Company Quick10K Filing
Duo World
Price0.10 EPS-0
Shares116 P/E-19
MCap12 P/FCF82
Net Debt-0 EBIT-1
TEV12 TEV/EBIT-21
TTM 2019-09-30, in MM, except price, ratios
10-Q 2019-12-31 Filed 2020-02-13
10-Q 2019-09-30 Filed 2019-11-13
10-Q 2019-06-30 Filed 2019-08-30
10-K 2019-03-31 Filed 2019-08-13
10-Q 2018-12-31 Filed 2019-02-13
10-Q 2018-09-30 Filed 2018-11-13
10-Q 2018-06-30 Filed 2018-08-20
10-K 2018-03-31 Filed 2018-06-29
10-Q 2017-12-31 Filed 2018-02-14
10-Q 2017-09-30 Filed 2017-11-13
10-Q 2017-06-30 Filed 2017-08-14
10-K 2017-03-31 Filed 2017-06-30
10-Q 2016-12-31 Filed 2017-02-10
10-Q 2016-09-30 Filed 2016-11-08
8-K 2018-07-27
8-K 2018-05-30
8-K 2018-02-01
8-K 2018-01-02

DUUO 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements.
Note 1 - Organization and Nature of Operations
Note 2 - Basis of Presentation
Note 3 - Summary of Significant Accounting Policies
Note 4 - Reverse Recapitalization
Note 5 - Accounts Receivable
Note 6 - Prepaid Expenses and Other Current Assets
Note 7 - Property and Equipment
Note 8 - Intangible Assets
Note 9 - Short - Term Borrowings
Note 10 - Due To Related Parties
Note 11 - Taxes Payables
Note 12 - Accruals and Other Payables
Note 13 - Cost of Revenue
Note 14 - General and Administrative Expenses
Note 15 - Selling and Distribution Expenses
Note 16 - Equity
Note 17 - Commitments and Contingencies
Note 18 - General
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex31-1.htm
EX-31.2 ex31-2.htm
EX-32.1 ex32-1.htm
EX-32.2 ex32-2.htm

Duo World Earnings 2019-12-31

Balance SheetIncome StatementCash Flow
3.01.70.4-0.8-2.1-3.42015201620182020
Assets, Equity
0.4-0.5-1.4-2.3-3.2-4.12015201620182020
Rev, G Profit, Net Income
0.20.10.0-0.0-0.1-0.22015201620182020
Ops, Inv, Fin

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 December 31, 2019

 

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 7, 2019, there were 67,754,296 outstanding shares of the Registrant’s Common Stock, $.001 par value.

 

 

 

 
 

 

INDEX

 

 

2
 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

Duo World, Inc. and Subsidiaries

Consolidated Financial Statements

December 31, 2019

(Unaudited)

 

F-1
 

 

CONTENTS

 

 

F-2
 

 

Duo World, Inc. and Subsidiaries

Consolidated Balance Sheets

 

   December 31, 2019   March 31, 2019 
   (Un-audited)   (Audited) 
ASSETS          
           
Current Assets          
Cash and cash equivalents  $14,483   $2,698 
Accounts receivable – trade   172,076    125,044 
Prepaid expenses and other current assets   77,410    82,282 
Accrued revenue   95,738    102,851 
Total Current Assets   359,707    312,875 
           
Non Current Assets          
Property and equipment, net of accumulated depreciation of $232,612 and $226,882 respectively   9,080    23,513 
Intangible assets, net   692,630    746,158 
Total Non Current Assets   701,710    769,671 
           
Total Assets  $1,061,417   $1,082,546 
           
LIABILITIES and SHAREHOLDERS’ DEFICIT          
           
Current Liabilities          
Accounts payable  $554,923   $489,082 
Payroll, employee benefits, severance   606,706    636,637 
Short term borrowings   513,863    531,675 
Due to related parties   903,955    824,991 
Payable for acquisition   185,762    185,762 
Taxes payable   166,901    157,171 
Accruals and other payables   62,023    71,675 
Lease creditors   4,797    10,921 
Deferred revenue   10,292    6,995 
Total Current liabilities   3,009,222    2,914,909 
           
Long Term Liabilities          
Due to related parties   1,343,875    1,345,968 
Employee benefit obligation   76,252    104,700 
Total Long Term liabilities   1,420,127    1,450,668 
Total liabilities  $4,429,349   $4,365,577 
           
Commitments and contingencies (Note 17)          
           
Shareholders’ Deficit          
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   (15,408,233)   (15,163,357)
Accumulated other comprehensive income   326,211    266,235 
Total shareholders’ deficit   (3,367,932)   (3,283,032)
           
Total Liabilities and Shareholders´ Deficit  $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.

