Notes
to the Consolidated Financial Statements
September
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 September 30, 2017 are not necessarily indicative
of results for the full fiscal year.
Going
Concern
The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business. These consolidated financial statements do not
include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be
necessary should the Company be unable to continue as a going concern.
As reflected in the accompanying consolidated
financial statements, the Company had a net loss of $692,488 and $854,361 for the three and six months ended September 30, 2017,
respectively, net cash provided by operations of $147,845 and $38,942 in six months ended September 30, 2017 and 2016,
respectively, a working capital of $17,076 and a working capital deficit of $907,817 as of September 30, 2017 and March 31,
2017 respectively, outstanding statutory dues towards employee provident fund and employee trust fund of $335,644 and $269,781
as of September 30, 2017 and March 31, 2017, respectively, and a stockholders´ deficit of $437,360 and $1,416,833
as of September 30, 2017 and March 31.2017, respectively.
Operating
losses during the three and six months ended September 30, 2017 were mainly due to a one-time expenditure incurred for professional
fee relating to investment advisory services.
Furthermore, the Company has entered into
contracts with the clients for the products launched during the year 2016-17 and our management is believes that
these projects should generate sufficient revenues to offset the operating losses in the recent future; however, management
cannot guarantee such results.
Duo
World Inc. and Subsidiaries
Notes
to the Consolidated Financial Statements
September
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.
Duo
World Inc. and Subsidiaries
Notes
to the Consolidated Financial Statements
September
30, 2017
(Unaudited)
Accounts
Receivable and Provision for Doubtful Accounts
The
Company recognizes accounts receivable in connection with the products sold and services provided and have strong policies and
procedures for the collection of receivables from its clients. However, there are inevitably occasions when the receivables due
to the Company cannot be collected and, therefore, have to be written off as bad debts. While the debt collection process is being
pursued, an assessment is made of the likelihood of the receivable being collectable. A provision is, therefore, made against
the outstanding receivable to reflect that component that may not become collectable. The Company is in the practice of provisioning
for doubtful debts based on the period outstanding as per the following:
Trade receivables outstanding:
|
|
Provision
|
|
Over 24 months
|
|
|
100
|
%
|
Over 18 months
|
|
|
50
|
%
|
Over 15 months
|
|
|
25
|
%
|
Over 12 months
|
|
|
10
|
%
|
Over 9 months
|
|
|
5
|
%
|
Cash
Equivalents
The
Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. As of
September 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
|
|
Duo
World Inc. and Subsidiaries
Notes
to the Consolidated Financial Statements
September
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 two products from which it generates
its revenue; they are “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
September
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 six months ended September 30, 2017 and 2016, the Company received only cash as consideration for sale of licenses and related
services rendered.
For
the six months ended September 30, 2017 and 2016, the Company had following concentrations of revenue with customers:
Customer
|
|
September
30, 2017
|
|
|
September
30, 2016
|
|
|
|
|
|
|
|
|
DEN Networks
|
|
|
50.03
|
%
|
|
|
25.41
|
%
|
Commercial Bank
|
|
|
14.29
|
%
|
|
|
0
|
%
|
Topaz TV
|
|
|
8.28
|
%
|
|
|
7.94
|
%
|
Development Services
|
|
|
7.98
|
%
|
|
|
0
|
%
|
BOC
|
|
|
4.70
|
%
|
|
|
2.88
|
%
|
Mediatama
|
|
|
3.30
|
%
|
|
|
2.04
|
%
|
Meghbela
|
|
|
3.20
|
%
|
|
|
0
|
%
|
Singer Sri Lanka
|
|
|
2.18
|
%
|
|
|
0.80
|
%
|
Megamedia
|
|
|
0
|
%
|
|
|
37.00
|
%
|
Hutchison
|
|
|
0
|
%
|
|
|
13.09
|
%
|
HelloCorp
|
|
|
0
|
%
|
|
|
3.28
|
%
|
Other misc. customers
|
|
|
6.04
|
%
|
|
|
7.56
|
%
|
|
|
|
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 September 30, 2017 and March 31, 2017, deferred revenue was $10,654 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 September 30, 2017 and March 31,
2017, unbilled/accrued revenues were $65,663 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.
Duo
World Inc. and Subsidiaries
Notes
to the Consolidated Financial Statements
September
30, 2017
(Unaudited)
Product
research and development
Product
research and development expenses consist primarily of salary and benefits for the Company’s development and technical support
staff, contractors’ fees and other costs associated with the enhancements of existing products and services and development
of new products and services. Costs incurred for software development prior to technological feasibility are expensed as product
research and development costs in the period incurred. Once the point of technological feasibility is reached, which is generally
upon the completion of a working prototype that has no critical bugs and is a release candidate development costs are capitalized
until the product is ready for general release and are classified within “Intangibles assets” in the accompanying
consolidated balance sheets. The Company amortizes capitalized software development costs using the greater of the ratio of the
products’ current gross revenues to the total of current gross revenues and expected gross revenues or on a straight-line
basis over the estimated economic life of the related product, which is typically four years.
During the six months ending on September
30, 2017 and 2016, product research and development cost of $139,020 and $196,595, respectively, were capitalized as “Intangible
assets”. Product research and development costs of the “SaaS” version of “FaceTone”
were also capitalized during the six months ended September 30, 2017.
