UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number: 001-37466

Majesco

(Exact Name of Registrant as Specified in Its Charter)

(973) 461-5200

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yesx ☒  No¨ ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yesx ☒  No¨ ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes¨ ☐  Nox ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

MAJESCO

PART I - FINANCIAL INFORMATION

Majesco and Subsidiaries

Consolidated Balance Sheets (Unaudited)

(All(All amounts are in thousands of US Dollars except share data and as stated otherwise)

Unaudited

See accompanying notes to the Consolidated Financial Statements.

Majesco and Subsidiaries

Consolidated Statements of Operations (Unaudited)

(All amounts are in thousands of US Dollars except per share data and as stated otherwise)

See accompanying notes to the Consolidated Financial Statements.

Majesco and Subsidiaries

Consolidated Statements of Comprehensive IncomeIncome/(Loss) (Unaudited)

(All amounts are in thousands of US Dollars)

See accompanying notes to the Consolidated Financial Statements.

Consolidated Statements of Changes in Stockholders’ Equity
(Allamounts are in thousands of US Dollars except per share data and as stated otherwise)
Unaudited

Majesco and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

(All amounts are in thousands of US Dollars)

See accompanying notes to the Consolidated Financial Statements.

Majesco and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

(All amounts are in thousands of US Dollars except per share data and as stated otherwise)

Majesco (“Majesco” or(the “Company” and, together with its subsidiaries, the “Company”“Group”) is a global providerleader of cloud insurance software solutions for insurance business transformation. We provide technology, expertise, and leadership that helps insurers modernize, innovate and connect to build the future of their business and the insurance industry at speed and scale. We do this by providing technology that connects people and businesses to insurance in ways that are innovative, hyper-relevant, compelling and personal. In addition to the United States, we operate in Canada, Mexico, the United Kingdom, Malaysia, Singapore, Ireland and India. With our CloudInsurer^® solutions, we offer cloud-based core insurance platform platforms, along with distribution management and data and analytics solutions. With our Digital1^st™solutions consulting serviceswe offer a cloud-native, digital engagement and other insurance solutions for business transformationmicroservices platform-as-a-service for the entire insurance industry. Majesco offers core insurance platformbusiness and an ecosystem of partners with apps that provide innovative data sources and capabilities. These solutions for property and casualty/general insuranceenable Property & Casualty/General Insurance (“P&C”), and life, annuities, pensionsLife, Annuities, Pensions and group/benefitsGroup/Voluntary Benefits (“L&A and the Group”) providers enabling them to automatemodernize and manage  business processesoptimize their businesses across the end-to-end insurance value chain, andbetter comply with policies and regulations, across their organizations. In addition, Majesco offers a variety of other technology-based solutionsinnovate with new business models, enter new markets, and launch new products and services for distribution management, digital, dataincumbents, greenfields and cloud.  Our consulting service solutions provide enterprise consulting, applications development management and testing for insurers. Ourstartups. Using this portfolio of solutions enableincluding our core P&C, L&A and Group and LifePlus insurance platforms, data and analytics, distribution management and Digital1^st Insurance, our customers tocan respond to evolving market needs, growth and innovation opportunities and regulatory changes, which enables agility, innovation and speed while improving the effectiveness and efficiency of their business operations.

Majesco’s customers are insurers, managing general agents and other risk providers from the P&C, L&A and Group insurance segments worldwide. Majesco delivers proven platform solutions for policy, rating, underwriting, billing, claims, distribution management, digital and data and analytics as well as consulting services for enterprise consulting, digital, data, testing and application development and maintenance.

Majesco’s common stock was listed on the NYSE American and began trading on the NYSE American on June 29, 2015. Effective on February 26, 2019, Majesco along withtransferred the listing of its subsidiaries (hereinafter referred to collectively ascommon stock and began trading on the “Group”), operates inNasdaq Global Market under the United States, Canada, Mexico, the United Kingdom, Malaysia, Singapore, Thailand and India.symbol “MJCO.”

The accompanying unaudited consolidated financial statements were preparedreflect the Group’s financial position, results of operations and cash flows in accordanceconformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information.

All inter-company balances and with the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Act of 1933, as amended. The March 31, 2018 consolidated balance sheet was derived from our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2018 filed with the U.S. Securities and Exchange Commission (the “SEC”) on June 22, 2018 (the “Annual Report”), but does not include all disclosures required by U.S. GAAP. In the opinion of management, all adjustments, consisting only of normal recurring adjustments except as otherwise noted, considered necessary for a fair statement of results of operations and financial positiontransactions have been included. The results for the interim periods presented are not necessarily indicativeeliminated in consolidation.

Certain employees of the results expected for any future period. The following information should be readGroup participate in conjunction with the audited financial statements and notes thereto included in our Annual Report. 

Mastek Ltd. maintained benefit and stock-based compensation programs at the parent company level. After the demerger from Mastek Ltd., which became effective on June 1, 2015, the Group employees who participated in those programs were allotted options of Majesco’sour parent company Majesco Limited, in the same proportion in addition to the existing options of Mastek Ltd., which these employees already had.Limited. The consolidated balance sheets do not include anythe outstanding equity related to the stock-based compensation programs of Mastek Ltd., but include outstanding equity related to the equity-based compensation programsprogram of Majesco Limited.

and Majesco Limited which is operated for the benefit of our employees.

For a description of all significant accounting policies, see Note 2, Summary of Significant Accounting Policies, of the notes to the consolidated and combined financial statements included in our Annual Report.Report on Form 10-K for the fiscal year ended March 31, 2019 (the “Annual Report”). There have been no material changes to our significant accounting policies since the filing of the Annual Report.Report other than the ASC 842 for Lease accounting which has been included under Recent Accounting Pronouncements.

