UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the Fiscal Year Ended
For the transition period from ________________ to _________________
Commission File Number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
Registrant’s telephone number, including area code: +1-
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Name of each exchange on which each is registered |
N/A | N/A |
Securities registered pursuant to Section 12(g) of the Act: Common Stock, without par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐ | Accelerated filer ☐ |
Smaller reporting company | |
(Do not check if a smaller reporting company) | Emerging growth company |
If an emerging growth company, indicate by check mark whether the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of Exchange Act. ☐
Indicate by check mark whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. The number of shares of the registrant’s common stock, without par value, outstanding as of February 15, 2022, was
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TABLE OF CONTENTS
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PART I
NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains “forward-looking statements”. These forward-looking statements are based on our current expectations, assumptions, estimates and projections about our business and our industry. Words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “may,” and other similar expressions identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in the sections of this annual report titled “Risk Factors”, “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as well as the following:
·our ability to execute prospective business plans;
·inexperience in developing and mass-producing electric vehicles;
·actions by government authorities, including changes in government regulation;
·changes in the electric vehicle market;
·dependency on certain key personnel and any inability to retain and attract qualified personnel;
·developments in alternative technologies or improvements in the internal combustion engine;
·disruption of supply or shortage of raw materials;
·failure of our conceptual vehicles to perform as expected;
·failure to manage future growth effectively;
·future decisions by management in response to changing conditions;
·inability to design, develop, market and sell electric vehicles and services that address additional market opportunities;
·inability to keep up with advances in electric vehicle technology;
·inability to reduce and adequately control operating costs;
·inability to succeed in maintaining and strengthening the Duesenberg brand;
·labor and employment risks;
·misjudgments in the course of preparing forward-looking statements;
·our ability to raise sufficient funds to carry out our proposed business plan;
·the unavailability, reduction or elimination of government and economic incentives;
·uncertainties associated with legal proceedings;
·general economic conditions, because they may affect our ability to raise money;
·our ability to raise enough money to continue our operations;
·changes in regulatory requirements that adversely affect our business; and
·other uncertainties, all of which are difficult to predict and many of which are beyond our control.
You are cautioned not to place undue reliance on these forward-looking statements, which relate only to events as of the date on which the statements are made. Except as required by applicable securities laws, we undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date of this annual report. You should refer to and carefully review the information in future documents we file with the Securities and Exchange Commission.
UNCERTAINTY DUE TO GLOBAL OUTBREAK OF COVID-19
In March of 2020, the World Health Organization declared an outbreak of COVID-19 Global pandemic. The COVID-19 has impacted vast array of businesses through the restrictions put in place by most governments internationally, including the federal, provincial, and municipal governments, regarding travel, business operations and isolation/quarantine orders. At this time, the extent of the impact of the COVID-19 outbreak on the Company and its operations is unknown and will greatly depend on future developments that are highly uncertain and that cannot be predicted with confidence. These uncertainties arise from the inability to predict the ultimate geographic spread of the disease, and the duration of the outbreak, including the duration of travel restrictions, business closures or disruptions, and quarantine/isolation measures that are currently, or may be put, in place world-wide to fight the virus. While the extent of the impact is unknown, the COVID-19 outbreak may hinder the Company’s ability to raise financing for its research and development initiatives or operating costs due to uncertain capital markets,
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supply chain disruptions, increased government regulations and other unanticipated factors, all of which may also negatively impact the Company’s business and financial condition.
ITEM 1: BUSINESS
General
We were incorporated on August 4, 2010, under the laws of the State of Nevada under the name “SOS Link Corporation”. On April 15, 2011, we changed our place of incorporation from the State of Nevada to the Province of British Columbia, Canada and concurrently changed our name to Venza Gold Corp. The change from Nevada to British Columbia was approved by our shareholders on April 14, 2011. On January 6, 2014, we changed our name to CoreComm Solutions Inc., on February 11, 2015, we changed our name to VGrab Communications Inc., and on December 23, 2020, we changed our name to Duesenberg Technologies Inc (the “Company” or “Duesenberg”).
On February 10, 2015, we completed an acquisition of the VGrab software application (the “VGrab Application”) pursuant to the terms of a software purchase agreement dated January 8, 2015 (the “Software Purchase Agreement”) between us and Hampshire Capital Limited (“Hampshire”). The VGrab Application is a free mobile voucher application developed for smartphones using the Android and Apple iOS operating systems and allows users to redeem vouchers on their smartphones at a number of retailers and merchants.
On June 24, 2015, we formed a subsidiary, VGrab International Ltd., (“VGrab International”) under the Labuan Companies Act 1990 in Federal Territory of Labuan, Malaysia. The initial focus of the VGrab International was to continue development of the VGrab Application and continue its market penetration in Southeast Asia. During the year ended October 31, 2021, all the business operations were moved to Duesenberg Technologies Malaysia Sdn Bhd., (formerly VGrab Communications Malaysia Sdn Bhd ) (“Duesenberg Malaysia”), which we incorporated on May 17, 2018, under the Malaysia Companies Act 2016 in Malaysia. On November 24, 2021, we filed an application with the government of the Federal Territory of Labuan, Malaysia, to dissolve VGrab International; we expect the dissolution to be finalized by the end of March 2022.