 

F-4
 

 

Duo World, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

 

   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.

 

F-6
 

 

Duo World Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

(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 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-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 applications (“Duo Subscribe”, “Facetone”, and “Smoothflow”) provide solutions in the space of Customer Life Cycle Management, Subscriber Billing and Work Flow.

 

Note 2 - Basis of Presentation

 

The Company has prepared the accompanying consolidated financial statements and accompanying notes in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All amounts in the consolidated financial statements are stated in U.S. dollars.

 

We have recast certain prior period amounts to conform to the current period presentation, with no impact on consolidated 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 $244,876 and $1,180,108 for the nine months ended December 31, 2019 and 2018, respectively; net cash provided by operations of $(124,118) and $(278,814) for the nine months ended December 31, 2019 and 2018, respectively; working capital deficit of $2,649,515 and $2,602,035 as of December 31, 2019 and March 31, 2019, respectively; outstanding statutory dues towards employee provident fund and employee trust fund of $425,882 and $423,354 as of December 31, 2019 and March 31, 2019, respectively; and a stockholders´ deficit of $3,367,932 and $3,283,032 as of December 31, 2019 and March 31, 2019, respectively.

 

The revenue for the nine months ended December 31, 2019 has increased by 17% when compared to the nine months ended December 31, 2018. With the increasing trend in revenue, management is confident that the Company shall generate sufficient revenues to offset the operating losses in the recent future.

 

F-7
 

 

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-8
 

 

Provisions

 

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

 

Accounts Receivable and Provision for Doubtful Accounts

 

The Company recognizes accounts receivable in connection with the products sold and services provided and has 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 December 31, 2019 and March 31, 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 converted into United States Dollars ($) and/or USD as the reporting currency. All assets and liabilities denominated in foreign functional currencies are converted into U.S. dollars at the closing exchange rate on the balance sheet date and equity balances are converted at historical rates. Revenues, costs and expenses in foreign functional currencies are converted at the average rate of exchange during the period. Conversion 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-9
 

 

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.

 

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 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 the 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.

 

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 sells a perpetual nonexclusive license to the customer and enables the customer to install and use the software and its documentation. Price per customer varies 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.” The Company charges an Implementation fee on key milestone basis for on premise customers upon completion of 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. 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. 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, 2019 and 2018, the Company received only cash as consideration for sale of licenses and related services rendered.

 

For the nine months ended December 31, 2019 and 2018, the Company had following concentrations of revenues with customers:

 

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, 2019 and March 31, 2019, the Company recognized deferred revenue $10,292 and $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, 2019 and March 31, 2019, unbilled /accrued revenues were $95,738 and $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 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 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 Nine months ended December 31, 2019 and 2018, product research and development cost of $45,114 and $145,822, respectively, were capitalized as “Intangible assets”.

 

Advertising Costs

 

The Company expenses advertising costs as incurred. No advertising expenses were incurred during the nine months ended December 31, 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, 2015 through December 31, 2019, includes only foreign currency conversion 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, 2019 and March 31, 2019 were as follows:

 

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.

 

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 & 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.

 

F-15
 

 

Note 5 – Accounts Receivable

 

Following is a summary of accounts receivable as at December 31, 2019 and March 31, 2019:

 

  

December 31,

2019

  

March 31,

2019

 
Accounts receivable – trade  $220,231   $148,933 
Less: Provision for doubtful debts   (48,155)   (23,889)
   $172,076   $125,044 

 

As at December 31, 2019 and March 31, 2019, the Company had following concentrations of accounts receivables with customers:

 

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 6 – Prepaid Expenses and Other Current Assets

 

Following is a summary of prepaid expenses and other current assets as at December 31, 2019 and March 31, 2019:

 

  

December 31,

2019

  

March 31,

2019

 
Security deposits   48,016    56,878 
Prepayments   7,422    577 
Supplier advance   12,769    8,108 
ESC receivable   4,866    11,126 
Travel advance   4    28 
Other receivables   4,333    5,565 
    77,410    82,282 

