Notes to Consolidated Condensed Financial
Statements
June 30, 2019
(UNAUDITED)
1. DESCRIPTION
OF BUSINESS
Overview
TripBorn,
Inc. (“TripBorn” or the “Company”) is an eCommerce aggregator and a hospitality management company. An
aggregator model is a form of eCommerce whereby our website, www.tripborn.com aggregates information from various travel and hospitality
vendors and presents them to users on a single platform, to ease, facilitate, coordinate and effectuate consumer travel and hospitality
needs. Our eCommerce Aggregator business segment
operates through Sunalpha Green Technologies Private Limited (“Sunalpha”), a wholly owned subsidiary. Our hospitality
business segment is comprised of our 51% equity interest in our subsidiary PRAMA Hotels and Resorts Private Limited (“PRAMA”),
which was acquired on April 22, 2019, for aggregate consideration of $2,137,143. All of the Company’s net revenues are derived
from operations in India.
The unaudited consolidated financial statements
include the accounts and transactions of the Company; its wholly owned subsidiary, Sunalpha; its 51% owned subsidiary, PRAMA and
an equity investee, PRAMA Canary Wharf Private Limited (“PCW”). Through PRAMA, the Company has a 29.575% equity interest
in PCW, a non-trading company formed to develop a potential hotel in Bengaluru, India. The Company exercises significant influence
over PCW but does not control the investee and the Company is not the primary beneficiary of the investee’s activities. PCW
is accounted for using the equity method. All significant inter-company accounts and transactions are eliminated in consolidation.
Acquisitions
On April 22, 2019 the Company acquired
a 51% equity interest in PRAMA for $2,137,143, consisting of $1,400,000 in cash and the issuance of 2,632,653 shares of common
stock valued at $737,143.
The Company has made acquisitions at
prices above the determined fair value of the acquired identifiable net assets, resulting in goodwill due to the Company’s
expectations of the synergies that will be realized by combining the businesses. These synergies include access to PRAMA’s
hotel brands, customers and operations; use of the Company’s existing technology to expand sales of the acquired businesses;
new operational and financial efficiencies of the acquired businesses to expand sales cost effectively for both business segments.
Acquisitions will be accounted for by using the purchase method of accounting, and the acquired company’s results will be
included in the accompanying financial statements from their respective dates of acquisition. Acquisition transaction costs have
been recorded in selling, general and administrative expenses as incurred.
The acquisition of PRAMA was treated as a business combination
under U.S. GAAP. During the first quarter, we estimated the allocation of the purchase price to the assets acquired and liabilities
assumed based on estimated fair value assessments. The allocation of the purchase price is preliminary pending the completion of
various analyses and the finalization of estimates. During the measurement period, which is not to exceed one year from the acquisition
date, additional assets or liabilities may be recognized if new information is obtained about facts and circumstances that existed
as of the acquisition date that, if known, would have resulted in the recognition of those assets or liabilities as of that date.
The preliminary allocation may be adjusted after obtaining additional information regarding, among other things, asset valuations,
liabilities assumed and revisions of previous estimates, and these adjustments may be significant.
The following reflects our preliminary purchase price allocation:
|
|
Fair Value
|
|
Net cash
|
|
$
|
642,907
|
|
Acquired intangible assets at fair value
|
|
|
2,003,085
|
|
Investment in and receivable from equity investee
|
|
|
665,799
|
|
Right to use of assets
|
|
|
7,480,986
|
|
Property and equipment, net
|
|
|
1,684,360
|
|
Accounts receivable
|
|
|
616,564
|
|
Amounts due from related parties
|
|
|
661,128
|
|
Other current assets
|
|
|
1,353,687
|
|
Other non-current assets
|
|
|
990,449
|
|
|
|
|
|
|
Operating lease liabilities assumed
|
|
|
(7,641,431
|
)
|
Accounts payable
|
|
|
(1,292,260
|
)
|
Amounts due to related parties
|
|
|
(704,646
|
)
|
Loans due within one year with third parties
|
|
|
(574,021
|
)
|
Other current liabilities
|
|
|
(1,654,116
|
)
|
Other non-current liabilities
|
|
|
(978,803
|
)
|
Fair value of net assets acquired
|
|
|
3,253,688
|
|
Goodwill
|
|
|
936,788
|
|
Noncontrolling interests
|
|
|
(2,053,333
|
)
|
Purchase consideration paid in cash and common stock
|
|
$
|
2,137,143
|
|
The following reflects the composition and timing of consideration:
|
|
Fair Value
|
|
Cash paid on closing on April 22, 2019
|
|
$
|
1,150,000
|
|
Deposit paid on March 27, 2019, applied on closing on April 22, 2019
|
|
|
250,000
|
|
Gross cash paid on acquisition of PRAMA
|
|
|
1,400,000
|
|
Fair value of 2,632,653 common shares
|
|
|
737,143
|
|
Total consideration for 51% interest in PRAMA
|
|
$
|
2,137,143
|
|
The following reflects the net cash paid on acquisition of PRAMA
in the quarter ended June 30, 2019:
|
|
Fair Value
|
|
Cash paid in quarter ended June 30, 2019
|
|
$
|
1,150,000
|
|
Net cash on opening balance sheet of PRAMA
|
|
|
(642,907
|
)
|
Net cash paid for 51% interest in PRAMA
|
|
$
|
507,093
|
|
Acquired intangible assets acquired are
as follows:
|
|
Fair value
|
|
|
Useful life
|
|
Trademarks
|
|
$
|
469,204
|
|
|
Indefinite
|
|
Customer relationships
|
|
|
1,533,881
|
|
|
4-15 years
|
|
Total intangible assets
|
|
$
|
2,003,085
|
|
|
|
|
|
During the quarter ended June 30, 2019,
we recognized $936,788 in goodwill as the result of the acquisition of PRAMA, recorded within our Hospitality reporting
segment. The revenues and earnings from PRAMA's operations that are included in the Consolidated Statement of Operations for the
quarter ended June 30, 2019 is reflected in the Business segments note below.
