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, 2016

 

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. 403 Galle Road 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]

 

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, 2017, there were 38,567,467 outstanding shares of the Registrant’s Common Stock, $.001 par value.

 

 

 

INDEX

 

	Page
PART I – FINANCIAL INFORMATION	3
Item 1. Financial Statements.	3
Notes to Financial Statements (Unaudited)	F-4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	5
Item 3. Quantitative and Qualitative Disclosures about Market Risk	16
Item 4. Controls and Procedures	16
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.	17
Item 1A. Risk Factors	17
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	19

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

Duo World, Inc. and Subsidiaries

Consolidated Financial Statements

December 31, 2016

(Unaudited)

 

 

CONTENTS

 

	Page(s)
Consolidated Balance Sheets - December 31, 2016 (unaudited) and March 31, 2016	F-1
Consolidated Statements of Operations and Comprehensive Income / (Loss) for the three and nine months ended December 31, 2016 and December 31, 2015 (unaudited)	F-2
Consolidated Statements of Cash Flows for the nine months ended December 31, 2016 and December 31, 2015 (unaudited)	F-3
Notes to the Consolidated Financial Statements (unaudited)	F-4 – F-14

 

 

Duo World, Inc. and Subsidiaries

Consolidated Balance Sheets

 

		December 31, 2016				March 31, 2016
		(Unaudited)				(Audited)
ASSETS
Current Assets
Cash and cash equivalents		$	30,379			$	91,106
Accounts receivable - trade			708,843				512,685
Prepaid expenses and other current assets			245,872				249,745
Accrued Revenue			20,681				31,154
Total Current Assets			1,005,775				884,690
Non Current Assets
Property and equipment, net of accumulated depreciation of $661,913 and $626,292, respectively			54,034				105,790
Intangible assets, net			549,660				382,352
Deferred taxes			17,634				18,070
Total Non Current Assets			621,328				506,212
Total Assets		$	1,627,103			$	1,390,902
LIABILITIES and SHAREHOLDERS’ DEFICIT
Current Liabilities
Accounts Payable		$	281,008			$	377,376
Payroll, employee benefits, severance			237,796				121,395
Short term borrowings			333,426				227,578
Due to related parties			329,626				163,738
Payable for acquisition			185,762				185,762
Taxes payable			69,233				38,978
Accruals and other payables			79,399				83,441
Deferred revenue			23,312				9,954
Total Current liabilities			1,539,562				1,208,222
Long Term Liabilities
Due to related parties			1,162,325				1,194,668
Total Long Term liabilities			1,162,325				1,194,668
Total liabilities		$	2,701,887			$	2,402,890
Commitments and contingencies (Note 16)
Shareholders’ Deficit
Ordinary shares: $0.001 par value per share; 90,000,000 shares authorized; 38,567,467 and 38,060,000 shares issued and outstanding, respectively		$	38,567			$	38,060
Convertible series “A” preferred shares: $0.001 par value per share; 10,000,000 shares authorized; 5,500,000 and 5,500,000 shares issued and outstanding, respectively			5,500				5,500
Additional Paid in Capital			907,456				601,560
Accumulated deficit			(2,160,374	)			(1,733,937	)
Accumulated other comprehensive income			134,067				76,829
Total shareholders’ deficit			(1,074,784	)			(1,011,988	)
Total Liabilities and Shareholders´ Deficit		$	1,627,103			$	1,390,902

 

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

 

 

Duo World, Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

 

		For the three months ended,								For the nine months ended,
		December 31, 2016				December 31, 2015				December 31, 2016				December 31, 2015
Revenue		$	282,385			$	351,183			$	923,501			$	1,019,314
Cost of revenue (exclusive of depreciation presented below)			(84,575	)			(141,355	)			(226,897	)			(310,866	)
Gross Income		$	197,810			$	209,827			$	696,604			$	708,448
Operating Expenses:
Research and development		$	10,461			$	6,867			$	30,088			$	52,169
General and administrative			146,287				156,893				660,512				807,987
Salaries and casual wages			113,514				88,239				322,374				274,927
Selling and distribution			5,937				13,503				12,567				28,856
Depreciation			7,725				9,107				56,149				25,893
Amortization of web site development			438				200				1,664				937
Allowance for bad debts			40,356				-				85,176				-
Total operating expenses			324,718				274,809				1,168,530				1,190,769
Loss from operations		$	(126,908	)		$	(64,982	)		$	(471,926	)		$	(482,321	)
Other Income (Expenses):
Interest expense		$	(7,409	)		$	(7,980	)		$	(17,885	)		$	(24,274	)
Gain on debt extinguishment			-				-				-				16,331
Other income			28				3,155				273				(9	)
Bank charges			(1,005	)			(834	)			(2,733	)			(1,759	)
Exchange gain / (loss)			15,029				11,106				23,689				17,899
Total other income and (expenses)			6,643				5,447				3,344				8,189
Loss before provision for income taxes		$	(120,265	)		$	(59,535	)		$	(468,582	)		$	(474,131	)
Provision for income taxes			-				(532	)			-				(1,644	)
Net loss		$	(120,265	)		$	(60,067	)		$	(468,582	)		$	(475,776	)
Basic and Diluted Loss per Share		$	(0.00	)		$	(0.00	)		$	(0.01	)		$	(0.01	)
Basic and Diluted Weighted Average Number of Shares Outstanding			38,567,467				38,060,000				38,521,304				37,707,709
Comprehensive Income (Loss):
Unrealized foreign currency translation gain		$	42,234			$	(6,247	)		$	51,661			$	18,969
Net loss			(120,265	)			(60,067	)			(468,582	)			(475,776	)
Comprehensive loss		$	(78,031	)		$	(66,314	)		$	(416,921	)		$	(456,807	)

