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 December 31, 20172019
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION FROM ______ TO ______.
Commission File Number: 0-55698
DUO WORLD, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 35-2517572 | |
| (State or other Jurisdiction of | (I.R.S. Employer | |
| Incorporation or Organization) | Identification No.) |
c/o Duo Software (Pvt.) Ltd. | ||
| No. 6, Charles Terrace, Off Alfred Place | ||
| Colombo 03, Sri Lanka | Not applicable | |
| (Address of principal executive offices) | (Zip code) |
Registrant’s telephone number: (870) 505-6540
Securities registered pursuant to Section 12(b) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes[X]No[ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No[ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer[ ] | Accelerated filer[ ] |
| Non-accelerated filer[ ] | Smaller reporting company[X] |
| Emerging growth company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes[ ]No [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. [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes[ ]No[ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of February 14, 2018,7, 2019, there were 52,659,15467,754,296 outstanding shares of the Registrant’s Common Stock, $.001 par value.
INDEX
| 2 |
PART I – FINANCIAL INFORMATION
Duo World, Inc. and Subsidiaries
Consolidated Financial Statements
December 31, 20172019
(Unaudited)
| F-1 |
CONTENTS
| F-2 |
Duo World, Inc. and Subsidiaries
| December 31, 2017 | March 31, 2017 | December 31, 2019 | March 31, 2019 | |||||||||||||
| (Un-audited) | (Audited) | (Un-audited) | (Audited) | |||||||||||||
| ASSETS | ||||||||||||||||
| Current Assets | ||||||||||||||||
| Cash and cash equivalents | $ | 20,748 | $ | 25,084 | $ | 14,483 | $ | 2,698 | ||||||||
Accounts receivable – trade | 572,363 | 621,670 | 172,076 | 125,044 | ||||||||||||
| Prepaid expenses and other current assets | 1,156,687 | 257,376 | 77,410 | 82,282 | ||||||||||||
| Accrued Revenue | 63,928 | 70,174 | ||||||||||||||
| Accrued revenue | 95,738 | 102,851 | ||||||||||||||
| Total Current Assets | 1,813,726 | 974,304 | 359,707 | 312,875 | ||||||||||||
| Non Current Assets | ||||||||||||||||
| Property and equipment, net of accumulated depreciation of $259,939 and $248,326, respectively | 30,397 | 48,087 | ||||||||||||||
| Property and equipment, net of accumulated depreciation of $232,612 and $226,882 respectively | 9,080 | 23,513 | ||||||||||||||
| Intangible assets, net | 702,070 | 580,899 | 692,630 | 746,158 | ||||||||||||
| Deferred taxes | 31,202 | 30,864 | ||||||||||||||
| Total Non Current Assets | 763,669 | 659,850 | 701,710 | 769,671 | ||||||||||||
| Total Assets | $ | 2,577,395 | $ | 1,634,154 | $ | 1,061,417 | $ | 1,082,546 | ||||||||
| LIABILITIES and SHAREHOLDERS’ DEFICIT | ||||||||||||||||
| Current Liabilities | ||||||||||||||||
| Accounts Payable | $ | 370,924 | $ | 307,616 | ||||||||||||
| Accounts payable | $ | 554,923 | $ | 489,082 | ||||||||||||
| Payroll, employee benefits, severance | 479,335 | 284,285 | 606,706 | 636,637 | ||||||||||||
| Short term borrowings | 562,610 | 473,838 | 513,863 | 531,675 | ||||||||||||
| Due to related parties | 602,218 | 361,785 | 903,955 | 824,991 | ||||||||||||
| Payable for acquisition | 185,762 | 185,762 | 185,762 | 185,762 | ||||||||||||
| Taxes payable | 116,419 | 82,669 | 166,901 | 157,171 | ||||||||||||
| Accruals and other payables | 107,735 | 169,746 | 62,023 | 71,675 | ||||||||||||
| Lease creditors | 4,797 | 10,921 | ||||||||||||||
| Deferred revenue | 46,769 | 16,420 | 10,292 | 6,995 | ||||||||||||
| Total Current liabilities | 2,471,772 | 1,882,121 | 3,009,222 | 2,914,909 | ||||||||||||
| Long Term Liabilities | ||||||||||||||||
| Due to related parties | 1,184,214 | 1,168,866 | 1,343,875 | 1,345,968 | ||||||||||||
| Employee benefit obligation | 76,252 | 104,700 | ||||||||||||||
| Total Long Term liabilities | 1,184,214 | 1,168,866 | 1,420,127 | 1,450,668 | ||||||||||||
| Total liabilities | $ | 3,655,986 | $ | 3,050,987 | $ | 4,429,349 | $ | 4,365,577 | ||||||||
| Commitments and contingencies (Note 16) | ||||||||||||||||
| Commitments and contingencies (Note 17) | ||||||||||||||||
| Shareholders’ Deficit | ||||||||||||||||
| Ordinary shares: $0.001 par value per share; 400,000,000 and 90,000,000 shares authorized; 44,750,654 and 38,567,467 shares issued and outstanding, respectively | $ | 44,751 | $ | 38,567 | ||||||||||||
| Convertible series “A” preferred shares: $0.001 par value per share; 10,000,000 shares authorized; 5,136,600 and 5,500,000 shares issued and outstanding, respectively | 5,137 | 5,500 | ||||||||||||||
| Additional Paid in Capital | 2,763,597 | 907,456 | ||||||||||||||
| Ordinary shares: $0.001 par value per share; 400,000,000 shares authorized; 67,754,296 and 65,754,296 shares issued and outstanding, respectively | $ | 67,754 | $ | 65,754 | ||||||||||||
| Convertible series “A” preferred shares: $0.001 par value per share; 10,000,000 shares authorized; 5,000,000 and 5,000,000 shares issued and outstanding, respectively | 5,000 | 5,000 | ||||||||||||||
| Additional paid in capital | 11,641,336 | 11,543,336 | ||||||||||||||
| Accumulated deficit | (3,964,979 | ) | (2,481,117 | ) | (15,408,233 | ) | (15,163,357 | ) | ||||||||
| Accumulated other comprehensive income | 72,903 | 112,761 | 326,211 | 266,235 | ||||||||||||
| Total shareholders’ deficit | (1,078,591 | ) | (1,416,833 | ) | (3,367,932 | ) | (3,283,032 | ) | ||||||||
| Total Liabilities and Shareholders´ Deficit | $ | 2,577,395 | $ | 1,634,154 | $ | 1,061,417 | $ | 1,082,546 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements
| F-3 |
Duo World, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
| For the three months ended, | For the nine months ended, | |||||||||||||||
| December 31, 2019 | December 31, 2018 | December 31, 2019 | December 31, 2018 | |||||||||||||
| Revenue | $ | 177,068 | 150,199 | $ | 561,165 | 479,080 | ||||||||||
| Cost of revenue (exclusive of depreciation presented below) | (57,278 | ) | (57,658 | ) | (205,369 | ) | (185,101 | ) | ||||||||
| Gross Income | 119,790 | 92,541 | 355,796 | 293,979 | ||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | 80,943 | 82,579 | 260,831 | 276,421 | ||||||||||||
| Salaries and casual wages | 28,834 | 53,392 | 97,271 | 198,319 | ||||||||||||
| Selling and distribution | 1,829 | 9,238 | 9,604 | 14,807 | ||||||||||||
| Professional services - investment advisory | - | - | - | 438,598 | ||||||||||||
| Depreciation | 4,169 | 4,796 | 13,129 | 17,227 | ||||||||||||
| Amortization of web site development | 476 | 432 | 1,443 | 1,317 | ||||||||||||
| Allowance for bad debts | 5,369 | 121,509 | 24,941 | 299,350 | ||||||||||||
| Total operating expenses | 121,620 | 271,946 | 407,219 | 1,246,038 | ||||||||||||
| Loss from operations | $ | (1,830 | ) | (179,406 | ) | $ | (51,424 | ) | (952,059 | ) | ||||||
| Other income (expenses): | ||||||||||||||||
| Interest expense | $ | (44,226 | ) | (58,428 | ) | $ | (132,135 | ) | (157,944 | ) | ||||||
| Gain on disposals of property and equipment | 380 | - | 573 | 14 | ||||||||||||
| Write back expenses | - | - | 1,692 | 4,360 | ||||||||||||
| Other income | 56 | 38 | 625 | 203 | ||||||||||||
| Bank charges | (680 | ) | (709 | ) | (3,146 | ) | (2,268 | ) | ||||||||
| Exchange (loss) / gain | 12,225 | (13,372 | ) | (20,399 | ) | (40,475 | ) | |||||||||
| Total other income (expenses) | (32,245 | ) | (72,471 | ) | (152,790 | ) | (196,110 | ) | ||||||||
| Loss before provision for income taxes: | $ | (34,075 | ) | (251,876 | ) | $ | (204,213 | ) | (1,148,169 | ) | ||||||
| Tax expense: | ||||||||||||||||
| Provision for income taxes | - | - | - | - | ||||||||||||
| Foreign taxes- withheld | (12,177 | ) | (11,861 | ) | (40,663 | ) | (31,939 | ) | ||||||||
| Net loss | $ | (46,252 | ) | (263,738 | ) | $ | (244,876 | ) | (1,180,108 | ) | ||||||
| Basic and Diluted Loss per Share | $ | (0.00 | ) | (0.00 | ) | $ | (0.00 | ) | (0.01 | ) | ||||||
| Basic and Diluted Weighted Average Number of Shares Outstanding | 117,689,079 | 115,738,321 | 117,107,023 | 112,774,120 | ||||||||||||
| Comprehensive Income (Loss): | ||||||||||||||||
| Unrealized foreign currency translation (loss) gain | $ | (25,011 | ) | 135,617 | $ | 59,976 | 290,689 | |||||||||
| Net loss | (46,252 | ) | (263,738 | ) | (244,876 | ) | (1,180,108 | ) | ||||||||
| Comprehensive loss | $ | (71,263 | ) | (128,120 | ) | $ | (184,900 | ) | (889,418 | ) | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
Duo World, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)Cash Flows
| For the three months ended, | For the nine months ended, | |||||||||||||||
| December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||
| Revenue | $ | 200,911 | $ | 282,385 | $ | 582,049 | $ | 923,501 | ||||||||
| Cost of revenue (exclusive of depreciation presented below) | (76,039 | ) | (84,575 | ) | (237,708 | ) | (226,897 | ) | ||||||||
| Gross Income | $ | 124,872 | $ | 197,810 | $ | 344,341 | $ | 696,604 | ||||||||
| Operating Expenses: | ||||||||||||||||
| Research and development | $ | - | $ | 10,461 | $ | - | $ | 30,088 | ||||||||
| General and administrative | 134,035 | 146,287 | 458,860 | 660,512 | ||||||||||||
| Salaries and casual wages | 91,077 | 113,514 | 269,082 | 322,374 | ||||||||||||
| Selling and distribution | 3,527 | 5,937 | 9,410 | 12,567 | ||||||||||||
| Professional services- Investment advisory | 438,598 | - | 877,195 | - | ||||||||||||
| Depreciation | 5,553 | 7,725 | 18,932 | 56,149 | ||||||||||||
| Amortization of web site development | 383 | 438 | 1,146 | 1,664 | ||||||||||||
| Allowance for bad debts | 63,198 | 40,356 | 141,435 | 85,176 | ||||||||||||
| Total operating expenses | 736,371 | 324,718 | 1,776,060 | 1,168,530 | ||||||||||||
| Loss from operations | $ | (611,499 | ) | $ | (126,908 | ) | $ | (1,431,719 | ) | $ | (471,926 | ) | ||||
| Other Income (Expenses): | ||||||||||||||||
| Interest expense | $ | (19,250 | ) | $ | (7,409 | ) | $ | (55,407 | ) | $ | (17,885 | ) | ||||
| Gain on disposals of property and equipment | 51 | - | 83 | - | ||||||||||||
| Other income | 2,514 | 28 | 3,134 | 273 | ||||||||||||
| Bank charges | (932 | ) | (1,005 | ) | (3,021 | ) | (2,733 | ) | ||||||||
| Exchange gain | 2,885 | 15,029 | 6,338 | 23,689 | ||||||||||||
| Total other income and (expenses) | (14,732 | ) | 6,643 | (48,873 | ) | 3,344 | ||||||||||
| Loss before provision for income taxes | $ | (626,231 | ) | $ | (120,265 | ) | $ | (1,480,592 | ) | $ | (468,582 | ) | ||||
| Provision for income taxes | - | - | - | - | ||||||||||||
| Net loss | $ | (626,231 | ) | $ | (120,265 | ) | $ | (1,480,592 | ) | $ | (468,582 | ) | ||||
| Basic and Diluted Loss per Share | $ | (0.02 | ) | $ | (0.00 | ) | $ | (0.04 | ) | $ | (0.01 | ) | ||||
| Basic and Diluted Weighted Average Number of Shares Outstanding | 41,595,863 | 38,567,467 | 39,951,984 | 38,521,304 | ||||||||||||
| Comprehensive Income (Loss): | ||||||||||||||||
| Unrealized foreign currency translation gain (loss) | $ | (15,001 | ) | $ | 42,234 | $ | (39,857 | ) | $ | 57,238 | ||||||
| Net loss | (626,231 | ) | (120,265 | ) | (1,480,592 | ) | (468,582 | ) | ||||||||
| Comprehensive loss | $ | (641,232 | ) | $ | (78,031 | ) | $ | (1,520,449 | ) | $ | (411,344 | ) | ||||
| For the nine months ended, | ||||||||
| December 31, 2019 | December 31, 2018 | |||||||
| Operating activities: | ||||||||
| Loss before provision for income taxes | $ | (244,876 | ) | $ | (1,180,108 | ) | ||
| Adjustments to reconcile loss before provision for income taxes to cash provided by operating activities: | ||||||||
| Depreciation and amortization | 14,572 | 18,544 | ||||||
| Bad debts | 24,941 | 299,350 | ||||||
| Gain on disposals of property and equipment | - | (14 | ) | |||||
| Previous period adjustments | - | (8,520 | ) | |||||
| Product development cost written off | 75,368 | 58,783 | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable – trade | (71,973 | ) | (115,699 | ) | ||||
| Prepayments | 11,985 | 497,825 | ||||||
| Accounts payable | 65,841 | 24,674 | ||||||
| Payroll, employee benefits, severance | (29,930 | ) | 88,022 | |||||
| Short term borrowings | (17,813 | ) | (123,188 | ) | ||||
| Due to related parties | 78,964 | 189,475 | ||||||
| Taxes payable | 9,730 | 8,669 | ||||||
| Lease creditor | (6,124 | ) | (6,071 | ) | ||||
| Retirement benefit | (28,448 | ) | (53,206 | ) | ||||
| Accruals and other payables | (6,355 | ) | 22,649 | |||||
| $ | (124,118 | ) | $ | (278,814 | ) | |||
| Investing activities: | ||||||||
| Acquisition of property and equipment | (913 | ) | (3,246 | ) | ||||
| Sale proceeds of disposal of property and equipment | 445 | - | ||||||
| Intangible assets | (45,114 | ) | (145,822 | ) | ||||
| Net cash used in investing activities | $ | (45,582 | ) | $ | (149,068 | ) | ||
| Financing activities: | ||||||||
| Proceeds from issuance of common stock | 100,000 | - | ||||||
| Net cash provided by financing activities | $ | 100,000 | $ | - | ||||
| Effect of exchange rate changes on cash | 81,485 | 411,578 | ||||||
| Net increase/(decrease) in cash | $ | 11,785 | $ | (16,305 | ) | |||
| Cash, beginning of period | 2,698 | 25,798 | ||||||
