10-Q 1 form10-q.htm

 

 

 

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 September 30, 2018

 

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 06, 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

 

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]

 

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 November 8, 2018, there were 65,738,320 outstanding shares of the Registrant’s Common Stock, $.001 par value.

 

 

 

 
 

 

INDEX

 

  Page
PART I – FINANCIAL INFORMATION F-1
   
Item 1. Financial Statements. F-1
   
Notes to Financial Statements (Unaudited) F-6
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 3
   
Item 3. Quantitative and Qualitative Disclosures about Market Risk 16
   
Item 4. Controls and Procedures 16
   
PART II – OTHER INFORMATION 16
   
Item 1. Legal Proceedings. 16
   
Item 1A. Risk Factors 16
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 17
   
Item 3. Defaults Upon Senior Securities 17
   
Item 4. Mine Safety Disclosure 17
   
Item 5. Other Information. 17
   
Item 6. Exhibits 17
   
SIGNATURES 18

 

 2 
 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

Duo World, Inc. and Subsidiaries

Consolidated Financial Statements

September 30, 2018

(Unaudited)

 

 F-1 
 

 

CONTENTS

 

  Page(s)
   
Consolidated Balance Sheets - September 30, 2018 (unaudited) and March 31, 2018 F-3
   
Consolidated Statements of Operations and Comprehensive Income / (Loss) for the three and six months ended September 30, 2018 and September 30, 2017 (unaudited) F-4
   
Consolidated Statements of Cash Flows for September 30, 2018 and September 30, 2017 (unaudited) F-5
   
Notes to the Consolidated Financial Statements (unaudited) F-6 – F-21

 

 F-2 
 

 

Duo World, Inc. and Subsidiaries

Consolidated Balance Sheets

 

  September 30, 2018   March 31, 2018 
   (Unaudited)   (Audited) 
ASSETS        
Current Assets          
Cash and cash equivalents  $18,035   $25,798 
Accounts receivable – trade   295,311    369,232 
Prepaid expenses and other current assets   77,893    523,000 
Accrued Revenue   98,189    148,714 
Total Current Assets   489,428    1,066,744 
           
Non Current Assets          
Property and equipment, net of accumulated depreciation of $227,939 and $255,654 respectively   32,312    43,494 
Intangible assets, net   746,012    732,939 
Total Non Current Assets   778,324    776,433 
           
Total Assets  $1,267,752   $1,843,177 
           
LIABILITIES and SHAREHOLDERS’ DEFICIT          
           
Current Liabilities          
Accounts Payable  $417,902   $367,620 
Payroll, employee benefits, severance   575,702    458,717 
Short Term Borrowings   590,705    690,139 
Due to related parties   643,460    524,955 
Payable for acquisition   185,762    185,762 
Taxes payable   135,146    126,716 
Accruals and other payables   161,550    131,550 
Lease creditors   12,187    9,696 
Deferred Revenue   9,715      
Total Current liabilities   2,732,129    2,495,155 
           
Long Term Liabilities          
Due to related parties   1,346,337    1,348,193 
Lease creditors   3,962    10,129 
Employee Benefit Obligation   119,475    154,032 
Total Long Term liabilities   1,469,774    1,512,354 
           
Total liabilities  $4,201,903   $4,007,509 
           
Commitments and contingencies (Note xx)          
           
Shareholders’ Deficit          
Ordinary shares: $0.001 par value per share; 400,000,000 shares authorized; 65,738,320 and 52,590,654 shares issued and outstanding, respectively  $65,738   $52,591 
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   11,539,358    5,767,533 
Accumulated deficit   (14,769,300)   (8,059,437)
Accumulated other comprehensive income   225,053    69,981 
Total shareholders’ deficit   (2,934,151)   (2,164,333)
           
Total Liabilities and Shareholders´ Deficit  $1,267,752   $1,843,177 

 

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 six months ended, 
   September 30, 2018   September 30, 2017   September 30, 2018   September 30, 2017 
Revenue  $179,678    170,326   $328,881    381,138 
Cost of revenue (exclusive of depreciation presented below)   (65,622)   (74,919)   (127,442)   (161,669)
Gross Income   114,056    95,407    201,439    219,469 
Operating Expenses                    
General and Administrative   102,679    165,771    213,919    303,842 
Salaries and casual wages   66,716    104,239    144,926    198,988 
Selling and distribution   2,885    2,828    5,568    5,883 
Professional services - Investment advisory   -    438,598    438,598    438,598 
Depreciation   5,493    6,288    12,431    13,379 
Amortization of Web Site Development   440    383    886    764 
Allowance for bad debts   77,279    47,635    177,841    78,237 
Total operating expenses   255,492    765,742    994,169    1,039,690 
                     
Loss from operations  $(141,436)   (670,335)  $(792,730)   (820,222)
                     
Other income (expenses):                    
Interest expense  $(45,578)   (18,305)  $(99,516)   (36,156)
Gain on disposals of property and equipment   14    -    14    32 
Other income   4,259    18    4,524    620 
Bank charges   (829)   (1,095)   (1,559)   (2,089)
Exchange (loss) / gain   (23,018)   (2,771)   (27,103)   3,453 
Total other income (expenses)   (65,152)   (22,153)   (123,640)   (34,140)
                     
Loss before provision for income taxes:  $(206,588)   (692,488)  $(916,370)   (854,361)
Provision for income taxes   -    -    -    - 
Net loss  $(206,588)   (692,488)  $(916,370)   (854,361)
                     
Basic and Diluted Loss per Share  $(0.00)   (0.01)  $(0.01)   (0.01)
                     