 

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

 

 

Duo World, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

 

		For the nine months ended,
		December 31, 2016				December 31, 2015
Cash flows from operating activities:
Loss before provision for income taxes		$	(468,582	)		$	(474,131	)
Adjustments to reconcile loss before provision for income taxes to cash provided by / (used in) operating activities
Depreciation			57,813				26,830
Bad debts			85,176				-
Previous period adjustments			42,146				-
Stock issued as payment for accrued interest			15,000				-
Stock issued for services			214,600				-
Product development cost written off			108,172				139,323
Changes in assets and liabilities:
Accounts receivable - trade			(281,333	)			14,811
Prepaid expenses and other current assets			3,873				173,992
Deferred taxes			-				(33,235	)
Accrued revenue			10,473				2,952
Accounts Payable			(96,368	)			143,366
Payroll, employee benefits, severance			116,401				75,424
Short term borrowings			105,848				870
Due to relates parties			165,888				11,876
Payable for acquisition			-				(124,238	)
Taxes payable			30,255				-
Accruals and other payables			(4,042	)			16,090
Deferred revenue			13,358				(10,013	)
Net cash provided by / (used in) operating activities		$	118,678			$	(36,084	)
Cash Flows used in investing activities:
Acquisition of property and equipment			(10,512	)			(46,833	)
Addition to intangible assets			(294,507	)			(189,174	)
Net cash used in investing activities		$	(305,019	)		$	(236,007	)
Cash flows from financing activities:
Long term - Due to related parties			-				(58,297	)
Common stock			151,001				3,460
Preferred stock			-				500
Additional paid in capital			(74,197	)			342,540
Net cash provided by financing activities		$	76,804			$	288,203
Effect of exchange rate changes on cash			48,810				42,941
Net (decrease) / increase in cash		$	(60,727	)		$	59,053
Cash at Beginning of Period			91,106				10,530
Cash at End of Period		$	30,379			$	69,583

 

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

 

 

Duo World Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

(Unaudited)

 

Note 1 - Organization and Nature of Operations

 

Duo World Inc. (hereinafter referred to as “Successor” or “Duo”) a private company, 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 22nd September 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 5th June 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 30th August 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). 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 application (“Duo Subscribe”, “Duo Contact”, “Digin”, “Facetone” CloudCharge and SmoothFlow) provide solutions in the space of Data Analytics, Customer Life Cycle Management, Subscriber Billing and Work Flow.

 

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, 2016. The interim results for the period ended December 31, 2016 are not necessarily indicative of results for the full fiscal year.

 

Note 3 - Summary of Significant Accounting Policies

 

Basis of Consolidation

 

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

 

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 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. 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.

 

 

Duo World Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

(Unaudited)

 

Risks and Uncertainties

 

The Company’s operations are subject to significant risk and uncertainties including financial, operational, competition and potential risk of business failure. Product revenues are concentrated in the application software industry, which is highly competitive and rapidly changing. Significant technological changes in the industry or customer requirements, or the emergence of competitive products with new capabilities or technologies, could adversely affect operating results

 

Concentrations of Credit Risk

 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company maintains cash and cash equivalents with various high quality financial institutions and we monitor the credit ratings of those institutions. The Company’s sales are primarily to the companies located in Sri Lanka, Singapore, Indonesia and India. The Company performs ongoing credit evaluations of our customers, and the risk with respect to trade receivables is further mitigated by the diversity, both by geography and by industry, of the customer base. Accounts receivable are due principally from the companies under stated contract terms.

 

Provisions

 

A provision is recognized when the Company has present obligations as a result of a 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 of receivables from its clients. However, there are inevitably occasions when the receivables due to the Company cannot be collected and, therefore, have to be written off as bad debts. While the debt collection process is being pursued, an assessment is made of the likelihood of the receivable being collectable. A provision is, therefore, made against the outstanding receivable to reflect that component that may not become collectable. The Company is in the practice of provisioning for doubtful debts based on the period outstanding as per the following:

 

Trade receivables outstanding:		Provision
Over 24 months			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, 2016 and March 31, 2016, 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).

 

 

Duo World Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

(Unaudited)

 

Fixed assets

 

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

 

For the financial year ending March 31, 2016, the useful life of Computer Equipment and Website development were assumed to be 5 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 related to the sale, 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.

 

 

Duo World Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

(Unaudited)

 

Revenue Recognition, Deferred& Accrued Revenue

 

The Company recognizes revenue from the sale of software licenses and related services in accordance with ASC Topic 605, Revenue Recognition. ASC Topic 605 sets forth guidance as to when revenue is realized or realizable and earned, which is generally, when all of the following criteria are met:

 

●	Persuasive evidence of an arrangement exists. Evidence of an arrangement generally consists of a contract or purchase order signed by the customer.
●	Delivery has occurred or services have been performed. Services are considered delivered as the work is performed or, in the case of maintenance, over the contractual service period. The Company uses written evidence of customer acceptance to verify delivery or completion of any performance terms.
●	The seller’s price to the buyer is fixed or determinable. The Company assesses whether the sales price is fixed or determinable based on payment terms associated with the transaction and whether the sales price is subject to refund or adjustment.
●	Collectability is reasonably assured. The Company assesses collectability primarily based on the creditworthiness of the customer as determined by credit checks and related analysis, as well as the customer’s payment history, economic conditions in the customer’s industry and geographic location and general economic conditions. If we do not consider collection of a fee to be probable, we defer the revenue until the fees are collected, provided all other conditions for revenue recognition have been met.

