Registration No. 333-211460
This prospectus supplement
(“Supplement”) supplements and amends the prospectus dated September 27, 2016, relating to the resale by the Selling
Shareholders of up to 8,567,467 shares of our common stock, par value $0.001 per share.
On August 14, 2017, we
filed with the U.S. Securities and Exchange Commission (“SEC”) the attached Quarterly Report on Form 10-Q for the period
ended June 30, 2017. We are filing this Supplement to update and supplement the information included in the prospectus dated September
27, 2016 with the information contained in our Quarterly Report on Form 10-Q. The text of our Quarterly Report on Form 10-Q is
attached hereto, and a part of, this Supplement. Any document, exhibit or information contained in our Quarterly Report on Form
10-Q that has been deemed furnished and not filed in accordance with SEC rules shall not be included in this Supplement.
This Supplement should
be read in conjunction with the prospectus dated September 27, 2016 and may not be delivered or utilized without the prospectus.
To the extent there is a discrepancy between the information contained in this Supplement and the information in the prospectus
dated September 27, 2016, the information contained herein supersedes and replaces such conflicting information.
PART
I – FINANCIAL INFORMATION
Item
1. Financial Statements.
Duo
World, Inc. and Subsidiaries
Consolidated
Financial Statements
June
30, 2017
(Unaudited)
CONTENTS
Duo
World, Inc. and Subsidiaries
Consolidated
Balance Sheets
|
|
June
30, 2017
|
|
|
March
31, 2017
|
|
|
|
(Un-audited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
45,432
|
|
|
$
|
25,084
|
|
Accounts
receivable - trade
|
|
|
704,454
|
|
|
|
621,670
|
|
Prepaid
expenses and other current assets
|
|
|
239,901
|
|
|
|
257,376
|
|
Accrued
Revenue
|
|
|
46,063
|
|
|
|
70,174
|
|
Total
Current Assets
|
|
|
1,035,850
|
|
|
|
974,304
|
|
|
|
|
|
|
|
|
|
|
Non-Current
Assets
|
|
|
|
|
|
|
|
|
Property
and equipment, net of accumulated depreciation of $251,437 and $248,326 respectively
|
|
|
39,829
|
|
|
|
48,087
|
|
Intangible
asset
|
|
|
613,356
|
|
|
|
580,899
|
|
Deferred
taxes
|
|
|
30,811
|
|
|
|
30,864
|
|
Total
Non-Current Assets
|
|
|
683,996
|
|
|
|
659,850
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
1,719,846
|
|
|
$
|
1,634,154
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
and SHAREHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
351,889
|
|
|
$
|
307,616
|
|
Short
term borrowings
|
|
|
459,334
|
|
|
|
473,838
|
|
Payroll,
employee benefits, severance
|
|
|
314,048
|
|
|
|
284,285
|
|
Due
to related parties
|
|
|
512,890
|
|
|
|
361,785
|
|
Payable
for acquisition
|
|
|
185,762
|
|
|
|
185,762
|
|
Taxes
payable
|
|
|
86,678
|
|
|
|
82,669
|
|
Accruals
and other payables
|
|
|
110,126
|
|
|
|
169,746
|
|
Deferred
revenue
|
|
|
64,030
|
|
|
|
16,420
|
|
Total
Current liabilities
|
|
|
2,084,757
|
|
|
|
1,882,121
|
|
|
|
|
|
|
|
|
|
|
Long
Term Liabilities
|
|
|
|
|
|
|
|
|
Due
to related parties
|
|
|
1,167,956
|
|
|
|
1,168,866
|
|
Total
Long Term liabilities
|
|
|
1,167,956
|
|
|
|
1,168,866
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
$
|
3,252,713
|
|
|
$
|
3,050,987
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 16)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
Deficit
|
|
|
|
|
|
|
|
|
Ordinary
shares: $0.001 par value per share; 90,000,000 shares authorized; 38,707,467 and 38,567,467 shares issued and outstanding,
respectively
|
|
$
|
38,707
|
|
|
$
|
38,567
|
|
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
|
|
|
959,116
|
|
|
|
907,456
|
|
Accumulated
deficit
|
|
|
(2,642,989
|
)
|
|
|
(2,481,117
|
)
|
Accumulated
other comprehensive income
|
|
|
106,799
|
|
|
|
112,761
|
|
Total
Shareholders’ Deficit
|
|
|
(1,532,867
|
)
|
|
|
(1,416,833
|
)
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Shareholders’ Deficit
|
|
$
|
1,719,846
|
|
|
$
|
1,634,154
|
|
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)
For
the three months ended June 30, 2017 and June 30, 2016 (Unaudited)
|
|
June
30 2017
|
|
|
June
30 2016
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
210,812
|
|
|
$
|
328,726
|
|
Cost
of sales (exclusive of depreciation presented below)
|
|
|
(86,750
|
)
|
|
|
(76,228
|
)
|
Gross
income
|
|
$
|
124,062
|
|
|
$
|
252,498
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
Research
and development
|
|
$
|
-
|
|
|
$
|
7,011
|
|
General
and administrative expenses
|
|
|
148,569
|
|
|
|
385,511
|
|
Salaries
and benefits
|
|
|
84,251
|
|
|
|
95,501
|
|
Selling
and distribution expenses
|
|
|
3,055
|
|
|
|
3,313
|
|
Depreciation
|
|
|
7,091
|
|
|
|
39,724
|
|
Amortization
of web site development
|
|
