UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________
FORM 10-Q
_______________________________________
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2017
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:No. 333-210821
_______________________________________
TripBorn, Inc.
(Exact name of registrant as specified in its charter)
_______________________________________
| Delaware | 27-2447426 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |
| 762 Perthshire Pl Abingdon MD | 21009 | |
| ( | (Zip Code) |
(269) 274-7877
(Registrant’s telephone number, including area code)
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 ☐ý
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 ☐ý
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):
| Large accelerated filer | Accelerated filer | |||||
| Non-accelerated filer | 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 ☒ý
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.
| Page | ||||||
| Part I | Financial Information (Unaudited) | 3 | ||||
| Consolidated Condensed Financial Statements | ||||||
| Consolidated Condensed Statements of Operations | 3 | |||||
| Consolidated Condensed Statements of Comprehensive Loss | 4 | |||||
| Consolidated Condensed Statements of Balance Sheets | 5 | |||||
| Consolidated Condensed Statements of Equity (Deficit) | 6 | |||||
| Consolidated Condensed Statements of Cash Flows | 7 | |||||
| Notes to Consolidated Condensed Financial Statements | 8 | |||||
| Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 39 | ||||
| Item 4 | Controls and Procedures | 45 | ||||
| PART II. | ||||||
| Item 1 | Legal Proceedings | |||||
| 46 | ||||||
| Item 2 | ||||||
| 46 | ||||||
| Item 5 | 47 | |||||
| Item 6 | 48 | |||||
| Index to Exhibits | 48 | |||||
| 48 | ||||||
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 | ||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| September 30, 2019 | September 30,2018 | September 30, 2019 | September 30,2018 | |||||||||||||
| NET REVENUES | $ | 2,128,370 | $ | 84,583 | $ | 3,954,228 | $ | 180,223 | ||||||||
| COST OF REVENUES AND EXPENSES | ||||||||||||||||
| Cost of revenue | 2,024,650 | 56,422 | 3,480,298 | 116,382 | ||||||||||||
| Selling, general and administrative expenses | 611,132 | 202,339 | 1,185,217 | 370,923 | ||||||||||||
| Legal and consulting expenses | 169,620 | 31,626 | 275,687 | 77,497 | ||||||||||||
| Depreciation and amortization | 136,823 | 33,579 | 271,157 | 72,863 | ||||||||||||
| 2,942,225 | 323,966 | 5,212,359 | 637,665 | |||||||||||||
| LOSS FROM OPERATIONS | (813,855 | ) | (239,383 | ) | (1,258,131 | ) | (457,442 | ) | ||||||||
| Other income, net | 32,604 | 6,392 | 63,585 | 12,535 | ||||||||||||
| Interest expense | (86,480 | ) | (47,709 | ) | (242,146 | ) | (95,034 | ) | ||||||||
| Interest income | 39,882 | 62 | 46,086 | 144 | ||||||||||||
| Equity in earnings | - | - | - | - | ||||||||||||
| LOSS BEFORE INCOME TAXES | (827,849 | ) | (280,638 | ) | (1,390,606 | ) | (539,797 | ) | ||||||||
| Provision for income taxes | - | - | - | - | ||||||||||||
| NET LOSS | $ | (827,849 | ) | $ | (280,638 | ) | $ | (1,390,606 | ) | $ | (539,797 | ) | ||||
| Net loss attributable to noncontrolling interests | $ | (375,339 | ) | $ | - | $ | (574,056 | ) | $ | - | ||||||
| Net loss attributable to TripBorn, Inc. | $ | (452,510 | ) | $ | (280,638 | ) | $ | (816,550 | ) | $ | (539,797 | ) | ||||
| NET LOSS PER COMMON SHARE | ||||||||||||||||
| Basic loss per common share attributable to TripBorn, Inc. | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||
| Diluted loss per common share attributable to TripBorn, Inc. | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||
| WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | ||||||||||||||||
| Basic weighted-average number of common shares | 112,791,334 | 95,819,093 | 112,791,334 | 95,819,093 | ||||||||||||
| Diluted weighted-average number of common shares | 113,136,703 | 95,819,093 | 113,136,703 | 95,819,093 | ||||||||||||
See accompanying notes to consolidated condensed financial statements.statements (unaudited).
| 3 |
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 | ) | ||||
| Three months ended | Six months ended | |||||||||||||||
| September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | |||||||||||||
| Net loss | $ | (827,849 | ) | $ | (280,638 | ) | $ | (1,390,606 | ) | $ | (539,797 | ) | ||||
| Net loss attributable to noncontrolling interests | (375,339 | ) | - | (574,056 | ) | - | ||||||||||
| Net loss attributable to TripBorn, Inc. | (452,510 | ) | (280,638 | ) | (816,550 | ) | (539,797 | ) | ||||||||
| Currency translations adjustment | (65,141 | ) | 4,136 | (27,903 | ) | 5,583 | ||||||||||
| Currency translation adjustment attributable to noncontrolling interests | (41,820 | ) | - | 5,210 | - | |||||||||||
| Currency translation adjustment attributable to TripBorn, Inc | (23,321 | ) | 4,136 | (33,113 | ) | 5,583 | ||||||||||
| Comprehensive loss | (892,990 | ) | (276,502 | ) | (1,418,509 | ) | (534,214 | ) | ||||||||
| Comprehensive loss attributable to noncontrolling interests | 417,159 | - | 568,846 | - | ||||||||||||
| Comprehensive loss attributable to TripBorn, Inc. | $ | (475,831 | ) | $ | (276,502 | ) | $ | (849,663 | ) | $ | (534,214 | ) | ||||
See accompanying notes to consolidated condensed financial statements.statements (unaudited).
| 4 |
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 | ||||
| September 30, | March 31, | |||||||
| 2019 | 2019 | |||||||
| ASSETS | (UNAUDITED) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 910,096 | $ | 1,230,012 | ||||
| Investments | 427,755 | - | ||||||
| Accounts receivable, net, and unbilled revenue | 1,286,659 | 178,492 | ||||||
| Due from related parties | 914,601 | 14,364 | ||||||
| Other current assets | 1,272,035 | 570,571 | ||||||
| Total current assets | 4,811,146 | 1,993,439 | ||||||
| Non current assets: | ||||||||
| Operating lease, right-of-use assets, net | 9,819,947 | - | ||||||
| Goodwill | 936,788 | - | ||||||
| Intangible assets, net | 2,207,814 | 362,717 | ||||||
| Property and equipment, net | 1,679,405 | 12,247 | ||||||
| Other noncurrent assets | 1,650,037 | 48,956 | ||||||
| TOTAL ASSETS | $ | 21,105,137 | $ | 2,417,359 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 1,700,204 | $ | 310,130 | ||||
| Local duties and taxes | 897,764 | 12,660 | ||||||
| Due to related parties | 872,751 | 13,828 | ||||||
| Loans and convertible notes due to related parties | 1,089,211 | 1,838,157 | ||||||
| Interest payable (includes $578,226 and $508,531 due to related parties, respectively) | 615,740 | 536,073 | ||||||
| Salaries and benefits (includes $555,030 and $430,030 due to related parties respectively) | 1,220,063 | 448,290 | ||||||
| Current portion of loans and convertible notes with third parties | 494,185 | - | ||||||
| Other current liabilities | 1,042,791 | 87,191 | ||||||
| Total current liabilities | 7,932,709 | 3,246,329 | ||||||
| Long term liabilities: | ||||||||
| Long term portion of operating lease liabilities | 9,698,698 | - | ||||||
| Long term portion of loans and convertible notes | 377,875 | 250,000 | ||||||
| Other non-current liabilities | 594,051 | - | ||||||
| Total current and long-term liabilities | 18,603,333 | 3,496,329 | ||||||
| Commitments and contingencies (Note 14) | ||||||||
| Preferred stock $.0001 par value | - | - | ||||||
| Authorized shares: 10,000,000, none issued and none outstanding | ||||||||
| Common stock $.0001 par value | 12,835 | 9,719 | ||||||
| Authorized shares: 200,000,000 | ||||||||
| Shares issued and outstanding: 128,346,128 and 97,190,435 | ||||||||
| Additional paid in capital | 6,170,286 | 3,227,452 | ||||||
| Accumulated deficit | (5,172,180 | ) | (4,355,630 | ) | ||||
| Accumulated other comprehensive income | 6,376 | 39,489 | ||||||
| TOTAL TRIPBORN, INC STOCKHOLDERS’ EQUITY / (DEFICIT) | 1,017,317 | (1,078,970 | ) | |||||
| Noncontrolling interest in consolidated entity (Note 1) | 1,484,487 | - | ||||||
| Total equity (deficit) | 2,501,804 | (1,078,970 | ) | |||||
| TOTAL LIABILITIES AND EQUITY | $ | 21,105,137 | $ | 2,417,359 | ||||
See accompanying notes to consolidated condensed financial statements.statements (unaudited).
| 5 |
TRIPBORN, INC.
| 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 | |||||||||||||||||
| For the six months ended September 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 | 1,489,443 | 150 | 1,042,460 | - | - | 1,042,610 | - | 1,042,610 | ||||||||||||||||||||||||
| 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 | - | - | - | (33,113 | ) | - | (33,113 | ) | 5,210 | (27,903 | ) | |||||||||||||||||||||
| Net loss | - | - | - | - | (816,550 | ) | (816,550 | ) | (574,056 | ) | (1,390,606 | ) | ||||||||||||||||||||
| Balance as of September 30, 2019 | 128,346,128 | $ | 12,835 | $ | 6,170,286 | $ | 6,376 | $ | (5,172,180 | ) | $ | 1,017,317 | $ | 1,484,487 | $ | 2,501,804 | ||||||||||||||||
| For the six months ended September 30, 2018 | ||||||||||||||||||||||||||||||||
| Shares | Common stock | Additional paid in capital | Accumulated other comprehensive income | Accumulated deficit | TripBorn Inc deficit | Noncontrolling interests | Total deficit | |||||||||||||||||||||||||
| (In $ except for number of common stock) | ||||||||||||||||||||||||||||||||
| Balance as of March 31, 2018 | 95,711,874 | $ | 9,572 | $ | 2,321,818 | $ | 14,537 | $ | (3,087,583 | ) | $ | (741,656 | ) | $ | - | $ | (741,656 | ) | ||||||||||||||
| Issuance of common stock | 478,560 | 48 | 205,733 | - | - | 205,781 | - | 205,781 | ||||||||||||||||||||||||
| Currency translation adjustment | - | - | 5,583 | - | 5,583 | - | 5,583 | |||||||||||||||||||||||||
| Net loss | - | - | - | - | (539,797 | ) | (539,797 | ) | - | (539,797 | ) | |||||||||||||||||||||
| Balance as of September 30, 2018 | 96,190,434 | $ | 9,620 | $ | 2,527,551 | $ | 20,120 | $ | (3,627,380 | ) | $ | (1,070,089 | ) | $ | - | $ | (1,070,089 | ) | ||||||||||||||
See accompanying notes to consolidated condensed financial statements.statements (unaudited).