Basic and Diluted Weighted Average Number                    
 of Shares Outstanding   115,738,320    89,682,783    111,283,919    89,128,172 
Comprehensive Income (Loss):                    
Unrealized foreign currency translation (loss) gain  $116,293    (18,895)  $155,072    (24,856)
Net loss   (206,588)   (692,488)   (916,370)   (854,361)
Comprehensive loss  $(90,295)   (711,383)  $(761,298)   (879,217)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 F-4 
 

 

Duo World, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

 

   For the six months ended, 
   September 30, 2018   September 30, 2017 
Operating activities:          
Loss before provision for income taxes  $(916,370)  $(854,361)
           
Adjustments to reconcile loss before provision for income taxes          
to cash provided by operating activities:          
           
Depreciation and amortization   13,316    14,143 
Bad debts   177,841    78,237 
Gain on disposals of property and equipment   (14)   (32)
Previous period adjustments   (8,520)   - 
Stock issued for services   -    1,858,690 
Product development cost written off   41,080    56,114 
           
Changes in assets and liabilities:          
           
Accounts receivable – trade   (103,920)   (42,155)
Prepayments   495,632    (1,304,458)
Deferred taxes   -    268 
Accounts Payable   50,282    44,331 
Payroll, employee benefits, severance   116,985    111,113 
Short term overdraft   (99,434)   27,418 
Due to related parties   118,506    210,263 
Taxes payable   8,430    19,881 
Lease Creditor   (3,677)   - 
Retirement Benefit   (34,557)   - 
Accruals and other payables   39,715    (71,607)
   $(104,704)  $147,845 
           
Investing activities:          
           
Acquisition of Property and Equipment   (886)   (629)
Sale proceeds of disposal of Property and Equipment   -    282 
Intangible assets   (113,945)   (139,020)
Net cash used in investing activities  $(114,831)  $(139,367)
           
Financing activities:          
           
Net cash provided by financing activities  $-   $- 
Effect of exchange rate changes on cash   211,773    (10,563)
           
Net decrease in cash  $(7,763)  $(2,085)
Cash, beginning of period   25,798    25,084 
Cash, end of period  $18,035   $22,999 
           
Supplemental disclosure of cash flow information:          
           
Cash paid for interest  $(94,722)  $(36,156)
Cash paid for income taxes  $-   $- 
           
Supplemental disclosure of non-cash investing and financing activities:          
           
Common shares issued for services received  $-   $1,858,690 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 F-5 
 

 

Duo World Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

September 30, 2018

(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. Duo Software (Pvt.) Limited (hereinafter referred to as “DSSL” or “Predecessor”), a company based in Sri Lanka, 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.

 

On December 3, 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 customer service experience and life cycle management industry. The Company’s applications (“Duo Subscribe,” “Facetone,” and “Smoothflow”) provide solutions in the space of Subscriber management and billing, Customer Life Cycle Management, and Work Flow & Customer Service.

 

Note 2 - Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and 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.

 

The unaudited interim 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, 2018. The interim results for the period ended September 30, 2018 are not necessarily indicative of results for the full fiscal year.

 

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 $206,588 and $916,370 for the three and six months ended September 30, 2018 respectively, net cash provided by operations of $(104,704) and $147,845 in six months ended September 30, 2018 and 2017 respectively, a working capital deficit of $2,242,701 and $1,428,411 as of September 30, 2018 and March 31, 2018 respectively, outstanding statutory dues towards employee provident fund and employee trust fund of $407,535 and $388,630 as of September 30, 2018 and March 31, 2018 respectively and a stockholders´ deficit of $2,934,151 and $2,164,333 as of September 30, 2018 and March 31.2018 respectively.

 

 F-6 
 

 

Furthermore, the Company has entered into significant contracts with the clients for the products launched, and the management is confident that these projects shall generate sufficient revenues to offset the operating losses in the recent future.

 

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 Pte. 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 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 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 understated contract terms.

 

 F-7 
 

 

Provisions

 

A provision is recognized when the company has present obligations because of past event, 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.

 

Accounts Receivable and Provision for Doubtful Accounts

 

The Company recognizes accounts receivable in connection with the products sold and services provided and have strong policies and procedures for the collection 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   100%
Over 18 months   50%
Over 15 months   25%
Over 12 months   10%
Over 9 months   5%

 

Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. As of September 30, 2018 and March 31, 2018, 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 translated into United States Dollars ($) and/or USD as the reporting currency. All assets and liabilities denominated in foreign functional currencies are translated into U.S. dollars at the closing exchange rate on the balance sheet date and equity balances are translated at historical rates. Revenues, costs and expenses in foreign functional currencies are translated at the average rate of exchange during the period. Translation 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) as other income (expense).

 

 F-8 
 

 

Property 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 & Fittings 5 years
Improvements to lease hold assets Lease term
Office equipment 5 years
Computer equipment (Data Processing Equipment) 3 years
Website development 4 years

 

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 to 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.

 

 F-9 
 

 

 

Post Retirement Benefit Plan

 

The company has gratuity as it 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

 

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 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 the amount that reflect the consideration to which the company expected to be entitled in exchange for those goods and services.

 

Following five steps are followed in recognizing revenue from contracts:

 

Identify the Contract(s), with a customer;
   
Identify the performance obligation of the contract;
   
Determine the transaction price;
   
Allocate the transaction price to the performance obligations in the contract and;
   
Recognize revenue when or as the company satisfies a performance obligation.

 

One of the revenue models adopted by the Company is that, it licenses its products on a 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. The products offered on this basis are “Duo Subscribe” and “Facetone-enterprise.” Duo sells its software license along with software implementation and annual maintenance services under an agreement with various clients. The Company raises invoice on key milestone basis, as defined in the agreement and recognizes revenue after satisfying the performance obligations. Revenues from consulting and training services are typically recognized as the services are performed.