|
381
|
|
|
|
746
|
|
Allowance
for bad debts
|
|
|
30,601
|
|
|
|
-
|
|
Total
operating expenses
|
|
|
273,948
|
|
|
|
531,806
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
$
|
(149,886
|
)
|
|
$
|
(279,308
|
)
|
|
|
|
|
|
|
|
|
|
Other
income (expenses):
|
|
|
|
|
|
|
|
|
Gain
/ (Loss) on disposals
|
|
$
|
32
|
|
|
$
|
-
|
|
Other
income
|
|
|
602
|
|
|
|
224
|
|
Bank
charges
|
|
|
(994
|
)
|
|
|
(1,204
|
)
|
Exchange
gain / (loss)
|
|
|
6,225
|
|
|
|
2,652
|
|
Interest
expense
|
|
|
(17,851
|
)
|
|
|
(4,992
|
)
|
Total
other expenses
|
|
|
(11,986
|
)
|
|
|
(3,319
|
)
|
|
|
|
|
|
|
|
|
|
Loss
before provision for income taxes
|
|
$
|
(161,872
|
)
|
|
$
|
(282,627
|
)
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(161,872
|
)
|
|
$
|
(282,627
|
)
|
|
|
|
|
|
|
|
|
|
Net
loss per common share - basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted Weighted Average Number of Common Shares Outstanding
|
|
|
38,567,467
|
|
|
|
38,427,962
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
Income / (Loss):
|
|
|
|
|
|
|
|
|
(Loss)
/ gain on foreign currency translation
|
|
$
|
(5,962
|
)
|
|
$
|
9,427
|
|
Net
loss
|
|
|
(161,872
|
)
|
|
|
(282,627
|
)
|
Comprehensive
Loss
|
|
$
|
(167,834
|
)
|
|
$
|
(273,200
|
)
|
The
accompanying notes are an integral part of these consolidated financial statements.
Duo
World, Inc. and Subsidiaries
Consolidated
Statements of Cash Flows
For
the three months ended June 30, 2017 and June 30, 2016 (Unaudited)
|
|
June
30 2017
|
|
|
June
30 2016
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
Loss
before provision for income taxes
|
|
$
|
(161,872
|
)
|
|
$
|
(282,627
|
)
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile loss before provision for income taxes to cash provided by / (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
$
|
7,472
|
|
|
$
|
40,470
|
|
Allowance
for bad debts
|
|
|
30,601
|
|
|
|
-
|
|
Gain
on disposals of property and equipment
|
|
|
(32
|
)
|
|
|
-
|
|
Product
development cost written off
|
|
|
27,384
|
|
|
|
46,021
|
|
Stock
issued for services
|
|
|
51,800
|
|
|
|
214,600
|
|
Stock
issued as payment for accrued interest
|
|
|
-
|
|
|
|
15,000
|
|
Prior
year adjustments
|
|
|
-
|
|
|
|
42,146
|
|
|
|
|
|
|
|
|
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable - trade
|
|
|
(113,385
|
)
|
|
|
(85,895
|
)
|
Prepayments
|
|
|
41,587
|
|
|
|
(3,560
|
)
|
Accounts
Payable
|
|
|
44,272
|
|
|
|
(90,249
|
)
|
Payroll,
employee benefits, severance
|
|
|
29,763
|
|
|
|
34,697
|
|
Short
term overdraft - Pan Asia Bank
|
|
|
(14,503
|
)
|
|
|
(3,021
|
)
|
Due
to relates parties
|
|
|
151,105
|
|
|
|
3,599
|
|
Taxes
payable
|
|
|
4,009
|
|
|
|
2,875
|
|
Accruals
and other payables
|
|
|
(12,010
|
)
|
|
|
(9,278
|
)
|
Deferred
taxes
|
|
|
53
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by / (used in) operating activities
|
|
$
|
86,244
|
|
|
$
|
(75,223
|
)
|
|
|
|
|
|
|
|
|
|
Cash
Flows used in investing activities:
|
|
|
|
|
|
|
|
|
Acquisition
of Property and Equipment
|
|
$
|
-
|
|
|
$
|
(3,721
|
)
|
Sale
proceeds of disposal of Property and Equipment
|
|
|
282
|
|
|
|
-
|
|
Intangible
asset
|
|
|
(65,426
|
)
|
|
|
(90,792
|
)
|
Net
cash used in investing activities
|
|
$
|
(65,144
|
)
|
|
$
|
(94,513
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Long
term - Due to related parties
|
|
$
|
-
|
|
|
$
|
22,781
|
|
Proceeds
from issuance of common stock to PPM investors
|
|
|
-
|
|
|
|
151,001
|
|
Additional
Paid in Capital
|
|
|
-
|
|
|
|
(74,197
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
$
|
-
|
|
|
$
|
99,585
|
|
|
|
|
|
|
|
|
|
|
Net
increase / (decrease) in cash
|
|
$
|
21,100
|
|
|
$
|
(70,151
|
)
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
|
|
(752
|
)
|
|
|
12,629
|
|
|
|
|
|
|
|
|
|
|
Cash,
beginning of period
|
|
$
|
25,084
|
|
|
$
|
91,106
|
|
|
|
|
|
|
|
|
|
|
Cash,
end of period
|
|
$
|
45,432
|
|
|
$
|
33,584
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
(16,276
|
)
|
|
$
|
(4,256
|
)
|
|
|
|
|
|
|
|
|
|
Cash
paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shares issued for services received
|
|
$
|
51,800
|
|
|
$
|
214,600
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
Duo
World Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
June 30, 2017
(Unaudited)
Note
1 - Organization and Nature of Operations
Duo
World Inc. (hereinafter referred to as “Successor” or “Duo”) a reporting 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 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). 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, 2017. The interim results for the period ended June 30, 2017 are not necessarily indicative
of results for the full fiscal year.