The main business objective of Duesenberg Malaysia is to facilitate online promotions, advertising and e-commerce. Since its incorporation, Duesenberg Malaysia has been working on the development of its SMART System prototype. Duesenberg’s new SMART System will consist of several modules, including Duesenberg Membership system (formerly referred to as “VGrab Membership”), which will allow its users to sign up via internet or quick response code, also known as “QR Code”, Duesenberg Cloud Management System (“DCMS”) (formerly referred to as “VGrab Cloud Management System”), and Duesenberg Database Management System (“DDMS”) (formerly referred to as “VGrab Database Management System”). DCMS and DDMS will form the backbone of Duesenberg’s SMART System, integrating each future developed Duesenberg SMART System’s module into the platform. The Company is currently testing the development of the Duesenberg SMART System before deployment to potential clients.
On February 18, 2019, we formed another subsidiary, VGrab Asia Limited, which we renamed to Duesenberg Technologies Evolution Ltd (“Duesenberg Evolution”). The main business objective of Duesenberg Evolution is to facilitate online promotions, advertising and e-commerce to its potential customer based in P.R. China. In addition, Duesenberg Evolution is going to position itself as commodities trader to capture the current market trends in P.R. China.
On March 5, 2019, Duesenberg Evolution entered into a mobile application development agreement with a group of private software developers from China (the “Vendor”) to develop a mobile software application (“Duesenberg WeChat Application”, formerly referred to as “Vgrab WeChat Application”). Duesenberg WeChat Application is developed for use with smartphones in P.R. China using the WeChat Android and Apple iOS operating systems allowing users to sign up for memberships, deposit money, purchase products, redeem vouchers, upload media promotions onto the smartphones, etc... On August 14, 2019, the Duesenberg WeChat Application was tested and completed for client usage.
In March of 2020 we completed development of the prototype Duesenberg vending machine (the “Vending Machine”) and were attempting to organize the first test run before starting a large-scale production and commercialization of the Vending Machines. Prior to COVID-19 measures, we were expecting to have the first prototype of the Vending Machine installed and operational at a local university by the end of April with further units to be placed across the university’s campus and other universities across Malaysia. However, due to COVID-
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19 measures, we were required to postpone the roll-out until the restrictions set to prevent the spread of virus are lifted and businesses are allowed to resume their normal operations.
The newly developed Vending Machine is customizable to sell variety of consumer products ranging from traditional snacks, soft drinks, and coffee, to prepaid mobile cards and other goods, while simultaneously displaying advertisements and other various promotional content. Each Vending Machine is based on the operating system developed by us, and is supplied with a credit card reader and a QR Code reader, which facilitate not only payments with credit cards, but also enables payments via eWallet and other membership-based payments.
On November 1, 2019, we incorporated Duesenberg Inc., a Nevada corporation (“Duesenberg Nevada”). The purpose of Duesenberg Nevada is to undertake the development of Electric Vehicle (“Duesenberg EV”) using the Duesenberg brand. We were given the rights to use the Duesenberg trademark name in 2018. We are planning to develop the Duesenberg EV in partnerships with leading developers and suppliers for various components into the vehicle, and also include our in-house developed Duesenberg SMART System as part of its operating system.
On January 8, 2021, Duesenberg Nevada signed an agreement with Rocket Supreme, the Barcelona, Spain automotive design house established by Christopher Reitz. The agreement is the first step towards creating a network of suppliers required to successfully complete the Duesenberg EV development project. As of the date of this Annual Report on Form 10-K, we have received initial ergonomics exterior and interior data sheets and CAS IGES files as well as the initial drafts of the exterior and interior designs for the Duesenberg EV. We expect the final design of the first Duesenberg EV to be released in mid to late 2022. Based on the initial drafts, we commenced negotiations with various manufacturers required to continue the development and manufacturing of the required components for the Duesenberg’s EV.
On May 21, 2021, we formed Duesenberg Heritage LLC. under the laws of the State of Nevada (“Duesenberg Heritage”). Duesenberg Heritage’s operations will be focused on reproducing very limited Duesenberg heritage vehicles which were originally manufactured in the 1920s and 1930s; such as the Duesenberg Model J and Boat Tail series. The Company expects that the manufacture of the heritage vehicles from that era (as well as possibly converting them to electrical models) will be time consuming and would require highly specialized and skilled tradesman.
In order to support the development and future production of Duesenberg EV as well as Duesenberg Heritage vehicles, we will require significant financing. During the year ended October 31, 2021, we have closed two private placement financings (the “Financings”) by issuing a total of 833,333 shares of our common stock (the “Shares”) for gross proceeds of $673,000. The Shares were issued pursuant to the provisions of Regulation S of the United States Securities Act of 1933, as amended (the “Act”) to the persons who are not residents of the United States and are otherwise not “U.S. Persons” as that term is defined in Rule 902(k) of Regulation S of the Act. The funds we have raised in the above Financings are not sufficient to bring our Duesenberg EV and Duesenberg Heritage vehicle production plans to completion, and we will require additional funding. We cannot assure the reader that we will be successful in securing the further funding as required.
Business of Duesenberg Technologies Inc.