Advertising
Costs
The
Company expenses advertising costs as incurred. No advertising expenses were incurred during the six months ended September 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
September 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 September 30, 2017 and March 31, 2017
were as follows:
Foreign Currency Translation gains (losses)
|
|
|
|
Balance, March 31, 2017
|
|
$
|
112,761
|
|
Translation rate gain for the period
|
|
|
(5,962
|
)
|
Balance, June 30, 2017
|
|
$
|
106,799
|
|
Translation rate loss during the period
|
|
|
(18,895
|
)
|
Balance, September 30, 2017
|
|
$
|
87,904
|
|
Recent
Accounting Pronouncements
The
Company has reviewed accounting pronouncements that were issued as of September 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.
Duo
World Inc. and Subsidiaries
Notes
to the Consolidated Financial Statements
September
30, 2017
(Unaudited)
Note
4 – Accounts Receivable
Following
is a summary of accounts receivable as at September 30, 2017 and March 31, 2017;
|
|
September 30, 2017
|
|
|
March 31, 2017
|
|
Accounts receivable – Trade
|
|
$
|
797,782
|
|
|
$
|
754,783
|
|
Less: Provision for doubtful debts
|
|
|
(212,194
|
)
|
|
|
(133,113
|
)
|
|
|
$
|
585,588
|
|
|
$
|
621,670
|
|
At
September 30, 2017 and March 31, 2017, the Company had following concentrations of accounts receivable with customers:
Customer
|
|
September 30, 2017
|
|
|
March 31, 2017
|
|
Megamedia
|
|
|
57.08
|
%
|
|
|
63.68
|
%
|
DEN Networks
|
|
|
16.68
|
%
|
|
|
15.99
|
%
|
Topas
|
|
|
7.56
|
%
|
|
|
7.24
|
%
|
Commercial Bank
|
|
|
5.03
|
%
|
|
|
0
|
%
|
Dish Media
|
|
|
3.80
|
%
|
|
|
5.88
|
%
|
Bank of Ceylon
|
|
|
3.11
|
%
|
|
|
0
|
%
|
Mediatama
|
|
|
1.78
|
%
|
|
|
1.29
|
%
|
Meghbela
|
|
|
1.33
|
%
|
|
|
0.74
|
%
|
MediaNet
|
|
|
0.90
|
%
|
|
|
1.14
|
%
|
Sri Lanka Telecom
|
|
|
0.74
|
%
|
|
|
1.42
|
%
|
Other receivables
|
|
|
1.98
|
%
|
|
|
2.62
|
%
|
|
|
|
100
|
%
|
|
|
100
|
%
|
Note
5 – Prepaid Expenses and Other Current Assets
Following
is a summary of prepaid expenses and other current assets as at September 30, 2017 and March 31, 2017;
|
|
September 30, 2017
|
|
|
March 31, 2017
|
|
Security deposits
|
|
$
|
18,711
|
|
|
$
|
29,621
|
|
WHT receivable
|
|
|
194,037
|
|
|
|
201,362
|
|
Staff loan and advances
|
|
|
-
|
|
|
|
100
|
|
Travel advance
|
|
|
57
|
|
|
|
295
|
|
Supplier advance
|
|
|
3,481
|
|
|
|
4,398
|
|
ESC receivable
|
|
|
5,786
|
|
|
|
5,826
|
|
Insurance prepayment
|
|
|
356
|
|
|
|
1,435
|
|
Prepayments
|
|
|
18,601
|
|
|
|
10,580
|
|
Prepayment for other professional services
|
|
|
1,315,793
|
|
|
|
-
|
|
Other receivables
|
|
|
9,523
|
|
|
|
3,759
|
|
|
|
$
|
1,566,345
|
|
|
$
|
257,376
|
|
Duo
World Inc. and Subsidiaries
Notes
to the Consolidated Financial Statements
September
30, 2017
(Unaudited)
Note
6 – Property and Equipment
Following
table illustrates net book value of property and equipment as at September 30, 2017 and March 31, 2017;
|
|
September 30, 2017
|
|
|
March 31, 2017
|
|
Office equipment
|
|
$
|
9,399
|
|
|
$
|
9,465
|
|
Furniture & fittings
|
|
|
138,409
|
|
|
|
139,377
|
|
Computer equipment (Data Processing Equipment)
|
|
|
128,623
|
|
|
|
131,909
|
|
Improvements to lease hold assets
|
|
|
1,881
|
|
|
|
1,894
|
|
Website Development
|
|
|
13,682
|
|
|
|
13,768
|
|
|
|
|
291,994
|
|
|
|
296,413
|
|
Accumulated depreciation and amortization
|
|
|
(258,304
|
)
|
|
|
(248,326
|
)
|
Net fixed assets
|
|
$
|
33,690
|
|
|
$
|
48,087
|
|
Depreciation and amortization expense for
the Six months ended September 30, 2017 and 2016 was $14,143 and $49,650, 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 September 30, 2017 and March 31, 2017:
|
|
September 30, 2017
|
|
|
March 31, 2017
|
|
Opening Balance
|
|
$
|
580,899
|
|
|
$
|
382,352
|
|
Add: Costs capitalized during the year
|
|
|
139,020
|
|
|
|
365,216
|
|
Less: Amount Written-off
|
|
|
(56,114
|
)
|
|
|
(147,326
|
)
|
Translational gain
|
|
|
(5,154
|
)
|
|
|
(19,343
|
)
|
Net Intangible Assets
|
|
$
|
658,651
|
|
|
$
|
580,899
|
|
Note
8 – Short Term Borrowings
Following
is a summary of short-term borrowings as at September 30, 2017 and March 31, 2017;
|
|
September 30, 2017
|
|
|
March 31, 2017
|
|
PAN Asia Bank – Short term overdraft
|
|
$
|
480,758
|
|
|
$
|
460,088
|
|
Prosperous Capital
|
|
|
8,934
|
|
|
|
8,997
|
|
Commercial bank
|
|
|
11,564
|
|
|
|
4,753
|
|
|
|
$
|
501,256
|
|
|
$
|
473,838
|
|
Bank
overdraft facility, obtained from Pan Asia Banking Corporation PLC, contains an average interest rate of 15.55% per annum.