| 6 |
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 | ||||
| Six months ended September 30 | ||||||||
| 2019 | 2018 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (1,390,606 | ) | $ | (539,797 | ) | ||
| Adjustment to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 266,978 | 72,863 | ||||||
| Stock based compensation | 51,445 | 25,723 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (491,603 | ) | (129,698 | ) | ||||
| Other current assets | 56,359 | 183,220 | ||||||
| Accounts payable | (452,491 | ) | 92,643 | |||||
| Other current liabilities | 2,324,036 | 16,604 | ||||||
| Other non-current liabilities | (593,914 | ) | - | |||||
| Other non-current assets | 20,457 | - | ||||||
| Net cash used in operating activities | (209,339 | ) | (278,442 | ) | ||||
| Cash flows from investing activities | ||||||||
| Net cash paid on acquisition of subsidiary | (971,910 | ) | - | |||||
| Other investments | 32,509 | - | ||||||
| Purchases of fixed assets | (126,438 | ) | (393 | ) | ||||
| Net cash used in investing activities | (1,065,839 | ) | (393 | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from issuance of common stock and exercise of warrants | 1,058,324 | - | ||||||
| Repayment of debt, net | (189,341 | ) | (9,377 | ) | ||||
| Net cash used in financing activities | 868,983 | (9,377 | ) | |||||
| Effect of exchange rates changes on cash | 86,279 | 5,583 | ||||||
| Net change in cash | (319,916 | ) | (282,629 | ) | ||||
| Cash | ||||||||
| Beginning of the period | 1,230,012 | 1,155,367 | ||||||
| End of the period | $ | 910,096 | $ | 872,738 | ||||
| Supplementary disclosure of cash flows information | ||||||||
| Cash paid during the period for: | ||||||||
| Interest paid | $ | 134,351 | $ | - | ||||
See accompanying notes to consolidated condensed financial statements.statements (unaudited).
| 7 |
September 30, 2019
(Unaudited)
1. DESCRIPTION OF BUSINESS
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. Our eCommerce Aggregator business segment operates through Sunalpha Green Technologies Private Limited (“Sunalpha”), a wholly owned subsidiary. Our hospitality business segment is comprised of our 51% equity interest in our subsidiary PRAMA Hotels and Resorts Private Limited (“PRAMA”), which was acquired on April 22, 2019, for aggregate consideration of $2,137,143. All of the Company’s net revenues are derived from operations in India.
The unaudited consolidated financial statements include the accounts and transactions of the Company; its subsidiaries (ownership interests as of September 30, 2019), Sunalpha (ownership interest 100%); PRAMA (ownership interest 51%), Apodis Hotels & Resorts Limited (“AHRL”) (ownership interest approximately 30%, derived from 51%*59.15%), IntelliStay Hotels Private Limited (“IHPL”) (ownership interest approximately 26%, derived from 51%*59.15%*86.96%), Apodis Foods and Brands Private Limited (“AFBL”) (ownership interest approximately 30%, derived from 51%*59.15%*100%), non-operating subsidiary Apodis Projects Private Limited (“APPL”) (ownership interest approximately 30% derived from 51%*59.15%*100%); and an equity investee, PRAMA Canary Wharf Hotels Private Limited (“PCW”) (ownership interest approximately 15%, derived from 51%*59.15%*50%).
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.
The Company’s operations are moderately seasonal, with average net revenues normally higher during the Indian summer months and national or regional holidays, than during winter months and non-holiday periods. Also certain of the Company’s managed hotel properties are in remote hillside locations which experience their own distinct weather patterns. As the business is moderately seasonal, results for any quarter are not necessarily indicative of the results that may be achieved for any other quarter, or for the full fiscal year.
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 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. We have not revised the initial purchase price allocation from the first quarter estimate.
The following reflects the net cash paid on acquisition of PRAMA in the six month period ended September 30, 2019:
| Fair Value | ||||
| Cash paid in six month period ended September 30, 2019 | $ | 1,150,000 | ||
| Net cash on opening balance sheet of PRAMA | (178,090 | |||
| Net cash paid for 51% interest in PRAMA | $ | 971,910 | ||
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The Company recognized revenue of $1,942,177 and $3,635,915 for the three months and six months ended September 30, 2019 consolidated condensed statements of operations related to the acquiree, respectively. The Company recognized net loss of $512,793 and $789,305 for the three months and six months ended September 30, 2019 consolidated condensed statements of operations related to the acquiree, respectively.
The revenue for the combined entity for the three and six months ended September 30, 2019, as though the acquisition of PRAMA had occurred on April 1, 2018 were $3,954,228, and $4,373,526, respectively. The revenue for the combined entity for the three and six months ended September 30, 2018, as though the acquisition of PRAMA had occurred on April 1, 2018 were $1,685,071, and $3,781,321, respectively. The net loss before taxes for the combined entity for the three and six months ended September 30, 2019, as though the acquisition of PRAMA had occurred on April 1, 2018 were $827,849 and $1,408,638, respectively. The net loss before taxes for the combined entity for the three and six months ended September 30, 2018, as though the acquisition of PRAMA had occurred on April 1, 2018 were $411,389 and $833,986, respectively.
TripBorn, Inc owns a 51% interest in PRAMA, in turn PRAMA owns a 59.15% interest in AHRL, AHRL in turn owns an interest in IHPL. AHRL’s ownership interest in IHPL was 84.94% as of April 22, 2019, but this increased to 86.96% as of June 30, 2019 and September 30, 2019. This increase arose from AHRL’s subscription in 308,000 shares at INR 125 per share, $548,616 in aggregate, on April 25, 2019. Accordingly, the Company increased its equity ownership marginally but still approximated 26% (Ownership percentage 51%*59.15%*84.94% to 51%*59.15%*86.96%).
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
Management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the financial statements are issued.
The Company has selectedincurred net losses from operations since inception. The net loss for the six month period ended September 30, 2019 was $1,390,606 and the accumulated deficit was $5,172,180 as of September 30, 2019. The cash and cash equivalents and the current portion of loans and convertible notes due to third parties were $910,096 and $494,185, respectively, as of September 30, 2019. The Company’s ongoing losses have had a significant negative impact on the Company’s financial position and liquidity. The Company has also been historically reliant on loans from related parties, loans from third parties and sales of equity securities to fund operations, working capital and complete acquisitions.
Beginning in December 2019, after September 30, 2019, China, experienced an outbreak of a highly infectious form of a respiratory infection caused by a novel Coronavirus. The disease caused by the novel Coronavirus was later termed Covid-19. On March 3111, 2020 the World Health Organization declared the Coronavirus outbreak a global pandemic. India reported its first Covid-19 infection in the city of Thrissur, in the state of Kerala, India on January 30, 2020 and the first case fatality on March 10, 2020 in the state of Karnataka, India. On March 25, 2020, India’s Prime Minister Narendra Modi announced a 21-day nationwide lockdown in response to the Covid-19 pandemic. To comply with the Indian lockdown, the Company closed all of its hotel operations, which impacts the Hospitality segment. Also as a result of the Indian lockdown, the Indian government temporarily suspended flights, trains and buses which impacts the e-Commerce Aggregator segment. On June 1, 2020, India partially lifted its fiscal year end.lockdown, however the Hospitality and e-Commerce Aggregator segments are still materially adversely impacted by Covid-19. As of the date of filing this Form 10-Q, hotels, flights, trains and buses are operating to varying degrees by region.
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The Company does not have operations in China and the Coronavirus pandemic did not have any impact on the operations or financial results of the Company for the three and six month periods ended September 30, 2019. Management is assessing and monitoring the potential future impact of the pandemic and expects the impact to be materially adverse to its Indian operations, vendors, customers, lessors and employees’ health, but cannot presently estimate the degree and severity of the adverse impact. Management is in the process of implementing various cost reduction efforts to conserve cash and liquidity, including reducing staffing levels and potentially closing certain hotels permanently, but has not reached fixed conclusions.
The Company will require additional capital and may also require additional financing from related or third parties in the event that operations do not generate the expected revenues or a recurrence of Covid-19 were to cause another suspension of operations. Such additional capital or financing may not be available on favorable terms, or at all. Due to these factors, substantial doubt exists about the Company’s ability to continue as PinstripesNYC, Inc. until January 2016. TripBorn filed reportsa going concern through September 2021, which is twelve months after the date that the financial statements are issued. If the Company does not obtain sufficient funds when needed, the Company expects it would reduce its operating expenses and defer vendor payments, including closure of certain operations and or disposals of assets. Because such contingency plans have not been finalized (because the specifics would depend on the situation at the time), such actions also are not considered probable. Because, neither receipt of future equity or loan support, nor management’s contingency plans to mitigate the risk and extend cash resources through September 2021, are considered probable, substantial doubt is deemed to exist about the Company’s ability to continue as PinstripesNYC, Inc.a going concern.
The financial statements for the three and six months ended September 30, 2019, do not include any adjustment relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern because the events leading to the uncertainty arose after September 30, 2019.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The interim unaudited consolidated condensed financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission 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.
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 an approximate 15% equity interest in PCW, which is accounted for under the equity method. All significant inter-company accounts and transactions are preparedeliminated in consolidation.
Reclassifications
The Company has recorded reclassifications to correctly disclose items which are discussed in Note 16 Reclassifications.
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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 reclassified to conform to the current year’s presentation, that is they have been classified as relating to the eCommerce Aggregator business. The change in segment structure had no effect on previously reported total net revenues, cost of revenues and other operating expenses, other expenses (net), net loss, basic and fully diluted earnings per share.
Otherwise, we have not reclassified other prior-period amounts to conform to the accrual basiscurrent-period presentation. Certain columns and rows may not add due to the use of accountingrounded numbers.
Use of Estimates
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 six month period ended September 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.
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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.
Effect of exchange rates changes on cash presented in the Consolidated condensed statements of cash flows (Unaudited) is presented in accordance with ASC 830 and reflects the translation effects of cash held in Indian Rupees at the beginning and requires a foreign currency translation adjustment. The Company’send of the period, and the effects of actual cash depositsflows using the exchange rates in India are not insured against loss. The Company does not believe that this results in any significant credit risk.
Receivables and Credit Policies
Accounts receivable are stated at the amount 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.
The Company has not recorded an impairment to property and equipment as of September 30, 2019, but expects to record an impairment for the year ended March 31, 2020 due to the impacts of covid-19.
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. Intangible assets with definite useful lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.
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The fair value of Credit Risk
The Company has not experienced any losses in such accounts.recorded an impairment to intangible assets as of September 30, 2019, but expects to record an impairment for the year ended March 31, 2020 due to the impacts of covid-19.