Going
Concern
The Company has incurred a net loss
of $161,872 and $282,627 during the three months ended June 30, 2017 and 2016 respectively, As at June 30, 2017 and March 31,
2017, the Company’s current liabilities exceeded current assets by $1,048,908 and $907,817 and Shareholders deficit
as at June 30, 2017 and March 31, 2017 has been $1,532,867 and $1,416,833. The Company has outstanding statutory dues towards
Employee provident fund and employee trust fund as at that date of $303,531 and $269,781.
The financial statements of the Company
have been prepared on a going concern. The Company has operating losses as mentioned in the above paragraph. However,
the same were incurred as one-time expenditure incurred for incorporation and listing of the company. The Company has operating
cash inflows/ (outflows) of $86,244 and ($75,223) respectively during the three months ended June 30, 2017 and June 30, 2016.
Further, the Company has entered into contracts
with the clients for the products launched during the year 2016-17 and it is confident that the projects shall generate sufficient
revenue to offset the operating losses.
Duo
World Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
June 30, 2017
(Unaudited)
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.
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:
Duo
World Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
June 30, 2017
(Unaudited)
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
June 30, 2017 and March 31, 2017, 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).
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.
Duo
World Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
June 30, 2017
(Unaudited)
Impairment
of Long-Lived Assets
The
Company reviews long-lived assets, such as property, plant, and equipment for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount
by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of by sale would be separately
presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs related to the sale,
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.
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.
Duo
World Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
June 30, 2017
(Unaudited)
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 three months ended June 30, 2017 and 2016, the Company received only cash as consideration for sale of licenses and related
services rendered.
For
the three months ended June 30, 2017 and 2016, the Company had following concentrations of revenue with customers:
Customer
|
|
June
30, 2017
|
|
|
June
30, 2016
|
|
|
|
|
|
|
|
|
DEN Networks
|
|
|
51.88
|
%
|
|
|
26.25
|
%
|
Commercial Bank
|
|
|
12.21
|
%
|
|
|
0.00
|
%
|
Topas TV
|
|
|
7.52
|
%
|
|
|
11.45
|
%
|
Bank of Ceylon
|
|
|
8.49
|
%
|
|
|
0.00
|
%
|
Development services
|
|
|
7.26
|
%
|
|
|
0.00
|
%
|
Meghbela
|
|
|
2.90
|
%
|
|
|
1.38
|
%
|
Megamedia
|
|
|
0.00
|
%
|
|
|
35.02
|
%
|
Hutchison
|
|
|
0.00
|
%
|
|
|
14.77
|
%
|
HelloCorp
|
|
|
0.00
|
%
|
|
|
3.72
|
%
|
Other
misc. customers
|
|
|
10.00
|
%
|
|
|
7.41
|
%
|
|
|
|
100
|
%
|
|
|
100
|
%
|
Deferred
Revenue -
Deferred revenue represents advance payments for software licenses, services, and maintenance billed in advance
of the time revenue is recognized. As at June 30, 2017 and March 31, 2017, deferred revenue was $64,030 and $16,420 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 June 30, 2017 and March 31, 2017,
unbilled/accrued revenues were $46,063 and $70,174 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.
Duo
World Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
June 30, 2017
(Unaudited)
During
the three months ending on June 30, 2017 and 2016, product research and development cost of $65,426 and $90,792 respectively,
were capitalized as “Intangible assets”.
Advertising
Costs
The
Company expenses advertising costs as incurred. No advertising expenses were incurred during the three months ended June 30, 2017
and 2016.