The Company recognized $1,693,738 in revenue
and $276,512 in net loss before income taxes of the acquiree in the consolidated condensed statement of operations for the period
April 22, 2019 through June 30, 2019. The revenue and net loss before taxes for the combined entity for the quarter ended
June 30, 2019, as though the acquisition of PRAMA had occurred on April 1, 2019 was $2,259,644, and $674,729, respectively.
The revenue and net loss before taxes for the combined entity for the quarter ended June 30, 2018, as though the acquisition of
PRAMA had occurred on April 1, 2018 was $2,096,250, and $422,597, respectively. There were no material, nonrecurring pro
forma adjustments directly attributable to the PRAMA acquisition, which were reported in the pro forma revenue and statement of
operations or the consolidated condensed statement of operations.
2. LIQUIDITY AND GOING CONCERN
The Company has incurred
net losses from operations since inception. The net loss for the quarter ended June 30, 2019 was $562,755 and the accumulated deficit
was $4,782,894 as of June 30, 2019. The Company’s ongoing losses have had a significant negative impact on the Company’s
financial position and liquidity.
The Company’s
cash requirements are primarily to fund operating losses, working capital, capital expenditures and the completion of acquisitions.
Historically, the Company has met these cash needs by borrowings under notes, sales of shares and warrants and the cash balances
acquired from subsidiary acquisitions. There can be no assurance that the Company will be able to borrow or sell securities in
the future, which raises substantial doubt about the ability of the Company to continue as a going concern. The consolidated financial
statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount
of and classification of liabilities that may result should the Company be unable to continue as a going concern.
The Company’s
operations are subject to number of factors that can affect its operating results and financial conditions. Such factors include,
but are not limited to: the continuous enhancement of the current products and services; marketing its new services; continuing
to invest in new technologies; changes 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.
The Company’s
directors are confident that the Company will be able to issue new shares (see Subsequent Events note below), and extend the maturity
date on its convertible notes which will provide the Company with sufficient funding to meet its obligations as they become due.
The Company’s directors believe it is appropriate to prepare the financial statements on the going concern basis. However,
in the event that the Company is not able to successfully complete the fundraising and extension referred to above, significant
uncertainty would exist as to whether the Company and its subsidiaries will continue as going concerns and, therefore, whether
they will realize their assets and extinguish their liabilities in the normal course of business and at the amounts stated in the
financial statements.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The interim unaudited consolidated
condensed financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting
principles (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities
and Exchange Commission ("SEC") and include the accounts of the Company and its subsidiaries. We have condensed
or omitted certain information and disclosures normally included in financial statements presented in accordance with U.S. “GAAP”.
All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management,
the interim unaudited condensed consolidated financial statements include all adjustments, which include only normal recurring
adjustments, necessary for the fair presentation of the Company’s financial position, results of operations and cash flows
for the periods and dates presented. These interim unaudited condensed consolidated financial statements are not necessarily indicative
of the results expected for the full fiscal year or for any subsequent period.
The accompanying condensed consolidated balance sheet as of
March 31, 2019 was derived from the audited financial statements as of that date, but does not include all the information and
footnotes required by U.S. GAAP. These financial statements should be read in conjunction with the consolidated financial statements
and related notes included in Form 10-K for the year ended March 31, 2019.
As a result of the acquisition of PRAMA, during the quarter
ended June 30, 2019, the Company made a change to its segment reporting structure which resulted in two segments 1) eCommerce
Aggregator and 2) Hospitality. As a result, certain prior year amounts have been restated to conform to the current year’s
presentation, that is they have been classified as relating to the eCommerce Aggregator business. These reclassifications had
no effect on previously reported total net revenues, cost of revenues and other operating expenses, other expenses, net and net
loss. Otherwise, we have not reclassified other prior-period amounts to conform to the current-period presentation. Certain columns
and rows may not add due to the use of rounded numbers.
Principles of Consolidation
The consolidated financial statements include
the accounts and transactions of the Company, its wholly owned subsidiary, Sunalpha and its subsidiary, PRAMA which the Company
owns a 51% equity interest in. PRAMA was acquired on April 22, 2019. Through PRAMA, the Company has a 29.575% equity interest in
PCW, which is accounted for under the equity method. All significant inter-company accounts and transactions are eliminated in
consolidation.
Use of Estimates
The preparation
of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect
the amounts reported and disclosed in the financial statements and the accompanying notes. The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making
judgments about the carrying values of assets and liabilities. Such estimates primarily relate to unsettled transactions and events
as of the date of the financial statements. Accordingly, actual results may differ from estimated amounts.
Our significant
estimates include elements of revenue recognition, the application of fair value estimates for the purchase price allocation on
the acquisition of PRAMA, 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 income taxes. 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 an impairment charge. The Company has not recognized an impairment charge for the quarter ended June 30, 2019.
Revenue Recognition
In May 2014, the Financial Accounting Standards
Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”): Topic 606 which
supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of Topic 606 is to recognize revenues
when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be
received for those goods or services. Topic 606 defines a five-step process to achieve this core principle and, in doing so, it
is possible more judgment and estimates may be required within the revenue recognition process than are required under existing
U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include
in the transaction price and allocating the transaction price to each separate performance obligation, among others. Topic 606
also provides guidance on the recognition of costs related to obtaining customer contracts.
Topic 606 was effective as of April 1,
2018, for the Company, using either of two methods: (1) retrospective application of Topic 606 to each prior reporting period presented
with the option to elect certain practical expedients as defined within Topic 606 or (2) retrospective application of Topic 606
with the cumulative effect of initially applying Topic 606 recognized at the date of initial application and providing certain
additional disclosures as defined per Topic 606. We adopted Topic 606 pursuant to the method (2) and we determined that any cumulative
effect for the initial application did not require an adjustment to accumulated deficit at April 1, 2018.
For revenue recognition
arrangements that we determine are within the scope of Topic 606, we perform the following five steps: (i) identify the contract(s)
with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate
the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies
a performance obligation. We only apply the five-step model to arrangements that meet the definition of a contract under Topic
606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or
services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606,
we evaluate the goods or services promised within each contract related performance obligation and assess whether each promised
good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective
performance obligation when (or as) the performance obligation is satisfied.