Goodwill
Goodwill is assigned to our reporting units based on the expected benefit from the synergies arising from each business combination, determined by using certain financial metrics. The reporting units are aligned with our reporting segments. Goodwill is not amortized, but the Company believestests goodwill for impairment each year or more frequently should facts and circumstances indicate that it is more likely than not exposedthat the fair value of a reporting unit is less than the carrying amount. As part of the impairment test, we may elect to perform an assessment of qualitative factors. If this qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit, including goodwill, is less than its carrying amount, or if we elect to bypass the qualitative assessment, we would then proceed with a quantitative assessment. The quantitative assessment involves calculating an estimated fair value of each reporting unit based on projected future cash flows and comparing the estimated fair values of the reporting units to their carrying amounts, including goodwill. If the estimated fair value of the reporting unit exceeds its carrying value, including goodwill, no impairment is recognized. However, if the carrying amount of a reporting unit, including goodwill, exceeds its fair value, an impairment loss is recognized in an amount equal to the excess, limited to the total goodwill balance of the reporting unit.
The Company has not recorded an impairment to goodwill as of September 30, 2019, but expects to record an impairment for the year ended March 31, 2020 due to the impacts of covid-19.
Impairment of Long-lived Assets
The Company records an impairment of long-lived assets used in operations, other than goodwill, when events or circumstances indicate that the asset might be impaired and the estimated undiscounted cash flows to be generated by those assets over their remaining lives are less than the carrying amount of those items. The net carrying value of assets not recoverable is reduced to fair value, which is typically calculated using the discounted cash flow method. The Company has not recorded an impairment as of September 30, 2019, but expects to record an impairment for the year ended March 31, 2020 due to the impacts of covid-19.
Business Combinations
When acquiring other businesses or participating in mergers or joint ventures in which we are deemed to be the acquirer, we generally recognize identifiable assets acquired, liabilities assumed and any noncontrolling interests at their acquisition date fair values, and separately from any goodwill that may be required to be recognized. Goodwill, when recognizable, would be measured as the excess amount of any consideration transferred, which is generally measured at fair value, over the acquisition date fair values of the identifiable assets acquired and liabilities assumed.
On the date of acquisition, the assets acquired, liabilities assumed, and any noncontrolling interests in the acquiree are recorded at their fair values. The acquiree's results of operations are also included in our consolidated results as of the date of acquisition. Intangible assets that arise from contractual/legal rights or are capable of being separated are measured and recorded at fair value and amortized over the estimated useful life.
Accounting for such transactions requires us to make significant credit riskassumptions 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.
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Foreign Currency Translation
The functional currency of the Company and the currency of the primary economic environment in which it operates is the Indian Rupee. Monetary assets and liabilities in foreign currencies are re-measured into the functional currency at the rates of exchange prevailing at the balance sheet dates. Transactions in foreign currencies are re-measured into functional currency at the rates of exchange prevailing on the date of the transaction. All transaction foreign exchange gains and losses are recorded in the accompanying unaudited consolidated condensed statements of operations.
The assets and liabilities of the subsidiaries for which the functional currency is other than the U.S. dollar are translated into U.S. dollars, the reporting currency, at the rate of exchange prevailing on the balance sheet dates. Revenues and expenses are translated into U.S. dollars at average exchange rates in effect for the periods presented. Resulting translation adjustments are included in accumulated other comprehensive income (loss) within stockholders’ equity (deficit).
Earnings and loss per share
Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average common shares outstanding for the period. 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.
Diluted earnings per share gives effect to all dilutive potential common shares outstanding during 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. The computation of diluted earnings per share does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect. The Company has outstanding convertible debt and outstanding warrants which have been excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive.
Promotion and Advertising expenses
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.
Stock-Based Compensation
The Company accounts for stock-based awards to employees and consultants in accordance with applicable accounting principles, which requires compensation expense related to share-based transactions, including employee stock options, to be measured and recognized in the financial statements based on a determination of the fair value of the stock options over the instruments vesting period. Options awarded to purchase shares of common stock issued to non-employees do not need to be remeasured as per ASU 2018-07 principles. Stock based compensation is recorded in Legal and Consulting expenses in our Statement of Operations.
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 carry forward 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.
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The adoption did not impact our beginning or prior period consolidated condensed balance sheets, statement of equity / (deficit), statement of operations and statement of cash flows.
Under Topic 842, the Company determines if an arrangement is a lease and classifies that lease as either an operating or finance lease at inception. If an arrangement is a lease or contains a lease, we then determine whether the lease meets the criteria of a finance lease or an operating lease. ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, only payments that are fixed and determinable at the time of commencement are considered. As the rate implicit in certain of the Company's leases is not easily determinable, the Company’s applicable incremental borrowing rate is used in calculating the present value of the sum of the lease payments. The right-of-use asset is recognized at the amount of the lease liability with certain adjustments, if applicable. These adjustments include lease incentives, prepaid rent, and initial direct costs. We reassess if an arrangement is or contains a lease upon modification of the arrangement. At the commencement date of a lease, we recognize a lease liability for contractual fixed lease payments and a corresponding right-of-use asset representing our right to use the underlying asset during the lease term. The lease liability is measured initially as the present value of the contractual fixed lease payments during the lease term. The lease term additionally includes renewal periods only if it is reasonably certain that we will exercise the options. Contractual fixed leases payments are discounted at the rate implicit in the lease when readily determinable. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the options will be exercised.
Operating leases are included in Operating lease right-of-use assets, Other current liabilities, and Operating lease liabilities, due after one year, in our Consolidated Condensed Balance Sheets.
The Company has not recorded an impairment to the right the use of assets as of September 30, 2019, but expects to record an impairment for the year ended March 31, 2020 due to the impacts of covid-19.
Employee Benefits
PRAMA has employee benefit plans in the form of statutory and welfare schemes covering statutorily eligible employees which are accounted for in accordance with ASC 715 Compensation – Retirement benefits.
Gratuity
In accordance with the Indian Payment of Gratuity Act, 1972, PRAMA provides for gratuity, a defined benefit retirement plan (the Gratuity Plan) covering eligible employees. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation. The Gratuity Plan is unfunded. The current service costs for defined benefit plans are accrued in the year to which they relate. Prior service costs, if any, resulting from amendments to the plans are recognized and amortized over the remaining period of service of such employees.
Provident
In accordance with Indian law, all eligible employees of the Company, are entitled to receive benefits under the Provident Fund, a defined contribution plan in which both the employee and the Company, contribute monthly at a determined rate (currently twelve percent of contributory wages subject to a maximum cap). These contributions are made to the Government Provident Fund and the Company has no further obligation under Provident Fund, beyond its cash holdings.
Vacation
Accruals for Indian statutory vacation pay is determined at the actuarial estimate for the entire unutilized leave balance standing to the credit of the employees at the period end. The amount accrued as of September 30, 2019 and 2018, amounted to $79,582 and $Nil, respectively.
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Income Taxes
The Company accounts for income taxes under the asset and liability method, in accordance with FASB ASC 740, Accounting for Income Taxes. Deferredwhich requires the recognition of deferred tax assets and liabilities are recognized for the expected future tax consequences attributable toof events that have been included in the financial statements. Under this method, the Company has determined the deferred tax assets and liabilities based on the differences between the financial statement carrying amountsand tax basis of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measuredby using the enacted tax rates expected to apply to taxable income in effect for the yearsyear in which those temporarythe differences are expected to be recovered or settled.reverse. The effect of a change in tax rates on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company recordsrecognizes deferred tax assets to the estimated future tax effects of temporary differences between tax bases ofextent that it believes that these assets and liabilities and amounts reported on the balance sheets as well as operating loss and tax credit carryforwards. Deferred taxes are classified as current or noncurrent based on the balance sheet classification of the related assets and liabilities. Deferred income tax results primarily from temporary differences related to net property and equipment for financial and income tax reporting.
The Company has concluded that as of December 31, 2017 and 2016 there are no materialrecords uncertain tax positions taken or expectedin accordance with ASC 740 on the basis of a two-step process in which (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, it recognizes the amount of tax benefit that is more than 50 percent likely to be taken that would require recognition of a liability or asset or disclosure inrealized upon ultimate settlement with the financial statements. related tax authority.
Non Income Taxes
The Company is subject to routine auditsIndia Goods and Services Tax and other local duties and non-income taxes on its transactions in India. The Company collects such taxes from customers, and pays such taxes on applicable supplies and inputs, and remits the net amounts to the respective local tax authorities on an accrual basis.
Short-term Investments
Through PRAMA, the Company is contractually required under two separate customer contracts, to maintain 30 million Indian Rupees in bank deposits. These are accounted for at cost.
Equity-method Investments
Through PRAMA, the Company has an approximately 15% equity interest in PCW, a non-trading company formed to develop a potential hotel in Bengaluru, India. The Company exercises significant influence over PCW but does not control the investee and the Company is not the primary beneficiary of the investee’s activities. PCW is accounted for using the equity method.
Equity investments are accounted for using the equity-method of accounting if the investment gives us the ability to exercise significant influence, but not control, over an investee. The total of our investments in equity-method investees, including identifiable intangible assets, deferred tax liabilities and goodwill, is included within “Other noncurrent assets” on our consolidated balance sheets. Our share of the earnings or losses as reported by taxing jurisdictions; however,equity-method investees, amortization of the related intangible assets, and related gains or losses, if any, are classified as “Equity-method investment activity, net of tax” on our consolidated statements of operations. Our share of the net income or loss of our equity-method investees may in the future include operating and non-operating gains and charges, which may have a significant impact on our reported equity-method investment activity and the carrying value of those investments. We regularly evaluate these investments, which are not carried at fair value, for other-than-temporary impairment.
We record purchases, including incremental purchases, of shares in equity-method investees at cost. Reductions in our ownership percentage of an investee, including through dilution, are generally valued at fair value, with the difference between fair value and our recorded cost reflected as a gain or loss in our equity-method investment activity. In the event we no longer have the ability to exercise significant influence over an equity-method investee, we would discontinue accounting for the investment under the equity method.
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Included in Other Non Current Assets as of September 30, 2019, is $343,744 relating to the fair value of equity-method investments and $307,877 relating to the fair value of amounts due from equity-method investee, in aggregate $651,621. During the period April 22, 2019, through September 30, 2019, there are currentlywas no auditsrecorded impairment for anythe equity investee. Also, there was no activity in the equity method investee and so no equity-method investment activity, net of tax, periodswas recorded in progress. our Statement of Operations for the respective three and six month periods.
The Company’s management believes thatCompany has not recorded an impairment to the equity investee as of September 30, 2019, but expects to record an impairment for the year ended March 31, 2020 due to the impacts of covid-19.