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
June 30, 2017, includes only foreign currency translation 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 June 30, 2017 and March 31, 2017 were
as follows:
Foreign
Currency Translation gains (losses)
|
|
|
|
Balance,
March 31, 2016
|
|
$
|
76,829
|
|
Translation rate gain
for the period
|
|
|
35,932
|
|
Balance,
March 31, 2017
|
|
$
|
112,761
|
|
Translation rate loss
during the period
|
|
|
(5,962
|
)
|
Balance,
June 30, 2017
|
|
$
|
106,799
|
|
Recent
Accounting Pronouncements
The
Company has reviewed accounting pronouncements that were issued as of June 30, 2017 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 June 30, 2017 and March 31, 2017;
|
|
June
30, 2017
|
|
|
March
31, 2017
|
|
Accounts
receivable – Trade
|
|
$
|
867,467
|
|
|
$
|
754,783
|
|
Less:
Provision for doubtful debts
|
|
|
(163,013
|
)
|
|
|
(133,113
|
)
|
|
|
$
|
704,454
|
|
|
$
|
621,670
|
|
Duo
World Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
June 30, 2017
(Unaudited)
At
June 30, 2017 and March 31, 2017, the Company had following concentrations of accounts receivable with customers:
Customer
|
|
June
30, 2017
|
|
|
March
31, 2017
|
|
Megamedia
|
|
|
53.45
|
%
|
|
|
63.68
|
%
|
DEN Networks
|
|
|
25.30
|
%
|
|
|
15.99
|
%
|
Topas
|
|
|
7.81
|
%
|
|
|
7.24
|
%
|
Dish Media
|
|
|
3.92
|
%
|
|
|
5.88
|
%
|
Sri Lanka Telecom
|
|
|
1.39
|
%
|
|
|
1.42
|
%
|
Bank of Ceylon
|
|
|
2.58
|
%
|
|
|
0.00
|
%
|
DFCC
|
|
|
1.53
|
%
|
|
|
0.13
|
%
|
Meghbela
|
|
|
1.07
|
%
|
|
|
0.74
|
%
|
Mediatama
|
|
|
0.48
|
%
|
|
|
1.29
|
%
|
MediaNet
|
|
|
0.92
|
%
|
|
|
1.14
|
%
|
Other
8 receivables
|
|
|
1.56
|
%
|
|
|
2.49
|
%
|
|
|
|
100
|
%
|
|
|
100
|
%
|
Prepaid
Expenses and Other Current Assets
Following
is a summary of prepaid expenses and other current assets as at June 30, 2017 and March 31, 2017;
|
|
June
30, 2017
|
|
|
March
31, 2017
|
|
Security
deposits
|
|
$
|
18,198
|
|
|
$
|
29,621
|
|
WHT receivable
|
|
|
199,622
|
|
|
|
201,362
|
|
Staff loan and advances
|
|
|
-
|
|
|
|
100
|
|
Travel advance
|
|
|
-
|
|
|
|
295
|
|
Supplier advance
|
|
|
3,474
|
|
|
|
4,398
|
|
ESC receivable
|
|
|
5,775
|
|
|
|
5,826
|
|
Insurance prepayment
|
|
|
889
|
|
|
|
1,435
|
|
Prepayments
|
|
|
9,190
|
|
|
|
10,580
|
|
Other
receivables
|
|
|
2,753
|
|
|
|
3,759
|
|
|
|
$
|
239,901
|
|
|
$
|
257,376
|
|
Note
6 – Property and Equipment
Following
table illustrates net book value of property and equipment as at June 30, 2017 and March 31, 2017;
|
|
June
30, 2017
|
|
|
March
31, 2017
|
|
Office
equipment
|
|
$
|
9,381
|
|
|
$
|
9,465
|
|
Furniture & fittings
|
|
|
138,144
|
|
|
|
139,377
|
|
Computer equipment
(Data Processing Equipment)
|
|
|
128,205
|
|
|
|
131,909
|
|
Improvements to lease
hold assets
|
|
|
1,877
|
|
|
|
1,894
|
|
Website
Development
|
|
|
13,659
|
|
|
|
13,768
|
|
|
|
|
291,266
|
|
|
|
296,413
|
|
Less:
Accumulated depreciation and amortization
|
|
|
(251,437
|
)
|
|
|
(248,326
|
)
|
Net
property and equipment
|
|
$
|
39,829
|
|
|
$
|
48,087
|
|
Duo
World Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
June 30, 2017
(Unaudited)
Depreciation
and amortization expense for the three months ended June 30, 2017 and 2016 was $7,472 and $40,470 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 June 30, 2017 and March 31, 2017:
|
|
June
30, 2017
|
|
|
March
31, 2017
|
|
Opening
Balance
|
|
$
|
580,899
|
|
|
$
|
382,352
|
|
Add: Costs capitalized
during the period
|
|
|
65,426
|
|
|
|
365,216
|
|
Less: Amount written
–off during the period
|
|
|
(27,384
|
)
|
|
|
(147,326
|
)
|
Translational
loss
|
|
|
(5,589
|
)
|
|
|
(19,343
|
)
|
Net
Intangible Assets
|
|
$
|
613,356
|
|
|
$
|
580,899
|
|
Note
8 – Short Term Borrowings
Following
is a summary of short-term borrowings as at June 30, 2017 and March 31, 2017;
|
|
June
30, 2017
|
|
|
March
31, 2017
|
|
PAN Asia
Bank – Short term overdraft
|
|
$
|
450,417
|
|
|
$
|
460,088
|
|
Prosperous Capital
|
|
|
8,917
|
|
|
|
8,997
|
|
Commercial
bank credit card
|
|
|
-
|
|
|
|
4,753
|
|
|
|
$
|
459,334
|
|
|
$
|
473,838
|
|
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 June 30, 2017 and March 31, 2017, the Company owed directors $512,890 and $361,785 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 June 30, 2017 and March 31, 2017, the Company owed directors $1,167,956 and $1,168,866 respectively.
