Summary of financial condition
Table 2: Comparison of financial condition
October 31, 2022 October 31, 2021
Working capital deficit $ (1,090,400) $ (963,891)
Current assets $ 286,892 $ 39,069
Total liabilities $ 1,377,292 $ 1,002,960Common stock and additional paid-in capital $ 10,317,857 $ 8,469,145
Deficit
$ (11,314,321) $ (9,457,922)
Accumulated other comprehensive income $ (93,419) $ 26,838
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Results of operations
YEARS ENDED OCTOBER 31, 2022 AND 2021
Our operating results for the years ended October 31, 2022 and 2021 and the
changes in our operating results between them are summarized in the Table 3
below.
Table 3: Summary
Year ended Percentage
October 31, increase /
2022 2021 (decrease)
Revenue net of cost of goods sold $ 26,061 $ 41,459 (37)%
Operating expenses (1,950,189) (1,737,885) 12%
Foreign exchange 102,030 (658) (15,606)%
Interest expense (6,301) (10,758) (41)%
Loss on debt settlement (28,000) - n/a
Net loss (1,856,399) (1,707,842) 9%
Translation to reporting currency (120,257) (31,991) 276%
Comprehensive loss
$ (1,976,656) $ (1,739,833) 14%
Revenue
During the year ended October 31, 2022, we generated $20,061 in revenue from our
SMART Systems software licensing and maintenance of the applications required to
run SMART Systems (2021 - $29,094). Our first customer is Duesey Coffee and
Chocolates Sdn Bhd ("Duesey Coffee"), of which Mr. Lim is a 50% shareholder. In
addition, we generated $6,000 (2021 - $12,028) 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 market uncertainty associated with COVID-19, during the year ended
October 31, 2020, we agreed to bill our customers set monthly fees for these
services without entering into any termed contracts, we also agreed to give our
customers extended time to pay the amounts due. 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. Due
to complicated market conditions, we determined that we will not be able to
realize revenues from our customers, and therefore we stopped recording revenue
from Shanghai Duesenberg Marketing Planning Co Ltd as of April 30, 2022, and
from Duesey Coffee as of July 31, 2022.
Subsequent to October 31, 2022, Shanghai Duesenberg Marketing Planning Co Ltd.
notified us of their inability to pay the balance of the amount owed to us as
their company was unable to restart their normal operations after the
COVID-19-related restrictions were lifted. We were also unable to collect all
amounts that are receivable from Duesey Coffee. Therefore as at October 31,
2022, we wrote off total receivable from both our customers, which resulted in a
bad debts expenses totaling $38,305.
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. This
revenue did not exist during the year ended October 31, 2022.
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Operating Expenses
Our operating expenses for the years ended October 31, 2022 and 2021 consisted
of the following:
Table 4: Changes in operating expenses
Year ended Percentage
October 31, increase /
2022 2021 (decrease)
Operating expenses:
Accounting $ 47,602 $ 29,237 63%
Amortization 1,299 990 31%
Bad debts 38,305 - n/a
General and administrative expenses 153,858 250,134 (38)%
Management fees
114,400 24,000 377%
Professional fees 17,431 32,610 (47)%
Regulatory and filing 30,010 33,391 (10)%
Salaries and wages 526,359 510,621 3%
Research and development costs 1,000,209 848,291 18%
Travel and entertainment 20,716 8,611 141%
Total operating expenses $ 1,950,189 $ 1,737,885 12%
Our operating expenses increased by $212,304 or 12% from $1,737,885 for the year
ended October 31, 2021, to $1,950,189 for the year ended October 31, 2022. The
most significant change in our operating expenses was associated with $1,000,209
in research and development costs which consisted of fees for digitization of
the CAD ("Computer Aided Design") drawings to create two-dimensional ("2-D") and
three-dimensional ("3-D") models of the vehicle, required to improve the quality
of design, provide communications through documentation, and to create a
database for future manufacturing of the vehicles including the blueprints of
Duesenberg Heritage vehicles, which we commissioned from Hampshire Automotive
Sdn Bhd. ("Hampshire Automotive"); during the year ended October 31, 2021, our
research and development costs were $848,291. Our salaries and wages increased
by $15,738 from $510,621 we incurred during the year ended October 31, 2021, to
$526,359 we incurred during the year ended October 31, 2022, the increase was
mainly associated with an addition of one more employee to Duesenberg Malaysia.
Other notable expenses included $114,400 in management fees, an increase of
$90,400, as compared to $24,000 we incurred during the year ended October 31,
2021, the increase was associated with increased board of directors during the
current year, and our decision to issue bonuses to our directors, who were on
the board of the Company during the year ended October 31, 2021, but were not
paid monthly directors' fees; $47,602 in accounting fees, an increase of $18,365
as compared to $29,237 we incurred during the year ended October 31, 2021, and
were associated with expansion of our operating activities and increased
complexity of accounting and audit procedures. In addition, our travel and
entertainment expenses, increased by $12,105 to $20,716 for the year ended
October 31, 2022, as compared to $8,611 we incurred during the comparative
period in our fiscal 2021 year, this increase was associated with increased
travel due to elimination of COVID-19 travel restrictions imposed by various
federal governments. In addition, our amortization expense increased by $309 for
the year ended October 31, 2022, to $1,299.