We continue to expand and evolve our corporate strategy. During the year ended October 31, 2021, we made another shift to integrate our SMART Systems with development of Duesenberg EV, and Duesenberg Heritage vehicles capitalizing on our rights to the use of the Duesenberg brand. Since the acquisition of the Vgrab technology in 2015, the Company has been in the business of advanced information technology. We believe the integration of our SMART Systems with Electric Vehicle industry will allow the Company to open a new frontier in advancing its technology.
Alongside with venturing into Duesenberg EV and Duesenberg heritage vehicle development, we continue working on the development of our SMART Systems and Vending Machines. Since the early months of 2020 the retail and consumer markets have been largely affected by the COVID-19 pandemic; majority of our potential clients for the SMART Systems and the Vending Machines have decided to postpone any purchases or joint ventures until such time that the global economy starts to recover. The Company decided to use the global situation brought on by COVID-19 pandemic as an opportunity to pivot, realign, and improve its SMART Systems based on the current and future expected market trends.
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We see the current problem of energy resources, and eminent lack thereof, becoming one of the most important trends in the industry. Many various industries are turning towards development and use of clean, renewable energy sources, such as solar energy, wind energy, etc. Announcement of prototypes of electric vehicles and their mass productions scheduled for the near future are becoming everyday occurrence. Many vehicles are being designed to use only electricity as their main source of power.
With the development of Duesenberg EV and redevelopment of Duesenberg heritage vehicles on electric platform, the Company will be involved in the EV technology revolution and is determined to redefine the primal relationship between vehicle and a driver, which has been trending in the last decade. Duesenberg’s future EV technologies will be incorporated in nearly every component of Duesenberg’s vehicles, from dashboard panels and passenger zones to the engine configuration, braking systems, headlights and tires, without minimizing attention to building comfortable and luxurious interiors for all of the individual handcrafted vehicles.
The Company’s goal is to become climate-neutral across our full value chain, in line with the goals of the Paris Agreement, a legally binding international treaty on climate change which was adopted by 196 Parties at the twenty-first session of the Conference of the Parties (“COP 21”) in Paris, on December 12, 2015, and entered into force on November 4, 20161. We are committed to energy resiliency through Duesenberg’s Vehicle Development in Energy Transition Goal2. The Paris Agreement identified an immediate and urgent need to reduce greenhouse gas (GHG) emissions to help mitigate the effects of climate change, through reduction of energy use, and improvement of air quality.
Our Strategy and Distribution
Our marketing strategy will be based mainly on ensuring Duesenberg’s EV and Duesenberg heritage vehicles, associated products, and Duesenberg brand are recognizable and trusted. We plan on achieving this goal through ensuring the adequate and timely information coupled with excellent service targeted towards our clients. Duesenberg brand is a well-known heritage brand and is highly respected in the automotive industry; we intend to uphold the standards set by its founders with our Duesenberg EV, heritage vehicles, and products based on our SMART Technologies.
We anticipate that initial target users of Duesenberg EV as well as Duesenberg heritage vehicles would consist of high net-worth individuals or car collectors. While in development of the prototype Duesenberg EV, we are planning to manufacture a limited-edition Duesenberg EV and heritage vehicle packages to market to potential high net-worth individuals as Founder’s Series.
In order to achieve our goals and commence the manufacturing of the Founder’s Series vehicles, we will require substantial financing to secure various vendors, consultants, designers, manufacturers, and so on. There is no assurance that the Company, Duesenberg Nevada, and/or Duesenberg Heritage will be able to secure the necessary financing to commence the design and manufacturing of the Duesenberg EV and heritage vehicles, nor is there any assurance that the scheduled milestones will be attained as envisioned in our current plan of development.
Additionally, the conceptual design of our electrical vehicle does not have many of the legacy issues of current car manufacturers which allows our body, construction and powertrain infrastructure to be implemented in a far more cost-effective way than the existing car industry with more advanced use of Composites and Advanced Frame Techniques than traditional manufacturing allows.
Competition
The next generation of luxury automotive manufacturers are focusing on autonomous vehicles, connected vehicles, electric vehicles, and shared mobility trends. Automakers in the space of luxury electric vehicles are becoming more flexible, incorporating advanced technological and technical innovations.
1 https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement
2 https://www.irena.org/energytransition; Energy transition Goal is a transformation from fossil-based to zero-carbon emission.
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Duesenberg is planning to enter the United States market as the only Ultra-Premium electrical vehicle. The Company will be required to compete with other non-electric Ultra-Premium combustion vehicles (ex. Bentley and Rolls Royce) as well as non-ultra-premium electrical vehicles (for example Tesla).
Our competitors include companies that have substantially greater financial resources, staff and facilities than us. Our failure to obtain and maintain a competitive position within the market could have a materially adverse effect on our business, financial condition and results of operations.
Government Regulations
We are subject to a number of foreign and domestic laws and regulations that affect companies conducting business in the automotive industry and also on the Internet. Additionally, these laws and regulations may be interpreted differently across domestic and foreign jurisdictions. As a company in a new and rapidly growing industry, we are exposed to certain risks that many of these laws may change and are subject to uncertain interpretations. These laws and regulations may involve intellectual property, product liability and consumer protection, distribution, competition, online payment and point of sale services, employee, merchant and customer privacy and data security, taxes or other areas.
