UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2017
or
oTRANSITION REPORT PURSUANT TO SECTION 13 OR
For the transition period from to
Commission File Number:file number 333-210821
| TripBorn, Inc. |
(Exact name of registrant as specified in its charter)
| Delaware | 27-2447426 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
762 Perthshire Pl, Abingdon, MD 21009 |
(Address of principal executive offices) |
Registrant’s telephone number, including area code)
+1 269 274 7877
Securities registered pursuant to Section 12(b) of the Act: None
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. Yes ☒o No ☐x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒o No ☐x
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,”filer”, “accelerated filer,”filer”, “smaller reporting company,”company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Accelerated filer | o | |||||
| Smaller reporting company | ||||||
| Emerging growth company |
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)7(a)(2)(B) of the ExchangeSecurities Act.☐o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐o No ☒x
The number of February 7, 2018, there were outstanding 95,711,874the registrant’s common shares, of common stock,$0.0001 par value $0.0001 per share.
TRIPBORN, INC.
Third Quarter Ended December 31, | Nine Months Ended December 31, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net revenue | $ | 77,192 | $ | 148,387 | $ | 255,824 | $ | 405,189 | ||||||||
| Cost of revenue | 10,903 | 73,271 | 37,776 | 272,876 | ||||||||||||
| Gross profit | 66,289 | 75,116 | 218,048 | 132,313 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general, and administrative expenses | 193,460 | 112,750 | 513,125 | 253,996 | ||||||||||||
| Legal and consulting expenses | 53,584 | 56,110 | 151,231 | 206,171 | ||||||||||||
| Income (loss) from operations | (180,755 | ) | (93,744 | ) | (446,308 | ) | (327,854 | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Depreciation and amortization | (83,469 | ) | (51,809 | ) | (283,016 | ) | (153,557 | ) | ||||||||
| Interest income | 157 | 0 | 321 | 0 | ||||||||||||
| Interest expense | (52,578 | ) | (37,068 | ) | (122,167 | ) | (108,526 | ) | ||||||||
| Total other income (expense) | (135,890 | ) | (88,877 | ) | (404,862 | ) | (262,083 | ) | ||||||||
| Income (loss) before income tax expense | (316,645 | ) | (182,621 | ) | (851,170 | ) | (589,937 | ) | ||||||||
| Income tax benefit (expense) | 69,926 | 55,260 | 240,455 | 152,017 | ||||||||||||
Net income (loss) | $ | (246,719 | ) | $ | (127,361 | ) | $ | (610,715 | ) | $ | (437,920 | ) | ||||
| Basic income (loss) per share | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||
Diluted income (loss) per share | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||
| Basic weighted average number of shares | 89,840,099 | 76,816,272 | 89,840,099 | 76,816,272 | ||||||||||||
| Diluted weighted average number of shares | 89,840,099 | 76,816,272 | 89,840,099 | 76,816,272 | ||||||||||||
| June 30, | March 31, | |||||||
| 2019 | 2019 | |||||||
| ASSETS | (UNAUDITED) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 1,358,902 | $ | 1,230,012 | ||||
| Accounts receivable, net, and unbilled revenue | 1,275,350 | 178,492 | ||||||
| Due from related parties | 951,521 | 14,364 | ||||||
| Other current assets | 1,242,181 | 570,571 | ||||||
| Total current assets | 4,827,954 | 1,993,439 | ||||||
| Non current assets: | ||||||||
| Operating lease, right-of-use assets, net | 8,335,384 | - | ||||||
| Goodwill | 936,788 | - | ||||||
| Intangible assets, net | 2,309,043 | 362,717 | ||||||
| Property and equipment, net | 1,707,019 | 12,247 | ||||||
| Other noncurrent assets | 1,705,203 | 48,956 | ||||||
| TOTAL ASSETS | $ | 19,821,391 | $ | 2,417,359 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 2,094,061 | $ | 310,130 | ||||
| Local duties and taxes | 1,003,166 | - | ||||||
| Due to related parties | 909,610 | 13,828 | ||||||
| Loans and convertible notes due to related parties | 1,224,323 | 1,838,157 | ||||||
| Interest payable (includes $560,390 and $508,531 due to related parties, respectively) | 592,988 | 536,073 | ||||||
| Salaries and benefits | 459,661 | - | ||||||
| Loans due within one year with third parties | 467,222 | - | ||||||
| Other current liabilities | 864,045 | 548,141 | ||||||
| Total current liabilities | 7,615,076 | 3,246,329 | ||||||
| Long term liabilities: | ||||||||
| Long term portion of operating lease liabilities | 8,233,283 | - | ||||||
| Long term loans and convertible notes | 371,571 | 250,000 | ||||||
| Other non-current liabilities | 706,664 | - | ||||||
| Total current and long-term liabilities | 16,926,594 | 3,496,329 | ||||||
| Commitments and contingencies (Note 13) | ||||||||
| Preferred stock $.0001 par value | - | - | ||||||
| Authorized shares: 10,000,000, none issued and none outstanding | ||||||||
| Common stock $.0001 par value | 12,763 | 9,719 | ||||||
| Authorized shares: 200,000,000 | ||||||||
| Shares issued and outstanding: 127,631,842 and 97,190,435 | ||||||||
| Additional paid in capital | 5,670,358 | 3,227,452 | ||||||
| Accumulated deficit | (4,782,894 | ) | (4,355,630 | ) | ||||
| Accumulated other comprehensive income | 55,587 | 39,489 | ||||||
| TOTAL TRIPBORN, INC STOCKHOLDERS’ EQUITY / (DEFICIT) | 955,814 | (1,078,970 | ) | |||||
| Noncontrolling interest in consolidated entity (Note 1) | 1,938,983 | - | ||||||
| Total equity (deficit) | 2,894,797 | (1,078,970 | ) | |||||
| TOTAL LIABILITIES AND EQUITY | $ | 19,821,391 | $ | 2,417,359 | ||||
See accompanying notes to condensed consolidated financial statements.statements (unaudited).
| 4 |
TRIPBORN, INC.
Third Quarter Ended December 31, | Nine Months Ended December 31, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net income (loss) | $ | (246,719 | ) | $ | (127,361 | ) | $ | (610,715 | ) | $ | (437,920 | ) | ||||
| Other comprehensive income (loss), net of tax | ||||||||||||||||
Unrealized foreign currency translation income / (loss) | (1,578 | ) | 501 | (1,551 | ) | 457 | ||||||||||
| Other comprehensive income (loss), net of tax | (1,578 | ) | 501 | (1,551 | ) | 457 | ||||||||||
| Comprehensive loss | $ | (248,297 | ) | $ | (126,860 | ) | $ | (612,266 | ) | $ | (437,463 | ) | ||||
(UNAUDITED)
| Three months ended June 30, | Three months ended June 30, | |||||||
| 2019 | 2018 | |||||||
| Net revenues | $ | 1,825,858 | $ | 95,640 | ||||
| Cost of revenue and expenses | ||||||||
| Cost of revenue | 1,432,305 | 59,960 | ||||||
| Selling, general, and administrative expenses | 597,428 | 168,584 | ||||||
| Legal and consulting expenses | 106,067 | 45,871 | ||||||
| Depreciation and amortization | 134,334 | 39,284 | ||||||
| 2,270,134 | 313,699 | |||||||
| Loss from operations | (444,276 | ) | (218,059 | ) | ||||
| Other income (expense) | ||||||||
| Other income | 30,983 | 6,143 | ||||||
| Interest income | 6,204 | 82 | ||||||
| Interest expense | (155,666 | ) | (47,325 | ) | ||||
| Total other expense | $ | (118,479 | ) | $ | (41,100 | ) | ||
| Loss before income taxes | (562,755 | ) | (259,159 | ) | ||||
| Income taxes | - | - | ||||||
| Net loss | $ | (562,755 | ) | $ | (259,159 | ) | ||
| Net loss attributable to noncontrolling interests | $ | (135,491 | ) | $ | - | |||
| Net loss attributable to TripBorn, Inc | $ | (427,264 | ) | $ | (259,159 | ) | ||
| Net loss per common share: | ||||||||
| Basic loss per common share attributable to TripBorn, Inc. | $ | (0.00 | ) | $ | (0.00 | ) | ||
| Diluted loss per common share attributable to TripBorn, Inc. | $ | (0.00 | ) | $ | (0.00 | ) | ||
| Weighted-average common shares outstanding: | ||||||||
| Basic weighted-average number of shares | 97,605,456 | 95,711,874 | ||||||
| Diluted weighted-average number of shares | 97,605,456 | 95,711,874 | ||||||
See accompanying notes to consolidated condensed financial statements.