 

F-16
 

 

Note 7– Property and Equipment

 

Following table illustrates net book value of property and equipment as at December 31, 2019 and March 31, 2019:

 

  

December 31,

2019

  

March 31,

2019

 
Office equipment  $1,757   $1,812 
Furniture & fittings   117,891    123,678 
Computer equipment (data processing equipment)   89,921    91,814 
Improvements to lease hold assets   18,157    18,729 
Website development   13,966    14,362 
    241,692    250,395 
Accumulated depreciation and amortization   (232,612)   (226,882)
Net fixed assets  $9,080   $23,513 

 

Depreciation and amortization expense for the nine months ended December 31, 2019 and 2018 was $14,572 and $18,544, respectively.

 

Note 8 – Intangible assets

 

Intangible assets comprise of capitalization of certain costs pertaining to products development which meets the criteria as set forth above under Note 3. Following table illustrates the movement in intangible assets as at December 31, 2019 and March 31, 2019:

 

  

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 9 – Short-term borrowings

 

Following is a summary of short-term borrowings as at December 31, 2019 and March 31, 2019:

 

  

December 31,

2019

  

March 31,

2019

 
PAN Asia Bank – Short term overdraft  $412,993   $471,350 
PAN Asia Bank – Loan   65,841    - 
Commercial Bank   31,843    45,950 
Senkadagala Finance   3,186    14,375 
   $513,863   $531,675 

 

F-17
 

 

Bank overdraft facility, obtained from Pan Asia Banking Corporation PLC, contains an interest rate of 15.75% per annum for $180,897, 16.25% per annum for $116,887 and 16.39% per annum for $105,755.

 

Note 10 – Due to Related Parties

 

Due to Related Parties – Short term

 

From time to time, the Company receives advances from related parties such as 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, 2019 and March 31, 2019, the Company owed directors $903,955 and $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, 2019 and March 31, 2019, the Company owed directors $1,343,875 and $1,345,968, respectively.

 

Note 11 – Taxes Payables

 

Taxes payable comprised of items listed below as at December 31, 2019 and March 31, 2019:

 

  

December 31,

2019

  

March 31,

2019

 
PAYE  $163,092   $143,766 
WHT payable   3,710    2,127 
Stamp duty payable   11    17 
Tax payable   88    11,261 
   $166,901   $157,171 

 

Note 12 – Accruals and Other Payables

 

Following is a summary of accruals and other payables as at December 31, 2019 and March 31, 2019:

 

  

December 31,

2019

  

March 31,

2019

 
Accruals  $21,211   $49,114 
Accrued interest   6,347    3,090 
Audit fee payable   1,745    1,770 
Other payables   32,720    17,700 
   $62,023   $71,675 

 

F-18
 

 

Note 13 – Cost of Revenue

 

Following is the summary of cost of revenue for the nine months ending December 31, 2019 and 2018:

 

  

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   11,800    20,517 
Consultancy, contract basis employee cost   2,720    898 
Other external services   1,015    5,495 
Development services   -    2,532 
   $205,369   $185,101 

 

Note 14 – General and Administrative Expenses

 

Following is the summary of general and administrative expenses for the nine months ending December 31, 2019 and 2018:

 

  

December 31,

2019

  

December 31,

2018

 
Directors remuneration  $97,848   $105,978 
EPF   11,462    7,448 
ETF   1,719    1,862 
Consulting fee   17,690    - 
Office rent   15,549    34,668 
Legal fee   13,711    15,073 
Vehicle allowance   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   2,539    5,822 
Irrecoverable tax   1,862    254 
Transfer agent fees   1,565    150 
Filling fee and subscription   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   3    192 
Travelling expense   -    560 
Office expenses   -    358 
Security charges   -    1,186 
Other expenses   716    510 
   $260,831   $276,421 

 

F-19
 

 

Note 15 – Selling and Distribution Expenses

 

Following is the summery of selling and distribution expenses for the nine months ending December 31, 2019 and 2018:

 

  

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 16 - Equity

 

(A)Common Stock

 

As at December 31, 2019, the Company had 400,000,000 authorized common shares having a par value of $0. 001. The common 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; 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 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 nine months ended December 31, 2019, the Company issued 2,000,000 common shares at a value of $0.05 per share to an investor.