Duo
World Inc. and Subsidiaries
Notes
to the Consolidated Financial Statements
September
30, 2017
(Unaudited)
Note
9 – Due to Related Parties
Due
to Related Parties – Short term
From
time to time, the Company receives advances from related parties such as officers, directors or principal shareholders in the
normal course of business. Loans and advances received from related parties are unsecured and non-interest bearing. Balances outstanding
to these persons for less than 12 months are presented under current liabilities in the accompanying consolidated financial statements.
As of September 30, 2017 and March 31, 2017, the Company owed directors $572,047 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 September 30, 2017 and March 31, 2017, the Company owed directors $1,177,373 and $1,168,866,
respectively.
Note
10 – Taxes Payable
The
taxes payable comprise of items listed below as at September 30, 2017 and March 31, 2017;
|
|
September 30, 2017
|
|
|
March 31, 2017
|
|
PAYE
|
|
$
|
95,799
|
|
|
$
|
73,611
|
|
VAT payable
|
|
|
-
|
|
|
|
14
|
|
Stamp Duty Payable
|
|
|
39
|
|
|
|
48
|
|
Tax payable
|
|
|
6,712
|
|
|
|
8,996
|
|
|
|
$
|
102,550
|
|
|
$
|
82,669
|
|
Note
11 – Accruals and Other Payables
Following
is a summary of accruals and other payables as at September 30, 2017 and March 31, 2017;
|
|
September 30, 2017
|
|
|
March 31, 2017
|
|
Audit fee payable
|
|
$
|
17,705
|
|
|
$
|
20,906
|
|
Accruals
|
|
|
7,063
|
|
|
|
81,696
|
|
Other payables
|
|
|
79,137
|
|
|
|
67,144
|
|
|
|
$
|
103,905
|
|
|
$
|
169,746
|
|
Note
12 – Cost of Revenue
Following
is the summary of cost of revenue for the six months ending September 30, 2017 and 2016;
|
|
September 30, 2017
|
|
|
September 30, 2016
|
|
Purchases
|
|
$
|
23,178
|
|
|
$
|
19,696
|
|
Implementation cost
|
|
|
15,575
|
|
|
|
22,904
|
|
Product development cost written off
|
|
|
56,114
|
|
|
|
69,996
|
|
Consultancy, contract basis employee cost
|
|
|
7,468
|
|
|
|
19,007
|
|
Support services
|
|
|
34,723
|
|
|
|
10,721
|
|
Development services
|
|
|
21,361
|
|
|
|
-
|
|
Other external services
|
|
|
3,250
|
|
|
|
-
|
|
|
|
$
|
161,669
|
|
|
$
|
142,324
|
|
Duo
World Inc. and Subsidiaries
Notes
to the Consolidated Financial Statements
September
30, 2017
(Unaudited)
Note
13 – General and Administrative Expenses
Following
is the summary of general and administrative expenses for the six months ending September 30, 2017 and 2016;
|
|
September 30, 2017
|
|
|
September 30, 2016
|
|
Directors remuneration
|
|
$
|
75,952
|
|
|
$
|
52,741
|
|
EPF
|
|
|
22,125
|
|
|
|
23,607
|
|
ETF
|
|
|
5,531
|
|
|
|
5,902
|
|
Bonus
|
|
|
-
|
|
|
|
24,961
|
|
Vehicle allowance
|
|
|
18,842
|
|
|
|
28,614
|
|
Staff welfare
|
|
|
6,578
|
|
|
|
8,748
|
|
Penalties / Late payment charges
|
|
|
817
|
|
|
|
2,951
|
|
Office rent
|
|
|
35,684
|
|
|
|
35,892
|
|
Electricity charges
|
|
|
7,822
|
|
|
|
8,214
|
|
Office maintenance
|
|
|
6,057
|
|
|
|
8,164
|
|
Telephone charges
|
|
|
5,232
|
|
|
|
6,793
|
|
Travelling expense
|
|
|
1,633
|
|
|
|
1,718
|
|
Audit fee
|
|
|
5,138
|
|
|
|
2,564
|
|
Printing and stationery
|
|
|
420
|
|
|
|
886
|
|
Office expenses
|
|
|
986
|
|
|
|
1,252
|
|
Computer maintenance
|
|
|
2,699
|
|
|
|
3,697
|
|
Internet charges
|
|
|
6,530
|
|
|
|
6,634
|
|
Courier and postage
|
|
|
396
|
|
|
|
418
|
|
Security charges
|
|
|
1,854
|
|
|
|
1,696
|
|
Training and development
|
|
|
-
|
|
|
|
130
|
|
Insurance expense
|
|
|
1,046
|
|
|
|
1,172
|
|
Professional fees
|
|
|
10,015
|
|
|
|
25,372
|
|
Gratuity
|
|
|
3,640
|
|
|
|
-
|
|
Secretarial fees
|
|
|
351
|
|
|
|
411
|
|
Irrecoverable tax
|
|
|
20,041
|
|
|
|
23,249
|
|
Software Rentals
|
|
|
12,952
|
|
|
|
12,993
|
|
Other professional services
|
|
|
5,145
|
|
|
|
219,650
|
|
Consulting fee
|
|
|
51,300
|
|
|
|
-
|
|
Transfer agent fees
|
|
|
865
|
|
|
|
1,235
|
|
Filling fee and subscription
|
|
|
3,933
|
|
|
|
2,756
|
|
Stamp duty expenses