 

The Company typically 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. Currently, Duo is offering three products from which it generates its revenue; they are “Duo Contact”, “Duo Subscribe” and “Facetone”. In the case of “Duo Contact”, Duo offers license to use software to its clients under an agreement. Invoices are raised monthly over the term of agreement, and it recognizes revenue monthly over the term of the underlying arrangement. In the case of “Duo Subscribe” and “Facetone”, Duo sells its software license along with software implementation and annual maintenance services under an agreement with various clients. The Company raises invoices on a key milestone basis, as defined in the agreement. Revenue recognition is based on stage of completion basis. 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. Maintenance fees are bundled with license fees in the initial licensing period and charged separately for renewals of annual maintenance in subsequent years. Fair value for maintenance is based upon either renewal rates stated in the contracts or separate sales of renewals to customers. Revenue is recognized ratably, or daily, over the term of the maintenance period, which is typically one year.

 

For the nine months ended December 31, 2016 and 2015, the Company received only cash as consideration for sale of licenses and related services rendered.

 

For the nine months ended December 31, 2016 and December 31, 2015, the Company had following concentrations of revenue with customers:

 

Customer		December 31, 2016				December 31, 2015
Megamedia			38.51	%			32.22	%
DEN Networks			30.08	%			26.49	%
Hutchison			9.09	%			13.58	%
Mediatama			2.55	%			7.27	%
Dish Media			-				6.16	%
HelloCorp			2.49	%			3.57	%
Topaz			7.04	%			2.71	%
Bank of Ceylon			2.00	%			-
Other misc. customers			8.24	%			8.01	%
			100.00	%			100.00	%

 

 

Duo World Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

(Unaudited)

 

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, 2016 and March 31, 2016, deferred revenue was $23,312 and $9,954 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, 2016 and March 31, 2016, unbilled/accrued revenues were $20,681 and $31,154 respectively.

 

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 nine months ending on December 31, 2016 and 2015, product research and development cost of $294,507 and $189,174 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, 2016. The amount expensed during the nine months ended December 31, 2015 was $781and is included in selling and distribution expense in the accompanying consolidated statements of operations.

 

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, 2013 through December 31, 2016, includes only foreign currency translation gains (losses), and is presented in the Company’s consolidated statements of comprehensive income.

 

 

Duo World Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

(Unaudited)

 

Changes in Accumulated Other Comprehensive Income (Loss) by Component during the periods ending on December 31, 2016 and March 31, 2016 were as follows:

 

Foreign Currency Translation gains (losses)
Balance, March 31, 2015		$	84,309
Translation rate loss			(7,480	)
Balance, March 31, 2016		$	76,829
Translation rate gain during the period			57,238
Balance, December 31, 2016		$	134,067

 

Recent Accounting Pronouncements

 

The Company has reviewed accounting pronouncements that were issued as of December 31, 2016 and believes that these pronouncements are not applicable to the Company, or that they will not have a material impact on the Company’s financial position or results of operations.

 

Note 4 – Accounts Receivable

 

Following is a summary of accounts receivable as at December 31, 2016 and March 31, 2016:

 

		December 31, 2016				March 31, 2016
Accounts receivable – Trade		$	951,706			$	674,823
Less: Provision for doubtful debts			(242,863	)			(162,138	)
		$	708,843			$	512,685

 

At December 31, 2016 and March 31, 2016, the Company had following concentrations of accounts receivable with customers:

 

Customer		December 31, 2016				March 31, 2016
Megamedia			60.82	%			28.92	%
Digicable			4.73	%			23.68	%
DEN Networks			13.97	%			11.97	%
Dish Media			5.95	%			5.55	%
Topas			8.46	%			1.62	%
MediaNet			1.03	%			3.54	%
Mediatama			1.52	%			1.86	%
Hutchison			-				2.45	%
Fastway			-				5.54	%
Pentavision			-				4.51	%
Technosat			-				3.15	%
Other Misc. receivables			3.52	%			7.22	%
			100.00	%			100.00	%

 

 

Duo World Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

(Unaudited)

 

Note 5 – Prepaid Expenses and Other Current Assets

 

Following is a summary of prepaid expenses and other current assets as at December 31, 2016 and March 31, 2016:

 

		December 31, 2016				March 31, 2016
Security deposits		$	20,923			$	24,132
WHT receivable			198,329				205,632
Staff loan and advances			304				1,052
Supplier advance			4,304				1,786
ESC receivable			5,914				6,131
Insurance prepayment			2,003				1,632
Prepayments			243				1,526
Other receivables			13,852				7,854
		$	245,872			$	249,745

  

Note 6 – Property and Equipment

 

Following table illustrates net book value of property and equipment as at December 31, 2016 and March 31, 2016:

 

		December 31, 2016				March 31, 2016
Office equipment		$	19,099			$	19,802
Furniture & fittings			212,695				220,526
Computer equipment (Data Processing Equipment)			468,278				479,273
Improvements to lease hold assets			1,922				1,993
Website Development			13,953				10,487
			715,947				732,082
Less: Accumulated depreciation and amortization			(661,913	)			(626,292	)
Net property and equipment		$	54,034			$	105,790

 

Depreciation and amortization expense for the nine months ended December 31, 2016 and 2015 was $57,813 and $26,830 respectively.