 

 F-10 
 

 

The Company offers annual maintenance programs on its licenses that provide for technical support and updates to the Company’s software products. Initial Annual Maintenance fees are bundled with license fees in the initial licensing period and recognized when the performance obligation of license fee is met. However, subsequent renewals of annual maintenance are charged separately for renewals. 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.

 

During 2018, Duo also commenced distribution of its software product ‘Facetone-hosted version” with third part telecommunication companies. It’s a revenue model where the Tele-communication provider hosts Duo’s software applications and makes them available to its customers over the Internet for a monthly subscription fee.

 

For the three months ended September 30, 2018 and 2017, the Company received only cash as consideration for sale of licenses and related services and not in kind.

 

For the six months ended September 30, 2018 and 2017, the Company had the following concentrations of revenues with customers:

 

Customer   September 30, 2018     September 30, 2017  
             
A     58.92 %     50.03 %
B     20.36 %     0.00 %
C     6.86 %     3.30 %
D     3.81 %     3.20 %
E     0.53 %     14.29 %
F     2.71 %     8.28 %
G     0.00 %     7.98 %
H     0.55 %     4.70 %
I     1.80 %     2.18 %
Other misc. customers     4.46 %     6.04 %
      100.00 %     100.00 %

 

For the six months ended September 30, 2018 and 2017, the company had following sales by products:

 

Product  30-Sep-18   30-Sep-17 
         
DuoSubscribe  $224,583   $254,325 
Facetone   92,596    89,668 
Software hosting and reselling   11,558    6,730 
Development services   144    30,415 
   $328,881   $381,138 

 

 F-11 
 

 

Significant Judgments

 

The company’s contract with customers includes multiple Software products and services to deliver and in the most of the contract 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 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. 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 deferred revenue and accrued revenue/ unbilled accounts receivables recognized by the Company. Revenue under Software Implementation contracts are invoices 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). Company invoice 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 company recognize as Deferred revenue in the financial statements.

 

For the six months ended September 30, 2018 Company recognized $75,602 revenue from a contract with customer as the performance obligations are completed, and has a contract balance of $101,881 from the same customer as at September 30, 2018. Company is waiting for the customer confirmation to deliver the balance product and services.

 

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 March 31, 2018, there were no deferred revenue recognized and as at September 30, 2018, deferred revenue recognized was $9,715.

 

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 September 30, 2018 and March 31, 2018 unbilled/accrued revenues were $98,189 and $148,714 respectively.

 

Company has no contract liabilities and asset recognized for cost to fulfill a requirement of a customer as at September 30, 2018.

 

 F-12 
 

 

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 aggregate cost related to the software implementations, including support and consulting services pertaining to the revenue recognized during the reporting period, is recognized as Cost of 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 candidate; 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 six months ended September 30, 2018 and 2017, product research and development cost of $113,945 and $139,020, respectively, were capitalized as “Intangible assets”.

 

Advertising Costs

 

The Company expenses advertising costs as incurred. No advertising expenses were incurred during the six months ended September 30, 2018 and 2017.

 

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.

 

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, 2015 through September 30, 2018, includes only foreign currency translation gains (losses), and is presented in the Company’s consolidated statements of comprehensive income.

 

 F-13 
 

 

Changes in Accumulated Other Comprehensive Income (Loss) by Component during the periods ending on September 30, 2018 and March 31, 2018 were as follows:

 

Foreign Currency Translation gains (losses)    
     
Balance, March 31, 2018  $69,981 
Translation rate gain (loss)   38,779 
Balance, June 30, 2018  $108,760 
Translation rate gain (loss)   116,293 
Balance, September 30, 2018  $225,053 

 

Recent Accounting Pronouncements

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers: Topic 606 and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, May 2016, September 2017 and November 2017 within ASU 2015-04, ASU 2016-08, ASU 2016-10 and ASU 2016-12, ASU 2017-13 and ASU 2017-14, respectively (collectively, Topic 606). Topic 606 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers and will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. Topic 606 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates will be required within the revenue recognition process than are required under current GAAP (Accounting Standards Codification 605). Topic 606 is effective for the Company’s annual and interim reporting periods beginning January 1, 2018 (“effective date”).

 

The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). The Company adopted the new standard effective January 1, 2018 using the modified retrospective method.

 

The Company has adopted implementation of ASC 606 with effect from April 1, 2018 as a result of it $0.21 million impact which was provided as at March 31, 2018 has been reversed.

 

Note 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 and DSS and of the consolidated entities from the date of recapitalization and subsequent.

 

 F-14 
 

 

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.

 

Note 4 – Accounts Receivable

 

Following is a summary of accounts receivable as at September 30, 2018 and March 31, 2018;

 

   September 30, 2018   March 31, 2018 
Accounts receivable – Trade  $657,142   $576,775 
Less: Provision for doubtful debts   (361,831)   (207,543)
   $295,311   $369,232 

 

At September 30, 2018 and March 31, 2018, the Company had following concentrations of accounts receivable with customers:

 

Customer   September 30, 2018     March 31, 2018  
A     20.19 %     56.37 %
B     20.91 %     14.83 %
C     8.58 %     7.85 %
D     22.30 %     0.00 %
E     4.51 %     1.86 %
F     11.95 %     5.04 %
G     5.03 %     4.61 %
H      3.21 %     3.39 %
Other receivables     3.32 %     6.05 %
      100.00 %     100.00 %

 

 F-15 
 

 

Note 5 – Prepaid Expenses and Other Current Assets

 