|
|
|
852
|
|
|
|
451
|
|
Legal fee
|
|
|
4,500
|
|
|
|
1,005
|
|
Investor relations
|
|
|
4,395
|
|
|
|
-
|
|
Other expenses
|
|
|
1,493
|
|
|
|
350
|
|
|
|
$
|
324,824
|
|
|
$
|
514,226
|
|
Duo
World Inc. and Subsidiaries
Notes
to the Consolidated Financial Statements
September
30, 2017
(Unaudited)
Note
14 – Selling and Distribution Expenses
Following
is the summary of selling and distribution expenses for the six months ending on September 30, 2017 and 2016;
|
|
September 30, 2017
|
|
|
September 30, 2016
|
|
Marketing Expenses
|
|
$
|
444
|
|
|
$
|
570
|
|
Vehicle hire charges
|
|
|
3,108
|
|
|
|
3,221
|
|
Foreign Travel
|
|
|
-
|
|
|
|
424
|
|
Vehicle Running Expense
|
|
|
2,331
|
|
|
|
2,416
|
|
|
|
$
|
5,883
|
|
|
$
|
6,631
|
|
Note
15 - Equity
As
at September 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 six months ended September 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
|
|
08/23/2017
|
|
Stock issued to Maxim Partners LLC.
|
|
|
1,391,816
|
|
|
$
|
1,043,862
|
|
08/23/2017
|
|
Stock issued to Dayspring Capital LLC.
|
|
|
947,371
|
|
|
$
|
710,528
|
|
09/18/2017
|
|
Stock issued to Consulting for Strategic Growth 1, Ltd.
|
|
|
70,000
|
|
|
$
|
52,500
|
|
As
at September 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 six months ended September 30, 2017, the Company has not issued any new preferred shares.
Duo
World Inc. and Subsidiaries
Notes
to the Consolidated Financial Statements
September
30, 2017
(Unaudited)
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 $119,119 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 $1,248 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
|
|
$
|
9,940
|
|
05/15/2013
|
|
Guarantee for Lanka Clear
|
|
|
2,089
|
|
07/31/2014
|
|
Guarantee for SLT
|
|
|
563
|
|
08/10/2015
|
|
Guarantee for LOLC
|
|
|
1,588
|
|
|
|
|
|
$
|
14,180
|
|
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 rearranged / 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 September 30, 2017 and September 30, 2016
D.
Results of operations for the six months ended September 30, 2017 and September 30, 2016
E.
Financial condition as at September 30, 2017 and March 31, 2017
F.
Liquidity and capital reserves
G.
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 Communication and Collaboration Platform & Customer Life Cycle Management,
Subscriber Management Billing, Business Intelligence and Workflow Management 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 two products from which
it generates its revenue; they are” “Duo Subscribe” and “FaceTone.” Currently company is
not marketing its old product “Duo CLM” and also it has updated Duo CLM” customers with “FaceTone”
which is the new version introduced replacing “Duo CLM”. Duo sells its software licenses of FaceTone 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.
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 September 30, 2017 and September 30, 2016:
|
The
Company had revenues amounting to $170,326 and $312,390, respectively, for three months ended September 30, 2017 and September
30, 2016. Following is a breakdown of revenues for both periods:
|
|
September
30, 2017
|
|
September
30, 2016
|
|
Changes
|
|
|
|
|
|
|
|
DuoSubscribe
|
|
$
|
115,983
|
|
|
$
|
230,805
|
|
|
$
|
(114,822
|
)
|
FaceTone
|
|
|
35,223
|
|
|
|
4,791
|
|
|
|
30,432
|
|
DuoCLM
|
|
|
-
|
|
|
|
74,032
|
|
|
|
(74,032
|
)
|
Software
hosting and reselling - FaceTone (Beta/testing version)
|
|
|
4,011
|
|
|
|
2,762
|
|
|
|
1,249
|
|
Development
services
|
|
|
15,109
|
|
|
|
-
|
|
|
|
15,109
|
|
|
|
$
|
170,326
|
|
|
$
|
312,390
|
|
|
$
|
(142,064
|
)
|
Total
revenue for the three months ended September 30, 2017 decreased by 45% when compared to September 30, 2016. The decrease is mainly
due to the drop in revenue generated by the legacy products, DuoCLM and DuoSubscribe. This is as a result of the Company’s
decision to phase out the legacy products.