 

(B)Preferred Stock

 

As at December 31, 2019, the Company had 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 17 - 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 $36,736 with Ms. Praveena Sujeevan on November 1, 2018 for a period of 2 years. 

 

Guarantees and security deposits provided by the company existed on the balance sheet date are as follows:

 

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.

 

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 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

 

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 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.

 

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 ,or contract with the 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.

 

The consideration for the transaction [performance obligation(s)] is determined as per the agreement, contract or invoice for the services and products.

 

DuoSubscribe

 

“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 how these sector operate, DuoSubscribe 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.

 

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 December 31, 2019 and December 31, 2018:

 

The Company had revenues amounting to $177,068 and $150,199, respectively, for three months ended December 31, 2019 and December 31, 2018. Following is a breakdown of revenues for both periods:

 

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, 2019 increased by 18% when compared to December 31, 2018.

 

Revenue generated from Facetone increased by $24,531 for the three months ended December 31, 2019 when compared to the same period in 2018. The increase is due to implementation fees invoiced for an existing customer.

 

Revenue from DuoSubscribe increased for the three months ended December 31, 2019 when compared to the same period in 2018. Increase in DuoSubscribe revenue is due to the additional revenue generated from development projects.

 

For the three months ended December 31, 2019 and December 31, 2018, the Company had the following concentrations of revenues with customers:

 

Customer 

December 31,

2019

  

December 31,

2018

 
         
A   75.50%   81.00%
B   13.31%   1.57%
C   1.89%   2.30%
D   1.37%   6.66%
Other misc. customers   7.93%   8.47%
    100%   100%

 

The total cost of sales amounted to $57,278 and $57,658 for the three months ended December 31, 2019 and December 31, 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
 

 

The gross income for the three months ended December 31, 2019 and December 31, 2018 amounted to $119,790 and $92,541, respectively, recording an increase of $27,249.

 

The total operating expenditure amounted to $121,620 and $271,946 for the three months ended December 31, 2019 and December 31, 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,

2019

  

December 31,

2018

   Change 
General and administrative  $80,943   $82,579   $(1,636)
Salaries and casual wages   28,834    53,392    (24,558)
Selling and distribution   1,829    9,238    (7,409)
Depreciation   4,169    4,796    (627)
Amortization of web site development   476    432    44 
Allowance for bad debts   5,369    121,509    (116,140)
   $121,620   $271,946   $(150,326)

 

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

 

General and Administrative Cost

 

During the three months ended December 31, 2019, general and administrative cost marginally declined by 2% when compared to the same period in 2018.

 

7
 

 

Salaries and benefits

 

Salaries and benefits decreased by $24,558 during the three months ended December 31, 2019 as there was a reduction in the total number of staff when compared to the same period in 2018. Duo’s move towards outsourcing of non-core activities and shifting towards contract employment lead to a general decrease in the number of permanent staff, and increase in the overall efficiency in the operations of the company.

 

Selling and distribution

 

Marketing expenses decreased during the period ended December 31, 2019 when compared to the same period in 2018. The reduction is due to decease in initial marketing expenses incurred for Smoothflow product.

 

Depreciation and Amortization expense

 

Depreciation and amortization expense recorded a slight decrease of $627 during the three months ended December 31, 2019, when compared to the three months ended December 31, 2018.

 

Allowance for bad debts

 

During the three months ended December 31, 2019, the bad debts provision decreased by $116,140 when compared to 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, 2019 and December 31, 2018, respectively.

 

The Company’s other income and (expense) for the three months ended December 31, 2019 and December 31, 2018 amounted to $(32,245) and $(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 

 

8
 

 

Other expenditures decreased by 56% in the three months ended December 31, 2019, when compared to the three months ended December 31, 2018. The main reason for this increase was the decrease in exchange loss and reduction in interest expense.

 

The loss before provision for income taxes for the three months ended December 31, 2019 and December 31, 2018 amounted to $34,075 and $251,876, respectively.

 

The net loss for the three months ended December 31, 2019 and December 31, 2018 amounted to $46,252 and $263,738, respectively.

 

The Company’s comprehensive loss for the three months ended December 31, 2019 and December 31, 2018 amounted to $71,263 and $128,120, respectively.