The Group’s consolidated financial statements include the accounts of Majesco and its wholly-owned subsidiaries, Cover-All Systems, Inc., Majesco Canada Ltd., Majesco Software and Solutions Inc. (“MSSI”), Majesco Sdn. Bhd., Majesco UK Limited, Majesco (Thailand) Co., Ltd., Majesco Software and Solutions India Private Limited (“MSSIPL”) and, Majesco Asia Pacific Pte Ltd., Exaxe Limited and Exaxe Holdings Limited (“Exaxe”) as of SeptemberJune 30, 2018. All material intercompany balances and transactions have been eliminated in consolidation.2019.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. On an on-going basis, we evaluate our estimates, including those related to revenue recognition cash equivalents and marketable securities, accounts receivable, income taxes, goodwill, and stock-based compensation.

Recent Accounting Developments

Accounting for Leases (Topic 842)

In February 2016, the FASBFinancial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, “Leases (Topic 842)”(“Leases (“ASU 2016-02”), which requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice.. ASU 2016-02 states thatsupersedes the lease guidance under FASB ASC Topic 840, Leases, resulting in the creation of FASB ASC Topic 842, Leases. ASU 2016-02 requires a lessee wouldto recognize in the statement of financial position a lease liability for the obligation to make lease payments (the lease liability) and a right-to-useright-of-use (“ROU”) asset for therepresenting its right to use the underlying asset for the lease term.term from operating leases. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors were originally required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. In July 2018, FASB issued ASU No. 2018-11, Targeted Improvements. This update still requires modified retrospective transition; however, it adds the option to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment in the current period instead of at the beginning of the earliest period presented. Under this option, comparative periods presented in the financial statements in which the new lease standard is adopted will continue to be presented in accordance with prior guidance. The Company has adopted the new accounting standard using the modified retrospective alternative effective April 1, 2019.

The adoption of the new standard had a material effect on the Company’s financial statements, with the most significant effects of adoption relating to (1) the recognition of new right-of-use assets and lease liabilities on its balance sheet for real estate operating leases; and (2) providing significant new disclosures about its leasing activities. Upon adoption, the Company recognized operating lease liabilities of approximately $5.2 million based on the present value of the remaining minimum rental payments for existing operating leases. The Company also recognized corresponding ROU assets of approximately $5.2 million. There is no impact to stockholders’ equity from the adoption.

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU No. 2016-13”). ASU No. 2016-13 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. ASU No. 2016-13 will becomebe effective for the Company beginning April 1, 2019. Basedin the first quarter of fiscal year 2021, with early adoption permitted, and is to be applied using a modified retrospective approach. The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2016-13 on its current assessment, the Company does not expect the adoption of this update to have a material impact on its consolidated financial statements.

Simplifying the Test for Goodwill Impairment (Topic 350)Consolidated Financial Statements.

In January 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-04, “Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which removes the requirement for an entity to calculate the implied fair value of goodwill (as part of step 2 of the current goodwill impairment test) in measuring a goodwill impairment loss. The standard will be effective for the Company beginning April 1, 2020.in the first quarter of fiscal 2021. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Based on its current assessment, the Company does not expect the adoption of this update to have a material impact on its consolidated financial statements.

IncomeIn February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Effects from Accumulated Other Comprehensive Income

In February 2018, the FASB issued ASU No. 2018-02, “Income Statement, Reporting Comprehensive Income (Topic 220): Reclassification of CertainTax Effects from Accumulated Other Comprehensive Income” (“ASU 2018-02”), which allows apermits the reclassification of stranded tax effects resulting from the Tax Cuts and Jobs Act (the “TCJA” or “U.S. tax reform”) from accumulated other comprehensive income (loss) to retained earnings, asearnings. The new standard became effective for the Company beginning with the first quarter of fiscal 2020. The adoption of this guidance did not have a resultmaterial impact on the Company’s Consolidated Financial Statements.

In June 2018, the FASB issued Accounting Standards Update No. 2018-07, “Compensation — Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”), which aligns the measurement and classification guidance for share-based payments to nonemployees with that for employees, with certain exceptions. It expands the scope of ASC 718 to include share-based payments granted to nonemployees in exchange for goods or services used or consumed in the entity’s own operations and supersedes the guidance in ASC 505-50. The ASU retains the existing cost attribution guidance, which requires entities to recognize compensation cost for nonemployee awards in the same period and in the same manner (i.e., capitalize or expense) they would if they paid cash for the goods or services, but it moves the guidance to ASC 718. The guidance also allows nonpublic entities to account for nonemployee awards using certain practical expedients that are already available for employee awards, but the same accounting policies must be used for awards to both employees and nonemployees. The new standard became effective for the Company beginning with the first quarter of fiscal 2020. The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

In July 2018, the FASB issued ASU 2018-09 – Codification Improvements (“ASU 2018-09”), which facilitates amendments to a variety of topics to clarify, correct errors in, or make minor improvements to the accounting standards codification. The effective date of the Tax Cutsstandard is dependent on the facts and Jobs Act.circumstances of each amendment. Some amendments do not require transition guidance and will be effective upon the issuance of this standard. A majorityof the amendments in ASU 2018-02 is2018-09became effective for the Company beginning with the first quarter of fiscal years, and interim periods within those years, beginning after December 15,2020. The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which amends ASC 820, Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The effective date is the first quarter of fiscal year 2021, with early adoption permitted.permitted for the removed disclosures and delayed adoption until fiscal year 2021 permitted for the new disclosures. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. The Company is currently evaluating the impact of adopting the new standard forASU 2018-13 on its 2020 fiscal year and subsequent periods.consolidated financial statements.

