UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-Q
[X] |
Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 |
For
the quarterly period ended March 31, 2020
or
[ ] |
Transition
Report Pursuant Section 13 or 15(d) of the Securities Exchange Act
of 1934 |
For
the transition period from _____________ to
_____________.
Commission
file number 000-53988
DSG GLOBAL, INC.
(Exact
name of registrant as specified in its charter)
Nevada |
|
26-1134956 |
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
312
– 2630 Croydon Drive
Surrey,
British Columbia, V3Z 6T3, Canada
(Address
of principal executive offices, zip code)
(604)
575-3848
(Registrant’s
telephone number, including area code)
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. Yes [X] No [ ]
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 during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post
such files). Yes [ ] No [X]
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 |
[ ] |
Non-accelerated
filer |
[ ] |
(Do
not check if smaller reporting company) |
Smaller
reporting company |
[X] |
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ] No
[X]
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class |
|
Trading
Symbols(s) |
|
Name
of each exchange on which registered |
None |
|
N/A |
|
N/A |
As June 29, 2020, the issuer had 17,862,008 shares of common stock
issued and outstanding.
DSG
GLOBAL, INC.
TABLE
OF CONTENTS
PART I: FINANCIAL
INFORMATION
ITEM
1: Financial Statements (unaudited)
The
accompanying unaudited interim condensed consolidated financial
statements of DSG Global Inc. as at March 31, 2020, have been
prepared by our management in conformity with accounting principles
generally accepted in the United States of America and in
accordance with the instructions to Form 10-Q and Rule 8-03 of
Regulation S-X and, therefore, do not include all information and
footnotes necessary for a complete presentation of financial
position, results of operations, cash flows, and stockholders’
equity in conformity with generally accepted accounting principles.
In the opinion of management, all adjustments considered necessary
for a fair presentation of the results of operations and financial
position have been included and all such adjustments are of a
normal recurring nature.
Operating
results for the three-month period ended March 31, 2020 are not
necessarily indicative of the results that can be expected for the
year ending December 31, 2020.
DSG
GLOBAL, INC.
INTERIM
CONDENSED CONSOLIDATED BALANCE SHEETS
AS
AT MARCH 31, 2020 AND DECEMBER 31, 2019
(Expressed
in U.S. dollars)
(UNAUDITED)
|
|
March 31, 2020 |
|
|
December 31, 2019 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
Cash |
|
$ |
16,398 |
|
|
$ |
25,494 |
|
Trade receivables, net |
|
|
131,432 |
|
|
|
74,793 |
|
Inventories, net of inventory
allowance of $138,878 and $151,191, respectively |
|
|
138,112 |
|
|
|
140,943 |
|
Prepaid
expenses and deposits |
|
|
4,176 |
|
|
|
9,570 |
|
TOTAL
CURRENT ASSETS |
|
|
290,118 |
|
|
|
250,800 |
|
|
|
|
|
|
|
|
|
|
Fixed assets, net |
|
|
112,671 |
|
|
|
139,823 |
|
Equipment on lease, net |
|
|
1,115 |
|
|
|
1,457 |
|
Intangible
assets, net |
|
|
13,754 |
|
|
|
14,061 |
|
TOTAL
ASSETS |
|
$ |
417,658 |
|
|
$ |
406,141 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES |
|
|
|
|
|
|
|
|
Trade and other payables |
|
$ |
2,574,848 |
|
|
$ |
2,345,333 |
|
Deferred revenue |
|
|
127,667 |
|
|
|
65,274 |
|
Operating lease liability |
|
|
53,932 |
|
|
|
62,935 |
|
Loans payable |
|
|
781,786 |
|
|
|
789,469 |
|
Derivative liability |
|
|
3,949,628 |
|
|
|
2,856,569 |
|
Convertible
notes payable, net of unamortized discount of $488,979 and
$550,876, respectively |
|
|
2,625,100 |
|
|
|
2,507,653 |
|
TOTAL
CURRENT LIABILITIES |
|
|
10,112,961 |
|
|
|
8,627,233 |
|
|
|
|
|
|
|
|
|
|
Operating lease
liability |
|
|
65,348 |
|
|
|
74,225 |
|
TOTAL
LIABILITIES |
|
|
10,178,309 |
|
|
|
8,701,458 |
|
|
|
|
|
|
|
|
|
|
Going concern (Note 2) |
|
|
|
|
|
|
|
|
Commitments (Note 16) |
|
|
|
|
|
|
|
|
Contingencies (Note 17) |
|
|
|
|
|
|
|
|
Subsequent events (Note 19) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MEZZANINE
EQUITY |
|
|
|
|
|
|
|
|
Redeemable
preferred stock, $0.001 par value, 11,000,000 shares authorized
(2019 – 11,000,000), to be issued (2019 - to be issued) |
|
|
33,807 |
|
|
|
33,807 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT |
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value,
3,010,000 shares authorized (2019 – 3,010,000), 200,376 issued and
outstanding (2019 - 200,376) |
|
|
200 |
|
|
|
200 |
|
Common stock, $0.001 par value,
150,000,000 shares authorized, (2019 - 150,000,000); 4,603,136
issued and outstanding (2019 - 1,146,302) |
|
|
4,604 |
|
|
|
1,146 |
|
Additional paid in capital, common
stock |
|
|
30,783,539 |
|
|
|
28,097,710 |
|
Discounts on common stock |
|
|
(69,838 |
) |
|
|
(69,838 |
) |
Common stock to be issued |
|
|
6,016,001 |
|
|
|
7,402,254 |
|
Other accumulated comprehensive
income |
|
|
1,561,936 |
|
|
|
1,372,345 |
|
Accumulated
deficit |
|
|
(48,090,900 |
) |
|
|
(45,132,941 |
) |
TOTAL
STOCKHOLDERS’ DEFICIT |
|
|
(9,794,458 |
) |
|
|
(8,329,124 |
) |
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT |
|
$ |
417,658 |
|
|
$ |
406,141 |
|
The
accompanying notes are an integral part of the unaudited interim
condensed consolidated financial statements
DSG
GLOBAL, INC.
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR
THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Expressed
in U.S. dollars)
(UNAUDITED)
|
|
Three months ending |
|
|
|
March 31,
2020
|
|
|
March 31,
2019
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
150,212 |
|
|
$ |
501,424 |
|
Cost of revenue |
|
|
28,566 |
|
|
|
306,068 |
|
Gross
profit |
|
|
121,646 |
|
|
|
195,356 |
|
|
|
|
|
|
|
|
|
|
Operating
expenses |
|
|
|
|
|
|
|
|
Compensation expense |
|
|
642,536 |
|
|
|
135,083 |
|
General and administration
expense |
|
|
524,747 |
|
|
|
236,792 |
|
Bad debt expense |
|
|
9,348 |
|
|
|
1,424 |
|
Depreciation
and amortization expense |
|
|
656 |
|
|
|
885 |
|
Total
operating expense |
|
|
1,177,287 |
|
|
|
374,184 |
|
Loss
from operations |
|
|
(1,055,641 |
) |
|
|
(178,828 |
) |
|
|
|
|
|
|
|
|
|
Other income
(expense) |
|
|
|
|
|
|
|
|
Foreign currency exchange |
|
|
(120,681 |
) |
|
|
17,637 |
|
Change in fair value of derivative
instruments |
|
|
(945,594 |
) |
|
|
(6,635,917 |
) |
Loss on extinguishment of debt |
|
|
(428,465 |
) |
|
|
(74,109 |
) |
Finance
costs |
|
|
(407,578 |
) |
|
|
(301,756 |
) |
Total
other income (expense) |
|
|
(1,902,318 |
) |
|
|
(6,994,145 |
) |
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(2,957,959 |
) |
|
$ |
(7,172,973 |
) |
|
|
|
|
|
|
|
|
|
Net loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.84 |
) |
|
$ |
(11.02 |
) |
Diluted |
|
$ |
(0.84 |
) |
|
$ |
(11.02 |
) |
|
|
|
|
|
|
|
|
|
Weighted average
number of shares used in computing basic and diluted net loss per
share: |
|
|
|
|
|
|
|
|
Basic |
|
|
3,515,590 |
|
|
|
651,126 |
|
Diluted |
|
|
3,515,590 |
|
|
|
651,126 |
|
The
accompanying notes are an integral part of the unaudited interim
condensed consolidated financial statements
DSG
GLOBAL, INC.
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
LOSS
FOR
THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Expressed
in U.S. dollars)
(UNAUDITED)
|
|
Three months ending |
|
|
|
March 31,
2020
|
|
|
March 31,
2019
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(2,957,959 |
) |
|
$ |
(7,172,973 |
) |
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustments |
|
|
189,591 |
|
|
|
(69,635 |
) |
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
$ |
(2,768,368 |
) |
|
$ |
(7,242,608 |
) |
The
accompanying notes are an integral part of the unaudited interim
condensed consolidated financial statements
DSG
GLOBAL, INC.
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
DEFICIT
(Expressed
in U.S. dollars)
(UNAUDITED)
|
|
Common Stock |
|
|
Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Additional paid in capital |
|
|
Discount on common stock |
|
|
To be issued |
|
|
Amount |
|
|
Accumulated other comprehensive income |
|
|
Accumulated deficit |
|
|
Total stockholders’ deficit |
|
Balance, December 31, 2018 |
|
|
634,471 |
|
|
$ |
634 |
|
|
$ |
22,415,121 |
|
|
$ |
(69,838 |
) |
|
$ |
- |
|
|
$ |
4,872,732 |
|
|
$ |
1,465,389 |
|
|
$ |
(42,054,821 |
) |
|
$ |
(13,370,783 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued on conversion of debt |
|
|
55,932 |
|
|
|
56 |
|
|
|
119,921 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
119,977 |
|
Net loss for the period |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(69,635 |
) |
|
|
(7,172,973 |
) |
|
|
(7,242,608 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2019 |
|
|
690,403 |
|
|
$ |
690 |
|
|
$ |
22,535,042 |
|
|
$ |
(69,838 |
) |
|
$ |
- |
|
|
$ |
4,872,732 |
|
|
$ |
1,395,754 |
|
|
$ |
(49,227,794 |
) |
|
$ |
(20,493,414 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2019 |
|
|
1,146,302 |
|
|
$ |
1,146 |
|
|
$ |
28,097,710 |
|
|
$ |
(69,838 |
) |
|
$ |
7,402,254 |
|
|
$ |
200 |
|
|
$ |
1,372,345 |
|
|
$ |
(45,132,941 |
) |
|
$ |
(8,329,124 |
) |
Shares to
be issued for cash |
|
|
191,865 |
|
|
|
192 |
|
|
|
99,839 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
100,031 |
|
Shares
and warrants issued for services |
|
|
320,000 |
|
|
|
320 |
|
|
|
636,128 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
636,448 |
|
Shares
issued on conversion of debt |
|
|
1,178,518 |
|
|
|
1,180 |
|
|
|
565,375 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
566,555 |
|
Issuance
of shares to be issued |
|
|
1,766,451 |
|
|
|
1,766 |
|
|
|
1,384,487 |
|
|
|
- |
|
|
|
(1,386,253 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net loss for the period |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
189,591 |
|
|
|
(2,957,959 |
) |
|
|
(2,768,368 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2020 |
|
|
4,603,136 |
|
|
$ |
4,604 |
|
|
$ |
30,783,539 |
|
|
$ |
(69,838 |
) |
|
$ |
6,016,001 |
|
|
$ |
200 |
|
|
$ |
1,561,936 |
|
|
$ |
(48,090,900 |
) |
|
$ |
(9,794,458 |
) |
The
accompanying notes are an integral part of the unaudited interim
condensed consolidated financial statements
DSG
GLOBAL INC.