The Company does not market
or sell DuoCLM and DuoSubscribe, as the newer products are being introduced to the market. FaceTone is an advanced version
of DuoCLM and it is generating a lot of interest in the market because of its superior features and flexibility. During the three
months ended September 30, 2017, revenue from FaceTone increased by 635% signifying the favorable market for the
new product.
During the three months
ended September 30, 2017, the Company was able to attract number of high profile and profitable customers for the product “FaceTone”.
Most of these sales leads are at agreement finalization stage, and revenue would be recognized in the subsequent quarters.
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 September 30, 2017 and September 30, 2016, the Company had the following concentrations of revenues with
customers:
Customer
|
|
September
30, 2017
|
|
September
30, 2016
|
|
|
|
|
|
A
|
|
|
47.74
|
%
|
|
|
24.53
|
%
|
B
|
|
|
16.87
|
%
|
|
|
0
|
%
|
C
|
|
|
9.22
|
%
|
|
|
4.24
|
%
|
D
|
|
|
8.87
|
%
|
|
|
0
|
%
|
E
|
|
|
0
|
%
|
|
|
39.08
|
%
|
Other
misc. customers
|
|
|
17.30
|
%
|
|
|
32.15
|
%
|
|
|
|
100
|
%
|
|
|
100
|
%
|
The
total cost of sales amounted to $74,919 and $66,095 for the three months ended September 30, 2017 and September 30, 2016, respectively.
The following table sets forth the Company’s cost of sales breakdown for both periods:
|
|
September
30, 2017
|
|
September
30, 2016
|
|
Change
|
|
|
|
|
|
|
|
Purchases
|
|
$
|
11,927
|
|
|
$
|
12,174
|
|
|
$
|
(247
|
)
|
Implementation
and onsite support cost
|
|
|
6,373
|
|
|
|
12,150
|
|
|
|
(5,777
|
)
|
Product
development cost written off
|
|
|
28,730
|
|
|
|
23,975
|
|
|
|
4,755
|
|
Consultancy,
contract basis employee cost
|
|
|
643
|
|
|
|
7,495
|
|
|
|
(6,852
|
)
|
Support
services
|
|
|
17,517
|
|
|
|
10,301
|
|
|
|
7,216
|
|
Development
services
|
|
|
9,729
|
|
|
|
-
|
|
|
|
9,729
|
|
Total
cost of sales
|
|
$
|
74,919
|
|
|
$
|
66,095
|
|
|
$
|
8,824
|
|
Cost
of sales has marginally increased by 13% in the three months ended September 30, 2017 when compared to the three months ended
September 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 September 30, 2017 and September 30, 2016 amounted to $95,407 and $246,295, respectively.
The
total operating expenditures amounted to $765,742 and $312,007 for the three months ended September 30, 2017 and September 30,
2016, respectively. The following table sets forth the Company’s operating expenditure analysis for both periods:
|
|
September
30, 2017
|
|
September
30, 2016
|
|
Change
|
|
|
|
|
|
|
|
Research
and development
|
|
$
|
-
|
|
|
$
|
12,615
|
|
|
$
|
(12,615
|
)
|
General
and administrative
|
|
|
176,256
|
|
|
|
128,714
|
|
|
|
47,542
|
|
Salaries
and benefits
|
|
|
93,754
|
|
|
|
113,360
|
|
|
|
(19,606
|
)
|
Selling
and distribution
|
|
|
2,828
|
|
|
|
3,317
|
|
|
|
(489
|
)
|
Professional
services - Investment advisory
|
|
|
438,598
|
|
|
|
-
|
|
|
|
438,598
|
|
Depreciation
|
|
|
6,288
|
|
|
|
8,701
|
|
|
|
(2,413
|
)
|
Amortization
of web site development
|
|
|
383
|
|
|
|
480
|
|
|
|
(97
|
)
|
Allowance
for bad debts
|
|
|
47,635
|
|
|
|
44,820
|
|
|
|
2,815
|
|
Total
operating expenses
|
|
$
|
765,742
|
|
|
$
|
312,007
|
|
|
$
|
453,735
|
|
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 costs during the three months ended September 30, 2017, as all of our
products have passed through the research and development phase. Whereas during the three months ended September 30, 2016, the
Company incurred $12,615 as research and development expense.
General
and Administrative Cost
During
the three months ended September 30, 2017, general and administrative cost increased by $47,542 when compared to the same period
in 2016.
The main contributor for
the increase was $42,750 paid as consultancy fee to the Investor Relations firm during the three months ended September
30, 2017.
Salaries
and benefits
Salaries
and benefits decreased by 17% during the three months ended September 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
September 30, 2017, marketing expenses marginally decreased by 15% as the Company only marketed one product (FaceTone)
and that too within Sri Lanka only, as a test market before the product is marketed in other countries.
Professional
services – Investment advisory
Company
incurred a cost of $438,598 on account of agreement signed in July 2017, for the procurement of investment advisory services over
a period of one year.
Depreciation
and Amortization expense
Depreciation
and amortization expense had decreased by 27% during the 3 months ended September 30, 2017, when compared to the three months
ended September 30, 2016.