TRIPBORN, INC.
| December 31, | March 31, | |||||||
| 2017 | 2017 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 1,322,002 | $ | 516,707 | ||||
| Accounts receivable | 211,586 | 289,089 | ||||||
| Other current assets | 473,800 | 294,203 | ||||||
| Total current assets | 2,007,388 | 1,099,999 | ||||||
| Property and equipment, net | 11,642 | 13,236 | ||||||
| Intangible assets, net | 1,273,885 | 1,563,222 | ||||||
| Deferred income taxes | 469,032 | 226,331 | ||||||
| TOTAL ASSETS | $ | 3,761,947 | $ | 2,902,788 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 77,129 | $ | 175,748 | ||||
| Other current liabilities | 932,358 | 460,314 | ||||||
| Total current liabilities | 1,009,487 | 636,062 | ||||||
| Long term liabilities | ||||||||
| Loans payable – related party | 0 | 0 | ||||||
| Convertible notes | 1,855,120 | 2,355,120 | ||||||
| Total current and long term liabilities | 2,864,607 | 2,991,182 | ||||||
| Stockholders’ equity (deficit): | ||||||||
| Preferred stock $.0001 par value | 0 | 0 | ||||||
| Authorized shares: 10,000,000 | ||||||||
| Common stock $.0001 par value | 9,572 | 7,898 | ||||||
| Authorized shares: 200,000,000 | ||||||||
| Shares issued and outstanding: 95,711,874 and 78,971,581 | ||||||||
| Additional paid-in capital | 2,321,818 | 725,492 | ||||||
| Accumulated other comprehensive income (loss) | 5,181 | 6,732 | ||||||
| Retained earnings (deficit) | (1,439,231 | ) | (828,516 | ) | ||||
| Total stockholders’ equity | 897,340 | (88,394 | ) | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 3,761,947 | $ | 2,902,788 | ||||
(UNAUDITED)
| Three months ended June 30, | Three months ended June 30, | |||||||
| 2019 | 2018 | |||||||
| Net loss | $ | (562,755 | ) | $ | (259,159 | ) | ||
| Less net loss attributable to noncontrolling interests | (135,491 | ) | - | |||||
| Net loss attributable to TripBorn, Inc | (427,264 | ) | (259,159 | ) | ||||
| Currency translation adjustment | 37,239 | 1,447 | ||||||
Currency translation adjustment attributable to noncontrolling interests | (21,141 | ) | - | |||||
| Currency translation adjustment attributable to TripBorn, Inc | $ | 16,098 | $ | 1,447 | ||||
| Comprehensive loss | (525,516 | ) | (257,712 | ) | ||||
| Less comprehensive loss attributable to noncontrolling interests | (114,350 | ) | - | |||||
| Comprehensive loss attributable to TripBorn, Inc | $ | (411,166 | ) | $ | (257,712 | ) | ||
See accompanying notes to consolidated condensed financial statements.statements (unaudited).
| 6 |
| Common Stock | ||||||||||||||||||||||||
Shares | Amount | Additional paid-in capital | Accumulated other comprehensive income | Retained earnings (deficit) | Total stockholder’s equity (deficit) | |||||||||||||||||||
| Balance at March 31, 2017 | 78,971,581 | $ | 7,898 | $ | 725,492 | $ | 6,732 | $ | (828,516 | ) | $ | (88,394 | ) | |||||||||||
| Issuance of common stock | 3,660,001 | 366 | 1,097,634 | 1,098,000 | ||||||||||||||||||||
| Conversion of debt to common stock | 13,080,292 | 1,308 | 498,692 | 500,000 | ||||||||||||||||||||
| Other comprehensive income (loss) | (1,551 | ) | (1,551 | ) | ||||||||||||||||||||
| Net income (loss) | (610,715 | ) | (610,715 | ) | ||||||||||||||||||||
| Balance at December 31, 2017 | 95,711,874 | 9,572 | 2,321,818 | 5,181 | (1,439,231 | ) | 897,340 | |||||||||||||||||
(UNAUDITED)
| For the three months ended June 30, 2019 | ||||||||||||||||||||||||||||||||
| Shares | Common stock | Additional paid in capital | Accumulated other comprehensive income |
Accumulated deficit | TripBorn Inc stockholders’ equity (deficit) | Noncontrolling interest | Total equity / (deficit) | |||||||||||||||||||||||||
| (In $ except for number of common stock) | ||||||||||||||||||||||||||||||||
| Balance as of March 31, 2019 | 97,190,435 | $ | 9,719 | $ | 3,227,452 | $ | 39,489 | $ | (4,355,630 | ) | $ | (1,078,970 | ) | $ | - | $ | (1,078,970 | ) | ||||||||||||||
| Common stock issued on purchase of subsidiary | 2,632,653 | 263 | 736,880 | - | - | 737,143 | - | 737,143 | ||||||||||||||||||||||||
| Common stock and warrants issued for cash consideration | 775,157 | 78 | 542,532 | - | - | 542,610 | - | 542,610 | ||||||||||||||||||||||||
| Common stock issued on exercise of warrants | 1,571,430 | 157 | 15,557 | - | - | 15,714 | - | 15,714 | ||||||||||||||||||||||||
| Common stock issued on conversion of debt | 25,462,167 | 2,546 | 1,147,937 | - | - | 1,150,483 | - | 1,150,483 | ||||||||||||||||||||||||
| Noncontrolling interests arising on acquisition of subsidiary | - | - | - | - | - | - | 2,053,333 | 2,053,333 | ||||||||||||||||||||||||
| Currency translation adjustment | - | - | - | 16,098 | - | 16,098 | 21,141 | 37,239 | ||||||||||||||||||||||||
| Net loss | - | - | - | - | (427,264 | ) | (427,264 | ) | (135,491 | ) | (562,755 | ) | ||||||||||||||||||||
| Balance as of June 30, 2019 | 127,631,842 | $ | 12,763 | $ | 5,670,358 | $ | 55,587 | $ | (4,782,894 | ) | $ | 955,814 | $ | 1,938,983 | $ | 2,894,797 | ||||||||||||||||
| For the three months ended June 30, 2018 | ||||||||||||||||||||||||||||||||
| Shares | Common stock | Additional paid in capital | Accumulated other comprehensive income |
Accumulated | TripBorn Inc deficit | Noncontrolling interests | Total deficit | |||||||||||||||||||||||||
| (In $ except for number of common stock) | ||||||||||||||||||||||||||||||||
| Balance as of March 31, 2018 | 95,711,874 | $ | 9,752 | $ | 2,321,818 | $ | 14,537 | $ | (3,087,583 | ) | $ | (741,476 | ) | $ | - | $ | (741,476 | ) | ||||||||||||||
| Currency translation adjustment | - | - | - | 1,267 | - | 1,267 | - | 1,447 | ||||||||||||||||||||||||
| Net loss | - | - | - | - | (259,159 | ) | (259,159 | ) | - | (259,159 | ) | |||||||||||||||||||||
| Balance as of June 30, 2018 | 95,711,874 | $ | 9,752 | $ | 2,321,818 | $ | 15,984 | $ | (3,346,742 | ) | $ | (999,368 | ) | $ | - | $ | (999,368 | ) | ||||||||||||||
See accompanying notes to condensed consolidated financial statements.statements (unaudited).
| 7 |
TRIPBORN, INC.