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR
THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Expressed
in U.S. Dollars)
(UNAUDITED)
|
|
March 31, 2020 |
|
|
March 31, 2019 |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(2,957,959 |
) |
|
$ |
(7,172,973 |
) |
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to
net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and
amortization |
|
|
656 |
|
|
|
885 |
|
Change in
inventory allowance |
|
|
- |
|
|
|
(2,760 |
) |
Non-cash financing
costs |
|
|
- |
|
|
|
12,500 |
|
Accretion of
discounts on debt |
|
|
242,447 |
|
|
|
173,656 |
|
Change in fair
value of derivative liabilities |
|
|
945,594 |
|
|
|
6,635,917 |
|
Bad debt
expense |
|
|
9,348 |
|
|
|
1,418 |
|
Shares and
warrants issued for services |
|
|
636,448 |
|
|
|
- |
|
Loss on
extinguishment of debt |
|
|
428,465 |
|
|
|
74,109 |
|
Unrealized foreign
exchange gain (loss) |
|
|
63,960 |
|
|
|
(89,570 |
) |
|
|
|
|
|
|
|
|
|
Changes in non-cash working
capital: |
|
|
|
|
|
|
|
|
Trade receivables,
net |
|
|
(75,568 |
) |
|
|
(92,279 |
) |
Inventories |
|
|
(9,129 |
) |
|
|
(11,869 |
) |
Prepaid expense
and deposits |
|
|
4,871 |
|
|
|
(46,567 |
) |
Trade payables and
accruals |
|
|
394,350 |
|
|
|
385,118 |
|
Deferred
revenue |
|
|
71,477 |
|
|
|
(105,598 |
) |
Operating lease liabilities |
|
|
(559 |
) |
|
|
971 |
|
Net
cash used in operating activities |
|
|
(245,599 |
) |
|
|
(237,042 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities |
|
|
|
|
|
|
|
|
Proceeds from
issuing shares |
|
|
100,031 |
|
|
|
- |
|
Payments on notes
payable |
|
|
(7,531 |
) |
|
|
- |
|
Proceeds from notes payable |
|
|
147,465 |
|
|
|
275,000 |
|
Net
cash provided by financing activities |
|
|
239,965 |
|
|
|
275,000 |
|
|
|
|
|
|
|
|
|
|
Effect of
exchange rate changes on cash |
|
|
(3,462 |
) |
|
|
- |
|
Net increase (decrease) in cash |
|
|
(9,096 |
) |
|
|
37,958 |
|
Cash at beginning of period |
|
|
25,494 |
|
|
|
5,059 |
|
|
|
|
|
|
|
|
|
|
Cash
at the end of the period |
|
$ |
16,398 |
|
|
$ |
43,017 |
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information
(Note 18) |
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the unaudited interim
condensed consolidated financial statements
DSG
GLOBAL, INC.
NOTES
TO INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note
1 – ORGANIZATION
DSG
Global, Inc. (the “Company”) was incorporated under the laws of the
State of Nevada on September 24, 2007.
The
Company is a technology development company engaged in the design,
manufacture, and marketing of fleet management solutions in the
golf industry. The Company’s principal activities are the sale and
rental of GPS tracking devices and interfaces for golf vehicles and
related support services.
On
April 13, 2015, the Company entered into a share exchange agreement
with Vantage Tag Systems Inc. (“VTS”) (formerly DSG Tag Systems
Inc.), now wholly-owned subsidiary of the Company, incorporated
under the laws of the State of Nevada on April 17, 2008 and extra
provincially registered in British Columbia, Canada in 2008. In
March 2011, VTS formed DSG Tag Systems International, Ltd. in the
United Kingdom (“DSG UK”). DSG UK is a wholly owned subsidiary of
VTS.
On
March 26, 2019, the Company effected a reverse stock split of its
shares of common stock on a four thousand (4,000) old for one (1)
new basis. Upon effect of the reverse split, authorized capital
decreased from 3,000,000,000 shares of common stock to 750,000
shares of common stock, with a par value of $0.001. On May 23,
2019, the Company approved to increase its authorized common stock
to 150,000,000, with a par value of $0.001. Shares of preferred
stock remain unchanged. These consolidated financial statements
give retroactive effect to such reverse stock split named above and
all share and per share amounts have been adjusted accordingly,
unless otherwise noted.
Note
2 – GOING CONCERN
These
unaudited interim condensed consolidated financial statements have
been prepared on a going concern basis, which implies the Company
will continue to realize its assets and discharge its liabilities
in the normal course of business. The continuation of the Company
as a going concern is dependent upon the continued financial
support from its shareholders and note holders, the ability of the
Company to obtain necessary equity financing to continue
operations, and ultimately the attainment of profitable operations.
As at March 31, 2020, the Company has a working capital deficit of
$9,822,843 and has an accumulated deficit of $48,090,900 since
inception. Furthermore, the Company incurred a net loss of
$2,957,959 and used $245,599 of cash flows for operating activities
during the three months ended March 31, 2020. These factors raise
substantial doubt regarding the Company’s ability to continue as a
going concern. These unaudited interim condensed consolidated
financial statements do not include any adjustments to the
recoverability and classification of recorded asset amounts and
classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
Note
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying interim condensed consolidated financial statements
were prepared in conformity with generally accepted accounting
principles in the United States (“U.S. GAAP”) and with the
instructions to Form 10-Q.
Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with U.S. GAAP have been
condensed or omitted pursuant to U.S. GAAP rules and regulations
for presentation of interim financial information. Therefore, the
unaudited interim condensed consolidated financial statements
should be read in conjunction with the financial statements and the
notes thereto, included in the Company’s Annual Report on the Form
10-K for the year ended December 31, 2019. Current and future
financial statements may not be directly comparable to the
Company’s historical financial statements. However, except as
disclosed herein, there have been no material changes in the
information disclosed in the notes to the financial statements for
the year ended December 31, 2019 included in the Company’s Annual
Report on Form 10-K filed with the Securities and Exchange
Commission. In the opinion of Management, all adjustments
considered necessary for a fair presentation, consisting solely of
normal recurring adjustments, have been made. Operating results for
the three months ended March 31, 2020 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 2020.
Principles
of Consolidation
The
interim condensed consolidated financial statements include the
accounts of DSG Global Inc. and its wholly-owned subsidiaries VTS
and DSG UK (collectively referred to as the “Company”). All
intercompany accounts, transactions and profits were eliminated in
the interim condensed consolidated financial
statements..
Use
of Estimates
The
preparation of interim condensed consolidated financial statements
in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities
at the date of the interim condensed consolidated financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates. Estimates and assumptions are reviewed periodically, and
the effects of revisions are reflected in the condensed
consolidated financial statements in the period they are
determined. There were no new estimates in the period.
Recently
Adopted Accounting Pronouncements
In
June 2016, FASB issued ASU 2016-13, Measurement of Credit Loss
on financial Instruments. ASU 2016-13 replaces the current
incurred loss impairment methodology with the expected credit loss
impairment model, which requires consideration of a broader range
of reasonable and supportable information to estimate expected
credit losses over the life of the instrument instead of only when
losses are incurred. This standard applies to financial assets
measured at amortized cost basis and investments in leases
recognized by the lessor. The Company adopted ASU 2016-13 on
January 1, 2020 with no impact on the interim condensed
consolidated financial statements.
Other
recent accounting pronouncements issued by FASB, including its
Emerging Issues Task Force, the American Institute of Certified
Public Accountants, and the Securities and Exchange Commission did
not or are not believed by management to have a material impact on
the Company’s interim condensed consolidated financial
statements.
Reclassification
Certain
prior year amounts have been reclassified for consistency with the
current period presentation. These reclassifications had no effect
on the reported results of operations or cash flow.
Note
4 – TRADE RECEIVABLES, NET
As of
March 31, 2020 and December 31, 2019, trade receivables consist of
the following:
|
|
March 31,
2020 |
|
|
December 31,
2019 |
|
Accounts receivables |
|
$ |
147,274 |
|
|
$ |
82,927 |
|
Allowance for
doubtful accounts |
|
|
(15,842 |
) |
|
|
(8,134 |
) |
Total trade
receivables, net |
|
$ |
131,432 |
|
|
$ |
74,793 |
|
Note
5 – FIXED ASSETS AND EQUIPMENT ON LEASE
As of
March 31, 2020 and December 31, 2019, fixed assets consisted of the
following:
|
|
March 31,
2020 |
|
|
December 31,
2019 |
|
Computer equipment |
|
$ |
24,824 |
|
|
$ |
27,025 |
|
Right-of-use lease asset |
|
|
167,859 |
|
|
|
178,202 |
|
Accumulated
depreciation |
|
|
(80,012 |
) |
|
|
(65,404 |
) |
|
|
$ |
112,671 |
|
|
$ |
139,823 |
|
As of
March 31, 2020 and December 31, 2019, equipment on lease consisted
of the following:
|
|
March 31,
2020 |
|
|
December 31,
2019 |
|
Tags |
|
$ |
116,487 |
|
|
$ |
126,817 |
|
Text |
|
|
25,748 |
|
|
|
28,029 |
|
Touch |
|
|
21,327 |
|
|
|
23,218 |
|
Accumulated
depreciation |
|
|
(162,447 |
) |
|
|
(176,607 |
) |
|
|
$ |
1,115 |
|
|
$ |
1,457 |
|
For
the three months ended March 31, 2020, total depreciation expense
for fixed assets was $349 (2019 - $578) and is included in general
and administration expense. For the three months ended March 31,
2020, total depreciation for right-of-use assets was $17,321 (2019
- $9,036) and is included in general and administration expense as
operating lease expense.
Note
6 – INTANGIBLE ASSETS
As of
March 31, 2020 and December 31, 2019, intangible assets consist of
the following:
|
|
March 31,
2020 |
|
|
December 31,
2019 |
|
Intangible asset –
Patent |
|
$ |
22,353 |
|
|
$ |
22,353 |
|
Accumulated
depreciation |
|
|
(8,599 |
) |
|
|
(8,292 |
) |
|
|
$ |
13,754 |
|
|
$ |
14,061 |
|
The
estimated useful life of the patent is 20 years. Patents are
amortized on a straight-line basis.For the three months ended March
31, 2020, total amortization expense was $307 (2019 -
$307).