| Cash, end of period | $ | 14,483 | $ | 9,493 | ||||
The accompanying notes are an integral part of these consolidated financial statements
| F-5 |
Duo World, Inc. and Subsidiaries
Consolidated Statement of Changes in Shareholders’ Deficit
For the three months ended December 31, 2019
| Additional | Other | Total | ||||||||||||||||||||||||||||||
| Common Share Capital | Preferred Share Capital | Paid-in | Accumulated | Comprehensive | Shareholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Income | Deficit | |||||||||||||||||||||||||
| September 30, 2019 | 65,754,296 | 65,754 | 5,000,000 | 5,000 | 11,543,336 | (15,361,981 | ) | 351,222 | (3,396,669 | ) | ||||||||||||||||||||||
| Stock issued | 2,000,000 | 2,000 | - | - | 98,000 | - | - | 100,000 | ||||||||||||||||||||||||
| �� | ||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | (46,252 | ) | - | (46,252 | ) | ||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | - | (25,011 | ) | (25,011 | ) | ||||||||||||||||||||||
| December 31, 2019 | 67,754,296 | 67,754 | 5,000,000 | 5,000 | 11,641,336 | (15,408,233 | ) | 326,211 | (3,367,932 | ) | ||||||||||||||||||||||
Duo World, Inc. and Subsidiaries
Consolidated Statement of Changes in Shareholders’ Deficit
For the nine months ended December 31, 2019
| Additional | Other | Total | ||||||||||||||||||||||||||||||
| Common Share Capital | Preferred Share Capital | Paid-in | Accumulated | Comprehensive | Shareholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Income | Deficit | |||||||||||||||||||||||||
| March 31, 2019 | 65,754,296 | 65,754 | 5,000,000 | 5,000 | 11,543,336 | (15,163,357 | ) | 266,235 | (3,283,032 | ) | ||||||||||||||||||||||
| Stock issued | 2,000,000 | 2,000 | - | - | 98,000 | - | - | 100,000 | ||||||||||||||||||||||||
| Net loss | - | - | - | - | - | (244,876 | ) | - | (244,876 | ) | ||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | - | 59,976 | 59,976 | ||||||||||||||||||||||||
| December 31, 2019 | 67,754,296 | 67,754 | 5,000,000 | 5,000 | 11,641,336 | (15,408,233 | ) | 326,211 | (3,367,932 | ) | ||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
Duo World Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
| For the nine months ended, | ||||||||
| December 31, 2017 | December 31, 2016 | |||||||
| Cash flows from operating activities: | ||||||||
| Loss before provision for income taxes | $ | (1,480,592 | ) | $ | (468,582 | ) | ||
| Adjustments to reconcile loss before provision for income taxes to cash provided by operating activities | ||||||||
| Depreciation | 20,078 | 57,813 | ||||||
| Bad debts | 141,435 | 85,176 | ||||||
| Gain on disposals of property and equipment | (83 | ) | - | |||||
| Previous period adjustments | - | 42,146 | ||||||
| Common shares issued as payment for accrued interest | - | 15,000 | ||||||
| Common shares issued for services | 1,858,690 | 214,600 | ||||||
| Product development cost written off | 84,844 | 108,172 | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable – trade | (92,127 | ) | (281,333 | ) | ||||
| Prepaid expenses and other current assets | (899,311 | ) | 3,873 | |||||
| Accrued revenue | 6,246 | 10,473 | ||||||
| Accounts Payable | 63,308 | (96,368 | ) | |||||
| Payroll, employee benefits, severance | 195,050 | 116,401 | ||||||
| Short term borrowings | 88,772 | 105,848 | ||||||
| Due to related parties | 240,433 | 165,888 | ||||||
| Taxes payable | 33,750 | 30,255 | ||||||
| Accruals and other payables | (62,011 | ) | (4,042 | ) | ||||
| Deferred revenue | 30,349 | 13,358 | ||||||
| Net cash provided by operating activities | $ | 228,831 | $ | 118,678 | ||||
| Cash Flows used in investing activities: | ||||||||
| Acquisition of property and equipment | (3,458 | ) | (10,512 | ) | ||||
| Sale proceeds of disposal of property and equipment | 334 | - | ||||||
| Addition to intangible assets | (212,748 | ) | (294,507 | ) | ||||
| Net cash used in investing activities | $ | (215,872 | ) | $ | (305,019 | ) | ||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common shares | - | 151,001 | ||||||
| Additional paid in capital | - | (74,197 | ) | |||||
| Net cash provided by financing activities | $ | - | $ | 76,804 | ||||
| Effect of exchange rate changes on cash | (17,295 | ) | 48,810 | |||||
| Net decrease in cash | $ | (4,336 | ) | $ | (60,727 | ) | ||
| Cash at Beginning of Period | 25,084 | 91,106 | ||||||
| Cash at End of Period | $ | 20,748 | $ | 30,379 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 55,407 | $ | 17,885 | ||||
| Cash paid for income taxes | $ | - | $ | - | ||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Common shares issued for services | $ | 1,858,690 | $ | 214,600 | ||||
| Accrued interest converted into common shares | $ | - | $ | 15,000 | ||||
| Common shares issued upon conversion of preferred shares | $ | 3,634 | $ | - | ||||
The accompanying notes are an integral part of these consolidated financial statements.
Duo World Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 20172019
(Unaudited)
Note 1 - Organization and Nature of Operations
Duo World Inc. (hereinafter referred to as “Successor” or “Duo”) a reporting company since September 26, 2016, was organized under the laws of the state of Nevada on September 19, 2014. Duo2014.Duo Software (Pvt.) Limited (hereinafter referred to as “DSSL” or “Predecessor”), a Sri Lanka based company, was incorporated on September 22, 2004, in the Democratic Socialist Republic of Sri Lanka, as a limited liability company. Duo Software (Pte.) Limited (hereinafter referred to as “DSS” or “Predecessor”), a Singapore based company, was incorporated on June 05, 2007 in the Republic of Singapore as a limited liability company. DSS also includes its wholly ownedwholly-owned subsidiary, Duo Software India (Private) Limited (India) which was incorporated on August 30, 2007, under the laws of India.
On December 03, 2014, Duo Software (Pvt.) Limited (DSSL) and Duo Software Pte. Limited (DSS) executed a reverse recapitalization with Duo World Inc. (Duo). See Note 4. Duo (Successor) is a holding company that conducts operations through its wholly owned subsidiaries DSSL and DSS (Predecessors) in Sri Lanka, Singapore and India. The consolidated entity is referred to as “the Company”. The Company, having its development center in Colombo, has been in the space of developing products and services for the subscription-based industry. The Company’s applicationapplications (“DigIn”Duo Subscribe”, “FaceTone”“Facetone”, “CloudCharge” ,“SmoothFlow”, “DuoSubscribe” and “DuoCLM”“Smoothflow”) provide solutions in the space of Data Analytics, Customer Life Cycle Management, Subscriber Billing and Work Flow and Pay-TV Subscription Billing.Flow.
Note 2 - Basis of Presentation
The Company has prepared the accompanying unaudited consolidated financial statements have been preparedand accompanying notes in accordance with accounting principles generally accepted in the United States of America and(“U.S. GAAP”). All amounts in the rules and regulations of the United States Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information and disclosures necessary for a comprehensive presentation of consolidated financial position, results of operations, or cash flows. It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair consolidated financial statements presentation.are stated in U.S. dollars.
The unaudited interimWe have recast certain prior period amounts to conform to the current period presentation, with no impact on consolidated financial statements should be read in conjunction with the Company’s Annual Report, which contains the audited consolidated financial statements and notes thereto, together with the Management’s Discussion and Analysis, for the year ended March 31, 2017. The interim results for the period ended December 31, 2017 are not necessarily indicative of results for the full fiscal year.net income or cash flows.
Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
As reflected in the accompanying consolidated financial statements, the Company had a net loss of $626,231$244,876 and $1,480,592$1,180,108 for the three and nine months ended December 31, 20172019 and 2018, respectively; net cash provided by operations of $228,831$(124,118) and $118,678$(278,814) for the nine months ended December 31, 20172019 and 20162018, respectively; working capital deficit of $ 658,046$2,649,515 and $907,817$2,602,035 as of December 31, 20172019 and March 31, 20172019, respectively; outstanding statutory dues towards employee provident fund and employee trust fund of $365,678$425,882 and $269,781$423,354 as of December 31, 20172019 and March 31, 2017,2019, respectively; and a stockholders´ deficit of $1,078,591$3,367,932 and $1,416,833$3,283,032 as of December 31, 20172019 and March 31, 2017,2019, respectively.
Operating losses duringThe revenue for the three and nine months ended December 31, 2017 were mainly due2019 has increased by 17% when compared to a one-time expenditure incurred for professional fee relating to investment advisory services.
Furthermore, the Company has entered into contracts withnine months ended December 31, 2018. With the clients for the products launched during the year 2016-17 and theincreasing trend in revenue, management is confident that these projectsthe Company shall generate sufficient revenues to offset the operating losses in the recent future.
Duo World Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017
(Unaudited)
Note 3 - Summary of Significant Accounting Policies
Basis of Consolidation
The accompanying consolidated Financial Statements include the accounts and transactions of DSSL and DSS (Predecessors) and Duo (Successor). Duo World Inc. is the parent company of its 100% subsidiaries Duo Software (Pvt.) Limited (DSSL) and Duo Software PtePte. Limited (DSS). Duo Software Pte. Limited is the parent company of its 100% subsidiary Duo Software India (Private) Limited (India). All significant inter-company accounts and transactions have been eliminated in consolidation.
Use of Estimates and Assumptions
The preparation of consolidated Financial Statementsfinancial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Making estimates and assumptions requires management to exercise significant judgment. It is least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future non-confirming events. Accordingly, the actual results could differ from those estimates.estimates and assumptions. The most significant estimates relate to the timing and amounts of revenue recognition, the recognition and disclosure of contingent liabilities and the collectability of accounts receivable.
Risks and Uncertainties
The Company’s operations are subject to significant risk and uncertainties including financial, operational, competition and potential risk of business failure. Product revenues are concentrated in the application software industry, which is highly competitive and rapidly changing. Significant technological changes in the industry or customer requirements, or the emergence of competitive products with new capabilities or technologies could adversely affect operating results.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company maintains cash and cash equivalents with various high quality financial institutions and we monitor the credit ratings of those institutions. The Company’s sales are primarily to the companies located in Sri Lanka, Singapore Indonesia and India. The Company performs ongoing credit evaluations of our customers, and the risk with respect to trade receivables is further mitigated by the diversity, both by geography and by industry, of the customer base. Accounts receivable are due principally from the companies under statedunderstated contract terms.
| F-8 |
Provisions
A provision is recognized when the Companycompany has present obligations as a resultbecause of a past event. Itevent and when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations and reliable estimate can be made of amount of the obligation. Provisions are not discounted at their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
Duo World Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017
(Unaudited)
Accounts Receivable and Provision for Doubtful Accounts
The Company recognizes accounts receivable in connection with the products sold and services provided and havehas strong policies and procedures for the collection of receivables from its clients. However, there are inevitably occasions when the receivables due to the Company cannot be collected and, therefore, have to be written off as bad debts. While the debt collection process is being pursued, an assessment is made of the likelihood of the receivable being collectable. A provision is therefore, made against the outstanding receivable to reflect that component that may not become collectable. The Company is in the practice of provisioning for doubtful debts based on the period outstanding as per the following:
| Trade receivables outstanding: | Provision | |||
| Over 24 months | ||||
| Over 18 months | ||||
| Over 15 months | ||||
| Over 12 months | ||||
| Over 9 months | ||||
Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. As of December 31, 20172019 and March 31, 2017,2019, there were no cash equivalents.