Nine Months Ended December 31, | ||||||||
| 2017 | 2016 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | (610,715 | ) | $ | (437,920 | ) | ||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 283,016 | 153,557 | ||||||
| Other comprehensive income (loss) | (1,551 | ) | 457 | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 77,503 | (187,034 | ) | |||||
| Other current assets | (179,597 | ) | (39,363 | ) | ||||
| Deferred tax asset | (242,701 | ) | (134,552 | ) | ||||
| Accounts payable and accrued expenses | (98,619 | ) | 174,780 | |||||
| Other current liabilities | 472,044 | 206,502 | ||||||
| Net cash provided (used) by operating activities | (300,620 | ) | (263,573 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Change in property and equipment | (5,725 | ) | (10,365 | ) | ||||
| Change in intangible assets | 13,640 | (680,275 | ) | |||||
| Net cash used in investing activities | 7,915 | (690,640 | ) | |||||
| Cash flows from financing activities: | ||||||||
| Increase in common stock | 1,674 | 153 | ||||||
| Change in additional paid in capital | 1,096,326 | 459,847 | ||||||
| Increase (Decrease) in loan from shareholder | (23,958 | ) | ||||||
| Increase in convertible notes | 842,215 | |||||||
| Net cash provided (used) in financing activities | 1,098,000 | 1,278,257 | ||||||
| Net increase (decrease) in cash and cash equivalents | 805,295 | 324,044 | ||||||
| Cash and cash equivalents at beginning of period | 516,707 | 251,971 | ||||||
| Cash and cash equivalents at end of period | $ | 1,322,002 | $ | 576,015 | ||||
| Supplemental cash flow information | ||||||||
| Cash paid for interest | $ | 0 | $ | 0 | ||||
| Income tax payments | $ | 0 | $ | 0 | ||||
| Conversion of debt to 13,080,292 shares of common stock | $ | 500,000 | $ | 0 | ||||
(UNAUDITED)
| Three Months Ended June 30 | ||||||||
| 2019 | 2018 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (562,755 | ) | $ | (259,159 | ) | ||
| Adjustment to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 134,334 | 39,284 | ||||||
| Stock based compensation | 25,723 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (480,294 | ) | (107,219 | ) | ||||
| Other current assets | 111,934 | (268,213 | ) | |||||
| Accounts payable | (58,634 | ) | 43,852 | |||||
| Other current liabilities | 1,199,970 | 211,211 | ||||||
| Other non-current liabilities | (257,475 | ) | ||||||
| Net cash used in operating activities | 112,803 | (340,244 | ) | |||||
| Cash flows from investing activities | ||||||||
| Net cash paid on acquisition of subsidiary | (507,093 | ) | - | |||||
| Purchases of fixed assets | (51,865 | ) | (396 | ) | ||||
| Net cash used in investing activities | (558,958 | ) | (396 | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from issuance of common stock and exercise of warrants | 558,325 | - | ||||||
| Repayment of convertible notes | (9,730 | ) | (10,518 | ) | ||||
| Net cash used in financing activities | 548,595 | (10,518 | ) | |||||
| Effect of exchange rates changes on cash | 26,450 | 1,448 | ||||||
| Net change in cash | 128,890 | (349,710 | ) | |||||
| Cash | ||||||||
| Beginning of the period | 1,230,012 | 1,155,367 | ||||||
| End of the period | $ | 1,358,902 | $ | 805,657 | ||||
| Supplementary disclosure of cash flows information | ||||||||
| Cash paid during the period for: | ||||||||
| Interest paid | $ | 92,586 | $ | - | ||||
See accompanying notes to unaudited condensed consolidated financial statements.statements (unaudited).
| 8 |
June 30, 2019
(UNAUDITED)
1. DESCRIPTION OF BUSINESS
Overview
TripBorn, Inc. (“TripBorn” or the “Company”) is a business to business online travel agency (“OTA”) that offers travel reservations,related travel services and products,an eCommerce aggregator and a payment services product to travel agents in India through its proprietary internet-based platform at www.tripborn.com. TripBornhospitality management company. An aggregator model is a holding company that was incorporated in Delaware in January 2010form of eCommerce whereby our website, www.tripborn.com aggregates information from various travel and operated ashospitality vendors and presents them to users on a shell company with nominal or no assets or operations until December 2015 when it acquired substantially all of the outstanding common stock of its operating subsidiary,single platform, to ease, facilitate, coordinate and effectuate consumer travel and hospitality needs. OureCommerce Aggregator business segment operates through Sunalpha Green Technologies Private Limited (“Sunalpha”), a wholly owned subsidiary. Ourhospitality 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 selected March 31made 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 fiscal year end.
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 PinstripesNYC, Inc. until January 2016. TripBorn filed reportsthey 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 PinstripesNYC, Inc.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”) andpursuant to the rules and regulations of the Securities and Exchange Commission under("SEC")and include the Securities Exchange Actaccounts of 1934, as amended (“Exchange Act”) from August 2010 until it terminated its registration under the Exchange Act in May 2013.
The transactionaccompanying condensed consolidated balance sheet as of March 31, 2019 was accounted forderived from the audited financial statements as a reverse recapitalization. Sunalpha wasof that date, but does not include all the acquirer for financial reporting purposes,information and TripBorn was the acquired company.
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.
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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 prepared on the accrual basiseliminated in consolidation.
Use of accountingEstimates
The preparation of financial statements in conformity with accounting principles generally acceptedU.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the United Statesfinancial 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 America (“US GAAP”)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 detailedof 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’sBoard (“FASB”) Accounting Standards Codificationissued ASU 2014-09, Revenue from Contracts with Customers (“ASC”Topic 606”).
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 December 14, 2015method (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 are those of Sunalpha and are recorded usingprice, (iv) allocate the historical cost basis. The consolidated financial statements after completion of the December 14, 2015 transaction include the assets, liabilities and results of operations of Sunalpha upprice to the day priorperformance 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 closingcustomer. 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 andprice that is allocated to the assets, liabilities and results of operationsrespective performance obligation when (or as) the performance obligation is satisfied.
The following is a description of the Company and SunalphaCompany’s principal activities, separated by reportable segments, from and after the closing of the transaction on December 14, 2015. All significant related party accounts and transactions betweenwhich the Company generates its revenue.
eCommerce Aggregator revenues:
Air, Rail and Sunalpha have been eliminated upon consolidation.
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 confirmation of the issuance of an airline ticket to the customer. In instances where the Company has procured coupons for airline tickets in advance for an anticipated future demand from customersservice.
Other Revenue. Primarily comprising visa processing fees, money transfer, and assumes the risk of loss for tickets not used, the revenue from the sale of such airline tickets is accounted for on the gross basis.
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 rail and bus ticket reservations is recognized asthe disclosure requirement for remaining performance obligations for specific situations in which an agent on a net commission earned basis, asentity need not estimate variable consideration to recognize revenue. Accordingly, the Company does not assume anyapplies the practical expedient to its management fees from contracts with Operation & Maintenance Properties. These contracts are typically long-term, and the performance obligation following the confirmationconsists of the issuance of the ticketproviding hotel management services to the customer.
The Company has elected the practical expedient to not disclose revenue recognition since revenuerelated 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 recognized uponone year or less.
The Company has elected certain of the availment of services byoptional exemptions from the customer.
Cost of Revenue
Cost of revenue is the amount paid or accrued to procureagainst 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.
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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, costsdirect operating expenses, general and administrative expenses such as advertising and business promotion costs, utilities, rent, payroll, and consultants fees and charges, 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 investments (including money market funds)highly liquid debt instruments with an original maturity at acquisition of three months or less, to be cash equivalents. The Company maintains its cash balances in both USbank accounts in the U.S. and Indian financial institutions. At December 31, 2017 and 2016, depositsIndia, which at US financial institutions that exceededtimes may not be covered by, or exceed the Federalcoverage limit of the Deposit Insurance Company (“FDIC”) $250,000 insured limits were $758,380 and $0, respectively. BankCredit Guarantee Corporation of America’s credit rating is closely monitored by the Company and theIndia. The Company does not believe it’s uninsured deposits at Bank of America constitutes anythat this results in significant credit risk.
Receivables and Credit Policies
Accounts receivable are stated at the amount billedmanagement 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 customer. Customer account balances with invoices exceeding credit terms are considered delinquent. PaymentsCompany's estimate of potential losses inherent in accounts receivable are allocatedbalances, 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 specific invoices identifiedbe adjusted based on currently available evidence such as historical collection experience, current economic trends and changes in customer payment terms. In accordance with the customer’s remittance advice or,Company’s policy, if unspecified, are applied to the earliest unpaid invoices.
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 at least annually. 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.
The fair value of the Company to concentrations of credit risk consist primarily oftrade names is determined using a discounted cash and cash equivalents and accounts receivable.