Allowance
for bad debts
Allowance
for bad debts has marginally increased by $2,815 during the three months ended September 30, 2017, when compared to the three
months ended September 30, 2016.
The
loss from operations for the three months ended September 30, 2017 and September 30, 2016 amounted to $670,335 and $65,712, respectively.
The
Company’s other income and (expense) for the three months ended September 30, 2017 and September 30, 2016 amounted to $(22,153)
and $21, respectively. The following table sets forth the Company’s other income and (expense) analysis for both periods:
|
|
September
30, 2017
|
|
September
30, 2016
|
|
Change
|
|
|
|
|
|
|
|
Interest
expense
|
|
$
|
(18,305
|
)
|
|
$
|
(5,484
|
)
|
|
$
|
(12,821
|
)
|
Other
income
|
|
|
18
|
|
|
|
21
|
|
|
|
(3
|
)
|
Bank
charges
|
|
|
(1,095
|
)
|
|
|
(524
|
)
|
|
|
(571
|
)
|
Exchange
gain/ (loss)
|
|
|
(2,771
|
)
|
|
|
6,008
|
|
|
|
(8,779
|
)
|
Total
other income (expenses)
|
|
$
|
(22,153
|
)
|
|
$
|
21
|
|
|
$
|
(22,174
|
)
|
Other
expenditures increased by $22,174 in the three months ended September 30, 2017, when compared to the three months ended September
30, 2016. The main reasons for this increase were the increase in interest cost and foreign exchange losses.
The
loss before provision for income taxes for the three months ended September 30, 2017 and September 30, 2016 amounted to $692,488
and $65,691, respectively.
The
net loss for the three months ended September 30, 2017 and September 30, 2016 amounted to $692,488 and $65,691, respectively.
The
Company’s comprehensive loss for the three months ended September 30, 2017 and September 30, 2016 amounted to $711,383 and
$60,114, respectively.
Comprehensive
Income / (Loss):
|
|
September
30, 2017
|
|
September
30, 2016
|
(Loss)
/ gain on foreign currency translation
|
|
$
|
(18,895
|
)
|
|
$
|
5,577
|
|
Net
loss
|
|
|
(692,488
|
)
|
|
|
(65,691
|
)
|
Comprehensive
loss
|
|
$
|
(711,383
|
)
|
|
$
|
(60,114
|
)
|
At
September 30, 2017 and March 31, 2017, the Company had 41,116,654 and 38,567,467 common shares issued and outstanding, respectively.
The weighted average number of shares for the three months ended September 30, 2017 and September 30, 2016 was 39,682,783 and
38,567,467, respectively. The loss per share for both periods was $(0.02) per share and $(0.00) per share, respectively.
D.
|
Results
of operations for the six months ended September 30, 2017 and September 30, 2016:
|
The
Company had revenues amounting to $381,138 and $641,117, respectively, for six months ended September 30, 2017 and September 30,
2016. Following is a breakdown of revenues for both periods:
|
|
September
30, 2017
|
|
September
30, 2016
|
|
Changes
|
|
|
|
|
|
|
|
DuoSubscribe
|
|
$
|
254,325
|
|
|
$
|
491,697
|
|
|
$
|
(237,372
|
)
|
FaceTone
|
|
|
89,668
|
|
|
|
4,790
|
|
|
|
84,878
|
|
DuoCLM
|
|
|
-
|
|
|
|
139,377
|
|
|
|
(139,377
|
)
|
Software
hosting and reselling - FaceTone (Beta/testing version)
|
|
|
6,730
|
|
|
|
5,253
|
|
|
|
1,477
|
|
Development
services
|
|
|
30,415
|
|
|
|
-
|
|
|
|
30,415
|
|
|
|
$
|
381,138
|
|
|
$
|
641,117
|
|
|
$
|
(259,979
|
)
|
Total
revenue for the six months ended September 30, 2017 has decreased by 41% when compared to six months ended September 30, 2016.
This decrease is mainly due to the reduction in revenue generated by DuoSubscribe and DuoCLM as the company stopped marketing
the two legacy software products.
FaceTone, the advanced
version of DuoCLM, has already attracted the potential market due to its unique features and flexibility. It is evidenced by the
increase of revenue generated by FaceTone by $84,878 during the six months ended September 30, 2017 when compared to the
same period ended September 30, 2016.