Related Parties
The Company follows FASB ASC subtopic 850-10 for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20, the Company’s income tax returnsrelated parties include: (a) affiliates of the Company (“Affiliate” means, with respect to any specified person, any other person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such person, as such terms are used in and construed under Rule 405 under the Securities Act); (b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; (c) trusts for the last three years remain subjectbenefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners of the Company; (e) management of the Company; (f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to examination basedan extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
Recent Accounting Pronouncements
New Accounting Pronouncements Recently Adopted
On April 1, 2019 the Company adopted ASU No. 2016-2, Leases (Topic 842) (ASU 2016-2), as amended, which generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use (“ROU”) assets on normal statutory periods subject to audits, notwithstanding any events or circumstances that may exist which could expand the open period.
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 translated at average rates in effector 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 periods presented. 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 believe it is expected to have a minimal impact on the Company’s financial statements and related disclosures.
New Accounting Pronouncements Not Yet Adopted
No other recent accounting pronouncements were issued by FASB and the SEC that are believed by management to have a material impact on the Company's present or future consolidated condensed financial statements.
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4. CUSTOMER CONCENTRATION
Significant customers and suppliers are those that account for greater than 10% of the Company’s revenues and purchases. A significant portion of the Company’s Hospitality revenue has been derived from two customers, which were acquired as part of the PRAMA acquisition on April 22, 2019 and so were not present in the comparable period. For the three months and six months ended September 30, 2019, the two largest customers accounted for 55% and 61%, respectively, of the Company's total revenue. As of September 30, 2019, the two largest customers accounted for 30% of the Company’s total receivables. There were no significant revenue and receivable concentrations for the three and six months ended September 30, 2018. Changes in the relationship with these customers could materially and adversely affect the Company’s financial performance and going concern status.
5. EMPLOYEE BENEFITS
The cumulative translation adjustmentchange in benefit obligation of the gratuity and vacation statutory plans are as follows:
| September 30, 2019 | September 30, 2018 | |||||||
| Change in Projected Benefit Obligation | ||||||||
| Projected benefit obligation, beginning of period | $ | — | $ | — | ||||
| Assumed on acquisition on April 22, 2019 | 157,104 | — | ||||||
| Service cost | 3,878 | — | ||||||
| Interest cost | 12,302 | — | ||||||
| Benefits paid | (2,659 | ) | — | |||||
| Foreign currency translation effect | (2,250 | ) | — | |||||
| Projected Benefit Obligation, end of period | $ | 168,375 | $ | — | ||||
The components of net periodic pension costs for the gratuity and vacation statutory plans are as follows:
| Six months ended September 30, 2019 | Six months ended September 30, 2018 | |||||||
| Net Periodic Pension Cost | ||||||||
| Service cost benefit earned | $ | 3,878 | $ | — | ||||
| Interest cost on projected benefit obligation | 12,302 | — | ||||||
| Benefits paid | (2,659 | ) | — | |||||
| Foreign currency translation effect | (132 | ) | — | |||||
| Net Periodic Pension Cost | $ | 13,389 | $ | — | ||||
There were no amounts recognized in accumulated other comprehensive income.
Assumptions used for benefit obligations and net periodic benefit cost are as follows:
Discount rate 7.86% per annum
Rate of compensation increase 8.0% per annum
PRAMA evaluates these assumptions based on its long-term growth plans and industry standards.
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6. LEASES
Balance sheet information related to our leases is included in the accumulatedfollowing table:
| Operating leases | September 30, 2019 | |||
| Operating lease right-of-use assets | $ | 9,819,947 | ||
| Operating lease liabilities, due within one year | $ | 347,623 | ||
| Operating lease liabilities, due after one year | 9,698,698 | |||
| Total operating lease liabilities | $ | 10,046,321 | ||
Operating lease liabilities, due within one year are included in Other current liabilities on our Consolidated Condensed Balance Sheet as of September 30, 2019.
The components of lease expense during the quarter ended and six month period ended September 30, 2019 is included in the following table:
| Financial statement line item | 3 months ended September 30, 2019 | |||||
| Amortization of right-of-use assets | Cost of revenue | $ | 90,257 | |||
| Interest on lease liabilities | Cost of revenue | 314,944 | ||||
| Total lease expense | $ | 405,201 | ||||
| Financial statement line item | 6 months ended September 30, 2019 | |||||
| Amortization of right-of-use assets | Cost of revenue | $ | 171,561 | |||
| Interest on lease liabilities | Cost of revenue | 593,061 | ||||
| Total lease expense | $ | 764,622 | ||||
Lease expense is included in Cost of revenue in our Consolidated Condensed Statement of Operation for the periods ended September 30, 2019.
Supplemental other comprehensive gain (loss) within shareholders’ equity (deficit).
| Weighted Average Remaining Lease Term | ||||
| Operating leases | 14.8 | Years | ||
| Weighted Average Discount Rate | ||||
| Operating leases | 14.0 % | |||
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The future maturities of common stock to Arna Global LLC (“Arna”) for cash considerationlease liabilities as of $95,500. Arna is wholly-owned by Deepak Sharma, the Company’s President and Chief Executive Officer and a director. The Company accounted for the change in control transaction with Arna using the acquisition method of accounting. Arna obtained control of 93% of the outstanding shares of common stock of PinstripesNYC, Inc. in connection with the Stock Purchase Agreement among PinstripesNYC, Inc., Arna, and Maxim Kelyfos, LLC dated December 8, 2015, and was the acquirer. This transaction resulted 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.
| Operating Leases | ||||
| Year ending March 31, 2021 | $ | 201,125 | ||
| Year ending March 31, 2022 | 366,412 | |||
| Year ending March 31, 2023 | 432,450 | |||
| Year ending March 31, 2024 | 497,536 | |||
| Thereafter | 8,548,798 | |||
| Total lease payments | $ | 10,046,321 | ||
7. PROPERTY AND EQUIPMENT, NET
Property and Equipment consists of the following as of December 31September 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 | ||||
| September 30, 2019 | March 31, 2019 | |||||||
| Furniture, fixtures and fittings | $ | 335,396 | $ | 32,247 | ||||
| Leasehold improvements | 830,767 | - | ||||||
| Plant and machinery | 563,829 | - | ||||||
| Construction in process | 87,547 | - | ||||||
| Total | 1,817,539 | 32,247 | ||||||
| Accumulated depreciation | (138,134 | ) | (20,000 | ) | ||||
| Fixed assets, net | $ | 1,679,405 | $ | 12,247 | ||||
Depreciation expense for the quartersthree and six months ended December 31, 2017September 30, 2019 was $60,312 and 2016 is $930,$118,134, respectively. Depreciation expense for the three and $2,309, respectively.
8. INTANGIBLE ASSETS
Intangible assets with definite lives consist of the following as of December 31September 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 | ||||
| September 30, 2019 | March 31, 2019 | |||||||
| Software and software access agreement | $ | 1,106,128 | $ | 1,088,264 | ||||
| Customer relationships | 1,513,200 | - | ||||||
| Total | 2,619,328 | 1,088,264 | ||||||
| Accumulated amortization | (874,392 | ) | (725,547 | ) | ||||
| Intangible assets with definite lives, net | $ | 1,744,936 | $ | 362,717 | ||||
Amortization expense for the quartersthree and six months ended September 30, 2019 was $72,362 and $148,845 respectively. Amortization expense for the three and six months ended September 30, 2018 were $70,884 and $109,203 respectively. The Company has no impairment charge for definite lived intangible assets for the above periods.
Intangible assets with indefinite lives consist of the following as of September 30 and March 31, 2019:
| September 30, 2019 | March 31, 2019 | |||||||
| Trademarks | $ | 462,878 | $ | - | ||||
| Accumulated amortization | - | - | ||||||
| Intangible assets with indefinite lives, net | $ | 462,878 | $ | - | ||||
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.
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9. AMOUNTS DUE TO AND FROM RELATED PARTIES
Amounts due from related parties arising from the e-Commerce Aggregator segment
In the 3 months ended September 30, 2019, the $14,364 brought forward related party balance from the previous period was paid to TripBorn Travel Technologies Pvt. Ltd, which is a company owned and controlled by Deepak Sharma, the Company’s CEO.
Amounts due from related parties arising from the Hospitality segment
The amounts due from related parties balance of $914,601 as of September 30, 2019, which arose 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 | September 30, 2019 | ||||
| Pramatech Pvt. Ltd | Shareholder in PRAMA, there are also common shareholders in PRAMA and this company | $ | 692,193 | |||
| Mr. B. K. Ashok | Shareholder in PRAMA | 106,165 | ||||
| Alchemy Food & Franchisee Solutions Pvt. Ltd | Company partly owned by the Chief Executive Officer of a subsidiary of PRAMA | 35,439 | ||||
| Prime Finvest Leasing Limited | Company partly owned by a PRAMA shareholder, has common shareholders with Pramatech Pvt. Ltd above | 35,388 | ||||
| Opus Restaurants Pvt. Ltd | Shareholder in PRAMA, there are also common shareholders in PRAMA and this company | 9,909 | ||||
| Mr. Akbar S Khwaja | Chief Executive Officer of a subsidiary of PRAMA | 30,553 | ||||
| Mr. M. V. Chetan Kumar | Shareholder in PRAMA | 4,954 | ||||
| Total | $ | 914,601 |
The balances above are denominated in Indian Rupees and the above amounts are translated into US dollars at the closing rate as of September 30, 2019. The movement from the June 30, 2019 balance of $937,157 to $914,601, relates to foreign exchange translation only with no change in the Indian Rupee amount.
Amounts due to related parties arising from the e-Commerce Aggregator segment
There is a balance of $1,708 due to Sachin Mandloi, a Director of the Company for services rendered to Sunalpha.
Amounts due to related parties arising from the Hospitality segment
The amounts due from related parties balance in the Hospitality segment arose from the acquisition of PRAMA on April 22, 2019, all of which are unsecured and non-interest bearing, which are described below:
| Due to related parties | Description | September 30, 2019 | ||||
| Opus Hotels & Resorts Pvt. Ltd | Shareholder in PRAMA, there are also common shareholders in PRAMA and this company | $ | 664,591 | |||
| Mr. Mahesh Gandhi | Shareholder in PRAMA | 182,751 | ||||
| Mr. Sobha Gandhi | Relative of Mahesh Gandhi, (shareholder above) | 236 | ||||
| Navkar Pole Products Ltd | Company partly owned by a PRAMA shareholder | 7,078 | ||||
| Mr. Pravin Rathod | Shareholder in PRAMA | 16,387 | ||||
| Total | $ | 871,043 | ||||
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During the 3 months ended September 30, 2019, a balance of $4,351 outstanding as of June 30, 2019, was paid to Mr. Akbar Khwaja $4,351, the Chief Executive Officer of a subsidiary of PRAMA. The above remaining balances in Indian Rupee have not changed, with the translated amounts in U.S. dollars changing, due to changes in the closing balance sheet exchange rate.
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.