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Goodwill
Goodwill is assigned to our reporting units based on the expected benefit from temporary differences related to net property and equipment forthe synergies arising from each business combination, determined by using certain financial and income tax reporting.
Impairment of Long-lived Assets
The Company has concluded that asrecords an impairment of December 31, 2017 and 2016 there are no material uncertain tax positions taken or expected to be taken that would require recognition of a liability or asset or disclosurelong-lived assets used in the financial statements. The Company is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Company’s management believes that the Company’s income tax returns for the last three years remain subject to examination based on normal statutory periods subject to audits, notwithstanding anyoperations, 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 existbe required to be recognized. Goodwill, when recognizable, would be measured as the excess amount of any consideration transferred, which could expandis generally measured at fair value, over the open period.
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 USU.S. Dollars using the year or reporting period end or average exchange rates in accordance with the requirements of ASC subtopic 830-10,830, Foreign Currency Matters (“ASC 830-10”).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 shareholders’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.
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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 issued 71,428,570accounts 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 Arna Global LLC (“Arna”)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 considerationflows.
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 $95,500. Arnaa 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 wholly-owned by Deepak Sharma,not easily determinable, the Company’s Presidentapplicable 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 Chief Executive Officerinitial 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 director.corresponding right-of-use asset representing our right to use the underlying asset during the lease term. The Company accounted forlease liability is measured initially as the change in control transaction with Arna using the acquisition method of accounting. Arna obtained control of 93%present value of the outstanding shares of common stock of PinstripesNYC, Inc.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 connection with the Stock Purchase Agreement among PinstripesNYC, Inc.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 inOperating lease right-of-use assets,Other current liabilities, Arna, and Maxim Kelyfos, LLC dated December 8, 2015, and was the acquirer. This transaction resultedOperating lease liabilities, due after one year, in (1) no identifiable assets being acquired, (2) no liabilities being assumed, (3) no goodwill being recognized and (4) no gains being recognized from a bargain purchase.
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 acquired substantiallyhas 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 the outstanding shares of Sunalpha which was incorporated under the laws of the Republic of India in November 2010. The transaction was accounted for as a reverse recapitalization. Sunalpha was the acquirer for financial reporting purposes, and TripBorn was the acquired company. Consequently, the assets, liabilitiesexisting taxable temporary differences, projected future taxable income, tax-planning strategies, and results of operationsoperations. If the Company determines that are reflectedit would be able to realize our deferred tax assets in the Company’s consolidated financial statements priorfuture in excess of their net recorded amount, it would make an adjustment to the December 14, 2015 transaction aredeferred 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 Sunalphatax 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 are recordedServices 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 historical cost basis.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 financial statements after completionbalance sheets. Our share of the December 14, 2015 transactionearnings 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 assets, liabilitiescarrying 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 resultsour 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 operations of Sunalpha upJune 30, 2019, is $346,074 relating to the day priorfair value of equity-method investments and $319,725 relating to the closingfair value of amounts due from equity-method investee, in aggregate $665,799. During the transaction,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 assets, liabilitiesquarter ended June 30, 2019.
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Related Parties
The Company follows FASB ASC subtopic 850-10 for the identification of related parties and resultsdisclosure of operationsrelated 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 Sunalpha from and afterconstrued under Rule 405 under the closing dateSecurities Act); (b) entities for which investments in their equity securities would be required, absent the election of the transaction.
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 isexpected 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.
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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 Company amended its certificatecomponents of incorporation on January 13, 2016lease 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 (1) increase the authorized number of shares of common stock from 100,000,000 to 200,000,000 and (2) change its name from PinstripesNYC. Inc. to TripBorn, Inc.
| 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 December 31June 30 and March 31, 2017. The property and equipment listed below are recorded in the books of Sunalpha.
| December 31, 2017 | March 31, 2017 | |||||||
| Computer | $ | 13,258 | $ | 20,782 | ||||
| Furniture and Fixture | 4,139 | 4,138 | ||||||
| Office Equipment | 6,537 | 5,768 | ||||||
| Software License | 768 | 244 | ||||||
| Total | 24,702 | 30,933 | ||||||
| Accumulated depreciation | (13,060 | ) | (17,697 | ) | ||||
| Fixed assets, net | $ | 11,642 | $ | 13,236 | ||||
| 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 December 31, 2017June 30, 2019 and 2016 is $930,June 30, 2018 was $57,822 and $2,309, respectively.
6. INTANGIBLE ASSETS
Intangible assets with definite lives consist of the following as of December 31June 30 and March 31, 2017:
| December 31, 2017 | March 31, 2017 | |||||||
| API Access | $ | 132,399 | $ | 129,876 | ||||
| Software | 1,651,000 | 1,651,000 | ||||||
| Total | 1,783,399 | 1,780,876 | ||||||
| Accumulated amortization | (509,514 | ) | (217,654 | ) | ||||
| Intangible assets, net | $ | 1,273,885 | $ | 1,563,222 | ||||
| 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, 20172013 and 2016 was
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, 2018 – 2022:
| Years ended March 31 | 2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||||||
| Estimated amortization expense | $ | 256,946 | $ | 342,594 | $ | 342,594 | $ | 342,594 | $ | 116,644 | ||||||||||
The loan from Mr. Mahesh Gandhi was assumed as a result of the event thatpurchase 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 isMr. 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 completesborrowed $300,000 from ARNA Global LLC, an Uplist Transaction priorentity owned and controlled by Mr. Sharma, its President and CEO, to December 31,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 outstanding principal balanceremaining $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 will automatically convertmatured on March 7, 2019, and bore interest at the rate of ten percent. The note was converted into 10,303,07021,194,381 shares of common stock (the “Takniki Note Shares”). Ifat the Uplist Transaction does not occur prior to December 31, 2019, Takniki Communications will have thenoteholders option to receive full payment of the outstanding principal balance or the Takniki Note Shares, each together with accrued unpaid interest paid in cash. Takniki Communications also will have the option to receive full payment of the outstanding principal or the Takniki Note Shares, each together with accrued unpaid interest paid in cash, in connection with a “sale of the company” as such term is defined in the convertible promissory note. The current amount of principal and interest outstanding on this note at December 31, 2017 is $766,769.
On FebruaryMarch 8, 2016, the Company issued a convertible promissory notesnote to three accredited investors in the aggregate principal amount of $350,000 pursuant toMr. Sachin Mandloi, a related party for $38,076. The note purchase agreement of the same date. Interest accruedmatured on March 8, 2019, and bore interest at the rate of 6% per annum. In the event that the Company completed an Uplist Transaction, prior to February 8, 2019, the outstanding principal balance of theten percent. The note would automatically convertwas converted into a total of 9,156,206835,552 shares of common stock (the “February 2016 Note Shares”). If the Uplist Transaction did not occur prior to February 8, 2019,at the noteholders would have had the option to receive full payment of the outstanding principal balance or the February 2016 Note Shares, each together with accrued unpaid interest paid in cash. The noteholders also had the option to receive full payment of the outstanding principal or the February 2016 Note Shares, each together with accrued unpaid interest paid in cash, in connection with a “sale of the company” as such term is defined in the convertible promissory note.
On July 1,March 8, 2016, the Company issued a convertible promissory notesnote to an accredited investor inMr. Deepak Sharma, the aggregate principal amountCEO and President of $150,000 pursuant to the Company for $156,407. The note purchase agreement dated Februarymatured on March 8, 2016. Interest accrued2019, and bore interest at the rate of 6% per annum. In the event that the Company completed an Uplist Transaction, prior to July 1, 2019, the outstanding principal balance of theten percent. The note would automatically convertwas converted into a total of 3,924,0883,432,234 shares of common stock (the “July 2016 Note Shares”). Ifat the Uplist Transaction did not occur prior to July 1,noteholders option on March 8, 2019.
10. STOCKHOLDERS’ EQUITY
During the quarter ended June 30, 2019, the noteholder would have hadCompany 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 option to receive full payment ofPRAMA acquisition; c) 1,571,430 common shares when the outstanding principal balance orwarrant 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 July 2016 Note Shares, each together with accrued unpaid interest paid in cash. The noteholder also had the option to receive full payment of the outstanding principal or the July 2016 Note Shares, each together with accrued unpaid interest paid in cash,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, theCompany issued 2,632,653 common shares to the shareholders of PRAMA, at a “saleprice of $0.28 per share, as part of the company” as such term is defined in the convertible promissory note.