Foreign Currency Translation
The functional currencies of the Company’s foreign subsidiaries are their local currencies. For financial reporting purposes, these currencies have been translatedconverted into United States Dollars ($) and/or USD as the reporting currency. All assets and liabilities denominated in foreign functional currencies are translatedconverted into U.S. dollars at the closing exchange rate on the balance sheet date and equity balances are translatedconverted at historical rates. Revenues, costs and expenses in foreign functional currencies are translatedconverted at the average rate of exchange during the period. TranslationConversion adjustments arising from the use of different exchange rates from period to period are included as a component of shareholders’ deficit as “accumulated other comprehensive income (loss).”. Gains and losses resulting from foreign currency transactions are included in the statement of operations and comprehensive income / (loss)/(loss) as other income (expense).
| F-9 |
Fixed assetsProperty and Equipment
Fixed assets (including leasehold improvements) are stated at cost, net of accumulated depreciation and amortization. Depreciation is computed utilizing the straight-line method over the estimated useful lives of the related assets. The estimated salvage value is considered as NIL. Amortization of leasehold improvements is computed utilizing the straight-line method over the estimated benefit period of the related assets, which may not exceed 15 years, or the lease term, if shorter. Repairs and maintenance expenditures, which are not considered improvements and do not extend the useful life of the property and equipment, are expensed as incurred. In case of sale or disposal of an asset, the cost and related accumulated depreciation are removed from the consolidated financial statements.
Useful lives of the fixed assets are as follows:
| Furniture & | 5 years | |
| Improvements to lease hold assets | Lease term | |
| Office equipment | 5 years | |
| Computer equipment (Data | 3 years | |
| Website development | 4 years |
Duo World Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017
(Unaudited)
Impairment of Long-Lived Assets
The Company reviews long-lived assets, such as property, plant, and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of by sale would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs related to the sale,sell, and are no longer depreciated. The assets and liabilities of a group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.
Fair Value Measurements and Fair Value of Financial Instruments
The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability.
The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
Post Retirement Benefit Plan
The Company has gratuity as post-employment plan for all the eligible employees. The recognition for the gratuity plan is as below:-
The expected postretirement benefit obligation (“EPBO”) is the actuarial present value (“APV”) as of a specific date of the benefits expected to be paid to the employee, beneficiaries, and covered dependents.
Measurement of the EPBO is based on the following:
1. Expected amount and timing of future benefits
2. Expected future costs
3. Extent of cost sharing
| F-10 |
The EPBO includes an assumed salary progression for a pay-related plan. Future compensation levels represent the best estimate after considering the individual employees involved, general price levels, seniority, productivity, promotions, indirect effects, and the like.
The Accumulated postretirement benefit obligation (“APBO”) is the APV as of a specific date of all future benefits attributable to service by an employee to that date. It represents the portion of the EPBO earned to date. After full eligibility is attained, the APBO equals the EPBO. The APBO also includes an assumed salary progression for a pay-related plan.
Revenue Recognition, Deferred & Accrued Revenue
The Company recognizes revenue from the sale of software licenses and related services. The Company revenue recognition policy follows guidance from Accounting Standards Codification (ASC) 606, Revenue from contract with customers. Revenue is recognized when the Company transferred promised goods and services to the customer and in accordance with ASC Topic 605, Revenue Recognition. ASC Topic 605 sets forth guidance asthe amount that reflect the consideration to whenwhich the company expected to be entitled in exchange for those goods and services.
The following five steps are followed in recognizing revenue is realized or realizable and earned, which is generally, when all of the following criteria are met:from contracts:
| ● |
| ● |
| ● |
| ● | Allocate the transaction price to the |
| ● |
The consideration for the transaction [performance obligation(s)] is determined as per the agreement, contract or invoice for the services and products.
Duo Subscribe
Duo Subscribe is a solution for Subscriber Management and Billing. With over a decade of experience in developing applications for these sectors and having vast amount of domain knowledge on how these sectors operate, Duo Subscribe is eminently capable of meeting the complex and rigorous demands of businesses around the world.
Facetone
‘Facetone’ is a communication and collaboration platform, which provides users the capability of operating and running a high performance contact center operation efficiently while saving cost and maximizing revenue opportunities. In-built Facetone CRM feature provides the opportunity for contact centers to deliver a superior customer experience and build a better relationship by linking customers and data in real time.
Smoothflow
Smoothflow automates customer engagements, including building ChatBots, VoiceBots and IoTBots to deliver an Omni channel customer service experience. The product uses the power of artificial intelligence to keep improving the conversational flow and user experience.
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.
| F-11 |
Nature of Products and Services
Licenses for on premise software– The Company typically licensessells a perpetual nonexclusive license to the customer and enables the customer to install and use the software and its products on a per server, per user basis with the pricedocumentation. Price per customer varyingvaries based on the selection of the products licensed, the number of site installations and the number of authorized users. Currently, Duo is offering twoThe products from which it generates its revenue; theyoffered on this basis are “Duo Subscribe” and “FaceTone”. Duo sells its software license along with software implementation and annual maintenance services under an agreement with various clients.“Facetone-enterprise.” The Company raises invoicescharges an Implementation fee on a key milestone basis as defined in the agreement. Revenue recognition is basedfor on stagepremise customers upon completion of completion basis. Revenues from consulting and training services are typically recognized as the services are performed.
Duo World Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017
(Unaudited)performance obligation.
Enterprise software solutions– The Company distributes its software product ‘Facetone- hosted version” with third party telecommunication companies. It is a revenue model where the telecommunication provider hosts the Company’s software applications and makes them available to its customers over the Internet for a monthly subscription fee. The Company charges telecommunication providers a monthly license fee calculated according to number of licenses sold.
Cloud services- The Company sells its product Smoothflow as a “SAAS” product (Software-as-a-Service) and services are provided on a monthly subscription model.
AMC Services- The Company offers annual maintenance programs on its licenses that provide for technical support and updates to the Company’s software products. MaintenanceInitial annual maintenance fees are bundled with license fees in the initial licensing period and charged separately for renewalsrecognized when the performance obligation of annual maintenance in subsequent years. Fair value for maintenancelicense fee is based upon either renewal rates stated in the contracts or separate sales of renewals to customers.met. Revenue is recognized ratably, or daily, over the term of the maintenance period, which is typically one year.
For the nine months ended December 31, 20172019 and 2016,2018, the Company received only cash as consideration for sale of licenses and related services rendered.
For the nine months ended December 31, 20172019 and 2016,2018, the Company had following concentrations of revenuerevenues with customers:
| Customer | December 31, 2017 | December 31, 2016 | ||||||
| DEN Networks | 47.57 | % | 30.08 | % | ||||
| Commercial Bank of Ceylon PLC | 11.00 | % | 0.00 | % | ||||
| Topaz | 8.13 | % | 7.04 | % | ||||
| Development services | 7.47 | % | 1.08 | % | ||||
| LOLC | 6.77 | % | 0.00 | % | ||||
| Mediatama | 3.84 | % | 2.55 | % | ||||
| Meghbela | 3.13 | % | 1.47 | % | ||||
| Bank of Ceylon | 3.08 | % | 2.00 | % | ||||
| Megamedia | 0.00 | % | 38.51 | % | ||||
| Hutchison | 0.00 | % | 9.09 | % | ||||
| HelloCorp | 0.00 | % | 2.49 | % | ||||
| Other misc. customers | 9.01 | % | 5.69 | % | ||||
| 100.00 | % | 100.00 | % | |||||
| Customer | December 31, 2019 | December 31, 2018 | ||||||
| A | 74.78 | % | 65.00 | % | ||||
| B | 7.65 | % | 15.16 | % | ||||
| C | 6.37 | % | 1.50 | % | ||||
| D | 3.35 | % | 6.80 | % | ||||
| E | 2.29 | % | 2.68 | % | ||||
| F | 1.58 | % | 1.95 | % | ||||
| Other misc. customers | 3.98 | % | 6.91 | % | ||||
| 100.00 | % | 100.00 | % | |||||
| F-12 |
For the nine months ended December 31, 2019 and 2018, the company had following sales by products:
| Product | December 31, 2019 | December 31, 2018 | ||||||
| DuoSubscribe | $ | 450,779 | $ | 362,921 | ||||
| Facetone | 92,174 | 99,407 | ||||||
| Software hosting and reselling | 15,631 | 16,609 | ||||||
| Smooth flow | 2,581 | - | ||||||
| Development services | - | 143 | ||||||
| $ | 561,165 | $ | 479,080 | |||||
Significant Judgments
The Company’s contract with customers includes multiple Software products and services to deliver and in most contracts the price of the separately identifiable features are stated separately. In the event the price of the multiple product and services are not mentioned in the agreement the Company allocate transaction price estimating the standalone selling price of the promised Products and the services. The determination of standalone selling price for each performance obligation requires judgments. The Company determines standalone selling price for performance obligations based on overall pricing strategies, which consider market in which the company operates, historical data analysis, number of users of the product or services, size of the customer and the market price of the hardware used.
Contract Balances
When the timing of revenue recognition differs from the timing of invoicing for contract with customers, differed revenue and accrued revenue/ unbilled accounts receivables are recognized by the Company. Revenue under Software Implementation contracts are invoiced on stages of completion as stipulates in the agreement and the revenue recognized when the performance obligations are met and customer sign the user acceptance test (UAT). The Company invoices software license fee and royalty fee at the end of the period according to the customer agreement and accrued revenue/ unbilled revenue is recognized for the relevant period. The maintenance fee is invoiced beginning of the period and the Company recognizes as deferred revenue in the financial statements and is ratably recognized over a period of service.
The Company recognized $42,942 revenue as at December 31, 2019 from the contract with LOLC as the performance obligations are completed in this year, and has a contract balance of $67,492 from the same customer as at December 31, 2019. The Company is waiting for the customer confirmation to deliver the balance of product and services.
The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience, and other currently available evidence.
Refer Note- 5 for “Accounts receivables and Provision for doubtful debts”
Segment Information
The Company has determined that its Chief Executive Officer is its Chief Operating Decision Maker. The Company’s executive reviews financial information presented on a consolidated basis for the purposes of assessing the performance and making decisions on how to allocate resources. Accordingly, the Company has determined that it operates in a single reportable segment.
Deferred Revenue -Deferred revenue represents advance payments for software licenses, services, and maintenance billed in advance of the time revenue is recognized. As at December 31, 20172019 and March 31, 2017,2019, the Company recognized deferred revenue was $46,769$10,292 and $16,420$6,995, respectively.
Accrued Revenue/Unbilled Accounts Receivable -Accrued revenue/Unbilled accounts receivable primarily occur due to the timing of the respective billings, which occur subsequent to the end of each reporting period. As at December 31, 20172019 and March 31, 2017, unbilled/accrued2019, unbilled /accrued revenues were $63,928$95,738 and $70,174$102,851, respectively.
| F-13 |
The Company had no contract liabilities and assets recognized for cost to fulfill a requirement of a customer as at December 31, 2019.
Cost of Revenue
Cost of revenue mainly includes purchases, product implementation costs, amortization of product development, developer support and implementation, and consultancy fees related to the products offered by Duo.the Company. The aggregate cost related to the software implementations, including support and consulting services pertaining to the revenue recognized during the reporting period, is recognized as Costcost of Revenue.
Duo World Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017
(Unaudited)revenue.
Product research and development
Product research and development expenses consist primarily of salary and benefits for the Company’s development and technical support staff, contractors’ fees and other costs associated with the enhancements of existing products and services and development of new products and services. Costs incurred for software development prior to technological feasibility are expensed as product research and development costs in the period incurred. Once the point of technological feasibility is reached, which is generally upon the completion of a working prototype that has no critical bugs and is a release candidatecandidate; development costs are capitalized until the product is ready for general release and are classified within “Intangibles assets” in the accompanying consolidated balance sheets. The Company amortizes capitalized software development costs using the greater of the ratio of the products’ current gross revenues to the total of current gross revenues and expected gross revenues or on a straight-line basis over the estimated economic life of the related product, which is typically four years.
During the nineNine months ending onended December 31, 20172019 and 2016,2018, product research and development cost of $212,748$45,114 and $294,507$145,822, respectively, were capitalized as “Intangible assets”. Product research and development cost of $26,370 of the “SaaS” version of “FaceTone” was capitalized during the nine months ended December 31, 2017.
Advertising Costs
The Company expenses advertising costs as incurred. The amount expensed during the nine months ended December 31, 2017 was $484 and is included in selling and distribution expense in the accompanying consolidated statements of operations. No advertising expenses were incurred during the nine months ended December 31, 2016.2019 and 2018.
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets and liabilities are not recognized in the current financials due to recurring tax losses and the uncertainty of the realization of the tax allowances. Withholding taxes deducted from the source of income from foreign operations are debited to profit and loss account due to non-refundable status.
| F-14 |
Comprehensive Income
The Comprehensive Income Topic of the FASB Accounting Standards Codification establishes standards for reporting and presentation of comprehensive income and its components in a full set of financial statements. Comprehensive income from April 1, 20132015 through December 31, 2017,2019, includes only foreign currency translationconversion gains (losses), and is presented in the Company’s consolidated statements of comprehensive income.