Following is a summary of prepaid expenses and other current assets as at September 30, 2018 and March 31, 2018;

 

   September 30, 2018   March 31, 2018 
Security deposits  $50,913   $67,348 
ESC receivable   8,799    5,688 
OTCQB Annual Fee   6,000    - 
Prepayments   3,962    1,370 
Supplier advance   126    136 
Prepayment for other professional services   -    438,598 
Insurance prepayment   -    1,160 
Other receivables   8,093    8,700 
   $77,893   $523,000 

 

Note 6 – Property and Equipment

 

Following table illustrates net book value of property and equipment as at September 30, 2018 and March 31, 2018;

 

   September 30, 2018   March 31, 2018 
Office equipment  $1,890   $2,054 
Furniture & fittings   127,732    138,752 
Computer equipment (Data Processing Equipment)   97,468    122,443 
Improvements to lease hold assets   19,535    21,221 
Website Development   13,626    14,678 
    260,251    299,148 
Accumulated depreciation and amortization   (227,939)   (255,654)
Net fixed assets  $32,312   $43,494 

 

Depreciation and amortization expense for the six months ended September 30, 2018 and 2017 was $13,316 and $14,143 respectively.

 

 F-16 
 

 

Note 7 – Intangible Assets

 

Intangible assets comprise of capitalization of certain costs pertaining to product development, which meet the criteria as set forth above under Note 3. Following table illustrates the movement in intangible assets as at September 30, 2018 and March 31, 2018:

 

   September 30, 2018   March 31, 2018 
Opening Balance  $732,939   $580,899 
Add: Costs capitalized during the year   113,945    277,812 
Less: Amount Written-off   (41,080)   (113,363)
Translational gain/ (loss)   (59,792)   (12,409)
Net Intangible Assets  $746,012   $732,939 

 

Note 8 – Short Term Borrowings

 

Following is a summary of short-term borrowings as at September 30, 2018 and March 31, 2018;

 

   September 30, 2018   March 31, 2018 
PAN Asia Bank – Short term overdraft  $409,445   $440,609 
PAN Asia Bank – Loan   87,721    162,636 
Commercial bank   42,454    53,571 
Senkadagala Finance   28,626    33,323 
Beanstalk Investments   22,459    - 
   $590,705   $690,139 

 

Bank overdraft facility, obtained from Pan Asia Banking Corporation PLC, contains an average interest rate of 15.55% per annum.

 

 F-17 
 

 

Note 9 – Due to Related Parties

 

Due to Related Parties – Short term

 

From time to time, the Company receives advances from related parties such as officers, 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 September 30, 2018 and March 31, 2018, the Company owed directors $643,460 and $524,955 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 September 30, 2018 and March 31, 2018, the Company owed directors $1,346,337 and $1,348,193 respectively.

 

Note 10 – Taxes Payable

 

The taxes payable comprise of items listed below as at September 30, 2018 and March 31, 2018;

 

   September 30, 2018   March 31, 2018 
PAYE  $129,727   $117,805 
Stamp Duty Payable   23    34 
Tax payable   5,396    8,877 
   $135,146   $126,716 

 

Note 11 – Accruals and Other Payables

 

Following is a summary of accruals and other payables as at September 30, 2018 and March 31, 2018;

 

   September 30, 2018   March 31,2018 
Audit fee payable  $19,106   $22,260 
Accruals   24,969    29,128 
Other payables   112,680    78,745 
Accrued interest   4,795    1,417 
   $161,550   $131,550 

 

 F-18 
 

 

Note 12 – Cost of Revenue

 

Following is the summary of cost of revenue for the six months ending September 30, 2018 and 2017;

 

   September 30, 2018   September 30, 2017 
Purchases  $15,855   $23,178 
Implementation cost   23,590    15,575 
Product development cost written off   40,028    56,114 
Consultancy, contract basis employee cost   -    7,468 
Support services   42,492    34,723 
Development services   2,532    21,361 
Other external services   2,945    3,250 
   $127,442   $161,669 

 

Note 13 – General and Administrative Expenses

 

Following is the summary of general and administrative expenses for the six months ending September 30, 2018 and 2017;

 

    September 30, 2018     September 30, 2017  
Directors remuneration   $ 73,049     $ 75,952  
EPF     5,134       5,338  
ETF     1,283       1,334  
Vehicle allowance     16,619       18,842  
Office rent     26,809       35,684  
Irrecoverable tax     20,331       20,041  
Legal fees     10,376       4,500  
Other professional services     7,902       5,145  
Internet charges     6,032       6,530  
Uplisting fee     6,000       -  
Electricity charges     5,919       7,822  
Office maintenance     5,930       6,057  
Software rentals     5,596       12,952  
Telephone charges     4,231       5,232  
Staff welfare     3,710       6,578  
Professional fees     3,820       10,015  
 Audit fee     2,643       5,138  
Computer maintenance     1,599       2,699  
Security charges     1,034       1,854  
Penalties / late payment charges     1,643       817  
Filling fee and subscription     1,460       3,933  
Travelling expense     560       1,633  
Printing and stationery     323       420  
Office expenses     358       986  
Courier and postage     420       396  
Insurance expense     -       1,046  
Gratuity     -       3,640  
Secretarial fees     334       351  
Consulting fee     -       51,300  
Transfer agent fees     150       865  
Stamp duty expenses     6       852  
Investor relations     398       4,395  
Other expenses     250       1,495  
    $ 213,919     $ 303,842  

 

 F-19 
 

 

Note 14 – Selling and Distribution Expenses

 

Following is the summary of selling and distribution expenses for the six months ending on September 30, 2018 and 2017;

 

   September 30, 2018   September 30, 2017 
Vehicle hire charges  $2,989   $3,108 
Vehicle running Expense   2,579    2,331 
Marketing expenses   -    444 
   $5,568   $5,883 

 

Note 15 – Equity

 

(A)Common Stock

 

As at September 30, 2018, the Company has 400,000,000 authorized common shares having a par value of $0. 001. The ordinary shares have been designated with the following rights:

 

Voting rights: Common shareholders can attend at annual general meeting to cast vote or use a proxy.
   