Emerging Growth Company

We are an “emerging growth company” and “smaller reporting company” under the federal securities laws and are subject to reduced public company reporting requirements. In addition, Section 107 of the Jumpstart Our Business Startups Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have taken advantage of the extended transition period for complying with new or revised accounting standards. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates for complying with new or revised accounting standards.

The Group’s financial instruments consist primarily of cash and cash equivalents, short term investments in time deposits, restricted cash, accounts receivable, unbilled accounts receivable, accounts payable, accrued liabilities and accrued liabilities.derivative financial instruments. The carrying amounts of cash and cash equivalents, short term investments in time deposits, restricted cash, accounts receivable, unbilled accounts receivable, accounts payable and accrued liabilities as of the reporting date approximate their fair market value due to the relatively short period of time of original maturity tenure of these instruments.

Basis of Fair Value Measurement

Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The current accounting guidance for fair value measurements defines a three-level valuation hierarchy for disclosures as follows:

The following table sets forth the financial assets, measured at fair value, by level within the fair value hierarchy as of SeptemberJune 30, 20182019 and March 31, 2018:2019:

The following table presents the change in level 3 instruments:

The Company considers all short-term investments purchased with an original maturity date of three months or less to be cash equivalents.

Contingent consideration pertaining to the acquisition of the consulting business of Agile Technologies, LLC, a New Jersey limited liability company (“Agile”), as of December 31, 2015 has been classified under level 3 as the fair valuation of such contingent consideration and has been calculated using one or more of the significant inputs which are not based on observable market data. The fair value of the contingent consideration was estimated using a discounted cash flow technique with significant inputs that are not observable in the market. The significant inputs not supported by market activity included the Group’s probability assessments of expected future cash flows related to its acquisition of the consulting business of Agile during the earn-out period, appropriately discounted considering the uncertainties associated with the obligation, and calculated in accordance with the terms of the asset purchase agreement (the “Agile Agreement”) dated December 12, 2014, as amended on January 26, 2016.

The total gain/(losses) attributable to changes in the estimated contingent consideration payable for the acquisition of the consulting business of Agile were $835$0 for the three months ended June 30, 2019 and $835 for the three and six months ended SeptemberJune 30, 2018 and $(79) for2018. The Group paid no earn-out consideration to Agile in the fiscal year ended March 31, 2018.2019. The Group paid $1,100 to Agile as earn-out consideration in the fiscal year ended March 31, 2018. The Group paid $1,100 to Agile as earn-out consideration in the fiscal year ended March 31, 2017.

During the quarter ended September 30, 2018, the CompanyGroup and the promotersshareholders of Agile determined that the final earn-outearnout targets under the Agile Agreement would not be met and that no further contingent consideration would therefore be due under the Agile Agreement. Accordingly, the accrued outstanding balancecontingent consideration has been reversed in the income statement during the period ended September 30, 2018.

We use foreign currency forward contracts and par forward contractsContingent consideration pertaining to hedge our risks associated with foreign currency fluctuations related to certain commitments and forecasted transactions. The usethe acquisition of hedging instruments is governed by our policiesthe stock of Exaxe as of March 31, 2019 has been classified under level 3 as the fair value of such contingent consideration has been calculated using one or more significant inputs which are approved by our Boardnot based on observable market data. The fair value of Directors. We designate these hedging instruments asthe contingent consideration was estimated using a discounted cash flow hedges. Derivative financial instruments we enter intotechnique with significant inputs that are not designated as hedging instruments in hedge relationships are classified as financial instruments at fair valueobservable in the statementmarket. The significant inputs not supported by market activity included the Group’s probability assessments of operations.expected future cash flows related to its acquisition of the stock of Exaxe during the earn-out period, appropriately discounted considering the uncertainties associated with the obligation, and calculated in accordance with the terms of the share purchase agreement dated November 27, 2018 (the “Exaxe Agreement”).

The estimated contingent consideration payable for the acquisition of the stock of Exaxe was $5,019 at June 30, 2019 and $4,884 at March 31, 2019. The long-term contingent consideration has been evaluated for net present value.

The fair value of derivative financial instruments is determined based on observable market inputs and valuation models. The derivative financial instruments are valued based on valuations received from the relevant counter-party (i.e., bank). The fair value of the foreign exchange forward contract and foreign exchange par forward contract not valued by a bank has been determined as the difference between the forward rate on the reporting date and the forward rate on the original transaction, multiplied by the transaction’s notional amount (with currency matching).

The Group acquired software under a hire purchase arrangement which is stated at the present value of the minimum installment payments. The gross stated amount for such software is $430 and $430 and related accumulated depreciation is $150 and $107, respectively, as of September 30, 2018 and March 31, 2018.

Depreciation expenses in respect of assets held under hire purchase were $22 and $43 for the three and six months ended September 30, 2018, compared to $43 and $0 for the three and six months ended September 30, 2017.

The following is a schedule of the future minimum installment payments under hire purchase, together with the present value of the net minimum installment payments as of September 30, 2018.

MSSIPL Facilities

On June 30, 2015, the Group’s subsidiary, MSSIPL, entered into a secured Pre Shipment in Foreign Currency and Post Shipment in Foreign Currency (“PCFC”) facility with Yes Bank under which MSSIPL may request three months pre-export advances and advances against export collection bills. The maximum borrowing limit was initially 300 million Indian rupees. The interest rate on this PCFC facility was initially three months LIBOR plus 275 basis points. The interest rate on this PCFC facility is determined at the time of each advance. This PCFC facility is secured by a first pari passu charge over the current assets of MSSIPL. Excess outstanding beyond 100 million Indian rupees is to be backed by 100% fixed deposit receipts in MSSIPL or Majesco Limited. On September 27, 2016, MSSIPL extended this PCFC facility to June 17, 2017.

