UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2018

 

OR

 

o	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: 333-210821

 

 

 

TripBorn, Inc.

(Exact name of registrant as specified in its charter)

Delaware		27-2447426
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

812, Venus Atlantis Corporate Park

Near Prahalad Nagar Garden, Satellite

Ahmedabad, Gujarat, India 380 015

(Address of principal executive office) (Zip Code)

 

(91) 79 40191914

(Registrant’s telephone number, including area code)

 

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   x   No o 

 

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  x    No  o

 

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

 

Large accelerated filer		o		Accelerated filer		o
Non-accelerated filer		o  (Do not check if a smaller reporting company)		Smaller reporting company		x
				Emerging growth company		x

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  o    No  x

  

No market value has been computed based upon the fact that no active trading market existed as of the last business day of the registrant’s most recently completed second fiscal quarter.

 

As of August 13, 2018, there were outstanding 95,711,874 shares of common stock, par value $0.0001 per share.

 

 

TripBorn, Inc.

 

Form 10-Q

 

For the First Quarter Ended June 30, 2018

 

Contents

 

Part I		Financial Information
Item 1		Unaudited Condensed Consolidated Financial Statements
		Statements of Operations for the First Quarter Ended June 30, 2018 and 2017			3
		Statements of Comprehensive Income (Loss) for the First Quarter Ended June 30, 2018 and 2017			4
		Balance Sheets as of June 30, 2018 and March 31, 2018			5
		Statements of Stockholders Equity for the First Quarter Ended June 30, 2018			6
		Statements of Cash Flows for the First Quarter Ended June 30, 2018 and 2017			7
		Notes to Consolidated Financial Statements			8
Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations			17
Item 4		Controls and Procedures			21
Part II		Other Information			22
Item 1		Legal Proceedings			22
Item 1A		Risk Factors			22
Item 2		Unregistered Sales of Equity Securities and Use of Proceeds			22
Item 5		Other Information			22
Item 6		Exhibits			22
Signature					22
Index to Exhibits					23

 

 

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

 

 

TRIPBORN, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		First Quarter Ended June 30,
		2018				2017
Net revenue		$	101,783			$	108,542
Cost of revenue			2,637				19,886
Gross profit			99,146				88,656
Operating expenses
Selling, general, and administrative expenses			240,702				176,177
Legal and consulting expenses			48,913				47,623
Income (loss) from operations			(190,469	)			(135,144	)
Other income (expense)
Depreciation and amortization			(83,566	)			(118,904	)
Interest income			82
Interest expense			(47,325	)			(60,494	)
Total other income (expense)			(130,809	)			(179,398	)
Income (loss) before income tax expense			(321,278	)			(314,542	)
Income tax benefit (expense)			67,468				92,000
Net income (loss)			(253,810	)		$	(222,542	)
Basic income (loss) per share		$	(0.00	)		$	(0.00	)
Diluted income (loss) per share		$	(0.00	)		$	(0.00	)
Basic weighted average number of shares			91,287,934				80,660,849
Diluted weighted average number of shares			91,287,934				80,660,849

 

See accompanying notes to consolidated financial statements.

 

 

TRIPBORN, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

		First Quarter Ended
		June 30,
		2018				2017
Net income (loss)		$	253,810			$	(222,542	)
Other comprehensive income (loss), net of tax
Unrealized foreign currency translation income/(loss)			3,660				(200	)
Other comprehensive income (loss), net of tax			3,660				(200	)
Comprehensive loss		$	(250,150	)		$	(222,742	)

 

See accompanying notes to consolidated financial statements.  

