Notes to Consolidated Financial
Statements
June 30, 2018
(Unaudited)
1.
Organization
and the Nature of Business
TripBorn,
Inc. (“TripBorn” or the “Company”) is a business to business online travel agency (“OTA”) that
offers travel reservations and related travel services and products to travel agents in India through its proprietary internet-based
platform at www.tripborn.com. TripBorn is a holding company that was incorporated in Delaware in January 2010 and operated as 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, Sunalpha Green Technologies Private Limited (“Sunalpha”). The Company has
selected March 31 as its fiscal year end.
TripBorn
was known as PinstripesNYC, Inc. until January 2016. TripBorn filed reports as PinstripesNYC, Inc. with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (“Exchange Act”) from August 2010 until it terminated
its registration under the Exchange Act in May 2013.
On December
14, 2015, the Company acquired all of the outstanding shares of Sunalpha, which was incorporated under the laws of the Republic
of India on November 4, 2010. The transaction was accounted for as a reverse recapitalization. Sunalpha was the acquirer for financial
reporting purposes, and TripBorn was the acquired company.
2.
Summary
of Significant Accounting Policies
Accounting Policies
These financial
statements are prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United
States of America (“US GAAP”) as detailed in the Financial Accounting Standards Board’s (“FASB”)
Accounting Standards Codification (“ASC”).
Basis of Presentation
The acquisition
of all of the outstanding shares of common stock of Sunalpha by TripBorn on December 14, 2015 was accounted for as a reverse recapitalization.
Sunalpha was the acquirer for financial reporting purposes, and TripBorn was the acquired company. Consequently, the assets, liabilities
and results of operations that are reflected in the Company’s consolidated financial statements prior to the December 14,
2015 transaction are those of Sunalpha and are recorded using 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 up
to the day prior to the closing of the transaction, and the assets, liabilities and results of operations of the Company and Sunalpha
from and after the closing of the transaction on December 14, 2015. All significant related party accounts and transactions between
the Company and Sunalpha have been eliminated upon consolidation.
Revenue Recognition
In
May 2014, the FASB issued guidance on revenue from contracts with customers that superseded most current revenue recognition guidance,
including industry-specific guidance. The underlying principle of the guidance is to recognize revenue to depict the transfer
of goods or services to customers at an amount to which the company expects to be entitled in exchange for those goods or services.
The new guidance requires an evaluation of revenue arrangements with customers following a five-step approach: (1) identify the
contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate
the transaction price to the performance obligations; and (5) recognize revenue when (or as) the company satisfies each performance
obligation. Revenues are recognized when control of the promised services are transferred to the customers in an amount that reflects
the expected consideration in exchange for those services. A customer obtains control when it has the ability to direct the use
of and obtain the benefits from the services. Other major provisions of the guidance include capitalization of certain contract
costs, consideration of the time value of money in the transaction price and allowing estimates of variable consideration to be
recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding
the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted
the provisions of this guidance effective January 1, 2018 as required under the guidance. The adoption of this guidance did not
have any material impact on the Company’s consolidated condensed financial statements.
Cost of Revenue
Cost of
revenue primarily consists of costs paid to hotel and vacation package suppliers for the acquisition of relevant services and products
for sale to customers and includes the procurement cost of hotel rooms and other services.
Cost of
revenue is the amount paid or accrued to procure these services and products from the respective suppliers and do not include any
other operating cost to provide these services or products. Cost of revenue is recognized when incurred, which coincides with the
recognition of the corresponding revenue.
Operating Expenses
Operating
expenses include costs such as advertising and business promotion costs, utilities, rent, payroll and consultants fees and charges,
which are recognized on an accrual basis. Depreciation and amortization costs are amortized over the estimated useful lives of
the assets.
Use of Estimates
The preparation
of financial statements in US GAAP requires management to make estimates and assumptions that affect the amounts reported in the
financial statements and footnotes thereto. Actual results could differ significantly from those estimates. The estimates underlying
the Company’s Financial Statements relate to, accruals for travel transactions, valuation of accounts receivable, useful
life of long-lived assets and income taxes.
Cash and Cash Equivalents
The Company
considers all highly-liquid investments (including money market funds) with an original maturity at acquisition of three months
or less to be cash equivalents. The Company maintains cash balances, which may exceed federally insured limits. The Company does
not believe that this results in any significant credit risk.
