Banks or suppliers are recognized upon achievement of performance obligations
and amount is billed to suppliers.
Other Revenue. Revenue
from other sources, primarily comprising net commission and fees from bus tickets booking fees, visa processing fees, and pre-and
post-paid expenses are recognized after the services are being performed.
Cost of Revenue
Cost of revenue primarily consists
of costs paid to hotel and vacation package suppliers for the acquisition of relevant services and products for sale to customers
and includes the procurement cost of hotel rooms and other services.
Cost of revenue is the amount paid
or accrued against procurement of these services and products from the respective suppliers and do not include any other operating
cost to provide these services or products. Cost of revenue is recognized when incurred, which coincides with the recognition of
the corresponding revenue.
Operating Expenses
Operating expenses include costs such
as advertising and business promotion costs, utilities, rent, payroll and consultants fees and charges, which are recognized on
an accrual basis. Depreciation and amortization costs are amortized over the estimated useful lives of the assets.
Cash and Cash Equivalents
The Company maintains cash balances,
which may exceed federally insured limits. The Company does not believe that this results in any significant credit risk.
Sunalpha has twelve accounts denominated
in Indian Rupees. As of June 30, 2018, and 2017, the cash balance in financial institutions in India was USD $360,210 and $229,520,
respectively. The transactions are undertaken in Indian Rupees and requires a foreign currency translation adjustment. The Company’s
cash deposits in India are not insured against loss. The Company does not believe that this results in any significant credit risk.
Receivables and Credit Policies
Accounts receivable are stated at the
amount’s management expects to collect. An allowance for doubtful accounts is recorded, as a charge to bad debt expense,
where collection is doubtful due to credit issues. These allowances together reflect the Company's estimate of potential losses
inherent in accounts receivable balances, based on historical loss and known factors impacting its customers.
The Company performs periodic analysis of each customer’s
outstanding accounts receivable balance and assesses, on an account-by-account basis, whether the allowance for doubtful accounts
needs to be adjusted based on currently available evidence such as historical collection experience, current economic trends and
changes in customer payment terms. In accordance with the Company’s policy, if collection efforts have been pursued and all
reasonable and contractually available avenues for collections exhausted, accounts receivable would be written off as uncollectible.
The Company does use estimate to use a general reserve methodology when estimating the level of allowance for doubtful accounts
because the Company believes, due to the unique circumstances of each customer and a limited number of customers, a general reserve
methodology would not provide a reasonable estimate of potentially uncollectible accounts.
Property and Equipment
Property and equipment are stated at
cost less accumulated depreciation. Depreciation of property and equipment is computed on a straight-line basis over the estimated
useful lives of the assets. The Company charges repairs and maintenance costs that do not extend the lives of the assets to expense
as incurred.
Intangible Assets
Intangible assets with definite useful
lives are tested for impairment at least annually for their recoverability. We do not have any intangible assets with indefinite
lives. Intangible assets that have limited useful lives are amortized on a straight-line basis over their useful lives.
Impairment of Long-lived Assets
The Company records an impairment of
long-lived assets used in operations, when events or circumstances indicate that the asset might be impaired and the estimated
undiscounted cash flows to be generated by those assets over their remaining lives are less than the carrying amount of those items.
The net carrying value of assets not recoverable is reduced to fair value, which is typically calculated using the discounted cash
flow method.
Foreign Currency Translation
The Company translates the foreign
currency of its foreign subsidiary, whose functional currency is Indian rupee, into US Dollars, the reporting currency using the
year or reporting period end or average exchange rates in accordance with the requirements of ASC subtopic 830, Foreign Currency
Matters (“ASC 830”). Assets and liabilities are translated at exchange rates as of the balance sheet date.
Revenues and expenses are translated at average rates in effect for the periods presented. The cumulative translation adjustment
is included in the accumulated other comprehensive gain (loss) within shareholders’ equity (deficit).
The value of INR against US$ and other
currencies may fluctuate and is affected by, among other things, changes in India’s political and economic conditions. Any
significant revaluation of INR may materially affect the Company’s financial condition in terms of US$ reporting. The following
table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report:
|
|
June 30, 2018
|
June 30, 2017
|
|
Period-end spot rate
|
US$1=INR 68.7100
|
US$1=INR 64.6112
|
|
Average rate
|
US$1=INR 66.9200
|
US$1=INR 64.7509
|
Earnings and Loss per Share
Basic earnings (loss) per share is computed
by dividing net income (loss) attributable to common stockholders by the weighted average common shares outstanding for the period.
Potentially dilutive common shares may consist of incremental shares issuable upon the exercise of stock options and warrants and
the conversion of notes payable to common stock. In periods in which a net loss has been incurred, all potentially dilutive common
shares are considered anti-dilutive and thus are excluded from the calculation.