For
the six months ended September 30, 2017 and September 30, 2016, the Company had the following concentrations of revenues with
customers:
Customer
|
|
September
30, 2017
|
|
September
30, 2016
|
|
|
|
|
|
A
|
|
|
50.03
|
%
|
|
|
25.41
|
%
|
B
|
|
|
14.29
|
%
|
|
|
0
|
%
|
C
|
|
|
8.28
|
%
|
|
|
7.94
|
%
|
D
|
|
|
7.98
|
%
|
|
|
0
|
%
|
E
|
|
|
0
|
%
|
|
|
37.00
|
%
|
Other
misc. customers
|
|
|
19.42
|
%
|
|
|
29.65
|
%
|
|
|
|
100
|
%
|
|
|
100
|
%
|
The
total cost of sales amounted to $161,669 and $142,324 for the six months ended September 30, 2017 and 2016, respectively. The
following table sets forth the Company’s cost of sales breakdown for both periods:
|
|
September
30, 2017
|
|
September
30, 2016
|
|
Change
|
|
|
|
|
|
|
|
Purchases
|
|
$
|
23,178
|
|
|
$
|
19,696
|
|
|
$
|
3,482
|
|
Implementation
and onsite support cost
|
|
|
15,575
|
|
|
|
22,904
|
|
|
|
(7,329
|
)
|
Product
development cost written off
|
|
|
56,114
|
|
|
|
69,996
|
|
|
|
(13,882
|
)
|
Consultancy,
contract basis employee cost
|
|
|
7,468
|
|
|
|
19,007
|
|
|
|
(11,539
|
)
|
Support
services
|
|
|
34,723
|
|
|
|
10,721
|
|
|
|
24,002
|
|
Development
services
|
|
|
21,361
|
|
|
|
-
|
|
|
|
21,361
|
|
Other
external services
|
|
|
3,250
|
|
|
|
-
|
|
|
|
3,250
|
|
Total
cost of sales
|
|
$
|
161,669
|
|
|
$
|
142,324
|
|
|
$
|
19,345
|
|
Cost
of sales marginally increased by $19,345 during the six months ended September 30, 2017 when compared to the six months ended
September 30, 2016. Cost of development services and the increase in the cost of support services were the main contributors to
the increase in cost of sales.
The
gross income for the six months ended September 30, 2017 and 2016 amounted to $219,469 and $498,793, respectively.
The
total operating expenditures amounted to $1,039,690 and $843,813 for the six months ended September 30, 2017 and 2016, respectively.
The following table sets forth the Company’s operating expenditure analysis for both periods:
|
|
September
30, 2017
|
|
September
30, 2016
|
|
Change
|
|
|
|
|
|
|
|
Research
and development
|
|
$
|
-
|
|
|
$
|
19,626
|
|
|
$
|
(19,626
|
)
|
General
and administrative
|
|
|
324,824
|
|
|
|
514,226
|
|
|
|
(189,402
|
)
|
Salaries
and benefits
|
|
|
178,005
|
|
|
|
208,860
|
|
|
|
(30,855
|
)
|
Selling
and distribution
|
|
|
5,883
|
|
|
|
6,631
|
|
|
|
(748
|
)
|
Professional
services - Investment advisory
|
|
|
438,598
|
|
|
|
-
|
|
|
|
438,598
|
|
Depreciation
|
|
|
13,379
|
|
|
|
48,424
|
|
|
|
(35,045
|
)
|
Amortization
of web site development
|
|
|
764
|
|
|
|
1,226
|
|
|
|
(462
|
)
|
Allowance
for bad debts
|
|
|
78,237
|
|
|
|
44,820
|
|
|
|
33,417
|
|
Total
operating expenses
|
|
$
|
1,039,690
|
|
|
$
|
843,813
|
|
|
$
|
195,877
|
|
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 six months ended September 30, 2017, as all of our products
have passed through the research and development phase. Whereas during the six months ended September 30, 2016, the Company incurred
$19,626 as research and development expense.
General
and Administrative Cost
The general and administrative
expenditure has decreased by 37% in the six months ended September 30, 2017 when compared with six months ended September
30, 2016. The main reason for the decrease is due to the reduction in the professional fees paid to consultants and auditors for
the purpose of filing Form S-1 Registration Statement, during the six months ended September 30, 2017, when compared with the
same period in 2016.
Salaries
and benefits
Salaries
and benefits decreased by 15% during the six months ended September 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
There
is a decrease of 11% on account of expenditure incurred for selling and distribution activities during the six months ended September
30, 2017, when compared with the six months ended September 30, 2016. The company reduced marketing activities during the six
months ended September 30, 2017, as it is pooling all of the resources for the launch of the new products during the two succeeding
quarters.
Professional
services – Investment advisory
Company
incurred a cost of $438,598 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 72% during the six months ended September 30, 2017, when compared to the six months
ended September 30, 2016. Since April 1, 2016 the Company has changed its accounting policies on useful life of computer equipment
and web site development cost and the effect on changing the accounting policies were reflected during the six months ended September
30, 2016.
Allowance
for bad debts
Allowance
for bad debts increased by $33,417 during the six months ended September 30, 2017 when compared to the six months ended September
30, 2016.
The
loss from operations for the six months ended September 30, 2017 and 2016 amounted to $820,221 and $345,020, respectively.
The
Company’s other income and (expenses) for the six months ended September 30, 2017 and 2016 amounted to $(34,140) and $(3,299),
respectively. The following table sets forth the Company’s other income and (expenses) analysis for both periods:
|
|
September
30, 2017
|
|
September
30, 2016
|
|
Change
|
|
|
|
|
|
|
|
Interest
expense
|
|
$
|
(36,156
|
)
|
|
$
|
(10,476
|
)
|
|
$
|
(25,680
|
)
|
Gain
on disposals of property and equipment
|
|
|
32
|
|
|
|
-
|
|
|
|
32
|
|
Other
income
|
|
|
620
|
|
|
|
245
|
|
|
|
375
|
|
Bank
charges
|
|
|
(2,089
|
)
|
|
|
(1,728
|
)
|
|
|
(361
|
)
|
Exchange
gain
|
|
|
3,453
|
|
|
|
8,660
|
|
|
|
(5,207
|
)
|
Total
other income (expenses)
|
|
$
|
(34,140
|
)
|
|
$
|
(3,299
|
)
|
|
$
|
(30,841
|
)
|
Other
expenses increased by $30,841, during the six months ended September 30, 2017, when compared with the six months ended September
30, 2016. This increase was mainly due to the increase in interest expense during the six months ended September 30, 2017.