Note
7 – TRADE AND OTHER PAYABLES
As of
March 31, 2020 and December 31, 2019, trade and other payables
consist of the following:
|
|
March 31,
2020 |
|
|
December 31,
2019 |
|
Accounts payable and
accrued expenses |
|
$ |
1,408,453 |
|
|
$ |
1,334,685 |
|
Accrued interest |
|
|
1,134,730 |
|
|
|
992,755 |
|
Other
liabilities |
|
|
31,665 |
|
|
|
17,893 |
|
Total
payables |
|
$ |
2,574,848 |
|
|
$ |
2,345,333 |
|
Note
8 – LOANS PAYABLE
As of
March 31, 2020 and December 31, 2019, loans payable consisted of
the following:
|
|
March 31,
2020 |
|
|
December 31,
2019 |
|
Unsecured, loan payable,
due on demand, interest at 18% per annum |
|
$ |
317,500 |
|
|
$ |
317,500 |
|
Unsecured, loan payable, due on
demand, interest 10% per annum, with a minimum interest amount of
$25,000 |
|
|
250,000 |
|
|
|
250,000 |
|
Unsecured
share-settled debt, due on May 7, 2019, non-interest
bearing(a) |
|
|
214,286 |
|
|
|
214,286 |
|
Unsecured loan
payable in the amount of CDN$10,000, due on demand, non-interest
bearing |
|
|
- |
|
|
|
7,683 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
781,786 |
|
|
$ |
789,469 |
|
(a) |
On
March 8, 2019, the Company entered into a convertible bridge loan
agreement (the “Share-Settled Loan”). The Share-Settled Loan
initially bore interest at 4.99% per month, was due in 60 days on
May 7, 2019 and is convertible into restricted common shares of the
Company at the lender’s option at the market price per share less a
30% discount to market. The Company has accounted the Share-Settled
Loan as share-settled debt. It is initially recognized at its fair
value and accreted to its share-settled redemption value of
$214,286 over the term of the debt. At March 31, 2020, the carrying
value consists of principal of $150,000 and accumulated accretion
of $64,286. The Share-Settled Loan was not repaid on May 7, 2019
and is in default. Effective September 1, 2019, interest was
reduced to 2% per month and effective December 1, 2019, the loan
became non-interest bearing. |
Note
9 – CONVERTIBLE NOTES
As of
March 31, 2020 and December 31, 2019, convertible loans payable
consisted of the following:
Convertible Notes Payable
(a) |
On
March 31, 2015, the Company issued a convertible promissory note in
the principal amount of $310,000 to a company owned by a former
director of the Company for marketing services. The note is
unsecured, bears interest at 5% per annum, is convertible at $1.25
per common share, and is due on demand. As at March 31, 2020, the
carrying value of the convertible promissory note was $310,000
(December 31, 2019 - $310,000). |
|
|
(b) |
On
August 25, 2015, the Company issued a convertible promissory note
in the principal amount of $250,000. The convertible promissory
note is unsecured, bears interest at 10% per annum, is due on
demand, and is convertible at $7,000 per share. As at March 31,
2020, the carrying value of the convertible promissory note was
$250,000 (December 31, 2019 - $250,000). |
|
|
(c) |
On
November 7, 2016, the Company entered into a securities purchase
agreement with a non-related party. Pursuant to the agreement, the
Company was provided with proceeds of $125,000 on November 10, 2016
in exchange for the issuance of a secured convertible promissory
note in the principal amount of $138,889, which was inclusive of an
8% original issue discount and bears interest at 8% per annum to
the holder. The convertible promissory note matures nine months
from the date of issuance and is convertible at the option of the
holder into our common shares at a price per share that is the
lower of $480 or the closing price of the Company’s common stock on
the conversion date. In addition, under the same terms, the Company
also issued a secured convertible note of $50,000 in consideration
for proceeds of $10,000 and another secured convertible note of
$75,000 in consideration for proceeds of $10,000. Under the
agreements, the Company has the right to redeem $62,500 and $40,000
of the notes for consideration of $1 each at any time prior to the
maturity date in the event that the convertible promissory note is
exchanged or converted into a revolving credit facility with the
lender, whereupon the two $10,000 convertible note balances shall
be rolled into such credit facility. |
|
|
|
On
May 7, 2017, the Company triggered an event of default in the
convertible note by failing to repay the full principal amount and
all accrued interest on the due date. The entire convertible note
payable became due on demand and would accrue interest at an
increased rate of 1.5% per month (18% per annum) or the maximum
rate permitted under applicable law until the convertible note
payable was repaid in full. |
|
|
|
On
May 8, 2017, the Company issued 25 common shares for the conversion
of $5,000 of the $72,500 convertible note dated November 7, 2016.
On May 24, 2017, the Company issued 53 common shares for the
conversion of $10,500 of the $72,500 convertible note dated
November 7, 2016. On May 25, 2017, the lender provided conversion
notice for the remaining principal $57,000 of the $72,500
convertible note dated November 7, 2016. This conversion was not
processed by the Company’s transfer agent due to direction from the
Company not to honor any further conversion notices from the
lender. In response, the Company received legal notification
pursuant to the refusal to process further conversion notices.
Refer to Note 17. |
|
|
|
During
the year ended December 31, 2019, the Company issued 72,038 common
shares with a fair value of $59,097 for the conversion of $32,000
of principal resulting in a loss on settlement of debt of
$27,097. |
|
|
|
During
the three months ended March 31, 2020, the Company issued 53,764
common shares with a fair value of $53,226 for the conversion of
$20,000 of principal resulting in a loss on settlement of debt of
$33,226. |
|
|
|
As at
March 31, 2020, the carrying value of the note was $193,889
(December 31, 2019 - $213,889) and the fair value of the derivative
liability was $343,312 (December 31, 2019 - $360,718). |
(d) |
On
June 5, 2017, the Company issued a convertible promissory note in
the principal amount of $110,000. As at March 31, 2020, the
carrying value of the note was $9,487 (December 31, 2019 - $9,487),
relating to an outstanding penalty. |
|
|
(e) |
On
July 17, 2017, the Company issued a convertible promissory note in
the principal amount of $135,000. The note is unsecured, bears
interest at 10% per annum, is due on July 17, 2018, and is
convertible into common shares at a conversion price equal to the
lessor of (i) 55% multiplied by the lowest trading price during the
previous twenty trading day period ending on the latest complete
trading day prior to the date of this note and (ii) $244. Interest
will be accrued and payable at the time of promissory note
repayment. Financing fees on the note were $16,500. Derivative
liability applied as discount on the note was $118,500 and is
accreted over the life of the note. |
|
|
|
As at
March 31, 2020, the carrying value of the note was $81,470
(December 31, 2019 - $81,470) and the fair value of the derivative
liability was $139,112 (December 31, 2019 - $111,990). |
|
|
(f) |
In
January 2018, the Company issued a convertible promissory note in
the principal amount of $15,000 as a commitment fee. The note is
unsecured, non-interest bearing until default, was due on August
16, 2018, and is convertible into common shares at a conversion
price equal to 75% of the average closing trading price during the
previous five trading days prior to conversion date, with a minimum
of $0.20. |
|
|
|
During
the year ended December 31, 2018, the Company issued 1,558 common
shares with a fair value of $19,937 for the conversion of $10,000
of principal resulting in a loss on settlement of debt of
$9,937. |
|
|
|
As at
March 31, 2020, the carrying value of the note was $5,000 (December
31, 2019 - $5,000) and the fair value of the derivative liability
was $4,043 (December 31, 2019 - $2,601). |
(g) |
On
May 8, 2018, the Company issued a convertible note in the principal
amount of $51,500. The note is unsecured, bears interest at 10% per
annum, and is due on February 8, 2019. The note is convertible into
common shares at a 32% discount to the lowest intra-day trading
price of the Company’s common stock for the ten trading days
immediately preceding the conversion date. |
|
|
|
During
the three months ended March 31, 2020, the Company issued 170,000
common shares with a fair value of $27,200 for the conversion of
$13,090 accrued interest resulting in a loss on settlement of debt
of $14,110. |
|
|
|
As at
March 31, 2020, the carrying value of the note was $51,500
(December 31, 2019 - $51,500) and the fair value of the derivative
liability was $86,068 (December 31, 2019 - $48,918). During the
three months ended March 31, 2020, the Company accreted $Nil (2019
- $7,277) of the debt discount to finance costs. |
|
|
(h) |
On
May 28, 2018 the Company issued a convertible note in the principal
amount of $180,000. The note is unsecured, bears interest at 10%
per annum, and was due on February 28, 2019. The note is
convertible into common shares at a 32% discount to the lowest
intra-day trading price of the Company’s common stock for the ten
trading days immediately preceding the conversion date. |
|
|
|
As at
March 31, 2020, the carrying value of the note was $180,000
(December 31, 2018 - $180,000) and the fair value of the derivative
liability was $366,996 (December 31, 2019 - $169,234). During the
three months ended March 31, 2020, the Company accreted $Nil (2019
- $38,478) of the debt discount to finance costs. |
|
|
(i) |
On
June 18, 2018, the Company reassigned convertible note balances
from the original lender to another unrelated party in the
principal amount of $168,721. The note is unsecured, bears interest
at 10% per annum, which was due on August 2, 2018, and is
convertible into common shares at a conversion price equal to the
lesser of the lowest trading price during the previous twenty-five
trading days prior to: (i) the date of the promissory note; or (ii)
the latest complete trading day prior to the conversion date.
