Summary of financial condition
Table 2: Comparison of financial condition
October 31, 2021 October 31, 2020
Working capital deficit $ (963,891) $ (501,033)
Current assets $ 39,069 $ 20,937
Total liabilities $ 1,002,960 $ 521,970
Common stock and additional paid in capital $ 8,469,145 $ 7,190,431
Deficit
$ (9,457,922) $ (7,750,080)
Accumulated other comprehensive income $ 26,838 $ 58,829
Results of operations
YEARS ENDED OCTOBER 31, 2021 AND 2020
Our operating results for the years ended October 31, 2021 and 2020 and the
changes in our operating results between them are summarized in the Table 3
below.
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Table 3: Summary
Year ended Percentage
October 31, increase /
2021 2020 (decrease)
Revenue net of cost of goods sold $ 41,459 $ 17,401 138%
Operating expenses (1,737,885) (472,142) 268%
Foreign exchange (658) 4,513 (115)%
Interest expense (10,758) (12,887) (17)%
Impairment of deposits - (22,801) (100)%
Net loss (1,707,842) (485,916) 251%
Translation to reporting currency (31,991) 12,490 (356)%
Comprehensive loss
$ (1,739,833) $ (473,426) 267%
Revenue
During the year ended October 31, 2021, we generated $29,094, in revenue from
our SMART Systems software licensing and maintenance of the applications
required to run SMART Systems (2020 - $14,375). Our first customer is Duesey
Coffee and Chocolates Sdn Bhd ("Duesey Coffee"), of which Mr. Lim is a 50%
shareholder. In addition, we generated $12,028 (2020 - $3,026) from WeChat
Online product, which was developed specifically for Duesey Coffee in P.R.
China, which is managed by Shanghai Duesenberg Marketing Planning Co Ltd, our
second customer. Due to current market uncertainty associated with COVID-19 we
agreed to bill our customers set monthly fees for these services without
entering into any termed contracts, which will allow us or our customers to
cancel the services any time. Duesey Coffee agreed to a monthly fee of 10,000
Malaysian Ringgit (approximately USD$2,450), Shanghai Duesenberg Marketing
Planning Co Ltd. agreed to a monthly fee of USD$1,000.
In August of 2021, our Duesenberg platform started generating revenue from our
online store, which at the moment allows us to sell third-party-products. Our
customers are vendors who wish to sell their merchandise on our platform. During
the year ended October 31, 2021, we generated $455, in gross revenue from online
sales, and paid $118 to our payment gateway provider for the services.
Operating Expenses
Our operating expenses for the years ended October 31, 2021 and 2020 consisted
of the following:
Table 4: Changes in operating expenses
Year ended Percentage
October 31, increase /
2021 2020 (decrease)
Operating expenses:
Accounting $ 29,237 $ 16,078 82%
Amortization 990 4,353 (77)%
General and administrative expenses 250,134 59,997 317%
Management fees
24,000 24,000 -
Professional fees 32,610 14,242 129%
Regulatory and filing 33,391 32,827 2%
Salaries and wages 510,621 295,579 73%
Research and development costs 848,291 14,629 5,699%
Travel and entertainment 8,611 10,437 (17)%
Total operating expenses $ 1,737,885 $ 472,142 268%
Our operating expenses increased by $1,265,743 or 268% from $472,142 for the
year ended October 31, 2020, to $1,737,885 for the year ended October 31, 2021.
The most significant change in our operating expenses was associated with
$848,291 in research and development costs which included $616,800 we recorded
for initial ergonomics exterior and interior data sheets and CAS IGES files for
the Duesenberg EV commissioned from Rocket Supreme, and $231,325 in fees for
digitization of the drawings and the blueprints of Duesenberg Heritage vehicles,
which we commissioned from Hampshire Automotive Sdn Bhd. ("Hampshire
Automotive"); during the year ended October 31, 2020, our research and
development costs were $14,629. Our salaries and wages increased by $215,042
from $295,579 we incurred during the year ended October 31, 2020, to $510,621 we
incurred during the year ended
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October 31, 2021, the increase was mainly associated with employment agreements
for our new CSO and CTO. Other notable expenses included $24,000 in management
fees, which did not change in comparison to the year ended October 31, 2020;
$29,237 in accounting fees, which increased by $13,159 as compared to $16,078 we
incurred during the year ended October 31, 2020; $32,610 in professional fees,
which increased by $18,368 from $14,242 we incurred during the year ended
October 31, 2020, and $33,391 in regulatory fees, an increase of $564 as
compared to $32,827 we incurred during the year ended October 31, 2020.