On September 13, 2017, MSSIPL entered into an addendum facility letter (the “2017 Addendum”) to its addendum facility letter dated September 27, 2016 with respect to the PCFC facility with Yes Bank dated June 30, 2015. The 2017 Addendum further extended the maturity date of the PCFC facility to May 22, 2018 and reduced the maximum borrowing limit from 300 million Indian rupees to 130 million Indian rupees, or approximately $1,793 based upon the exchange rate on September 30, 2018. In addition, the 2017 Addendum also amended the interest rate of the PCFC facility to LIBOR plus 150 basis points plus 2%. The interest rate on the PCFC facility is determined at the time of each advance. There is no outstanding balance against this loan as of September 30, 2018. The Group did not extend the term of this facility.

On May 9, 2017, MSSIPL and Standard Chartered Bank entered into an Export Invoice Financing Facility, Working Capital Overdraft Facility, Short Term Loans Facility, Bonds and Guarantees Facility and Pre Shipment Financing Under Export Orders Facility (collectively, the(the “Combined Facility”) pursuant to which Standard Chartered Bank agreed to a Combined Facility of up to 200 million Indian rupees (or approximately $2,917 based upon the$2,895 at exchange raterates in effect on SeptemberJune 30, 2018)2019). The Export Invoice Financing Facility is for the financing of MSSIPL’s sale of goods, as evidenced by MSSIPL’s invoice to the customer. Each amount drawn is required to be repaid within 90 days. The interest on this facility is based on the marginal cost of funds based lending rate (“MCLR”(the “MCLR”) plus a margin to be agreed with Standard Chartered Bank at the time of each drawdown. The MCLR is to be determined on the date of each disbursement and beis effective until repayment or maturity date.repayment. Interest will accrue from the utilization date to the date of repayment or payment of that utilization. The Working Capital Overdraft Facility and the Short Term Loans Facility are for working capital purposes and subject to sub-limits. The interest on these facilities is based on the MCLR plus a margin to be agreed with Standard Chartered Bank at the time of each borrowing.disbursement. The MCLR is to be determined on the date of each disbursement and beis effective until repayment or maturity. Interest will accrue from the draw down date up to the repayment or maturity date. The Bonds and Guarantees Facility is for the issuance of guarantees and subject to commissions as agreed with Standard Chartered Bank from time to time. The Pre Shipment Financing Under Export Orders Facility is for the purchase of raw material, processing, packing, transportation, warehousing and other expenses and overheads incurred by MSSIPL to ready goods for sale. The interest on this facility is based on the MCLR plus a margin to be agreed with Standard Chartered Bank at the time of each borrowing.disbursement. The MCLR is to be determined on the date of utilization and beis effective until repayment. Interest will accrue from the utilization date up to the repayment date.

The interest under the Combined Facility may be changed by Standard Chartered Bank upon the occurrence of certain market disruption events. The Combined Facility is secured by a first pari passu security interest over the current assets of MSSIPL. MSSIPL was in compliance under the terms of this Combined Facility as of SeptemberJune 30, 2018.

2019. There are no outstanding loans under this Combined Facility as of SeptemberJune 30, 2018.2019.

Term Loan Facility

On March 23, 2016, Majesco entered into a Loan Agreement (the “Loan Agreement”) with HSBC Bank USA, National Association (“HSBC”) pursuant to which HSBC agreed to extend loans to Majesco in the amount of up to $10,000 and Majesco issued a promissory note to HSBC in the maximum principal amount of $10,000 or any lesser amount borrowed under the Loan Agreement (the “Note”, and together with the “Loan Agreement”, the “Facility”). The outstanding principal balance of the loan bearsbore interest based on LIBOR plus a margin in effect on the first day of the relevant interest period. Until January 1, 2018, only interest was payable under the loan. Commencing on January 1, 2018, and on each January 1 and July 1 thereafter until July 1, 2020, installments of principal in the amount of $1,667 will bewere due and payable semi-annually. All principal and interest outstanding under the Note iswas due and payable on March 1, 2021. The Facility iswas unsecured and supported by a letter of credit issued by a bank of $10,000, which iswas secured by a cash pledge of the Group’sour parent company, Majesco Limited. AsOn February 27, 2019, Majesco used a portion of September 30, 2018, the Group had $6,667proceeds from its recently completed rights offering to repay the total amount outstanding under this Facility. As of September 30, 2018, the Group was in complianceLoan Agreement with the terms of this Facility.

The Facility contains affirmative covenants that require Majesco to furnish financial statements to HSBC and cause Majesco Limited to maintain (1) a Net Debt-to-EBITDA Ratio (as defined in the Loan Agreement) of not more than (a) 5.00 to 1.00 as of the last day of its 2017 fiscal year and (b) 2.50 to 1.00 as of the last day of each fiscal year thereafter, and (2) a Debt Service Coverage Ratio (as defined in the Loan Agreement) of not less than 1.50 to 1.00 as of the last day of each fiscal year. The Facility contains restrictive covenants on Majesco, including restrictions on declaring or paying dividends upon and during the continuation of an event of default, incurring additional indebtedness, selling material portions of its assets or undertaking other substantial changes to the business, purchasing or holding securities for investment, and extending credit to any person outside the ordinary course of business. The Facility also restricts any transfer or change in, or assignment or pledge of the ownership or control of Majesco which would cause Majesco Limited to directly own less than 51% of the issued and outstanding equity interests in Majesco. The Facility also restricts Majesco Limited from incurring any Net Debt (as defined in the Loan Agreement) in excess of $25,000 at any time prior to April 1, 2017. The Facility also contains a customary events of default provision and indemnification provisions whereby Majesco will indemnify HSBC against all losses or damages related to the Facility; provided, however, that Majesco shall not have any indemnification obligations to HSBC for any claims caused by HSBC’s gross negligence or willful misconduct. Majesco used the loan proceeds to repay existing indebtedness and for capital expenditures, working capital and other general corporate purposes.terminated this Facility.