Interest is accrued will be and payable at the time of promissory
note repayment. The remaining derivative liability applied as a
discount on the reassigned note was $25,824 and is accreted over
the remaining life of the note. |
|
|
|
During
the year ended December 31, 2019, the Company issued 234,350 common
shares with a fair value of $268,614 for the conversion of $63,012
of principal and $9,671 of accrued interest resulting in a loss on
settlement of debt of $195,931. |
|
|
|
As at
March 31, 2020, the carrying value of the note was $39,037
(December 31, 2019 - $39,037) and the fair value of the derivative
liability was $55,105 (December 31, 2019 - $21,869). |
(j) |
On
April 26, 2019, the Company entered into a note purchase and
assignment agreement with two unrelated parties pursuant to a
certain secured inventory convertible note issued on March 19, 2018
in the principal amount of $900,000. Pursuant to this agreement,
the seller desired to sell the balance owing under the Second and
Third tranche of the original note in four separate closings on
April 26, May 22, June 24, and July 24, 2019, totaling $84,396,
$85,838, $120,490 and $122,866, respectively (consisting of
$375,804 principal and $37,786 of accrued interest). As at March
31, 2020, $413,590 in principal and accrued interest had been
assigned to the purchaser. |
|
|
|
The
note is unsecured, bears interest at 12% per annum, is due 184 days
upon receipt, and is convertible into common shares after 180 days
from issuance date at a conversion price equal to the lessor of:
(i) the lowest trading price during the previous fifteen trading
days prior to the date of the promissory note; or (ii) 55% of the
lowest trading price during the previous fifteen days prior to the
latest complete trading day prior to the conversion date. Interest
will be accrued and payable at the time of promissory note
repayment. |
|
|
|
As at
March 31, 2020, the carrying value of the note was $413,590
(December 31, 2019 - $413,590). The fair value of the derivative
liability was $641,252 (December 31, 2019 - $181,870). |
|
|
(k) |
On
May 7, 2019, the Company entered into a secured convertible
promissory note agreement with an unrelated party. The note is
secured by an unconditional first priority interest in and to, any
and all property of the Company and its subsidiaries, of any kind
or description, tangible or intangible, whether now existing or
hereafter arising or acquired until the balance of all Notes has
been reduced to $Nil. The note bears interest at 10% per annum,
each tranche matures 12 months from the funding date and is
convertible into common shares at the holder’s discretion at a
conversion price equal to 62% of the lowest trading price of the
Company’s common stock during the 10 trading days immediately
preceding the conversion of the note. |
|
|
|
The
note was funded in four tranches on May 7, 2019, June 28, 2019,
July 8, 2019 and August 8, 2019, totaling $250,420. Proceeds from
the note were paid directly to a former lender as an inducement for
entering into a debt assignment arrangement. The $250,420
inducement is recorded to finance costs for the year ended December
31, 2019. |
|
|
|
Deferred
financing fees and original issuance discount on the note were
$26,765. The derivative liability applied as a discount on the note
was $250,420 and is accreted over the life of the note. |
|
|
|
As at
March 31, 2020, the carrying value of the note was $187,127
(December 31, 2019 - $124,695) and the fair value of the derivative
liability was $474,079 (December 31, 2019 - $323,514). During the
three months ended March 31, 2020, the Company accreted $62,432
(2019 - $Nil) of the debt discount to finance costs. |
|
|
(l) |
On
July 30, 2019, the Company issued a convertible promissory note in
the principal amount of $220,000. The note is unsecured, bears
interest at 10% per annum, is due on July 30, 2020, and is
convertible into common shares at a conversion price equal to the
lesser of (i) 60% of the lowest trading price during the previous
twenty trading days prior to the issuance date, or (ii) the lowest
trading price for the Common Stock during the twenty day period
ending one trading day prior to conversion of the note. Deferred
financing fees and original issuance discount on the note were
$23,500. The derivative liability applied as a discount on the note
was $196,500 and is accreted over the life of the note. |
|
|
|
During
the three months ended March 31, 2020, the Company issued 954,754
common shares with a fair value of $486,129 for the conversion of
$105,000 of principal resulting in a loss on settlement of debt of
$381,129. |
|
|
|
As at
March 31, 2020, the carrying value of the note was $42,068
(December 31, 2019 - $92,219) and the fair value of the derivative
liability was $162,606 (December 31, 2019 - $284,734). During the
three months ended March 31, 2020, the Company accreted $54,849
(2019 - $Nil) of the debt discount to finance costs. |
|
|
(m) |
On
September 4, 2019, the Company issued a convertible promissory note
in the principal amount of $137,500. The note is unsecured, bears
interest at 10% per annum, is due on June 3, 2020, and is
convertible during the first 180 calendar days from the issuance
date at a price of $0.50 per share. For the subsequent period until
repayment the conversion price shall equal the lesser of (i) 60%
multiplied by the lowest traded price of the Common Stock during
the previous twenty trading days before the issuance date of the
note, or (ii) the lowest traded price for the Common Stock during
the twenty day period ending on the last complete trading day
before conversion. Deferred financing fees and original issuance
discount on the note were $16,000. The derivative liability applied
as a discount on the note was $121,500 and is accreted over the
life of the note. |
|
In
connection with the note, the Company granted 100,000 warrants to
the lender. Each warrant can be exercised to purchase shares of
common stock of the Company at a price of $0.75 per warrant for a
period of five years. As the entire net proceeds of $121,500 were
first allocated to the derivative liability which is measured at
fair value on a recurring basis, the residual value of $Nil was
allocated to the equity-classified warrants. |
|
|
|
As at
March 31, 2020, the carrying value of the note was $77,603
(December 31, 2019 - $43,322) and the fair value of the derivative
liability was $177,528 (December 31, 2019 - $173,596). During the
three months ended March 31, 2020, the Company accreted $34,281
(2019 - $Nil), of the debt discount to finance costs. |
|
|
(n) |
On
September 19, 2019, the Company issued a convertible promissory
note in the principal amount of $55,000. The note is unsecured,
bears interest at 10% per annum, is due on September 19, 2020, and
is convertible during the first six months from the issuance date
at a price of $0.50 per share. For the subsequent period until
repayment the conversion price shall equal the lesser of (i) 60%
multiplied by the lowest traded price of the Common Stock during
the previous twenty trading days before the issuance date of the
note, or (ii) the lowest traded price for the Common Stock during
the twenty day period ending on the last complete trading day
before conversion. Deferred financing fees and original issuance
discount on the note were $7,000. The derivative liability applied
as a discount on the note was $48,000 and is accreted over the life
of the note. |
|
|
|
As at
March 31, 2020, the carrying value of the note was $29,082
(December 31, 2019 - $15,370) and the fair value of the derivative
liability was $72,239 (December 31, 2019 - $70,052). During the
three months ended March 31, 2020, the Company accreted $13,712
(2019 - $Nil), of the debt discount to finance costs. |
|
|
(o) |
On
September 19, 2019, the Company issued a convertible promissory
note in the principal amount of $141,900. The note is unsecured,
bears interest at 10% per annum, is due on September 19, 2020, and
is convertible during the first six months from the issuance date
at a price of $0.50 per share. For the subsequent period until
repayment the conversion price shall equal the lesser of (i) 60%
multiplied by the lowest traded price of the Common Stock during
the previous twenty trading days before the issuance date of the
note, or (ii) the lowest traded price for the Common Stock during
the twenty day period ending on the last complete trading day
before conversion. Deferred financing fees and original issuance
discount on the note were $16,400. The derivative liability applied
as a discount on the note was $125,500 and is accreted over the
life of the note. |
|
|
|
In
connection with the note, the Company granted 113,250 warrants to
the lender. Each warrant can be exercised to purchase shares of
common stock of the Company at a price of $0.75 per warrant for a
period of five years. As the entire net proceeds of $125,500 were
first allocated to the derivative liability which is measured at
fair value on a recurring basis, the residual value of $Nil was
allocated to the equity-classified warrants. |
|
|
|
As at
March 31, 2020, the carrying value of the note was $75,421
(December 31, 2019 - $40,043) and the fair value of the derivative
liability was $186,377 (December 31, 2019 - $190,246). During the
three months ended March 31, 2020, the Company accreted $35,378
(2019 - $Nil), of the debt discount to finance costs. |
|
|
(p) |
On
October 2, 2019, the Company issued a convertible promissory note
in the principal amount of $82,500. The note is unsecured, bears
interest at 10% per annum, is due on September 30, 2020, and is
convertible during the first six months from the issuance date at a
price of $0.50 per share. For the subsequent period until repayment
the conversion price shall equal the lesser of (i) 60% multiplied
by the lowest traded price of the Common Stock during the previous
twenty trading days before the issuance date of the note, or (ii)
the lowest traded price for the Common Stock during the twenty day
period ending on the last complete trading day before conversion.
Deferred financing fees and original issuance discount on the note
were $9,500. The derivative liability applied as a discount on the
note was $73,000 and is accreted over the life of the
note. |
|
|
|
In
connection with the note, the Company granted 83,333 warrants to
the lender. Each warrant can be exercised to purchase shares of
common stock of the Company at a price of $0.75 per warrant for a
period of five years. As the entire net proceeds of $73,000 were
first allocated to the derivative liability which is measured at
fair value on a recurring basis, the residual value of $Nil was
allocated to the equity-classified warrants. |
|
As at
March 31, 2020, the carrying value of the note was $41,363
(December 31, 2019 - $20,795) and the fair value of the derivative
liability was $3,178 (December 31, 2019 - $105,790). During the
three months ended March 31, 2020, the Company accreted $20,568
(2019 - $Nil), of the debt discount to finance costs. |
|
|
(q) |
During
the year ended December 31, 2019, a convertible promissory note
with an outstanding principal balance of $226,000 was assigned to
another unrelated party with no changes to the terms of the note
upon assignment. The note is unsecured, bears interest at 12% per
annum, was due on August 31, 2019 and is convertible into common
shares at a conversion price equal to 55% of the lowest trading
price during the previous fifteen trading days prior to the
conversion date, including the conversion date. Interest will be
accrued and payable at the time of promissory note
repayment. |
|
|
|
As at
March 31, 2020, the carrying value of the note was $226,000
(December 31, 2019 - $226,000) and the fair value of the derivative
liability was $370,334 (December 31, 2019 - $289,462). |
|
|
(r) |
During
the year ended December 31, 2019, a convertible promissory note
with an outstanding principal balance of $258,736 was assigned to
another unrelated party with no changes to the terms of the note
upon assignment. The note is unsecured, bears interest at 12% per
annum, was due on September 19, 2018 and is convertible into common
shares at a conversion price equal to the lessor of: (i) the lowest
trading price during the previous fifteen trading days prior to the
date of the promissory note; or (ii) 55% of the lowest trading
price during the previous fifteen days prior to the latest complete
trading day prior to the conversion date. Interest will be accrued
and payable at the time of promissory note repayment. |
|
|
|
As at
March 31, 2020, the carrying value of the note was $258,736
(December 31, 2019 - $258,736) and the fair value of the derivative
liability was $448,817 (December 31, 2019 - $351,774). |
|
|
(s) |
During
the year ended December 31, 2019, a convertible promissory note
with an outstanding principal balance of $137,500 was assigned to
another unrelated party with no changes to the terms of the note
upon assignment. The note is unsecured, bears interest at 12% per
annum, was due on January 22, 2020 and is convertible into common
shares at a conversion price equal to 55% of the lowest trading
price during the previous fifteen trading days prior to the
conversion date, including the conversion date. Interest will be
accrued and payable at the time of promissory note
repayment. |
|
|
|
As at
March 31, 2020, the carrying value of the note was $137,500
(December 31, 2019 - $137,500) and the fair value of the derivative
liability was $218,112 (December 31, 2019 - $170,201). |
|
|
(t) |
On
February 10, 2020, the Company issued a convertible promissory note
in the principal amount of $119,600. The note is unsecured, bears
interest at 10% per annum, is due on February 10, 2021, and is
convertible into common shares of the Company, beginning 180 days
from the date of the note up to maturity or repayment, at a price
equal to 80% of the average of the lowest two trading prices for
the common stock during the fifteen trading days before conversion.
Deferred financing fees and original issuance discount on the note
were $22,135. The derivative liability applied as a discount on the
note was $97,465 and is accreted over the life of the
note. |
|
|
|
As at
March 31, 2020, the carrying value of the note was $16,384
(December 31, 2019 - $Nil) and the fair value of the derivative
liability was $134,048 (December 31, 2019 - $Nil). During the three
months ended March 31, 2020, the Company accreted $16,384 (2019 -
$Nil), of the debt discount to finance costs. |
|
|
(u) |
On
March 2, 2020, the Company issued a convertible promissory note in
the principal amount of $60,950. The note is unsecured, bears
interest at 10% per annum, is due on March 2, 2021, and is
convertible into common shares of the Company, beginning 180 days
from the date of the note up to maturity or repayment, at a price
equal to 80% of the average of the lowest two trading prices for
the common stock during the fifteen trading days before conversion.
Deferred financing fees and original issuance discount on the note
were $10,950. The derivative liability applied as a discount on the
note was $50,000 and is accreted over the life of the
note. |
|
|
|
As at
March 31, 2020, the carrying value of the note was $4,843 (December
31, 2019 - $Nil) and the fair value of the derivative liability was
$66,422 (December 31, 2019 - $Nil). During the three months ended
March 31, 2020, the Company accreted $4,843 (2019 - $Nil), of the
debt discount to finance costs. |
Note
10 – DERIVATIVE LIABILITIES
The
following range of inputs and assumptions were used to value the
derivative liabilities outstanding during the three months ended
March 31, 2020 and year ended December 31, 2019, assuming no
dividend yield:
|
|
|
March 31, 2020
|
|
|
|
December 31, 2019
|
|
Expected volatility |
|
|
243 - 298 |
% |
|
|
176 - 374 |
% |
Risk free interest rate |
|
|
0.1 -
0.2 |
% |
|
|
1.6 -
2.6 |
% |
Expected life (years) |
|
|
0.25 -
0.92 |
|
|
|
0.25 -
2.0 |
|
A
summary of the activity of the derivative liabilities is shown
below:
|
|
|
|
Balance, December 31, 2018 |
|
$ |
2,188,354 |
|
New issuances |
|
|
939,919 |
|
Change in fair
value |
|
|
(271,704 |
) |
Balance, December 31, 2019 |
|
|
2,856,569 |
|
New issuances |
|
|
147,465 |
|
Change in fair
value |
|
|
945,594 |
|
Balance, March 31, 2020 |
|
$ |
3,949,628 |
|
Note
11 - LEASES
The
Company leases certain assets under lease agreements. The lease
liability relates to leases for office and showroom
spaces.