 

Comprehensive Income / (Loss):  

December 31,

2019

   

December 31,

2018

 
(Loss) / gain on foreign currency translation   $ (25,011)     $ 135,617  
Net loss     (46,252 )     (263,738 )
Comprehensive loss   $ (71,263 )   $ (128,120 )

 

At December 31, 2019 and March 31, 2019, the Company had 67,754,296 and 65,754,296 common shares issued and outstanding, respectively. The weighted average number of shares for the three months ended December 31, 2019 and, 2018 was 67,689,079 and 65,738,320, respectively. The loss per share for both periods was $(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 $561,165 and $479,080, respectively, for nine months ended December 31, 2019 and December 31, 2018. Following is a breakdown of revenues for both periods:

 

  

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, 2019 increased by 17% when compared to nine months ended December 31, 2018. This increase is mainly due to the gain in revenue generated by DuoSubscribe and Smoothflow.

 

For the nine months ended December 31, 2019 and December 31, 2018, the Company had the following concentrations of revenues with customers:

 

 

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 $205,369 and $185,101 for the nine months ended December 31, 2019 and 2018, respectively. The following table sets forth the Company’s cost of sales breakdown for both periods:

 

  

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 

 

Cost of sales increased by 11% during the nine months ended December 31, 2019 when compared to the nine months ended December 31, 2018. Increase is due to the increase in product development cost written off and implementation and onsite support cost.

 

The gross income for the nine months ended December 31, 2019 and 2018 amounted to $355,796 and $293,979, respectively.

 

The total operating expenditures amounted to $407,219 and $1,296,038 for the nine months ended December 31, 2019 and 2018, respectively. The following table sets forth the Company’s operating expenditure analysis for both periods

 

  

December 31,

2019

  

December 31,

2018

   Change 
General and administrative  $260,831   $276,421   $(15,590)
Salaries and casual wages   97,271    198,319    (101,048)
Selling and distribution   9,604    14,807    (5,203)
Professional services - investment advisory   -    438,598    (438,598)
Depreciation   13,129    17,227    (4,098)
Amortization of web site development   1,443    1,317    126 
Allowance for bad debts   24,941    299,350    (274,409)
   $407,219   $1,246,038   $(838,819)

 

10
 

 

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

 

General and Administrative Cost

 

The general and administrative expenditure decreased by 6% in the nine months ended December 31, 2019 when compared with nine months ended December 31, 2018. The main reason for the decrease is decrease in office rent and vehicle allowances.

 

Salaries and benefits

 

Salaries and benefits decreased by $101,048 during the nine months ended December 31, 2019 as the total number of staff was reduced when compared to the same period in 2018. 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 35% in selling and distribution activities during the nine months ended December 31, 2019, when compared with the nine months ended December 31, 2018

 

Professional services – Investment advisory

 

Company incurred a cost of $438,598 for the nine months ended December 31, 2018 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 $3,972 during the nine months ended December 31, 2019, when compared to the nine months ended December 31, 2018.

 

11
 

 

Allowance for bad debts

 

Allowance for bad debts decreased by $274,409 during the nine months ended December 31, 2019 when compared to the nine months ended December 31, 2018.

 

The loss from operations for the nine months ended December 31, 2019 and 2018 amounted to $51,424 and $952,059, respectively.

 

The Company’s other income and (expenses) for the nine months ended December 31, 2019 and 2018 amounted to $(152,790) and $(196,110), respectively. The following table sets forth the Company’s other income and (expenses) analysis for both periods:

 

  

December 31,

2019

  

December 31,

2018

   Changes 
Interest expense  $(132,135)  $(157,944)  $25,810 
Gain on disposals of property and equipment   573    14    560 
Write back expenses   1,692    4,360    (2,668)
Other income   625    203    422 
Bank charges   (3,146)   (2,268)   (877)
Exchange (loss) / gain   (20,399)   (40,475)   20,075 
   $(152,790)  $(196,110)  $43,321 

 

Other expenses decreased by $43,321, during the nine months ended December 31, 2019, when compared with the nine months ended December 31, 2018. This decrease was mainly due to the decrease in interest expense and exchange loss during the nine months ended December 31, 2019.

 

The loss before provision for income taxes for the nine months ended December 31, 2019 and 2018 amounted to $204,213 and $1,148,169, respectively.

 

The net loss for the nine months ended December 31, 2019 and 2018 amounted to $244,876 and $1,180,108, respectively.