 

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 December 31, 2016 and March 31, 2016:

 

		December 31, 2016				March 31, 2016
Opening Balance		$	382,352			$	327,542
Add: Costs capitalized during the period			294,507				276,197
Less: Amount written –off during the period			(108,172	)			(202,311	)
Translational loss			(19,028	)			(19,076	)
Net Intangible Assets		$	549,660			$	382,352

 

 

Duo World Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

(Unaudited)

 

Note 8 – Short Term Borrowings

 

Following is a summary of short-term borrowings as at December 31, 2016 and March 31, 2016:

 

		December 31, 2016				March 31, 2016
Yenom (Pvt.) Limited		$	-			$	13,636
PAN Asia Bank – Short term overdraft			328,511				213,804
Commercial Bank			4,916				138
		$	333,426			$	227,578

 

Bank overdraft facility, obtained from Pan Asia Banking Corporation PLC, contains an interest rate of 9.61% per annum up to $ 101,846 and 11.35% per annum up to $ 207,383.

 

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 December 31, 2016 and March 31, 2016, the Company owed directors $329,626 and $163,738 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. Related party loan in the Balance Sheet of Duo Software Pte. Ltd was recognized at cost as of December 31, 2016, and at amortized cost as of March 31, 2016. As of December 31, 2016 and March 31, 2016, the Company owed directors $1,162,325 and $1,194,668 respectively.

 

Note 10 – Taxes Payable

 

The taxes payable comprise of items listed below as at December 31, 2016 and March 31, 2016:

 

		December 31, 2016				March 31, 2016
Stamp Duty Payable		$	52			$	51
PAYE			63,089				33,718
Tax payable			6,092				5,209
		$	69,233			$	38,978

 

Note 11 – Accruals and Other Payables

 

Following is a summary of accruals and other payables as at December 31, 2016 and March 31, 2016:

 

		December 31, 2016				March 31, 2016
Audit fee payable		$	-			$	4,715
Accrued expenses			9,639				7,860
Third party refundable deposits			200				-
Other payables			69,560				70,866
		$	79,399			$	83,441

 

 

Duo World Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

(Unaudited)

 

Note 12 – Cost of Revenue

 

Following is the summary of cost of revenue for the nine months ending December 31, 2016 and 2015:

 

		December 31, 2016				December 31, 2015
Purchases		$	31,737			$	94,205
Implementation and onsite support cost			32,445				16,053
Product development cost written off			108,101				139,591
Consultancy, contract basis employee cost			19,007				15,676
Developer support and implementation			21,859				15,207
Other external services			7,981				30,134
Cost of development services			5,767				-
		$	226,897			$	310,866

 

Note 13 – General and Administrative Expenses

 

Following is the summary of general and administrative expenses for the nine months ending December 31, 2016 and 2015:

 

		December 31, 2016				December 31, 2015
Directors remuneration		$	78,758			$	82,530
EPF			36,493				31,103
ETF			9,123				7,775
Bonus			24,961				39,598
Vehicle allowance			42,905				38,800
Staff welfare			20,176				20,476
Penalties / Late payment charges			4,792				5,018
Office rent			57,481				48,449
Electricity charges			12,190				14,869
Office maintenance			12,741				15,646
Telephone charges			9,304				9,765
Travelling expense			2,470				35,010
Printing and stationery			1,368				2,051
Office expenses			1,773				1,645
Computer maintenance			4,764				15,585
Internet charges			9,952				8,171
Courier and postage			575				465
Security charges			2,700				2,941
Training and development			170				288
Insurance expense			1,735				1,215
Professional fees			26,951				3,013
Secretarial fees			740				104
Un-claimable VAT input/ Irrecoverable tax			34,178				29,217
Software Rentals			19,372				16,102
Other professional services			224,103				352,146
Audit fee			5,068				20,000
Transfer agent fees			1,235				2,460
Filling fee and subscription			4,047				-
Stamp duty expenses			728				-
Legal fee			5,505				-
Gratuity			3,724				2,538
Other expenses			430				1,007
		$	660,512			$	807,987

 

 

Duo World Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

(Unaudited)

 

Note 14 – Selling and Distribution Expenses

 

Following is the summary of selling and distribution expenses for the nine months ending on December 31, 2016 and 2015:

 

		December 31, 2016				December 31, 2015
Marketing Expenses		$	1,472			$	18,737
Vehicle hire charges			4,810				5,040
Vehicle running expense			3,608				1,720
Foreign Travel			2,427				2,361
Advertisement			-				781
Visa expenses			250				217
		$	12,567			$	28,856

 

Note 15 - Equity

 

(A)

Common Stock

 

As at December 31, 2016, the Company had 90,000,000 authorized shares of common stock having a par value of $0.001. The shares of Common Stock are designated with the following rights:

 

●	Voting rights: Common shareholders can attend at annual or special meeting of shareholders 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 the Company’s earnings equally on a per share basis in the form of dividends. Similarly, in the event of liquidation, shareholders have claims on assets that remain after meeting the obligations to pay 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.