 

 

TRIPBORN, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

		June 30,				March 31,
		2018				2018
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	824,290			$	1,148,741
Accounts receivable			282,279				172,625
Other current assets			469,732				334,961
Total current assets			1,576,301				1,656,327
Property and equipment, net			11,539				12,159
Intangible assets, net			1,103,781				1,189,499
Deferred income taxes			371,797				348,098
TOTAL ASSETS		$	3,063,418			$	3,206,083
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	450,886			$	390,201
Other current liabilities			567,212				520,412
Total current liabilities			1,018,098				910,613
Long term liabilities
Convertible notes			1,840,668				1,840,668
Total current and long term liabilities			2,858,766				2,751,281
Stockholders’ equity (deficit):
Preferred stock $.0001 par value			0				0
Authorized shares: 10,000,000
Common stock $.0001 par value			9,572				9,572
Authorized shares: 200,000,000
Shares issued and outstanding: 80,794,914 and 78,971,581
Additional paid-in capital			2,321,818				2,321,818
Accumulated other comprehensive income (loss)			19,316				15,656
Retained earnings (deficit)			(2,146,054	)			(1,892,244	)
Total stockholders’ equity			204,652				454,802
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	3,063,418			$	3,206,083

 

See accompanying notes to consolidated financial statements.

 

 

TRIPBORN, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER’S EQUITY (DEFICIT)

(Unaudited)

 

 

			Common Stock
			Shares				Amount				Additional paid-in capital				Accumulated other comprehensive income				Retained earnings (deficit)				Total stockholder’s equity (deficit)
Balance at March 31, 2018			95,711,874			$	9,572			$	2,321,818			$	15,656			$	(1,892,244	)		$	454,802
Issuance of common stock
Other comprehensive income (loss)															3,660								3,660
Net income (loss)																			(253,810	)			(253,810	)
Balance at June 30, 2018			95,711,844			$	9,572			$	2,321,818			$	19,316			$	(2,146,054	)		$	204,652

 

See accompanying notes to consolidated financial statements.

 

 

TRIPBORN, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Quarter Ended June 30
		2018				2017
Cash flows from operating activities
Net income (loss)		$	(253,810	)		$	(222,542	)
Adjustment to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization			83,566				118,904
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable			(109,652	)			38,824
Other current assets			(134,773	)			(12,813	)
Deferred tax asset			(23,699	)			(92,478	)
Increase (decrease) in:
Accounts payable and accrued expenses			66,477				(53,185	)
Other current liabilities			46,800				142,366
Net cash provided by (used in) operating activities			(325,091	)			(80,924	)
Cash flows from investing activities
Purchase of property and equipment			(3,020	)			368
Increase in intangible assets			0				569
Net cash used in investing activities			(3,020	)			937
Cash flows from financing activities
Increase in common stock			—				182
Increase in additional paid-in capital			—				546,818
Net cash provided by financing activities			—				547,000
Effect of exchange rates changes on cash			3,660				(200	)
Net change in cash			(324,451	)			466,813
Cash
Beginning of the year			1,148,741				516,707
End of the year		$	824,290			$	983,520
Supplementary disclosure of cash flows information
Cash paid during the period for:
Interest		$	—			$	—
Income taxes		$	—			$	—

 

See accompanying notes to consolidated financial statements.

  

 

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

 

i.

Convertible Notes

 

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.

 

 

iii.

Guarantee

 

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. 

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including: any projections of earnings, revenues or other financial items; any statements regarding the adequacy, availability and sources of capital, any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan” or “anticipate” and other similar words. In addition to any assumptions and other factors and matters referred to specifically in connection with such forward-looking statements, factors that could cause actual results or outcomes to differ materially from those contained in forward-looking statements include those factors set forth in this Quarterly Report, particularly under the headings, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations" and subsequent reports that we file with the Securities and Exchange Commission.

 

Although we believe that the expectations reflected in our 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.

 

Notwithstanding the above, Section 21E of the Securities Exchange Act of 1934, as amended, expressly states that the safe harbor for forward looking statements under the PSLRA does not apply to companies that issue penny stocks. Accordingly, the safe harbor for forward looking statements under the PSLRA is not currently available to us because we may be considered to be an issuer of penny stock.

 

The information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and the notes included in this Quarterly Report, and the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K filed on June 28, 2018. 