Promotion and Advertising Expense
We incur advertising expense consisting
of offline costs, including newspaper and media advertising, and online advertising expense to promote our brands. We expense the
production costs associated with advertisements in the period in which the advertisement first takes place. We expense the costs
of communicating the advertisement (e.g., newspaper, SMS or email campaign) as incurred each time the advertisement or promotion
is performed.
Stock-Based Compensation
The Company accounts for stock-based awards
to employees and consultants in accordance with applicable accounting principles, which requires compensation expense related to
share-based transactions, including employee stock options, to be measured and recognized in the financial statements based on
a determination of the fair value of the stock options over the instruments vesting period. Options awarded to purchase shares
of common stock issued to non-employees do not need to be remeasured as per ASU 2018-07 principles.
Leases
Leases of assets where the Company has
assumed substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are recognized at
the lower of the fair value of the leased assets and the present value of the minimum lease payments.
Income Taxes
The Company accounts for income taxes under
the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements. Under this method, the Company has determined the deferred
tax assets and liabilities based on the differences between the financial statement and tax basis of assets and liabilities by
using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax
rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes deferred tax assets
to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company
considers all available evidence, including future reversals of existing taxable temporary differences, projected future taxable
income, tax-planning strategies, and results of operations. If the Company determines that it would be able to realize our deferred
tax assets in the future in excess of their net recorded amount, it would make an adjustment to the deferred tax asset valuation
allowance, which would reduce the provision for income taxes.
The Company records uncertain tax positions
in accordance with ASC 740 on the basis of a two-step process in which (1) it determines whether it is more likely than not that
the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet
the more-likely-than-not recognition threshold, it recognizes the amount of tax benefit that is more than 50 percent likely
to be realized upon ultimate settlement with the related tax authority.
Recent Accounting Pronouncements
New Accounting Pronouncements Recently Adopted
In July 2015, the Financial Accounting Standards Board (“FASB”)
issued ASU No. 2015-11, “Simplifying the Measurement of Inventory”. ASU No. 2015-11 changes the measurement principle
for inventory from the lower of cost or market to lower of cost and net realizable value. Net realizable value is defined as the
estimated selling prices in the ordinary course of business; less reasonably predictable costs of completion, disposal and transportation.
For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including
interim reporting periods within those fiscal years. The Company adopted this guidance in the first quarter of its fiscal year
ended March 31, 2018 using a prospective application. The adoption of this guidance did not have a material impact on the Company’s
consolidated financial statements and related disclosures.
In March 2016, the FASB issued ASU 2016-09, “Compensation—Stock
Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This update addresses several aspects
of the accounting for share-based compensation transactions including: (a) income tax consequences when awards vest or are settled,
(b) classification of awards as either equity or liabilities, (c) a policy election to account for forfeitures as they occur rather
than on an estimated basis and (d) classification of excess tax impacts on the statement of cash flows. The Company adopted this
guidance in the first quarter of its fiscal year ended March 31, 2018, which did not have a material impact on the consolidated
financial statements and related disclosures. The amendments requiring recognition of excess tax benefits and tax deficiencies
in the income statement will be applied prospectively. The Company does not expect the impact to be material to the consolidated
results of operations; however, such determination is subject to change based on facts and circumstances at the time when awards
vest or settle.
We adopted Revenue Recognition
- Revenue from Contracts with Customers (ASU 2014-09) for the fiscal year ended March 31, 2018, which amends the guidance
in former ASC 605, Revenue Recognition and found no significant impact on the revenue recognition.
New Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued ASU No. 2016-02, "Leases”
to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance
sheet with a corresponding liability and disclosing key information about leasing arrangements. For public business entities, the
amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim reporting periods within
those fiscal years. For all other entities, the amendments in this ASU are effective for fiscal years beginning after December
15, 2019, and interim reporting periods within fiscal years beginning after December 15, 2019. Early adoption is permitted. The
Company is evaluating the impact of the adoption of this revised guidance on its consolidated financial statements and related
disclosures.
In October 2016, the FASB issued ASU No. 2016-16, “Income
Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory”, which requires the recognition of the income tax
consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. For public business entities,
the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017, including interim reporting
periods within those annual reporting periods. Early adoption is permitted. The amendments in this ASU should be adopted on a modified
retrospective basis. The Company reviewing adoption and its impact of this guidance on its consolidated financial statements and
related disclosures.
In October 2016, the FASB issued ASU No. 2016-17, “Consolidation
(Topic 810): Interests Held through Related Parties That Are under Common Control”. The amendments affect reporting entities
that are required to evaluate whether they should consolidate a variable interest entity in certain situations involving entities
under common control. Specifically, the amendments change the evaluation of whether a reporting entity is the primary beneficiary
of a variable interest entity by changing how a reporting entity that is a single decision maker of a variable interest entity
treats indirect interests in the entity held through related parties that are under common control with the reporting entity. As
of fiscal year, ending March 31, 2018 and 2017 we have no variable interest entity under common control with the reporting entity.