Right-of-use
assets have been included within fixed assets, net and lease
liabilities have been included in operating lease liability on the
Company’s consolidated balance sheet.
Right-of-use
assets |
|
March 31,
2020 |
|
|
December 31,
2019 |
|
Cost |
|
$ |
167,859 |
|
|
$ |
178,202 |
|
Accumulated
depreciation |
|
|
(56,267 |
) |
|
|
(39,671 |
) |
|
|
$ |
111,592 |
|
|
$ |
138,531 |
|
Future
minimum lease payments to be paid by the Company as a lessee for
operating leases as of March 31, 2020 for the next three years are
as follows:
Operating
lease commitments and lease liability |
|
March
31, 2020 |
|
Remainder
of 2020 |
|
$ |
41,575 |
|
2021 |
|
|
49,977 |
|
2022 |
|
|
47,904 |
|
Total
future minimum lease payments |
|
|
139,456 |
|
Discount |
|
|
(20,176 |
) |
Total |
|
|
119,280 |
|
Current
portion of operating lease liabilities |
|
|
(53,932 |
) |
Long-term
portion of operating lease liabilities |
|
$ |
65,348 |
|
Operating
lease expense for the three months ended March 31, 2020 was $21,245
(2019 -$10,424) and is recorded in general and administration
expense. As of March 31, 2020, the Company’s leases had a weighted
average remaining term of 2.39 years.
Note
12 – MEZZANINE EQUITY
Authorized
5,000,000
shares of redeemable Series C preferred shares, authorized, each
having a par value of $0.001 per share. Each share of Series C
preferred shares is convertible into 10 shares of common
stock.
1,000,000
shares of redeemable Series D preferred shares, authorized, each
having a par value of $0.001 per share. Each share of Series D
preferred shares is convertible into 5 shares of common
stock.
5,000,000
shares of redeemable Series E preferred shares, authorized, each
having a par value of $0.001 per share. Each share of Series E
preferred shares is convertible into 4 shares of common
stock.
Mezzanine
Preferred Equity Transactions
During
the three months ended March 31, 2020, the Company did not have any
mezzanine equity transactions.
During
the year ended December 31, 2019:
|
● |
The
Company settled various accounts payable balances, debt and
preferred shares in exchange for shares of common stock to be
issued and warrants. Included in these settlements were 100,500 and
4,649,908 shares of Series D and Series E preferred shares,
respectively, with an aggregate carrying value of
$6,668,643. |
Note
13 – PREFERRED STOCK
Authorized
3,000,000
shares of Series A preferred shares authorized, each having a par
value of $0.001 per share.
10,000
shares of Series B convertible preferred shares authorized, each
having a par value of $0.001 per share. Each share of Series B
convertible preferred shares is convertible into 100,000 shares of
common stock.
Preferred
Stock Transactions
During
the three months ended March 31, 2020, the Company did not have any
preferred share equity transactions
During
the year ended December 31, 2019:
|
● |
The
Company settled various accounts payable balances, debt and
preferred shares in exchange for shares of common stock to be
issued and warrants. Included in these settlements were 132 shares
of Series B Preferred Stock with a carrying value of
$4,872,732. |
|
|
|
|
● |
On
October 29, 2019, the Company issued an aggregate of 200,376 shares
of Series A preferred shares at value of $200 to three directors of
the Company. |
Note
14 – COMMON STOCK AND ADDITIONAL PAID IN CAPITAL
Authorized
On
March 26, 2019, the Company effected a reverse stock split of its
shares of common stock on a four thousand (4,000) old for one (1)
new basis. Upon effect of the reverse split, authorized capital
decreased from 3,000,000,000 shares of common stock to 750,000
shares of common stock. Subsequently, on May 23, 2019, an increase
in common shares to 150,000,000 was authorized, with a par value of
$0.001. These consolidated financial statements give retroactive
effect to such reverse stock split named above and all share and
per share amounts have been adjusted accordingly, unless otherwise
noted. Each share of common stock is entitled to one (1)
vote.
Common
Stock Transactions
During
the three months ended March 31, 2020:
|
● |
The
Company issued an aggregate of 191,865 shares of common stock for
cash proceeds of $100,031. |
|
|
|
|
● |
The
Company issued an aggregate of 320,000 shares of common stock with
a fair value of $171,200 in exchange for services. |
|
|
|
|
● |
The
Company issued an aggregate of 1,766,451 shares of common stock to
satisfy shares to be issued at December 31, 2019. |
|
|
|
|
● |
The
Company issued an aggregate of 1,178,518 shares of common stock
with a fair value of $566,555 upon the conversion of $141,090 of
convertible debentures and accrued interest, as outlined in Note 9,
per the table below: |
Date
issued |
|
Common
shares issued (#) |
|
|
Fair
value(1) |
|
|
Converted
balance(2) |
|
|
Loss
on conversion |
|
January
7, 2020 |
|
|
53,764 |
|
|
$ |
53,226 |
|
|
$ |
20,000 |
|
|
$ |
(33,226 |
) |
February
4, 2020 |
|
|
135,802 |
|
|
|
127,654 |
|
|
|
19,500 |
|
|
|
(108,154 |
) |
February
7, 2020 |
|
|
151,234 |
|
|
|
142,160 |
|
|
|
24,000 |
|
|
|
(118,160 |
) |
February
26, 2020 |
|
|
151,515 |
|
|
|
45,455 |
|
|
|
19,500 |
|
|
|
(25,955 |
) |
February
26, 2020 |
|
|
140,151 |
|
|
|
39,242 |
|
|
|
18,000 |
|
|
|
(21,242 |
) |
March
9, 2020 |
|
|
170,000 |
|
|
|
27,200 |
|
|
|
13,090 |
|
|
|
(14,110 |
) |
March
9, 2020 |
|
|
195,547 |
|
|
|
68,441 |
|
|
|
12,500 |
|
|
|
(55,941 |
) |
March
11, 2020 |
|
|
180,505 |
|
|
|
63,177 |
|
|
|
11,500 |
|
|
|
(51,677 |
) |
Total |
|
|
1,178,518 |
|
|
$ |
566,555 |
|
|
$ |
138,090 |
|
|
$ |
(428,465 |
) |
|
(1) |
Fair
values are derived based on the closing price of the Company’s
common stock on the date of the conversion notice. |
|
|
|
|
(2) |
Converted
balance includes portions of principal, accrued interest, financing
fees, interest penalties and other fees converted upon the issuance
of shares of common stock. |
During
the year ended December 31, 2019:
|
● |
The
Company issued an aggregate of 72,295 shares of common stock with a
fair value of $63,437 in exchange for services. |
|
|
|
|
● |
The
Company issued an aggregate of 32,000 shares of common stock with a
fair value of $37,760 as partial settlement for accounts
payable. |
|
|
|
|
● |
The
Company issued an aggregate of 407,536 shares of common stock with
a fair value of $506,468 upon the conversion of $180,642 of
convertible debentures, accrued interest and accounts payable per
the table below: |
Date issued |
|
Common
shares issued (#) |
|
|
Fair
value(1) |
|
|
Converted
balance(2) |
|
|
Loss on
conversion |
|
January 22, 2019 |
|
|
10,189 |
|
|
$ |
28,527 |
|
|
$ |
15,690 |
|
|
$ |
(12,837 |
) |
March 11, 2019 |
|
|
18,606 |
|
|
|
37,211 |
|
|
|
12,280 |
|
|
|
(24,931 |
) |
March 15, 2019 |
|
|
27,137 |
|
|
|
54,238 |
|
|
|
17,899 |
|
|
|
(36,339 |
) |
June 17, 2019 |
|
|
45,216 |
|
|
|
58,781 |
|
|
|
31,651 |
|
|
|
(27,130 |
) |
June 20, 2019 |
|
|
34,450 |
|
|
|
36,517 |
|
|
|
19,895 |
|
|
|
(16,622 |
) |
July 17, 2019 |
|
|
37,900 |
|
|
|
33,352 |
|
|
|
5,628 |
|
|
|
(27,724 |
) |
August 26, 2019 |
|
|
40,000 |
|
|
|
27,020 |
|
|
|
6,620 |
|
|
|
(20,400 |
) |
September 18, 2019 |
|
|
39,500 |
|
|
|
49,376 |
|
|
|
8,255 |
|
|
|
(41,121 |
) |
October 11, 2019 |
|
|
35,000 |
|
|
|
44,450 |
|
|
|
13,475 |
|
|
|
(30,975 |
) |
November 13, 2019 |
|
|
47,500 |
|
|
|
77,899 |
|
|
|
18,810 |
|
|
|
(59,089 |
) |
November 7, 2019 |
|
|
23,149 |
|
|
|
18,519 |
|
|
|
10,000 |
|
|
|
(8,519 |
) |
December 19, 2019 |
|
|
48,889 |
|
|
|
40,578 |
|
|
|
22,000 |
|
|
|
(18,578 |
) |
Total |
|
|
407,536 |
|
|
$ |
506,468 |
|
|
$ |
182,203 |
|
|
$ |
(324,265 |
) |
|
(1) |
Fair
values are derived based on the closing price of the Company’s
common stock on the date of the conversion notice. |
|
|
|
|
(2) |
Converted
balance includes portions of principal, accrued interest, accounts
payable, financing fees and interest penalties converted upon the
issuance of shares of common stock. |
Common
stock to be issued
Common
stock to be issued as at March 31, 2020 consists of:
|
● |
7,663,695
shares valued at $6,016,001 to be issued pursuant to settlement of
various accounts payable balances, debt and preferred shares in
exchange for shares of common stock to be issued and
warrants. |
As at
March 31, 2020, 7,663,695 shares of common stock remain to be
issued with a value of $6,016,001, all of which were issued
subsequent to period end.
Warrants
During the three months ended March 31, 2020, the Company granted
2,829,859 warrants with a contractual live of five years and
exercise price of $0.25 per share in exchange for strategic
advisory services. Warrants were valued at $465,248 using the Black
Scholes Option Pricing Model with the assumptions outlined below.
Expected life was determined based on historical exercise data of
the Company.
|
|
March 31, 2020 |
|
Risk-free interest
rate |
|
|
0.88 |
% |
Expected life |
|
|
5.0
years |
|
Expected dividend rate |
|
|
0 |
% |
Expected volatility |
|
|
266 |
% |
Continuity
of the Company’s common stock purchase warrants issued and
outstanding is as follows:
|
|
Warrants |
|
|
Weighted
average
exercise
price
|
|
Outstanding at year December 31, 2019 |
|
|
6,859,954 |
|
|
$ |
0.77 |
|
Granted |
|
|
2,829,859 |
|
|
|
0.25 |
|
Exercised |
|
|
- |
|
|
|
- |
|
Expired |
|
|
- |
|
|
|
- |
|
Outstanding as at March 31,
2020 |
|
|
9,689,813 |
|
|
$ |
0.62 |
|
As at
March 31, 2020, the weighted average remaining contractual life of
warrants outstanding was 3.44 years with an intrinsic value of
$Nil.