 

 

Overview

We are an online travel agency, sometimes referred to as an OTA, that offers travel reservations and related travel services and products to travel agents in India through our website, www.tripborn.com. Currently, we operate as a business to business, or B2B, online travel agency that serves travel agents and travel companies based in India in booking travel services and products for their customers. Through our internet-based platform, our travel agent customers 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-commerce money transfer products. We serve over 6,534 agents across Indian.

 

We are a holding company incorporated in Delaware in 2010. Deepak Sharma, our president and director, formed our operating subsidiary, Sunalpha Green Technologies Private Limited, under the laws of the Republic of India in 2010. Sunalpha commenced operations as an OTA in India in February 2014.

 

Prior to acquiring Sunalpha in December 2015, we operated as a shell company with nominal or no assets or operations. We were known as PinstripesNYC, Inc. until January 2016. We filed reports as PinstripesNYC, Inc. with the SEC under the Exchange Act from August 2010 until we terminated our registration under the Exchange Act in May 2013. Our fiscal year ends on March 31. We refer to the fiscal year ended March 31, 2019 as fiscal 2019 and the fiscal year ended March 31, 2018 as fiscal 2018.

 

We manage our OTA business through Travelcord, our proprietary internet-based online transaction platform. Through our website, www.tripborn.com, we offer a wide inventory of travel services and products to travel agents who serve the growing middle class of largely offline travelers in semi-urban and rural regions of India. Through our proprietary technology, we consolidate and provide our travel agent customers with access to travel bookings and hotel reservations that otherwise would be costly and time-consuming to obtain for their customers in an often-fragmented marketplace. While some of our more established competitors have focused on selling directly to consumers in urban areas, our travel agent partners tend to be small, brick and mortar establishments that serve travelers who rely on more personalized transactions for their travel booking needs due to language barriers and lack of access to the internet or credit cards. We have grown our operations through referrals and a focus on addressing our travel agent customers’ needs through technology. As internet penetration in India continues to increase, we anticipate that we will be in a position to use our established platform to offer travel services and products directly to consumers. 

 

We generate revenue through our ticketing business, which includes rail ticketing, bus ticketing and air ticketing, and our hotel reservations and vacation and business packages business. We also generate revenue by providing online payment services and access to visa processing services.

 

In our ticketing business, our main sources of revenue are (1) commissions and incentive payments from airline suppliers for tickets booked by our travel agent customers through our distribution channels and (2) service fees we charge our customers.

 

 

Historical Operations and Outlook

 

Since commencing operations as an OTA in February 2014, we have grown our business by initially processing a few transactions a day to processing approximately 6,000 transactions per day in June 2018. In our fiscal year ended March 31, 2018 we processed 1,035,206 transactions and 16.9 million searches have been performed on our platform compared to 373,651 and 7.6 million as of March 31, 2017. During fiscal 2018, we experienced increased traffic on our website due to our efforts in marketing and branding. Our agent customers log in nearly 2,701 times per day, up from 1,300 at March 31, 2017. We have steadily worked to add suppliers in order to provide additional services and better pricing for our travel agent customers. In the development stages, we have relied on user feedback to enhance our core technology. As internet penetration in India continues to increase, we anticipate that we will be in a position to use our established platform to offer travel services and related services directly to consumers. We believe our online platform is capable of managing hundreds of suppliers and millions of transactions in furtherance of our growth strategies.

 

In November 2015, we integrated the Indian Railway reservation system into our online platform using complex and scalable technology tools. Previously, we provided rail ticketing through a third-party supplier. Becoming a principle agent has resulted in and will continue to result in an increase in rail ticketing revenue associated with an increase in fees associated with enrolling our travel agent customers and usage fees for ticketing. We have also experienced, and anticipate that we will continue to see, an increase in selling, general and administrative expenses associated with hiring additional personnel and expanding our marketing activities in connection with the expanded rail ticketing services as well as an increase in legal and consulting expenses associated with becoming a reporting company with the SEC.

 

Assuming we are successful in enrolling new travel agents while retaining our existing travel agents, we anticipate that we will achieve sustainable and predictable cash flow and revenue growth, year-over-year. However, there is no assurance that we will be successful in implementing our business model and achieving our operational and financial objectives.