In January 2017, the FASB issued ASU
2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business
to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.
In January 2017, the FASB issued ASU 2017-04,
"Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment". The update simplifies how
an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures
a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carrying amount. The new
rules will be effective for the Company in the first quarter of 2021. Early adoption is permitted. The Company is currently evaluating
the impact of adopting this ASU on its consolidated financial statements.
No other recent accounting pronouncements
were issued by FASB and the SEC that are believed by management to have a material impact on the Company's present or future consolidated
financial statements.
4. PROPERTY AND EQUIPMENT,
NET
Property and Equipment consists of
the following as of June 30 and March 31, 2018. The property and equipment listed below are recorded in the books of Sunalpha.
|
|
|
June 30, 2018
|
|
|
March 31, 2018
|
|
|
Computer
|
|
$
|
13,443
|
|
|
$
|
13,443
|
|
|
Furniture and Fixture
|
|
|
5,864
|
|
|
|
5,467
|
|
|
Office Equipment
|
|
|
6,352
|
|
|
|
6,352
|
|
|
Software License
|
|
|
768
|
|
|
|
768
|
|
|
Total
|
|
|
26,427
|
|
|
|
26,030
|
|
|
Accumulated depreciation
|
|
|
(17,101
|
)
|
|
|
(16,134
|
)
|
|
Fixed assets, net
|
|
$
|
9,326
|
|
|
$
|
9,896
|
|
Depreciation expense for the quarters
ended June 30, 2018 and 2017 is $966 and $1,604 respectively.
5. INTANGIBLE ASSETS WITH DEFINITE
LIVES
Intangible assets consist of the following
as of June 30 and March 31, 2018:
|
|
|
June 30, 2018
|
|
|
March 31, 2018
|
|
|
API Access
|
|
$
|
139,472
|
|
|
$
|
139,472
|
|
|
Software
|
|
|
954,501
|
|
|
|
954,501
|
|
|
Total
|
|
|
1,093,973
|
|
|
|
1,093,973
|
|
|
Accumulated amortization
|
|
|
(633,534
|
)
|
|
|
(595,215
|
)
|
|
Intangible assets, net
|
|
$
|
460,439
|
|
|
$
|
498,758
|
|
Amortization expense for the quarters ended June 30, 2018 and
2017 was $38,319 and $117,300, respectively.
6. STOCK COMPENSATION
During the quarter ended June 30, 2118,
we had no stock-based compensation.
7. CONVERTIBLE NOTES PAYABLE
Related Party Convertible Notes
The Company issued an $956,000 convertible
note with maturity date of March 7, 2019, with annual rate of 10% from ARNA GLOBAL LLC, wholly owned by the Company’s president.
The note converts into 21,194,381 shares of common stock (the “Note Shares”).
The Company issued an $695,000 convertible
note with maturity date of December 19, 2019, with annual rate of 10% from TAKNIKI COMMUNICATION, wholly owned by the Company’s
Vice President. The note converts into 10,303,070 shares of common stock (the “Note Shares”).
The Company issued an $156,407 convertible
note with maturity date of March 7, 2019, with annual rate of 10% from Mr. Sharma, Company’s president. The note converts
into 3,432,234 shares of common stock (the “Note Shares”).
The Company issued an $38,076 convertible
note with maturity date of March 7, 2019, with annual rate of 10% from Mr. Mandloi, Company’s vice president. The note converts
into 835,552 shares of common stock (the “Note Shares”).
The Company has accrued interest of
$47,325 for related parties for the quarter ended June 30, 2018.
Non-Affiliate Party Convertible
Notes
None.
8. RELATED PARTY TRANSACTION
On April 1, 2017, the board approved the compensation of Deepak
Sharma, President of the Corporation, be fixed at USD 250,000/- per year for the next three year period beginning April 1, 2017
to year ending March 31, 2020, payments to be made in monthly installments on the last day of each month. The Company had not paid
any compensation for the fiscal year ending March 31, 2018. The Company accrued the total executive compensation payable of $250,000
for the fiscal year ending March 31, 2018.
The above related party
transactions are not necessarily indicative of the amounts and terms that would have been incurred had comparable transactions
been entered with independent parties.
9. STOCKHOLDER’S EQUITY
None.
Equity Compensation Plan
On April 15, 2016, we adopted the TripBorn,
Inc. 2016 Stock Incentive Plan, which authorized the issuance of 7,680,000 shares of our common stock pursuant to stock options,
restricted stock, restricted stock units or other awards authorized under the terms of the plan. No awards have been issued under
the plan.
10. INCOME TAX
Deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes.
The Company files its income tax returns
on a fiscal year basis.