The above increases were in part offset by $17,431 in professional fees, which
decreased by $15,179 from $32,610 we incurred during the year ended October 31,
2021, and $30,010 in regulatory fees, a decrease of $3,381 as compared to
$33,391 we incurred during the year ended October 31, 2021. In addition, our
general and administrative expenses ("G&A Expenses") decreased by $96,276 to
$153,858 for the year ended October 31, 2022, as compared to $250,134 we
incurred during the year ended October 31, 2021, with largest change being
$149,491 decrease in corporate communication fees, which, for the year ended
October 31, 2022, were $45,782, however, this decrease was offset by $53,062 in
consulting fees we incurred during the same period, the expense we did not have
during the comparative period.
Other Items
During the year ended October 31, 2022, we recorded $6,301 (2021 - $10,758) in
interest expense, of which $514 (2021 - $5,435) was associated with the interest
we accrued on the notes payable we issued to our major shareholder, and $5,787
(2021 - $5,309) was accrued on the third-party notes payable; we also recorded
$102,030 in realized foreign exchange gain (2021 - $658 loss) associated with
the fluctuation in foreign exchange rates between the US, Canadian, Malaysian,
and Hong Kong currencies.
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During the year ended October 31, 2022, we recognized a $28,000 loss on debt
settlements with two vendors who agreed to settle our debt to them in shares
(2021 - $Nil).
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, 2022, we had a working capital deficit of $1,090,400 and
accumulated losses of $11,314,321 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.
INTERNAL AND EXTERNAL SOURCES OF LIQUIDITY
Table 5: Working Capital
At October 31, 2022 At October 31, 2021
Current assets $ 286,892 $ 39,069
Current liabilities (1,377,292) (1,002,960)
Working capital deficit $ (1,090,400) $ (963,891)
During the year ended October 31, 2022, our working capital deficit increased by
$126,509, from $963,891 at October 31, 2021, to $1,090,400 at October 31, 2022.
The increase in working capital deficit was primarily related to increased
amounts due to related parties of $695,755, as compared to $273,869 we owed to
related parties at October 31, 2021, representing an increase of $421,886, which
were in part offset by a $245,568 increase in cash, which at October 31, 2022,
was $253,002, as compared to $7,434 at October 31, 2021.
Table 6: Cash Flows
At October 31, 2022 At October 31, 2021
Net cash used in operating activities $ (1,398,469) $ (788,995)
Net cash used in investing activities
- (2,760)
Net cash provided by financing
activities 1,678,855 787,445
Effect of exchange rate changes on
cash (34,818) 29
Net increase/(decrease) in cash $ 245,568 $ (4,281)
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Net cash used in operating activities.
During the year ended October 31, 2022, we used $1,398,469 to support our
operating activities. This cash was used to cover our cash operating expenses of
$1,849,064, which were determined as net loss the Company recognized for the
year ended October 31, 2022, being $1,856,399, adjusted for the non-cash
transactions included in the net loss, which for the year ended October 31,
2022, totaled $7,335; to increase our receivables by $13,007, and to increase
our prepaid expenses by $28,929. These uses of cash were offset by increases in
our accounts payable and accrued liabilities of $43,111, an increase to accrued
salaries payable to our management team of $350,769, and an increase to amounts
due to our related parties of $98,651.
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.
Non-cash operating activities.
During the year ended October 31, 2022, we recorded $514 in interest on the note
payable we issued to Mr. Lim, and $5,787 in interest owed to third-party lenders
under notes payable. We recorded $1,299 in amortization of our office equipment
and $110,970 gain on foreign exchange fluctuation between the US, Canadian,
Malaysian, and Hong Kong currencies. In addition, we recognized $44,400 on grant
of 240,000 Shares to Mr. Chee Wai Hong and to Mr. Barth (120,000 each), which
were recorded as part of management fees, and recorded $28,000 loss on debt
settlement with our vendors.
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.
Net cash used in investing activities.
We did not have any investing activities in our Fiscal 2022 year.
During the year ended October 31, 2021, we used $2,760 to acquire computers and
other office equipment.
Net cash provided by financing activities.
During the year ended October 31, 2022, we received $111,671 under a loan
agreement with Mr. Joe Lim. The loan bears interest at 4% per annum, is
unsecured and payable on demand. During the year ended October 31, 2022, we
received $1,567,184 in proceeds from two separate private placement financings
by issuing a total of 11,113,152 shares of our common stock.
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.
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.
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As of October 31, 2022, we had cash on hand of $253,002 and working capital
deficit of $1,090,400, which raises substantial doubt about our continuation as
a going concern. During the year ended October 31, 2022, we closed two private
placement financings for net proceeds of $1,567,184, 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, 2022.
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.
Our significant accounting policies are disclosed in the notes to the audited
consolidated financial statements for the year ended October 31, 2022. 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.
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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, 2022, we had $21,637 in cash on deposit with a large chartered
Canadian bank, $230,728 in cash on deposits with a bank in Malaysia, and $637 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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DUESENBERG TECHNOLOGIES INC. 