Sunalpha
has twelve accounts denominated in Indian Rupees. As of June 30, 2018 and 2017, the cash balance in financial institutions in India
was USD $360,210 and $229,520, respectively. The transactions are undertaken in Indian Rupees and requires a foreign currency translation
adjustment. The Company’s cash deposits in India are not insured against loss. The Company does not believe that this results
in any significant credit risk.
Receivables and Credit Policies
Accounts
receivable are uncollateralized customer obligations due under normal trade terms which generally range from 24 hours to seven
to ten days from the time and date of transaction. Accounts receivable are stated at the amount billed to the customer. Customer
account balances with invoices exceeding credit terms are considered delinquent. Payments of accounts receivable are allocated
to specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid
invoices.
Property and Equipment
Property
and equipment are stated at cost less accumulated depreciation. Depreciation of property and equipment is computed on a straight-line
basis over the estimated useful lives of the assets. The Company charges repairs and maintenance costs that do not extend the lives
of the assets to expenses as incurred.
Intangible Assets
Intangible
assets with indefinite useful lives are tested for impairment at least annually. Intangible assets that have limited useful lives
are amortized on a straight line basis over the shorter of their useful or legal lives.
Concentration of Credit Risk
Financial
instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents
and accounts receivable.
The Company
maintains its cash in bank deposit accounts, which are not insured. The Company has not experienced any losses in such accounts.
The Company believes that it is not exposed to any significant credit risk related to its cash holdings.
Income Taxes
The Company is
subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.
TripBorn, Inc. was incorporated in the State of Delaware and is subject to Federal income tax in the United States of America.
Sunalpha was incorporated under the laws of the Republic of India and has no operating profit for current tax liabilities. The
Indian corporate income tax rate is 30% for domestic companies.
The Company accounts
for income taxes in accordance with ASC 740, “Income Taxes”, which requires the Company to use the asset and liability
method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences
of temporary differences by applying enacted statutory tax rates applicable to future years to differences between financial statement
carrying amounts and the tax bases of existing assets and liabilities and operating loss and tax credit carry forwards. Under this
accounting standard, the effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes
the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all of, a deferred
tax asset will not be realized.
ASC 740 clarifies
the accounting for uncertainty in tax positions. This interpretation requires that an entity recognizes in its financial statements
the impact of a tax position, if that position is more likely than not of being sustained upon examination, based on the technical
merits of the position. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being
realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company
has elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of income tax
expense in the consolidated statements of income and comprehensive income. No significant uncertainty in tax positions relating
to income taxes have been incurred during the quarters ended June 30, 2018 and 2017.
On December 22,
2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”).
The Tax Act included a broad range of complex provisions impacting the taxation of multi-national companies. The Tax Act makes
broad and complex changes to the U.S. corporate income tax system and includes a Transition Toll Tax (the “Transition Tax”),
which is a one-time mandatory deemed repatriation tax on accumulated foreign subsidiaries’ previously untaxed foreign earnings.
Since the Company’s foreign subsidiary has historically realized net losses, we believe that the Company is not subject to
the Transition Tax.
The Tax Act also
imposed a global intangible low-taxed income tax (“GILTI”), which is a new tax on certain off-shore earnings at an
effective rate of 10.5% for tax years beginning after December 31, 2017 (increasing to 13.125% for tax years beginning after December
31, 2025) with a partial offset for foreign tax credits. We are still evaluating the impacts of the GILTI tax.
Foreign Currency Translation
The Company
translates the foreign currency financial statements into US Dollars using the year or reporting period end or average exchange
rates in accordance with the requirements of ASC subtopic 830-10, Foreign Currency Matters (“ASC 830-10”). Assets
and liabilities are translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average
rates in effect for the periods presented. The cumulative translation adjustment is included in the accumulated other comprehensive
gain (loss) within shareholders’ equity (deficit).
|
June 30, 2018
|
June 30, 2017
|
Period-end
spot rate
|
US$1=INR 68.7100
|
US$1=INR 64.6112
|
Average rate
|
US$1=INR 66.9200
|
US$1=INR 64.7509
|
3.
Change
in Control Transaction
On December
8, 2015, the Company issued 71,428,570 shares of common stock to Arna Global LLC (“Arna”) for cash consideration of
$95,500. Arna is wholly-owned by the Company’s President and director, Deepak Sharma. 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.
4.