Right to elect board of directors: Common shareholders control the Company through their right to elect the company’s board of directors.
   
Right to share income and assets: Common shareholders have the right to share company’s earnings equally on a per-share basis in the form of dividend. Similarly, in the event of liquidation, shareholders have claim on assets that remain after meeting the obligation to accrued taxes, accrued salary and wages, creditors including bondholders (if any) and preferred shareholders. Thus, common shareholders are residual claimants of the company’s income and assets.

 

 F-20 
 

 

During the six months ended September 30, 2018, the Company issued following common shares:

 

Date   Type  No. of Shares   Valuation 
 06/01/2018   Stock issued as a Dividend payment   13,147,666   $5,784,973 
             $5,784,973 

 

(B)Preferred Stock

 

As at September 30, 2018, the Company has 10,000,000 authorized Series “A” preferred shares having a par value of $0.001 per share.

 

The preferred shares have been designated with the following conversion rights:

 

One preferred share will convert into ten (10) common shares no earlier than 24 months and 1 day after the issuance.

 

Note 16 - 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 $39,526 with Ms. Praveena Sujeevan on November 1, 2018 for a period of 2 years. Duo entered in to another lease commitment for its Indian office amounting to $1,187 on April 1, 2018 with Regus Office Center Services Pvt. Limited for a period of 1 year.

 

Guarantee provided by the company existed on the balance sheet date are as follows:

 

Date  Description  Amount 
9/23/2011  Performance bond for BOC Tender  $8,995 
5/15/2013  Guarantee for Lanka Clear   1,890 
7/31/2014  Guarantee for SLT   509 
8/10/2015  Guarantee for LOLC   1,437 
5/23/2018  Rent deposit for Delhi apartment   1,389 
7/17/2018  Security deposit- Senkadagala Finance   29,944 
7/18/2018  Guarantee for Amana bank   571 
9/10/2018  Guarantee for ICTA   1,796 
      $46,531 

 

The company has not provided any guarantees other than those mentioned above.

 

Note 17 - General

 

Figures have been rounded off to the nearest dollar and the comparative figures have been re-arranged / reclassified, wherever necessary, to facilitate comparison.

 

 F-21 
 

 

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 customers; and
  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
     
  B. Critical Accounting Policies
     
  C. Results of operations for the three months ended September 30, 2018 and September 30, 2017
     
  D. Results of operations for the six months ended September 30, 2018 and September 30, 2018
     
  E. Financial condition as at March 31, 2018 and September 30, 2018
     
  F. Liquidity and capital reserves
     
  G. Milestones for next twelve months

 

A. Business overview:

 

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 company based in Sri Lanka, 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 Service Experience and Life Cycle Management and Work flow, 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 and service offerings. Duo World has been in the business of developing products and services for the customer service experience and life cycle management 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.

 

 3 
 

 

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 the amount that reflect the consideration to which the company expected to be entitled in exchange for those goods and services.

 

The following five steps are followed in recognizing revenue from contracts:

 

 

Identify the Contract(s), with a customer;

     
  Identify the performance obligation of the contract;
     
  Determine the transaction price;
     
  Allocate the transaction price to the performance obligations in the contract and;
     
  Recognize revenue when or as the Company satisfies a performance obligation.

 

One of the revenue models adopted by the Company is that it licenses its products on a 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. The products offered on this basis are “Duo Subscribe” and “Facetone-enterprise.” Duo sells its software license 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 and recognizes revenue after satisfying the performance obligations. Revenues from consulting and training services are typically recognized as the services are performed.

 

The Company offers annual maintenance programs on its licenses that provide for technical support and updates to the Company’s software products. Initial Annual Maintenance fees are bundled with license fees in the initial licensing period and recognized when the performance obligation of license fee is met. However, subsequent renewals of annual maintenance are charged separately for renewals. 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.

 

During 2018, Duo also commenced distribution of its software product ‘Facetone-hosted version” with third party telecommunication companies. It is a revenue model where the telecommunication provider hosts Duo’s software applications and makes them available to its customers over the Internet for a monthly subscription fee.

 

 4 
 

 

Provisions

 

A provision is recognized when the Company has present obligations as a result of past events. 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 estimates 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 September 30, 2018 and September 30, 2017:

 

The Company had revenues amounting to $179,678 and $170,326, respectively, for three months ended September 30, 2018 and September 30, 2017. Following is a breakdown of revenues for both periods:

 

   30-Sep-18   30-Sep-17   Changes 
             
DuoSubscribe  $140,510   $115,983   $24,527 
Facetone   31,948    35,223    (3,275)
Software hosting and reselling   5,484    4,011    1473 
Development services   1,736    15,109    (13,373)
   $179,678   $170,326   $9,352 

 

 5 
 

 

 

Total revenue for the three months ended September 30, 2018 increased by 5% when compared to September 30, 2017.

 

Our new product, Facetone, has been successful in converting many sales leads into signed contracts and out of those contracts only part of the revenue has been identified for the period ended September 30, 2018, and the contract balance of $101,881 will be recognized in the future periods.