Changes in Accumulated Other Comprehensive Income (Loss) by Component during the periods ending on December 31, 20172019 and March 31, 20172019 were as follows:
| Foreign Currency Translation gains (losses) | ||||
| Balance, March 31, 2017 | $ | 112,761 | ||
| Translation rate loss during the period | (5,962 | ) | ||
| Balance, June 30, 2017 | $ | 106,799 | ||
| Translation rate loss during the period | (18,895 | ) | ||
| Balance, September 30, 2017 | $ | 87,904 | ||
| Translation rate loss during the period | (15,001 | ) | ||
| Balance, December 31, 2017 | $ | 72,903 | ||
| Foreign Currency Translation Gains (losses) | ||||
| Balance, March 31, 2019 | $ | 266,235 | ||
| Translation rate gain (loss) | 2,626 | |||
| Balance, June 30, 2019 | $ | 268,861 | ||
| Translation rate gain (loss) | 82,361 | |||
| Balance, September 30, 2019 | $ | 351,222 | ||
| Translation rate gain (loss) | (25,011 | ) | ||
| Balance, December 31, 2019 | $ | 326,211 | ||
Recent Accounting Pronouncements
The Company has reviewed the recent accounting pronouncements and believes that they will not have material impact on the Company’s financial position and results of operations.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09,Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which updates the existing accounting standards for revenue recognition. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606):Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year. In March 2016, the FASB issued Accounting Standards Update No. 2016-08,Revenue from Contracts with Customers (Topic 606):Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (ASU 2016-08) which clarifies the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10,Revenue from Contracts with Customers (Topic 606),Identifying Performance Obligations and Licensing, which clarifies the guidance related to whether goods or services are distinct within the context of contract and therefore a performance obligation and the timing and pattern of revenue recognition for IP licenses. In May 2016, the FASB issued ASU 2016-12,Revenue from Contracts with Customers (Topic 606):Narrow-Scope Improvements and Practical Expedients, which provides clarifying guidance in certain narrow areas and added some practical expedients. In December 2016, the FASB issued ASU 2016-20,Revenue from Contracts with Customers (Topic 606):Technical Corrections and Improvements, which provides clarifying guidance in certain technical areas. The new standard further requires new disclosures about contracts with customers, including the significant judgments the registrant has made when applying the guidance. The standard and related amendments will be effective for financial statements issued by public companies for interim and annual reporting periods beginning after December 15, 2017. The management will be adopting the new standard effective January 1, 2018. The management does not expect that the impact of adopting the standard to be significant to our consolidated financial statementsNote 4 – Reverse Recapitalization
Duo (Successor) merged with DSSL (Predecessors) on December 3, 2014, and merged with DSS (Predecessors) on December 3, 2014 (Predecessors), and DSSL and DSS became the surviving corporations, in a transaction treated as a reverse recapitalization. Duo did not have any material operations and majority-voting control was transferred to DSSL.
In the recapitalization, Duo issued 28,000,000 shares of common stock, 5,000,000 series “A” preferred shares and $310,000 in cash in exchange for all of DSSL’s 5,000,000 issued and outstanding shares of common stock. Duo also issued 2,000,000 shares of common stock in exchange for all of DSS’s 10,000 issued and outstanding shares of common stock. The transaction resulted in DSSL’s shareholder and DSS’s shareholder acquiring approximately 100% control.
The transaction also required a recapitalization of DSSL and DSS. Since DSSL and DSS acquired a controlling voting interest, they were deemed the accounting acquirer, while Duo was deemed the legal acquirer. The historical financial statements of the Company are those of combined financial statements of DSSL & DSS and of the consolidated entities from the date of recapitalization and subsequent.
Since the transaction is considered a reverse recapitalization, the presentation of pro-forma financial information was not required. All share and per share amounts have been retroactively restated to the earliest periods presented to reflect the transaction.
Duo World Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017
(Unaudited)
Note 45 – Accounts Receivable
Following is a summary of accounts receivable as at December 31, 20172019 and March 31, 2017;2019:
| December 31, 2017 | March 31, 2017 | December 31, 2019 | March 31, 2019 | |||||||||||||
| Accounts receivable – Trade | $ | 849,038 | $ | 754,783 | ||||||||||||
| Accounts receivable – trade | $ | 220,231 | $ | 148,933 | ||||||||||||
| Less: Provision for doubtful debts | (276,675 | ) | (133,113 | ) | (48,155 | ) | (23,889 | ) | ||||||||
| $ | 572,363 | $ | 621,670 | $ | 172,076 | $ | 125,044 | |||||||||
AtAs at December 31, 20172019 and March 31, 2017,2019, the Company had following concentrations of accounts receivablereceivables with customers:
| Customer | December 31, 2017 | March 31, 2017 | ||||||
| Megamedia | 49.07 | % | 63.68 | % | ||||
| DEN Networks | 15.53 | % | 15.99 | % | ||||
| Topas | 9.39 | % | 7.24 | % | ||||
| LOLC | 7.05 | % | 0.00 | % | ||||
| Commercial Bank | 5.14 | % | 0.00 | % | ||||
| Bank of Ceylon | 3.18 | % | 0.00 | % | ||||
| Development Services | 2.86 | % | 0.00 | % | ||||
| Dish Media | 1.88 | % | 5.88 | % | ||||
| Mediatama | 1.75 | % | 1.29 | % | ||||
| Meghbela | 1.41 | % | 0.74 | % | ||||
| Other receivables | 2.73 | % | 5.18 | % | ||||
| 100.00 | % | 100.00 | % | |||||
| Customer | December 31, 2019 | March 31, 2019 | ||||||
| A | 32.60 | % | 16.83 | % | ||||
| B | 27.23 | % | 27.98 | % | ||||
| C | 20.05 | % | 0.52 | % | ||||
| D | 12.18 | % | 25.80 | % | ||||
| E | 0.00 | % | 10.23 | % | ||||
| F | 2.22 | % | 6.32 | % | ||||
| G | 0.00 | % | 6.43 | % | ||||
| Other receivables | 5.72 | % | 5.90 | % | ||||
| 100.00 | % | 100.00 | % | |||||
Note 56 – Prepaid Expenses and Other Current Assets
Following is a summary of prepaid expenses and other current assets as at December 31, 20172019 and March 31, 2017;2019:
| December 31, 2017 | March 31, 2017 | December 31, 2019 | March 31, 2019 | |||||||||||||
| Security deposits | $ | 18,766 | $ | 29,621 | 48,016 | 56,878 | ||||||||||
| WHT receivable | 198,839 | 201,362 | ||||||||||||||
| Staff loan and advances | - | 100 | ||||||||||||||
| Travel advance | - | 295 | ||||||||||||||
| Prepayments | 7,422 | 577 | ||||||||||||||
| Supplier advance | 3,476 | 4,398 | 12,769 | 8,108 | ||||||||||||
| ESC receivable | 5,778 | 5,826 | 4,866 | 11,126 | ||||||||||||
| Insurance prepayment | - | 1,435 | ||||||||||||||
| Prepayments | 48,107 | 10,580 | ||||||||||||||
| Prepayment for other professional services | 877,195 | - | ||||||||||||||
| Travel advance | 4 | 28 | ||||||||||||||
| Other receivables | 4,526 | 3,759 | 4,333 | 5,565 | ||||||||||||
| $ | 1,156,687 | $ | 257,376 | 77,410 | 82,282 | |||||||||||
Duo World Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017
(Unaudited)
Note 6 –7– Property and Equipment
Following table illustrates net book value of property and equipment as at December 31, 20172019 and March 31, 2017;2019:
| December 31, 2017 | March 31, 2017 | December 31, 2019 | March 31, 2019 | |||||||||||||
| Office equipment | $ | 7,318 | $ | 9,465 | $ | 1,757 | $ | 1,812 | ||||||||
| Furniture & fittings | 140,960 | 139,377 | 117,891 | 123,678 | ||||||||||||
| Computer equipment (Data Processing Equipment) | 126,513 | 131,909 | ||||||||||||||
| Computer equipment (data processing equipment) | 89,921 | 91,814 | ||||||||||||||
| Improvements to lease hold assets | 1,879 | 1,894 | 18,157 | 18,729 | ||||||||||||
| Website Development | 13,666 | 13,768 | ||||||||||||||
| Website development | 13,966 | 14,362 | ||||||||||||||
| $ | 290,336 | $ | 296,413 | 241,692 | 250,395 | |||||||||||
| Accumulated depreciation and amortization | (259,939 | ) | (248,326 | ) | (232,612 | ) | (226,882 | ) | ||||||||
| Net fixed assets | $ | 30,397 | $ | 48,087 | $ | 9,080 | $ | 23,513 | ||||||||
Depreciation and amortization expense for the nine months ended December 31, 20172019 and 20162018 was $20,078$14,572 and $57,813$18,544, respectively. $7,098 of fully depreciated long lived assets were disposed during the nine months ended December 31, 2017.
Note 78 – Intangible Assetsassets
Intangible assets comprise of capitalization of certain costs pertaining to productproducts development which meetmeets the criteria as set forth above under Note 3. Following table illustrates the movement in intangible assets as at December 31, 20172019 and March 31, 2017:2019:
| December 31, 2017 | March 31, 2017 | |||||||
| Opening Balance | $ | 580,899 | $ | 382,352 | ||||
| Add: Costs capitalized during the period | 212,748 | 365,216 | ||||||
| Less: Amount Written-off | (84,844 | ) | (147,326 | ) | ||||
| Translational gain | (6,733 | ) | (19,343 | ) | ||||
| Net Intangible Assets | $ | 702,070 | $ | 580,899 | ||||
December 31, 2019 | March 31, 2019 | |||||||
| Opening balance | $ | 746,158 | $ | 732,939 | ||||
| Add: Costs capitalized during the period | 45,114 | 171,416 | ||||||
| Less: Amount written-off | (75,368 | ) | (74,024 | ) | ||||
| Translational gain/ (loss) | (23,274 | ) | (84,173 | ) | ||||
| Net Intangible Assets | $ | 692,630 | $ | 746,158 | ||||
Note 89 – Short Term BorrowingsShort-term borrowings
Following is a summary of short-term borrowings as at December 31, 20172019 and March 31, 2017;2019:
| December 31, 2017 | March 31, 2017 | December 31, 2019 | March 31, 2019 | |||||||||||||
| PAN Asia Bank – Short term overdraft | $ | 480,550 | $ | 460,088 | $ | 412,993 | $ | 471,350 | ||||||||
| Prosperous Capital | 8,922 | 8,997 | ||||||||||||||
| Commercial bank | 40,093 | 4,753 | ||||||||||||||
| PAN Asia Bank – Loan | 65,841 | - | ||||||||||||||
| Commercial Bank | 31,843 | 45,950 | ||||||||||||||
| Senkadagala Finance | 33,045 | - | 3,186 | 14,375 | ||||||||||||
| $ | 562,610 | $ | 473,838 | $ | 513,863 | $ | 531,675 | |||||||||
| F-17 |
Bank overdraft facility, obtained from Pan Asia Banking Corporation PLC, contains an average interest rate of 15.55%15.75% per annum.
Duo World Inc.annum for $180,897, 16.25% per annum for $116,887 and Subsidiaries16.39% per annum for $105,755.
Notes to the Consolidated Financial Statements
December 31, 2017
(Unaudited)
Note 910 – Due to Related Parties
Due to Related Parties – Short term
From time to time, the Company receives advances from related parties such as officers,management, directors or principal shareholders in the normal course of business. Loans and advances received from related parties are unsecured and non-interest bearing. Balances outstanding to these persons for less than 12 months are presented under current liabilities in the accompanying consolidated financial statements. As of December 31, 20172019 and March 31, 2017,2019, the Company owed directors $602,218$903,955 and $361,785$824,991, respectively.
Due to Related Parties – Long term
Balances outstanding to related parties for more than 12 months are presented under long-term liabilities in the accompanying consolidated financial statements. As of December 31, 20172019 and March 31, 2017,2019, the Company owed directors $1,184,214$1,343,875 and $1,168,866$1,345,968, respectively.