The future effective income tax rate depends
on various factors, such as the Company’s income (loss) before taxes, tax legislation and the geographic composition of pre-tax
income. The Company files income tax returns in the U.S. Federal jurisdiction and various State jurisdictions. Sunalpha files tax
returns in India. The Company is generally subject to U.S. Federal, State and local examinations by tax authorities for the past
three years.
On December 22, 2017, the U.S. government
enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”). The Tax Act included
a broad range of complex provisions impacting the taxation of multi-national companies. The Tax Act makes broad and complex changes
to the U.S. corporate income tax system and includes a Transition Toll Tax (the “Transition Tax”), which is a one-time
mandatory deemed repatriation tax on accumulated foreign subsidiaries’ previously untaxed foreign earnings. The Toll Charge
will be paid over an eight-year period, starting in 2018, and will not accrue interest. The Tax Act also imposed a global intangible
low-taxed income tax (“GILTI”), which is a new tax on certain off-shore earnings at an effective rate of 10.5% for
tax years beginning after December 31, 2017 (increasing to 13.125% for tax years beginning after December 31, 2025) with a partial
offset for foreign tax credits. Generally, accounting for the impacts of newly enacted tax legislation is required to be completed
in the period of enactment, however in response to the complexities and ambiguity surrounding the Tax Act, the SEC released Staff
Accounting Bulletin No. 118 (“SAB 118”) to provide companies with relief around the initial accounting for the Tax
Act. Pursuant to SAB 118, the SEC has provided a one-year measurement period for companies to analyze and finalize accounting for
the Tax Act. During the one-year measurement period, SAB 118 allows companies to recognize provisional amounts when reasonable
estimates can be made for the impacts resulting from the Tax Act. TripBorn will finalize accounting for the Tax Act during the
one-year measurement period, and any adjustments to the provisional amounts will be included in income tax expense or benefit in
the appropriate period, and disclosed if material, in accordance with guidance provided by SAB 118.
While our accounting for the Tax Act is
not complete, we do not believe we are subject to the Transition Tax. The Transition Tax is a tax on previously untaxed accumulated
earnings and profits (“E&P”) of our foreign subsidiaries and our foreign subsidiary has historically generated
operating losses. To determine the amount of the Transition Tax, we must determine, in addition to other factors, the amount of
post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings, if any.
The Tax Act has significant complexity
and our final tax liability may materially differ from provisional estimates due to additional guidance and regulations that may
be issued by the U.S. Treasury Department, the Internal Revenue Service (“IRS”) and state and local tax authorities,
and for TripBorn’s finalization of the relevant calculations required by the new tax legislation.
11. EARNINGS AND LOSS PER SHARE
ASC 260, “Earnings Per Share”
requires presentation of basic earnings per share and dilutive earnings per share. The computation of basic earnings (loss)
per share is computed by dividing earnings (loss) available to common shareholders by the weighted average number of outstanding
common shares during the period. Diluted earnings per share gives effect to all dilutive potential common shares outstanding during
the period. The computation of diluted earnings per share does not assume conversion, exercise or contingent exercise of securities
that would have an anti-dilutive effect.
A reconciliation of net loss and weighted
average shares used in computing basic and diluted net income per share is as follows:
|
|
|
First Quarter Ended June 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
Basic net income (loss) per share:
|
|
|
|
|
|
|
|
Net income (loss) applicable to common shares
|
|
$
|
(259,159
|
)
|
|
$
|
(222,542
|
)
|
|
Weighted average common shares outstanding
|
|
|
95,711,874
|
|
|
|
80,660,849
|
|
|
Basic net income (loss) per share of common stock
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
Diluted net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to common shares
|
|
$
|
(259,159
|
)
|
|
$
|
(222,542
|
)
|
|
Weighted average common shares outstanding
|
|
|
95,711,874
|
|
|
|
80,660,849
|
|
|
Dilutive effects of convertible debt
|
|
|
-
|
|
|
|
-
|
|
Weighted average common shares, assuming dilutive effect of convertible
debt
|
|
|
95,711,874
|
|
|
|
80,660,849
|
|
|
Diluted net income (loss) per share of common stock
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
Due to net loss, the shares of common
stock underlying the convertible notes described in Notes 7 and 9 were not included in the calculation of diluted net loss per
share, as they would have had an antidilutive effect.
12. COMMITMENTS
The Company is the B2B Principal Agent
of the Indian Railway Catering and Tourism Corporation, or IRCTC, which is a government entity that allows the Company to offer
reservations through Indian Railways’ passenger reservation system on the Company’s webpage. Indian Railways is India’s
state-owned railway, which owns and operates most of India’s rail transportation. The Company has integrated its online portal
with IRCTC’s to provide a seamless booking process. Pursuant to an Application Programming Interface (API) agreement, dated
October 5, 2015, the Company is required to pay a minimum annual maintenance fee of $7,500 to IRCTC. In the event the agreement
is renewed, the amount based on the number of active railway agents that use the Company rail booking services on the Company’s
platform will be payable annually. On September 30, 2017, the Company renewed its agreement with the IRCTC and paid an annual maintenance
fee of $8,600 based on the number of active railway agents it has enrolled to book rail tickets.