 

For the three months ended September 30, 2018 and September 30, 2017, the Company had the following concentrations of revenues with customers:

 

Customer   30-Sep-18     30-Sep-17  
             
A     66.21 %     47.74 %
E     14.15 %        
B             16.87 %
C     2.85 %     9.22 %
D     0.97 %     8.87 %
Other misc. customers     15.01 %     17.3 %
      100 %     100 %

 

The following table illustrates the comparison between the revenue for the three months ended September 30, 2018 and June 30, 2018.

 

Product  30-Sep-18   30-Jun-18   Changes 
             
DuoSubscribe  $140,510   $82,480   $58,030 
Facetone   31,948    60,648    (28,700)
Software hosting and reselling   5,484    6,075    (591)
Development services   1,736    -    1,736 
   $179,678   $149,203   $30,475 

 

There was a significant increase (20%) in the total revenue for the three months ended September 30, 2018 when compared to the three months ended June 30, 2018.

 

The total cost of sales amounted to $65,622 and $74,919 for the three months ended September 30, 2018 and September 30, 2017, respectively. The following table sets forth the Company’s cost of sales breakdown for both periods:

 

   30-Sep-18   30-Sep-17   Change 
             
Purchases (Server space)  $6,242   $11,927   $(5,685)
Implementation and onsite support cost   13,604    6,373    7,231 
Product development cost written off   20,492    28,730    (8,238)
Consultancy, contract basis employee cost   -    643    (643)
Support services   21,973    17,517    4,456 
Development services   391    9,729    (9,339)
Other external services   2,921    -    2,921 
Total cost of sales  $65,622   $74,919   $(9,297)

 

 6 
 

 

Cost of sales decreased by 12% in the three months ended September 30, 2018 when compared to the three months ended September 30, 2017. Reduction in purchase of servers, cost of development services, and product development cost written off were the main contributors for the reduction in the total cost of sales.

 

The gross income for the three months ended September 30, 2018 and September 30, 2017 amounted to $114,056 and $95,407, respectively. The increase in gross income is a result of the increase in revenue and the decrease in cost of sales in the three months ended September 30, 2018, when compared with the three months ended September 30, 2017

 

The total operating expenditure amounted to $255,492 and $765,742 for the three months ended September 30, 2018 and September 30, 2017, respectively. The following table sets forth the Company’s operating expenditure analysis for both periods:

 

   30-Sep-18   30-Sep-17   Change 
             
General and administrative  $102,679   $165,771   $(63,092)
Salaries and benefits   66,716    104,239    (37,523)
Selling and distribution   2,885    2,828    57 
Professional services - Investment advisory   -    438,598    (438,598)
Depreciation   5,493    6,288    (795)
Amortization of web site development   440    383    57 
Allowance for bad debts   77,279    47,635    29,644 
Total operating expenses  $255,492   $765,742   $(510,250)

 

Following are the main reasons for the variances in operating expenses of the Company:

 

General and Administrative Cost

 

During the three months ended September 30, 2018, general and administrative cost declined significantly by $63,092 (38%) when compared to the same period in 2017, mainly due to reduction in the consulting fees paid for investor relations and the reduction in rent expense.

 

 7 
 

 

Salaries and benefits

 

There has been significant reduction (36%) in salaries and benefits during the three months ended September 30, 2018, due to decline in the total number of staff when compared to the same period in 2017. The Company completed development of many of its software products and moved toward outsourcing of non-core activities; this lead to a decrease of 44% in the number of permanent staff.

 

Selling and distribution

 

During the period ended September 30, 2018, marketing expenses marginally increased by 2% when compared to September 30, 2017.

 

Professional services – Investment advisory

 

During the three months ended September 30, 2018 the Company did not incur any expenditure on account of Professional / Investment advisory services. Whereas, for the three months ended September 30, 2017 it incurred $438,598,

 

Depreciation and Amortization expense

 

Depreciation and amortization expense had marginally decreased by $738 during the three months ended September 30, 2018, when compared to the three months ended September 30, 2017.

 

Allowance for bad debts

 

During the three months ended September 30, 2018, the Company made a provision for bad debts amounting to $77,279.

 

The loss from operations for the three months ended September 30, 2018 has significantly reduced ($528,899) when compared with September 30, 2017. The loss from operations were $141,436 and $670,335, respectively.

 

The Company’s other income and (expense) for the three months ended September 30, 2018 and September 30, 2017 amounted to $(65,152) and $(22,153), respectively. The following table sets forth the Company’s other income and (expense) analysis for both periods:

 

   September 30, 2018   September 30, 2017   Changes 
Interest expense  $(45,578)  $(18,305)  $(27,273)
Gain on disposals of property and equipment   14    -    14 
Other income   4,259    18    4,241 
Bank charges   (829)   (1,095)   266 
Exchange (loss)/ gain   (23,018)   (2,771)   (20,247)
Total other income (expenses)  $(65,152)  $(22,153)  $(42,999)

 

 8 
 

 

Other expenditures increased by $42,999 in the three months ended September 30, 2018, when compared to the three months ended September 30, 2017. The main reason for this increase was the increase in interest cost and reduction in exchange gain when compared with three months ending September 30, 2017.

 

The loss before provision for income taxes for the three months ended September 30, 2018 and September 30, 2017 amounted to $206,588 and $692,488, respectively.

 

The net loss for the three months ended September 30, 2018 and September 30, 2017 amounted to $206,588 and $692,488, respectively.

 

The Company’s comprehensive loss for the three months ended September 30, 2018 and September 30, 2017 amounted to $90,295 $711,383, respectively.