 

We expect to see an increase in bookings through our website and a corresponding increase in revenue in fiscal 2019 due to the recent expansion of our sales force and our expansion into the states of Maharashtra, Karnataka and Madya Pradesh. In fiscal 2019 we expect to expand into other neighboring states in India.

 

India remains a largely unbanked country with cash transactions typical. The Indian government’s decision to demonetize their two largest bank notes in circulation on November 8, 2016 caused a disruption throughout India’s economy, slowing growth and forcing customers to focus on day to day expenses. This move slowed India’s GDP during the fourth quarter of fiscal 2017 to 6.1% causing India to lose its status as being the world’s fastest growing economy. Growth in some of our travel products slowed during the quarter, while our money transfer product grew during this period. We believe that the slowdown in growth will be short lived as the impacts of re-monetization have begun to be felt and GDP growth is projected to be 7.3% and 7.5% in 2018 and 2019.

 

 

India’s biggest indirect tax reform in the form of Goods and Services Tax (GST) was completed and a comprehensive dual GST was introduced in India on July 1, 2017. These reforms were approved by the Parliament after they were introduced as part of the Money Bill. Following the passage of the GST Acts, the GST Council decided the rates for the Goods and Services to be taxed under the GST regime. GST is considered to be the biggest tax reform in India since independence. It will help realize the goal of “One Nation-One Tax-One Market.” GST is expected to benefit all the stakeholders – industry, government and consumer.

 

The GST for travel industry and hotels also comes with its share of adverse impacts in short to medium term, were final prices for customers will increase.

 

Tripborn looks at GST for hotels and tourism as a mixture of simpler, smoother rules and seemingly higher costs & compliance. The process to claim and avail ITC (input tax credit) is simple and clear. Earlier, adjusting the tax paid on inputs against the output was complex and error-prone. This is believed to have become easy with GST. Also, under GST, tourists have a clearer idea about the tax they are paying, and we believe in the longer run that GST will help Tripborn grow faster and efficiently.

 

  

RESULTS OF OPERATIONS

 

During the first quarter of fiscal year 2019, we continued to add new markets and add an increasing number of sales agents that offer our services. These changes drove an increase in our net revenues. Our costs of revenue and operating expenses increased as we expanded our market reach and drove the increase in net loss from operations.

 

		First Quarter Ended June 30,
		2018				2017
Net revenue		$	101,783			$	108,542
Cost of revenue			2,637				19,886
Gross profit			99,146				88,656
Operating expenses
Selling, general, and administrative expenses			240,702				176,177
Legal and consulting expenses			48,913				47,623
Income (loss) from operations			(190,469	)			(135,144	)
Other income (expense)
Depreciation and amortization			(83,566	)			(118,904	)
Interest income			82
Interest expense			(47,325	)			(60,494	)
Total other income (expense)			(130,809	)			(179,398	)
Income (loss) before income tax expense		$	(321,278	)		$	(314,542	)
Income tax benefit			67,468				92,000
Net income (loss)			(253,810	)		$	(222,542	)
Basic income (loss) per share		$	(0.00	)		$	(0.00	)
Diluted income (loss) per share		$	(0.00	)		$	(0.00	)
Basic weighted average number of shares			91,287,934				80,660,849
Diluted weighted average number of shares			91,287,934				80,660,849

 

Revenue

 

Net revenues for the first quarter ended June 30, 2018 were $101,783 compared to $108,542 for the first quarter ended June 30, 2017. Revenue for the quarter ended June 30, 2018 consisted of $8,224 from air ticketing compared to $21,900 in the prior year quarter, $0 from bus ticketing compared to $0 in the prior year quarter, $4,297 from rail ticketing compared to $8,896 in the prior year quarter, $0 from hotel booking compared to $819 in the prior year quarter, $2,728 from vacation packages compared to $18,873 in the prior year quarter, $6,143 from payment services compared to $6,638 in the prior year quarter, and $80,391 from incentives from our aggregators and suppliers and fees, penalty income and surcharges from our travel agent customers compared to $51,416 in the prior year. Revenue declined by $6,759 in the current year quarter compared to the prior year quarter. The primary driver was the increase in incentives from our aggregators and suppliers, which was fueled by an increase in the number of transaction that were processed. This increase was offset by declines in air and rail ticketing, hotel booking, vacation packages, and payment services which declines resulted from increased competition for these services.