Note
15 – RELATED PARTY TRANSACTIONS
As at
March 31, 2020, the Company owed $282,721 (December 31, 2019 -
$263,409) to the President, CEO, and CFO of the Company for
management fees and salaries, which has been recorded in trade and
other payables. The amounts owed and owing are unsecured,
non-interest bearing, and due on demand. During the three months
ended March 31, 2020 the Company incurred $50,000 (2019 - $50,000)
in salaries to the President, CEO, and CFO of the
Company.
As at
March 31, 2020, the Company owed $7,260 (CDN$9,450) (December 31,
2019 - $7,260 (CDN$9,450)) to a company controlled by the son of
the President, CEO, and CFO of the Company for subcontractor
services. The balance owing has been recorded in trade and other
payables. The amount owing is unsecured, non-interest bearing, and
due on demand.
Note
16 – COMMITMENTS
Product
Warranties
The
Company’s warranty policy generally covers a period of two years
which is also covered by the manufacturer warranty. Thus, any
warranty costs incurred by the Company are immaterial.
Indemnifications
In
the normal course of business, the Company indemnifies other
parties, including customers, lessors, and parties to other
transactions with the Company, with respect to certain matters. The
Company has agreed to hold the other parties harmless against
losses arising from a breach of representations or covenants, or
out of intellectual property infringement or other claims made
against certain parties. These agreements may limit the time within
which an indemnification claim can be made and the amount of the
claim. In addition, the Company has entered into indemnification
agreements with its officers and directors, and the Company’s
bylaws contain similar indemnification obligations to the Company’s
agents. It is not possible to determine the maximum potential
amount under these indemnification agreements due to the Company’s
limited history with prior indemnification claims and the unique
facts and circumstances involved in each particular agreement.
Historically, payments made by the Company under these agreements
have not had a material effect on the Company’s operating results,
financial position, or cash flows.
Note
17 – CONTINGENCIES
On
September 7, 2016, Chetu Inc. filed a Complaint for Damage in
Florida to recover an unpaid invoice amount of $27,335 plus
interest of $4,939. The invoice was not paid due to a service
dispute. As at March 31, 2020, included in trade and other payables
is $40,089 (December 31, 2019 - $40,227) related to this unpaid
invoice, interest and legal fees.
On
May 24, 2017, the Company received a notice of default from Coastal
Investment Partners LLC (“Coastal”), on three 8% convertible
promissory notes issued by the Company in aggregate principal
amount of $261,389 and commenced a lawsuit on June 12, 2017 in the
United States District Court, Southern District of New York.
Coastal alleges that the Company failed to deliver shares of common
stock underlying the Coastal notes, and thus giving rise to an
event of default. Coastal seeks damages in excess of $250,000 for
breach of contact damages, and legal fees incurred by Coastal with
respect to the lawsuit. This action is still pending. As at March
31, 2020 the principal balance and accrued interest on this
convertible note is included on the consolidated balance sheet
under convertible notes payable.
On
October 10, 2017, a vendor filed a complaint for Breach of Contract
with Superior Court of the State of California. The Complainant is
alleging that it is contractually owed 1,848,130 shares of the
Company’s common stock and is seeking damages of $270,000. In
addition, a related vendor filed in the same filing a complaint for
$72,000 as part of a consulting agreement the Company executed. The
Company is currently in the process of negotiating a settlement and
no accrual has been recorded to date due to the uncertainty of the
settlement amount.
On
April 9, 2018, the Company received a share-reserve increase letter
from JSJ Investments Inc. (“JSJ”) pursuant to the terms of a 10%
convertible promissory note issued to the Company in the principal
amount of $135,000. On April 24, 2018, the Company received a
notice of default from JSJ for failure to comply with the
share-reserve increase and on April 30, 2018 demanded payment in
full of the default amount totaling $172,845. On May 7, 2018, JSJ
commenced a lawsuit in the United States District Court, District
of Dallas County, Texas. JSJ alleges that the Company failed to
comply with the share-reserve increase letter, thus giving rise to
an event of default, and failed to pay the outstanding default
amount due under the terms of the note. JSJ seeks damages in excess
of $200,000 but not more than $1,000,000, which consists of the
principal amount of the note, default interest, and legal fees
incurred by JSJ with respect to the lawsuit. This action is still
pending but as at March 31, 2020, JSJ has negotiated a reduced
amount with a private investor. As at March 31, 2020, the principal
balance and accrued interest on this convertible note is included
on the consolidated balance sheet under convertible notes
payable.
Note
18 – SUPPLEMENTAL CASH FLOW INFORMATION
|
|
Three-months ended |
|
|
|
March 31, 2020 |
|
|
March 31, 2019 |
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Income tax payments |
|
$ |
— |
|
|
$ |
— |
|
Interest payments |
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing
transactions: |
|
|
|
|
|
|
|
|
Shares issued for convertible notes payable and accrued
interest |
|
$ |
566,555 |
|
|
$ |
119,977 |
|
Initial recognition of lease assets |
|
$ |
— |
|
|
$ |
51,203 |
|
Initial recognition of lease liabilities |
|
$ |
— |
|
|
$ |
47,118 |
|
Note
19 – SUBSEQUENT EVENTS
Management
has evaluated events subsequent to the year ended for transactions
and other events that may require adjustment of and/or disclosure
in such consolidated financial statements.
The
recent outbreak of the coronavirus, also known as “COVID-19”, has
spread across the globe and is impacting worldwide economic
activity. Conditions surrounding the coronavirus continue to
rapidly evolve and government authorities have implemented
emergency measures to mitigate the spread of the virus. The
outbreak and the related mitigation measures may have an adverse
impact on global economic conditions as well as on the Company’s
business activities. The extent to which the coronavirus may impact
the Company’s business activities will depend on future
developments, such as the ultimate geographic spread of the
disease, the duration of the outbreak, travel restrictions,
business disruptions, and the effectiveness of actions taken in
Canada and other countries to contain and treat the disease. These
events are highly uncertain and as such, the Company cannot
determine their financial impact at this time.
On
April 15, 2020 the Company issued a convertible promissory note in
the principal amount of $60,950. The note is unsecured, bears
interest at 8% per annum, is due on April 15, 2021 and is
convertible into common shares at a conversion price equal to 80%
multiplied by the average of the lowest two closing bid prices for
the Common Stock during the fifteen trading day period ending on
the latest complete trading day before conversion. Deferred
financing fees and original issuance discount on the note were
$10,950.
On
May 14, 2020, the Company entered into a working capital loan
arrangement for $30,817 (CDN$43,253) with terms yet to be
finalized.
Subsequent
to March 31, 2020, the Company issued:
|
● |
1,183,000
shares of common stock for services provided by employees and
consultants; |
|
|
|
|
● |
612,244
shares of common stock for settlement of share-settled loans
payable; |
|
|
|
|
● |
3,799,933
shares of
common stock for conversion of debt and outstanding
interest; |
|
|
|
|
● |
7,663,695
shares of common stock to satisfy shares to be issued at December
31, 2019; and |
|
|
|
|
● |
136
Series B convertible preferred shares to directors, officers,
former directors and related parties of the Company. |
Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of
Operations
The
following discussion and analysis is based on, and should be read
in conjunction with, the condensed, consolidated interim financial
statements and the related notes thereto of DSG Global, Inc.
contained in this Quarterly Report on Form 10-Q (this
“Report”).
As
used in this section, unless the context otherwise requires,
references to “we,” “our,” “us,” and “our company” refer to DSG
Global, Inc. a Nevada corporation, together with our consolidated
subsidiaries,
FORWARD
LOOKING STATEMENTS
This
Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. The words
“believe,” “may,” “will,” “potentially,” “estimate,” “continue,”
“anticipate,” “intend,” “could,” “would,” “project,” “plan,”
“expect” and similar expressions that convey uncertainty of future
events or outcomes are intended to identify forward-looking
statements. These forward-looking statements include, but are not
limited to, statements concerning the following:
|
● |
our
future financial and operating results; |
|
|
|
|
● |
our
intentions, expectations and beliefs regarding anticipated growth,
market penetration and trends in our business; |
|
|
|
|
● |
the
timing and success of our business plan; |
|
|
|
|
● |
our
plans regarding future financings; |
|
|
|
|
● |
our
ability to attract and retain customers; |
|
|
|
|
● |
our
dependence on growth in our customers’ businesses; |
|
|
|
|
● |
the
effects of market conditions on our stock price and operating
results; |
|
|
|
|
● |
our
ability to maintain our competitive technological advantages
against competitors in our industry; |
|
|
|
|
● |
the
expansion of our business in our core golf market as well as in new
markets like commercial fleet management and
agriculture; |
|
|
|
|
● |
our
ability to timely and effectively adapt our existing technology and
have our technology solutions gain market acceptance; |
|
|
|
|
● |
our
ability to introduce new offerings and bring them to market in a
timely manner; |
|
|
|
|
● |
our
ability to maintain, protect and enhance our intellectual
property; |
|
|
|
|
● |
the
effects of increased competition in our market and our ability to
compete effectively; |
|
|
|
|
● |
the
attraction and retention of qualified employees and key
personnel; |
|
|
|
|
● |
future
acquisitions of or investments in complementary companies or
technologies; and |
|
|
|
|
● |
our
ability to comply with evolving legal standards and regulations,
particularly concerning requirements for being a public
company. |
These
forward-looking statements speak only as of the date of this Form
10-Q and are subject to uncertainties, assumptions and business and
economic risks. As such, our actual results could differ materially
from those set forth in the forward-looking statements as a result
of the factors set forth below in Part II, Item 1A, “Risk Factors,”
and in our other reports filed with the Securities and Exchange
Commission. Moreover, we operate in a very competitive and rapidly
changing environment, and new risks emerge from time to time. It is
not possible for us to predict all risks, nor can we assess the
impact of all factors on our business or the extent to which any
factor, or combination of factors, may cause actual results to
differ materially from those contained in any forward-looking
statements we may make. In light of these risks, uncertainties and
assumptions, the forward-looking events and circumstances discussed
in this Form 10-Q may not occur, and actual results could differ
materially and adversely from those anticipated or implied in our
forward-looking statements.
You
should not rely upon forward-looking statements as predictions of
future events. Although we believe that the expectations reflected
in our forward-looking statements are reasonable, we cannot
guarantee that the future results, levels of activity, performance
or events and circumstances described in the forward-looking
statements will be achieved or occur. Moreover, neither we nor any
other person assumes responsibility for the accuracy and
completeness of the forward-looking statements. We undertake no
obligation to update publicly any forward-looking statements for
any reason after the date of this Form 10-Q to conform these
statements to actual results or to changes in our expectations,
except as required by law.
Our
unaudited financial statements are stated in United States Dollars
(US$) and are prepared in accordance with United States Generally
Accepted Principles. The following discussion should be read in
conjunction with our unaudited condensed consolidated financial
statements and notes thereto appearing elsewhere in this Quarterly
Report on Form 10-Q with the understanding that our actual future
results, levels of activity, performance and events and
circumstances may be materially different from what we
expect.
Corporate
History
DSG
Global, Inc. (formerly Boreal Productions Inc.) was incorporated
under the laws of the State of Nevada on September 24, 2007. We
were formed to option feature films and TV projects to be packaged
and sold to movie studios and production companies.