We lease approximately 2,455 square feet
of office space for our principal executive officers in Ahmedabad, India. Currently, our president and director, Deepak Sharma
leases this space to us at no charge.
Since March 2016, we also lease approximately
4,080 square feet of office space for our technology center in Bangalore, Karnataka India, for which we currently pay approximately
$5,896 per month including annual maintenance charges. This lease is continued with expiration dates through December 2024. We
believe these properties suit our operations and business needs and that adequate, suitable lease space will continue to be available
to meet our needs. Following table describes our obligation for the next five year from the lease.
|
Fiscal Year
|
Estimated Lease Charges
|
|
2019
|
$70,757
|
|
2020
|
$75,272
|
|
2021
|
$80,067
|
|
2022
|
$85,116
|
|
2023
|
$90,549
|
13. SUBSEQUENT EVENTS
The Company has evaluated subsequent
events through August 13, 2018, the date on which the financial statements were available to be issued.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. All statements, other than statements of historical fact included in this report, including, without
limitation, statements regarding our financial position, business strategy and other plans and objectives for our future operations,
are forward-looking statements. These statements include declarations regarding our management’s beliefs and current expectations.
In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,”
“could”, “intend,” “consider,” “expect,” “plan,” “anticipate,”
“believe,” “estimate,” “predict” or “continue” or the negative of such terms or
other comparable terminology. Forward-looking statements by their nature address matters that are, to different degrees, uncertain.
Our business has been undergoing substantial change, which has magnified such uncertainties. Readers should bear these factors
in mind when considering forward-looking statements and should not place undue reliance on such statements. Forward-looking statements
involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially from those suggested
by such statements. In the past, actual results have differed from those suggested by forward looking statements and this may
happen again. Important factors that could cause actual results to differ include, but are not limited to, the risks discussed
in “Risk Factors” and the following:
|
|
·
|
adverse
effects on our business because of regulatory investigations, litigation, cease and desist
orders or settlements;
|
|
|
·
|
our
ability to comply with the terms of our settlements;
|
|
|
·
|
increased
regulatory scrutiny and media attention;
|
|
|
·
|
any
adverse developments in existing legal proceedings or the initiation of new legal proceedings;
|
|
|
·
|
our
ability to effectively manage our regulatory and contractual compliance obligations;
|
|
|
·
|
the
adequacy of our financial resources, including our sources of liquidity and ability to
sell, fund and recover advances, repay borrowings and comply with the terms of our debt
agreements, including the financial and other covenants contained in them;
|
|
|
·
|
our
ability to interpret correctly and comply with liquidity, net worth and other financial
and other requirements of regulators as well as those set forth in our debt and other
agreements;
|
|
|
·
|
our
ability to invest available funds at adequate risk-adjusted returns;
|
|
|
·
|
uncertainty
regarding regulatory restrictions on our ability to repurchase our own stock;
|
|
|
·
|
volatility
in our stock price;
|
|
|
·
|
our
ability to contain and reduce our operating costs;
|
|
|
·
|
our
ability to successfully modify delinquent loans, manage foreclosures and sell foreclosed
properties;
|
|
|
·
|
uncertainty
related to legislation, regulations, regulatory agency actions, regulatory examinations,
government programs and policies, industry initiatives and evolving best servicing practices;
|
|
|
·
|
the
loss of the services of our senior managers and our ability to execute effective chief
executive and chief financial officer leadership transitions;
|
|
|
·
|
uncertainty
related to general economic and market conditions, delinquency rates, home prices and
disposition timelines on foreclosed properties;
|
|
|
·
|
uncertainty
related to our ability to continue to collect certain expedited payment or convenience
fees and potential liability for charging such fees;
|
|
|
·
|
uncertainty
related to our reserves, valuations, provisions and anticipated realization of assets;
|
|
|
·
|
uncertainty
related to the ability of third-party obligors and financing sources to fund servicing
advances on a timely basis on loans serviced by us;
|
|
|
·
|
uncertainty
related to the ability of our technology vendors to adequately maintain and support our
systems, including our servicing systems, loan originations and financial reporting systems;
|
|
|
·
|
our
ability to effectively manage our exposure to interest rate changes and foreign exchange
fluctuations;
|
|
|
·
|
our
ability to meet capital requirements established by, or agreed with, regulators or counterparties;
|
|
|
·
|
our
ability to protect and maintain our technology systems and our ability to adapt such
systems for future operating environments; and
|
|
|
·
|
uncertainty
related to the political or economic stability of the United States and of the foreign
countries in which we have operations; and
|
|
|
·
|
our
ability to maintain positive relationships with our large shareholders and obtain their
support for management proposals requiring shareholder approval.