 

Cost of Revenues and Gross Profit

 

The cost of revenue for the first quarter ended June 30, 2019 was $2,637 compared to $19,886 for the prior year quarter. The cost of revenue represents fees charged by our suppliers. The decrease in cost of revenue from the first quarter ended June 30, 2018 compared to the prior year quarter was primarily driven by the increase in incentives from our aggregators and suppliers as no costs are associated with these incentives. We are continuing to manage our cost of revenue by optimizing pricing from our suppliers and aggregators to increase our profitability and by implementing pricing algorithms and profitability calculations.

 

Gross profit from revenues for the first quarter ended June 30, 2018 was $99,146 compared to $88,656 for the prior year quarter. The $10,490 increase is driven primarily by a decrease in costs to provide revenue.

 

Operating Expenses

 

Total operating expenses for the first quarter ended June 30, 2018 were $289,615 compared to $223,800 for the prior year quarter. Our operating expenses include our sales and marketing, payroll and general and administrative costs, and the increase in these costs was driven by our increased headcount as we ramp up our operations. Included in our operating expenses is $48,913 in legal and consulting expenses associated with our operating as an Exchange Act reporting company, even with $47,623 in the prior year quarter.

 

 

We expect our sales and marketing expenses to increase as we continue to grow the business and hire experienced personnel to support our growing business and operations. Our general and administrative expenses are expected to continue to increase as we incur expenses associated with being an Exchange Act reporting company and developing an active trading market for our stock on the OTCQB Market.

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of June 30, 2018, we had $824,290 in cash and cash equivalents, compared to $1,148,741 as of March 31, 2018. The $324,451 decrease in cash was driven by our operating loss and a use of working capital. As of June 30, 2018, we had stockholders’ equity of $204,652 compared to stockholder’s equity of $454,802 at March 31, 2018, which resulted an increase in operating losses during the quarter ended June 30, 2018.

 

Our primary source of working capital to date has been through the sale of common stock and the sale and issuance of convertible notes. Our focus remains on deriving net cash flow from operations.

 

Cash Flows: The following table is a summary of our Consolidated Statements of Cash Flows:

 

		Three Months Ended
		June 30,				June 30,
		2018				2017
Cash Provided by (Used in):
Operating Activities		$	(325,091	)		$	(80,924	)
Investing Activities			(3,020	)			937
Financing Activities			0				547,000

 

Operating Activities: Net cash used by operations was $325,091 during the three months ended June 30, 2018 compared to a cash use from operating activities of $80,924 during the same period in fiscal 2018.

 

The year-over-year increase in cash used by operations is primarily the result of an increase in operating losses plus negative changes in net working capital (defined as current assets less current liabilities).

 

Investing Activities: During the three months ended June 30, 2018, there was a cash use of $3,020 from investing activities compared to a cash provision of $937 in the same period in fiscal 2018. These cash uses represent net changes in property, plant, and equipment and intangible assets.

 

Financing Activities: During the three months ended June 30, 2018, there was zero cash provided or used by financing activities compared to a 547,000 cash provision in the same period in fiscal 2018. Cash generated during the three months ended June 30, 2018 resulted from the sale of common stock pursuant to a private placement.

 

We presently do not have a senior credit or revolving credit facility and do not expect to obtain one in the foreseeable future.

 

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 $3.0 million and $5.0 million in the next 12 and 24 months to support our continued operations.

 

We took the following steps during fiscal years 2017 and 2018 to manage our liquidity and to avoid default on any material third-party obligations:

 

·           We continue to employ “on demand” procurement processes for travel products that we sell to our customers. We also continue our attempts to collect customer payments promptly based on their payment terms, which has helped us manage our working capital needs.