The following
is a description of the Company’s principal activities, separated by reportable segments, from which the Company generates
its revenue.
eCommerce Aggregator revenues:
Air, Rail and Bus Ticketing.
Recognized on a net commission basis upon transfer of control of promised services in an amount which we are entitled to in exchange
for the service.
Vacation Packages. Recognized
on a gross basis, upon transfer of control of promised services in an amount which we are entitled to in exchange for the service.
Other Revenue. Primarily
comprising visa processing fees, money transfer, and pre-and post-paid expenses are recognized after the services are performed.
Hospitality
Revenues:
Hospitality Services.
|
·
|
Room revenue: Revenue from hotel operations where customers book rooms and banquets/conference rooms is recognized based on
the period for which the customer completes the transaction (i.e. the stayed night occurs or a deposit cancellation provision elapses).
Payment is typically received upon check-out. For room revenue, the Company recognizes revenue over time.
|
|
·
|
Food & beverages revenue: The Company provides food and beverages that customer consumes as they are provided. The performance
obligation is satisfied at point in time. The Company recognizes revenue at the time of sale only.
|
|
·
|
Management Fees from Operation & Maintenance Properties: Revenue under management contracts is recognized on the attainment
of certain financial results, primarily operating earnings, as specified in each contract. Management fees are typically billed
and paid monthly. A time-elapsed output method is used to measure progress and provides a faithful depiction of the transfer of
services to the customer as the value transferred to the customer is substantially the same over time. Fees are variable with the
uncertainty of base fees being resolved monthly and the uncertainty of incentive fees being resolved annually. These fees are included
in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once the uncertainty
is resolved.
|
Practical expedients.
The Company has elected certain of the optional exemptions from the disclosure requirement for remaining performance obligations
for specific situations in which an entity need not estimate variable consideration to recognize revenue. Accordingly, the Company
applies the practical expedient to its management fees from contracts with Operation & Maintenance Properties. These contracts
are typically long-term, and the performance obligation consists of providing hotel management services to the owner. Revenue is
recognized based upon an agreed base fee and additional revenue is recognized on the attainment of certain financial results, primarily
operating earnings, as specified in each contract. As such, fees are variable with the uncertainty of base fees being resolved
monthly and the uncertainty of incentive fees being resolved annually. These fees are included in revenue to the extent that it
is probable that a significant reversal of cumulative revenue will not occur once the uncertainty is resolved.
The Company has
elected the practical expedient to not disclose revenue related to remaining performance obligations that are part of a contract
with an original expected duration of one year or less, and to not consider the effects of significant financing components in
the transaction price when the duration of financing is one year or less.
The Company has
elected certain of the optional exemptions from the disclosure requirement for the remaining performance obligations for specific
situations in which an entity need not estimate variable consideration.
Cost of Revenues
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.
Other operating
expenses
Other operating
expenses includes Selling, general and administrative expenses, Legal and consulting expenses and Depreciation and amortization.
Selling, general
and administrative expenses include, direct operating expenses, general and administrative expenses such as business promotion
costs, utilities, rent, payroll, which are recognized on an accrual basis.
Legal and consulting
expenses 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 considers
all highly liquid debt instruments with maturity of three months or less, to be cash equivalents. The Company maintains its cash
in bank accounts in the U.S. and India, which at times may not be covered by, or exceed the coverage limit of the Deposit Insurance
and Credit Guarantee Corporation of India. The Company does not believe that this results in significant credit risk. As of June
30, 2019, and 2018, the cash balance in financial institutions in India was $859,189 and $360,210, respectively.
Receivables
and Credit Policies
Accounts receivable
are stated at the amount management expects to collect. An allowance for doubtful accounts is recorded, as a charge to bad debt
expense, where collection is considered to be 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 does not accrue interest on past due receivables.
The Company performs
periodic analyses 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.
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 expenses as incurred.
Intangible Assets
Intangible assets with indefinite useful
lives consist exclusively of trademarks and are tested for impairment annually, or whenever events or indicators of impairment
occur between annual impairment tests. Management expects to use the trademarks indefinitely.
Intangible assets that have limited
useful lives are amortized on a straight-line basis over the shorter of their useful or legal lives. Intangible assets with definite
useful lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset
may not be recoverable.
The fair value of the trade names is determined using a discounted
cash flow analysis based on the relief-from-royalty approach. The relief-from-royalty approach is an income approach
that utilizes certain market information by reference to the amount of royalty income we could generate if the trade names were
licensed, in an arm’s length transaction, to a third party. Based on a comparison of our trade names to the guideline
transactions, including an assessment of industry conditions, the age of the trademark/trade name, degree of consumer recognition
and life cycle of the brand, a reasonable royalty rate is estimated for the trade names. The principal factors used in the discounted
cash flow analysis requiring judgment are the projected net sales, discount rate, royalty rate and terminal value assumptions.
Goodwill
Goodwill is assigned to our reporting units
based on the expected benefit from the synergies arising from each business combination, determined by using certain financial
metrics. The reporting units are aligned with our reporting segments. Goodwill is not amortized, but the Company tests goodwill
for impairment each year or more frequently should facts and circumstances indicate that it is more likely than not that the fair
value of a reporting unit is less than the carrying amount. As part of the impairment test, we may elect to perform an assessment
of qualitative factors. If this qualitative assessment indicates that it is more likely than not that the fair value of a reporting
unit, including goodwill, is less than its carrying amount, or if we elect to bypass the qualitative assessment, we would then
proceed with a quantitative assessment. The quantitative assessment involves calculating an estimated fair value of each reporting
unit based on projected future cash flows and comparing the estimated fair values of the reporting units to their carrying amounts,
including goodwill. If the estimated fair value of the reporting unit exceeds its carrying value, including goodwill, no impairment
is recognized. However, if the carrying amount of a reporting unit, including goodwill, exceeds its fair value, an impairment loss
is recognized in an amount equal to the excess, limited to the total goodwill balance of the reporting unit. We have not recognized
any impairment on goodwill during the quarter ended June 30, 2019.
Impairment of Long-lived Assets
The Company records
an impairment of long-lived assets used in operations, other than goodwill, 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.