|
Further information on the risks specific to our business
is detailed within this report, including under “Risk Factors.” Forward-looking statements speak only as of the date
they were made, and we disclaim any obligation to update or revise forward-looking statements whether because of new information,
future events or otherwise. The information included in this Management’s Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with our consolidated financial statements and the notes included in this
Quarterly Report, and the audited consolidated financial statements and notes and Management’s Discussion and Analysis of
Financial Condition and Results of Operations contained in our latest Annual Report that has been filled on Form 10-K.
Overview
We are Last Mile Commerce and Connectivity aggregator that
delivering the product and services to offline consumer using service agent network in India through our website, www.tripborn.com.
Currently, we operate as a business to business, or B2B, Last Mile Commerce platform that serves business agents and companies
based in India in providing travel and financial services products for their offline customers. Through our internet-based platform,
our business or travel agents can search and book domestic and international air tickets, hotels, vacation packages, rail tickets
and bus tickets, as well as ancillary travel-related services and financial services including money transfer bill payment, and
Micro ATM products. We serve approximately 6,534 business agents across India. We plan to expand our presence throughout pan-India
as opportunities present, with an immediate focus on the states of Gujarat, Maharashtra, Rajasthan, Delhi, Bihar, Jharkhand, Orissa,
and Madya Pradesh and South India. Sometimes we also referred as an Online Travel Agency (“OTA”), that offers travel
reservations and related travel services and products to travel agents in India through our website, www.tripborn.com.
We generate revenue through our ticketing business, which includes
rail ticketing, bus ticketing and air ticketing, and our hotel reservations and vacation and business packages business. We also
generate revenue by providing online payment services and access to visa processing services.
In our ticketing business, our main sources of revenue are (1)
commissions and incentive payments from airline suppliers for tickets booked by our travel agent customers through our distribution
channels and (2) service fees we charge our customers.
Corporate History
Tripborn, Inc. (“Company”)
was incorporated under the law of the state of Delaware in January 2010 office is located at 762 Perthshire Pl, Abingdon, MD 21009.
The Company provides Online Travel Agency (OTA) and related services and selling its services to directly to Business customers.
The Company primarily operates in India. Tripborn, Inc. formerly known as PinstripesNYC, Inc was operating as a shell company
with nominal or no assets or operations until December 14, 2015. Tripborn Inc. was known as PinstripesNYC, Inc. until January
2016.
On December 14, 2015, a PinstripesNYC, Inc. (the “Registrant”)
executed an agreement and Plan of Merger (the, “Agreement”) with Sunalpha Green Technologies Private Limited. (the,
“Sunalpha”) registered under the Company Act of 1956, India with principle office located at 812, Venus Atlantis Corporate
Park, Near Prahalad Nagar Garden, Satellite, Ahmedabad, Gujarat, India 380 015.
As a result of the Merger, Sunalpha became a wholly owned
subsidiary of the Registrant (Pinstripes NYC Inc.) now Tripborn Inc. and following the consummation of the Merger and giving effect
to the issuance of the Merger Shares 76,804,914 shares issued and outstanding of the Registrant by its principle stockholders.
For accounting purposes, Sunalpha was deemed to be the accounting
acquirer in the transaction and, consequently, the transaction was treated as a recapitalization of the Company. Accordingly,
Sunalpha’s assets, liabilities, and results of operations are the historical consolidated financial statements of the Company
and Company’s assets, liabilities and results of operations are consolidated with Tripborn Inc. effective as of the date
of the Merger. No step-up in basis or intangible assets or goodwill was recorded in this transaction.
Since commencing operations as an OTA in February 2014,
we have grown our business by initially processing a few transactions a day to processing approximately 1.0 million plus transactions
and 16.9 million searches in March 31, 2018. During fiscal 2018, we have experienced increased traffic on our website due to our
efforts in marketing and branding. Our agent customers log in nearly 2,701 times per day in March 31, 2018. We have steadily worked
to add suppliers in order to provide additional services and better pricing for our travel agent customers. In the development
stages, we have relied on user feedback to enhance our core technology. As internet penetration in India continues to increase,
we anticipate that we will be in a position to use our established platform to offer travel services and related services directly
to consumers. We believe our online platform is capable of managing hundreds of suppliers and millions of transactions in furtherance
of our growth strategies.