Note 1011 – Taxes PayablePayables
The taxesTaxes payable comprisecomprised of items listed below as at December 31, 20172019 and March 31, 2017;2019:
| December 31, 2017 | March 31, 2017 | December 31, 2019 | March 31, 2019 | |||||||||||||
| PAYE | $ | 107,712 | $ | 73,611 | $ | 163,092 | $ | 143,766 | ||||||||
| VAT payable | - | 14 | ||||||||||||||
| Stamp Duty Payable | 36 | 48 | ||||||||||||||
| WHT payable | 3,710 | 2,127 | ||||||||||||||
| Stamp duty payable | 11 | 17 | ||||||||||||||
| Tax payable | 8,671 | 8,996 | 88 | 11,261 | ||||||||||||
| $ | 116,419 | $ | 82,669 | $ | 166,901 | $ | 157,171 | |||||||||
Note 1112 – Accruals and Other Payables
Following is a summary of accruals and other payables as at December 31, 20172019 and March 31, 2017;2019:
| December 31, 2017 | March 31, 2017 | December 31, 2019 | March 31, 2019 | |||||||||||||
| Accruals | $ | 21,211 | $ | 49,114 | ||||||||||||
| Accrued interest | 6,347 | 3,090 | ||||||||||||||
| Audit fee payable | $ | 17,089 | $ | 20,906 | 1,745 | 1,770 | ||||||||||
| Accruals | 30,534 | 81,696 | ||||||||||||||
| Other payables | 60,112 | 67,144 | 32,720 | 17,700 | ||||||||||||
| $ | 107,735 | $ | 169,746 | $ | 62,023 | $ | 71,675 | |||||||||
Duo World Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017
(Unaudited)
Note 1213 – Cost of Revenue
Following is the summary of cost of revenue for the nine months ending December 31, 20172019 and 2016;2018:
| December 31, 2017 | December 31, 2016 | December 31, 2019 | December 31, 2018 | |||||||||||||
| Product development cost written off | $ | 75,368 | $ | 58,783 | ||||||||||||
| Support services | 65,980 | 60,674 | ||||||||||||||
| Implementation cost | 48,486 | 36,202 | ||||||||||||||
| Purchases | $ | 38,087 | $ | 31,737 | 11,800 | 20,517 | ||||||||||
| Implementation cost | 20,510 | 32,445 | ||||||||||||||
| Product development cost written off | 84,844 | 108,101 | ||||||||||||||
| Consultancy, contract basis employee cost | 7,468 | 19,007 | 2,720 | 898 | ||||||||||||
| Support services | 50,262 | 21,859 | ||||||||||||||
| Other external services | 6,594 | 7,981 | 1,015 | 5,495 | ||||||||||||
| Development services | 29,943 | 5,767 | - | 2,532 | ||||||||||||
| $ | 237,708 | $ | 226,897 | $ | 205,369 | $ | 185,101 | |||||||||
Note 1314 – General and Administrative Expenses
Following is the summary of general and administrative expenses for the nine months ending December 31, 20172019 and 2016;2018:
| December 31, 2017 | December 31, 2016 | December 31, 2019 | December 31, 2018 | |||||||||||||
| Directors remuneration | $ | 113,781 | $ | 78,758 | $ | 97,848 | $ | 105,978 | ||||||||
| EPF | 32,809 | 36,493 | 11,462 | 7,448 | ||||||||||||
| ETF | 8,202 | 9,123 | 1,719 | 1,862 | ||||||||||||
| Bonus | - | 24,961 | ||||||||||||||
| Consulting fee | 17,690 | - | ||||||||||||||
| Office rent | 15,549 | 34,668 | ||||||||||||||
| Legal fee | 13,711 | 15,073 | ||||||||||||||
| Vehicle allowance | 28,227 | 42,905 | 12,407 | 23,113 | ||||||||||||
| Penalties / late payment charges | 11,289 | 2,493 | ||||||||||||||
| Investor relations | 10,652 | 398 | ||||||||||||||
| Professional fees | 10,372 | 6,669 | ||||||||||||||
| OTC market fees | 8,666 | 9,000 | ||||||||||||||
| Audit fee | 6,693 | 3,787 | ||||||||||||||
| Internet charges | 6,147 | 9,053 | ||||||||||||||
| Gratuity | 4,892 | 1,889 | ||||||||||||||
| Other professional services | 4,833 | 9,440 | ||||||||||||||
| Electricity charges | 4,582 | 7,621 | ||||||||||||||
| Telephone charges | 4,277 | 5,723 | ||||||||||||||
| Expenses write-off | 3,602 | - | ||||||||||||||
| Office maintenance | 3,093 | 11,458 | ||||||||||||||
| Staff welfare | 8,693 | 20,176 | 2,539 | 5,822 | ||||||||||||
| Penalties / Late payment charges | 817 | 4,792 | ||||||||||||||
| Office rent | 51,260 | 57,481 | ||||||||||||||
| Electricity charges | 10,919 | 12,190 | ||||||||||||||
| Office maintenance | 9,241 | 12,741 | ||||||||||||||
| Telephone charges | 8,137 | 9,304 | ||||||||||||||
| Travelling expense | 2,761 | 2,470 | ||||||||||||||
| Audit fee | 8,094 | 5,068 | ||||||||||||||
| Printing and stationery | 848 | 1,368 | ||||||||||||||
| Office expenses | 1,354 | 1,773 | ||||||||||||||
| Computer maintenance | 3,723 | 4,764 | ||||||||||||||
| Internet charges | 9,638 | 9,952 | ||||||||||||||
| Courier and postage | 689 | 575 | ||||||||||||||
| Security charges | 2,338 | 2,700 | ||||||||||||||
| Training and development | - | 170 | ||||||||||||||
| Insurance expense | 1,393 | 1,735 | ||||||||||||||
| Professional fees | 13,882 | 26,951 | ||||||||||||||
| Gratuity | 5,382 | 3,724 | ||||||||||||||
| Secretarial fees | 396 | 740 | ||||||||||||||
| Irrecoverable tax | 36,010 | 34,178 | 1,862 | 254 | ||||||||||||
| Software Rentals | 19,176 | 19,372 | ||||||||||||||
| Other professional services | 5,945 | 224,103 | ||||||||||||||
| Consulting fee | 51,300 | - | ||||||||||||||
| Transfer agent fees | 1,010 | 1,235 | 1,565 | 150 | ||||||||||||
| Filling fee and subscription | 4,687 | 4,047 | 1,528 | 1,616 | ||||||||||||
| Computer maintenance | 1,017 | 2,032 | ||||||||||||||
| Software rentals | 734 | 6,385 | ||||||||||||||
| Courier and postage | 508 | 558 | ||||||||||||||
| Secretarial fees | 493 | 556 | ||||||||||||||
| Printing and stationery | 291 | 571 | ||||||||||||||
| Insurance expense | 91 | - | ||||||||||||||
| Stamp duty expenses | 1,123 | 728 | 3 | 192 | ||||||||||||
| Legal fee | 9,403 | 5,505 | ||||||||||||||
| Investor relations | 5,742 | - | ||||||||||||||
| Travelling expense | - | 560 | ||||||||||||||
| Office expenses | - | 358 | ||||||||||||||
| Security charges | - | 1,186 | ||||||||||||||
| Other expenses | 1,880 | 430 | 716 | 510 | ||||||||||||
| $ | 458,860 | $ | 660,512 | $ | 260,831 | $ | 276,421 | |||||||||
Duo World Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017
(Unaudited)
Note 1415 – Selling and Distribution Expenses
Following is the summarysummery of selling and distribution expenses for the nine months ending on December 31, 20172019 and 2016;2018:
| December 31, 2017 | December 31, 2016 | |||||||
| Marketing Expenses | $ | 743 | $ | 1,472 | ||||
| Vehicle hire charges | 4,681 | 4,810 | ||||||
| Vehicle running expense | 3,492 | 3,608 | ||||||
| Foreign Travel | - | 2,427 | ||||||
| Advertisement | 484 | - | ||||||
| Visa expenses | - | 250 | ||||||
| Gifts and donations | 10 | - | ||||||
| $ | 9,410 | $ | 12,567 | |||||
December 31, 2019 | December 31, 2018 | |||||||
| Vehicle hire charges | $ | 4,004 | $ | 4,336 | ||||
| Marketing expenses | 4,083 | 6,522 | ||||||
| Vehicle running expense | 1,154 | 3,949 | ||||||
| Travel expenses | 363 | - | ||||||
| $ | 9,604 | $ | 14,807 | |||||
Note 1516 - Equity
| (A) | Common Stock |
As at December 31, 2017,2019, the Company had 400,000,000 authorized shares of common stockshares having a par value of $0.001.$0. 001. The common shares of Common Stock arehave been designated with the following rights:
| ● | Voting rights: Common shareholders can attend at annual | |
| ● | Right to elect board of directors: Common shareholders control the Company through their right to elect the company’s board of directors; however, the holder of our preferred stock has super-majority voting rights and has power to elect all of the Company’s board of directors. | |
| ● | Right to share income and assets:Common shareholders have the right to share |
| F-20 |
During the nine months ended December 31, 2017,2019, the Company issued following2,000,000 common shares:
| Date | Type | Shares | Valuation | |||||||
| 06/30/2017 | Stock issued for services - Consulting for Strategic Growth 1, Ltd. | 140,000 | $ | 51,800 | ||||||
| 08/23/2017 | Stock issued for services - Maxim Partners LLC. | 1,391,816 | $ | 1,043,862 | ||||||
| 08/23/2017 | Stock issued for services - Dayspring Capital LLC. | 947,371 | $ | 710,528 | ||||||
| 09/18/2017 | Stock issued for services - Consulting for Strategic Growth 1, Ltd. | 70,000 | $ | 52,500 | ||||||
| 12/19/2017 | Stock issued to Yenom (Pvt) Limited. | 3,634,000 | $ | 3,634 | ||||||
Duo World Inc. and Subsidiaries
Notesshares at a value of $0.05 per share to the Consolidated Financial Statements
December 31, 2017
(Unaudited)
In December 2017, the Board of Directors approved the “Duo World, Inc. 2017 Employee Stock Ownership Plan” and reserved an aggregate of 9,611,665 shares of common stock for issuance thereunder.investor.
| (B) | Preferred Stock |
As at December 31, 2017,2019, the Company had 10,000,000 authorized series “A” preferred shares having a par value of $0.001 per share.
The preferred shares arehave been designated with the following conversion rights:
| ● | One preferred share will convert into ten (10) common shares no earlier than |
On December 19, 2017, 363,400 convertible series “A” preferred shares were converted into 3,634,000 common stock at par at a ratio of one preferred share to ten common shares.
During the nine months ended December 31, 2017, the Company has not issued any new preferred shares.
Note 1617 - Commitments and Contingencies
The Company consults with legal counsel on matters related to litigation and other experts both within and outside the Company with respect to matters in the ordinary course of business. The Company does not have any contingent liabilities in respect of legal claims arising in the ordinary course of business.
Duo entered into a lease commitment for its Sri Lanka office amounting to $118,961$36,736 with Happy Building Management CompanyMs. Praveena Sujeevan on November 1, 2018 for a period of 3 years in 2016. Duo entered into another lease commitment for its Indian office amounting to $1,273 on April 1, 2017 with Regus Office Center Services Pvt. Limited for a period of 1 year.2 years.
GuaranteeGuarantees and security deposits provided by the company existed on the balance sheet date are as follows:
| Date | Description | Amount | ||||
| 09/23/2011 | Performance Bond for BOC Tender | $ | 9,927 | |||
| 05/15/2013 | Guarantee for Lanka Clear | 2,086 | ||||
| 07/31/2014 | Guarantee for SLT | 562 | ||||
| 08/10/2015 | Guarantee for LOLC | 1,586 | ||||
| $ | 14,160 | |||||
The company has not provided any guarantees other than those mentioned above.
Note 17 – Subsequent Events
On January 2, 2018, the Company awarded 6,542,500 shares of common stock to various employees, including 1,750,000 shares of common stock to two of the Company’s executive officers, 1,500,000 shares to Suzannah Jennifer Samuel Perera, Chief Finance Officer, and 250,000 shares to Mahmud Riad Ameen, Legal Director. The aggregate value of the 6,542,500 shares awarded was $3,042,262.50 in non-cash compensation.
On January 12, 2018, 136,600 shares of convertible Series “A” Preferred Stock were converted into 1,366,000 common stock at par at a ratio of one preferred share to ten common shares.
| Date | Description | Amount | |||||
| 7/31/2014 | Guarantee for SLT | $ | 473 | ||||
| 8/10/2015 | Guarantee for LOLC | 1,336 | |||||
| 5/23/2018 | Rent deposit for Delhi apartment | 1,291 | |||||
| 7/17/2018 | Security deposit- Senkadagala Finance | 27,830 | |||||
| 7/18/2018 | Guarantee for Amana bank | 530 | |||||
| 9/10/2018 | Guarantee for ICTA | 1,670 | |||||
| 10/9/2018 | Rent deposit for office space | 9,184 | |||||
| 10/9/2019 | Guarantee for BOC | 2,032 | |||||
| 10/14/2019 | Security deposit for CEB | 835 | |||||
| 10/21/2019 | Security deposit for CEB | 334 | |||||
| $ | 45,515 | ||||||
Note 18 - General
Figures have been rounded off to the nearest dollar and the comparative figures have been re-arranged / reclassified, wherever necessary, to facilitate comparison.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Forward - Looking Statement
The following discussion and analysis of the results of operations and financial condition of Duo World, Inc. should be read in conjunction with the unaudited financial statements, and the related notes. References to “we,” “our,” or “us” in this section refers to the Company and its subsidiaries. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
Certain matters discussed herein may contain forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties include, but are not limited to, the following:
| ● | the volatile and competitive nature of our industry, | |
| ● | the uncertainties surrounding the rapidly evolving markets in which we compete, | |
| ● | the uncertainties surrounding technological change of the industry, | |
| ● | our dependence on its intellectual property rights, | |
| ● | the success of marketing efforts by third parties, | |
| ● | the changing demands of | |
| ● | the arrangements with present and future customers and third parties. |
Should one or more of these risks or uncertainties materialize or should any of the underlying assumptions prove incorrect, actual results of current and future operations may vary materially from those anticipated.
Our MD&A is comprised of the following sections:
A. Business Overview
| A. | Business Overview | |
| B. | Critical Accounting Policies | |
| C. | Results of operations for the three months ended December 31, 2019 and December 31, 2018 | |
| D. | Results of operations for the nine months ended December 31, 2019 and December 31, 2018 | |
| E. | Financial condition as at March 31, 2019 and December 31, 2019 | |
| F. | Liquidity and capital reserves | |
| G. | Milestones for next twelve months |
B. Critical Accounting PoliciesA.Business overview:
C. Results of operations for the three months ended December 31, 2017 and December 31, 2016
D. Results of operations for the nine months ended December 31, 2017 and December 31, 2016
E. Financial condition as at December 31, 2017 and March 31, 2017
F. Liquidity and capital reserves
G. Milestones for next twelve months
Duo World, Inc. (hereinafter referred to as “Successor” or “Duo”), a reporting Company since September 26, 2016, was organized under the laws of the state of Nevada on September 19, 2014. Duo Software (Pvt.) Limited (hereinafter referred to as “DSSL” or “Predecessor”), a Sri Lanka based company, was incorporated on September 22, 2004, in the Democratic Socialist Republic of Sri Lanka, as a limited liability company. Duo Software (Pte.) Limited (hereinafter referred to as “DSS” or “Predecessor”), a Singapore based company, was incorporated on June 5, 2007 in the Republic of Singapore as a limited liability company. DSS also includes its wholly-owned subsidiary, Duo Software India (Private) Limited (India), which was incorporated on August 30, 2007, under the laws of India.