Receivable Purchase Facility

On January 13, 2017, Majesco and its subsidiaries MSSI, and Cover-All Systems, jointly and severally entered into a Receivable Purchase Agreement with HSBC pursuant to which HSBC may advance funds against receivables at an agreed advance rate. The outstanding aggregate amount of all advances may not exceed a $10,000 facility limit. The facility bears interest at two (2%) per cent2% plus the ninety (90)90 day LIBOR rate. HSBC will also receive an arrangement fee equal to 0.20% of the facility limit and a facility review fee equal to 0.20% of the facility limit. Majesco will serveserves as HSBC’s agent for the collection of receivables, and Majesco will collectcollects and otherwise enforceenforces payment of the receivables. HSBC has a security interest in accounts of MSSI and Cover-All Systems. The term of the Receivable Purchase Agreement is for a minimum period of twelve (12)12 months and shall continue unless terminated by either party. Either party may terminate the Receivable Purchase Agreement at any time upon sixty (60)60 days’ prior written notice to the other party. The Group expensed the discount, interest and other direct fees as incurred. The Receivable Purchase Agreement will provide additional liquidity to the Group for working capital and other general corporate purposes.

On November 29, 2018, the Group amended the Receivable Purchase Agreement to increase its limit to $15,000 until March 29, 2019, and $10,000 thereafter. HSBC received an arrangement fee of $10 in connection with this amendment. The amendment will provide additional liquidity to Majesco for mergers and acquisitions and other general corporate purposes. As of SeptemberJune 30, 2018,2019, Majesco had $4,814$106 outstanding under this facility. Majesco used proceeds from this facility to repay existing indebtedness and for capital expenditures, working capital and other general corporate purposes.

Exaxe Limited has a receivables purchase agreement with AIB Commercial Finance Limited (“AIB Commercial”) pursuant to which AIB Commercial will purchase up to € 200 in receivables from Exaxe Limited on a discounted basis. In addition, Exaxe Limited has an overdraft facility with Allied Irish Banks, p.l.c. (“AIB”) of up to € 100. The facility has a variable interest rate and is payable on demand at any time. This facility is secured by the assets of Exaxe Limited. As of June 30, 2019, there were no outstanding balances under these facilities.

Auto loanloans

MSSIPL has obtained an auto loanloans from HDFC Bank for the purchase of vehicles. The loans bear interest at a vehicle. This loan israte of 8.75% per annum, are payable in 60 monthly installments over a 5 year period and are secured by the hypothecationa pledge of the vehicle.vehicles. The outstanding balance of thethese auto loanloans as of SeptemberJune 30, 20182019 is $110.$130.

The following table provides information of fair values of derivative financial instruments:

The noncurrent and current portions of derivative assets are included in ‘Other assets’ and ‘Prepaid expenses and other current assets,’ respectively, and the noncurrent and current portions of derivative liabilities are included in ‘Other liabilities’ and ‘Accrued expenses and other current liabilities,’ respectively, in our consolidated balance sheet.

Cash Flow Hedges and Other Derivatives

We use foreign currency forward contracts and par forward contracts to hedge our risks associated with foreign currency fluctuations related to certain commitments and forecasted transactions. The use of hedging instruments is governed by our policies which are approved by our Board of Directors. We designate these hedging instruments as cash flow hedges. Derivative financial instruments we enter into that are not designated as hedging instruments in hedge relationships are classified as financial instruments at fair value in the statement of operations.

The aggregate contracted USD notional amounts of the Group’s foreign exchange forward contracts (sell) outstanding amounted to $31,975$31,600 and $18,250$31,100 as of SeptemberJune 30, 20182019 and March 31, 2018, respectively. The aggregate contracted Great Britain Pound (“GBP”) notional amounts of the Group’s foreign exchange forward contracts (sell) outstanding amounted to GBP 525 and GBP 1,155 as of September 30, 2018 and March 31, 2018,2019, respectively.

The outstanding forward contracts as of SeptemberJune 30, 20182019 mature between one month and 3637 months. As of SeptemberJune 30, 2018,2019, the Group estimates that $(1,303),$117, net of tax, of the net (loss)/gains related to derivatives designated as cash flow hedges recorded in accumulated other comprehensive income (loss) is expected to be reclassified into earnings within the next 3637 months.

The related cash flow impacts of all of our derivative activities are reflected as cash flows from operating activities.

The following table provides information on the amounts of pre-tax gains/(losses) recognized in and reclassified from Accumulated Other Comprehensive Income (“AOCI”) of derivative instruments designated as cash flow hedges:

Changes in accumulated other comprehensive income by component were as follows:

The Group recognized income tax provisions of $1,299 and $2,091$1,381 for the three and six months ended SeptemberJune 30, 20182019 and recognized income tax benefitsprovisions of $(451) and $(1,297)$795 for the three and six months ended SeptemberJune 30, 2017.2018.

The effective tax rate is 31% and 35%51.9% for the three and six months ended SeptemberJune 30, 2018,2019, which differs from the statutory U.S. federal income tax rate of 21%, mainly due to equity-based compensation, the impact of different tax jurisdictions and prior year tax credits. 

Majesco 2015 Equity Incentive Plan

InDuring the three and six months ended SeptemberJune 30, 2018,2019, we recognized $406 and $858, respectively,$750 in equity-based compensation expense in our consolidated financial statements compared to $428 and $783 in$452 during the three and six months ended SeptemberJune 30, 2017.2018.