10. LOANS WITH THIRD PARTIES
Loans and borrowings with third parties are discussed below:
| As of | ||||||||
| September 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 | 221,450 | - | ||||||
| Short term borrowing with NeoGrowth Credit Private Limited | 22,735 | - | ||||||
| $ | 494,185 | $ | - | |||||
| Long term loans and convertible notes: | ||||||||
| Loan with Small Industries Development Bank of India | $ | 521,991 | $ | - | ||||
| Loan with Advance Finstock Private Limited | 77,334 | - | ||||||
| Convertible note with United Techno Solutions, Inc | - | 250,000 | ||||||
| Total | 599,325 | 250,000 | ||||||
| Less current portion of Small Industries Development Bank of India loan | (221,450 | ) | - | |||||
| $ | 377,875 | $ | 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 September 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, with a maturation of March 21, 2020, which is included in short term borrowings as of September 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. During the three months ended September 30, 2019, the balance on the loan reduced by $11,686, net of repayments.
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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, 2017 and 2016 was
| Years ended March 31 | 2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||||||
| Estimated amortization expense | $ | 256,946 | $ | 342,594 | $ | 342,594 | $ | 342,594 | $ | 116,644 | ||||||||||
11. LOANS WITH RELATED PARTIES
Loans and borrowings with related parties are discussed below:
| As of | ||||||||
| September 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 | 394,211 | - | ||||||
| Promissory note with Arna Global LLC | - | - | ||||||
| Convertible note with Mr. Deepak Sharma | - | 150,515 | ||||||
| Convertible note with Mr. Sachin Mandloi | - | 36,642 | ||||||
| $ | 1,089,211 | $ | 1,838,157 | |||||
On December 31, 2016, the Travelcord software from Arna for a fee of $956,000 pursuant to a Software Agreement dated December 16, 2015. The Company paid the $956,000 fee to Arna in the form ofissued a convertible promissory note. The Travelcord software was recognized as an intangible asset at historical cost pursuantnote to ASC 350-40 Intangibles – Goodwill and Other, Internal Use Software, and no goodwill was recognized. Arna acquired the Travelcord software from Takniki Communications, which is wholly-ownedInc, an affiliate owned by Sachin Mandloi, our Vice President and a director, Sachin Mandloitotaling $695,000. This note was issued pursuant to a Software Development Agreement dated January 26, 2015.
The loan from Mr. Mahesh Gandhi was assumed as a result of the note will automatically convert into 10,303,070 sharespurchase of common stock (the “Takniki Note Shares”). If the Uplist Transaction does not occur priorPRAMA on April 22, 2019. The loan amounted to December 31,$360,190, $369,946 and $394,211 as of April 22, 2019, Takniki Communications will have the option to receive full paymentJune 30, 2019 and September 30, 2019, respectively. The increase 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$24,264 in the convertible promissory note.three months ended September 30, 2019, reflected an increased loan from Mr. Mahesh Gandhi, offset by small closing rate exchange differences. The current amount of principal andcounterparty is Mr. Mahesh Gandhi, a shareholder in PRAMA. This is an informal loan agreement. The loan bears interest outstanding on this note at December 31, 2017 is $766,769.
On April 16, 2019, the Company completedborrowed $300,000 from ARNA Global LLC, an Uplist Transaction, priorentity owned and controlled by Mr. Sharma, its President and CEO, to Februarypartially fund the acquisition of PRAMA. During the quarter ended June 30, 2019, $100,000 was re-paid and the remaining $200,000 balance was repaid on July 8, 2019. The loan was unsecured and bears interest at 10% per annum.
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The convertible note to Arna Global LLC matured on March 7, 2019, the outstanding principal balance of the note would automatically convert into a total of 9,156,206 shares of common stock (the “February 2016 Note Shares”). If the Uplist Transaction did not occur prior to February 8, 2019, 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 unpaidbore 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.
12. STOCKHOLDERS’ EQUITY
During the six month period ended September 30, 2019, the Company completedissued an Uplist Transaction, prioraggregate of 31,155,693 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 July 1,the PRAMA acquisition; c) 1,571,430 common shares when the warrant holders exercised their $0.01 warrants; and d) 1,489,443 common shares (775,157 and 714,286 discussed below) for cash proceeds of $1,042,610 ($542,610 and $500,000 discussed below) in private placements. These events are described in further detail below.
In June 2019, the outstanding principal balance of the note would automatically convert into a total of 3,924,088Company issued 25,462,167 common shares of common stock (the “July 2016 Note Shares”). If the Uplist Transaction did not occur prior to July 1, 2019, the noteholder would have had the option to receive full payment of the outstanding principal balance or 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,and reduced its liabilities by approximately $1,150,483 in connection with a “salethree separate related parties who converted their notes. There were no cash proceeds from the conversion of the company”notes.
On April 22, 2019, the Company issued 2,632,653 common shares to the shareholders of PRAMA, at a price of $0.28 per share, as such term is defined inpart of 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 three accredited investorsCompany. The Company issued warrants to amend their convertible promissory notes dated February 8, 2016acquire 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.
During the quarter ended September 30, 2019 the Company issued and July 1, 2016.sold 714,286 units comprising one share and warrant to purchase two shares of Company’s common stock; par value $0.0001 pursuant to a private placement. The Letter Agreement permitted thatpurchase price per unit was $0.70 resulting in aggregate proceeds of $500,000 to the Company. The Company issued warrants to acquire approximately 1,428,572 common shares pursuant to the 714,286 units listed above during the quarter ended September 30, 2019. These warrants shall be exercisable, in whole or in part, during the three-year term commencing from the issuance date at any time whilean exercise price of $0.01.
Warrants:
The following table is the notes weresummary of warrant activities during the period:
| Warrants | Number of shares | Weighted average exercise price | Weighted average remaining contractual life in months | Approximate aggregate intrinsic value | ||||||||||||
| Outstanding as of March 31, 2019 | 1,571,430 | $ | 0.01 | 3.0 | $ | 345,000 | ||||||||||
| Issued | 2,978,886 | $ | 0.01 | 36.0 | $ | 655,000 | ||||||||||
| Exercised | (1,571,430 | ) | $ | 0.01 | - | - | ||||||||||
| Expired | - | - | - | - | ||||||||||||
| Outstanding as of September 30, 2019 | 2,978,886 | $ | 0.01 | 35.5 | $ | 655,000 | ||||||||||
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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 notes were convertible,Over the Counter Market. The total intrinsic value of warrants exercised for the six month period ended September 30, 2019 was minimal. The fair value of warrants granted during the six month period ended September 30, 2019 approximated $0.23 per warrant, or an intrinsic value of approximately $0.22 per warrant.
The intrinsic value of the warrants as of September 30, 2019, will not approximate the intrinsic value of the warrants 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
13. 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.
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) | |
14. 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[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, 2017 and 2016, the Company has not paid any rent for this office space.
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 $300,000 (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.based on the asserted failure of Ms. Khurana Hotels and Apartments Private Limited, as lessor, to comply with the terms of the lease. As of the date of this filing, the arbitration proceedings are on-going. Otherwise, there were no significant commitments or contingencies for PRAMA as of September 30, 2019.
| 26 |
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.
| 27 |
15. BUSINESS SEGMENTS
Prior to the acquisition of PRAMA, a hospitality company, the Company was a one segment company. Following, the acquisition of PRAMA, the Company’s chief operating decision maker changed the information he receives to manage, assess, operate the business and to allocate capital. Accordingly, the Company changed its operating segments to comprise: eCommerce aggregation services and Hospitality, respectively. The Company management reviews and evaluates the operating segments, as defined, are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing financial performance. The reportable segments reflect the internal organization of the Company and are strategic businesses that offer different products and services. The Company reports financial information and evaluates its operations by revenues. Management, including the chief operating decision maker, reviews operating results solely by revenue and operating results.
All net revenues are derived from transactions with third party customers, there are no inter-segment revenues. All of the net revenue is derived from operations in India, substantially all of the expenses are borne in India, with certain expenses borne in the US. The Company measures segment performance based on loss from continuing operations. Summarized financial information concerning each of the Company's reportable segments is as follows:
| Three months ended September 30, 2019 | ||||||||||||||||
| eCommerce Aggregator | Hospitality | Intersegment elimination | Consolidated total | |||||||||||||
| Segment results and total assets | ||||||||||||||||
| Net revenue | $ | 186,193 | $ | 1,942,177 | $ | - | $ | 2,128,370 | ||||||||
| Cost of revenues | (152,890 | ) | (1,871,760 | ) | - | (2,024,650 | ) | |||||||||
| Operating expenses | (330,285 | ) | (587,290 | ) | (917,575 | ) | ||||||||||
| Loss from operations, before other expense, net | (296,982 | ) | (516,873 | ) | $ | - | (813,855 | ) | ||||||||
| Other expense, net | (18,073 | ) | 4,079 | - | (13,994 | ) | ||||||||||
| Net loss | $ | (315,055 | ) | $ | (512,794 | ) | $ | - | $ | (827,849 | ) | |||||
| Six months ended September 30, 2019 | ||||||||||||||||
| eCommerce Aggregator | Hospitality | Intersegment elimination | Consolidated total | |||||||||||||
| Segment results and total assets | ||||||||||||||||
| Net revenue | $ | 318,313 | $ | 3,635,915 | $ | - | $ | 3,954,228 | ||||||||
| Cost of revenues | (261,035 | ) | (3,219,263 | ) | - | (3,480,298 | ) | |||||||||
| Operating expenses | (594,156 | ) | (1,137,905 | ) | (1,732,061 | ) | ||||||||||
| Loss from operations, before other expense, net | (536,878 | ) | (721,253 | ) | $ | - | (1,258,131 | ) | ||||||||
| Other expense, net | (64,420 | ) | (68,055 | ) | - | (132,475 | ) | |||||||||
| Net loss | $ | (601,298 | ) | $ | (789,308 | ) | $ | - | $ | (1,390,606 | ) | |||||
| Total assets | $ | 3,905,559 | $ | 13,942,958 | $ | 3,256,620 | $ | 21,105,137 | ||||||||
During the quarter ended September 30, 2019, the Company derived approximately 91% and 9% 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 September 30, 2018.
During the six month period ended September 30, 2019, the Company derived approximately 91% and 9% 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 six month period ended September 30, 2018.
| 28 |
16. RE-CLASSIFICATIONS AND RE-STATEMENTS
Re-classifications
The Company previously disclosed $693,263, of accrued salaries in “Accounts payable and accrued expenses” as of June 30, 2019 but has decided to reclassify these accruals in “Salaries and benefits” for the consolidated condensed balance sheet as of September 30, 2019 to be consistent with management’s analysis of the business.
The Company previously disclosed $13,828 of amounts due to Sachin Mandloi, a Director of the Company in due to related parties, but has decided to reclassify this to Salary payable to related parties in the consolidated condensed balance sheet as of June 30, 2019 to be consistent with the September 30, 2019 classification.