In June 2019, the Company entered intoissued 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 letter agreement (the “Letter Agreement”) withprivate 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 accredited investors to amend their convertible promissory notes dated February 8, 2016 and July 1, 2016.month period ended June 30, 2019 was minimal. The Letter Agreement permitted that at any time whilefair value of warrants granted during the notes were outstanding, the notes were convertible, at the option of the investors, into shares of the Company’s common stock. Subsequently, on July 15 and 16, 2017, the investors elected to convert an aggregate of $500,000 of convertible debt into 13,080,292 shares of the Company’s common stock
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 deferred tax assets at December 31, 2017 and March 31, 2017 were
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.
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 |
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 net incomeloss per share isare the same as follows:
Third Quarter Ended December 31, | Nine Months Ended December 31, | ||||
| 2017 | 2016 | 2017 | 2016 | ||
| Basic net income (loss) per share: | |||||
| Net income (loss) applicable to common shares | $(246,719) | $(127,361) | $(610,715) | $(437,920) | |
| Weighted average common shares outstanding | 89,840,099 | 76,816,272 | 89,840,099 | 76,816,272 | |
| Basic net income (loss) per share of common stock | $(0.00) | $(0.00) | $(0.01) | $(0.01) | |
| Diluted net income (loss) per share: | |||||
| Net income (loss) applicable to common shares | $(246,719) | $(127,361) | $(610,715) | $(437,920) | |
| Weighted average common shares outstanding | 89,840,099 | 76,816,272 | 89,840,099 | 76,816,272 | |
| Dilutive effects of convertible debt | $(0.00) | $(0.00) | $(0.01) | $(0.01) | |
Weighted average common shares, assuming dilutive effect of convertible debt | 89,840,099 | 76,816,272 | 89,840,099 | 76,816,272 | |
Diluted net income (loss) per share of common stock | $(0.00) | $(0.00) | $(0.01) | $(0.01) | |
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 described in Notes 9 and 10 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)(“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, 2016,2018, 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. The Company has subsequently renewed its agreement through October 5, 2018.
Through Sunalpha, the Company currently occupies approximately 2,455 square feet of office space in Ahmedabad, India, owned by a directorthe CEO of the Company on a rent-free basis. As of December 31, 2017June 30, 2019 and 2016,2018, the Company has not paid any rentrent. There were no significant commitments or contingencies for this office space. PRAMA as of June 30, 2019.
The Company is expectedparty to pay market rate rent oncecertain 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 profitable.
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 has leased office spacemanagement 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 Ahmedabad, India effective from March 1, 2016 for a term of five years.deciding how to allocate resources and in assessing financial performance. The operationsreportable segments reflect the internal organization of the Company and are being undertaken from the new premises.strategic businesses that offer different products and services. The Company pays monthly rentreports 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 an amount equal to $1,260 per month pursuant toIndia, substantially all of the lease agreement.
The Company entered intomeasures 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 consulting agreement effective May 24, 2016 with LogiCore Strategies, LLC (“LogiCore”), pursuant to which Richard J. Shaw serves asprice $0.70 and received approximately $500,000. Each unit consists of one share of the Company’s Chief Financial Officer. The Company compensates LogiCorecommon stock and two warrants to purchase common stock. Each warrant can be exercised at any time prior to August 16, 2022 for Mr. Shaw’s timethe purchase of one share at an annual rateexercise price of $60,000.
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.
Introduction
In the accompanying analysis of financial information, we sometimes use information derived from consolidated unaudited financial data but not presented in our financial statements prepared in accordance with U.S. GAAP. Certain of these data are considered “non-GAAP financial measures” under SEC rules. See the Non-GAAP Financial Measures section for the reasons we use these non-GAAP financial
measures and the reconciliations to their most directly comparable GAAP financial measures. Certain columns and rows within
the tables may not add due to the use of rounded numbers. Percentages presented are calculated from the underlying numbers. Discussions throughout this Management Discussion & Analysis (“MD&A”) are based on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including: any projections of earnings, revenues or other financial items; any statements regarding the adequacy, availability and sources of capital, any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan” or “anticipate” and other similar words. In addition to any assumptions and other factors and matters referred to specifically in connection with such forward-looking statements, factors that could cause actual results or outcomes to differ materially from those contained in forward-looking statements include those factors set forth in this Quarterly Report, particularly under the headings, “Risk Factors” and “Management’scontinuing operations unless otherwise noted. The Management Discussion and Analysis of Financial Condition and Results of Operations" and subsequent reports that we fileshould be read in conjunction with the Securitiesunaudited consolidated condensed financial statements and Exchange Commission (“SEC”).
Forward-Looking Statements
The Company makes forward-looking statements are reasonable, actual results could differ materially from those projected or assumed. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed in this prospectus. We do not intend, and undertake no obligation, to update any forward-looking statement, except as required by law.
Any number of risks and uncertainties could cause actual results to differ materially from those we express in our forward-looking statements, including the risks and uncertainties we describe below and other factors we describe from time to time in our periodic filings with the SEC. We therefore caution you not to rely unduly on any forward-looking statement. Important factors that could cause actual results to differ include, but are not limited to, the risks discussed in “Risk Factors” and the audited consolidatedfollowing:
| · | the adequacy of our financial resources, including our sources of liquidity to fund business development activities and pursue acquisition opportunities; |
| · | our ability to find, negotiate and close acquisition opportunities at appropriate risk-adjusted returns and market rates; |
| · | our ability to extend, where needed maturities on existing notes; |
| · | our ability to raise equity capital at the right market terms; |
| · | the initiation of new legal proceedings; |
| · | our ability to effectively manage our regulatory and contractual compliance obligations; |
| · | our ability to contain and reduce our operating costs; |
| · | the loss of the services of our directors and officers and senior managers; |
| · | uncertainty related to general economic and market conditions, travel and hospitality market conditions; |
| · | uncertainty related to our ability to integrate the operations of PRAMA, a 51% equity interest subsidiary to our eCommerce Aggregator business; |
| · | uncertainty related to our ability to conduct future acquisitions to gain economies of scale and to leverage travel network synergistic benefits; |
| · | credit losses sustained in the event of a failure or lack of insurance coverage from the Deposit Insurance and Credit Guarantee Corporation of India for bank balances maintained in India; and |
| · | uncertainty related to our reserves, valuations, provisions and anticipated realization of assets. |
Further information on the risks specific to our business is detailed within this report, including under “Risk Factors.” Forward-looking statements speak only as of the date they were made, and noteswe disclaim any obligation to update or revise forward-looking statements whether because of new information, future events or otherwise.
Overview
The Company is an eCommerce aggregator and Management’s Discussiona hospitality management company. An aggregator model is a form of eCommerce whereby our website, www.tripborn.com aggregates, information on various travel and Analysishospitality vendors and presents them on a single platform, to ease, facilitate, coordinate and effectuate consumer travel and hospitality needs.The Hospitality segment is an Indian based operator of Financial Condition20 hotel properties in 16 cities with 949 keys under 7 brands as of June 30, 2019.
The eCommerce aggregator business functions as a Last Mile Commerce and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended March 31, 2017, filed with the SEC on June 29, 2017.
The hospitality business is comprised of our 51% equity interest in our subsidiary, PRAMA, which was acquired on April 22, 2019. The hospitality business operates the laws offollowing mid-priced to budget brands in India: Mango Hotels, Mango Suites, Mango Hotels Select, Mango Suites Select, i-Stay Hotels and Apodis Collection. APODIS and IntelliStay function as umbrella brands. Our brands strive to highlight friendly service and reflects a local spin on the Republic of Indiatravel experience in 2010. Sunalpha commenced operations as an OTA in India in February 2014.
PRAMA was acquired not only for its asset-light hotel property management business, but also for the expectation that we plan to deliver organic growth and synergies through combining the PRAMA portfolio with the SEC under the Exchange Act from August 2010 until we terminated our registration under the Exchange Act in May 2013. Our fiscal year ends on March 31. We refer to the fiscal year ended March 31, 2018 as fiscal 2018 and the fiscal year ended March 31, 2017 as fiscal 2017.
eCommerce Aggregator business overview
We have built, advanced and secure, service-oriented technology platforms, that integrate our supplierssales, customer service and holdfulfillment operations. Our website is hosted in the cloud and is used by our B2B customers or service agents to enable them to resell within specified time periods. If we are not ablesell our full suite of online travel services to sell these reservations, we recognize a loss.