Duo
World Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
June 30, 2017
(Unaudited)
Note
10 – Taxes Payable
The
taxes payable comprise of items listed below as at June 30, 2017 and March 31, 2017;
|
|
June
30, 2017
|
|
|
March
31, 2017
|
|
PAYE
|
|
$
|
83,554
|
|
|
$
|
73,611
|
|
VAT payable
|
|
|
-
|
|
|
|
14
|
|
Stamp Duty Payable
|
|
|
41
|
|
|
|
48
|
|
Tax
payable
|
|
|
3,083
|
|
|
|
8,996
|
|
|
|
$
|
86,678
|
|
|
$
|
82,669
|
|
Note
11 – Accruals and Other Payables
Following
is a summary of accruals and other payables as at June 30, 2017 and March 31, 2017;
|
|
June
30, 2017
|
|
|
March
31, 2017
|
|
Audit fee
payable
|
|
$
|
14,074
|
|
|
$
|
20,906
|
|
Accrued expenses
|
|
|
48,398
|
|
|
|
81,696
|
|
Other
payables
|
|
|
47,654
|
|
|
|
67,469
|
|
|
|
$
|
110,126
|
|
|
$
|
170,071
|
|
Note
12 – Cost of Revenue
Following
is the summary of cost of revenue for the three months ending June 30, 2017 and 2016;
|
|
June
30, 2017
|
|
|
June
30, 2016
|
|
Purchases
|
|
$
|
11,252
|
|
|
$
|
7,522
|
|
Implementation cost
|
|
|
9,202
|
|
|
|
10,754
|
|
Product development
cost written off
|
|
|
27,384
|
|
|
|
46,021
|
|
Consultancy, contract
basis employee cost
|
|
|
6,825
|
|
|
|
3,225
|
|
Support services
|
|
|
17,206
|
|
|
|
8,706
|
|
Other external Services
|
|
|
3,250
|
|
|
|
-
|
|
Cost
of development services
|
|
|
11,631
|
|
|
|
-
|
|
|
|
$
|
86,750
|
|
|
$
|
76,228
|
|
13
– General and Administrative Expenses
Following
is the summary of general and administrative expenses for the three months ending June 30, 2017 and 2016;
|
|
June
30, 2017
|
|
|
June
30, 2016
|
|
Directors
remuneration
|
|
$
|
38,123
|
|
|
$
|
26,410
|
|
EPF
|
|
|
11,078
|
|
|
|
10,767
|
|
ETF
|
|
|
2,769
|
|
|
|
2,692
|
|
Bonus
|
|
|
-
|
|
|
|
24,961
|
|
Vehicle allowance
|
|
|
9,457
|
|
|
|
13,691
|
|
Staff welfare
|
|
|
3,907
|
|
|
|
2,810
|
|
Penalties / Late payment
charges
|
|
|
-
|
|
|
|
2,406
|
|
Office rent
|
|
|
18,701
|
|
|
|
17,742
|
|
Electricity charges
|
|
|
3,796
|
|
|
|
4,311
|
|
Office maintenance
|
|
|
2,987
|
|
|
|
4,263
|
|
Telephone charges
|
|
|
2,573
|
|
|
|
3,275
|
|
Travelling expense
|
|
|
776
|
|
|
|
782
|
|
Audit fees
|
|
|
3,178
|
|
|
|
20,900
|
|
Printing and stationery
|
|
|
266
|
|
|
|
300
|
|
Office expenses
|
|
|
551
|
|
|
|
603
|
|
Computer maintenance
|
|
|
1,726
|
|
|
|
1,255
|
|
Internet charges
|
|
|
3,309
|
|
|
|
2,771
|
|
Courier and postage
|
|
|
84
|
|
|
|
203
|
|
Security charges
|
|
|
1,005
|
|
|
|
806
|
|
Insurance expense
|
|
|
525
|
|
|
|
587
|
|
Professional fees
|
|
|
6,510
|
|
|
|
3,845
|
|
Gratuity
|
|
|
3,640
|
|
|
|
-
|
|
Secretarial fees
|
|
|
186
|
|
|
|
246
|
|
Un-claimable VAT input/
Irrecoverable tax
|
|
|
10,087
|
|
|
|
14,863
|
|
Software Rentals
|
|
|
7,526
|
|
|
|
6,906
|
|
Other professional
services
|
|
|
2,244
|
|
|
|
214,600
|
|
Consulting Fee
|
|
|
8,550
|
|
|
|
-
|
|
Transfer agent fees
|
|
|
450
|
|
|
|
785
|
|
Filling fee and subscription
|
|
|
2,860
|
|
|
|
2,458
|
|
Stamp duty expenses
|
|
|
493
|
|
|
|
-
|
|
Other
expenses
|
|
|
1,212
|
|
|
|
273
|
|
|
|
$
|
148,569
|
|
|
$
|
385,511
|
|
Note
14 – Selling and Distribution Expenses
Following
is the summary of selling and distribution expenses for the three months ending on June 30, 2017 and 2016;
|
|
June
30, 2017
|
|
|
June
30, 2016
|
|
Marketing
Expenses
|
|
$
|
325
|
|
|
$
|
67
|
|
Vehicle hire charges
|
|
|
1,560
|
|
|
|
1,613
|
|
Foreign Travel
|
|
|
-
|
|
|
|
424
|
|
Vehicle
Running Expense
|
|
|
1,170
|
|
|
|
1,209
|
|
|
|
$
|
3,055
|
|
|
$
|
3,313
|
|
Note
15 - Equity
As
at June 30, 2017, 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.