Effective December 3, 2014, DSSL and DSS executed a reverse recapitalization with Duo. Duo (“Successor”) is a holding company that conducts operations through its wholly-owned subsidiaries, DSSL and DSS (“Predecessors”) in Sri Lanka, Singapore and India. The consolidated entity is referred to as the “Company.” The Company, having its development center in Colombo, Sri Lanka, specializes in the space of Customer Life Cycle Management & Contact Center solutions and Subscriber Management Billing and Business Intelligence in the Asia Pacific Region. Driven by innovation, Duo World has served the enterprises in many ways, including efficiency, cost reduction, revenue optimization and continuous value addition to their product or service offerings. Duo World has been in the business of developing products and services for the subscription based industry.
Our authorized capital consists of 410,000,000 shares, including 400,000,000 shares of common stock, $0.001 par value, and 10,000,000 shares of preferred stock, $0.001 par value.
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B.Critical Accounting Policies:
We prepare our consolidated financial statements in accordance with GAAP. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
Critical accounting policies and estimates are those that we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of the matters that are inherently uncertain.
Revenue Recognition
The Company recognizes revenue from the sale of software licenses and related services. The Company’s revenue recognition policy follows guidance from Accounting Standards Codification (“ASC”) 606, Revenue from contracts with customers. Revenue is recognized when the Company transfers promised goods and services to the customer and in accordance with ASC Topic 605, Revenue Recognition. ASC Topic 605 sets forth guidance asthe amount that reflect the consideration to whenwhich the company expected to be entitled in exchange for those goods and services.
The following five steps are followed in recognizing revenue is realized or realizable and earned, which is generally, when all of the following criteria are met:from contracts:
| ● | ||
| ● | ||
| ● | ||
| ● | ||
| ● | Recognize revenue when or as the |
The Company typically licenses its products on aconsideration for the transaction [performance obligation(s)] is determined as per server, per user basis with the price per customer varying based on the selection of the products licensed, the number of site installations and the number of authorized users. Currently, Duo is offering two main products from which it generates its revenue; they are “Duo Subscribe” and “FaceTone.” Duo sells its software licenses along with software implementation and annual maintenance services under an agreement with various clients. The Company raises invoices on key milestone basis as defined in the agreement, with the customer. Revenue recognition is based on stage of completion basis. Revenues from consulting, development and training services are typically recognized ascontract or invoice for the services are performed.and products.
The company has also commenced launching ‘FaceTone’ as a hosted solution, by signing reseller partnership agreements with the leading Telecommunication and Broadband Service providers. FaceTone is being offered to the Small and Medium Enterprises (SME’s) by the Service Providers for a fixed monthly subscription depending on the number of licenses and options.DuoSubscribe
The Company offers annual maintenance programs“DuoSubscribe” is a solution for Subscriber Management and Billing. With over a decade of experience in developing applications for these sectors and having vast amount of domain knowledge on its licenses that provide for technical supporthow these sector operate, DuoSubscribe is eminently capable of meeting the complex and updates torigorous demands of businesses around the Company’s software products. Maintenance fees are bundled with license fees in the initial licensing period and charged separately for renewals of annual maintenance in subsequent years. Fair value for maintenance is based upon either renewal rates stated in the contracts or separate sales of renewals to customers. Revenue is recognized ratably, or daily, over the term of the maintenance period, which is typically one year.world.
Facetone
“Facetone” is a communication and collaboration platform, which provides users the capability of operating and running a high performance contact center operation efficiently while saving cost and maximizing revenue opportunities. In-built Facetone CRM feature provides the opportunity for contact centers to deliver a superior customer experience and build a better relationship by linking customers and data in real time.
Smoothflow
“Smoothflow” automates customer engagements, including building ChatBots, VoiceBots and IoTBots to deliver an Omni channel customer service experience. The product uses the power of artificial intelligence to keep improving the conversational flow and user experience.
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Provisions
A provision is recognized when the Company has present obligations as a result of past events, itevents. It is probable that an outflow of resources embodying economic benefits will be required to settle the obligations and reliable estimates can be made of amount of the obligation. Provisions are not discounted at their present value and are determined based on the best estimateestimates required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Quantitative and Qualitative Disclosure about Market Risk
We are exposed to financial market risks, primarily changes in interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices.
Foreign Currency Exchange Risk
Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. All of our revenues are normally generated in U.S. dollars or Sri Lankan rupees. Our expenses are generally denominated in the currencies in which our operations are located, which are primarily in Asia and to a lesser extent in the U.S. Our results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. To date, we have not engaged in any foreign currency hedging strategies. As our international operations grow, we plan to generate revenues in foreign currencies and we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates.
Inflation
We do not believe that inflation had a material effect on our business, financial condition or results of operations in the last three fiscal years. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.
C. Results of operations for the three months ended December 31, 2019 and December 31, 2018:
The Company had revenues amounting to $200,911$177,068 and $282,385,$150,199, respectively, for three months ended December 31, 20172019 and December 31, 2016.2018. Following is a breakdown of revenues for both periods:
| December 31, 2017 | December 31, 2016 | Changes | ||||||||||
| DuoSubscribe | $ | 121,469 | $ | 261,548 | $ | (140,079 | ) | |||||
| FaceTone | 60,680 | 3,178 | 57,502 | |||||||||
| DuoCLM | - | 5,590 | (5,590 | ) | ||||||||
| Software hosting and reselling- FaceTone | 5,698 | 2,139 | 3,559 | |||||||||
| Development services | 13,064 | 9,930 | 3,134 | |||||||||
| $ | 200,911 | $ | 282,385 | $ | (81,474 | ) | ||||||
| Product | December 31, 2019 | December 31, 2018 | Change | |||||||||
| DuoSubscribe | $ | 140,354 | $ | 138,338 | $ | 2,016 | ||||||
| Facetone | 31,342 | 6,811 | 24,531 | |||||||||
| Software hosting and reselling | 4,526 | 5,050 | (524 | ) | ||||||||
| Smoothflow | 846 | - | 846 | |||||||||
| $ | 177,068 | $ | 150,199 | $ | 26,869 | |||||||
| 5 |
Total revenue for the three months ended December 31, 2017 decreased2019 increased by 29%18% when compared to December 31, 2016. The decrease is mainly due to the drop in revenue generated by our products, DuoCLM and DuoSubscribe, as these products are being phased out and the Company is focusing on new products.2018.
The Company is no longer marketing DuoCLM and DuoSubscribe, as the newer products are being introduced to the market. FaceTone is an advanced version of DuoCLM, and has been successful in converting many sales leads in to signed contracts during the last quarter. Revenue on the new contracts have either not been recognized (if implementation had not begun) or recognized in minimum (if work completed is below the milestone).
Even though the revenuegenerated from Facetone increased by $24,531 for the three months ended December 31, 2017 has decreased2019 when compared to the three months ended December 31, 2016, theresame period in 2018. The increase is a growth of 18% when compareddue to the three months ended September 30, 2017. The company is confident this trend will continue to increase in greater percentage in the subsequent quarters.implementation fees invoiced for an existing customer.
The following table illustrates the comparison between the revenueRevenue from DuoSubscribe increased for the three months ended December 31, 2017 and September 30, 2017.
| December 31, 2017 | September 30, 2017 | Changes | ||||||||||
| DuoSubscribe | $ | 121,469 | $ | 115,983 | $ | 5,486 | ||||||
| FaceTone | 60,680 | 35,223 | 25,457 | |||||||||
| Software hosting and reselling - FaceTone | 5,698 | 4,011 | 1,687 | |||||||||
| Development services | 13,064 | 15,109 | (2,045 | ) | ||||||||
| $ | 200,911 | $ | 170,326 | $ | 30,585 | |||||||
The total increase of 72%2019 when compared to the same period in 2018. Increase in DuoSubscribe revenue is due to the additional revenue generated from FaceTone signifies favorable market acceptance of the product.
During the period ended December 31, 2017, the Company entered into a software license agreement to implement FaceTone to one of the largest and most diversified conglomerate in Sri Lanka.
In addition, fully owned subsidiary of Duo World Inc., Duo Software won a ‘Merit Award’ at the Asia Pacific ICT Alliance (APICTA) Awards, held in December 2016 in Taipei, just months after winning ‘Gold’ and ‘Merit’ Awards at the National Best Quality Software Awards (NBQSA) for the new products.development projects.
For the three months ended December 31, 20172019 and December 31, 2016,2018, the Company had the following concentrations of revenues with customers:
| Customer | December 31, 2017 | December 31, 2016 | December 31, 2019 | December 31, 2018 | ||||||||||||
| A | 42.91 | % | 40.68 | % | 75.50 | % | 81.00 | % | ||||||||
| B | 19.61 | % | 0 | % | 13.31 | % | 1.57 | % | ||||||||
| C | 0 | % | 41.95 | % | 1.89 | % | 2.30 | % | ||||||||
| D | 7.85 | % | 5.02 | % | 1.37 | % | 6.66 | % | ||||||||
| Other misc. customers | 29.63 | % | 12.35 | % | 7.93 | % | 8.47 | % | ||||||||
| 100 | % | 100 | % | 100 | % | 100 | % | |||||||||
The total cost of sales amounted to $76,039$57,278 and $84,575$57,658 for the three months ended December 31, 20172019 and December 31, 2016,2018, respectively. The following table sets forth the Company’s cost of sales breakdown for both periods:
December 31, 2019 | December 31, 2018 | Change | ||||||||||
| Purchases- hosted servers | $ | 3,705 | $ | 4,661 | $ | (956 | ) | |||||
| Implementation and onsite support cost | 15,079 | 12,612 | 2,467 | |||||||||
| Product development cost written off | 23,055 | 18,754 | 4,301 | |||||||||
| Consultancy, contract basis employee cost | - | 898 | (898 | ) | ||||||||
| Support services | 15,194 | 18,183 | (2,989 | ) | ||||||||
| Other external services | 246 | 2,550 | (2,304 | ) | ||||||||
| Total cost of sales | $ | 57,278 | $ | 57,658 | $ | (380 | ) | |||||
| 6 |
| December 31, 2017 | December 31, 2016 | Change | ||||||||||
| �� | ||||||||||||
| Purchases | $ | 14,909 | $ | 12,041 | $ | 2,868 | ||||||
| Implementation and onsite support cost | 4,935 | 9,541 | (4,607 | ) | ||||||||
| Product development cost written off | 28,730 | 38,105 | (9,375 | ) | ||||||||
| Support services | 15,539 | 11,138 | 4,401 | |||||||||
| Other external services | 3,344 | 7,982 | (4,637 | ) | ||||||||
| Cost of development services | 8,582 | 5,768 | 2,814 | |||||||||
| Total cost of sales | $ | 76,039 | $ | 84,575 | $ | (8,536 | ) | |||||
Cost of sales marginally decreased by $8,536 (10%) in the three months ended December 31, 2017 when compared to the three months ended December 31, 2016. Reduction in product development cost written off, implementation and onsite support cost and other external services were the main contributors to the decrease in cost of sales.
The gross income for the three months ended December 31, 20172019 and December 31, 20162018 amounted to $124,872$119,790 and $197,810, respectively.$92,541, respectively, recording an increase of $27,249.
The total operating expenditure amounted to $736,371$121,620 and $324,718$271,946 for the three months ended December 31, 20172019 and December 31, 2016,2018, respectively. Operating expenditure declined by 55% during the three months ended December 31, 2019 when compared to the operating expenditure of the same period in 2018. The following table sets forth the Company’s operating expenditure analysis for both periods:
| December 31, 2017 | December 31, 2016 | Changes | December 31, 2019 | December 31, 2018 | Change | |||||||||||||||||||
| Research and development | $ | - | $ | 10,461 | $ | (10,461 | ) | |||||||||||||||||
| General and administrative | 134,035 | 146,287 | (12,252 | ) | $ | 80,943 | $ | 82,579 | $ | (1,636 | ) | |||||||||||||
| Salaries and casual wages | 91,077 | 113,514 | (22,437 | ) | 28,834 | 53,392 | (24,558 | ) | ||||||||||||||||
| Selling and distribution | 3,527 | 5,937 | (2,410 | ) | 1,829 | 9,238 | (7,409 | ) | ||||||||||||||||
| Professional services- Investment advisory | 438,598 | - | 438,598 | |||||||||||||||||||||
| Depreciation | 5,553 | 7,725 | (2,172 | ) | 4,169 | 4,796 | (627 | ) | ||||||||||||||||
| Amortization of web site development | 383 | 438 | (55 | ) | 476 | 432 | 44 | |||||||||||||||||
| Allowance for bad debts | 63,198 | 40,356 | 22,842 | 5,369 | 121,509 | (116,140 | ) | |||||||||||||||||
| Total operating expenses | $ | 736,371 | $ | 324,718 | $ | 411,653 | ||||||||||||||||||
| $ | 121,620 | $ | 271,946 | $ | (150,326 | ) | ||||||||||||||||||
Following are the main reasons for the variances in operating expenses of the Company:
Research and Development
The Company has not incurred research and development cost during the three months ended December 31, 2017, as all of our products have passed through the research and development phase. Whereas during the three months ended December 31, 2016, the Company incurred $10,461 as research and development expense.
