StarTek, Inc.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the balance lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the date of initial application on determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense is recognized on a straight-line basis over the lease term.

Our revenues for the quarter ended June 30, 2019 increased by 46.3% to $161,283 as compared to $110,223 for the three-month period ended June 30, 2018. The increase in revenues is largely due to the consolidation of Startek with Aegis. In the quarter ended June 30, 2019, there was a warrant contra revenue of $730 on account of vesting of the second tranche of Amazon warrants. The Net Revenue for the quarter ended June 30, 2019, after adjusting the warrant contra revenue, stood at $160,553 which was an increase of 45.7% as compared to $110,223 for the three-month period ended June 30, 2018.

The three-month period ended June 30, 2018 includes only Aegis while the current three-month period ended June 30, 2019 includes both Startek and Aegis. In order to promote a better understanding of the overall results of the combined business, we are providing below pro forma revenues for the three-month period ended June 30, 2018 combining the revenues for Aegis and Startek. The financial information presented below is presented for illustrative purposes only and does not purport to represent what the results of operations of operations would actually have been had the combination of Aegis and Startek occurred on January 1, 2018, or to project the combined results of operations for any future periods.

Our revenues for the six-month period ended June 30, 2019 increased by 43.1% to $322,425 as compared to $225,318 for the six-month period ended June 30, 2018. The increase in revenues is largely due to the consolidation of Startek with Aegis. In the six-months ended June 30, 2019, there was a warrant contra revenue of $730 on account of vesting of the second tranche of Amazon warrants. The net Revenue for the six-months ended June 30, 2019, after adjusting the warrant contra revenue, stood at $321,695 which was an increase of 42.8% as compared to $255,318 for the six-month period ended June 30, 2018.

Changes in internal controls over financial reporting. On July 20, 2018, we completed Aegis transaction. In connection with this, our internal controls over financial reporting are being integrated to incorporate the internal controls over financial reporting framework of Aegis. Such integration has resulted in changes in our financial reporting (as described in Rule 13a - 15(f) under the Exchange Act) that have materially affected our internal controls over financial reporting specifically in relation to accounting period end closure process and consolidation process. As a result of the remediation plan to address the material weakness raised by Plante Moran, PLCC in relation to SEC Financial Reporting process, accounting for significant and unusual transactions and the consolidation process,  there are changes in our internal controls over financial reporting.

Other than the remediation plan to mitigate the material weaknesses identified by Plante Moran, PLLC, additions and modifications to policies and controls over implementation of new lease standard, there has been no change in our internal controls over financial reporting (as described in Rule 13a - 15(f) under the Exchange Act) during the quarter ended June 30, 2019 that has materially affected or is reasonably likely to have material affect our internal controls.