In
January 2015, we changed our name to DSG Global, Inc. and effected
a one-for-three reverse stock split of our issued and outstanding
common stock in anticipation of entering in a share exchange
agreement with DSG TAG Systems, Inc., a corporation incorporated
under the laws of the State of Nevada on April 17, 2008 and extra
provincially registered in British Columbia, Canada in
2008.
On
April 13, 2015, we entered into a share exchange agreement with
Vantage Tag Systems Inc. (“VTS”) (formerly DSG Tag Systems Inc.)
and the shareholders of VTS who become parties to the agreement.
Pursuant to the terms of the share exchange agreement, we agreed to
acquire not less than 75% and up to 100% of the issued and
outstanding common shares in the capital stock of VTS in exchange
for the issuance to the selling shareholders of up to 20,000,000
pre-reverse split shares of our common stock on the basis of 1
common share for 5.4935 common shares of VTS.
On
May 6, 2015, we completed the acquisition of approximately 75%
(82,435,748 common shares) of the issued and outstanding common
shares of VTS as contemplated by the share exchange agreement by
issuing 15,185,875 pre-reverse split shares of our common stock to
shareholders of VTS who became parties to the agreement. In
addition, concurrent with the closing of the share exchange
agreement, we issued an additional 179,823 pre-reverse split shares
of our common stock to Westergaard Holdings Ltd. in partial
settlement of accrued interest on outstanding indebtedness of
VTS.
Following
the initial closing of the share exchange agreement and through
October 22, 2015, we acquired an additional 101,200 shares of
common stock of VTS from shareholders who became parties to the
share exchange agreement and issued to these shareholders an
aggregate of 18,422 pre-reverse split shares of our common stock.
Following completion of these additional purchases, DSG Global Inc.
owns approximately 100% of the issued and outstanding shares of
common stock of VTS. An aggregate of 4,229,384 shares of Series A
Convertible Preferred Stock of VTS were exchanged for 51 Series B
and 3,000,000 Series E preferred shares during the year ended
December 31, 2018 by Westergaard Holdings Ltd., an affiliate of
Keith Westergaard, a previous member of our board of directors
which have not been issued as of December 31, 2018 or
2019.
The
reverse acquisition was accounted for as a recapitalization
effected by a share exchange, wherein VTS is considered the
acquirer for accounting and financial reporting purposes. The
assets and liabilities of the acquired entity have been brought
forward at their book value and no goodwill has been recognized. We
adopted the business and operations of VTS upon the closing of the
share exchange agreement.
Overview
of Our Business
DSG
Global, Inc., under the brand name Vantage Tag Systems Inc. (“VTS”)
provides patented electronic tracking systems and fleet management
solutions to golf courses and other avenues that allow for remote
management of the course’s fleet of golf carts, turf equipment and
utility vehicles. Their clients use VTS’s unique technology to
significantly reduce operational costs, improve the efficiency plus
profitability of their fleet operations, increase safety, and
enhance customer satisfaction. VTS has grown to become a leader in
the category of Fleet Management in the golf industry, with its
technology installed in vehicles worldwide. VTS is now aggressively
branching into several new streams of revenue, through programmatic
advertising, licensing and distribution, as well as expanding into
Commercial Fleet Management, PACER a single rider golf cart and
Agricultural applications. Additional information is available at
http://vantage-tag.com/
Ready
Golf Ready: Our roots as a company are in golf, and our technology
is changing the way golf is being played and driving new revenue
for courses.
● |
Vantage
TAG equipped golf carts enhance fleet management. |
|
|
● |
Single
rider carts speed up pace of play and drive rental
revenue. |
|
|
● |
Onboard
touchscreens drive revenue and offer an enhanced course
experience. |
|
|
● |
Combination
of technology and single rider carts has the ability to decrease
average play time to 2:20 and drive numerous extra plays per
hour. |
|
|
● |
Our
“Pennies A Day, Pennies A Round” model provides easy entry to
leasing single-rider vehicles. |
In
Development: DSG’s Infinity On-Board Screen Offers Gaming Revenue
Potential
● |
In
the next 2 years, sports betting will generate $10B / licensed in
20+ States. |
|
|
● |
In
negotiations with leading mobile gaming developers. |
|
|
● |
DSG’s
existing infinity screens work with current gaming
technology. |
Business
Unit Overview: On Board Media
● |
38,000
courses globally. |
|
|
● |
26,000
courses capable of installing the DSG TAG SYSTEM with the TAG and
INFINITIY. |
|
|
● |
Courses
with INFINITY screens in carts can generate $90,000 - $110,000 in
additional revenue. |
● |
Screens
for free and own revenue generated by 250 golf courses. |
|
|
● |
DSG
single-rider golf cars are available in any quantity for most
courses on a revenue share basis with no upfront cost to the golf
course. |
|
|
● |
Programmatic
Advertising has the ability to increase revenue 4x more than
standard advertising, an average increase of $200,000 - $300,000
per course. |
Business
Unit Overview: TAG / Fleet Management Vantage Golf
Potential:
● |
38,000
courses globally. |
|
|
● |
4
Million golf carts in the world market. |
|
|
● |
DSG
Tech on 300 courses now, with an additional 500 courses added in
2020 driving $15 million in sales. |
|
|
● |
Key
component of our “Pennies A Day, Pennies A Round”
program. |
Vantage
e-Rickshaw Potential:
● |
Global
three-wheelers market is projected to reach $39.9 billion by
2024. |
|
|
● |
11,000
new e-Rickshaws hit the streets every month, with annual sales
expected to increase about 9 percent by 2021. |
|
|
● |
Research
on car-data-monetization trends and characteristics suggests that
this value pool could be as large as $750 billion by
2030. |
|
|
● |
DSG
Global, Inc. has a strategic partnership in China to integrate
Vantage TAG Systems with EVs, incorporating the Company’s advanced
fleet management capabilities. |
Our
most recent product that is used to increase the Pace of Play on
the course up to 90 minutes per round is the RAPTOR. Our 3-wheel
single rider allows the course to revenue share with VTS as the
RAPTOR is put on the course free of charge and then allows the
course to revenue share with VTS along the way. Each seat is rented
to the customers for minimum $25 per round.
Components
of Our Results of Operations
Revenue
We
derive revenue from four different sources, as follows:
Systems sales revenue, which consists of the sales price
paid by those customers who purchase or lease our TAG system
hardware.
Monthly service fees are paid by all customers for the
wireless data fee charges required to operate the GPS tracking on
the TAG systems.
Monthly rental Fees are paid by those customers that rent
the TAG system hardware. The amount of a customer’s monthly payment
varies based on the type of equipment rented (a TAG, a TAG and
TEXT, or a TAG and INFINITY).
Programmatic advertising revenue is a new source of revenue
that we believe has the potential to be strategic for us in the
future. We are in the process of implementing and designing
software to provide advertising and other media functionality on
our INFINITY units.
We
recognize revenue when it satisfies a performance obligation by
transferring control over a product to a customer. Revenue is
measured based on the consideration the Company expects to receive
in exchange for those products. In instances where final acceptance
of the product is specified by the customer, revenue is deferred
until all acceptance criteria have been met. We accrue for warranty
costs, sales returns, and other allowances based on its historical
experience.
Our
revenue recognition policies are discussed in more detail under
“Note 3 – Summary of Significant Accounting Policies” in the
notes to our Consolidated Financial Statements included in Part I,
Item 1 of this Form 10-K.
Cost of Revenue
Our
cost of revenue consists primarily of hardware purchases, wireless
data fees, mapping, installation costs, freight expenses and
inventory adjustments.
Hardware purchases. Our equipment purchases consist
primarily of TAG system control units, TEXT display, and INFINITY
displays. The TAG system control unit is sold as a stand-alone unit
or in conjunction with our TEXT alphanumeric display or INFINITY
high definition “touch activated” display. Hardware purchases also
include costs of components used during installations, such as
cables, mounting solutions, and other miscellaneous
equipment.
Wireless data fees. Our wireless data fees consist
primarily of the data fees charged by outside providers of GPS
tracking used in all of our TAG system control units.
Mapping. Our mapping costs consist of aerial mapping,
course map, geofencing, and 3D flyovers for golf courses. This cost
is incurred at the time of hardware installation.
Installation. Our installation costs consist primarily of
costs incurred by our employed service technicians for the cost of
travel, meals, and miscellaneous components required during
installations. In addition, these costs also include fees paid to
external contractors for installations on a project by project
basis.
Freight expenses and Inventory adjustments. Our freight
expenses consist primarily of costs to ship hardware to courses for
installations. Our inventory adjustments include inventory write
offs, write downs, and other adjustments to the cost of
inventory.
Operating expenses & other income (expenses) We
classify our operating expenses and other income (expenses) into
six categories: compensation, general and administrative, warranty,
foreign currency exchange, and finance costs. Our operating
expenses consist primarily of sales and marketing, salaries and
wages, consulting fees, professional fees, trade shows, software
development, and allocated costs. Allocated costs include charges
for facilities, office expenses, telephones and other miscellaneous
expenses. Our other income (expenses) primarily consists of
financing costs and foreign exchange gains or losses.
Compensation expense. Our compensation expenses consist
primarily of personnel costs, such as employee salaries, payroll
expenses, and employee benefits. This includes salaries for
management, administration, engineering, sales and marketing, and
service support technicians. Salaries and wages directly related to
projects or research and development are expensed as incurred to
their operating expense category.
General and administrative. Our general and administrative
expenses consist primarily of sales and marketing, commissions,
travel, trade shows, consultant fees, insurance, and compliance and
other administrative functions, as well as accounting and legal
professional services fees, allocated costs and other corporate
expenses. Sales and marketing includes brand marketing, marketing
materials, and media management.
Warranty expense (recovery). Our warranty expenses consist
primarily of associated material product costs, labor costs for
technical support staff, and other associated overhead. Warranty
costs are expensed as they are incurred.
Bad debt. Our bad debt expense consists primarily of
amounts written down for doubtful accounts recorded on trade
receivables.
Depreciation and amortization. Our depreciation and
amortization costs consist primarily of depreciation and
amortization on fixed assets, equipment on lease and intangible
assets.
Foreign currency exchange. Our foreign currency exchange
consists primarily of foreign exchange fluctuations recorded in
Canadian dollar (CAD), British Pounds (GBP), or Euro (EUR) at the
rates of exchange in effect when the transaction
occurred.
Finance costs. Our finance costs consist primarily of
investor interest expense, investor commission fees, and other
financing charges for obtaining debt financing.
We
expect to continue to invest in corporate infrastructure and incur
additional expenses associated with being a public company,
including increased legal and accounting costs, investor relations
costs, higher insurance premiums and compliance costs associated
with Section 404 of the Sarbanes-Oxley Act of 2002. In addition, we
expect sales and marketing expenses to increase in absolute dollars
in future periods. In particular, we expect to incur additional
marketing costs to support the expansion of our offerings in new
markets like commercial fleet management and
agriculture.