The
loss before provision for income taxes for the six months ended September 30, 2017 and 2016 amounted to $854,361 and $348,319,
respectively.
The net loss for the six
months ended September 30, 2017 and 2016 amounted to $854,361 and $348,319, respectively.
The
Company’s comprehensive loss for the six months ended September 30, 2017 and 2016 amounted to $879,217 and $333,315, respectively.
Comprehensive
Loss:
|
|
September
30, 2017
|
|
September
30, 2016
|
Unrealized
foreign currency translation (loss) gain
|
|
$
|
(24,856
|
)
|
|
$
|
15,004
|
|
Net
loss
|
|
|
(854,361
|
)
|
|
|
(348,319
|
)
|
Comprehensive
loss
|
|
$
|
(879,217
|
)
|
|
$
|
(333,315
|
)
|
At
September 30, 2017 and March 31, 2017, the Company had 41,116,654 and 38,567,467 common shares issued and outstanding, respectively.
The weighted average number of shares for the six months ended September 30, 2017 and September 30, 2016 was 39,128,172 and 38,498,096,
respectively. The loss per share for both periods was $(0.02) per share and $(0.01) per share, respectively.
E.
|
Financial
condition as at September 30, 2017 and March 31, 2017:
|
Assets:
The
Company reported total assets of $2,963,532 and $1,634,154 as at September 30, 2017 and March 31, 2017, respectively. 53% of these
total assets include prepaid expenses and other current assets, 22% of total assets comprise intangible assets and 20% of total
assets include net accounts receivables 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 $33,690 and $48,087 as at September 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 $30,596 as at September 30, 2017. Furthermore, our current assets at March 31,
2017 totaled $974,304 and at September 30, 2017, these current assets amounted to $2,240,595 comprised of cash of $22,999, accounts
receivable of $585,588, prepaid and other current assets of $1,566,345 and accrued revenue of $65,663.
Liabilities:
The
Company had total liabilities of $3,400,892 and $3,050,987 as at September 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 18% in current liabilities amounting to $341,398, making total
current liabilities of $2,223,519 as at September 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 September 30, 2017, the Company had stockholders´
deficit of $437,360, which represents a decrease of 69%.
The
Company had 41,116,654 and 38,567,467 shares issued and outstanding at September 30, 2017 and March 31, 2017, respectively.
F.
|
Liquidity
and capital reserves:
|
The
Company had loss from operations of $670,335 and $820,221 for the three and six months ended September 30, 2017 respectively;
a total other expense amounting to $22,153 and $34,140 for the three and six months ended September 30, 2017, respectively; and
a net loss of $692,488 and $854,361 for the three and six months ended September 30, 2017, respectively.
In
summary, our cash flows for the six months ended September 30, 2017 and September 30, 2016 were as follows:
|
|
September
30, 2017
|
|
September
30, 2016
|
Net
cash provided by / (used in) operating activities
|
|
$
|
147,845
|
|
|
$
|
38,942
|
|
Net
cash used in investing activities
|
|
|
(139,367
|
)
|
|
|
(205,952
|
)
|
Net
cash provided by financing activities
|
|
|
-
|
|
|
|
67,804
|
|
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 $22,999 in cash; net cash provided by operations of $147,845, for the six months ended
September 30, 2017; working capital of $17,076 and stockholders´ deficit of $437,360 as of September 30, 2017.
G.
|
Milestones
for next twelve months (2017-2018):
|
Our
specific plan of operations and milestones through September 2018 are as follows:
1)
|
Product
Development and Launch:
|
|
|
|
We
intend to commercially launch the new cloud based, SaaS products: FaceTone, DigIn, CloudCharge and Smoothflow.
|
|
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.
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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.
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Our
management intends to:
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Continue
to empower and create value for our human capital;
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Encourage
disruptive technologies;
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Provide
greater opportunities for knowledge sharing; and
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Sponsor
and motivate learning and adoption of new technologies.
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d)
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Infrastructure
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We
plan to increase our infrastructure in order to:
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Facilitate
the increase in software development teams supporting R&D and Product Development;
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Expand
our Global Support Center to cater to the increase in customer base, and increase in our product lines;
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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.
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e)
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Financial
Performance
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We
intend to provide value for all our shareholders by:
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Increasing
profitability and free cash flow;
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Efficiently
managing the use of capital;
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Raising
capital and expanding our operations;
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Uplisting to OTCQB;
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Capitalizing
and maximizing on the high growth opportunities in the market;
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Providing
a robust and steady capital appreciation; and
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Providing
options to realize gains.
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f)
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Corporate
Social Responsibility
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Our
wholly-owned subsidiary, Duo Software (Pvt.) Ltd., was Asia’s first software development company to be certified Carbon
Neutral in 2011.
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We
intend to be environmentally friendly, and continue with the carbon foot print audit and Carbon Neutral Certification in 2017.
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