Acquisition
of Sunalpha Green Technologies Private Limited
On December
14, 2015, the Company acquired substantially all of the outstanding shares of Sunalpha which was incorporated under the laws of
the Republic of India in November 2010. The transaction was accounted for as a reverse recapitalization. Sunalpha was the acquirer
for financial reporting purposes, and TripBorn was the acquired company. Consequently, the assets, liabilities and results of operations
that are reflected in the Company’s consolidated financial statements prior to the December 14, 2015 transaction are those
of Sunalpha and are recorded using 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 up to the day prior to the closing of
the transaction, and the assets, liabilities and results of operations of the Company and Sunalpha from and after the closing date
of the transaction.
5.
Increase
in Authorized Shares
The Company
amended its certificate of incorporation on January 13, 2016 to (1) increase the authorized number of shares of common stock from
100,000,000 to 200,000,000 and (2) change its name from PinstripesNYC. Inc. to TripBorn, Inc.
6.
Property
and Equipment
Property
and Equipment consists of the following as of June 30 and March 31, 2018. The property and equipment listed below are recorded
in the books of Sunalpha.
|
|
June 30, 2018
|
|
|
March 31, 2018
|
|
Computer
|
|
$
|
13,443
|
|
|
$
|
13,443
|
|
Furniture and Fixture
|
|
|
5,864
|
|
|
|
5,468
|
|
Office Equipment
|
|
|
6,537
|
|
|
|
6,537
|
|
Software License
|
|
|
768
|
|
|
|
768
|
|
Total
|
|
|
26,612
|
|
|
|
26,216
|
|
Accumulated depreciation
|
|
|
(15,073
|
)
|
|
|
(14,057
|
)
|
Fixed assets, net
|
|
$
|
11,539
|
|
|
$
|
12,159
|
|
Depreciation
expense for the quarters ended June 30, 2018 and 2017 is $1,016 and $1,604, respectively.
7.
Intangible Assets
Intangible
assets consist of the following as of June 30 and March 31, 2018:
|
|
June 30, 2018
|
|
|
March 31, 2018
|
|
API Access
|
|
$
|
133,763
|
|
|
$
|
133,763
|
|
Software
|
|
|
1,651,000
|
|
|
|
1,651,000
|
|
Total
|
|
|
1,784,763
|
|
|
|
1,784,763
|
|
Accumulated amortization
|
|
|
(680,982
|
)
|
|
|
(595,264
|
)
|
Intangible assets, net
|
|
$
|
1,103,781
|
|
|
$
|
1,189,499
|
|
Amortization
expense for the quarters ended June 30, 2018 and 2017 was $82,550 and $117,300, respectively.
Intangible
assets consist of Application Programming Interface (API) access with major travel companies and a customized online transaction
platform called Travelcord for use on the Company’s website, www.tripborn.com. Application Programming Interface components
are used to send/receive/retrieve various data to and from supplier systems for tickets availability, pricing, aggregation and
booking information. The API specifies how software components or applications should interact with each other using graphical
user interfaces (GUI). These components are automated software components or set of routines, protocols and tools for building
and communicating various software applications.
Following
the Company’s acquisition of Sunalpha, the Company acquired ownership and development rights to 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 of a convertible promissory note. The Travelcord software was recognized as an intangible asset at historical cost
pursuant 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-owned by our Vice President and director, Sachin Mandloi pursuant
to a Software Development Agreement, dated January 26, 2015.
On September
23, 2016, we entered into a software development agreement with Takniki Communications to further develop and enhance our online
transaction platform, Travelcord. Pursuant to this software development agreement, we agreed to pay a fee of $695,000 upon delivery
of enhanced software, which occurred on December 31, 2016. The Company paid for the software development by issuing a convertible
promissory note in the principal amount of $695,000 to Takniki Communications.
8.
Tax
Recovery Charges
The Company,
through its internet-based platform, facilitates the purchase of travel products and services from third party travel service providers.
The Company incurs service taxes at specified rates on the services it acquires from the travel service providers. The Company
charges service taxes at specified rates on sales of travel and travel related products to clients. The net difference of the amount
paid while acquiring services and the amount collected while selling the services is remitted to taxing authorities ("tax
recovery charge"). As of June 30, 2018, the Company has a balance with the tax authority to offset future service tax dues.
9.