Business Combinations
When acquiring other businesses or participating
in mergers or joint ventures in which we are deemed to be the acquirer, we generally recognize identifiable assets acquired, liabilities
assumed and any noncontrolling interests at their acquisition date fair values, and separately from any goodwill that may be required
to be recognized. Goodwill, when recognizable, would be measured as the excess amount of any consideration transferred, which
is generally measured at fair value, over the acquisition date fair values of the identifiable assets acquired and liabilities
assumed.
On the date of acquisition, the assets
acquired, liabilities assumed, and any noncontrolling interests in the acquiree are recorded at their fair values. The acquiree's
results of operations are also included in our consolidated results as of the date of acquisition. Intangible assets that arise
from contractual/legal rights or are capable of being separated are measured and recorded at fair value and amortized over the
estimated useful life.
Accounting for such transactions requires
us to make significant assumptions and estimates. These include, among others, any estimates or assumptions that may be made
for the amounts of future cash flows that will result from any identified intangible assets, the useful lives of such intangible
assets, the amount of any contingent liabilities, including contingent consideration, to record at the time of the acquisition
and the fair values of any tangible assets acquired and liabilities assumed. Although we believe any estimates and assumptions,
we make to be reasonable and appropriate at the time they are made, unanticipated events and circumstances may arise that affect
their accuracy, causing actual results to differ from those estimated by us.
Foreign Currency
Translation
The Company translates
the foreign currency financial statements into U.S. Dollars using the year or reporting period end or average exchange rates in
accordance with the requirements of ASC 830, Foreign Currency Matters. 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 stockholders’
equity (deficit).
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, short message service (“SMS”) or email campaign) as
incurred each time the advertisement or promotion is performed. Promotion and Advertising expense was $84,906 for the quarter ended
June 30, 2019, compared to $38 for the quarter ended June 30, 2018. This increase in Promotion and Advertising expenses is due
to the acquisition of PRAMA.
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. During the quarter ended June
30, 2019 and June 30, 2018, $25,723 and $0 was recognized in legal and consulting expenses in the Consolidated Condensed Statements
of Operations, respectively, as a result of an agreement for consulting services.
Leases
On April 1, 2019, the Company adopted Topic 842 using the modified
retrospective transition approach by applying the new standard to all leases existing at the date of initial application and not
restating prior periods. Results and disclosure requirements for reporting periods beginning after April 1, 2019 are presented
under Topic 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical
accounting under Topic 840.
The Company elected the package of practical expedients permitted
under the transition guidance, which allowed for the carryforward of historical lease classification, on whether a contract was
or contains a lease, and of the assessment of initial direct costs for any leases that existed prior to April 1, 2019. The Company
also elected to combine lease and non-lease components and to keep leases with an initial term of 12 months or less off the balance
sheet and recognize the associated lease payments in the consolidated statements of operations on a straight-line basis over the
lease term.
The adoption did not impact our beginning
or prior period consolidated condensed balance sheets, statement of equity / (deficit), statement of operations and statement of
cash flows.
Under Topic 842, the Company determines
if an arrangement is a lease and classifies that lease as either an operating or finance lease at inception. If an arrangement
is a lease or contains a lease, we then determine whether the lease meets the criteria of a finance lease or an operating lease.
ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the
lease term. For this purpose, only payments that are fixed and determinable at the time of commencement are considered. As the
rate implicit in certain of the Company's leases is not easily determinable, the Company’s applicable incremental borrowing
rate is used in calculating the present value of the sum of the lease payments. The right-of-use asset is recognized at the amount
of the lease liability with certain adjustments, if applicable. These adjustments include lease incentives, prepaid rent, and initial
direct costs. We reassess if an arrangement is or contains a lease upon modification of the arrangement. At the commencement date
of a lease, we recognize a lease liability for contractual fixed lease payments and a corresponding right-of-use asset representing
our right to use the underlying asset during the lease term. The lease liability is measured initially as the present value of
the contractual fixed lease payments during the lease term. The lease term additionally includes renewal periods only if it is
reasonably certain that we will exercise the options. Contractual fixed leases payments are discounted at the rate implicit in
the lease when readily determinable. Lease terms may include options to extend or terminate the lease when it is reasonably certain
that the options will be exercised.
Operating leases are included in Operating
lease right-of-use assets, Other current liabilities, and Operating lease liabilities, due after one year, in
our Consolidated Condensed Balance Sheets.
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.
Non Income Taxes
The Company is
subject to India Goods and Services Tax and other local duties and non-income taxes on its transactions in India. The Company collects
such taxes from customers, and pays such taxes on applicable supplies and inputs, and remits the net amounts to the respective
local tax authorities on an accrual basis.
Equity-method
Investments
Through PRAMA, the Company has a 29.575%
equity interest in PCW, a non-trading company formed to develop a potential hotel in Bengaluru, India. The Company exercises significant
influence over PCW but does not control the investee and the Company is not the primary beneficiary of the investee’s activities.
PCW is accounted for using the equity method.
Equity investments
are accounted for using the equity-method of accounting if the investment gives us the ability to exercise significant influence,
but not control, over an investee. The total of our investments in equity-method investees, including identifiable intangible assets,
deferred tax liabilities and goodwill, is included within “Other noncurrent assets” on our consolidated balance sheets.
Our share of the earnings or losses as reported by equity-method investees, amortization of the related intangible assets, and
related gains or losses, if any, are classified as “Equity-method investment activity, net of tax” on our consolidated
statements of operations. Our share of the net income or loss of our equity-method investees may in the future include operating
and non-operating gains and charges, which may have a significant impact on our reported equity-method investment activity and
the carrying value of those investments. We regularly evaluate these investments, which are not carried at fair value, for other-than-temporary
impairment.
We record purchases, including incremental purchases, of shares
in equity-method investees at cost. Reductions in our ownership percentage of an investee, including through dilution, are generally
valued at fair value, with the difference between fair value and our recorded cost reflected as a gain or loss in our equity-method
investment activity. In the event we no longer have the ability to exercise significant influence over an equity-method investee,
we would discontinue accounting for the investment under the equity method.