In June 2015, Majesco adopted the Majesco 2015 Equity Incentive Plan (the “2015 Plan”). On May 9, 2018, the Board of Directors of Majesco approved an increase of 2,000,000 shares in the amount of shares available for issuance under the 2015 Plan thereby increasing the number of shares available under such plan from 3,877,263 shares to 5,877,263 shares. This increase was approved by the shareholders of Majesco at the 2018 annual meeting.meeting of shareholders. Under the 2015 Plan, options, restricted stock and stockother equity incentive awards for the purchase ofwith respect to up to 5,877,263 shares may be granted by the Compensation Committee of the Board of Directors to our employees, consultants and directors at an exercise or grant price determined by the Compensation Committee of the Board of Directors on the date of grant. Options may be granted as incentive or nonqualified stock options with a term of not more than ten years. The 2015 Plan allows the grant of restricted or unrestricted stock awards or awards denominated in stock equivalent units or any combination of the foregoing, which may be paid in common stock or other securities, in cash, or in a combination of common stock or other securities and cash. On SeptemberAs of June 30, 2018, an aggregate of 2,661,4132019, 2,101,732 shares were available for grant under the 2015 Plan.

Majesco uses the Black-Scholes-Merton option-pricing model (“Black-Scholes”) to measure fair value of the share-based awards. The Black-Scholes model requires us to make significant judgments regarding the assumptions used within the model, the most significant of which are the expected stock price volatility, the expected life of the option award, the risk-free interest rate of return and dividends during the expected term.

As of SeptemberJune 30, 2018,2019, there was $3,272$4,651 of total unrecognized compensation costs related to non-vested share-based compensation arrangements previously granted by Majesco. That cost is expected to be recognized over a weighted-average period of 21.76 years.

Stock Option Awards

A summary of the outstanding common stock options under the 2015 Plan is as follows:

Of the stock options outstanding, an aggregate of 1,695,3242,020,918 were exercisable as of SeptemberJune 30, 2018.2019.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because our employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of our employee stock options.

We follow FASB ASC 718, Accounting for Stock Options and Other Stock-Based Compensation.Compensation (“ASC 718”). Among other items, ASC 718 requires companies to record the compensation expense for share-based awards issued to employees and directors in exchange for services provided. The amount of the compensation expense is based on the estimated fair value of the awards on their grant dates and is recognized over the required service periods. Our share-based awards include stock options and restricted stock awards. For restricted stock awards, the calculation of compensation expense under ASC 718 is based on the intrinsic value of the grant.

Restricted Stock Unit Awards

Restricted stock unit activity during the three months ended June 30, 2019 was as follows: 

Warrants

As of SeptemberJune 30, 2018,2019, there were warrants to purchase 25,000 shares of common stock outstanding. A summary of the terms of the outstanding warrants as of SeptemberJune 30, 20182019 is as follows:

On September 1, 2015, Majesco issued to Maxim Partners LLC a five year warrant to purchase 25,000 shares of common stock of Majesco at an exercise price of $7.00 per share. The warrant was issued in connection with the engagement of the holder to perform certain advisory services tofor the Group. The number of shares issuable upon exercise of the warrant may be reduced under certain circumstances of non-performance under the services agreement. The warrant may be exercised at any time after September 1, 2016 and will expire, if unexercised, on September 1, 2020. The warrant contains certain anti-dilution adjustment protection in case of certain future issuances of securities, stock dividends, split and other transactions affecting Majesco’s securities. The holder of the warrant is entitled to piggyback registration rights in case of certain registered securities offerings by Majesco.

Employee Stock Option Scheme of Majesco Limited — Plan 1

Certain employees of the Group participate in the Group’s parent company, Majesco Limited’s, employee stock option plan. The plan, termed as “ESOP plan 1,” became effective June 1, 2015, the effective date of the demerger from Mastek Ltd. Group employees who were issued options in the earlier ESOP plans of Mastek Ltd. were given options of Majesco Limited following the demerger. Under the plan, Majesco Limited also grants newly issued options to the employees of MSSIPL from time to time. During the three months ended SeptemberJune 30, 2018,2019, no options to purchase 39,600 shares of common stock were granted under ESOP plan 1 of Majesco Limited. The options were granted at the market price on the grant date.

As of SeptemberJune 30, 2018,2019, the total future compensation cost related to non-vested options not yet recognized in the Statement of Operations was $702,$333, and the weighted average period over which these awards are expected to be recognized was 3.060.02 years. The weighted average remaining contractual life of options expected to vest as of SeptemberJune 30, 20182019 is 8.718.20 years.

During the three months ended June 30, 2019, we recognized $179 in equity-based compensation expense in our consolidated financial statements compared to $208 during the three months ended June 30, 2018

Majesco Limited calculated the fair value of each option grant on the date of grant using the Black-Scholes option-pricing method with the following assumptions:

The summary of outstanding options of Majesco Limited as of SeptemberJune 30, 20182019 is as follows:

Of the stock options of Majesco Limited outstanding and held by Group employees, an aggregate of 1,138,6751,041,313 are exercisable as of SeptemberJune 30, 2018.2019.

Majesco Performance Bonus Plan

Majesco established the Majesco Performance Bonus Plan (the “Performance Bonus Plan”). The Performance Bonus Plan is administered by the Compensation Committee of the Board of Directors of Majesco. The purpose of the Performance Bonus Plan is to benefit and advance the interests of the Group by rewarding selectedselect employees of the Group for their contributions to the Group’s financial success and thereby motivatemotivating them to continue to make such contributions in the future by granting them performance-based awards that are fully tax deductible to the Group.

During the three and six months ended SeptemberJune 30, 2018, we2019, Majesco accrued $2,925 and $5,979$584 in incentive compensation expense in our consolidated financial statements compared to $1,179 and $1,174, respectively,$3,095 during the three and six months ended SeptemberJune 30, 2017.2018.