Related
Party Transactions
Mr. Sharma
loaned the Company $156,407, which is evidenced by a convertible promissory note, dated March 8, 2016, which bears interest at
an annual rate of 10%. The principal amount together with accrued and unpaid interest thereon becomes due and payable on March
7, 2019. In the event that the Company completes an underwritten public offering of its common stock in connection with a listing
on a national securities exchange (an “Uplist Transaction”) prior to the March 7, 2019 maturity date, the outstanding
principal balance of the note will automatically convert into 3,432,234 shares of common stock (the “Sharma Note Shares”).
If the Uplist Transaction does not occur prior to the maturity date, Mr. Sharma will have the option to receive full payment of
the outstanding principal balance or the Sharma Note Shares, each together with accrued unpaid interest paid in cash. Mr. Sharma
also will have the option to receive full payment of the outstanding principal or the Sharma 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.
Mr. Mandloi
loaned the Company $38,076, which is evidenced by a convertible promissory note, dated March 8, 2016, which bears interest at an
annual rate of 10%. The principal amount together with accrued and unpaid interest thereon becomes due and payable on March 7,
2019. In the event that the Company completes an Uplist Transaction prior to the March 7, 2019 maturity date, the outstanding principal
balance of the note will automatically convert into 835,552 shares of common stock (the “Mandloi Note Shares”). If
the Uplist Transaction does not occur prior to the maturity date, Mr. Mandloi will have the option to receive full payment of the
outstanding principal balance or the Mandloi Note Shares, each together with accrued unpaid interest paid in cash. Mr. Mandloi
also will have the option to receive full payment of the outstanding principal or the Mandloi 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.
In connection
with the Software Agreement described in Note 7 above, Arna, wholly owned by the Company’s president, loaned the Company
$956,000, which is evidenced by a convertible promissory note, dated March 8, 2016, which bears interest at an annual rate of
10%. The principal amount together with accrued and unpaid interest thereon becomes due and payable on March 7, 2019. In the event
that the Company completes an Uplist Transaction prior to the March 7, 2019 maturity date, the outstanding principal balance of
the note will automatically convert into 21,194,381 shares of common stock (the “Arna Note Shares”). If the Uplist
Transaction does not occur prior to the maturity date, Arna will have the option to receive full payment of the outstanding principal
balance or the Arna Note Shares, each together with accrued unpaid interest paid in cash. Arna also will have the option to receive
full payment of the outstanding principal or the Arna Note Shares, each together with accrued unpaid interest paid in cash, in
connection with a “sale of the company” as such term is defined in the convertible promissory note.
On September
23, 2016, we entered into a software development agreement with Takniki Communications to further develop and enhance our online
transaction platform, Travelcord. Pursuant to this software development agreement, we agreed to pay a fee of $695,000 upon delivery
of enhanced software, which occurred on December 31, 2016. The Company paid for the software development by issuing a convertible
promissory note in the principal amount of $695,000 to Takniki Communications with a maturity date of December 31, 2019, and bearing
interest at a rate of 10%. The principal amount of this note is convertible into 10,303,070 shares of our common stock at
the noteholder’s option at maturity. In the event that the Company completes an Uplist Transaction prior to the December
31, 2019 maturity date, the outstanding principal balance of the note will automatically convert into 10,303,070 shares of common
stock (the “Takniki Note Shares”). If the Uplist Transaction does not occur prior to the maturity date, Takniki will
have the option to receive full payment of the outstanding principal balance or the Takniki Note Shares, each together with accrued
unpaid interest paid in cash. Takniki also will have the option to receive full payment of the outstanding principal or the Takniki
Note Shares, each together with accrued unpaid interest paid in cash, in connection with a “sale of the company” as
such term is defined in the convertible promissory note.
Deposits
of the Company’s President and Managing Director with IndusInd Bank Ltd. serve as collateral for a guarantee in the amount
of $50,000 in favor of the International Air Transport Association (“IATA”) on behalf of Sunalpha. IndusInd Bank Ltd.
will pay the guaranteed amount for claims through September 30, 2018.
10.
Convertible
Notes
On February
8, 2016, the Company issued convertible promissory notes to three accredited investors in the aggregate principal amount of $350,000
pursuant to a note purchase agreement of the same date. Interest will accrue at the rate of 6% per annum. In the event that the
Company completes an Uplist Transaction, prior to the February 8, 2019 maturity date, the outstanding principal balance of the
note will automatically convert into a total of 9,156,206 shares of common stock (the “February 2016 Note Shares”).