The Company previously allocated net loss and comprehensive loss to the Parent and non-controlling interests on a 51% to 49% allocation based on the Parent’s equity interest in the PRAMA legal entity in accordance with GAAP. The Company has leased office spacedecided to allocate net loss and comprehensive income to the Parent and non-controlling interests in Ahmedabad, India effectiveproportion to the economic interest in the PRAMA group, which differs from the above 51% to 49% allocation. Explicitly, the Parent’s economic interest in AHRL, IHPL, AFBL is approximately 30%, 26%, and 30%, respectively. This causes the net loss and other comprehensive income for the non-controlling interest to rise, and the corresponding net loss and other comprehensive income for the Parent to fall for the period.
Re-statements
The Company previously disclosed $23,343 of rent expense associated with PRAMA in Selling, general and administrative expenses instead of Cost of revenues for the consolidated condensed statement of operations for the three months ended June 30, 2019.
The Company previously disclosed $75,950 due to Advance Finstock Private Limited as part of Other non-current liabilities as of June 30, 2019 but has decided to reclassify this balance to “Long term loans and convertible notes” in the consolidated condensed balance sheet as of September 30, 2019 to improve the disclosure of this matter. There is no formal loan agreement for this arrangement.
The Company previously disclosed $33,354 and $7,269, $40,623 in aggregate, due to Mr. Mahesh Ghandi, a related party, as part of Other non-current liabilities and Other current liabilities, as of June 30, 2019, respectively, but has corrected this error by reclassifying the amounts to “Loans and convertible notes due to related parties” within current liabilities in the consolidated condensed balance sheet as of September 30, 2019. The $33,354 reflects the informal loan and the $7,269 reflects accrued interest as of June 30, 2019. There is no formal loan agreement for this arrangement.
The Company previously disclosed $464,817 and $2,330 in cash and cash equivalents and other non-current assets, as of June 30, 2019, respectively, but has corrected this error by reclassifying the amounts to “Investments” within current assets in the consolidated condensed balance sheet as of September 30, 2019. The $464,817 is a deposit at a bank with a maturation beyond 90 days from June 30, 2019, the deposit was assumed on the purchase of PRAMA and so this also changed the net cash paid on acquisition of subsidiary by $464,817.
The re-classifications and re-statements are being made in accordance with ASC 250, “Accounting Changes and Error Corrections.” The disclosure provision of ASC 250 requires that a company that corrects an error to disclose that its previously issued financial statements have been restated, a description of the nature of the error, the effect of the correction on each financial statement line item and any per share amount affected for each prior period presented, and the cumulative effect on retained earnings (deficit) in the statement of financial position as of the beginning of each period presented.
There was no impact on basic and diluted earnings per share and cumulative effect on accumulated deficit in the balance sheet for the prior periods. The effect of the reclassifications and restatements did not have an impact on the balance sheet as of March 1, 201631, 2019, or basic and diluted earnings per share for the three month period ended June 30, 2019.
| 29 |
The effect of the reclassifications / restatements did have an impact on the consolidated condensed statement of operations, consolidated condensed balance sheet, consolidated condensed statement of cash flows, consolidated condensed statement of equity (deficit) and consolidated condensed statement of comprehensive loss as of and for the three months ended June 30, 2019, as described below:
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
| Three month period ended June 30, 2019 | As previously presented | Reclassification / Restatement | Reclassified / Restated | Description | |||||||||||
| Net revenues | $ | 1,825,858 | $ | - | $ | 1,825,858 | |||||||||
| Cost of revenue and expenses | |||||||||||||||
| Cost of revenue | 1,432,305 | 23,343 | 1,455,648 | Rent | |||||||||||
| Selling, general, and administrative expenses | 597,428 | (23,343 | ) | 574,085 | Rent | ||||||||||
| Legal and consulting expenses | 106,067 | - | 106,067 | ||||||||||||
| Depreciation and amortization | 134,334 | - | 134,334 | ||||||||||||
| 2,270,134 | - | 2,270,134 | |||||||||||||
| Loss from operations | (444,276 | ) | - | (444,276 | ) | ||||||||||
| Other income (expense) | |||||||||||||||
| Other income | 30,983 | - | 30,983 | ||||||||||||
| Interest income | 6,204 | - | 6,204 | ||||||||||||
| Interest expense | (155,666 | ) | - | (155,666 | ) | ||||||||||
| Total other expense | (118,479 | ) | - | (118,479 | ) | ||||||||||
| Loss before income taxes | (562,755 | ) | - | (562,755 | ) | ||||||||||
| Income taxes | - | - | |||||||||||||
| Net loss | (562,755 | ) | - | (562,755 | ) | ||||||||||
| Net loss attributable to noncontrolling interests | (135,491 | ) | (63,225 | ) | (198,716 | ) | Allocation non controlling interest | ||||||||
| Net loss attributable to TripBorn, Inc | (427,264 | ) | 63,225 | (364,039 | ) | Allocation non controlling interest | |||||||||
| 30 |
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE LOSS (UNAUDITED)
| Three month period ended June 30, 2019 | As previously presented | Reclassification / Restatement | Reclassified / Restated | Description | ||||||||||||
| Net loss | $ | (562,755 | ) | $ | - | $ | (562,755 | ) | ||||||||
| Net loss attributable to noncontrolling interests | (135,491 | ) | (63,225 | ) | (198,716 | ) | Allocation non controlling interest | |||||||||
| Net loss attributable to TripBorn, Inc. | (427,264 | ) | 63,225 | (364,039 | ) | Allocation non controlling interest | ||||||||||
| Currency translations adjustment | 37,239 | - | 37,239 | |||||||||||||
| Currency translation adjustment attributable to noncontrolling interests | 21,141 | 25,889 | 47,030 | Allocation non controlling interest | ||||||||||||
| Currency translation adjustment attributable to TripBorn, Inc | 16,098 | (25,889 | ) | (9,792 | ) | Allocation non controlling interest | ||||||||||
| Comprehensive loss | (525,516 | ) | - | (525,516 | ) | |||||||||||
| Comprehensive loss attributable to noncontrolling interests | (114,350 | ) | (37,336 | ) | (151,686 | ) | Allocation non controlling interest | |||||||||
| Comprehensive loss attributable to TripBorn, Inc. | (411,166 | ) | 37,336 | (373,830 | ) | Allocation non controlling interest | ||||||||||
| 31 |
CONSOLIDATED CONDENSED STATEMENT OF EQUITY (DEFICIT) (UNAUDITED) (AS PREVIOUSLY PRESENTED)
| 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 | ||||||||||||||||
| 32 |
CONSOLIDATED CONDENSED STATEMENT OF EQUITY (DEFICIT) (UNAUDITED) (RECLASSIFICATION)
| 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 | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||
| Common stock issued on purchase of subsidiary | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Common stock and warrants issued for cash consideration | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Common stock issued on exercise of warrants | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Common stock issued on conversion of debt | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Noncontrolling interests arising on acquisition of subsidiary | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Currency translation adjustment | - | - | - | (25,889 | ) | - | (25,889 | ) | 25,889 | - | ||||||||||||||||||||||
| Net loss | - | - | - | - | 63,225 | 63,225 | (63,225 | ) | - | |||||||||||||||||||||||
| Balance as of June 30, 2019 | - | $ | - | $ | - | $ | (25,889 | ) | $ | 63,225 | $ | 37,336 | $ | (37,336 | ) | $ | - | |||||||||||||||
| 33 |
CONSOLIDATED CONDENSED STATEMENT OF EQUITY (DEFICIT) (UNAUDITED) (RECLASSIFIED)
| 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 | - | - | - | (9,792 | ) | - | (9,792 | ) | 47,030 | 37,239 | ||||||||||||||||||||||
| Net loss | - | - | - | - | (364,039 | ) | (364,039 | ) | (198,716 | ) | (562,755 | ) | ||||||||||||||||||||
| Balance as of June 30, 2019 | 127,631,842 | $ | 12,763 | $ | 5,670,358 | $ | 29,697 | $ | (4,719,669 | ) | $ | 993,149 | $ | 1,901,648 | $ | 2,894,797 | ||||||||||||||||
| 34 |
CONSOLIDATED CONDENSED STATEMENT OF RECLASSIFIED CASH FLOWS (UNAUDITED)
| Three month period ended June 30, 2019 | As previously presented | Reclassification / Restatement | Reclassified / Restated | Description | ||||||||||
| Cash flows from operating activities | ||||||||||||||
| Net loss | $ | (562,755 | ) | $ | - | $ | (562,755 | ) | ||||||
| Adjustment to reconcile net loss to net cash used in operating activities: | ||||||||||||||
| Depreciation and amortization | 134,334 | - | 134,334 | |||||||||||
| Stock based compensation | 25,723 | - | 25,723 | |||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| Accounts receivable | (480,294 | ) | - | (480,294 | ) | |||||||||
| Other current assets | 111,934 | - | 111,934 | |||||||||||
| Accounts payable | (58,634 | ) | (693,263 | ) | (751,897 | ) | Accrued salary | |||||||
| Other current liabilities | 1,199,970 | 725,814 | 1,925,784 | Accrued salary and Mr Mahesh Ghandi impact | ||||||||||
| Other non-current liabilities | (257,475 | ) | (32,551 | ) | (290,026 | ) | Mr. Mahesh Ghandi | |||||||
| Net cash provided by operating activities | 112,803 | - | 112,803 | |||||||||||
| Cash flows from investing activities | ||||||||||||||
| Net cash paid on acquisition of subsidiary | (507,093 | ) | (464,817 | ) | (971,910 | ) | Bank deposits | |||||||
| Purchases of fixed assets | (51,865 | ) | - | (51,865 | ) | |||||||||
| Net cash used in investing activities | (558,958 | ) | (464,817 | ) | (1,023,775 | ) | ||||||||
| Cash flows from financing activities | ||||||||||||||
| Proceeds from issuance of common stock and exercise of warrants | (558,958 | ) | - | (558,958 | ) | |||||||||
| Repayment of convertible notes | (9,730 | ) | - | (9,730 | ) | |||||||||
| Net cash used in financing activities | 548,595 | - | 548,595 | |||||||||||
| Effect of exchange rates changes on cash | 26,450 | - | 26,450 | |||||||||||
| Net change in cash | 128,890 | (464,817 | ) | (335,927 | ) | |||||||||
| Cash | ||||||||||||||
| Beginning of the period | 1,230,012 | - | 1,230,012 | |||||||||||
| End of the period | $ | 1,358,902 | $ | (464,817 | ) | $ | 894,085 | |||||||
| Supplementary disclosure of interest paid | $ | 92,586 | $ | - | $ | 92,586 | ||||||||
| 35 |
CONSOLIDATED CONDENSED RECLASSIFIED BALANCE SHEET (UNAUDITED)
| Three month period ended June 30, 2019 | As previously presented | Reclassification | Reclassified / Restated | Description | ||||||||||
| ASSETS | ||||||||||||||
| Current Assets: | ||||||||||||||
| Cash and cash equivalents | $ | 1,358,902 | $ | (464,817 | ) | $ | 894,085 | Reclassification of cash, non current investments to fixed deposits | ||||||
| Accounts receivable, net, and unbilled revenue | 1,275,350 | - | 1,275,350 | |||||||||||
| Due from related parties | 951,521 | - | 951,521 | |||||||||||
| Investments | - | 467,147 | 467,147 | Reclassification of cash, non current investments to fixed deposits | ||||||||||
| Other current assets | 1,242,181 | - | 1,242,181 | |||||||||||