The above increases were in part offset by decreased travel and entertainment
expenses, which during the year ended October 31, 2021, totaled $8,611 as
compared to $10,437 we incurred during the comparative period in our fiscal 2020
year, this decrease was associated with reduced travel due to COVID-19 travel
bans imposed by various federal governments. In addition, our amortization
expense decreased by $3,363 for the year ended October 31, 2021, to $990.
Other Items
During the year ended October 31, 2021, we recorded $10,758 (2020 - $12,887) in
interest expense, of which $5,435 (2020 - $8,966) was associated with the
liabilities under the notes payable we issued to our major shareholder, and
$5,309 (2020 - $3,921) was accrued on the third-party notes payable; we also
recorded $658 in realized foreign exchange loss (2020 - $4,513 gain) associated
with the fluctuation in foreign exchange rates between the US, Canadian,
Malaysian, and Hong Kong currencies.
During the year ended October 31, 2020, we recognized a $22,801 impairment on
deposit paid by our subsidiary, Duesenberg Evolution, to a vendor, as underlying
agreement to supply certain commodities the Company acquired for trading fell
through. We did not have similar transactions during the current year ended
October 31, 2021.
Translation to Reporting Currency
Changes in translation to reporting currency result from differences between our
functional currencies, being the Canadian dollar for the parent Company,
Malaysian Ringgit for Duesenberg Malaysia, and Hong Kong Dollar for Duesenberg
Evolution, and our reporting currency, being the United States dollar. These
differences are caused by fluctuation in foreign exchange rates between the four
currencies as well as different accounting treatments between various financial
instruments.
Liquidity
GOING CONCERN
The audited consolidated financial statements included in this Annual Report on
Form 10-K have been prepared on a going concern basis, which implies that we
will continue to realize our assets and discharge our liabilities in the normal
course of business. We have not generated any revenues from operations since
inception, have never paid any dividends and are unlikely to pay dividends or
generate significant earnings in the immediate or foreseeable future. Our
continuation as a going concern depends upon the continued financial support of
our shareholders and management, our ability to obtain necessary debt or equity
financing to continue operations, and the attainment of profitable operations.
Based upon our current plans, we expect to incur operating losses in future
periods. At October 31, 2021, we had a working capital deficit of $963,891 and
accumulated losses of $9,457,922 since inception. These factors raise
substantial doubt about our ability to continue as a going concern. We cannot
assure you that we will be able to generate significant revenues in the future.
The consolidated financial statements included with this Annual Report on Form
10-K do not give effect to any adjustments that would be necessary should we be
unable to continue as a going concern. Therefore, we may be required to realize
our assets and discharge our liabilities in other than the normal course of
business and at amounts different from those reflected in our financial
statements.
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INTERNAL AND EXTERNAL SOURCES OF LIQUIDITY
Table 5: Working Capital
At October 31, 2021 At October 31, 2020
Current assets $ 39,069 $ 20,937
Current liabilities (1,002,960) (521,970)
Working capital deficit $ (963,891) $ (501,033)
During the year ended October 31, 2021, our working capital deficit decreased by
$462,858, from $501,033 at October 31, 2020, to $963,891 at October 31, 2021.
The increase in working capital deficit was primarily related to changes in
vendor payables and accrued liabilities, which increased from $69,525 and
$13,366 at October 31, 2020 to $576,881 and $45,318 at October 31, 2021,
respectively, and to a smaller extent to increase in amounts owed under notes
payable, which increased from $67,429 at October 31, 2020 to $106,892 at October
31, 2021. These increases were in part offset by decreased amounts due to
related parties of $273,869, as compared to $371,650 we owed to related parties
at October 31, 2020, representing a decrease of $97,781.