|
During
the three months ended June 30, 2017, the Company issued following common shares:
Date
|
|
|
Type
|
|
Shares
|
|
|
Valuation
|
|
|
06/30/2017
|
|
|
Stock
issued to Consulting for Strategic Growth 1, Ltd.
|
|
|
140,000
|
|
|
$
|
51,800
|
|
As
at June 30, 2017, 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 three
months ended June 30, 2017, the Company did 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 $118,890 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 $1,257 on April 1, 2017 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
|
|
|
09/23/2011
|
|
|
Performance
Bond for BOC Tender
|
|
$
|
9,921
|
|
|
05/15/2013
|
|
|
Guarantee for Lanka
Clear
|
|
|
2,085
|
|
|
07/31/2014
|
|
|
Guarantee for SLT
|
|
|
561
|
|
|
08/10/2015
|
|
|
Guarantee for LOLC
|
|
|
1,585
|
|
|
|
|
|
|
|
$
|
14,152
|
|
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 June 30, 2017 and June 30, 2016
D.
Financial condition as at June 30, 2017 and March 31, 2017
E.
Liquidity and capital reserves
F.
Milestones for next twelve months
Duo
World, Inc. (hereinafter referred to as “Successor” or “Duo”), a reporting Company since September 26,
2016, was organized under the laws of the state of Nevada on September 19, 2014. Duo Software (Pvt.) Limited (hereinafter referred
to as “DSSL” or “Predecessor”), a Sri Lanka based company, was incorporated on September 22, 2004, in
the Democratic Socialist Republic of Sri Lanka, as a limited liability company. Duo Software (Pte.) Limited (hereinafter referred
to as “DSS” or “Predecessor”), a Singapore based company, was incorporated on June 5, 2007 in the Republic
of Singapore as a limited liability company. DSS also includes its wholly-owned subsidiary, Duo Software India (Private) Limited
(India), which was incorporated on August 30, 2007, under the laws of India.
Effective
December 3, 2014, DSSL and DSS executed a reverse recapitalization with Duo. Duo (“Successor”) is a holding company
that conducts operations through its wholly-owned subsidiaries, DSSL and DSS (“Predecessors”) in Sri Lanka, Singapore
and India. The consolidated entity is referred to as the “Company.” The Company, having its development center in
Colombo, Sri Lanka, specializes in the space of Customer Life Cycle Management and 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 100,000,000 shares, including 90,000,000 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 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 “DuoCLM,” “Duo Subscribe” and “FaceTone.”
In the case of DuoCLM, Duo offers licenses 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 licenses along with software implementation and annual maintenance services under
an agreement with various clients. The Company raises invoices on key milestone basis as defined in the agreement with the customer.
Revenue recognition is based on stage of completion basis. Revenues from consulting, development and training services are typically
recognized 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 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 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 June 30, 2017 and June 30, 2016:
|
The
Company had revenues amounting to $210,812 and $328,726, respectively, for three months ended June 30, 2017 and June 30, 2016.
Following is a breakdown of revenues for both periods:
|
|
June
30, 2017
|
|
June
30, 2016
|
|
Changes
|
|
|
|
|
|
|
|
DuoSubscribe
|
|
$
|
138,342
|
|
|
$
|
260,891
|
|
|
$
|
(122,549
|
)
|
DuoCLM
|
|
|
380
|
|
|
|
65,344
|
|
|
|
(64,964
|
)
|
Software
hosting and reselling - FaceTone (Beta/testing version)
|
|
|
2,719
|
|
|
|
2,491
|
|
|
|
228
|
|
FaceTone
|
|
|
54,065
|
|
|
|
—
|
|
|
|
54,065
|
|
Development
services
|
|
|
15,306
|
|
|
|
—
|
|
|
|
15,306
|
|
|
|
$
|
210,812
|
|
|
$
|
328,726
|
|
|
$
|
(117,914
|
)
|
Total
revenue for the three months ended June 30, 2017 decreased by 36% when compared to June 30, 2016. The decrease is mainly due to
the drop in revenue generated by our products, DuoCLM and DuoSubscribe, as a result of the Company’s decision to phase out
these legacy products,
The
Company is no longer actively marketing DuoCLM and DuoSubscribe, as our 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.
During
the period ended June 30, 2017, the Company entered into a software license agreement to implement FaceTone to one of the
leading commercial banks in Sri Lanka.( The Bank has been ranked among the Top 1000 Banks of the World for a seventh consecutive
year in 2017,in the global list compiled by “The Banker” magazine of the U.K. The Bank is also the most awarded bank
in the country).
The
Company also signed a software distribution agreement with the biggest telecommunication service provider in Sri Lanka for the
product FaceTone. FaceTone is to be launched on the telecommunication provider’s platform in September 2017, making
it available to its subscribers at a monthly subscription.