Patents and Trademarks
On June 25, 2018, the Company, through VGrab International Limited, assigned the rights from Brightcliff Ltd and Hampshire Motors Group Ltd for the use and development of its products under the brand of Duesenberg. The rights to use the Duesenberg brand expire on June 24, 2038.
Our former VGrab name has also been trademarked under the registration certificate no 2014002852. The registration gives us non-exclusive right to use a letter “V”. The trademark is valid until March 14, 2024.
Dependence on Major Customers
As at the date of this Annual Report on Form 10-K we have two customers with whom we operate under month-to-month verbal service agreements. Our first customer is Duesey Coffee and Chocolates Sdn Bhd (“Duesey Coffee”), of which Mr. Lim Hun Beng, our CEO and President, is a 50% shareholder. Our second customer is Duesey Coffee in P.R. China, managed by Shanghai Duesenberg Marketing Planning Co Ltd, for whom we developed certain WeChat Online products. Due to current market uncertainty associated with COVID-19 we agreed to bill these 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 (formerly referred to as “Vmore 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. As of the date of this Annual Report on Form 10-k we have signed contracts with two vendors, and looking into expanding our customer based further in our Fiscal 2022 year.
In addition to the customers mentioned above, on June 25, 2018, our former wholly-owned subsidiary, VGrab International Ltd., entered into a cooperation agreement on a profit-sharing basis (the “Agreement”) with Hampshire Motor Group (China) Ltd. (“HMGC”), a related corporation, for the development and marketing of Duesenberg brand (the “Brand”) licensed to HMGC by the original Duesenberg trademark owner. Pursuant to the Agreement, VGrab International agreed to work with HMGC on developing marketing, advertising and customer relation programs for Duesenberg’s brands, with newly-developed sub-brand, Duesey, and its Duesey Coffee being the initial product offering. VGrab International was also expected to participate in the development of new products utilizing Duesenberg Trademark.
The term of the Agreement is 10 years, with an option to extend the Agreement for an additional 10-year period. Based on the Agreement, we will be entitled to a percentage of revenue generated from the sales of any new products developed by VGrab International or jointly with HMGC, which percentage will be determined as follows: (i) 94% from revenue of up to $100,000, and (ii) 95% from revenue of over and above $100,000. In addition, we will also be entitled to a percentage of revenue generated from the sales of the products developed by HMGC prior to the entry into the Agreement based on the following schedule: (i) 20% from revenue of up to $100,000, (ii) 15%
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from revenue of up to $500,000, (iii) 10% from revenue of up to $1,000,000, and (iv) 5% from revenue of over and above $1,000,000.
In February 2021, VGrab International Ltd assigned the cooperation agreement to Duesenberg Technologies Inc. with the consent and approval from HMGC. All terms and conditions of the cooperation agreement remain unchanged.
As of the date of this Annual Report on Form 10-K, we have not recorded any revenue associated with the Agreement, as the services have not started yet.
Research and Development
During the fiscal year ended October 31, 2021, we incurred $848,291 (2020 - $14,629) on our research and development efforts.
Number of Total Employees and Number of Full Time Employees
As at the date of this Annual Report on Form 10-K our subsidiary, Duesenberg Malaysia, has 8 employees. Mr. Lim, our CEO and President, and Mr. Liong, our CFO, Corporate Secretary and the Treasurer, were on payroll of Duesenberg Malaysia until April 30, 2020, as of May 1, 2020 Mr. Lim and Mr. Liong are on payroll of Duesenberg Evolution. Duesenberg Nevada employs Mr. Norman as Chief Strategy Officer while our parent Company and Duesenberg Heritage had no employees during its Fiscal 2021 and 2020 years, and relied on the services of third-party consultants to support the operations.
ITEM 1A: RISK FACTORS
IN ADDITION TO THE FACTORS DISCUSSED ELSEWHERE IN THIS ANNUAL REPORT, THE FOLLOWING RISKS AND UNCERTAINTIES COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL ALSO MAY IMPAIR OUR BUSINESS OPERATIONS AND FINANCIAL CONDITION.
We lack an operating history and have losses which we expect to continue into the future. As a result, we may have to suspend or cease our operations and if we do not obtain sufficient financing, our business will fail.
We were incorporated on August 4, 2010, however as of the date of the filing of this Annual Report on Form 10-K we were not successful in achieving profitability through our operations.
Our ability to achieve and maintain profitability and positive cash flow from our operations is dependent upon: (i) our ability to successfully market our Duesenberg EV to potential customers, (ii) our ability to obtain and retain customers, (iii) attract and retain merchants who wish to offer deals through our Duesenberg Applications and who will use our SMART Systems, (iv) react to challenges from existing and new competitors; and (v) increase the awareness of our brands domestically and internationally.
In order to continue our operations, we will be required to raise additional capital through financing, which would be subject to a number of factors, including market fluctuations, customer confidence, and general economic condition. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us. Since our inception, we have used our common shares to raise money for our operations. We have not attained profitable operations and are dependent upon obtaining financing to pursue our plan of operation.
Because we are in a development stage of our operations, our business has a high risk of failure.