Table 6: Cash Flows
At October 31, 2021 At October 31, 2020
Net cash used in operating activities $ (788,995) $ (159,889)
Net cash used in investing activities
(2,760) -
Net cash provided by financing
activities 787,445 151,773
Effect of exchange rate changes on
cash 29 25
Net decrease in cash $ (4,281) $ (8,091)
Net cash used in operating activities.
During the year ended October 31, 2021, we used $788,995 to support our
operating activities. This cash was used to cover our cash operating expenses of
$1,645,007, and to increase our receivables by $22,749. These uses of cash were
offset by increases in our accounts payable and accrued liabilities of $533,503,
an increase to accrued salaries payable to our management team of $294,444, an
increase to amounts due to our related parties of $50,125, and, to a smaller
extent, by a decrease in our prepaids of $689.
During the year ended October 31, 2020, we used $159,889 to support our
operating activities. This cash was used to cover our cash operating expenses of
$447,005, to increase our receivables by $3,016, and to pay $334 towards our
future expenses. These uses of cash were offset by $53,290 increase in amounts
due to related parties for reimbursable expenses, by $216,592 increase to
accrued salaries payable to our CEO and CFO, and a $20,584 increase to our
accounts payable and accrued liabilities.
Non-cash operating activities.
During the year ended October 31, 2021, we recorded $5,435 in interest on our
notes payable to Hampshire Avenue and $5,309 in interest owed to third-party
lenders under notes payable. We recorded $990 in amortization of our office
equipment and $25,849 gain on foreign exchange fluctuation between the US,
Canadian, Malaysian, and Hong Kong currencies. In addition, we recorded $76,950
as value of our common shares to be issued for corporate communication services
we have received during the year ended October 31, 2021.
During the year ended October 31, 2020, we recorded $22,801 in impairment of our
deposits, and $1,130 in foreign exchange fluctuation between the US, Canadian,
Malaysian, and Hong Kong currencies. We recorded $8,966 in interest on our notes
payable to Hampshire Avenue and $3,921 in interest on CAD$83,309 note payable
due on August 31, 2021. In addition, we recorded $4,353 in amortization of our
office equipment.
Net cash used in investing activities.
During the year ended October 31, 2021, we used $2,760 to acquire computers and
other office equipment.
We did not have any investing activities in our Fiscal 2020 year.
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Net cash provided by financing activities.
During the year ended October 31, 2021, we received $95,150 under loan
agreements with Hampshire Avenue. The loans bear interest at 4% per annum, are
unsecured and payable on demand. In addition, we borrowed $29,000 from
third-party-lenders under 4% demand notes payable. During the year ended October
31, 2021, we received $673,000 in proceeds from two separate private placement
financings by issuing a total of 833,333 shares of our common stock. We paid
$9,705 in share issuance costs associated with these private placements.
During the year ended October 31, 2020, we received $151,773 under loan
agreements with Hampshire Avenue. The loans bear interest at 4% per annum, are
unsecured and payable on demand.
Capital Resources
Our ability to continue the development and marketing of the Duesenberg
Applications, SMART Systems, Duesenberg WeChat Application, as well as
commencement of the development of Duesenberg EV and Duesenberg Heritage
vehicles, is subject to our ability to obtain necessary funding. We expect to
raise funds through sales of our debt or equity securities. We have no committed
sources of capital. If we are unable to raise funds as and when we need them,
we may be required to curtail, or even to cease, our operations.
As of October 31, 2021, we had cash on hand of $7,434 and working capital
deficit of $963,891, which raises substantial doubt about our continuation as a
going concern. During the year ended October 31, 2021, we closed two concurrent
private placement financings for net proceeds of $673,000, however, these funds
will not be sufficient to complete our current business plans, and we will
require additional financing.
We plan to mitigate our losses in future years by controlling our operating
expenses and actively seeking new distribution channels for our Duesenberg
products, Duesenberg EV, and Duesenberg Heritage Vehicles. We cannot provide
assurance that we will be successful in generating additional capital to support
our development. The financial statements do not include any adjustments that
might result from the outcome of these uncertainties.