 

Comprehensive Income / (Loss):  September 30, 2018   September 30, 2017 
(Loss) / gain on foreign currency translation  $116,293   $(18,895)
Net loss   (206,588)   (692,488)
Comprehensive loss  $(90,295)  $(711,383)

 

At September 30, 2018 and March 31, 2018, the Company had 65,738,320 and 52,590,654 common shares issued and outstanding, respectively. The weighted average number of shares for the three months ended September 30, 2018 and September 30, 2017 was 115,738,320 and 89,682,783, respectively. The loss per share for both periods was $(0.00) per share and $(0.01) per share, respectively.

 

 9 
 

 

D. Results of operations for the six months ended September 30, 2018 and September 30, 2017:

 

 

The Company had revenues amounting to $328,881 and $381,138, respectively, for six months ended September 30, 2018 and September 30, 2017. Following is a breakdown of revenues for both periods:

 

   30-Sep-18   30-Sep-17   Changes 
             
DuoSubscribe  $224,583   $254,325   $(29,742)
Facetone   92,596    89,668    2,928 
Software hosting and reselling   11,558    6,730    4,828 
Development services   144    30,415    (30,271)
   $328,881   $381,138   $(52,257)

 

 10 
 

 

Total revenue for the six months ended September 30, 2018 declined by 14% when compared to six months ended September 30, 2017. This decrease is mainly due to the reduction in revenue generated by DuoSubscribe and Development services.

 

For the six months ended September 30, 2018 and September 30, 2017, the Company had the following concentrations of revenues with customers:

 

Customer  30-Sep-18   30-Sep-17 
         
A   58.53%   50.03%
B   20.36%   0%
C   2.71%   8.28%
D   0.53%   14.29%
E   0%   7.98%
Other misc. customers   17.87%   19.42%
    100%   100%

 

The total cost of sales amounted to $127,442 and $161,669 for the six months ended September 30, 2018 and 2017, respectively. The following table sets forth the Company’s cost of sales breakdown for both periods:

 

   30-Sep-18   30-Sep-17   Change 
             
Purchases (Server space)  $15,855   $23,178   $(7,323)
Implementation and onsite support cost   23,590    15,575    8,015 
Product development cost written off   40,028    56,114    (16,086)
Consultancy, contract basis employee cost   -    7,468    (7,468)
Support services   42,492    34,723    7,769 
Development services   2,532    21,361    (18,829)
Other external services   2,945    3,250    (305)
Total cost of sales  $127,442   $161,669   $(34,227)

 

Cost of sales decreased by 21% during the six months ended September 30, 2018 when compared to the six months ended September 30, 2017. Decrease in the server cost, cost of development services and product development cost written off were the main contributors to the decrease in cost of sales.

 

The gross income for the six months ended September 30, 2018 and 2017 amounted to $201,439 and $219,469, respectively.

 

The total operating expenditures amounted to $994,169 and $1,039,690 for the six months ended September 30, 2018 and 2017, respectively. The following table sets forth the Company’s operating expenditure analysis for both periods

 

   30-Sep-18   30-Sep-17   Change 
             
General and administrative  $213,919   $303,842   $(89,923)
Salaries and benefits   144,926    198,988    (54,062)
Selling and distribution   5,568    5,883    (315)
Professional services - Investment advisory   438,598    438,598    - 
Depreciation   12,431    13,379    (948)
Amortization of web site development   886    764    122 
Allowance for bad debts   177,841    78,237    99,604 
Total operating expenses  $994,169   $1,039,690   $(45,521)

 

 11 
 

 

Following are the main reasons for the variances in operating expenses of the Company:

 

General and Administrative Cost

 

The general and administrative expenditure has significantly decreased by 30% in the six months ended September 30, 2018 when compared with six months ended September 30, 2017. The main reason for the decrease is due to the reduction in dispensable expenses.

 

Salaries and benefits

 

Salaries and benefits decreased by 27% during the six months ended September 30, 2018 as the total number of staff was reduced when compared to the same period in 2017. The Company moved toward outsourcing of non-core activities and this lead to a decrease in the number of permanent staff.

 

Selling and distribution

 

There is a decrease of 5% on account of expenditure incurred for selling and distribution activities during the six months ended September 30, 2018, when compared with the six months ended September 30, 2017

 

Professional services – Investment advisory

 

Company incurred a cost of $438,598 for the six months ended September 30, 2018 and six months ended September 30, 2017 on account of agreement signed in July 2017, for investment advisory services over a period of one year.

 

Depreciation and amortization of web site development

 

Depreciation and amortization expense has decreased by $826 during the six months ended September 30, 2018, when compared to the six months ended September 30, 2017.

 

 12 
 

 

Allowance for bad debts

 

Allowance for bad debts increased by $99,604 during the six months ended September 30, 2018 when compared to the six months ended September 30, 2017.

 

The loss from operations for the six months ended September 30, 2018 and 2017 amounted to $792,730 and $820,222, respectively.

 

The Company’s other income and (expenses) for the six months ended September 30, 2018 and 2017 amounted to $(123,640) and $(34,140), respectively. The following table sets forth the Company’s other income and (expenses) analysis for both periods:

 

      September 30, 2018       September 30, 2017       Change  
                         
Interest expense   $ (99,516 )   $ (36,156 )   $ (63,360 )
Gain on disposals of property and equipment     14       32       (18 )
Other income     4,524       620       3,904  
Bank charges     (1,559 )     (2,,089 )     530  
Exchange (loss) / gain     (27,103 )     3,453       (30,556 )
Total other income (expenses)   $ (123,640 )   $ (34,140 )   $ (89,500 )

 

Other expenses increased by $89,500, during the six months ended September 30, 2018, when compared with the six months ended September 30, 2017. This increase was mainly due to the increase in interest expense during the six months ended September 30, 2018.