| Total current assets | 4,827,954 | 2,330 | 4,830,284 | |||||||||||
| Non current assets: | ||||||||||||||
| Operating lease, right-of-use assets, net | 8,335,384 | - | 8,335,384 | |||||||||||
| Goodwill | 936,788 | - | 936,788 | |||||||||||
| Intangible assets, net | 2,309,043 | - | 2,309,043 | |||||||||||
| Property and equipment, net | 1,707,019 | - | 1,707,019 | |||||||||||
| Other noncurrent assets | 1,705,203 | (2,330 | ) | 1,702,873 | Reclassification of cash, non current investments to fixed deposits | |||||||||
| TOTAL ASSETS | $ | 19,821,391 | $ | - | $ | 19,821,391 | ||||||||
| 36 |
| Three month period ended June 30, 2019 | As previously presented | Reclassification | Reclassified / Restated | Description | ||||||||||
| ASSETS | ||||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable and accrued expenses | $ | 2,094,061 | $ | (693,263 | ) | $ | 1,400,798 | Accrued salary | ||||||
| Local duties and taxes | 1,003,166 | - | 1,003,166 | |||||||||||
| Due to related parties | 909,610 | (13,828 | ) | 895,782 | To Salary payable | |||||||||
| Loans and convertible notes due to related parties | 1,224,323 | 40,623 | 1,264,946 | Mr. Mahesh Ghandi | ||||||||||
| Interest payable (includes $560,390 due to related party) | 592,988 | - | 592,988 | |||||||||||
| Salaries and benefits (includes $430,030 due to related party) | 459,661 | 707,091 | 1,166,752 | Accrued salary | ||||||||||
| Loans due within one year with third parties | 467,222 | - | 467,222 | |||||||||||
| Other current liabilities | 864,045 | (7,269 | ) | 856,776 | Mr. Mahesh Ghandi | |||||||||
| Total current liabilities | 7,615,076 | 33,354 | 7,648,430 | |||||||||||
| Long term portion of operating lease liabilities | 8,233,283 | - | 8,233,283 | |||||||||||
| Long term loans and convertible notes | 371,571 | 75,950 | 447,521 | Advance Finstock Private Limited | ||||||||||
| Other non-current liabilities | 706,664 | (109,304 | ) | 597,360 | Advance Finstock Private Limited and Mr Mahesh Ghandi | |||||||||
| Total current and long-term liabilities | 16,926,594 | - | 16,926,594 | |||||||||||
| Commitments and contingencies | - | - | - | |||||||||||
| Preferred stock $.0001 par value | - | - | - | |||||||||||
| Common stock $.0001 par value | 12,763 | - | 12,763 | |||||||||||
| Additional paid in capital | 5,670,358 | - | 5,670,358 | |||||||||||
| Accumulated deficit | (4,782,894 | ) | 63,225 | (4,719,669 | ) | Allocation non controlling interest | ||||||||
| Accumulated other comprehensive income | 55,587 | (25,890 | ) | 29,697 | Allocation non controlling interest | |||||||||
| TOTAL TRIPBORN, INC STOCKHOLDERS’ EQUITY / (DEFICIT) | 955,814 | 37,335 | 993,149 | |||||||||||
| Nonc Noncontrolling interest in consolidated entity | 1,938,983 | (37,335 | ) | 1,901,648 | Allocation non controlling interest | |||||||||
| Total equity (deficit) | 2,894,797 | - | 2,894,797 | |||||||||||
| TOTAL LIABILITIES AND EQUITY | $ | 19,821,391 | $ | - | $ | 19,821,391 | ||||||||
| 37 |
CONDENSED PURCHASE PRICE ALLOCATION ON ACQUISITION OF PRAMA (UNAUDITED)
| As of April 22, 2019 | As previously presented | Reclassification / Restatement | Reclassified / Restated | Description | ||||||||||
| Purchase Price allocation | ||||||||||||||
| Net cash | $ | 642,907 | $ | (464,817 | ) | $ | 178,090 | Fixed deposits | ||||||
| Acquired intangible assets at fair value | 2,003,085 | - | 2,003,085 | |||||||||||
| Investment in and receivable from equity investee | 665,799 | - | 665,799 | |||||||||||
| Investment in fixed deposits | - | 467,047 | 467,047 | Fixed deposits | ||||||||||
| Right to use of assets | 7,480,986 | - | 7,480,986 | |||||||||||
| Property and equipment, net | 1,684,360 | - | 1,684,360 | |||||||||||
| Accounts receivable | 616,564 | - | 616,564 | |||||||||||
| Amounts due from related parties | 661,128 | - | 661,128 | |||||||||||
| Other current assets | 1,353,687 | - | 1,353,687 | |||||||||||
| Other non-current assets | 990,449 | (2,230 | ) | 988,219 | Fixed deposits | |||||||||
| Operating lease liabilities assumed | (7,641,431 | ) | - | (7,641,431 | ) | |||||||||
| Accounts payable | (1,292,260 | ) | 200,515 | (1,091,745 | ) | Accrued salary | ||||||||
| Amounts due to related parties | (704,646 | ) | (40,623 | ) | (745,269 | ) | Mr. Mahesh Ghandi | |||||||
| Loans due within one year with third parties | (574,021 | ) | - | (574,021 | ) | |||||||||
| Other current liabilities | (1,654,116 | ) | (193,246 | ) | (1,847,362 | ) | Advance Finstock Private Limited and Mr. Mahesh Ghandi | |||||||
| Other non-current liabilities | (978,803 | ) | 33,354 | (945,449 | ) | Mr. Mahesh Ghandi | ||||||||
| Fair value of net assets acquired | 3,253,688 | - | 3,253,688 | |||||||||||
| Goodwill | 936,788 | - | 936,788 | |||||||||||
| Noncontrolling interests | (2,053,333 | ) | - | (2,053,333 | ) | |||||||||
| Purchase consideration paid in cash and common stock | $ | 2,137,143 | $ | - | $ | 2,137,143 | ||||||||
17. SUBSEQUENT EVENTS
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.
The loan due to Takniki Communications, Inc, a related party for $695,000 as of September 30, 2019, with maturation December 31, 2019 was extended with no formal maturity date, the note was not converted into share capital. Takniki Communications, Inc is an entity controlled by the Company’s Director, Mr. Sachin Mandloi.
On March 26, 2020, the Company re-paid United Techno Solutions, Inc., $250,000, representing the repayment of principal on the $250,000 loan note which was originally extended on March 16, 2019. The accrued interest has not currently been re-paid.
The loan with NeoGrowth Credit Private Limited with $22,735 owing as of September 30, 2019 and maturation of March 21, 2020 was repaid in March 2020.
See Note 2 Liquidity and Going concern for a term of five years. The operationsdiscussion of the Company are being undertaken fromCoronavirus pandemic which is a non adjusting post balance sheet event for the new premises. The Company pays monthly rent in an amount equal to $1,260 per month pursuant to the lease agreement.three and six months ended and as of September 30, 2019, financial statements.
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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 meaningtables may not add due to the use of rounded numbers. Percentages presented are calculated from the Private Securities Litigation Reform Act of 1995 (the “PSLRA”underlying numbers. Discussions throughout this Management Discussion & Analysis (“MD&A”). 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’sbased on continuing 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”).
Promoters
The promoters and founders of the Company are Deepak Sharma, president and CEO / CFO and Sachin Mandloi, vice president and director. Transactions with the promoters are disclosed in ourthe financial statements.
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 material adverse impact of the covid-19 pandemic and the associated governmental restrictions on travel and hospitality and the extent of social distancing and shelter in place behavior conducted by consumers; |
| · | the absence of liquidity in capital markets with third parties and or related parties; |
| · | 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; |
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| · | 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 we disclaim any obligation to update or revise forward-looking statements whether because of new information, future events or otherwise.
Substantial doubt is deemed to exist concerning our ability to continue as a going concern
Management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and notes(2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the financial statements are issued.
The Company has historically incurred operating losses and Management’s Discussionexperienced cash outflows from operations and Analysishas an accumulated deficit. The Company has also been historically reliant on loans from related parties, loans from third parties and sales of Financial Conditionequity securities to fund operations, working capital and Resultscomplete acquisitions.
Beginning in December 2019, after September 30, 2019, China, experienced an outbreak of Operations containeda highly infectious form of a respiratory infection caused by a novel Coronavirus. The disease caused by the novel Coronavirus was later termed Covid-19. On March 11, 2020 the World Health Organization declared the Coronavirus outbreak a global pandemic. India reported its first Covid-19 infection in our Annual Reportthe city of Thrissur, in the state of Kerala, India on January 30, 2020 and the first case fatality on March 10, 2020 in the state of Karnataka, India. On March 25, 2020, India’s Prime Minister Narendra Modi announced a 21-day nationwide lockdown in response to the Covid-19 pandemic. To comply with the Indian lockdown, the Company closed all of its hotel operations, which impacts the Hospitality segment. Also as a result of the Indian lockdown, the Indian government temporarily suspended flights, trains and buses which impacts the e-Commerce Aggregator segment. On June 1, 2020, India partially lifted its lockdown, however the Hospitality and e-Commerce Aggregator segments are still materially adversely impacted by Covid-19. As of the date of filing this Form 10-K10-Q, hotels, flights, trains and buses are operating to varying degrees by region.
The Company does not have operations in China and the Coronavirus pandemic did not have any impact on the operations or financial results of the Company for the fiscal yearthree and six month periods ended March 31, 2017, filedSeptember 30, 2019. Management is assessing and monitoring the potential future impact of the pandemic and expects the impact to be materially adverse to its Indian operations, vendors, customers, lessors and employees’ health, but cannot presently estimate the degree and severity of the adverse impact. Management is in the process of implementing various cost reduction efforts to conserve cash and liquidity, including reducing staffing levels and potentially closing certain hotels permanently, but has not reached fixed conclusions.
The Company will require additional capital and may also require additional financing from related or third parties in the event that operations do not generate the expected revenues or a recurrence of Covid-19 were to cause another suspension of operations. Such additional capital or financing may not be available on favorable terms, or at all. Due to these factors, substantial doubt exists about the Company’s ability to continue as a going concern through September 2021, which is twelve months after the date that the financial statements are issued. If the Company does not obtain sufficient funds when needed, the Company expects it would reduce its operating expenses and defer vendor payments, including closure of certain operations and or disposals of assets. Because such contingency plans have not been finalized (because the specifics would depend on the situation at the time), such actions also are not considered probable. Because, neither receipt of future equity or loan support, nor management’s contingency plans to mitigate the risk and extend cash resources through September 2021, are considered probable, substantial doubt is deemed to exist about the Company’s ability to continue as a going concern.