We have designed our agent network within Indiacustomer facing websites to another consumer,be user-friendly to our B2B customer, providing our customers with extensive low-price options and alternative routings. We continuously make improvements to our online booking platforms to enhance the user experience by focusing on automation. Our cloud-based platform has been designed to link to our multiple suppliers’ systems either through “direct connects” or a global distribution system (“GDS”), we use both Amadeus and Galileo, and are capable of delivering real-time availability and pricing information for multiple options simultaneously. Our platform is hosted by a cloud-based IBM service, that enables consumerswhich provides a high degree of reliability, security and scalability and helps us to withdraw cash from their bank accounts.
eCommerce Aggregator operating metrics
In evaluating our eCommerce Aggregator business, we use operating metrics, including gross bookings and revenue margin. Gross bookings are a measure of the total dollar volume of transactions that we process and is used by us to measure our scale and growth. We calculate revenue margin as revenue as a percentage of gross bookings.
| Quarter ended June 30 | ||
| 2019 | 2018 | |
| Gross Bookings1* | $15,042,550 | $13,720,529 |
| Net revenues | $132,120 | $95,640 |
| Gross Bookings Margin2* | 0.88% | 0.70% |
1*Gross bookings represent the total retail value of transactions booked through us, generally including taxes, fees and other charges, and are generally reduced for cancellations and refunds. Gross bookings differ from the Company’s net revenues, which reflect the revenue earned by the Company.
2*Gross bookings margin is defined as net revenues as a percentage of gross bookings.
The increase in furtherancegross bookings is driven primarily by increases in incentives, fees, penalty income, and surcharges paid by our service agent customers. The revenue margin increased quarter over quarter by approximately 18 basis points, due to increased margin from suppliers in our offerings.
Hospitality business overview
Hospitality trends and opportunities
The Indian travel and hospitality segment is highly fragmented, with attention focused on a handful of higher end luxury brands. There has been a dearth of branded hotel chains catering to mass segments, where demand is primarily driven by approximately 650 million young travelers aged between 24 and 35, keen to travel, enabled by higher disposable income and improved transport options. With changing times, the young travelers have created demand in India’s smaller towns and hence creating a need for predictable hotel experience with affordable pricing.
In a country where access to local information and knowledge is rarely available in an online, social media driven environment, hospitality sales channels have relied on offline distribution channels, principally word-of-mouth, print, radio, television and travel agent marketing.Given the ever-growing list of options available today in India, using the right number and mix of channels to deliver a relevant and engaging customer experience in an increasingly fragmented, and often chaotic distribution landscape is pivotal. As such, hotels can no longer be complacent, relying on previous sales and distribution channels. It is incumbent upon hoteliers to effectively leverage both direct and indirect channels as part of their sales and marketing strategy to stay competitive, optimize yields, drive sales and revenue.
Hospitality business overview
We look at the number of keys (available rooms), number of properties by brand and the number of cities as a measure of our growth strategies.
Given the transaction occurred on April 22, 2019, we believe that consistent period on period performance will not be meaningful for a period of time and accordingly will not present the above post acquisition performance measures until they are meaningful.
We earn base management fees and in certain cases incentive management fees from the properties that we manage. In November 2015,most markets, base management typically consist of a percentage of property-level revenue, while incentive management fees typically consist of a percentage of net profit, adjusted for certain contractually agreed items.
We remain focused on doing the things that we integrateddo well; that is, selling rooms, taking care of our guests, and making sure we control costs. We provide our guests new and memorable experiences through our portfolio of brands, innovative technology, and a focus on employee training to deliver a consistent customer experience. Our brands remain strong due to our skilled management teams, dedicated associates, superior guest service with an emphasis on guest and associate satisfaction, and desirable property amenities within the Indian Railway reservation system into our online platform using complex and scalable technology tools. Previously, we provided rail ticketing through a third party supplier. Becoming a principal agent has resulted in and willbudget price range.
We, along with property owners, continue to resultinvest in our brands by means of new, refreshed, and reinvented properties, new room and public space designs, and enhanced amenities, technology offerings, and guest experiences. We address, through various means, hotels in our system that do not meet our standards. We continue to enhance the appeal of our proprietary, information-rich, and easy-to-use websites, and of our associated mobile smartphone applications, through functionality and service improvements.
OUR STRATEGY
We believe that the fast-growing travel market in in India, coupled with rising disposable income in India drive a strategic opportunity. Our objective is to capture this growth through the following strategic initiatives:
| · | Expand our hotels and packages offerings.Our hotels and packages offering generally yields higher margins than our air, rail ticketing and money transfer offerings, and we intend to increase this as part of the sales mix. In April 2019, we acquired PRAMA, which operates a budget hotel portfolio across India. We plan to increase the number of hotels, to increase captive demand, utilizing our last-mile-distribution network, by adopting new technologies, and a deep customer focus to create stronger brand loyalty and customer engagement experience. Our objective is to enable more hotel suppliers to be seamlessly connected to our platform with the latest technology methods which include direct connects, channel managers and direct integrations with various aggregators. We believe that we can increase our total number of transactions as internet penetration in India increases, by strengthening our distribution network, cross selling other products and service including vacation packages; |
| · | Expand our service and product portfolio to enhance cross-selling opportunities. We believe that expanding our service and product offerings (i.e. Money transfer and Payment services) is an important means of customer acquisition as the diversity of our services and products will improve our offerings to customers, attract more customers to our platform and which allow us to cross sell higher-margin service; |
| · | Enhance our service platforms by investing in technology.We intend to continue to invest in technology to enhance the features of our services and alignment of our platform and technology assets with business objectives which can improve visibility into business operation and profitability, ensure transparency for optimal service delivery, reducing cost, offer new services to customers, and to create efficiency across our businesses by enabling control of every transactions; and |
| · | Pursue selective strategic partnerships and acquisitions.In addition to organic growth, we will pursue strategic partnerships and targeted acquisitions that complement our service offerings, strengthen or establish our presence, or to gain access to technology and building brands. |
CONSOLIDATED RESULTS OF OPERATIONS
Acquisition of PRAMA
The acquisition of PRAMA on April 22, 2019, had a material impact on the results of operations, for the quarter ended June 30, 2019. Accordingly, the results for the period June 30, 2018, which do not include PRAMA are not comparable to the results for the quarter ended June 30, 2019, which do include the results of PRAMA, on a post-close basis. Equally, the PRAMA acquisition had a material impact on the liquidity and capital resources of the Company. The impact of the PRAMA acquisition on the post close results and the balance sheet is shown in the Company’s segmental disclosure. PRAMA’s results, scale and operations are significantly larger than the eCommerce Aggregator segment. Also, the effects of the PRAMA acquisition impacted every significant line item in the statements of operations and balance sheet.
The pro forma combined revenues and net loss before income taxes, for the combined entity, as though the acquisition of PRAMA had occurred on April 1, 2018, for the respective periods are shown in Note 1 of our Consolidated Condensed Financial Statements (unaudited).
The eCommerce Aggregator segment results improved but compared to the PRAMA acquisition did not have a meaningful impact on the results of the Company. The Company does not believe that presenting pro forma information for PRAMA, over and above what is disclosed in the segmental information above, would be meaningful at this time.
| Quarter ended June 30, | Quarter ended June 30, | |||||||
| 2019 | 2018 | |||||||
| Net revenues | $ | 1,825,858 | $ | 95,640 | ||||
| Cost of revenues and expenses | (2,270,134 | ) | (313,699 | ) | ||||
| Loss from operations | (444,276 | ) | (218,059 | ) | ||||
| Other expenses, net | (118,479 | ) | (41,100 | ) | ||||
| Net loss | $ | (562,755 | ) | $ | (259,159 | ) | ||
| Net loss attributable to noncontrolling interests | $ | (135,491 | ) | $ | - | |||
| Net loss attributable to TripBorn, Inc. | $ | (427,264 | ) | $ | (259,159 | ) | ||
Net Revenues
Net revenues increased by $1,730,218, which comprised the post close acquisition results of PRAMA for the period April 22, 2019 through June 30, 2019 of $1,693,738, which was not present in the prior period, and an increase of $36,480 for the eCommerce Aggregation business from increases in the levels of travel agents in the network and an associated increase in transaction volumes.
