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

 

	Page
PART I – FINANCIAL INFORMATION	F-1
Item 1. Financial Statements.	F-1
Notes to Financial Statements (Unaudited)	F-7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3. Quantitative and Qualitative Disclosures about Market Risk	15
Item 4. Controls and Procedures	15
PART II – OTHER INFORMATION	15
Item 1. Legal Proceedings.	15
Item 1A. Risk Factors	15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3. Defaults Upon Senior Securities	16
Item 4. Mine Safety Disclosure	16
Item 5. Other Information.	16
Item 6. Exhibits	16
SIGNATURES	17

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

Duo World, Inc. and Subsidiaries

Consolidated Financial Statements

December 31, 2019

(Unaudited)

 

 

CONTENTS

 

	Page(s)
Consolidated Balance Sheets - December 31, 2019 (unaudited) and March 31, 2019	F-3
Consolidated Statements of Operations and Comprehensive Income / (Loss) for the three and nine months ended December 31, 2019 and December 31, 2018 (unaudited)	F-4
Consolidated Statements of Cash Flows for December 31, 2019 and December 31, 2018 (unaudited)	F-5
Consolidated Statement of Changes in Shareholders’ Deficit for the December 31, 2019 (unaudited) and March 31, 2019	F-6
Notes to the Consolidated Financial Statements (unaudited)	F-7 – F-21

 

 

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

 

 

Duo World, Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

 

		For the three months ended,								For the nine months ended,
		December 31, 2019				December 31, 2018				December 31, 2019				December 31, 2018
Revenue		$	177,068				150,199			$	561,165				479,080
Cost of revenue (exclusive of depreciation presented below)			(57,278	)			(57,658	)			(205,369	)			(185,101	)
Gross Income			119,790				92,541				355,796				293,979
Operating Expenses
General and administrative			80,943				82,579				260,831				276,421
Salaries and casual wages			28,834				53,392				97,271				198,319
Selling and distribution			1,829				9,238				9,604				14,807
Professional services - investment advisory			-				-				-				438,598
Depreciation			4,169				4,796				13,129				17,227
Amortization of web site development			476				432				1,443				1,317
Allowance for bad debts			5,369				121,509				24,941				299,350
Total operating expenses			121,620				271,946				407,219				1,246,038
Loss from operations		$	(1,830	)			(179,406	)		$	(51,424	)			(952,059	)
Other income (expenses):
Interest expense		$	(44,226	)			(58,428	)		$	(132,135	)			(157,944	)
Gain on disposals of property and equipment			380				-				573				14
Write back expenses			-				-				1,692				4,360
Other income			56				38				625				203
Bank charges			(680	)			(709	)			(3,146	)			(2,268	)
Exchange (loss) / gain			12,225				(13,372	)			(20,399	)			(40,475	)
Total other income (expenses)			(32,245	)			(72,471	)			(152,790	)			(196,110	)
Loss before provision for income taxes:		$	(34,075	)			(251,876	)		$	(204,213	)			(1,148,169	)
Tax expense:
Provision for income taxes			-				-				-				-
Foreign taxes- withheld			(12,177	)			(11,861	)			(40,663	)			(31,939	)
Net loss		$	(46,252	)			(263,738	)		$	(244,876	)			(1,180,108	)
Basic and Diluted Loss per Share		$	(0.00	)			(0.00	)		$	(0.00	)			(0.01	)
Basic and Diluted Weighted Average Number of Shares Outstanding			117,689,079				115,738,321				117,107,023				112,774,120
Comprehensive Income (Loss):
Unrealized foreign currency translation (loss) gain		$	(25,011	)			135,617			$	59,976				290,689
Net loss			(46,252	)			(263,738	)			(244,876	)			(1,180,108	)
Comprehensive loss		$	(71,263	)			(128,120	)		$	(184,900	)			(889,418	)

 

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

 

 

Duo World, Inc. and Subsidiaries

Consolidated Statements of 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

 

 

Duo World, Inc. and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Deficit

For the three months ended December 31, 2019

 

																		Additional								Other				Total
		Common Share Capital								Preferred Share Capital								Paid-in				Accumulated				Comprehensive				Shareholders’
		Shares				Amount				Shares				Amount				Capital				Deficit				Income				Deficit
September 30, 2019			65,754,296				65,754				5,000,000				5,000				11,543,336				(15,361,981	)			351,222				(3,396,669	)
Stock issued			2,000,000				2,000				-				-				98,000				-				-				100,000
Net loss			-				-				-				-				-				(46,252	)			-				(46,252	)
Other comprehensive income			-				-				-				-				-				-				(25,011	)			(25,011	)
December 31, 2019			67,754,296				67,754				5,000,000				5,000				11,641,336				(15,408,233	)			326,211				(3,367,932	)

 

Duo World, Inc. and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Deficit

For the nine months ended December 31, 2019

 

																		Additional								Other				Total
		Common Share Capital								Preferred Share Capital								Paid-in				Accumulated				Comprehensive				Shareholders’
		Shares				Amount				Shares				Amount				Capital				Deficit				Income				Deficit
March 31, 2019			65,754,296				65,754				5,000,000				5,000				11,543,336				(15,163,357	)			266,235				(3,283,032	)
Stock issued			2,000,000				2,000				-				-				98,000				-				-				100,000
Net loss			-				-				-				-				-				(244,876	)			-				(244,876	)
Other comprehensive income			-				-				-				-				-				-				59,976				59,976
December 31, 2019			67,754,296				67,754				5,000,000				5,000				11,641,336				(15,408,233	)			326,211				(3,367,932	)

 

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

 

 

Duo World Inc. and Subsidiaries

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.

 

 

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.

 

 

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).

 

 

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

 

 

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.

 

 

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	%

 

 

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.

 

 

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.

 

 

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.

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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.

 

 

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.

 

 

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.

 

 

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.

 

 

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

 

 

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	)

 

 

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.

 

 

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

 

 

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

 

 

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	)

 

 

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.

 

 

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.

 

 

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.

 

 

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;

 

 

	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.

 

 

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

 

None

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

See Exhibit Index below for exhibits required by Item 601 of regulation S-K.

 

EXHIBIT INDEX

 

Exhibit No.

Description

 

List of Exhibits attached or incorporated by reference pursuant to Item 601 of Regulation S-K:

 

Exhibit		Description
31.1 *		Certification under Section 302 of Sarbanes-Oxley Act of 2002
31.2 *		Certification under Section 302 of Sarbanes-Oxley Act of 2002
32.1 * 32.2 *		Certification under Section 906 of Sarbanes-Oxley Act of 2002 Certification under Section 906 of Sarbanes-Oxley Act of 2002

 

* Filed herewith.

 

 

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)