As of the date of the filing of this Annual Report on Form 10-K we are in a development stage of our operations and have incurred net losses since our inception. We have yet to attain profitable operations and are dependent upon obtaining adequate financing to carry out our business activities. The success of our business operations will depend upon our ability to obtain further financing to complete our planned development and marketing programs and to attain profitable operations. Companies in development stage of their operations often encounter difficulties in generating revenue from services that are provided based on the applications installed on smart phones, and the risk of failure of these companies is high. If we are not able to complete our strategy and successfully develop and
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market our Duesenberg applications, SMART, as well as Duesenberg EV, we will not be able to attain sustainable profitable operations, resulting in failure of our business.
In addition, we have significant risks of failure associated with our business expansion into electric vehicles. There is uncertainty regarding our ability to execute prospective business plans as result of our inexperience in developing and mass-producing electric vehicles. As a result, we will depend on certain key personnel and may not be able to retain and attract qualified personnel. We run risks associated with developments in alternative technologies or improvements in the internal combustion engine. There is also a risk that our conceptual vehicles will fail to perform as expected.
We have determined there is substantial doubt about our ability to continue as a going concern; as a result, we could have difficulty finding additional financing.
Our audited consolidated financial statements have been prepared assuming that we will continue as a going concern. We have not generated any revenue from our main operations since inception and have accumulated losses. Our ability to continue our operations depends on our ability to complete equity or debt financings or generate profitable operations. Such financings may not be available or may not be available on reasonable terms. Our financial statements do not include any adjustments that could result from the outcome of this uncertainty.
Because our largest shareholder, Lim Hun Beng, who is also our CEO and director beneficially controls 49.39% of our outstanding common stock, investors may find that corporate decisions influenced by Hampshire Group and Mr. Lim are inconsistent with the best interests of other stockholders.
Mr. Lim Hun Beng, or CEO and director directly controls 2.5% of our common stock, Hampshire Capital Limited controls 43.84%, and Hampshire Motors Group Ltd. controls 3.04% of the issued and outstanding shares of our common stock. Mr. Lim Hun Beng is director and major shareholder of Hampshire Capital and Hampshire Motors (together referred here as “Hampshire Group”) and, accordingly, beneficially controls 49.39% or our common stock. In accordance with our Articles of Incorporation and Bylaws, Hampshire Group is able to control who is elected to our board of directors and thus could act, or could have the power to act, as our management.
The interests of Hampshire Group may not be, at all times, the same as those of other shareholders. Hampshire Group has the ability to significantly influence the outcome of most corporate actions requiring shareholder approval, including the merger of our company with or into another company, the sale of all or substantially all of our assets and amendments to our Articles of Incorporation. This concentration of ownership with Hampshire Group may also have the effect of delaying, deferring or preventing a change in control of Duesenberg which may be disadvantageous to minority shareholders.
We face intense competition.
Our business is evolving and intensely competitive, and is subject to changing technology, shifting user needs, and frequent introductions of new products and services.
We expect competition in e-commerce as well as the automotive industry, as it pertains to electrical vehicles, to continue to increase. Our current and potential competitors range from large and established companies to emerging start-ups. Established companies have longer operating histories and more established relationships with customers and users, and they can use their experience and resources against us in a variety of competitive ways, including acquisitions, investing aggressively in research and development, competing aggressively for advertisers, and using economies of scale, to name a few.
If our competitors are more successful than we are in developing compelling products or in attracting and retaining customers in the form of users, advertisers, and content providers, our potential for generating revenues and growth rates could decline.
Our success is dependent upon our ability to provide a superior mobile experience for our customers and merchants.
In order to continue to grow our mobile transactions, it is critical that our application works well with a range of mobile technologies, systems, networks and standards. Our business may be adversely affected if our customers choose not to access our offerings on their mobile devices or use mobile devices that do not offer access to our
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mobile applications. Similarly, our business may suffer if our merchants choose not to advertise through our applications or choose not to use our SMART Systems services.
We may be subject to claims that we violated intellectual property rights of others, which claims are extremely costly to defend and could require us to pay significant damages and limit our ability to operate.
Companies in the Internet and technology industries, and other patent and trademark holders seeking to profit from royalties in connection with grants of licenses, own large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. We acquired the VGrab Application from an original developer, however, there may be intellectual property rights held by others, including patents, copyrighted works and/or trademarks, which cover significant aspects of our technology. Any intellectual property claims against us, regardless of merit, could be time consuming and expensive to settle or litigate and could divert management’s attention and other resources. These claims also could subject us to significant liability for damages and could result in our having to stop using technology or content found to be in violation of another party’s rights. We might be required or may opt to seek a license for rights to intellectual property held by others, which may not be available on commercially reasonable terms, or at all. Even if a license is available, we could be required to pay significant royalties, which would increase our operating expenses. We may also be required to develop alternative non-infringing technology, or content, which could require significant effort and expense and make us less competitive in the relevant market. Any of these results could harm our business and financial performance.
We have a limited number of products.
We are reliant on the marketing and sale of our VGrab Applications, Duesenberg Platform and SMART Systems. If these products do not achieve sufficient market acceptance, it will be difficult for us to achieve consistent profitability.
If our software is defective, it will adversely affect our business.
Our VGrab Applications, Duesenberg Platform, and SMART Systems may contain undetected errors, defects or bugs. Although we have not suffered significant harm from any errors, defects or bugs to date, we may discover significant errors, defects or bugs in the future that we may not be able to correct or correct in a timely manner.