General and Administrative Cost
During the three months ended December 31, 2017,2019, general and administrative cost marginally declined by $12,252 (8%)2% when compared to the same period in 2016, mainly due to reduction in dispensable expenses.2018.
| 7 |
Salaries and benefits
Salaries and benefits decreased by 20%$24,558 during the three months ended December 31, 20172019 as there was a reduction in the total number of staff when compared to the same period in 2016. The Company moved toward2018. Duo’s move towards outsourcing of non-core activities and thisshifting towards contract employment lead to a general decrease in the number of permanent staff.staff, and increase in the overall efficiency in the operations of the company.
Selling and distribution
DuringMarketing expenses decreased during the period ended December 31, 2017,2019 when compared to the same period in 2018. The reduction is due to decease in initial marketing expenses marginally decreased as the Company only marketed one product (FaceTone) and that too only in Sri Lanka, as a test market before the product is marketed in other countries
Professional services – Investment advisory
Company incurred a cost of $438,598 for the three months ended December 31, 2017, 60% of the total operating cost on account of agreement signed in July 2017, for investment advisory services. Below table illustrates the impact of Professional services- Investment advisory on the total operating expenditure for the three months ended December 31, 2017 and 2016.
| December 31, 2017 | December 31, 2016 | |||||||
| Professional services- Investment advisory | $ | 438,598 | $ | - | ||||
| Business operating expenses | 297,773 | 324,718 | ||||||
| Total operating expenses | $ | 736,371 | $ | 324,718 | ||||
Smoothflow product.
Depreciation and Amortization expense
Depreciation and amortization expense had decreased by 27%recorded a slight decrease of $627 during the three months ended December 31, 2017,2019, when compared to the three months ended December 31, 2016.2018.
Allowance for bad debts
During the three months ended December 31, 2017,2019, the Company made a provision for bad debts amountingprovision decreased by $116,140 when compared to $63,198.the same period in December 2018.
The reduction in overheads amounting to $150,326 made by the Company during the three months ended December 31, 2019 led to a significant decrease of $177,576 in loss from operations, when compared to the operations loss recorded in December 31, 2018. Losses from operations were $1,830 and $179,406 for the three months ended December 31, 20172019 and December 31, 2016 amounted to $611,499 and $126,908,2018, respectively.
The Company’s other income and (expense) for the three months ended December 31, 20172019 and December 31, 20162018 amounted to $(14,732)$(32,245) and $6,643,$(72,471), respectively. The following table sets forth the Company’s other income and (expense) analysis for both periods:
December 31, 2019 | December 31, 2018 | Changes | ||||||||||
| Other income | $ | 56 | $ | 38 | $ | 18 | ||||||
| Gain on disposals of property and equipment | 380 | - | 380 | |||||||||
| Bank charges | (680 | ) | (709 | ) | 29 | |||||||
| Exchange gain / (loss) | 12,225 | (13,372 | ) | 25,597 | ||||||||
| Interest expense | (44,226 | ) | (58,428 | ) | 14,201 | |||||||
| Total other expenses | $ | (32,245 | ) | $ | (72,471 | ) | $ | 40,226 | ||||
| December 31, 2017 | December 31, 2016 | Changes | ||||||||||
| Interest expense | $ | (19,250 | ) | $ | (7,409 | ) | $ | (11,841 | ) | |||
| Gain on disposals of property and equipment | 51 | - | 51 | |||||||||
| Other income | 2,514 | 28 | 2,486 | |||||||||
| Bank charges | (932 | ) | (1,005 | ) | 73 | |||||||
| Exchange gain | 2,885 | 15,029 | (12,144 | ) | ||||||||
| Total operating expenses | $ | (14,732 | ) | $ | 6,643 | $ | (21,375 | ) | ||||
| 8 |
Other expenditures increaseddecreased by $ 21,37556% in the three months ended December 31, 2017,2019, when compared to the three months ended December 31, 2016.2018. The main reason for this increase was the increasedecrease in interest costexchange loss and reduction in exchange gain.interest expense.
The loss before provision for income taxes for the three months ended December 31, 20172019 and December 31, 20162018 amounted to $626,231$34,075 and $120,265,$251,876, respectively.
The net loss for the three months ended December 31, 20172019 and December 31, 20162018 amounted to $626,231$46,252 and $120,265$263,738, respectively.
The Company’s comprehensive loss for the three months ended December 31, 20172019 and December 31, 20162018 amounted to $641,232$71,263 and $78,031,$128,120, respectively.
| Comprehensive Income / (Loss): | December 31, 2017 | December 31, 2016 | December 31, 2019 | December 31, 2018 | ||||||||||||
| (Loss) / gain on foreign currency translation | $ | (15,001 | ) | $ | 42,234 | $ | (25,011) | $ | 135,617 | |||||||
| Net loss | (626,231 | ) | (120,265 | ) | (46,252 | ) | (263,738 | ) | ||||||||
| Comprehensive loss | $ | (641,232 | ) | $ | (78,031 | ) | $ | (71,263 | ) | $ | (128,120 | ) | ||||
At December 31, 20172019 and March 31, 2017,2019, the Company had 44,750,65467,754,296 and 38,567,46765,754,296 common shares issued and outstanding, respectively. The weighted average number of shares for the three months ended December 31, 20172019 and, December 31, 20162018 was 41,595,86367,689,079 and 38,567,467,65,738,320, respectively. The loss per share for both periods was $(0.02)$(0.00) per share and $(0.00) per share, respectively.
D. Results of operations for the nine months ended December 31, 2019 and December 31, 2018:
The Company had revenues amounting to $582,049$561,165 and $923,501,$479,080, respectively, for the nine months ended December 31, 20172019 and December 31, 2016.2018. Following is a breakdown of revenues for both periods:
| December 31, 2017 | December 31, 2016 | Changes | ||||||||||
| DuoSubscribe | $ | 375,794 | $ | 753,245 | $ | (377,451 | ) | |||||
| FaceTone | 150,348 | 7,968 | 142,380 | |||||||||
| DuoCLM | - | 144,966 | (144,966 | ) | ||||||||
| Software hosting and reselling - FaceTone | 12,248 | 7,392 | 5,035 | |||||||||
| Development services | 43,479 | 9,930 | 33,549 | |||||||||
| $ | 582,049 | $ | 923,501 | $ | (341,453 | ) | ||||||
December 31, 2019 | December 31, 2018 | Change | ||||||||||
| DuoSubscribe | $ | 450,779 | $ | 362,921 | $ | 87,858 | ||||||
| Facetone | 92,174 | 99,407 | (7,233 | ) | ||||||||
| Software hosting and reselling | 15,631 | 16,609 | (978 | ) | ||||||||
| Smooth Flow | 2,581 | - | 2,581 | |||||||||
| Development services | - | 143 | (144 | ) | ||||||||
| $ | 561,165 | $ | 479,080 | $ | 82,085 | |||||||
| 9 |
Total revenue for the nine months ended December 31, 2017 has decreased2019 increased by 37%17% when compared to nine months ended December 31, 2016.2018. This decreaseincrease is mainly due to the reductiongain in revenue generated by DuoSubscribe and DuoCLM as the company stopped marketing the two legacy software products.
FaceTone, the advanced version of DuoCLM, has already attracted the potential market due to its unique features and flexibility. It is evidenced by the increase of revenue generated by FaceTone by $142,380 during the nine months ended December 31, 2017 when compared to the same period ended December 31, 2016.
During the nine months ended December 31, 2017, the Company managed to attract a number of high profile customers and entered into software license agreements with three major customers to implement FaceTone, including one of the largest and most diversified conglomerate, a leading commercial bank and the largest private telecommunication and mobile network provider in Sri Lanka. In addition, most of the other potential customers are at agreement finalization stage, and revenue would be recognized in the subsequent quarters.Smoothflow.
For the nine months ended December 31, 20172019 and December 31, 2016,2018, the Company had the following concentrations of revenues with customers:
| Customer | December 31, 2017 | December 31, 2016 | ||||||
| A | 47.57 | % | 30.08 | % | ||||
| B | 11.00 | % | 0 | % | ||||
| C | 8.13 | % | 7.04 | % | ||||
| D | 7.47 | % | 1.08 | % | ||||
| E | 0 | % | 38.51 | % | ||||
| Other misc. customers | 25.83 | % | 23.29 | % | ||||
| 100 | % | 100 | % | |||||
| Customer | December 31, 2019 | December 31, 2018 | ||||||
| A | 74.78 | % | 65.00 | % | ||||
| B | 7.65 | % | 15.16 | % | ||||
| C | 6.37 | % | 1.50 | % | ||||
| D | 3.35 | % | 6.80 | % | ||||
| Other misc. customers | 7.85 | % | 11.54 | % | ||||
| 100.00 | % | 100.00 | % | |||||
The total cost of sales amounted to $237,708$205,369 and $226,897$185,101 for the nine months ended December 31, 20172019 and 2016,2018, respectively. The following table sets forth the Company’s cost of sales breakdown for both periods:
| December 31, 2017 | December 31, 2016 | Change | December 31, 2019 | December 31, 2018 | Change | |||||||||||||||||||
| Product development cost written off | $ | 75,368 | $ | 58,783 | $ | 16,585 | ||||||||||||||||||
| Support services | 65,980 | 60,674 | 5,306 | |||||||||||||||||||||
| Implementation cost | 48,486 | 36,202 | 12,284 | |||||||||||||||||||||
| Purchases | 11,800 | 20,517 | (8,717 | ) | ||||||||||||||||||||
| Consultancy, contract basis employee cost | 2,720 | 898 | 1,822 | |||||||||||||||||||||
| Other external services | 1,015 | 5,495 | (4,480 | ) | ||||||||||||||||||||
| Development services | - | 2,532 | (2,532 | ) | ||||||||||||||||||||
| $ | 205,369 | $ | 185,101 | $ | 20,268 | |||||||||||||||||||
| Purchases | $ | 38,087 | $ | 31,737 | $ | 6,350 | ||||||||||||||||||
| Implementation and onsite support cost | 20,510 | 32,445 | (11,935 | ) | ||||||||||||||||||||
| Product development cost written off | 84,844 | 108,101 | (23,257 | ) | ||||||||||||||||||||
| Consultancy, contract basis employee cost | 7,468 | 19,007 | (11,539 | ) | ||||||||||||||||||||
| Support services | 50,262 | 21,859 | 28,403 | |||||||||||||||||||||
| Development services | 29,943 | 5,767 | 24,176 | |||||||||||||||||||||
| Other external services | 6,594 | 7,981 | (1,387 | ) | ||||||||||||||||||||
| Total cost of sales | $ | 237,708 | $ | 226,897 | $ | 10,811 | ||||||||||||||||||
Cost of sales marginally increased by $10,81111% during the nine months ended December 31, 20172019 when compared to the nine months ended December 31, 2016. Cost of support services and the increase in the cost of development services were the main contributors2018. Increase is due to the increase in product development cost of sales.written off and implementation and onsite support cost.
The gross income for the nine months ended December 31, 20172019 and 20162018 amounted to $344,341$355,796 and $696,604,$293,979, respectively.
The total operating expenditures amounted to $1,776,060$407,219 and $1,168,530$1,296,038 for the nine months ended December 31, 20172019 and 2016,2018, respectively. The following table sets forth the Company’s operating expenditure analysis for both periods:periods
| December 31, 2017 | December 31, 2016 | Change | December 31, 2019 | December 31, 2018 | Change | |||||||||||||||||||
| Research and development | $ | - | $ | 30,088 | $ | (30,088 | ) | |||||||||||||||||
| General and administrative | 458,860 | 660,512 | (201,652 | ) | $ | 260,831 | $ | 276,421 | $ | (15,590 | ) | |||||||||||||
| Salaries and benefits | 269,082 | 322,374 | (53,292 | ) | ||||||||||||||||||||
| Salaries and casual wages | 97,271 | 198,319 | (101,048 | ) | ||||||||||||||||||||
| Selling and distribution | 9,410 | 12,567 | (3,157 | ) | 9,604 | 14,807 | (5,203 | ) | ||||||||||||||||
| Professional services - Investment advisory | 877,195 | - | 877,195 | |||||||||||||||||||||
| Professional services - investment advisory | - | 438,598 | (438,598 | ) | ||||||||||||||||||||
| Depreciation | 18,932 | 56,149 | (37,217 | ) | 13,129 | 17,227 | (4,098 | ) | ||||||||||||||||
| Amortization of web site development | 1,146 | 1,664 | (518 | ) | 1,443 | 1,317 | 126 | |||||||||||||||||
| Allowance for bad debts | 141,435 | 85,176 | 56,259 | 24,941 | 299,350 | (274,409 | ) | |||||||||||||||||
| Total operating expenses | $ | 1,776,060 | $ | 1,168,530 | $ | 607,530 | ||||||||||||||||||
| $ | 407,219 | $ | 1,246,038 | $ | (838,819 | ) | ||||||||||||||||||
| 10 |
Following are the main reasons for the variances in operating expenses of the Company:
Research and Development
The Company has not incurred research and development cost during the nine months ended December 31, 2017, as all of our products have passed through the research and development phase. Whereas during the nine months ended December 31, 2016, the Company incurred $30,088 as research and development expense.