 

 

Duo World Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

(Unaudited)

 

During the nine months ended December 31, 2016, the Company issued following common shares:

 

Date			Type		No. of Shares				Valuation
04/22/2016			Stock issued to PPM-2 investor			188,000			$	141,000
04/22/2016			Stock issued to PPM-2 investor			13,334				10,001
04/27/2016			Stock issued for services			46,133				34,600
04/27/2016			Stock issued for services			240,000				180,000
04/27/2016			Stock issued as payment for accrued interest			20,000				15,000
						507,467			$	380,600

 

(B)

Preferred Stock

 

As at December 31, 2016, the Company had 10,000,000 authorized series “A” preferred shares having a par value of $0.001 per share. The preferred shares are designated with the following conversion rights:

 

●	One preferred share will convert into ten (10) common shares no earlier than 12 months and 1 day after the issuance.

 

During the nine months ended December 31, 2016, the Company has not issued any new preferred shares.

 

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 $121,753 with Happy Building Management Company for a period of 3 years in 2016. Duo entered into another lease commitment for its Indian office amounting to $1,199 on April 1, 2016 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
	23/09/2011			Performance Bond for BOC Tender		$	10,160
	15/05/2013			Guarantee for Lanka Clear			2,135
	09/10/2012			Guarantee for CEB			338
	31/07/2014			Guarantee for SLT			575
	10/08/2015			Guarantee for LOLC			1,623
						$	14,831

 

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.

 

 

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, 2016 and December 31, 2015

 

D. Results of operations for the nine months ended December 31, 2016 and December 31, 2015

 

E. Financial condition as at December 31, 2016 and March 31, 2016

 

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 private company, 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, has been in the business of developing products and services for the subscription based industry. The Company’s applications (“DuoSubscribe” & “DuoCLM”) run on its core platform “Duo World” and is a provider of solutions for its customers for Customer Life Cycle Management, Subscriber Management, Customer Care, Billing and Contact Center Management.

 

Our authorized capital consists of 100,000,000 shares of common stock, $0.001 par value, of which 10,000,000 shares of preferred stock, $0.001 par value.

 

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 in accordance with ASC Topic 605, Revenue Recognition. ASC Topic 605 sets forth guidance as to when revenue is realized or realizable and earned, which is generally, when all of the following criteria are met:

 

	●	Persuasive evidence of an arrangement exists. Evidence of an arrangement generally consists of a contract or purchase order signed by the customer.
	●	Delivery has occurred or services have been performed. Services are considered delivered as the work is performed or, in the case of maintenance, over the contractual service period. The Company uses written evidence of customer acceptance to verify delivery or completion of any performance terms.
	●	The seller’s price to the buyer is fixed or determinable. The Company assesses whether the sales price is fixed or determinable based on payment terms associated with the transaction and whether the sales price is subject to refund or adjustment.
	●	Collectability is reasonably assured. The Company assesses collectability primarily based on the creditworthiness of the customer as determined by credit checks and related analysis, as well as the customer’s payment history, economic conditions in the customer’s industry and geographic location and general economic conditions. If we do not consider collection of a fee to be probable, we defer the revenue until the fees are collected, provided all other conditions for revenue recognition have been met.

 

 

The Company typically 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. Currently, Duo is offering three products from which it generates its revenue; they are “Duo Contact”, “Duo Subscribe” and “FaceTone”. In the case of “DuoContact”, Duo offers license to use software to its clients under an agreement. Invoices are raised monthly over the term of agreement, and it recognizes revenue monthly over the term of the underlying arrangement. In the case of “Duo Subscribe” and “FaceTone”, 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. Revenue recognition is based on stage of completion basis. 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. Maintenance fees are bundled with license fees in the initial licensing period and charged separately for renewals of annual maintenance in subsequent years. Fair value for maintenance is based upon either renewal rates stated in the contracts or separate sales of renewals to customers. Revenue is recognized ratably, or daily, over the term of the maintenance period, which is typically one year.

 

Provisions

 

A provision is recognized when the company has present obligations as a result 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.

 

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, 2016 and December 31, 2015:

 

The Company had revenues amounting to $282,385 and $351,183, respectively, for three months ended December 31, 2016 and December 31, 2015. Following is a breakdown of revenues for both periods:

 

		December 31, 2016				December 31, 2015				Changes
DuoSubscribe		$	271,478			$	286,767			$	(15,289	)
DuoCLM			5,590				62,642				(57,052	)
Software hosting and reselling - FaceTone (Beta/testing version)			2,139				1,774				365
FaceTone			3,178				-				3,178
		$	282,385			$	351,183			$	(68,798	)

 

Total revenue for the three months ended December 31, 2016 decreased by 20% when compared to December 31, 2015. The decrease is mainly due to the drop in revenue generated by the product DuoCLM (91%) and DuoSubscribe (5%) in the three months ended December 31, 2016 when compared to the same period in 2015.

 

The company is no longer marketing DuoCLM and DuoSubscribe actively, as the newer products are being introduced to the market. FaceTone is an advanced version of DuoCLM, and it is generating a lot of interest in the market, because of its superior features and flexibility.

 

Fully owned subsidiary of Duo World Inc., Duo Software won a ‘Merit Award’ at the Asia Pacific ICT Alliance (APICTA) Awards, held in December 2016 in Taipei, just months after winning ‘Gold’ and ‘Merit’ Awards at the National Best Quality Software Awards (NBQSA) for the new products.