If the Uplist Transaction does not occur prior to the maturity date, the noteholders will have the option to receive full payment
of the outstanding principal balance or the February 2016 Note Shares, each together with accrued unpaid interest paid in cash.
The noteholders also will have the option to receive full payment of the outstanding principal or the February 2016 Note Shares,
each together with accrued unpaid interest paid in cash, in connection with a “sale of the company” as such term is
defined in the convertible promissory note.
On July
1, 2016, the Company issued convertible promissory notes to an accredited investor in the aggregate principal amount of $150,000
pursuant to a note purchase agreement dated February 8, 2016. Interest will accrue at the rate of 6% per annum. In the event that
the Company completes an Uplist Transaction, prior to the July 1, 2019 maturity date, the outstanding principal balance of the
note will automatically convert into a total of 3,924,088 shares of common stock (the “July 2016 Note Shares”). If
the Uplist Transaction does not occur prior to the maturity date, the noteholder will have 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 will have 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, in connection with a “sale of the company” as such term is defined in the convertible
promissory note.
11.
Income
Tax
Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The deferred tax assets at June 30, 2018 and March 31, 2018 were
$371,797 and $348,098, respectively.
The Company
files its income tax returns on a fiscal year basis.
The future
effective income tax rate depends on various factors, such as the Company’s income (loss) before taxes, tax legislation and
the geographic composition of pre-tax income.
The Company
files income tax returns in the U.S. Federal jurisdiction and various State jurisdictions. Sunalpha files tax returns in India.
The Company is generally subject to U.S. Federal, State and local examinations by tax authorities for the past three years.
On December
22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax
Act”). The Tax Act included a broad range of complex provisions impacting the taxation of multi-national companies. The
Tax Act makes broad and complex changes to the U.S. corporate income tax system and includes a Transition Toll Tax (the “Transition
Tax”), which is a one-time mandatory deemed repatriation tax on accumulated foreign subsidiaries’ previously untaxed
foreign earnings. The Toll Charge will be paid over an eight-year period, starting in 2018, and will not accrue interest. The
Tax Act also imposed a global intangible low-taxed income tax (“GILTI”), which is a new tax on certain off-shore earnings
at an effective rate of 10.5% for tax years beginning after December 31, 2017 (increasing to 13.125% for tax years beginning after
December 31, 2025) with a partial offset for foreign tax credits. Generally, accounting for the impacts of newly enacted tax legislation
is required to be completed in the period of enactment, however in response to the complexities and ambiguity surrounding the
Tax Act, the SEC released Staff Accounting Bulletin No. 118 (“SAB 118”) to provide companies with relief around the
initial accounting for the Tax Act. Pursuant to SAB 118, the SEC has provided a one-year measurement period for companies to analyze
and finalize accounting for the Tax Act. During the one-year measurement period, SAB 118 allows companies to recognize provisional
amounts when reasonable estimates can be made for the impacts resulting from the Tax Act. TripBorn will finalize accounting for
the Tax Act during the one-year measurement period, and any adjustments to the provisional amounts will be included in income
tax expense or benefit in the appropriate period, and disclosed if material, in accordance with guidance provided by SAB 118.
While our accounting
for the Tax Act is not complete, we do not believe we are subject to the Transition Tax. The Transition Tax is a tax on previously
untaxed accumulated earnings and profits (“E&P”) of our foreign subsidiaries and our foreign subsidiary has historically
generated operating losses. To determine the amount of the Transition Tax, we must determine, in addition to other factors, the
amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings,
if any.
The Tax
Act has significant complexity and our final tax liability may materially differ from provisional estimates due to additional
guidance and regulations that may be issued by the U.S. Treasury Department, the Internal Revenue Service (“IRS”)
and state and local tax authorities, and for TripBorn’s finalization of the relevant calculations required by the new tax
legislation.
TripBorn continues
to analyze the provisions of the Tax Act which are effective after December 30, 2017, including but not limited to certain global
intangible low-tax income (“GILTI”) from foreign operations.
Under GAAP, companies
are allowed to make an accounting policy election to either treat taxes resulting from GILTI as a current-period expense when they
are incurred or factor such amounts into the measurement of deferred taxes. The Company has not completed its analysis of the effects
of the GILTI provisions and will further consider the accounting policy election within the measurement period as provided under
SAB 118.