Majesco Employee Stock Purchase Plan

Majesco established the Majesco Employee Stock Purchase Plan (the “ESPP”). The ESPP is intended to be qualified under Section 423 of the Internal Revenue Code. If a plan is qualified under Section 423, employees who participate in the ESPP enjoy certain tax advantages. The ESPP allows employees to purchase shares of Majesco common stock at a discount, without being subject to tax until they sell the shares, and without having to pay any brokerage commissions with respect to the purchases.

The purpose of the ESPP is to encourage the purchase of Majesco common stock by our employees, to provide employees with a personal stake in our business and to help us retain our employees by providing a long range inducement for such employees to remain in our employ.

The ESPP provides employees with the right to purchase shares of common stock through payroll deductions. The total number of shares available for purchase under the ESPP is 2,000,000. The ESPP Plan became effective January 1, 2016. As of SeptemberJune 30, 2018,2019, we had issued and sold 109,064129,205 shares under the ESPP.

The basic and diluted earnings/ (loss)earnings per share were as follows:

Basic earnings per share amounts are calculated by dividing net income for the three and six months ended SeptemberJune 30, 20182019 and 20172018 attributable to common shareholders by the weighted average number of ordinarycommon shares outstanding during the same periods.

Diluted earnings per share amounts are calculated by dividing the net income attributable to common shareholders by the sum of the weighted average number of shares of common stock outstanding during the three and six monthsmonth periods plus the weighted average number of shares of common stock that would be issued upon the conversion of all the dilutive potential shares of common stock into shares of common stock.stock as applicable pursuant to the treasury method.

The calculation of diluted earnings per share excluded 155,816 and 155,8162,000 shares and options for the three and six months ended SeptemberJune 30, 2018, respectively,2019 and 3,303,559 and 3,303,559754,816 shares and options for the three and six months ended SeptemberJune 30, 2017, respectively,2018 granted to employees, as their inclusion would have been antidilutive.

Reimbursement of Expenses

The Group reimburses expenses incurred by Majesco Limited attributable to shared resources with Majesco Limited that are in the process of being separated after the Reorganization,separation of Mastek Ltd.’s insurance related operations, including air travel, travel insurance, telephone costs, utility charges, insurance costs, administrative personnel costs, software and hardware costs and third party license costs, less receivables from Majesco Limited for similar expenses. The amount receivable/(payable) from Majesco Limited for reimbursement of expenses as on SeptemberJune 30, 20182019 and SeptemberJune 30, 20172018 is $0 and $(307),$0, respectively.

The Group also reimburses the insurance premium paid by Majesco Limited for the insurance policy at the Majesco Limited group level pertaining to the employees of MSSIPL. During the three and six months ended SeptemberJune 30, 20182019 MSSIPL paid $68 and $68, respectively,$88 to Majesco Limited toward such insurance premium.

Leases

MSSIPL entered into an operating lease for its operation facilities in Mahape, India, as lessee, with Majesco Limited, Majesco’ sMajesco’s parent company, as lessor. The approximate aggregate annual rent payable to Majesco Limited under this lease agreement is $1,337.$1,397. The lease becameis effective on June 1, 2015 and expires on May 31, 2020.  MSSIPL may terminate the lease after three years with six months’ prior written notice to Majesco Limited. Majesco Limited may terminate the lease after five years with six months’ prior written notice to MSSIPL. On May 16, 2019, a new lease agreement between Majesco Limited and MSSIPL was signed for the leasing of additional office space by Majesco Limited to MSSIPL, in continuation to the existing operating lease until May 31, 2020. The approximate aggregate annual rent payable to Majesco Limited under this lease agreement is $42.

MSSIPL also entered into a lease for facilities for its operations in Pune, India, with Mastek Ltd. as lessor. The approximate aggregate annual rent payable to Mastek Ltd. under this lease agreement is $237. The lease became effective on June 1, 2015 and expires on May 31, 2020. MSSIPL has also entered into a supplementary lease for its operations in Pune, India, with Mastek Ltd. as lessor. The approximate aggregate annual rent payable to Mastek Ltd. under this supplementary lease agreement is $110. The lease became effective on April 1, 2016 and expires on May 31, 2020. The approximate aggregate annual rent payableMSSIPL may terminate the lease after three years with six months’ prior written notice to Mastek Ltd. underMastek Ltd. may terminate the foregoing lease agreements is $404.after five years. On June 1, 2018, MSSIPL gave notice to Mastek Ltd. of its termination of both leases with an effective termination date of November 30, 2018.

Rental expenses paid by MSSIPL to Majesco Limited for the use of premises for the three and six months ended SeptemberJune 30, 2019 and June 30, 2018 were $343was $354 and $669,$326, respectively. Rental expenses paid by MSSIPL to Mastek Ltd. for the use of premises for the three and six months ended SeptemberJune 30, 2019 and June 30, 2018 were $104was $0 and $205,$101, respectively.

Joint Venture Agreement

On September 24, 2015, MSSIPL and Mastek (UK) Limited, a wholly-ownedwholly owned subsidiary of Mastek Ltd. (“Mastek UK”), entered into a Joint Venture Agreement (the “Joint Venture Agreement”) pursuant to which the two companies agreed to work together to deliver services to third parties under the terms of the Joint Venture Agreement, which services comprise the delivery of development, integration and support services to third parties by use of Mastek Ltd.’s development, integration and support methodologies and tools. The Joint Venture Agreement becameis effective on September 24, 2015 and will remain in force, unless terminated by either party upon three months’ notice in writing to the other of its intention to terminate the Joint Venture Agreement. The consideration for each party’s performance of its obligations under the Joint Venture Agreement is the performance of the other’s obligations under the same agreement, being services to the other. The services comprise in the case of Mastek Ltd., Mastek Ltd.’s development, integration and support methodologies and tools and business development services. In the case of MSSIPL, the services comprise the provision of leading edge technical expertise and advice. The parties will also exchange technical and business information.