 

For the three months ended December 31, 2016 and December 31, 2015, the Company had the following concentrations of revenues with customers:

 

Customer		December 31, 2016				December 31, 2015
A			41.95	%			31.89	%
B			40.68	%			26.38	%
C			5.02	%			7.86	%
D			3.72	%			4.70	%
Other misc. customers			8.63	%			29.17	%
			100	%			100	%

 

 

The total cost of sales amounted to $84,575 and $141,355 for the three months ended December 31, 2016 and December 31, 2015, respectively. The following table sets forth the Company’s cost of sales breakdown for both periods:

 

		December 31, 2016				December 31, 2015				Change
Purchases		$	12,041			$	41,525			$	(29,484	)
Implementation and onsite support cost			9,542				9,531				11
Product development cost written off			38,105				49,734				(11,629	)
Consultancy, contract basis employee cost			-				2,781				(2,781	)
Developer support and implementation			11,139				7,651				3,488
Other external services			7,981				30,133				(22,152	)
Cost of development services			5,767				-				5,767
Total cost of sales		$	84,575			$	141,355			$	(56,780	)

 

Cost of sales as a percentage to revenue declined from 40% in the three months ended December 31, 2015 to a 30% in the three months ended December 31, 2016. Reduction in purchases (outsourced components) and external services were the main contributors to the decrease in cost of sales.

 

The gross income for the three months ended December 31, 2016 and December 31, 2015 amounted to $197,810 and $209,827, respectively.

 

The total operating expenditures amounted to $324,718 and $274,809 for the three months ended December 31, 2016 and December 31 2015, respectively. The following table sets forth the Company’s operating expenditure analysis for both periods:

 

		December 31, 2016				December 31, 2015				Change
Research and development		$	10,461			$	6,867			$	3,594
General and administrative			146,287				156,893				(10,606	)
Salaries and benefits			113,514				88,239				25,275
Selling and distribution			5,937				13,503				(7,566	)
Depreciation			7,725				9,107				(1,382	)
Amortization of web site development			438				200				238
Allowance for bad debts			40,356				-				40,356
Total operating expenses		$	324,718			$	274,809			$	49,909

 

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

 

Research and Development

 

Research and development expenses nominally increased by $3,594 during the three months ended December 31, 2016 when compared with three months ended December 31, 2015.

 

General and Administrative Cost

 

During the three months ended December 31, 2016, general and administrative cost declined by 7% when compared to the same period in 2015. The main reason for the decline was non-payment of bonus in the three months ended 2016. During the three months ended December 31, 2015, the Bonus expenditure amounted to 15% of the total general and administrative cost.

 

 

Salaries and benefits

 

Salaries and benefits increased by 29% during the three months ended December 31, 2016 when compared with the same period in 2015. The company increased its salaries and benefits paid to staff in the months of August and October 2016, in order to remain competitive and attract the right resources.

 

Selling and distribution

 

There is a decrease of 56% on account of expenditure incurred for selling and distribution activities in the three months ended December 31, 2016 when compared to the three months ended December 31, 2015. The company curtailed all marketing activities related to DuoCLM and DuoSubscribe, during the three months ended December 31, 2016, and focused on completing the testing the new products.

 

Allowance for bad debts

 

During the three months ended December 31, 2016, the company provided an allowance for bad debts on a quarterly basis, whereas it was only provided at the financial year end during the previous period.

 

The loss from operations for the three months ended December 31, 2016 and December 31, 2015 amounted to $126,908 and $64,982, respectively.

 

The Company’s other income and (expenses) for the three months ended December 31, 2016 and December 31, 2015 amounted to $6,643 and $5,447, respectively. The following table sets forth the Company’s other income and (expenses) analysis for both periods:

 

		December 31, 2016				December 31, 2015				Change
Interest expense		$	(7,409	)		$	(7,980	)		$	571
Other income			28				3,155				(3,127	)
Bank charges			(1,005	)			(834	)			(171	)
Exchange gain			15,029				11,106				3,923
Total other income (expenses)		$	6,643			$	5,447			$	1,196

 

Other income has marginally increased from $ 5,447 in the three months ended December 31, 2015 to $6,643 in the three months ended December 31, 2016. The main reason for this increase was the favorable fluctuations in exchange rates.

 

The loss before provision for income taxes for the three months ended December 31, 2016 and December 31, 2015 amounted to $120,265 and $59,535, respectively.

 

The net loss for the three months ended December 31, 2016 and December 31, 2015 amounted to $120,265 and $60,067, respectively.

 

The Company’s comprehensive loss for the three months ended December 31, 2016 and December 31, 2015 amounted to $78,031 and $66,314, respectively.

 

Comprehensive Income / (Loss):		December 31, 2016				December 31, 2015
Gain / (loss) on foreign currency translation		$	42,234			$	(6,247	)
Net loss			(120,265	)			(60,067	)
Comprehensive loss		$	(78,031	)		$	(66,314	)

 

 

At December 31, 2016 and March 31, 2016, the Company had 38,567,467 and 38,060,000 common shares issued and outstanding, respectively. The weighted average number of shares for the three months ended December 31, 2016 and December 31, 2015 was 38,567,467 and 38,060,000, 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, 2016 and December 31, 2015:

 

The Company had revenues amounting to $923,501 and $1,019,314, respectively, for nine months ended December 31, 2016 and December 31, 2015. Following is a breakdown of revenues for both periods:

 

		December 31, 2016				December 31, 2015				Changes
DuoSubscribe		$	763,175			$	808,451			$	(45,276	)
DuoCLM			144,966				203,698				(58,732	)
Software hosting and reselling - FaceTone (Beta/testing version)			7,392				7,165				227
FaceTone			7,968				-				7,968
		$	923,501			$	1,019,314			$	(95,813	)

 