Included in Other Non Current Assets as of June 30, 2019, is
$346,074 relating to the fair value of equity-method investments and $319,725 relating to the fair value of amounts due from equity-method
investee, in aggregate $665,799. During the period April 22, 2019, through June 30, 2019, there was no recorded impairment for
the equity investee. Also there was no activity in the equity method investee and so no equity-method investment activity, net
of tax, was recorded in our Statement of Operations for the quarter ended June 30, 2019.
Related Parties
The Company follows FASB ASC subtopic 850-10 for the identification
of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20, the Company’s related
parties include: (a) affiliates of the Company (“Affiliate” means, with respect to any specified person, any other
person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with
such person, as such terms are used in and construed under Rule 405 under the Securities Act); (b) entities for which investments
in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection
of Section 825-10-15, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit of
employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal
owners of the Company; (e) management of the Company; (f) other parties with which the Company may deal if 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; and (g) other parties that can significantly influence
the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties
and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully
pursuing its own separate interests.
Recent Accounting Pronouncements
New Accounting Pronouncements Recently Adopted
On April 1, 2019 the Company adopted ASU No. 2016-2, Leases (Topic
842) (ASU 2016-2), as amended, which generally requires lessees to recognize operating and financing lease liabilities and corresponding
right-of-use (“ROU”) assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing
and uncertainty of cash flows arising from leasing arrangements. In July 2018, the FASB issued ASU 2018-11, Leases
(Topic 842), Targeted Improvements, which provides an additional, optional transition method with which to adopt the new
leases standard. This additional transition method allows for a cumulative-effect adjustment to the opening balance of retained
earnings in the period of adoption, rather than in the earliest period presented in the financial statements, as originally required
by ASU 2016-2.
Adoption of the standard did not result in adjustment to our
prior period Balance Sheets, Statements of Operations or Statements of Cash Flows. When we adopted ASU 2016-02, we applied the
package of practical expedients allowed by the standard, and therefore, we did not reassess: a) Whether any expired or existing
contracts are or contain leases under the new definition; b) The lease classification for any expired or existing leases; or c)
Whether previously capitalized costs continue to qualify as initial direct costs.
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. Management
is currently evaluating this ASU to determine its impact to the Company's financial statements but does believes it is expected
to have a minimal impact on the Company’s financial statements and related disclosures.
New Accounting Pronouncements Not
Yet Adopted
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. LEASES
Balance sheet information related to our
leases is included in the following table:
Operating leases
|
|
June 30, 2019
|
|
Operating lease right-of-use assets
|
|
$
|
8,335,384
|
|
Operating lease liabilities, due within one year
|
|
$
|
285,890
|
|
Operating lease liabilities, due after one year
|
|
$
|
8,233,283
|
|
Total operating lease liabilities
|
|
$
|
8,519,173
|
|
Operating lease liabilities, due within
one year are included in Other current liabilities on our Consolidated Condensed Balance Sheet as of June 30, 2019.
The components of lease expense during
the quarter ended June 30, 2019 is included in the following table:
|
|
Financial statement line item
|
|
|
June 30, 2019
|
|
Amortization of right-of-use assets
|
|
Cost of revenue
|
|
|
$
|
81,304
|
|
Interest on lease liabilities
|
|
Cost of revenue
|
|
|
|
278,117
|
|
Total lease expense
|
|
|
|
|
$
|
359,421
|
|
Lease expense is included in Cost of revenue in our Consolidated
Condensed Statement of Operation for the quarter ended June 30, 2019.
Supplemental other information related to leases were as follows:
Weighted Average Remaining Lease Term
|
|
|
|
|
Operating leases
|
|
14.5
|
Years
|
Weighted Average Discount Rate
|
|
|
|
|
Operating leases
|
|
14.0
|
|
%
|
The future maturities of lease liabilities
as of June 30, 2019, are as indicated below:
As of June 30, 2019
|
|
Operating Leases
|
|
Year ending March 31, 2021
|
|
$
|
221,174
|
|
Year ending March 31, 2022
|
|
|
335,368
|
|
Year ending March 31, 2023
|
|
|
402,300
|
|
Year ending March 31, 2024
|
|
|
462,539
|
|
Thereafter
|
|
|
7,097,792
|
|
Total lease payments
|
|
$
|
8,519,173
|
|
5. PROPERTY AND EQUIPMENT,
NET
Property and Equipment consists of
the following as of June 30 and March 31, 2019.
|
|
June 30, 2019
|
|
|
March 31, 2019
|
|
Furniture, fixtures and fittings
|
|
$
|
295,679
|
|
|
$
|
32,247
|
|
Leasehold improvements
|
|
|
867,918
|
|
|
|
-
|
|
Plant and machinery
|
|
|
554,205
|
|
|
|
-
|
|
Construction in process
|
|
|
67,039
|
|
|
|
-
|
|
Total
|
|
|
1,784,841
|
|
|
|
32,247
|
|
Accumulated depreciation
|
|
|
(77,822
|
)
|
|
|
(20,000
|
)
|
Fixed assets, net
|
|
$
|
1,707,019
|
|
|
$
|
12,247
|
|
Depreciation expense for the quarters
ended June 30, 2019 and June 30, 2018 was $57,822 and $966 respectively.
6. INTANGIBLE ASSETS
Intangible assets with definite lives
consist of the following as of June 30 and March 31, 2019:
|
|
June 30, 2019
|
|
|
March 31, 2019
|
|
Software and software access agreement
|
|
$
|
1,107,988
|
|
|
$
|
1,088,264
|
|
Customer relationships
|
|
|
1,533,881
|
|
|
|
-
|
|
Total
|
|
|
2,641,869
|
|
|
|
1,088,264
|
|
Accumulated amortization
|
|
|
(802,030
|
)
|
|
|
(725,547
|
)
|
Intangible assets with definite lives, net
|
|
$
|
1,839,839
|
|
|
$
|
362,717
|
|
Amortization expense for the quarters ended June 30, 2019 and
June 30, 2018 was $76,483 and $38,319 respectively. The Company has no impairment charge for definite lived intangible assets for
the quarter ended June 30, 2019.