General and Administrative Cost
The general and administrative expenditure has decreased by 31%6% in the nine months ended December 31, 20172019 when compared with nine months ended December 31, 2016.2018. The main reason for the decrease is due to the reductiondecrease in the professional fees paid to consultantsoffice rent and auditors for the purpose of filing Form S-1 Registration Statement, during the nine months ended December 31, 2016, when compared with the same period in 2017.vehicle allowances.
Salaries and benefits
Salaries and benefits decreased by 17%$101,048 during the nine months ended December 31, 20172019 as the total number of staff was reduced when compared to the same period in 2016.2018. The Company moved toward outsourcing of non-core activities and this lead to a general decrease in the number of permanent staff.
Selling and distribution
There is a decrease of 25% on account of expenditure incurred for35% in selling and distribution activities during the nine months ended December 31, 2017,2019, when compared with the nine months ended December 31, 2016. The company reduced marketing activities during the nine months ended December 31, 2017, as it is pooling all of the resources for the launch of the new products.2018
Professional services – Investment advisory
Company incurred a cost of $877,195$438,598 for the nine months ended December 31, 2017, 49% of the total operating cost2018 on account of agreement signed in July 2017, for investment advisory services. Below table illustrates the impactservices over a period of Professional services- Investment advisory on the total operating expenditure for the nine months ended December 31, 2017 and 2016.
| December 31, 2017 | December 31, 2016 | |||||||
| Professional services- Investment advisory | $ | 877,195 | $ | - | ||||
| Business operating expenses | 898,865 | 1,168,530 | ||||||
| Total operating expenses | $ | 1,776,060 | $ | 1,168,530 | ||||
one year.
Depreciation and amortization of web site development
Depreciation and amortization expense has decreased by 65%$3,972 during the nine months ended December 31, 2017,2019, when compared to the nine months ended December 31, 2016. Since April 01, 2016 the Company has changed its accounting policies on useful life of computer equipment and web site development cost and the effect on changing the accounting policies were reflected2018.
| 11 |
Allowance for bad debts
Allowance for bad debts decreased by $274,409 during the nine months ended December 31, 2016.
Allowance for bad debts
Allowance for bad debts increased by $56,258 during the nine months ended December 31, 20172019 when compared to the nine months ended December 31, 2016.2018.
The loss from operations for the nine months ended December 31, 20172019 and 20162018 amounted to $1,431,719$51,424 and $471,926,$952,059, respectively.
The Company’s other income and (expenses) for the nine months ended December 31, 20172019 and 20162018 amounted to $(48,873)$(152,790) and $3,344,$(196,110), respectively. The following table sets forth the Company’s other income and (expenses) analysis for both periods:
| December 31, 2017 | December 31, 2016 | Change | ||||||||||||||||||||||
December 31, 2019 | December 31, 2018 | Changes | ||||||||||||||||||||||
| Interest expense | $ | (55,407 | ) | $ | (17,885 | ) | $ | (37,522 | ) | $ | (132,135 | ) | $ | (157,944 | ) | $ | 25,810 | |||||||
| Gain on disposals of property and equipment | 83 | - | 83 | 573 | 14 | 560 | ||||||||||||||||||
| Write back expenses | 1,692 | 4,360 | (2,668 | ) | ||||||||||||||||||||
| Other income | 3,134 | 273 | 2,861 | 625 | 203 | 422 | ||||||||||||||||||
| Bank charges | (3,021 | ) | (2,733 | ) | (288 | ) | (3,146 | ) | (2,268 | ) | (877 | ) | ||||||||||||
| Exchange gain | 6,338 | 23,689 | (17,351 | ) | ||||||||||||||||||||
| Total other income (expenses) | $ | (48,873 | ) | $ | 3,344 | $ | (52,217 | ) | ||||||||||||||||
| Exchange (loss) / gain | (20,399 | ) | (40,475 | ) | 20,075 | |||||||||||||||||||
| $ | (152,790 | ) | $ | (196,110 | ) | $ | 43,321 | |||||||||||||||||
Other expenses increaseddecreased by $52,217,$43,321, during the nine months ended December 31, 2017,2019, when compared with the nine months ended December 31, 2016.2018. This increasedecrease was mainly due to the increasedecrease in interest expense and reduction in exchange gainloss during the nine months ended December 31, 2017.2019.
The loss before provision for income taxes for the nine months ended December 31, 20172019 and 20162018 amounted to $1,480,592$204,213 and $468,582,$1,148,169, respectively.
The net loss for the nine months ended December 31, 20172019 and 20162018 amounted to $1,480,592$244,876 and $468,582,$1,180,108, respectively.
The Company’s comprehensive loss for the nine months ended December 31, 20172019 and 20162018 amounted to $1,520,449$184,900 and $411,344,$889,418, respectively.
| Comprehensive Loss: | December 31, 2017 | December 31, 2016 | December 31, 2019 | December 31, 2018 | ||||||||||||
| Unrealized foreign currency translation (loss)\ gain | $ | (39,857 | ) | $ | 57,238 | $ | 59,976 | $ | 290,689 | |||||||
| Net loss | (1,480,592 | ) | (468,582 | ) | (244,876 | ) | (1,180,108 | ) | ||||||||
| Comprehensive loss | $ | (1,520,449 | ) | $ | (411,344 | ) | $ | (184,900 | ) | $ | (889,418 | ) | ||||
At December 31, 20172019 and March 31, 2017,2019, the Company had 44,750,65467,754,296 and 38,567,46765,754,296 common shares issued and outstanding, respectively. The weighted average number of shares for the nine months ended December 31, 201730, 2019 and December 31, 20162018 was 39,951,984 and 38,521,304,67,689,079and 65,738,321, respectively. The loss per share for both periods was $(0.04)$(0.00) per share and $(0.01)$(0.00) per share, respectively.
E.Financial condition as at December 31, 2019 and March 31, 2019:
Assets:
The Company reported total assets of $2,577,395$1,061,417 and $1,634,154$1,082,546 as at December 31, 20172019 and March 31, 2017,2019, respectively. 45%65% of these total assets include prepaid expensesintangible assets and other current assets, 27%16% of total assets comprise intangible assets and 22%are comprised of total assets include net accounts receivablesreceivable of the Company. Our property and equipment include office equipment, computer equipment (Data Processing Equipment), furniture and fittings, web site developments and improvement to lease- holdleasehold assets having a total net book value of $30,397$9,080 and $48,087$23,513 as at December 31, 20172019 and March 31, 2017,2019, respectively. We also had a deferred tax asset of $30,864Furthermore, our current assets as at March 31, 2017 which now totals $31,2022019 totaled $312,875 and as at December 31, 2017. Furthermore,2019, our current assets at March 31, 2017 totaled $974,304 and at December 31, 2017, thesewere $359,707. These current assets amounted to $1,813,726 comprised of cash of $20,748,$14,483, accounts receivable of $572,363,$172,076, prepaid and other current assets of $1,156,687$77,410 and accrued revenue of $63,928.$95,738.
Liabilities:
The Company had total liabilities of $3,655,986$4,429,349 and $3,050,987$4,365,577 as at December 31, 20172019 and March 31, 2017,2019, respectively. Long term liabilities include balances owed to related parties which are outstanding for more than 12 months. Our current liabilities at March 31, 20172019 totaled $1,882,121.$2,914,909. We have seen an increase of 31%7% in current liabilities amounting to $589,651,$94,313, making total current liabilities of $2,471,772$3,009,222 as at December 31, 2017.2019. These mainly include short term third party debt, payroll liabilities, payable to related parties, deferred revenue, taxes payable, accrued liabilities and our day to day operational creditors.
Stockholder’s Deficit:
At March 31, 2017,2019, the Company had stockholders´stockholders’ deficit of $1,416,833.$3,283,032. At December 31, 2017,2019, the Company had stockholders´stockholders’ deficit of $1,078,591,$3,367,932 which represents a decreasean increase of 24%2.6%.
The Company had 44,750,65467,754,296 and 38,567,46765,754,296 shares issued and outstanding at December 31, 20172019 and March 31, 2017,2019, respectively.
F. Liquidity and capital reserves:
The Company had loss from operations of $611,499$1,830 and $126,908$179,406 for the three months ended December 31, 2017,2019 and 20162018, respectively; a total other income (expense) amounting to $(14,732)$(32,275) and $6,643$(72,471) for the three months ended December 31, 20172019 and 2016,2018, respectively; and a net loss of $626,231$46,252 and $120,265$263,738 for the three months ended December 31, 20172019 and 2016,2018, respectively.
In summary, our cash flows for the threenine months ended December 31, 20172019 and December 31, 20162018 were as follows:
| December 31, 2017 | December 31, 2016 | December 31, 2019 | December 31, 2018 | |||||||||||||
| Net cash provided by operating activities | $ | 228,831 | $ | 118,678 | $ | (124,118 | ) | $ | (278,814 | ) | ||||||
| Net cash used in investing activities | (215,872 | ) | (305,019 | ) | (45,582 | ) | (149,068 | ) | ||||||||
| Net cash provided by financing activities | - | 76,804 | 100,000 | - | ||||||||||||
Since inception, we have financed our operations primarily through internally generated funds and the use of our lines of credit with several financial institutions. We had $20,748$14,483 in cash; net cash provided by operations of $228,831,$(124,118), for the nine months ended December 31, 2017;2019; working capital deficit of $658,046$2,649,515; and stockholders´stockholders’ deficit of $1,078,591$3,367,932 as of December 31, 2017.2019.
G. Milestones for next twelve months (2019-2020):
Our specific plan of operations and milestones through March 2019December 2020 are as follows:
| 1) | Product Development and Launch: |
| We intend to | |
| 2) | Expansion: |
| a) | Geographical Expansion | |
| We intend to | ||
| b) | Market Expansion | |
| Currently, we have clients in India, Indonesia, and Sri Lanka. | ||
| We intend to expand into new markets and regions with enhanced and new products. We hope to enter certain markets by way of appointing partners with the strategic fit to be able to promote the products in those markets in the more cost effective manner to the Company. | ||
| c) | Knowledge Capital, Learning and Innovation. | |
| Our greatest strength is our human capital. We have the ability to continue to innovate and set trends within the industries in which we operate, due to our ability to innovate and create value in our products. | ||
| Our management intends to: |
| ● | Continue to empower and create value for our human capital; | |
| ● | Encourage disruptive technologies; | |
| ● | Provide greater opportunities for knowledge sharing; and | |
| ● | Sponsor and motivate learning and adoption of new technologies. |
| d) | Infrastructure | |
| We plan to increase our infrastructure in order to: |
| ● | Facilitate the increase in software development teams supporting R&D and | |
| ● | Expand our | |
| e) | Financial Performance | |
| We intend to provide value for all our shareholders by: |
| ● | ||
| ● | ||
| ● | Raising capital and | |
| ● | Capitalizing and maximizing on the high growth opportunities in the market; and | |
| ● | Providing | |
|
| f) | Corporate Social Responsibility | |
| Our wholly-owned subsidiary, Duo Software (Pvt.) Ltd., was Asia’s first software development company to be certified Carbon Neutral in 2011. | ||
| We intend to be environmentally friendly, and continue with the carbon foot print audit and Carbon Neutral Certification |
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934) were effective.
Changes in internal control over financial reporting
There were no changes in our internal control over financial reporting during our last fiscal quarter that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
We are not involved in any legal proceedings.
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On December 19, 2017, 363,400 shares of our Series “A” Preferred Stock were converted into 3,634,000 shares of common stock at par at a conversion ratio of one preferred share for ten shares of common stock.None
In December 2017, the Board of Directors approved the “Duo World, Inc. 2017 Employee Stock Ownership Plan” and reserved an aggregate of 9,611,665 shares of common stock for issuance thereunder.
On January 2, 2018, the Company awarded 6,542,500 shares of common stock to various employees, including 1,750,000 shares of common stock to two of the Company’s executive officers, to wit: 1,500,000 shares to Suzannah Jennifer Samuel Perera, Chief Finance Officer, and 250,000 shares to Mahmud Riad Ameen, Legal Director. The aggregate value of the 6,542,500 shares awarded was $3,042,262.50 in non-cash compensation. These shares have yet to be issued in certificate or electronic format, which is in process of occurring. These 6,542,500 shares of common stock are included in the total issued and outstanding shares on the cover of this report.
On January 12, 2018, 136,600 shares of our Series “A” Preferred Stock were converted into 1,366,000 shares of common stock at par at a conversion ratio of one preferred share for ten shares of common stock.
The above shares awarded were issued in reliance on the exclusion from the registration requirements of the Securities Act of 1933, as amended, provided by Regulation S promulgated thereunder and/or on the exemption from registration afforded by Section 4.(a)(2) of the Securities Act of 1933, as amended.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
None.
See Exhibit Index below for exhibits required by Item 601 of regulation S-K.
EXHIBIT INDEX
| Exhibit No. | Description |
List of Exhibits attached or incorporated by reference pursuant to Item 601 of Regulation S-K:
* Filed herewith.
Pursuant to the requirements of Section 13 or 15(d) 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.
| DUO WORLD, INC. | |
Date: February | /s/ Muhunthan Canagasooryam |
| Muhunthan Canagasooryam | |
| President and Chief Executive Officer | |
(Principal Executive Officer) | |
Date: February | /s/ Suzannah Jennifer Samuel Perera |
| Suzannah Jennifer Samuel Perera | |
| Chief Financial Officer | |
| (Principal Accounting and Financial Officer) |