Services Agreements

On March 1, 2016, Majesco and Digility Inc., a Delaware corporation (“Digility”) wholly-owned by Mastek UK, entered into a Services Agreement (the “Digility Services Agreement”) pursuant to which Majesco provided certain management and operational support services to Digility, including managed office accommodation and facilities, managed office IT infrastructure and networks, and corporate support services. The charges for these services consisted of an initial set-up fee of  $1, a monthly fee of  $4 and a pass through of actual costs of providing the services incurred in excess of the monthly fee. The Digility Services Agreement was effective as of March 1, 2016 and was terminated on August 31, 2017. Service charges received from Digility for the three and six months ended September 30, 2018 were $0 and $0, respectively, and $8 and $19 for the three and six months ended September 30, 2017, respectively.

On August 2, 2016, Majesco Limited and MSSIPL entered into a master service agreement, effective as of June 30, 2016 pursuant to which MSSIPL will provideprovides software development services to Majesco Limited. Under this agreement, MSSIPL will chargecharges Majesco Limited cost plus a margin for the services rendered. Software development charges charged by MSSIPL under the agreement for the three and six months ended SeptemberJune 30, 2019 and June 30, 2018 were $359was $0 and $694, respectively, and $269 and $530 for$335, respectively.  This agreement was terminated on April 1, 2019 following the three and six months ended September 30, 2017, respectively.closing of the business transfer pursuant to the Transfer Agreement discussed below.

On July 25, 2018, Majesco Limited and MSSIPL entered into an Intra Group Services Agreement (the “Intra-Group Agreement”). Pursuant pursuant to the terms of the Intra-Group Agreement,which Majesco Limited will provideprovides certain sales and marketing services to MSSIPL in the Asia Pacific region (collectively, the “Services”). In consideration for the Services, MSSIPL will paypays Majesco Limited all direct and indirect operating costs of Majesco Limited incurred for the provision of the Services and which shall be allocated to MSSIPL on the basis of gross revenues plus a 10% mark-up. The mark-up will be subject to a periodic review. The Intra-Group Agreement will beis effective as of April 1, 2018 and will remain in effect until terminated. Each party may terminate the Intra-Group Agreement at any time upon sixty60 days prior written notice to the other. Expenses charged by Majesco Limited under the Intra-Group Agreement for the three and six months ended SeptemberJune 30, 20182019 were $17$100 and $74, respectively, and $0 and $0$57 for the three and six months ended SeptemberJune 30, 2017, respectively.

Sublease2018. This agreement was terminated on April 1, 2019 following the closing of the business transfer pursuant to the Transfer Agreement discussed below.

On March 1, 2016,May 16, 2019 an agreement between MSSIPL and Majesco and Digility entered into a Sublease Agreement (the “Sublease Agreement”), pursuantLimited was signed where MSSIPL will provide administrative support to which Majesco sublets the premises located on the first floor of 685 Route 202/206, Bridgewater, New Jersey to Digility. Digility paidLimited annually for any costs charged by the landlord, Route 206 Associates, a New Jersey partnership, for additionalapproximately $4. This services requested by Digility. The term of the Sublease Agreement commencedagreement will terminate on March 1, 2016 and expired on July 31, 2017. Rental charges received from Digility for the three and six months ended September 30, 2018 were $0 and $0, respectively, and for the three and six months ended September 30, 2017 were $1 and $5, respectively.2022.

Guarantee

During the three and six months ended SeptemberJune 30, 2019 and June 30, 2018, Majesco paid $8$0 and $18,$10, respectively, to Majesco Limited as arrangement fees and guarantee commission for the guarantee given by Majesco Limited to HSBC and ICICI Bank for the facilities taken by Majesco and its subsidiaries. DuringBoth facilities have been repaid and terminated on June 30, 2019. 

Lease with Exaxe Sellers

On October 14, 2004, Exaxe Consulting Limited entered into a lease (the “Lease”) with Norman Carroll, Philip Naughton and Luc Hemeryck for certain real property facilities for a term which initially expired on October 13, 2025. Pursuant to a Deed of Assignment dated December 6, 2017 between Exaxe Consulting Limited and Exaxe Limited, Exaxe Consulting Limited assigned Exaxe Limited the three and six months endedLease for the balance of the term. Pursuant to a Deed of Variation of the Lease executed in July 2019, the term of the Lease is expected to terminate on September 30, 2017, Majesco paid $13 and $25, respectively, to2024. The monthly rental fee under the Lease is € 10. All Euros are in thousands unless otherwise indicated.

Business Transfer Agreement

On April 1, 2019, MSSIPL entered into a Business Transfer Agreement (the “Transfer Agreement”) with Majesco Limited, as arrangement feesMajesco’s controlling shareholder. Pursuant to the Transfer Agreement, on May 15, 2019, MSSIPL purchased all of Majesco Limited’s insurance software business in India in a slump sale transaction, which included, among other things, Majesco Limited’s customer contracts and guarantee commissioncertain employees servicing this business, for the guarantee given bya total value of approximately 243,745,000 Indian Rupees (approximately $3.5 million). The transaction did not include real estate properties of Majesco Limited used in the business which will continue to HSBC for the facilities takenbe rented by MSSIPL from Majesco and its subsidiaries. Limited.

This being a transaction between entities under common control, the Company has followed the guidance as per FASB Business Combinations Topic 805 and recorded the assets, liabilities and reserves at respective book values as on April 1, 2019 pertaining to the transferred business and recorded resultant negative capital reserve which is adjusted in accumulated deficit of $2,707.

Recognized amount of identifiable assets acquired and liabilities assumed