Total revenue for the nine months ended December 31, 2016 has marginally decreased by 9% when compared to nine months ended December 31, 2015. The decrease was mainly due to the decrease in revenue generated by the product DuoCLM (29%) and DuoSubscribe (5%) in the nine months ended December 2016 when compared to the nine months ended December 31, 2015. The company has also scaled down all marketing and selling activities for DuoCLM and DuoSubscribe

 

For the nine months ended December 31, 2016 and December 31, 2015, the Company had the following concentrations of revenues with customers:

 

Customer		December 31, 2016				December 31, 2015
A			38.51	%			32.22	%
B			30.08	%			26.49	%
C			9.09	%			13.58	%
D			7.04	%			2.71	%
Other misc. customers			15.28	%			25.00	%
			100	%			100	%

 

The total cost of sales amounted to $226,897 and $310,866 for the nine months ended December 31, 2016 and December 31, 2015, respectively. The following table sets forth the Company’s cost of sales breakdown for both periods:

 

		December 31, 2016				December 31, 2015				Change
Purchases		$	31,737			$	94,205			$	(62,468	)
Implementation and onsite support cost			32,445				16,053				16,392
Product development cost written off			108,101				139,591				(31,490	)
Consultancy, contract basis employee cost			19,007				15,676				3,331
Developer support and implementation			21,859				15,207				6,652
Other external services			7,981				30,134				(22,153	)
Cost of development services			5,767				-				5,767
Total cost of sales		$	226,897			$	310,866			$	(83,969	)

 

 

Cost of sales as a percentage to revenue declined from 30% in the nine months ended December 31, 2015, to 25% in the same period in 2016. Reduction in purchases, services received from external parties and decrease in product development cost write off, were the main contributors to the decrease in cost of sales during the nine months ended December 31, 2016.

 

The gross income for the nine months ended December 31, 2016 and December 31, 2015 amounted to $696,604 and $708,448, respectively.

 

The total operating expenditures amounted to $1,168,530 and $1,190,769 for the nine months ended December 31, 2016 and December 31, 2015, respectively. The following table sets forth the Company’s operating expenditure analysis for both periods:

 

		December 31, 2016				December 31, 2015				Change
Research and development		$	30,088			$	52,169			$	(22,081	)
General and administrative			660,512				807,987				(147,475	)
Salaries and benefits			322,374				274,927				47,447
Selling and distribution			12,567				28,856				(16,289	)
Depreciation			56,149				25,893				30,256
Amortization of web site development			1,664				937				727
Allowance for bad debts			85,176				-				85,176
Total operating expenses		$	1,168,530			$	1,190,769			$	(22,239	)

 

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

 

Research and Development

 

Research and development expenses decreased by 42% during the nine months ended December 31, 2016 when compared with the nine months ended December 31, 2015, as most products have completed research and development phase and moved on to product development phase.

 

General and Administrative Cost

 

During the nine months ended December 31, 2016, general and administrative cost declined by 18% when compared to the same period in 2015. The main reason for the decrease is due to the reduction in the professional fees paid to consultants and auditors in preparation and filing of S1 registration statement. This cost amounted to $252,809 and $369,910 respectively in the nine months ended December 31, 2016, and December 31, 2015. Resulting in a reduction of 32% in the nine months ended December 31, 2016

 

Salaries and benefits

 

Salaries and benefits increased by 17% during the nine months ended December 31, 2016 when compared with the same period in 2015. The company Increased salaries and benefits paid to staff in order to remain competitive and attract resources.

 

Selling and distribution

 

There is a decrease of 56% on account of expenditure incurred for selling and distribution activities in the nine months ended December 31, 2016 when compared to the nine months ended in December 31, 2015.

 

 

The company curtailed all marketing activities on its existing products DuoCLM and DuoSubscribe, during the nine months ended December 31, 2016, in order to focus on its new products,

 

Allowance for bad debts

 

During the nine months ended December, 2016, the company provided an allowance for bad debts on a quarterly basis, whereas it was provided at the end of financial year during the previous period.

 

The loss from operations for the nine months ended December 31, 2016 and December 31, 2015 amounted to $471,926 and $482,321, respectively.

 

The Company’s other income and (expenses) for the nine months ended December 31, 2016 and December 31, 2015 amounted to $3,344 and $8,189, respectively. The following table sets forth the Company’s other income and (expenses) analysis for both periods:

 

		December 31, 2016				December 31, 2015				Change
Interest expense		$	(17,885	)		$	(24,274	)		$	6,389
Gain on debt extinguishment			-				16,331				(16,331	)
Other income			273				(9	)			282
Bank charges			(2,733	)			(1,759	)			(974	)
Exchange gain / (loss)			23,689				17,899				5,790
Total other income (expenses)		$	3,344			$	8,189			$	(4,845	)

 

Other income has decreased from $8,189 in the nine months ended December 31, 2015 to $3,344 in the nine months ended December 31, 2016. This decrease is mainly due to the gain recorded on debt extinguishment during the nine months ended December 31, 2015.

 

The loss before provision for income taxes for the nine months ended December 31, 2016 and December 31, 2015 amounted to $468,582 and $474,131, respectively.

 

The net loss for the nine months ended December 31, 2016 and December 31, 2015 amounted to $468,582 and $475,776, respectively.

 

The Company’s comprehensive loss for the nine months ended December 31, 2016 and December 31, 2015 amounted to $416,921 and $456,807, respectively.