It is possible that errors, defects or bugs will be found in our existing or future software products and related services with the possible results of delays in, or loss of market acceptance of, our products and services, diversion of our resources, injury to our reputation, increased service and warranty expenses and payment of damages.
We have limited brand awareness and there is no assurance that we will be able to achieve brand awareness.
We have achieved limited brand awareness with respect to our VGrab Applications, Duesenberg Platform., and SMART Systems. There is no assurance that we will be able to achieve brand awareness. In addition, we must develop a successful market for our products in order to complete sales. If we are not able to develop successful markets for our products, then such failure will have a material adverse effect on our business, financial condition and operating results.
We sometimes hold a significant portion of our cash in United States dollars, which could weaken our purchasing power in other currencies and limit our ability to conduct our development programs.
Currency fluctuations could affect the costs of our operations and affect our operating results and cash flows. The appreciation of Canadian dollar against the U.S. dollar can increase the costs of our operations.
If we are unable to hire and retain key personnel, we may not be able to implement our business plan and our business will fail.
Our success will largely depend on our ability to hire highly qualified personnel with experience in marketing, programming, data architecture and design. These individuals may be in high demand and we may not be able to attract the staff we need. In addition, we may not be able to afford the high salaries and fees demanded by qualified personnel or may lose such employees after they are hired. Currently, we have not hired any key personnel. Our failure to hire key personnel when needed could have a significant negative effect on our business.
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The JOBS Act allows us to postpone the date by which we must comply with certain laws and regulations and reduces the amount of information provided in reports filed with the SEC. We cannot be certain if the reduced disclosure requirements applicable to “emerging growth companies” may make our common stock less attractive to investors.
We are and we will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year during which our total annual revenues equal or exceed $1 billion (subject to adjustment for inflation), (ii) the last day of the fiscal year following the fifth anniversary of our initial public offering, (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities, or (iv) the date on which we are deemed a “large accelerated filer” (with at least $700 million in public float) under the Exchange Act. For so long as we remain an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” as described in further detail in the risk factors below. There may be a situation where investors may find our common stock less attractive because we rely on some or all of these exemptions. If some investors find our common stock less attractive as a result, we may experience decreased trading market for our common stock making our stock price more volatile. Since we avail ourselves of certain exemptions from various reporting requirements, our reduced disclosure may make it more difficult for investors and securities analysts to evaluate us and may result in less investor confidence.
Our election not to opt out of JOBS Act extended accounting transition period may not make its financial statements easily comparable to other companies.
Pursuant to the JOBS Act, as an “emerging growth company”, we can elect to opt out of the extended transition period for any new or revised accounting standards that may be issued by the Public Company Accounting Oversight Board (PCAOB) or the SEC. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, our company, as an “emerging growth company”, can adopt the standard for the private company. This may make comparison of our financial statements with any other public company which is not either an “emerging growth company” nor an “emerging growth company” which has opted out of using the extended transition period difficult or impossible, as possible different or revised standards may be used.
The JOBS Act also allows our company to postpone the date by which we must comply with certain laws and regulations intended to protect investors and to reduce the amount of information provided in reports filed with the SEC.
The JOBS Act is intended to reduce the regulatory burden on “emerging growth companies”. We meet the definition of an “emerging growth company” and so long as we qualify as an “emerging growth company,” we will, among other things:
·be exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that its independent registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting;
·be exempt from the “say on pay” provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and certain disclosure requirements of the Dodd-Frank Act relating to compensation of Chief Executive Officers;
·be permitted to omit the detailed compensation discussion and analysis from proxy statements and reports filed under the Exchange Act, as amended and instead provide a reduced level of disclosure concerning executive compensation; and
·be exempt from any rules that may be adopted by the PCAOB requiring mandatory audit firm rotation or a supplement to the auditor’s report on the financial statements.
9
We have been implementing all of the reduced regulatory and reporting requirements that are available to the Company under the JOBS Act. We have elected not to opt out of the extension of time to comply with new or revised financial accounting standards available under Section 102(b)(1) of the JOBS Act. Among other things, this means that our independent registered public accounting firm is not required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as we qualify as an “emerging growth company”, which may increase the risk that weaknesses or deficiencies in the internal control over financial reporting go undetected. Likewise, so long as we qualify as an “emerging growth company”, we may elect not to provide certain information, including certain financial information and certain information regarding compensation of executive officers, which would otherwise have been required to be provided in filings with the SEC, which may make it more difficult for investors and securities analysts to evaluate us. As a result, investor confidence in our company and the market price of our common stock may be adversely affected.
Notwithstanding the above, we are also currently a “smaller reporting company”, meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million and annual revenues of less than $50 million during the most recently completed fiscal year. In the event that we are still considered a “smaller reporting company”, at such time we cease being an “emerging growth company”, the disclosure we will be required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either an “emerging growth company” or a “smaller reporting company”. Specifically, similar to “emerging growth companies”, “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; are not required to conduct say-on-pay and frequency votes until annual meetings occurring on or after January 21, 2013; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as an “emerging growth company” or “smaller reporting company” may make it harder for investors to analyze the Company’s results of operations and financial prospects.
Because majority of our directors are not independent, they can make and control corporate decisions that may be disadvantageous to other common shareholders.