The financial statements for the three and six months ended September 30, 2019, do not include any adjustment relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern because the events leading to the uncertainty arose after September 30, 2019.
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Overview
The Company is an eCommerce aggregator and a hospitality management company. An aggregator model is a form of eCommerce whereby our website, www.tripborn.comaggregates, information on various travel and hospitality 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 24 hotel properties in 18 cities with the SEC on June 29, 2017.
The eCommerce aggregator business functions as a Last Mile Commerce and Connectivity aggregator that delivers product and services to as an OTA, that offers travel reservations and related travel services and products to travel agentsoffline consumers using a service agent network in India through our website, www.tripborn.com.website. Currently, we operate as a business to business, or B2B, online travel agencyLast Mile Commerce platform that serves travelbusiness agents and travel companies based in India in bookingproviding travel and financial services and products for their offline customers. Through our internet-based platform,website, our business or travel agent customersagents can search and book domestic and international air tickets, hotels, vacation packages, rail tickets and bus tickets, as well as ancillary travel-related services and e-commercefinancial services including money transfer bill payment, servicesand Micro ATM products. We serve over 4,966 travel agents in the Indian states of Gujarat, Maharashtra, Rajasthan, Karnataka and Madya Pradesh. At this time, approximately 85% of our travel agent customers are based in Gujarat, primarily in and around the city of Ahmedabad.
The hospitality business is comprised of our 51% equity interest in our subsidiary, PRAMA, which was acquired on April 22, 2019. Our brands strive to highlight friendly service and reflects a local spin on the lawstravel experience in an environment that allows customers to feel welcome and at home while paying a budget price. Our focus is to anticipate guest needs and pleasantly surprise them with our customer service. Under our asset-light business model, we manage hotels, rather than owning them. The Parent’s economic interests in PRAMA’s subsidiaries is below 51%, due to non-controlling interests in Tier 2 and Tier 3 subsidiaries.
The Indian hospitality and e-Commerce aggregator businesses have been materially impacted by the covid-19 pandemic. Future operations are expected to be radically different than the conditions existing as of September 30, 2019.
eCommerce Aggregator business overview
We have built, advanced and secure, service-oriented technology platforms, that integrate our sales, customer service and fulfillment operations. Our website is hosted in the Republiccloud and is used by our B2B customers or service agents to enable them to sell our full suite of India in 2010. Sunalpha commenced operations as an OTA in India in February 2014.
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.
The eCommerce Aggregator segment has been materially impacted by the covid-19 pandemic and future results will be materially different from historical results.
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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 September 30, | Six months ended September 30, | ||||||
| 2019 | 2018 | 2019 | 2018 | ||||
| Gross Bookings1 | $22,436,682 | $26,692,459 | $37,479,232 | $40,412,988 | |||
| Net revenues | $186,193 | $84,583 | $318,313 | $180,223 | |||
| Revenue Margin2 | 0.83% | 0.32% | 0.85% | 0.45% | |||
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* Revenue margin is defined as Net revenues as a percentage of gross bookings.
Gross Bookings decreased for the three and six month period ended September 30, 2019 compared to the comparable periods in furtherance2018 due to decreased transaction volume. Net revenues increased for the three and six month period ended September 30, 2019 compared to the comparable periods in 2018 primarily due to increases in money transfer revenues included in Other revenues, which also has a higher revenue margin than Air, Rail ticketing and vacation packages.
Money transfer revenues, where the Company receives a commission on the amount of our growth strategies.
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 | ) | ||||
Hospitality business overview
We look at the number of travel agentskeys (available rooms), number of properties by brand and entering new markets, selling at reduced margins,the number of cities as a measure of our geographical reach. We believe revenue per available room (“RevPar”), average daily rate (“ADR”) and growth in the payment services product.
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. Equally the covid-19 pandemic has adversely materially impacted our operations from the March 2020 onwards.
We earn base management fees and vacation packages asin certain cases incentive management fees from the properties that we manage. In 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.
Through September 30, 2019, we invested in our hotel bookingsbrands by means of new, refreshed, and vacation package revenue declined in the third quarter of fiscal 2018. We are continuing to manage our cost of revenue by optimizing pricing from our suppliersreinvented properties, new room and aggregators to increase our profitabilitypublic space designs, and by implementing pricing algorithmsenhanced amenities, technology offerings, and profitability calculations.guest experiences.
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The $8,827 decrease is driven primarily by a decrease in costs to provide revenue.
CONSOLIDATED RESULTS OF OPERATIONS
Acquisition of the prior year quarter including the expenses associated with our initial Form S-1 filing with the SEC.
The acquisition of PRAMA on April 22, 2019, had a material impact on the OTCQB Market.
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 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.
The eCommerce Aggregator segment results improved at the net revenue line, but deteriorated at the loss from operations level, but overall, compared to the PRAMA acquisition did not have a meaningful impact on the results of the Company. The eCommerce Aggregator business is not of a sufficient scale to bear the demands of being a publicly listed company with material financial reporting and internal control weaknesses.
The Hospitality segment improved at the revenue level, but continued to be loss making as it expanded its operations in terms of number of hotels managed.
CONSOLIDATED LIQUIDITY AND CAPITAL RESOURCES
Cash Requirements and Our Credit Facility
The Company does not maintain a credit or borrowing facility. The Company has $910,096 of cash and cash equivalents as of September 30, 2019 but its current liabilities of $7,914,765, exceeded its current assets of $4,871,720 as of September 30, 2019.
As of September 30, 2019, the Company has loans due to related parties, with Takniki Communications, Inc for $695,000, with maturation December 31, 2019 and with Mr. Mahesh Ghandi for $338,263 with no formal maturity date. Takniki Communications, Inc is an entity controlled by the Company’s Director, Mr. Sachin Mandloi and Mr. Mahesh Ghandi is a principal shareholder in PRAMA and in the Company. The Takniki Communications, Inc., note was not converted into share capital of the Company on December 31, 2019, it has been extended on informal terms.
On April 16, 2019, the Company borrowed $300,000 from ARNA Global LLC, an entity owned and controlled by Mr. Sharma, its President and CEO, to partially fund the acquisition of PRAMA. During the quarter ended June 30, 2017, which offset our year2019, $100,000 was re-paid and the remaining $200,000 balance was repaid on July 8, 2019. The loan was unsecured and bears interest at 10% per annum.
The loans with third parties do not include financial covenants or a requirement that the Company maintains certain financial ratios, however the loan of $521,991 as of September 30, 2019 with Small Industries Development Bank of India, whereby the counterparty has the right to date net lossconvert the loan into equity capital of $610,715. AsPRAMA and is secured by: a) A senior secured charge on all moveable assets located at a contract hotel in Ahmedabad, India; b) Pledged deposit of approximately $80,000 (5 million Indian Rupees); c) mortgage of leasehold rights in the lease contract for the contract hotel in Ahmedabad, India; d) Guarantee of Prama Consultancy Services Pvt. Ltd a related party of the Company; and e) the personal guarantees of Messrs. Mahesh Gandhi and Pravin Rathod. The loan has a maturation of December 31, 2017,2021 and bears interest at 15.5% per annum.
The loan with NeoGrowth Credit Private Limited with $22,735 owing as of September 30, 2019, matures March 21, 2020. The loan has an embedded finance charge of 18% interest. The loan was repaid in March 2020.
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As part of the acquisition of PRAMA, the Company assumed an amount owing to Advance Finstock Private Limited for $71,905, $75,950 and $77,334 as of April 22, 2019, June 30, 2019 and September 30, 2019, respectively. This is an undocumented informal loan agreement. The informal arrangement incurs interest at 18% per annum. The amounts due were not collateralized. The accrued but not paid interest on this loan as of September 30, 2019 amounted to $6,558. See note 16 – Reclassifications.
The Company has historically incurred operating losses and experienced cash outflows from operations. The Company has also been historically reliant on loans from related parties, loans from third parties and sales of equity securities to fund operations, working capital and complete acquisitions.
If conditions in the travel and hospitality lodging industry deteriorate, or if disruptions in the capital markets take place as they did in the immediate aftermath of both the 2008 worldwide financial crisis and the events of September 11, 2001, we had stockholders’ equitymay be unable to fund operations on a temporary or extended basis.
Cash and cash equivalents totaled $910,096, as of $897,340 compared toSeptember 30, 2019, a deficitdecrease of $88,394 at$319,916 from March 31, 2017, which resulted2019, primarily reflecting $1,058,324 of cash proceeds from salesthe issuance of common stock and conversionsexercise of notes payable into common stockwarrants, offset by an increase in operating losses$971,910 net cash paid during the quarter ended December 31, 2017.
| 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 | ||||||
Our ratio of current assets to current liabilities was approximately 0.6 for both September 30, 2019 and March 31, 2017 compared to a cash use from operating activities of $263,573 during the nine months ended December 31, 2016.
We do not own hotel properties, and do not plan to own hotel properties in the future. We also do not plan to invest significantly in property, plant and equipment. Our property, plant and equipment and intangible assets.
We will require additional capital to continue to fund our operations and will look to raise funds through public and private offerings of our securities. We estimate that we will require approximately $1.0 million and $5.0 million inOur future liquidity needs are largely impacted by the next 12 and 24 months to support our continued operations.
The Hospitality segment is a measure of total dollar volume of transactions that we process. This metric is an operating metric usedimpacted by management,seasonality which will be discussed in 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% |
OFF BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
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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.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 September 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.
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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 and six month periods as of and ended September 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.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On August 17, 2019, the Company issued and sold 714,286 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 $500,000 to the Company. The Company issued approximately 1,428,572 warrants pursuant to the 714,286 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.
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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 financial statements of PRAMA within 75 days from its acquisition, or pro forma financial information showing the effects of the acquisition, as required under rule 8-04 and 8-05 of Regulation S-X, respectively. However, the Company will file such financial statements on a Form 8-K Amendment, as soon as the audit and associated review is completed.
The Company is including reclassification adjustments in its financial statements for the quarter ended June 30, 2019, which are discussed in Note 16 Reclassifications to the unaudited financial statements above. The reclassifications are being made in accordance with ASC 250, “Accounting Changes and Error Corrections.” The disclosure provision of ASC 250 requires that a company that corrects an error to disclose that its previously issued financial statements have been restated, a description of the nature of the error, the effect of the correction on each financial statement line item and any per share amount affected for each prior period presented, and the cumulative effect on retained earnings (deficit) in the statement of financial position as of the beginning of each period presented. The Company does not believe it needs to file under item 4.02 “non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review” within a Current Report on Form 8-K.
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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.
| Date: September 30, 2020 | By: | / |
| Name: | ||
| Title: | President, Chief Executive Officer, Chief Financial Officer (Principal Financial 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 | |