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 June 30, 2017 and June 30, 2016, the Company had the following concentrations of revenues with customers:
Customer
|
|
June
30, 2017
|
|
|
June
30, 2016
|
|
|
|
|
|
|
|
|
A
|
|
|
51.88
|
%
|
|
|
26.25
|
%
|
B
|
|
|
12.21
|
%
|
|
|
0
|
%
|
C
|
|
|
8.49
|
%
|
|
|
0
|
%
|
D
|
|
|
7.52
|
%
|
|
|
11.45
|
%
|
Other misc. customers
|
|
|
19.90
|
%
|
|
|
62.30
|
%
|
|
|
|
100
|
%
|
|
|
100
|
%
|
The
total cost of sales amounted to $86,750 and $76,228 for the three months ended June 30, 2017 and June 30, 2016, respectively.
The following table sets forth the Company’s cost of sales breakdown for both periods:
|
|
June
30, 2017
|
|
June
30, 2016
|
|
Change
|
|
|
|
|
|
|
|
Purchases
|
|
$
|
11,252
|
|
|
$
|
7,522
|
|
|
$
|
3,730
|
|
Implementation and
onsite support cost
|
|
|
9,202
|
|
|
|
10,754
|
|
|
|
(1,552
|
)
|
Product development
cost written off
|
|
|
27,384
|
|
|
|
46,021
|
|
|
|
(18,637
|
)
|
Consultancy, contract
basis employee cost
|
|
|
6,825
|
|
|
|
3,225
|
|
|
|
3,600
|
|
Support services
|
|
|
17,206
|
|
|
|
8,706
|
|
|
|
8,500
|
|
Other external services
|
|
|
3,250
|
|
|
|
—
|
|
|
|
3,250
|
|
Cost
of development services
|
|
|
11,631
|
|
|
|
—
|
|
|
|
11,631
|
|
Total
cost of sales
|
|
$
|
86,750
|
|
|
$
|
76,228
|
|
|
$
|
10,522
|
|
Cost
of sales has marginally increased by $10,522 in the three months ended June 30, 2017 when compared to the three months ended June
30, 2016. Cost of development services was the main contributor to the increase in cost of sales.
The
gross income for the three months ended June 30, 2017 and June 30, 2016 amounted to $124,062 and $252,498, respectively.
The
total operating expenditures amounted to $273,948 and $531,806 for the three months ended June 30, 2017 and June 30, 2016, respectively.
The following table sets forth the Company’s operating expenditure analysis for both periods:
|
|
June
30, 2017
|
|
|
June
30, 2016
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
$
|
-
|
|
|
$
|
7,011
|
|
|
$
|
(7,011)
|
|
General and administrative
|
|
|
148,569
|
|
|
|
385,511
|
|
|
|
(236,942)
|
|
Salaries and benefits
|
|
|
84,251
|
|
|
|
95,501
|
|
|
|
(11,250)
|
|
Selling and distribution
|
|
|
3,055
|
|
|
|
3,313
|
|
|
|
(258)
|
|
Depreciation
|
|
|
7,091
|
|
|
|
39,724
|
|
|
|
(32,633)
|
|
Amortization of
web site development
|
|
|
381
|
|
|
|
746
|
|
|
|
(365)
|
|
Allowance
for bad debts
|
|
|
30,601
|
|
|
|
-
|
|
|
|
30,601
|
|
Total
operating expenses
|
|
$
|
273,948
|
|
|
$
|
531,806
|
|
|
$
|
(257,858)
|
|
Following
are the main reasons for the variances in operating expenses of the Company:
Research
and Development
The
Company has not incurred research and development cost during the three months ended June 30, 2017, as all of our products have
passed through the research and development phase. Whereas during the three months ended June 30, 2016, the Company incurred $
7,011 as research and development expense.
General
and Administrative Cost
During
the three months ended June 30, 2017, general and administrative cost declined by $236,942 (61%) when compared to the same period
in 2016.
The
main reason for the decrease was due to the reduction in the professional fees paid to consultants in preparation and filing of
Form S-1 registration statement. This cost amounted to $214,600 during the three months ended June 30, 2016. Further, the Company
has not paid any bonus during the three months ended June 30, 2017, whereas it paid bonuses amounting to $24,961 during the three
months ended June 30, 2016.
Salaries
and benefits
Salaries
and benefits decreased by 12% during the three months ended June 30, 2017 as the total number of staff was reduced when compared
to the same period in 2016. The Company moved toward outsourcing of non-core activities and this lead to a general decrease in
the number of permanent staff.
Selling
and distribution
During
the period ended June 30, 2017, marketing expenses marginally decreased as the Company only marketed one product (FaceTone)
and that was only in Sri Lanka, as a test market before the product is marketed in other countries
Depreciation
and Amortization expense
Depreciation
and amortization expense had decreased by 82% during the 3 months ended June 30, 2017, when compared to the three months ended
June 30, 2016. Since April 1, 2017 the Company has changed its accounting policies on useful life of computer equipment and website
development and the effect on changing accounting policies were reflected during the three months ended June 30, 2016.
Allowance
for bad debts
During
the three months ended June 30, 2017, the Company provided an allowance for bad debts on a quarterly basis and the same basis
was adapted from July 1, 2016 onward.
The
loss from operations for the three months ended June 30, 2017 and June 30, 2016 amounted to $149,886 and $279,308, respectively.