12.
New
Accounting Pronouncements
The Company considers the applicability and impact of all accounting standards updates
(“ASUs”). Management periodically reviews new accounting standards that are issued.
New Accounting Pronouncements Recently Adopted
As disclosed
in Revenue Recognition above, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) effective April
1, 2018 using the retrospective transition method. This new accounting standard outlines a single comprehensive model to use in
accounting for revenue arising from contracts with customers. This standard supersedes existing revenue recognition requirements
and eliminates most industry-specific guidance from US GAAP. The core principle of the new accounting standard is to recognize
revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods or services. In addition, the adoption of this new accounting standard
resulted in increased disclosure, including qualitative and quantitative disclosures about the nature, amount, timing and uncertainty
of revenue and cash flows arising from contracts with customers. Adoption of this standard did not result in significant changes
to the Company’s accounting policies, business processes, systems or controls, or have a material impact on the Company’s
financial position, results of operations and cash flows or related disclosures. As such, prior period financial statements were
not recast.
New Accounting Pronouncements Not Yet Adopted
In February
2016, the FASB issued ASU No. 2016-02, "Leases” to increase transparency and comparability among organizations by recognizing
lease assets and lease liabilities on the balance sheet with a corresponding liability and disclosing key information about leasing
arrangements. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December
15, 2018, including interim reporting periods within those fiscal years. For all other entities, the amendments in this ASU are
effective for fiscal years beginning after December 15, 2019, and interim reporting periods within fiscal years beginning after
December 15, 2020. Early adoption is permitted. The Company is evaluating the impact of the adoption of this revised guidance on
its consolidated financial statements and related disclosures.
In August
2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and
Cash Payments, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement
of cash flows”. The amendments provide guidance on the following eight specific cash flow issues: (1) Debt Prepayment or
Debt Extinguishment Costs; (2) Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates
That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; (3) Contingent Consideration Payments Made
after a Business Combination; (4)Proceeds from the Settlement of Insurance Claims; (5) Proceeds from the Settlement of Corporate-Owned
Life Insurance Policies, including Bank-Owned; (6) Life Insurance Policies; (7) Distributions Received from Equity Method Investees;
(8) Beneficial Interests in Securitization Transactions; and Separately Identifiable Cash Flows and Application of the Predominance
Principle. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim
periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. For all other entities,
the amendments are effective for fiscal years beginning after December 15, 2018, and interim reporting periods within fiscal years
beginning after December 15, 2019. The amendments should be applied using a retrospective transition method to each period presented.
If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be
applied prospectively as of the earliest date practicable. The Company does not expect the adoption of this guidance will have
a material impact on its consolidated financial statements and related disclosures.
In October 2016,
the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory”,
which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when
the transfer occurs. For public business entities, the amendments in this ASU are effective for annual reporting periods beginning
after December 15, 2017, including interim reporting periods within those annual reporting periods. For all other entities, the
amendments in this ASU are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods
within annual periods beginning after December 15, 2019. Early adoption is permitted. The amendments in this ASU should be adopted
on a modified retrospective basis. The Company does not expect that adoption of this guidance will have a material impact on its
consolidated financial statements and related disclosures.
In October 2016,
the FASB issued ASU No. 2016-17, “Consolidation (Topic 810): Interests Held through Related Parties That Are under Common
Control”. The amendments affect reporting entities that are required to evaluate whether they should consolidate a variable
interest entity in certain situations involving entities under common control. Specifically, the amendments change the evaluation
of whether a reporting entity is the primary beneficiary of a variable interest entity by changing how a reporting entity that
is a single decision maker of a variable interest entity treats indirect interests in the entity held through related parties that
are under common control with the reporting entity. The amendments are effective for public business entities for fiscal years
beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the amendments
are effective for fiscal years beginning after December 15, 2016, and interim reporting periods within fiscal years beginning after
December 15, 2017. Early adoption is permitted. The Company does not expect that adoption of this guidance will have a material
impact on its consolidated financial statements and related disclosures.
In January 2017,
the FASB issued ASU No. 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business". The amendments
in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether
transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Basically, these amendments provide
a screen to determine when a set is not a business. If the screen is not met, the amendments in this ASU first, require that to
be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute
to the ability to create output and second, remove the evaluation of whether a market participant could replace missing elements.