 

The Company’s comprehensive loss for the nine months ended December 31, 2019 and 2018 amounted to $184,900 and $889,418, respectively.

 

Comprehensive Loss: 

December 31,

2019

  

December 31,

2018

 
Unrealized foreign currency translation (loss)\ gain  $59,976   $290,689 
Net loss   (244,876)   (1,180,108)
Comprehensive loss  $(184,900)  $(889,418)

 

At December 31, 2019 and March 31, 2019, the Company had 67,754,296 and 65,754,296 common shares issued and outstanding, respectively. The weighted average number of shares for the nine months ended December 30, 2019 and December 31, 2018 was 67,689,079and 65,738,321, respectively. The loss per share for both periods was $(0.00) per share and $(0.00) per share, respectively.

 

12
 

 

E. Financial condition as at December 31, 2019 and March 31, 2019:

 

Assets:

 

The Company reported total assets of $1,061,417 and $1,082,546 as at December 31, 2019 and March 31, 2019, respectively. 65% of these total assets include intangible assets and 16% 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 $9,080 and $23,513 as at December 31, 2019 and March 31, 2019, respectively. Furthermore, our current assets as at March 31, 2019 totaled $312,875 and as at December 31, 2019, our current assets were $359,707. These current assets comprised of cash of $14,483, accounts receivable of $172,076, prepaid and other current assets of $77,410 and accrued revenue of $95,738.

 

Liabilities:

 

The Company had total liabilities of $4,429,349 and $4,365,577 as at December 31, 2019 and March 31, 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, 2019 totaled $2,914,909. We have seen an increase of 7% in current liabilities amounting to $94,313, making total current liabilities of $3,009,222 as at December 31, 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, 2019, the Company had stockholders’ deficit of $3,283,032. At December 31, 2019, the Company had stockholders’ deficit of $3,367,932 which represents an increase of 2.6%.

 

The Company had 67,754,296 and 65,754,296 shares issued and outstanding at December 31, 2019 and March 31, 2019, respectively.

 

F. Liquidity and capital reserves:

 

The Company had loss from operations of $1,830 and $179,406 for the three months ended December 31, 2019 and 2018, respectively; a total other income (expense) amounting to $(32,275) and $(72,471) for the three months ended December 31, 2019 and 2018, respectively; and a net loss of $46,252 and $263,738 for the three months ended December 31, 2019 and 2018, respectively.

 

In summary, our cash flows for the nine months ended December 31, 2019 and December 31, 2018 were as follows:

 

  

December 31,

2019

  

December 31,

2018

 
Net cash provided by operating activities  $(124,118)  $(278,814)
Net cash used in investing activities   (45,582)   (149,068)
Net cash provided by financing activities   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 $14,483 in cash; net cash provided by operations of $(124,118), for the nine months ended December 31, 2019; working capital deficit of $2,649,515; and stockholders’ deficit of $3,367,932 as of December 31, 2019.

 

13
 

 

G. Milestones for next twelve months (2019-2020):

 

Our specific plan of operations and milestones through December 2020 are as follows:

 

1) Product Development and Launch:
   
  We intend to market the software products online, thereby reaching new geographical locations where we do not have physical presence of partnerships.
   
2) Expansion:

 

  a) Geographical Expansion
     
    We intend to market the software products online, thereby reaching new geographical locations where we do not have physical presence or partnerships.
     
  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 product development;
     
  Expand our global support center to cater to the increase in customer base, and increase in our product lines;

 

14
 

 

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

 

  Continuing to increase revenue, efficiently manage operations and break-even.
     
  Increasing free cash flow and efficiently managing the use of funds;
     
  Raising capital and marketing the software products;
     
  Capitalizing and maximizing on the high growth opportunities in the market; and
     
  Providing robust and steady capital appreciation.

 

  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 8.

 

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.

 

15
 

 

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:

 

 

* Filed herewith.

 

16
 

 

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: February 13, 2020 /s/ Muhunthan Canagasooryam
  Muhunthan Canagasooryam
  President and Chief Executive Officer
  (Principal Executive Officer)
   
Date: February 13, 2020 /s/ Suzannah Jennifer Samuel Perera
  Suzannah Jennifer Samuel Perera
  Chief Financial Officer
  (Principal Accounting and Financial Officer)

 

17