The
Company’s other income and (expense) for the three months ended June 30, 2017 and June 30, 2016 amounted to $(11,986) and
$(3,319), respectively. The following table sets forth the Company’s other income and (expense) analysis for both periods:
|
|
June
30, 2017
|
|
June
30, 2016
|
|
Change
|
|
|
|
|
|
|
|
Gain
on disposals
|
|
$
|
32
|
|
|
$
|
—
|
|
|
$
|
32
|
|
Other income
|
|
|
602
|
|
|
|
224
|
|
|
|
378
|
|
Bank charges
|
|
|
(994
|
)
|
|
|
(1,204
|
)
|
|
|
210
|
|
Exchange gain
|
|
|
6,225
|
|
|
|
2,652
|
|
|
|
3,573
|
|
Interest
expense
|
|
|
(17,851
|
)
|
|
|
(4,992
|
)
|
|
|
(12,859
|
)
|
Total
other income (expenses)
|
|
$
|
(11,986
|
)
|
|
$
|
(3,319
|
)
|
|
$
|
(8,666
|
)
|
Other
expenditures increased by $8,666 in the three months ended June 30, 2017, when compared to the three months ended June 30, 2016.
The main reason for this increase was the increase in interest cost.
The
loss before provision for income taxes for the three months ended June 30, 2017 and June 30, 2016 amounted to $161,872 and $282,627,
respectively.
The
net loss for the three months ended June 30, 2017 and June 30, 2016 amounted to $161,872 and $282,627, respectively.
The
Company’s comprehensive loss for the three months ended June 30, 2017 and June 30, 2016 amounted to $167,834 and $273,200,
respectively.
Comprehensive Income / (Loss):
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
(Loss) / gain on foreign currency translation
|
|
$
|
(5,962
|
)
|
|
$
|
9,427
|
|
Net loss
|
|
|
(161,872
|
)
|
|
|
(282,627
|
)
|
Comprehensive loss
|
|
$
|
(167,834
|
)
|
|
$
|
(273,200
|
)
|
At
June 30, 2017 and March 31, 2017, the Company had 38,707,467 and 38,567,467 common shares issued and outstanding, respectively.
The weighted average number of shares for the three months ended June 30, 2017 and June 30, 2016 was 38,567,467 and 38,427,962,
respectively. The loss per share for both periods was $(0.00) per share and $(0.01) per share, respectively.
D.
|
Financial
condition as at June 30, 2017 and March 31, 2017:
|
Assets:
The
Company reported total assets of $1,719,846 and $1,634,154 as at June 30, 2017 and March 31, 2017, respectively. 41% of these
total assets include net accounts receivables and 36% 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 $39,829 and $48,087 as at June 30, 2017 and March 31, 2017,
respectively. We also had a deferred tax asset of $30,864 as at March 31, 2017 which now totals $30,811 as at June 30, 2017. Furthermore,
our current assets at March 31, 2017 totaled $974,304 and at June 30, 2017, these current assets amounted to $1,035,850 comprised
of cash of $45,432, accounts receivable of $704,454, prepaid and other current assets of $239,901 and accrued revenue of $46,063.
Liabilities:
The
Company had total liabilities of $3,252,713 and $3,050,987 as at June 30, 2017 and March 31, 2017, respectively. Long term liabilities
include balances owed to related parties which are outstanding for more than 12 months. Our current liabilities at March 31, 2017
totaled $1,882,121. We have seen an increase of 11% in current liabilities amounting to $202,636, making total current liabilities
of $2,084,757 as at June 30, 2017. These mainly include short term third party debt, payroll liabilities, payable to related parties,
deferred revenue, taxes payable, accrued liabilities and our day to day operational creditors.
Stockholder’s
Deficit:
At
March 31, 2017, the Company had stockholders´ deficit of $1,416,833. At June 30, 2017, the Company had stockholders´
deficit of $1,532,867, which represents an increase of 8%.
The
Company had 38,707,467 and 38,567,467 shares issued and outstanding at June 30, 2017 and March 31, 2017, respectively.
E.
|
Liquidity
and capital reserves:
|
The
Company had loss from operations of $149,886 and $279,308 for the three months ended June 30, 2017, and 2016, respectively;
a total other expense amounting to $11,986 and $3,319 for the three months ended June 30, 2017 and 2016, respectively; and a net
loss of $161,872 and $282,627 for the three months ended June 30, 2017 and 2016, respectively.
In
summary, our cash flows for the three months ended June 30, 2017 and June 30, 2016 were as follows:
|
|
June
30, 2017
|
|
|
June
30, 2016
|
|
Net cash
provided by / (used in) operating activities
|
|
$
|
86,244
|
|
|
$
|
(75,223
|
)
|
Net cash used in investing
activities
|
|
|
(65,144
|
)
|
|
|
(94,513
|
)
|
Net cash provided by
financing activities
|
|
|
-
|
|
|
|
99,585
|
|
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 $45,432 in cash; net cash provided by operations of $86,224, for the three months ended
June 30, 2017; working capital deficit of $1,048,908 and stockholders´ deficit of $1,532,867 as of June 30, 2017.
F.
|
Milestones
for next twelve months (2017-2018):
|
Our
specific plan of operations and milestones through June 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 during early 2018.
|
|
|
|
|
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;
|
|
|
|
|
●
|
Set
up a smaller software development center outside of Sri Lanka, 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;
|
|
|
|
|
●
|
Raising
capital and expanding our operations;
|
|
|
|
|
●
|
Up
list to OTCQB;
|
|
|
|
|
●
|
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.