 

The loss before provision for income taxes for the six months ended September 30, 2018 and 2017 amounted to $916,370 and $854,361, respectively.

 

The net loss for the six months ended September 30, 2018 and 2017 amounted to $916,370 and $854,361, respectively.

 

The Company’s comprehensive loss for the six months ended September 30, 2018 and 2017 amounted to $761,298 and $879,217, respectively.

 

Comprehensive Loss:   September 30, 2017   September 30, 2016
Unrealized foreign currency translation (loss)\ gain   $ 155,072     $ (24,856 )
Net loss     (916,370 )     (854,361 )
Comprehensive loss   $ (761,298 )   $ (879,217 )

 

At September 30, 2018 and March 31, 2018, the Company had 65,738,320 and 52,590,654 common shares issued and outstanding, respectively. The weighted average number of shares for the six months ended September 30, 2018 and September 30, 2017 was 111,283,919 and 89,128,172, respectively. The loss per share for both periods was $(0.01) per share and $(0.01) per share, respectively.

 

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E. Financial condition as at September 30, 2018 and March 31, 2018:

 

Assets:

 

The Company reported total assets of $1,267,752 and $1,843,177 as at September 30, 2018 and March 31, 2018, respectively. 59% of these total assets include intangible assets and 23% of total assets are comprised of accounts receivable of the Company. Our property and equipment include office equipment, computer equipment (Data Processing Equipment), furniture and fittings, web site developments and improvement to leasehold assets having a total net book value of $32,312 and $43,494 as at September 30, 2018 and March 31, 2018, respectively. Furthermore, our current assets as at March 31, 2018 totaled $1,066,744 and as at September 30, 2018, our current assets were $489,428. These current assets amounted to $489,428, comprised of cash of $18,035, accounts receivable of $295,311, prepaid and other current assets of $77,893 and accrued revenue of $98,189.

 

Liabilities:

 

The Company had total liabilities of $4,201,903 and $4,007,509 as at September 30, 2018 and March 31, 2018, respectively. Long term liabilities include balances owed to related parties which are outstanding for more than 12 months. Our current liabilities at March 31, 2018 totaled $4,007,509. We have seen an increase of 9% in current liabilities amounting to $236,974, making total current liabilities of $2,732,129 as at September 30, 2018. 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, 2018, the Company had stockholders’ deficit of $2,164,333. At September 30, 2018, the Company had stockholders’ deficit of $2,934,151, which represents an increase of 36%.

 

The Company had 65,738,320 and 52,590,654 shares issued and outstanding at September 30, 2018 and March 31, respectively.

 

F. Liquidity and capital reserves:

 

The Company had loss from operations of $141,436 and $670,335 for the three months ended September 30, 2018 and 2017, respectively; a total other income (expense) amounting to $(65,152) and $(22,153) for the three months ended September 30, 2018 and 2017, respectively; and a net loss of $206,588 and $692,488 for the three months ended September 30, 2018 and 2017, respectively.

 

In summary, our cash flows for the six months ended September 30, 2018 and September 30, 2017 were as follows:

 

   September 30, 2018   September 30, 2017 
Net cash provided by operating activities  $(104,704)  $147,845 
Net cash used in investing activities   (114,831)   (139,367)
Net cash provided by financing activities   -    - 

 

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 $18,035 in cash; net cash provided by operations of $(104,704), for the six months ended September 30, 2018; working capital deficit of $2,242,701; and stockholders’ deficit of $2,934,151 as of September 30, 2018.

 

 14 
 

 

G. Milestones for next twelve months (2018-2019):

 

Our specific plan of operations and milestones through September 2019 are as follows:

 

1) Product Development and Launch:
   
  We intend to commercially launch the new cloud based, SaaS products: Facetone, and Smoothflow.
   
2) Expansion:

 

  a) Geographical Expansion
     
    We intend 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 most cost effective manner to the Company.
     
  b) Market Expansion
     
    Currently, we have clients in India, Indonesia, and Sri Lanka
     
    We intend to expand into Saas market, with the launch of the cloud version of Facetone and Smoothflow.
     
  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.

 

 15 
 

 

  d) Financial Performance
     
    We intend to provide value for all our shareholders by:

 

  Increasing profitability and free cash flow;
     
  Efficiently managing the use of capital;
     
  Raising capital and expanding our operations;
     
  Capitalizing and maximizing on the high growth opportunities in the market;
     
  Providing a robust and steady capital appreciation; and
     
  Providing options to realize gains.

 

  e) Corporate Social Responsibility
     
    Our wholly-owned subsidiary, Duo Software (Pvt.) Ltd., was Asia’s first software product 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.

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not involved in any legal proceedings.

 

Item 1A. Risk Factors

 

Not applicable.

 

 16 
 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

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:

 

Exhibit   Description
31.1 *   Certification under Section 302 of Sarbanes-Oxley Act of 2002
31.2 *   Certification under Section 302 of Sarbanes-Oxley Act of 2002

32.1 *

32.2 *

 

Certification under Section 906 of Sarbanes-Oxley Act of 2002

Certification under Section 906 of Sarbanes-Oxley Act of 2002

 

* Filed herewith.

 

 17 
 

 

SIGNATURES

 

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: November 13, 2018 /s/ Muhunthan Canagasooryam
  Muhunthan Canagasooryam
  President and Chief Executive Officer
  (Principal Executive Officer)
   
Date: November 13, 2018 /s/ Suzannah Jennifer Samuel Perera
  Suzannah Jennifer Samuel Perera
  Chief Financial Officer
  (Principal Accounting and Financial Officer)

 

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