Our shares of common stock are listed on OTC Markets inter-dealer quotation system, which does not have director independence requirements. For the purpose of determining director independence, we have adopted the independence requirements of Canadian National Instrument 52-110 - Audit Committees (“NI 52-110”) as we are an OTC reporting issuer in the province of British Columbia. NI 52-110 recommends that the Board of Directors of a public company be constituted with a majority of individuals who qualify as “independent” directors. An “independent” director is a director who has no direct or indirect material relationship with us. A material relationship is a relationship, which could, in the view of the Board of Directors, reasonably interfere with the exercise of a director’s independent judgment. Four of our current five directors cannot be considered independent. Mr. Ong, See-Ming and Mr. Chee, Wai Hong are not independent directors due to their share position in the Company. Mr. Lim, Hun Beng is not an independent director because, aside from being our CEO and President, he also beneficially holds 49.39% of our issued and outstanding shares of common stock. Mr. Liong, Fook Weng is not an independent director because of his current position as CFO and Secretary of the Company, as well as the share position in the Company.
We do not expect to declare or pay dividends in the foreseeable future.
We have never paid cash dividends on our common stock and have no plans to do so in the foreseeable future. We intend to retain any earnings to develop, carry on, and expand our business.
“Penny stock” rules may make buying or selling our common stock difficult, and severely limit its marketability and liquidity.
Because our securities are considered a penny stock, shareholders will be more limited in their ability to sell their shares. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. Because our securities constitute “penny stocks” within the meaning of the rules, the rules apply to us and to our securities.
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The rules may further affect the ability of owners of shares to sell our securities in any market that might develop for them. As long as the trading price of our common shares is less than $5.00 per share, the common shares will be subject to Rule 15g-9 under the Exchange Act. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that:
1.contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;
2.contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of securities laws;
3.contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;
4.contains a toll-free telephone number for inquiries on disciplinary actions;
5.defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and
6.contains such other information and is in such form, including language, type, size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such shares; and (d) a monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our shares.
ITEM 1B: UNRESOLVED STAFF COMMENTS
None.
ITEM 2: PROPERTIES
We currently do not own any real property. Our operations management executive office is located at No 21, Denai Endau 3, Seri Tanjung Pinang,10470 Tanjung Tokong, Penang, Malaysia. The Company’s Canadian office is located at 820-1130 Pender Street West, Vancouver, British Columbia, V6E 4A4, and consists of approximately 25 square feet, which are provided to us free of charge.
Registered and records offices of our subsidiaries are as follows:
·Duesenberg Inc. and Duesenberg Heritage LLC registered and records office is located at 401 Ryland St STE 200-A, Reno, NV 89502, USA.
·Duesenberg Malaysia’s registered and records office is located at Level 33A, Menara 1MK, Kompleks 1 Mont Kiara N0.1 Jalan Kiara, Mont Kiara, 50480 Kuala Lumpur, Malaysia.
·Duesenberg Evolution’s registered and records office is located at Room 2401, 24/Fl., CC Wu Building, 302-308 Hennessy Road, Wanchai, Hong Kong.
Other than these offices, we do not currently maintain any other facilities and do not anticipate the need for maintaining other facilities at any time in the foreseeable future.
ITEM 3: LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings and, to the best of our knowledge, none of our claims or assets are the subject of any pending legal proceedings.
ITEM 4: MINE SAFETY DISCLOSURES
Not applicable.
11
PART II
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock commenced trading on OTC Markets inter-dealer quotation system under the symbol VZAGF on March 8, 2013. On January 8, 2014, we changed our name to CoreComm Solutions Inc., and our stock symbol changed to COCMF; on February 11, 2015, we changed our name to VGrab Communications Inc., and our stock symbol changed to VGRBF; on December 23, 2020, we changed our name to Duesenberg Technologies Inc., and our stock symbol changed to DUSYF effective December 29, 2020.
The table below gives the high and low bid information for each fiscal quarter for the last two fiscal years. The bid information was obtained from OTC Markets Group Inc. and reflects inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
Table 1: High and low bids
|
|
|
Fiscal quarters ended: | High | Low |
October 31, 2021 | $0.36 | $0.18 |
July 31, 2021 | $0.6801 | $0.36 |
April 30, 2021 | $1.63 | $0.70 |
January 31, 2021 | $1.70 | $0.4101 |
October 31, 2020 | $0.69 | $0.161 |
July 31, 2020 | $0.175 | $0.0372 |
April 30, 2020 | $0.075 | $0.0372 |
January 31, 2020 | $0.25 | $0.0372 |
Holders
As of February 15, 2022, we had 73 shareholders of record according to a shareholders’ list provided by our transfer agent. This number does not include an indeterminate number of shareholders whose shares are held by brokers in street name. Our transfer agent is Empire Stock Transfer with an address at 1859 Whitney Mesa Dr. Henderson, Nevada, 89014 and their phone number is 702-818-5898.
Dividend Policy
We have never declared, nor paid, any dividend since our incorporation and do not foresee paying any dividends in the near future since all available funds will be used to develop and market our business. Any future payment of dividends will depend on our financing requirements and financial condition and other factors which the board of directors, in its sole discretion, may consider appropriate.
Under the Business Corporations Act, we are prohibited from declaring or paying dividends if there are reasonable grounds for believing that we are insolvent, or the payment of dividends would render us insolvent.