 

Comprehensive Loss:		December 31, 2016				December 31, 2015
Gain on foreign currency translation		$	51,661			$	18,969
Net loss			(468,582	)			(475,776	)
Comprehensive loss		$	(416,921	)		$	(456,807	)

 

At December 31, 2016 and March 31, 2016, the Company had 38,567,467 and 38,060,000 common shares issued and outstanding, respectively. The weighted average number of shares for the nine months ended December 31, 2016 and December 31, 2015 was 38,521,304 and 37,707,709, respectively. The loss per share for both periods was $(0.01) per share and $(0.01) per share, respectively.

 

 

E.	Financial condition as at December 31, 2016 and March 31, 2016:

 

Assets:

 

The Company reported total assets of $1,627,103 and $1,390,902 as on December 31, 2016 and March 31, 2016, respectively. 44% of these total assets include net accounts receivables and 34% of total assets comprise intangible assets of the Company. Our property and equipment include office equipment, computer equipment (Data Processing Equipment), furniture and fittings, web site developments and improvement to lease- hold assets having a total net book value of $54,034 and $105,790 as at December 31, 2016 and March 31, 2016, respectively. We also had a deferred tax asset of $18,070 as at March 31, 2016 which now totals to $17,634 as at December 31, 2016. Furthermore, our current assets at March 31, 2016 totaled $884,690 and at December 31, 2016, these current assets amounted to $1,005,775 comprised of cash of $30,379, accounts receivable of $708,843, prepaid and other current assets of $245,872 and accrued revenue of $20,681.

 

Liabilities:

 

The Company had total liabilities of $2,701,887 and $2,402,890 as at December 31, 2016 and March 31, 2016 respectively. Long term liabilities include balances owed to related parties which are outstanding for more than 12 months. Our current liabilities at March 31, 2016 totaled $1,208,022. We have seen a 27% increase in current liabilities amounting to $331,340, making total current liabilities of $1,539,562 as at December 31, 2016. 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, 2016, the Company had stockholders´ deficit of $1,011,988. At December 31, 2016, the Company had stockholders´ deficit of $1,074,784, which represents an increase of 6%.

 

The Company had 38,567,467 and 38,060,000 shares issued and outstanding at December 31, 2016 and March 31, 2016, respectively.

 

F.	Liquidity and capital reserves:

 

The Company had loss from operations of $126,908 and $471,926 for the three and nine months ended December 31, 2016, respectively; a total other income amounting to $6,643 and $3,344 for the three and nine months ended December 31, 2016, respectively; and a net loss of $120,265 and $468,582 for the three and nine months ended December 31, 2016, respectively.

 

In summary, our cash flows for the nine months ended December 31, 2016 and December 31, 2015 were as follows:

 

		December 31, 2016				December 31, 2016
Net cash provided by / (used in) operating activities		$	118,678			$	(36,084	)
Net cash used in investing activities			(305,019	)			(236,007	)
Net cash provided by financing activities			76,804				288,203

 

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 $30,379 in cash; net cash provided by operations of $118,678 for the nine months ended December 31, 2016; working capital deficit of $533,787 and stockholders´ deficit of $1,074,784 as of December 31, 2016.

 

 

G.	Milestones for next twelve months (2016-2017):

 

Our specific plan of operations and milestones through January 2018 are as follows:

 

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

 

	a)	Geographical Expansion
		We intend to set up sales and support teams in Asian countries that have growing subscription markets. We hope to establish our presence in the United States by opening our first sales office in Boston during 2017.
	b)	Market Expansion
		Currently, we have clients in India, Indonesia, Nepal, Maldives, Dubai and Sri Lanka.
		We intend to expand into new markets and regions with enhanced and new products
	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;
	●	Set up a smaller software development center in India, which would also be used as a disaster recovery center in the event our development center in Sri Lanka becomes incapacitated due to unforeseen events.

 

 

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

  

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

 

	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 in 2017.

 

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.

 

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

 

In April 2016, we issued the following shares of our common stock to the following persons for the consideration indicated below:

 

Name of Shareholder		Number of Shares Issued		Aggregate Consideration
Ali Akbar Salehbhai
15/1 Duplication Road Colombo 05 Colombo, Sri Lanka		188,000 Common Stock		$141,000.00
Murtaza Ghandi
25223 Sterling Cloud Katy, Texas 77494		13,334 Common Stock		$10,000.50
Global Equity Partners Plc.
Office 3305, Jumeirah Bay Tower X3, JLT Dubai, UAE		46,133 Common Stock		$ 34,599.75 for consulting services
Spearfish Capital Group Limited
Vanterpool Plaza, 2nd Floor, Wickhams Cay I, Road Town, Tortola, British Virgin Islands		240,000 Common Stock		$ 180,000.00 for consulting services
Yenom (Pvt.) Limited
14A Cambridge Terrace, Colombo 07, Colombo, Sri Lanka.		20,000 Common Stock		$ 15,000.00 for consulting services

 

The above shares were issued in reliance on the exclusion from the registration requirements of the 33 Act provided by Regulation S or in reliance on the exemptions from registration requirements of the 33 Act provided Section 4(a)(2) of the 1933 Act or by Rule 506 of Regulation D promulgated thereunder, as the issuance of the stock did not involve a public offering of securities.

 

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.

 

 

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 10, 2017	/s/ Muhunthan Canagasooryam
	Muhunthan Canagasooryam
	President and Chief Executive Officer
	(Principal Executive Officer)
Date: February 10, 2017	/s/ Suzannah Jennifer Samuel Perera
	Suzannah Jennifer Samuel Perera
	Chief Financial Officer
	(Principal Accounting and Financial Officer)