Cost of Revenues and Other Operating Expenses
Cost of revenues and Other operating expenses increased by $1,956,435, which comprised the post close acquisition results of PRAMA for the period April 22, 2019 through June 30, 2019 of $1,931,685, which was not present in the prior period, and an increase of $24,750 for the eCommerce Aggregation business from increases in the levels of travel agents in the network and an associated increase in transaction volumes.
Loss from Operations
Loss from operations increased by $226,217, which comprised the post close acquisition results of PRAMA for the period April 22, 2019 through June 30, 2019 of $204,380, which was not present in the prior period, and an increase in rail ticketing revenue associated with an increase in fees associated with enrolling our travel agent customers and usage feesloss from operations of $21,837 for ticketing. We have also experienced, and anticipate that we will continue to see, an increase inthe eCommerce Aggregation business, reflecting higher selling, general and administrative expenses associated with hiring additional personnel and expanding our marketing activities in connection with the expanded rail ticketing services as well as an increase in legal and consulting expenses.
Other Expenses, Net
Other expenses, associated with becoming a reporting company withnet increased by $77,379, which comprised the SEC.
Third Quarter Ended December 31, | Nine Months Ended December 31, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net revenue | $ | 77,192 | $ | 148,387 | $ | 255,824 | $ | 405,189 | ||||||||
| Cost of revenue | 10,903 | 73,271 | 37,776 | 272,876 | ||||||||||||
| Gross profit | 66,289 | 75,116 | 218,048 | 132,313 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general, and administrative expenses | 193,460 | 112,750 | 513,125 | 253,996 | ||||||||||||
| Legal and consulting expenses | 53,584 | 56,110 | 151,231 | 206,171 | ||||||||||||
| Income (loss) from operations | (180,755 | ) | (93,744 | ) | (446,308 | ) | (327,854 | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Depreciation and amortization | (83,469 | ) | (51,809 | ) | (283,016 | ) | (153,557 | ) | ||||||||
| Interest income | 157 | 0 | 321 | 0 | ||||||||||||
| Interest expense | (52,578 | ) | (37,068 | ) | (122,167 | ) | (108,526 | ) | ||||||||
| Total other income (expense) | (135,890 | ) | (88,877 | ) | (404,862 | ) | (262,083 | ) | ||||||||
| Income (loss) before income tax expense | (316,645 | ) | (182,621 | ) | (851,170 | ) | (589,937 | ) | ||||||||
| Income tax benefit (expense) | 69,926 | 55,260 | 240,455 | 152,017 | ||||||||||||
Net income (loss) | $ | (246,719 | ) | $ | (127,361 | ) | $ | (610,715 | ) | $ | (437,920 | ) | ||||
Net Loss
Net loss increased by $303,596, which comprised the post close acquisition results of PRAMA for the period April 22, 2019 through June 30, 2019 of $276,512, which was not present in the prior period. The primary drivers were decreases in air ticketing, bus ticketing, hotel bookingperiod, and vacation packages, offset by an increase in rail ticketing, payment services and in incentivesloss from our aggregators and suppliers. The deceases in net revenues result from a decrease in pricing to our end user travel agent customers as our focus continues to remain on acquiring market share through offering lower pricing than our competitors with a focus on generating gross bookings. As described under the heading “Operating Metrics,” gross bookings increased from $5,581,647 during the nine months ended December 31, 2016 to $23,585,164 during the nine months ended December 31, 2017. The increase in gross bookings was the resultoperations of increasing the number of travel agents and entering new markets, selling at reduced margins, and growth in rail ticketing, incentives from our aggregators and suppliers and fees, penalty income and surcharges from our travel agent customers, and growth in the payment services product.
CONSOLIDATED LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2017,June 30, 2019, we had $1,322,002$1,358,902 in cash and cash equivalents, compared to $516,707$1,230,012 as of March 31, 2017.2019. The $805,295 increase in cash and cash equivalents was primarily driven by sales$558,325 proceeds from the issuance of common stock and warrants, and $112,803 in cash provided by operating activities and working capital, partially offset by the $507,093 net cash used for the purchase of $551,000 during the quarter ended September 30, 2017PRAMA and $547,000 during the quarter endedother cash movements. As of June 30, 2017, which offset our year to date net loss of $610,715. As of December 31, 2017, we2019, the Company had stockholders’ equity of $897,340$2,061,528, compared to a stockholders’ deficit of $88,394 at$1,078,970 as of March 31, 2017, which resulted from sales2019. The change of common stock$3,140,498, is comprised of $2,401,181 of share issuances and $1,150,483 of note conversions, of notes payable into common stockand other, partially offset by an increasea net loss attributable to the Parent Company of $427,264. The Company has continued to raise equity in operating losses during the quarter ended December 31, 2017.
Cash Flows:
The following table is a summary of our Consolidated Statements of Cash Flows:| Nine Months Ended | ||||||||
| December 31, | December 31, | |||||||
| 2017 | 2016 | |||||||
| Cash Provided by (Used in): | ||||||||
| Operating Activities | $ | (300,620 | ) | $ | (263,573 | ) | ||
| Investing Activities | 7,915 | (690,640 | ) | |||||
| Financing Activities | 1,098,000 | 1,278,257 | ||||||
| Three months ended | ||||||||
| June 30, | June 30, | |||||||
| 2019 | 2018 | |||||||
| Cash Provided by (Used in): | ||||||||
| Operating activities | $ | 112,803 | $ | (340,244 | ) | |||
| Investing activities | $ | (558,958 | ) | $ | (396 | ) | ||
| Financing activities | $ | 548,595 | $ | (10,518 | ) | |||
Investing Activities: The change in investing activities related to the net cash used by operations is has increased as operating losses have increased.
Financing Activities
: During theWe will require additional capital to continue to fund our operations and will look to raise funds through public and private offerings of our securities. We estimate thatOur liquidity needs are largely impacted by the acquisitions we will require approximately $1.0 millioncomplete, and $5.0 million in the next 12 and 24 months to support our continued operations.
BUSINESS SEGMENTS
The following discussion presents an analysis of operating results of our business, we use operating metrics, including gross bookingsreportable nosiness segments: eCommerce Aggregator and revenue margin. Gross bookings is a measure of total dollar volume of transactions that we process. This metric is an operating metric used by management, the investor community, and analysts who follow the travel industry to measure our market share and to measure our scale and growth. We calculate revenue margin as revenue as a percentage of gross bookings.
| Quarter Ended December 31, | Nine Months Ended December 31, | |||
| 2017 | 2016 | 2017 | 2016 | |
Gross Bookings1 | $8,361,856 | $2,394,253 | $23,585,164 | $5,581,647 |
Revenue Margin2 | 0.9% | 6.2% | 1.1% | 7.3% |
eCOMMERCE AGGREGATOR RESULTS OF OPERATIONS
| Quarter ended June 30, | Quarter ended June 30, | |||||||
| 2019 | 2018 | |||||||
| Net revenues | $ | 132,120 | $ | 95,640 | ||||
| Cost of revenues and Other operating expenses | (372,016 | ) | (313,699 | ) | ||||
| Loss from operations | (239,896 | ) | (218,059 | ) | ||||
| Other expenses, net | (46,347 | ) | (41,100 | ) | ||||
| Net loss | $ | (286,243 | ) | $ | (259,159 | ) | ||
| Segment net loss attributable to TripBorn Inc. | $ | (286,243 | ) | $ | (259,159 | ) | ||
| Segment net loss attributable to noncontrolling interests | $ | - | $ | - | ||||
Net Revenues
Net revenues increased by $36,480 reflecting increases in the levels of travel agents in the network and an associated increase in transaction volumes.
Cost of Revenues and Other Operating Expenses
Cost of revenues and Other operating expenses increased by $58,317 reflecting higher sales, general and administrative expenses and higher legal and consulting expenses.
Loss from Operations
Loss from operations increased by $21,837, reflecting higher sales, general and administrative expenses.
Other Expenses, net
Other expenses, net increased by $5,247.
Net Loss
Net loss increased by $27,084 primarily due to price pressurehigher sales, general and administrative expenses.