Intangible assets with indefinite lives
consist of the following as of June 30 and March 31, 2019:
|
|
June 30, 2019
|
|
|
March 31, 2019
|
|
Trademarks
|
|
$
|
469,204
|
|
|
$
|
-
|
|
Accumulated amortization
|
|
|
-
|
|
|
|
-
|
|
Intangible assets with indefinite lives, net
|
|
$
|
469,204
|
|
|
$
|
-
|
|
Intangible assets with indefinite lives are not amortized, they
are reviewed for impairment annually, or whenever events or changes in circumstances indicate that the related carrying amounts
may not be recoverable. In these circumstances, they are tested for impairment based on undiscounted cash flows and, if impaired,
written down to fair value based on either discounted cash flows or appraised values.
7. AMOUNTS DUE TO AND FROM RELATED
PARTIES
Amounts due from related parties
arising from PRAMA
Included in the amounts due from related
parties balance from the consolidated balance sheet of $951,521 as of June 30, 2019, is a $14,364 non-PRAMA brought forward from
the previous period, and $937,157 arising from the acquisition of PRAMA on April 22, 2019, all of which are unsecured and non-interest
bearing, which are described below:
Due from related parties
|
|
Description
|
|
June 30,
2019
|
|
Pramatech Pvt. Ltd
|
|
Shareholder in PRAMA, there are also common shareholders in PRAMA and this company
|
|
$
|
709,145
|
|
|
|
|
|
|
|
|
Mr. B. K. Ashok
|
|
Shareholder in PRAMA
|
|
|
108,765
|
|
Alchemy Food & Franchisee
Solutions Pvt. Ltd
|
|
Company partly owned by the Chief Executive Officer of a
subsidiary of PRAMA
|
|
|
36,307
|
|
Prime Finvest Leasing
Limited
|
|
Company partly owned by a PRAMA shareholder, has common
shareholders with Pramatech Pvt. Ltd above
|
|
|
36,255
|
|
Opus Restaurants Pvt. Ltd
|
|
Shareholder in PRAMA, there are also common shareholders in
PRAMA and this company
|
|
|
10,151
|
|
Mr. Akbar S Khwaja
|
|
Chief Executive Officer of a subsidiary of PRAMA
|
|
|
31,458
|
|
Mr. M. V. Chetan Kumar
|
|
Shareholder in PRAMA
|
|
|
5,076
|
|
Total
|
|
|
|
$
|
937,157
|
|
Amounts due to related parties arising
from PRAMA
Included in the amounts due to related
party balance from the consolidated balance sheet of $909,610 as of June 30, 2019, is a $13,828 non-PRAMA brought forward from
the previous period and $895,782 of various liabilities assumed on the purchase of PRAMA on April 22, 2019 which are described
below:
Due to related parties
|
|
Description
|
|
June 30,
2019
|
|
Opus Hotels & Resorts
Pvt. Ltd
|
|
Shareholder in PRAMA, there are also common shareholders in
PRAMA and this company
|
|
$
|
680,866
|
|
Mr. Mahesh Gandhi
|
|
Shareholder in PRAMA
|
|
|
187,226
|
|
Mr. Sobha Gandhi
|
|
Relative of Mahesh Gandhi, (shareholder above)
|
|
|
243
|
|
Navkar Pole Products
Ltd
|
|
Company partly owned by a PRAMA shareholder
|
|
|
7,251
|
|
Mr. Pravin Rathod
|
|
Shareholder in PRAMA
|
|
|
15,845
|
|
Mr. Akbar Khwaja
|
|
Chief Executive Officer of a subsidiary of PRAMA
|
|
|
4,351
|
|
Total
|
|
|
|
$
|
895,782
|
|
Transactions
involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive,
free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the
related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless
such representations can be substantiated.
8. LOANS WITH THIRD PARTIES
Loans and borrowings with third parties
are discussed below:
|
|
As of
|
|
|
|
June 30, 2019
|
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Convertible note with United Techno Solutions, Inc
|
|
$
|
250,000
|
|
|
$
|
-
|
|
Current portion of long term loan with Small Industries Development Bank of India
|
|
|
182,801
|
|
|
|
-
|
|
Short term borrowing with NeoGrowth Credit Private Limited
|
|
|
34,421
|
|
|
|
-
|
|
|
|
$
|
467,222
|
|
|
$
|
-
|
|
Long term loans and convertible notes:
|
|
|
|
|
|
|
|
|
Long term portion of loan with Small Industries Development Bank of India
|
|
$
|
554,372
|
|
|
$
|
-
|
|
Convertible note with United Techno Solutions, Inc
|
|
|
-
|
|
|
|
250,000
|
|
Less current portion of Small Industries Development Bank of India loan
|
|
|
(182,801
|
)
|
|
|
-
|
|
|
|
$
|
371,571
|
|
|
$
|
250,000
|
|
On March 16, 2019 the
Company obtained a $250,000 convertible note from United Techno Solutions, Inc with a maturation date of April 1, 2020 and an embedded
interest rate of 8%. The note may convert into 357,143 shares of common stock at the noteholder’s option. The balance outstanding
as of June 30, 2019 amounted to $250,000. No interest has been paid on this note.
As part of the acquisition
of PRAMA on April 22, 2019, the Company assumed a loan with NeoGrowth Credit Private Limited. The remaining balance as of June
30, 2019 was $34,421 with a maturation of March 21, 2020. This is included in short term borrowings as of June 30, 2019. The loan
has an embedded finance charge of 18% interest over an 18 month period. The loan is paid in daily installments, interest is paid
in Indian Rupees and approximates $23 per day. The loan is callable on demand. Interest paid during the period April 22, 2019 through
June 30, 2019 approximated $1,610.
As
part of the acquisition of PRAMA on April 22, 2019, the Company assumed a loan with Small Industries Development Bank of India.