These amendments take effect for public businesses for fiscal years beginning after December 15, 2017 and interim periods within
those periods, and all other entities should apply these amendments for fiscal years beginning after December 15, 2018, and interim
periods within annual periods beginning after December 15, 2019. The Company does not expect that adoption of this guidance will
have a material impact on its consolidated financial statements and related disclosures.
In February
2017, the FASB issued ASU No. 2017-05, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets”
to clarify the scope of Subtopic 610-20 and to add guidance for partial sales of nonfinancial assets. Subtopic 610-20, which was
issued in May 2014 as a part of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), provides guidance for recognizing
gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. For public entities, the amendments are
effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting
period. For all other entities, the amendments in this Update are effective for annual reporting periods beginning after December
15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. The Company does not
expect that adoption of this guidance will have a material impact on its consolidated financial statements and related disclosures.
In May 2017,
the FASB issued ASU 2017-09, “Scope of Modification Accounting”, which amends the scope of modification accounting
for share-based payment arrangements, provides guidance on the types of changes to the terms or conditions of share-based payment
awards to which an entity would be required to apply modification accounting under ASC 718. For all entities, the ASU is effective
for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017.
Early adoption is permitted, including adoption in any interim period. The Company does not expect that adoption of this guidance
will have a material impact on its
unaudited condensed consolidated financial statements and related
disclosures.
13.
Net
Income (Loss) Per Share
A reconciliation
of net loss and weighted average shares used in computing basic and diluted net income per share is as follows:
|
|
First Quarter Ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
Basic net income (loss) per share:
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to common shares
|
|
$
|
(253,810
|
)
|
|
$
|
(222,542
|
)
|
Weighted average common shares outstanding
|
|
|
91,287,934
|
|
|
|
80,660,849
|
|
Basic net income (loss) per share of common stock
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
Diluted net income (loss) per share:
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to common shares
|
|
$
|
(253,810
|
)
|
|
$
|
(222,542
|
)
|
Weighted average common shares outstanding
|
|
|
91,287,934
|
|
|
|
80,660,849
|
|
Dilutive effects of convertible debt
|
|
|
-
|
|
|
|
-
|
|
Weighted average common shares, assuming dilutive effect of convertible
debt
|
|
|
91,287,934
|
|
|
|
80,660,849
|
|
Diluted net income (loss) per share of common stock
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
Due to net
loss, the shares of common stock underlying the convertible notes described in Notes 9 and 10 were not included in the calculation
of diluted net loss per share, as they would have had an antidilutive effect.
14.
Commitments
The Company
is the B2B Principal Agent of the Indian Railway Catering and Tourism Corporation, or IRCTC, which is a government entity that
allows the Company to offer reservations through Indian Railways’ passenger reservation system on the Company’s webpage.
Indian Railways is India’s state-owned railway, which owns and operates most of India’s rail transportation. The Company
has integrated its online portal with IRCTC’s to provide a seamless booking process. Pursuant to an Application Programming
Interface (API) agreement, dated October 5, 2015, the Company is required to pay a minimum annual maintenance fee of $7,500 to
IRCTC. In the event the agreement is renewed, the amount based on the number of active railway agents that use the Company rail
booking services on the Company’s platform will be payable annually. On September 30, 2017, the Company renewed its agreement
with the IRCTC and paid an annual maintenance fee of $8,600 based on the number of active railway agents it has enrolled to book
rail tickets.
Until December
8, 2015, the Company shared office space with Maxim Group LLC. The majority member of Maxim Group LLC is the sole stockholder of
Maxim Kelyfos, LLC, which owned 93% of the Company’s common stock outstanding prior to the acquisition of Sunalpha by the
Company.
Through
Sunalpha, the Company currently occupies approximately 2,455 square feet of office space owned by a director of the Company on
a rent free basis. As of June 30, 2018 and 2017, the Company has not paid any rent. The Company is expected to pay market rate
rent once the Company is profitable.
The Company
has leased office space in Ahmedabad, India effective from March 1, 2016 for a term of five years. The operations of the Company
are being undertaken from the new premises. The Company will pay approximately $1,260 per month pursuant to the lease agreement.
The Company
entered into a consulting agreement effective May 24, 2016 with LogiCore Strategies, LLC (“LogiCore”), pursuant to
which Richard J. Shaw serves as the Company’s Chief Financial Officer. The Company compensates LogiCore for Mr. Shaw’s
time at an annual rate of $60,000.