HOSPITALITY RESULTS OF OPERATIONS
The quarter ended June 30, 2019 was largely impacted by the acquisition of PRAMA and the associated establishment of our Hospitality segment, which was not present in the comparable period, therefore all comparisons to the prior period are not meaningful. The results of the hospitality segment are only reflected for the period April 22, 2019 through June 30, 2019.
| Quarter ended June 30, | Quarter ended June 30, | |||||||
| 2019 | 2018 | |||||||
| Net revenues | $ | 1,693,738 | $ | - | ||||
| Cost of revenues and Other operating expenses | (1,898,118 | ) | - | |||||
| Loss from operations | (204,380 | ) | - | |||||
| Other expense, net | (72,132 | ) | - | |||||
| Net loss | $ | (276,512 | ) | $ | - | |||
| Segment net loss attributable to TripBorn Inc. | $ | (141,021 | ) | $ | - | |||
| Segment net loss attributable to noncontrolling interests | $ | (135,491 | ) | $ | - | |||
Changes in “Net Revenues”, “Cost of revenues and Other Operating Expenses”, “Gross Profit”, “Loss from Operations”, “Other Expenses, Net”, and “Net Loss” are wholly attributable to the purchase of PRAMA on air ticketing, low margin railApril 22, 2019, and bus ticketing, and payment services outpacing higher margin vacation packages and incentives. The Company has been focused on growing it’s market share by offering lower pricing than its competitors offer, which has resulted in a decline in it’s revenue margin.
OFF BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
Management’s Report on Disclosure Controls and Procedures
We maintain “disclosure controls and procedures”, as that term is defined in Rule 13a-15(e), promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended. Disclosure controls and procedures (as defined in Exchange Act Rule 15d-15(e)) areinclude controls and procedures designed with the objective of ensuringto ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 as amended, such as this report, is recorded, processed, summarized and reported within the time periods specified in the SEC’sSecurities and Exchange Commission’s rules and forms. Disclosure controlsforms, and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including our Chief Executive Officerprincipal executive officer and Chief Financial Officer,our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer
As required by paragraph (b) of Rules 13a-15 under the Securities Exchange Act of 1934, our management, with the participation of our principal executive officer and Chief Financial Officer, based on their evaluation of TripBorn’sour principal financial officer, evaluated our company’s disclosure controls and procedures as of December 31, 2017, havethe end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our management concluded that TripBorn’sas of the end of the period covered by this quarterly report on Form 10-Q, our disclosure controls and procedures are effective as of that date.
Management Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over the Company's financial reporting. In order to provide a reportevaluate the effectiveness of management’s assessment regarding internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002. Our management, with the participation of our principal executive officer and principal financial officer have conducted an assessment, including testing, using the criteria in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") (2013). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. This assessment included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of June 30, 2019. The ineffectiveness of the Company's internal control over financial reporting was due to the following material weaknesses, which are indicative of many small companies with small staff:
| (i) | inadequate segregation of duties consistent with control objectives; |
| (ii) | lack of multiple levels of supervision and review; and |
| (iii) | lack of adequate U.S. GAAP and SEC financial reporting knowledge to identify, account for and disclose financial reporting issues on a timely basis; and |
| (iv) | an inability to report financial statements in a timely manner. |
We believe that the weaknesses identified above have not had any material effect on our financial results. We are currently reviewing our disclosure controls and procedures related to these material weaknesses and expect to implement changes in the current fiscal year, including identifying specific areas within our governance, accounting and financial reporting processes to add adequate resources to potentially mitigate these material weaknesses.
Our management will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Management's Remediation Plan
The weaknesses and their related risks are not uncommon in a company of our size because of the limitations in the size and number of staff. Due to our size and nature, segregation of all conflicting duties has not always been possible and may not be economically feasible. However, we are committed to maintaining a strong internal control environment and implementing measures designed to help ensure that control deficiencies contributing to the material weakness are remediated as soon as possible. We continue to implement our remediation plan for the previously reported material weakness in internal control over financial reporting, described in Part II, Item 9A of our 2019 Form 10-K, which includes steps to increase dedicated personnel, improve reporting processes, and enhance related supporting technology.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. We will consider the material weakness remediated after the applicable controls operate for a sufficient period of time, and management has concluded, through testing, that the controls are operating effectively.
Management believes that despite our material weaknesses set forth above, our financial statements for the three month period ended June 30, 2019 are fairly stated, in all material respects, in accordance with U.S. GAAP. Because of the time needed to implement these steps and test the applicable controls in operation, management does not anticipate that the material weaknesses will be fully remediated by March 31, 2020.
Change in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Share-based compensation
See Note 3 of our Consolidated Condensed Financial Statements (unaudited) for more information.
New Accounting Standards
See Note 3 of our Consolidated Condensed Financial Statements (unaudited) for our adoption of new accounting standards.
PART II.
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 results are subject to various risks and uncertainties, including those described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended March 31, 2017, which could adversely affect our business, financial condition,position, liquidity or results of operations, cash flows, and the trading price of our common stock. There have been no material changes to our risk factors since our Annual Report on Form 10-K for the year ended December 31, 2017 other than as set forth below.
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.
On April 22, 2019, theCompany issued 2,632,653 common shares to the shareholders of PRAMA, at a price of $0.70 per share, as part of the purchase of a 51% equity interest in PRAMA. This was a non-monetary transaction.These issuances were made pursuant to the exemption from registration contained in Regulation S under the Securities Act for sales solely to non-US investors outside of the United States.
On June 10, 2019, the Company issued and sold 357,143 units comprising one share and a warrant to purchase two shares of the 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 $250,000 to the Company. The Company issued approximately 714,286 warrants pursuant to the 357,143 units listed above. 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. These issuances were made pursuant to the exemption from registration contained in Regulation D under the Securities Act for sales solely to accredited investors.
On June 27, 2019, the Company issued and sold 60,871 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 $42,610 to the Company. The Company issued approximately 121,742 warrants pursuant to the 60,871 units listed above. 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.This issuance was made pursuant to the exemption from registration contained in Regulation S under the Securities Act for sales solely to non-US investors outside of the United States.
On June 30, 2019, the Company issued and sold 357,143 units comprising one share and a warrant to purchase two shares of the 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 $250,000 to the Company. The Company issued approximately 714,286 warrants pursuant to the 357,143 units listed above. 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. These issuances were made pursuant to the exemption from registration contained in Regulation D under the Securities Act for sales solely to accredited investors.
On June 30, 2019, the Company issued 1,571,430 common shares when the warrant holders exercised their warrants and received approximately $15,714 in cash.These issuances were made pursuant to the exemption from registration contained in Regulation D under the Securities Act for sales solely to accredited investors.
On June 30, 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.These issuances were made pursuant to the exemption from registration contained in Regulation D under the Securities Act for sales solely to accredited investors.
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 equity interest was acquired from the stockholders of PRAMA. PRAMA is engaged in the business of owning and promoting businesses for operating and managing hotels and food and beverage services in India and nearby markets located in the Indian subcontinent. As previously disclosed, 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. The completion of the acquisition should have been reported on a Current Report on Form 8-K, under Item 2.01
(Completion of Acquisition or Disposition of Assets).
The audit of PRAMA is not complete and the Company did not file the financials of PRAMA within 75 days from its acquisition, as required under rule 8-04 of Regulation S-X. However, the Company will file such financial statements on a Form 8-K as soon as the audit is completed.
The exhibits listed below are filed as part of this Quarterly Report on Form 10-Q.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| TRIPBORN, INC. | |||
| Date: November 25, 2019 | By: | / | |
| Name: | Deepak Sharma | ||
| Title: | President, Chief and Accounting Officer) | ||
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Exhibit Number | Description | ||
| 31 | .1 | ||
| 31 | .2 | ||
| 32 | .1 | ||
| 32 | .2 | ||
| 101 | .CAL | XBRL Taxonomy Extension Calculation Linkbase | |
| 101 | .INS | XBRL Instance Document | |
| 101 | .LAB | XBRL Taxonomy Extension Label Linkbase | |
| 101 | .PRE | XBRL Taxonomy Extension Presentation Linkbase | |
| 101 | .SCH | XBRL Taxonomy Extension Schema Linkbase | |
| 101 | .DEF | XBRL Taxonomy Extension Definition Linkbase | |