The original principal was $969,932 (60 million Indian Rupees), on December 31, 2013 and is payable over monthly installments over
7 years, with no payments due in the first twelve months of the loan. The bank has the right to convert the loan into equity capital
of PRAMA. The rate of interest is 15.5% per annum. The loan is secured by: a) A senior secured charge on all moveable assets located
at a contract hotel in Ahmedabad, India; b) Pledged deposit of $80,828 (5 million Indian Rupees); c) mortgage of leasehold rights
in the lease contract for the contract hotel in Ahmedabad, India; d) Guarantee of Prama Consultancy Services Pvt. Ltd a related
party of the Company; and e) the personal guarantees of Messrs. Mahesh Gandhi, Pravin Rathod,
9. LOANS WITH RELATED PARTIES
Loans and borrowings with related parties
are discussed below:
|
|
As of
|
|
|
|
June 30, 2019
|
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Convertible note with Takniki Communications, Inc
|
|
$
|
695,000
|
|
|
$
|
695,000
|
|
Convertible note with Arna Global LLC
|
|
|
-
|
|
|
|
956,000
|
|
Loan with Mr. Mahesh Ghandi
|
|
|
329,323
|
|
|
|
-
|
|
Promissory note with Arna Global LLC
|
|
|
200,000
|
|
|
|
-
|
|
Convertible note with Mr. Deepak Sharma
|
|
|
-
|
|
|
|
150,515
|
|
Convertible note with Mr. Sachin Mandloi
|
|
|
-
|
|
|
|
36,642
|
|
|
|
$
|
1,224,323
|
|
|
$
|
1,838,157
|
|
On December 31, 2016,
the Company issued a convertible note to Takniki Communications, Inc, an affiliate owned by Sachin Mandloi, our Vice President
and a director, totaling $695,000. This note was issued pursuant to a Software Development Agreement dated September 23, 2016 between
Takniki Communications, Inc and the Company to finance the upgrade of our Travelcord operating software. The note has a maturation
of December 31, 2019, and bears interest at the rate of ten percent payable at maturity. The principal amount of this note is convertible
into 10,303,070 shares of the Company’s common stock at the noteholder’s option at maturity.
The
loan from Mr. Mahesh Gandhi was assumed as a result of the purchase of PRAMA on April 22, 2019. The loan amounted to $320,114 and
$329,323 as of April 22, 2019 and June 30, 2019, respectively. The counterparty is Mr. Mahesh Gandhi, a shareholder in PRAMA.
This is an informal loan agreement. The loan bears interest at the rate of 15% per annum and is callable on demand. The accrued
but not paid interest on this loan included in the balance as of June 30, 2019 amounted to $9,209.
On
April 16, 2019, the Company borrowed $300,000 from ARNA Global LLC, an entity owned and controlled by Mr. Sharma, its President
and CEO, to partially fund the acquisition of PRAMA. During the quarter, $100,000 was re-paid to ARNA Global LLC, however $200,000
was outstanding as of June 30, 2019. On July 8, 2019, the remaining $200,000 was repaid. The loan is unsecured and bears interest
at 10% per annum.
On March 7, 2016, the
Company issued a convertible note to Arna Global LLC, a related party wholly owned by the CEO and President of the Company for
$956,000. The note matured on March 7, 2019, and bore interest at the rate of ten percent. The note was converted into 21,194,381
shares of common stock at the noteholders option on March 7, 2019.
On March 8, 2016, the
Company issued a convertible note to Mr. Sachin Mandloi, a related party for $38,076. The note matured on March 8, 2019, and bore
interest at the rate of ten percent. The note was converted into 835,552 shares of common stock at the noteholders option on March
8, 2019.
On March 8, 2016, the
Company issued a convertible note to Mr. Deepak Sharma, the CEO and President of the Company for $156,407. The note matured on
March 8, 2019, and bore interest at the rate of ten percent. The note was converted into 3,432,234 shares of common stock at the
noteholders option on March 8, 2019.
10. STOCKHOLDERS’ EQUITY
During
the quarter ended June 30, 2019, the Company issued an aggregate of 30,441,407 of common shares by means of: a) 25,462,167 common
shares through conversion of notes; b) 2,632,653 common shares relating directly to the PRAMA acquisition; c) 1,571,430 common
shares when the warrant holders exercised their $0.01 warrants; and d) 775,157 common shares through a private placement. These
events are described in further detail below.
In
June 2019, the Company issued 25,462,167 common shares and reduced its liabilities by approximately $1,150,483 in connection with
three separate related parties who converted their notes. These were non-monetary transactions.
On
April 22, 2019, the Company issued 2,632,653 common shares to the shareholders of PRAMA, at a price of $0.28 per share,
as part of the PRAMA acquisition. This was a non-monetary transaction.
In
June 2019, the Company issued 1,571,430 common shares when the warrant holders exercised their warrants and received approximately
$15,714 in cash.
During the quarter ended June 30, 2019
the Company issued and sold 775,157 units comprising one share and warrant to purchase two share of Company’s common stock;
par value $0.0001 pursuant to a private placement. The purchase price per unit was $0.70 resulting in aggregate proceeds of $542,610
to the Company. The Company issued warrants to acquire approximately 1,550,314 common shares pursuant to the 775,157 units listed
above during the quarter ended June 30, 2019. These warrants shall be exercisable, in whole or in part, during the three-year term
commencing from the issuance date at an exercise price of $0.01.
Warrants:
The following table is the summary of warrant
activities during the period:
Warrants
|
|
|
Number
of shares
|
|
|
Weighted average
exercise price
|
|
|
Weighted average remaining
contractual life
|
|
|
Approximate aggregate intrinsic
value
|
|
Outstanding as of March 31, 2019
|
|
|
|
1,571,430
|
|
|
$
|
0.01
|
|
|
|
3.0
|
|
|
$
|
345,000
|
|
Issued
|
|
|
|
1,550,314
|
|
|
$
|
0.01
|
|
|
|
3.0
|
|
|
$
|
340,000
|
|
Exercised
|
|
|
|
1,571,430
|
|
|
$
|
0.01
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of June 30, 2019
|
|
|
|
1,550,314
|
|
|
$
|
0.01
|
|
|
|
3.0
|
|
|
$
|
340,000
|
|
Aggregate intrinsic value represents the difference between
the Company’s estimate of the fair value of its common shares and the exercise price of outstanding, in-the-money warrants.
The Company is not actively traded on the Over the Counter Market. The total intrinsic value of warrants exercised for the three
month period ended June 30, 2019 was minimal. The fair value of warrants granted during the three months ended June 30, 2019 approximated
$0.23 per warrant.