Recent Sales of Unregistered Securities
On March 9, 2021, we entered into debt settlement agreements (the “Debt Settlements”) with Mr. Lim Hun Beng, the Company’s CEO, President and the majority shareholder, and Hampshire Avenue SDN BHD, the Company’s major shareholder, (together referred here as the “Debt Holders”), whereby we proposed and the Debt Holders agreed to convert a total of $463,053 owed to the Debt Holders into 617,404 restricted common shares (the “Shares”) of the Company.
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On July 20, 2021, Hampshire Avenue SDN BHD, agreed to convert further $24,336 we owed on account of cash advances provided to us as into 62,828 Shares.
The shares were issued pursuant to the provisions of Regulation S of the United States Securities Act of 1933, as amended (the “Act”). The subscribers represented that they were not “U.S. Persons” as that term is defined in Rule 902(k) of Regulation S promulgated under the Act, as amended, and that they were “accredited investors” as that term is defined under National Instrument 45-106 -Prospectus and Registration Exemptions.
On April 9, 2021, we closed a private placement financing by issuing 233,333 Shares at $0.75 per share for gross proceeds of $175,000. The Shares were issued pursuant to the provisions of Regulation S of the Act to the persons who are not residents of the United States and are otherwise not “U.S. Persons” as that term is defined in Rule 902(k) of Regulation S of the Act.
On April 15, 2021, we closed a private placement financing by issuing 600,000 Shares at $0.83 per share for gross proceeds of $498,000. We paid $9,705 in share issuance costs associated with this private placement. The Shares were issued pursuant to the provisions of Regulation S of the Act to the persons who are not residents of the United States and are otherwise not “U.S. Persons” as that term is defined in Rule 902(k) of Regulation S of the Act.
On September 10, 2021, Mr. Thompson, our former CTO agreed to convert the full amount we owed him at his resignation, being $50,322, into 209,677 Shares. The shares were issued pursuant to the provisions of Rule 506(b) of Regulation D of the Act, as Mr. Thompson confirmed that he qualifies as “accredited investors” as that term is defined under Regulation D of the Act.
As at October 31, 2021, we had an obligation to issue 150,000 Shares valued at $76,950 to a third-party vendor for corporate communication services. The vendor is not residents of the United States and is otherwise not “U.S. Persons” as that term is defined in Rule 902(k) of Regulation S of the Act.
ITEM 6: SELECTED FINANCIAL DATA.
Not applicable.
ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 October 31, |
| Percentage 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 October 31, |
| Percentage 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.
17
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.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
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ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements | |
| Page No. |
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F-1 | |
F-2 | |
Consolidated Statements of Operations for the Years Ended October 31, 2021 and 2020 | F-3 |
Consolidated Statement of Stockholders’ Deficit as of October 31, 2021 and 2020 | F-4 |
Consolidated Statements of Cash Flows for the Years Ended October 31, 2021 and 2020 | F-5 |
F-6 | |
F-1
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Duesenberg Technologies Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Duesenberg Technologies Inc. (the “Company”) as of October 31, 2021 and 2020, the related consolidated statements of operations, stockholders’ deficit and cash flows, for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred losses in developing its business, and further losses are anticipated. The Company requires additional funds to meet its obligations and the costs of its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting in accordance with the standards of the PCAOB. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion in accordance with the standards of the PCAOB.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ DMCL
DALE MATHESON CARR-HILTON LABONTE LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
We have served as the Company’s auditor since 2010
Vancouver, Canada
February 15, 2022
F-2
DUESENBERG TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN US DOLLARS)
October 31, 2021 |
| October 31, 2020 | |||
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ASSETS |
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Current assets |
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Cash | $ |
| $ | ||
Receivables |
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Prepaids |
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Total current assets |
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Equipment |
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Total assets | $ |
| $ | ||
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Current liabilities |
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Accounts payable | $ |
| $ | ||
Accrued liabilities |
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Due to related parties |
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Notes payable |
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Total liabilities |
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Stockholders' deficit |
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Common stock, October 31, 2021 and 2020, respectively |
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Additional paid-in capital |
| ( |
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Obligation to issue shares |
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Accumulated other comprehensive income |
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Deficit |
| ( |
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| ( |
Total stockholders' deficit |
| ( |
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| ( |
Total liabilities and stockholders' deficit | $ |
| $ | ||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
DUESENBERG TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(EXPRESSED IN US DOLLARS)
| Year Ended October 31, | ||||
2021 |
| 2020 | |||
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Revenue | $ |
| $ | ||
Cost of goods sold |
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Gross margin |
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Operating expenses |
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Accounting |
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Amortization |
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General and administrative expenses |
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Management fees |
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Professional fees |
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Regulatory and filing |
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Research and development costs |
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Salaries and wages |
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Travel and entertainment |
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|
| ( |
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| ( |
Other items |
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Foreign exchange |
| ( |
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| |
Impairment of deposits |
|
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| ( | |
Interest expense |
| ( |
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| ( |
Net loss |
| ( |
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| ( |
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Translation to reporting currency |
| ( |
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Comprehensive loss | $ | ( |
| $ | ( |
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Loss per share - basic and diluted | $ | ( |
| $ | ( |
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Weighted average number of shares outstanding: |
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The accompanying notes are an integral part of these consolidated financial statements.
F-4