 

·           We raised $150,000 in the first quarter of fiscal 2017 pursuant to the Company’s issuance of a convertible note. The note had a three-year term and accrued interest at the rate of six percent payable at maturity. The principal amount of the note was convertible into shares of the Company’s common stock at the noteholder’s option at maturity. This note was converted into 3,924,088 shares of common stock on July 15 and 16, 2017.

 

 

·           We issued a convertible note to Takniki Communications, an affiliate owned by Sachin Mandloi, our Vice President and a director, totaling $695,000 in the third quarter of fiscal 2017. This note was issued pursuant to a Software Development Agreement dated September 23, 2016 between Takniki Communications and the Company to finance the upgrade of our Travelcord operating software.  The note has a three-year term and bears interest at the rate of ten percent payable at maturity. The principal amount of this note is convertible into shares of the Company’s common stock at the noteholder’s option at maturity.

 

·           We sold $460,000 of the Company’s common stock during the third quarter of fiscal 2017 and another $190,000 during the fourth quarter of fiscal 2017.

 

·           We sold $547,000 of the Company’s common stock during the first quarter of fiscal 2018 and another $551,000 during the second quarter of fiscal 2018.

 

·           The Company’s common stock is now quoted on the OTCQB Market.

 

There are no assurances that these steps will generate sufficient cash flow from operations or that we will be able to obtain sufficient financing necessary to support our working capital requirements. We can also give no assurance that additional capital financing will be available, or if available, will be on terms acceptable to us. If adequate working capital is not available, we may not be able to continue our operations or execute our business plan.

 

OPERATING METRICS

 

In evaluating our business, we use operating metrics, including gross bookings and revenue margin. Gross bookings is a measure of total dollar volume of transactions that we process. This metric is an operating metric used by management, the investor community, and analysts who follow the travel industry to measure our market share and to measure our scale and growth. We calculate revenue margin as revenue as a percentage of gross bookings.

 

	Quarter Ended June 30,
	2018	2017

Gross Bookings1	$13,720,529	$8,903,079
Revenue Margin2	0.7%	1.2%

 

¹Gross 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.

 

²Revenue margin is defined as revenue as a percentage of gross bookings

 

The increase in gross bookings is driven primarily by increases in incentives, fees, penalty income, and surcharges paid by our travel agent customers. Revenue margin declined quarter over quarter due to price pressure on air ticketing and low margin rail ticketing outpacing higher margin vacation and hotel package offerings.

 

 

OFF BALANCE SHEET ARRANGEMENTS

 

As of June 30, 2018, we had no off-balance sheet arrangements.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

Disclosure controls and procedures (as defined in Exchange Act Rule 15d-15(e)) are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Act of 1934, as amended, such as this report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer, based on their evaluation of TripBorn’s disclosure controls and procedures as of June 30, 2018, have concluded that TripBorn’s disclosure controls and procedures are effective as of that date.

 

Changes in Internal Control Over Financial Reporting

 

During the quarter ended June 30, 2018, there were no changes in TripBorn’s internal control over financial reporting that have materially affected, or are reasonably likely to affect, TripBorn’s internal control over financial reporting.

 

 

PART II.

 

ITEM 1. LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS

 

There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended March 31, 2018 filed with the SEC on June 28, 2018. 

 

 

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None

 

ITEM 5. OTHER INFORMATION

 

None

 

ITEM 6. EXHIBITS

 

The exhibits listed below are filed as part of this Quarterly Report on Form 10-Q.

 

 

Signature

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date:  August 13, 2018	TripBorn, Inc.
	By:	/s/ RICHARD J. SHAW
		Richard J. Shaw
		Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer)

 

Index to Exhibits

 

Exhibit Number			Description
31	.1		Certification of TripBorn, Inc. Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31	.2		Certification of TripBorn, Inc. Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	.1		Certification of TripBorn, Inc. Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32	.2		Certification of TripBorn, Inc. Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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

 

 

*       Indicates a management contract or compensatory plan, contract or arrangement.

  

 

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