11. INCOME TAX
US taxes
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 and PRAMA
file tax returns in India and due to losses, no tax liability or net deferred tax asset is recorded. The Company is generally subject
to U.S. Federal, State and local examinations by tax authorities for the past three years.
Indian taxes
Historically, the Company has not paid
Indian income taxes because of historical losses. For the period April 22, 2019 to June 30, 2019, the Company believes the PRAMA
results of operations would not have resulted in an income tax liability, due to the calculation of a pro forma tax loss for the
period and the availability of prior period tax losses.
12. 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.
The Company has outstanding convertible
debt of $945,000 which converts into 10,660,213 of the Company’s common stock, which may cause diluted earnings per share.
Since the Company has only incurred losses, basic and diluted loss per share are the same as potentially dilutive shares have been
excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive.
The Company issued approximately 1,550,314
warrants during quarter ended June 30, 2019, which had minimal impact on the earning per share calculation for the quarter ended
June 30, 2019.
|
|
Quarter Ended
|
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
Basic net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to TripBorn, Inc.
|
|
$
|
(427,264
|
)
|
|
$
|
(259,159
|
)
|
Weighted average common shares outstanding
|
|
|
97,605,456
|
|
|
|
95,711,874
|
|
Basic net loss per share attributable to TripBorn Inc. common stockholders
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
Due to net loss, the shares of common stock
underlying the convertible notes were not included in the calculation of diluted net loss per share, as they would have had an
antidilutive effect.
13. COMMITMENTS AND CONTINGENCIES
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, 2018, 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.
Through Sunalpha,
the Company currently occupies approximately 2,455 square feet of office space owned by the CEO of the Company on a rent-free basis.
As of June 30, 2019 and 2018, the Company has not paid any rent. There were no significant commitments or contingencies for PRAMA
as of June 30, 2019.
The Company is party to
certain legal proceedings that arise in the ordinary course and are incidental to its business. On the acquisition of PRAMA, on
April 22, 2019, the Company assumed an interest in an arbitration claim. PRAMA made an arbitration claim of approximately $295,000
(21.2 million Indian Rupees) against Ms. Khurana Hotels and Apartments Private Limited in the Civil Court Senior Division of Amritsar,
India. The claim is based on the asserted failure of Ms. Khurana Hotels and Apartments Private Limited, as lessor, to comply with
the terms of the lease. As of the date of this filing, the arbitration proceedings are on-going.
Although litigation and
arbitration are inherently uncertain, based on the information currently available, management does not believe that the currently
pending arbitration will have a material adverse effect on the Company’s consolidated financial position, liquidity or results
of operations.
14. BUSINESS SEGMENTS
Prior to the acquisition of PRAMA, a hospitality
company, the Company was a one segment company. Following, the acquisition of PRAMA, the Company’s chief operating decision
maker changed the information he receives to manage, assess, operate the business and to allocate capital. Accordingly, the Company
changed its operating segments to comprise: eCommerce aggregation services and Hospitality, respectively. The Company management
reviews and evaluates the operating segments, as defined, are components of an enterprise about which separate financial information
is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing
financial performance. The reportable segments reflect the internal organization of the Company and are strategic businesses that
offer different products and services. The Company reports financial information and evaluates its operations by revenues. Management,
including the chief operating decision maker, reviews operating results solely by revenue and operating results.
All net revenues are derived from transactions
with third party customers, there are no inter-segment revenues. All of the net revenue is derived from operations in India, substantially
all of the expenses are borne in India, with certain expenses borne in the US.
The Company measures segment performance
based on loss from continuing operations. Summarized financial information concerning each of the Company's reportable segments
is as follows:
|
|
Three months ended June 30, 2019
|
|
|
|
eCommerce
Aggregator
|
|
|
Hospitality
|
|
|
Intersegment
elimination
|
|
|
Consolidated total
|
|
Segment results and total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
132,120
|
|
|
$
|
1,693,738
|
|
|
$
|
-
|
|
|
$
|
1,825,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
(108,145
|
)
|
|
|
(1,324,160
|
)
|
|
|
-
|
|
|
|
(1,432,305
|
)
|
Operating expenses
|
|
|
(263,871
|
)
|
|
|
(573,958
|
)
|
|
|
|
|
|
|
(837,829
|
)
|
Loss from operations, before other
expense, net
|
|
|
(239,896
|
)
|
|
|
(204,380
|
)
|
|
$
|
-
|
|
|
|
(444,276
|
)
|
Other expense, net
|
|
|
(46,347
|
)
|
|
|
(72,132
|
)
|
|
|
-
|
|
|
|
(118,479
|
)
|
Net loss
|
|
$
|
(286,243
|
)
|
|
$
|
(276,512
|
)
|
|
$
|
-
|
|
|
$
|
(562,755
|
)
|
Total assets
|
|
$
|
4,950,735
|
|
|
$
|
17,654,185
|
|
|
$
|
(2,783,529
|
)
|
|
$
|
19,821,391
|
|
During the quarter ended June 30, 2019, the Company derived
approximately 93% and 7% of its revenue from its Hospitality and eCommerce Aggregation segments, respectively, compared to 100%
of its business from its eCommerce Aggregation segment solely, for the quarter ended June 30, 2018.
15. SUBSEQUENT EVENTS
In
August 2019, the Company issued 714,286 units at a price $0.70 and received approximately $500,000. Each unit consists of one share
of the Company’s common stock and two warrants to purchase common stock. Each warrant can be exercised at any time prior
to August 16, 2022 for the purchase of one share at an exercise price of $0.01.
In
October 2019 the Company issued 535,718 units at a price $0.70 and received approximately $375,000. Each unit consists of one share
of the Company’s common stock and two warrants to purchase common stock. Each warrant can be exercised at any time prior
to October 10, 2022 for the purchase of one share at an exercise price of $0.01.
In
October 2019, the Company issued 4,050,313 shares for the warrants that were outstanding and received approximately $40,503.
On July 8, 2019, the remaining $100,000
due on the promissory note to ARNA Global LLC, an entity owned and controlled by Mr. Sharma, the Company’s President and
CEO, was repaid.