OPERATING METRICS
In evaluating our business, we
use operating metrics, including gross bookings and revenue margin. Gross bookings is a measure of total dollar volume of transactions
that we process. This metric is an operating metric used by management, the investor community, and analysts who follow the travel
industry to measure our market share and to measure our scale and growth. We calculate revenue margin as revenue as a percentage
of gross bookings.
|
|
Quarter
Ended June 30
|
|
|
2018
|
2017
|
|
|
|
|
|
Gross Bookings1
|
$13,720,529
|
$8,903,079
|
|
Revenue Margin2
|
0.7%
|
1.2%
|
1Gross bookings represent the total retail value
of transactions booked through us, generally including taxes, fees and other charges, and are generally reduced for cancellations
and refunds.
2Revenue margin is defined as revenue as a percentage
of gross bookings
The increase in gross bookings is driven primarily by increases
in incentives, fees, penalty income, and surcharges paid by our travel agent customers. Revenue margin declined quarter over quarter
due to price pressure on air ticketing and low margin rail ticketing outpacing higher margin vacation and hotel package offerings.
RESULTS OF OPERATIONS
During the first quarter of fiscal year 2019, we continued to
add new markets and add an increasing number of sales agents that offer our services. These changes drove an increase in our net
revenues. Our costs of revenue and operating expenses increased as we expanded our market reach and drove the increase in net loss
from operations.
|
|
|
First Quarter Ended
June 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
Net revenue
|
|
$
|
95,640
|
|
|
$
|
108,542
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
59,960
|
|
|
|
19,886
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
35, 680
|
|
|
|
88,656
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
Selling, general, and administrative expenses
|
|
|
168,584
|
|
|
|
176,177
|
|
|
Legal and consulting expenses
|
|
|
45,871
|
|
|
|
47,623
|
|
|
Depreciation and amortization
|
|
|
39,284
|
|
|
|
118,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(218,059
|
)
|
|
|
(254,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
6,143
|
|
|
|
-
|
|
|
Interest income
|
|
|
82
|
|
|
|
|
|
|
Interest expense
|
|
|
(47,325
|
)
|
|
|
(60,494
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
(41,100
|
)
|
|
|
(60,494
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax expense
|
|
$
|
(259,159
|
)
|
|
$
|
(314,542
|
)
|
|
Income tax benefit
|
|
|
-
|
|
|
|
92,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(259,159
|
)
|
|
$
|
(222,542
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
Diluted income (loss) per share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of shares
|
|
|
95,711,874
|
|
|
|
80,660,849
|
|
|
Diluted weighted average number of shares
|
|
|
95,711,874
|
|
|
|
80,660,849
|
|
Revenue
Net revenues for the first quarter ended June 30, 2018 were
$95,640 compared to $108,542 for the first quarter ended June 30, 2017. Revenue for the quarter ended June 30, 2018 consisted of
$8,224 from air ticketing compared to $21,900 in the prior year quarter, $4,297 from rail ticketing compared to $8,896 in the prior
year quarter, $0 from hotel booking compared to $819 in the prior year quarter, $2,728 from vacation packages compared to $18,873
in the prior year quarter, and $80,391 from incentives from our aggregators and suppliers and fees, penalty income and surcharges
from our travel agent customers compared to $51,416 in the prior year. Revenue declined by $6,759 in the current year quarter compared
to the prior year quarter. The primary driver was the increase in incentives from our aggregators and suppliers, which was fueled
by an increase in the number of transactions that were processed. This increase was offset by declines in air and rail ticketing,
hotel booking, vacation packages, and payment services which declines resulted from increased competition for these services.
Cost of Revenues and Gross Profit
The cost of revenue for the first quarter ended June 30, 2019
was $59,960 compared to $19,886 for the prior year quarter. The cost of revenue represents fees charged by our suppliers. The increase
in cost of revenue from the first quarter ended June 30, 2018 compared to the prior year quarter was primarily driven re-classification
of some of selling expenses for the quarter ended June 30, 2018. We are continuing to manage our cost of revenue by optimizing
pricing from our suppliers and aggregators to increase our profitability and by implementing pricing algorithms and profitability
calculations.
Gross profit from revenues for the first quarter ended June
30, 2018 was $35,680 compared to $88,656 for the prior year quarter. The $52,976 decrease is driven primarily by re-classification
of some of selling expenses for the quarter ended June 30, 2018 and by a decrease in costs to provided revenue.
Operating Expenses
Total operating expenses for the first quarter ended June
30, 2018 were $253,739 compared to $342,704 for the prior year quarter. Our operating expenses include our sales and marketing,
payroll and general and administrative costs, and the increase in these costs was driven by our increased headcount as we ramp
up our operations. Included in our operating expenses is $45,871 in legal and consulting expenses associated with our operating
as an Exchange Act reporting company, even with $47,623 in the prior year quarter.