Contingencies and Commitments
We had no contingencies at October 31, 2021.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements and no non-consolidated,
special-purpose entities.
Critical Accounting Policies
The preparation of financial statements in conformity with United States
generally accepted accounting principles requires our management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Our management routinely makes judgments and estimates about the effects of
matters that are inherently uncertain.
The JOBS Act contains provisions that, among other things, reduce certain
reporting requirements for qualifying public companies. As an "emerging growth
company," we may, under Section 7(a)(2)(B) of the Securities Act, delay adoption
of new or revised accounting standards applicable to public companies until such
standards would otherwise apply to private companies. We may take advantage of
this extended transition period until the first to occur of the date that we (i)
are no longer an "emerging growth company" or (ii) affirmatively and irrevocably
opt out of this extended transition period. We have elected to take advantage of
the benefits of this extended transition period. Our consolidated financial
statements may therefore not be comparable to those of companies that comply
with such new or revised accounting standards. Until the date that we are no
longer an "emerging growth company," affirmatively and irrevocably opt out of
the exemption provided by Securities Act Section 7(a)(2)(B), or upon issuance of
a new or revised accounting standard that applies to our financial statements
and that has a different effective date for public and private companies, we
will disclose the date on which adoption is required for non-emerging growth
companies and the date on which we will adopt the recently issued accounting
standard.
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Our significant accounting policies are disclosed in the notes to the audited
consolidated financial statements for the year ended October 31, 2021. The
following accounting policies have been determined by our management to be the
most important to the portrayal of our financial condition and results of
operation:
Principles of Consolidation
The Company's audited consolidated financial statements include the accounts of
the Company and its subsidiaries. On consolidation, the Company eliminates all
intercompany balances and transactions.
Internal-Use Software
The Company incurs costs related to the development of its VGrab Applications,
SMART Systems, Duesenberg WeChat Application, and duesenbergtech.com website.
Costs incurred in the planning and evaluation stage of internally-developed
software and website, as well as development costs where economic benefit cannot
be readily determined, are expensed as incurred. Costs incurred and accumulated
during the development stage, where economic benefit of the software can be
readily determined, are capitalized and included as part of Intangible assets on
the balance sheets. Additional improvements to the web site and applications
following the initial development stage are expensed as incurred. Capitalized
internally-developed software and website development costs will be amortized
over their expected economic life using the straight-line method.
Foreign Currency Translation and Transaction
The Parent Company's functional currency is the Canadian dollar, Duesenberg
Malaysia's functional currency is Malaysian Ringgit, and Duesenberg Evolution's
functional currency is Hong Kong dollar, the Company's reporting currency is the
United States dollar. Duesenberg Nevada and Duesenberg Heritage functional and
reporting currencies are the United States dollar. The Company translates assets
and liabilities to US dollars using year-end exchange rates, and translates
revenues and expenses using average exchange rates during the period. Gains and
losses arising on translation to the reporting currency are included in the
other comprehensive income.
Foreign exchange gains and losses on the settlement of foreign currency
transactions are included in foreign exchange expense. Except for translations
of intercompany balances, all translations of monetary balances to the
functional currency at the yearend exchange rate are included in foreign
exchange expense. The translations of intercompany balances to the functional
currency at the yearend exchange rate are included in accumulated other
comprehensive income or loss.
Fair Value of Financial Instruments
Our financial instruments include cash, accounts payable and accruals as well as
amounts due to related parties. We believe the fair value of these financial
instruments approximate their carrying values due to their short-term nature.
Concentration of Credit Risk
Financial instruments that potentially subject us to significant concentrations
of credit risk consist principally of cash and accounts receivable.
At October 31, 2021, we had $1,955 in cash on deposit with a large chartered
Canadian bank, $5,231 in cash on deposits with a bank in Malaysia, and $248 in
cash on deposits with a bank in Hong Kong. As part of our cash management
process, we perform periodic evaluations of the relative credit standing of
these financial institutions. We have not experienced any losses in cash
balances and do not believe we are exposed to any significant credit risk on our
cash.
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