We expect our sales and marketing expenses to increase as we
continue to grow the business and hire experienced personnel to support our growing business and operations. Our general and administrative
expenses are expected to continue to increase as we incur expenses associated with being an Exchange Act reporting company and
developing an active trading market for our stock on the OTCQB Market.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2018, we had $805,657 in cash and cash equivalents,
compared to $1,155,367 as of March 31, 2018. The $349,710 decrease in cash was driven by our operating loss and a use of working
capital. As of June 30, 2018, we had stockholder’s deficit of $999,368 compared to stockholder’s deficit of $741,656
at March 31, 2018, which resulted an increase in operating losses during the quarter ended June 30, 2018.
Our primary source of working capital to date has been through
the sale of common stock and the sale and issuance of convertible notes. Our focus remains on deriving net cash flow from operations.
Cash Flows: The following table is a summary of
our Consolidated Statements of Cash Flows:
|
|
|
Three Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2018
|
|
2017
|
|
Cash Provided by (Used in):
|
|
|
|
|
|
|
|
|
|
Operating Activities
|
|
|
$(340,244)
|
|
|
|
$(80,924)
|
|
|
Investing Activities
|
|
|
(396)
|
|
|
|
937
|
|
|
Financing Activities
|
|
|
(10,518)
|
|
|
|
547,000
|
|
Operating Activities: Net cash used by operations
was $340,244 during the three months ended June 30, 2018 compared to a cash use from operating activities of $80,924 during the
same period in fiscal 2018. The year-over-year increase in cash used by operations is primarily the result of an increase in operating
losses plus negative changes in net working capital (defined as current assets less current liabilities).
Investing Activities: During the three months
ended June 30, 2018, there was a cash use of $396 from investing activities compared to a cash provision of $937 in the same period
in fiscal 2018. These cash uses represent net changes in property, plant, and equipment and intangible assets.
Financing Activities: During the three months ended
June 30, 2018, there was zero cash provided or used by financing activities compared to a 547,000 cash provision in the same period
in fiscal 2018. Cash generated during the three months ended June 30, 2018 resulted from the sale of common stock pursuant to a
private placement. We presently do not have a senior credit or revolving credit facility and do not expect to obtain one in the
foreseeable future.
We will require additional capital to continue to fund our operations
and will look to raise funds through public and private offerings of our securities. We estimate that we will require approximately
$3.0 million and $5.0 million in the next 12 and 24 months to support our continued operations.
We took the following steps during fiscal years 2017 and 2018
to manage our liquidity and to avoid default on any material third-party obligations:
|
|
·
|
We continue to employ “on demand” procurement processes
for travel products that we sell to our customers. We also continue our attempts to collect customer payments promptly based on
their payment terms, which has helped us manage our working capital needs.
|
|
|
·
|
We raised $150,000 in the first quarter of fiscal 2017 pursuant to
the Company’s issuance of a convertible note. The note had a three-year term and accrued interest at the rate of six percent
payable at maturity. The principal amount of the note was convertible into shares of the Company’s common stock at the noteholder’s
option at maturity. This note was converted into 3,924,088 shares of common stock on July 15 and 16, 2017.
|
|
|
·
|
We issued a convertible note to Takniki Communications, an affiliate
owned by Sachin Mandloi, our Vice President and a director, totaling $695,000 in the third quarter of fiscal 2017. This note was
issued pursuant to a Software Development Agreement dated September 23, 2016 between Takniki Communications and the Company to
finance the upgrade of our Travelcord operating software. The note has a three-year term and bears interest at the rate of
ten percent payable at maturity. The principal amount of this note is convertible into shares of the Company’s common stock
at the noteholder’s option at maturity.
|
|
|
·
|
We sold $460,000 of the Company’s common stock during the third
quarter of fiscal 2017 and another $190,000 during the fourth quarter of fiscal 2017.
|
|
|
·
|
We sold $547,000 of the Company’s common stock during the first
quarter of fiscal 2018 and another $551,000 during the second quarter of fiscal 2018.
|
There are no assurances that these steps will generate sufficient
cash flow from operations or that we will be able to obtain sufficient financing necessary to support our working capital requirements.
We can also give no assurance that additional capital financing will be available, or if available, will be on terms acceptable
to us. If adequate working capital is not available, we may not be able to continue our operations or execute our business plan.
OFF BALANCE SHEET ARRANGEMENTS
The Company has no off-balance
sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is
material to stockholders.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Exchange Act
Rule 15d-15(e)) are designed with the objective of ensuring that information required to be disclosed in our reports filed under
the Securities Act of 1934, as amended, such as this report, is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring
that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial
Officer, based on their evaluation of TripBorn’s disclosure controls and procedures as of June 30, 2018, have concluded that
TripBorn’s disclosure controls and procedures are effective as of that date.
Changes in Internal Control Over Financial Reporting
As a newly public company, we have not yet been required to
provide a report of management’s assessment regarding internal control over financial reporting.