Results
of Operations
The
following table summarizes key items of comparison and their
related increase (decrease) for the three months ended March 31,
2020 and 2019:
|
|
For the Three Months
Ended |
|
|
Increase |
|
|
|
31-Mar-20 |
|
|
31-Mar-19 |
|
|
(Decrease) |
|
|
|
($) |
|
|
($) |
|
|
(%) |
|
Revenues |
|
$ |
150,212 |
|
|
$ |
501,424 |
|
|
|
(70.0 |
)% |
Cost of revenue |
|
|
28,566 |
|
|
|
306,068 |
|
|
|
(90.7 |
)% |
Gross
profit |
|
|
121,646 |
|
|
|
195,356 |
|
|
|
(37.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense |
|
|
642,536 |
|
|
|
135,083 |
|
|
|
375.7 |
% |
General and administrative
expense |
|
|
524,747 |
|
|
|
236,792 |
|
|
|
121.6 |
% |
Bad debt expense |
|
|
9,348 |
|
|
|
1,424 |
|
|
|
556.5 |
% |
Depreciation
and amortization expense |
|
|
656 |
|
|
|
885 |
|
|
|
(25.9 |
)% |
Total
operating expenses |
|
|
1,177,287 |
|
|
|
374,184 |
|
|
|
214.6 |
% |
Loss
from operations |
|
|
(1,055,641 |
) |
|
|
(178,828 |
) |
|
|
490.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense) |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange |
|
|
(120,681 |
) |
|
|
17,637 |
|
|
|
(784.2 |
)% |
Change in fair value of derivative
instruments |
|
|
(945,594 |
) |
|
|
(6,635,917 |
) |
|
|
(85.8 |
% |
Loss on extinguishment of debt |
|
|
(428,465 |
) |
|
|
(74,109 |
) |
|
|
478.2 |
% |
Finance
costs |
|
|
(407,578 |
) |
|
|
(301,756 |
) |
|
|
35.1 |
% |
Total
other expense |
|
|
(1,902,318 |
) |
|
|
(6,994,145 |
) |
|
|
(72.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(2,957,959 |
) |
|
|
(7,172,973 |
) |
|
|
(58.8 |
)% |
Comparison
of the three months ended March 31, 2020 and 2019:
Revenue
|
|
For
the Three Months Ended
March
31, 2020,
|
|
|
|
2020 |
|
|
2019 |
|
|
%
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
150,212 |
|
|
|
501,424 |
|
|
|
(70.0 |
) |
Revenue
decrease by $351,212 or 70.0%, for the three months ended March 31,
2020 as compared to the three months ended March 31,
2019.
Sales
decreased for the three months ended, year over year, as the result
of challenges related to COVID-19 and normal customer attrition.
This compares to the comparative period in which the Company
experienced growth as a result of aggressive marketing and
installation of the new Infinity suite of products.
Cost of Revenue
|
|
For
the Three Months Ended
March
31,
|
|
|
|
2020 |
|
|
2019 |
|
|
%
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
$ |
28,566 |
|
|
$ |
306,068 |
|
|
|
(90.7 |
) |
Cost
of revenue increased by $277,502, or 90.7%, for the three months
ended March 31, 2020 as compared to the three months March 31,
2019. The table below outlines the differences in
detail:
|
|
For the Three Months Ended |
|
|
|
March
31,
2020
|
|
|
March
31,
2019
|
|
|
Difference |
|
|
%
Difference
|
|
Cost of goods |
|
$ |
15,517 |
|
|
$ |
287,694 |
|
|
$ |
(272,177 |
) |
|
|
(94.6 |
) |
Labour |
|
|
- |
|
|
|
8,995 |
|
|
|
(8,995 |
) |
|
|
(100.0 |
) |
Mapping & freight costs |
|
|
3,175 |
|
|
|
12,150 |
|
|
|
(8,975 |
) |
|
|
(73.9 |
) |
Wireless fees |
|
|
9,874 |
|
|
|
- |
|
|
|
9,874 |
|
|
|
- |
|
Inventory
adjustments & write offs |
|
|
- |
|
|
|
(2,771 |
) |
|
|
2,771 |
|
|
|
(100.0 |
) |
|
|
$ |
28,566 |
|
|
$ |
306,068 |
|
|
$ |
(277,502 |
) |
|
|
(90.7 |
) |
Cost
of sales decreased for the three months ended, year over year,
primarily due to challenges related to COVID-19 and normal customer
attrition. This decrease was consistent with the decrease in
revenue for the same period.
Compensation Expense
|
|
For the Three months ended
March 31,, |
|
|
|
2020 |
|
|
2019 |
|
|
%
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense |
|
$ |
642,536 |
|
|
$ |
135,083 |
|
|
|
375.7 |
|
Compensation
expense increased by $507,453, or 375.7%, for the three months
ended March 31, 2020 as compared to the three months ended March
31, 2019 primarily as a result of non-cash warrants issued for
consulting services during the period.
General and Administration Expense
|
|
For the Three Months Ended
March 31, |
|
|
|
2020 |
|
|
2019 |
|
|
%
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General & administration
expense |
|
$ |
524,747 |
|
|
$ |
236,792 |
|
|
|
121.6 |
|
General & administration expense increased by $287,955 or
121.6% for the three months ended March 31, 2020 compared to the
three months ended March 31, 2019. The table below outlines the
differences in detail:
|
|
For the Three Months Ended |
|
|
|
March 31,
2020 |
|
|
March
31
2019
|
|
|
Difference |
|
|
%
Difference
|
|
Accounting &
legal |
|
$ |
87,248 |
|
|
$ |
9,321 |
|
|
$ |
77,927 |
|
|
|
836.0 |
|
Marketing & advertising |
|
|
173,435 |
|
|
|
20,906 |
|
|
|
152,529 |
|
|
|
729.6 |
|
Subcontractor & commissions |
|
|
97,068 |
|
|
|
90,876 |
|
|
|
6,192 |
|
|
|
6.8 |
|
Hardware |
|
|
169 |
|
|
|
2,723 |
|
|
|
(2,554 |
) |
|
|
(93.8 |
) |
Office expense,
rent, software, bank & credit card charges, telephone &
meals |
|
|
166,827 |
|
|
|
112,966 |
|
|
|
53,861 |
|
|
|
47.7 |
|
|
|
$ |
524,747 |
|
|
$ |
236,792 |
|
|
$ |
287,955 |
|
|
|
121.6 |
|
The
overall increase general and admin expenses was primarily due to
increases in marketing and advertising, general office expenses and
accounting and legal expenses. Marketing and advertising increased
as a result of non-cash shares issued for investor relations
services. General office expenses increased as a result of greater
trade show and operating lease expenses in the current period.
Accounting and legal expenses increased as a result of lower
expenses in the prior period from delays in preparing and issuing
financial statements for the prior period.
Foreign Currency Exchange
|
|
For the Three Months Ended
March 31, |
|
|
|
2020 |
|
|
2019 |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange (gain)
loss |
|
$ |
120,681 |
|
|
$ |
(17,637 |
) |
|
|
(784.2 |
) |
For
the three months ended March 31, 2020, we recognized a $120,681
foreign exchange loss as compared to a $17,637 foreign exchange
gain for the three months ended March 31, 2019. The change was
primarily due to unfavorable changes in foreign currency rates on
payables, receivables, loans and other foreign balances denominated
in currencies other than the functional currencies of the legal
entities in which the transactions are recorded. Foreign currency
fluctuations are primarily from the United States dollar, Canadian
dollar, Euro and British pound.
Change in Fair Value of Derivative Instruments
|
|
For the Three Months Ended
March 31, |
|
|
|
2020 |
|
|
2019 |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of derivative
instruments |
|
$ |
945,594 |
|
|
$ |
6,635,917 |
|
|
|
(85.8 |
) |
Derivative
loss decreased by $5,690,323 or 85.8%, for the three months ended
March 31, 2020 as compared to the three months ended March 31,
2019. The Company had a loss on derivatives of $945,594 in the
current period due to minor increases in the volatility of the
Company’s stock price, partially offset by settlement of derivative
instruments in the period. The Company had a loss on derivatives of
$6,635,917 in the prior period due to significant increases in the
volatility of the Company’s common stock price during the period.
In general, the change in fair value was impacted heavily due to
the volatility and closing value in the Company’s stock
price.
Loss on extinguishment of debt
|
|
For the Three Months Ended
March 31, |
|
|
|
2020 |
|
|
2019 |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt |
|
$ |
428,465 |
|
|
$ |
74,109 |
|
|
|
478.2 |
|
Loss
on extinguishment of debt increased by $354,356 or 478.2% to a loss
of $428,465, for the three months ended March 31, 2020 as compared
to a loss of $74,109 for the three months ended March 31, 2019. The
increase was primarily a result of more conversions of convertible
debt and accrued interest in the current period.
Finance Costs
|
|
For the Three Months Ended
March 31, |
|
|
|
2020 |
|
|
2019 |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
$ |
407,578 |
|
|
$ |
301,756 |
|
|
|
35.1 |
|
Finance
costs decreased by $105,822 or 35.1%, for the three months ended
March 31, 2020 as compared to the three months ended March 31,
2019. Finance costs increased due to greater debt outstanding
during the current period in addition to elevated penalty interest
rates on debt in default.
Net Loss
|
|
For the Three Months ended
March 31,, |
|
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(2,957,959 |
) |
|
$ |
(7,172,973 |
) |
|
|
(58.8 |
) |
As a
result of the above factors, net loss increased by $ 4,215,014 or
58.8% for the three months ended March 31, 2020 as compared to the
three months ended March 31, 2019.
Liquidity
and Capital Resources
From
our incorporation on April 17, 2008 through March 31, 2020, we have
financed our operations, capital expenditures and working capital
needs through the sale of common shares and the incurrence of
indebtedness, including term loans, convertible loans, revolving
lines of credit and purchase order financing. At March 31, 2020, we
had $10,178,309 in total liabilities, the majority of which matures
within the next twelve months.
We
had cash in the amount of $16,398 as of March 31, 2020, as compared
to $25,494 as of December 31, 2019. We had a working capital
deficit of $9,822,843 as of March 31, 2020 compared to working
capital deficit of $8,376,433 as of December 31, 2019.
Liquidity and Financial Condition
Our
financial position as of March 31, 2020 and 2019, and the changes
for the periods then ended are as follows:
Working Capital
|
|
At
March 31,
2020
|
|
|
At December 31,
2019 |
|
Current assets |
|
$ |
290,118 |
|
|
$ |
250,800 |
|
Current liabilities |
|
$ |
10,112,961 |
|
|
$ |
8,627,233 |
|
Working capital |
|
$ |
(9,822,843 |
) |
|
$ |
(8,376,433 |
) |
Cash Flow Analysis
Our
cash flows from operating, investing, and financing activities are
summarized as follows:
|
|
March
31,, |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
Net
cash used in by operating activities |
|
$ |
(245,599 |
) |
|
$ |
(237,042 |
) |
Net
cash used in investing activities |
|
|
- |
|
|
|
- |
|
Net
cash provided by financing activities |
|
|
239,965 |
|
|
|
275,000 |
|
Effect
of exchange rate changes on cash and cash equivalents |
|
|
(3,462 |
) |
|
|
- |
|
Net
increase in cash |
|
|
(9,096 |
) |
|
|
37,958 |
|
Cash
at beginning of period |
|
|
25,494 |
|
|
|
5,059 |
|
Cash
at end of period |
|
$ |
16,398 |
|
|
$ |
43,017 |
|
Net Cash Used in Operating Activities. During the three
months ended March 31, 2020, cash used in operations totaled
$245,599. This reflects the net loss of $2,957,959 adjusted for
$2,712,360 changes in non-cash working capital items and
adjustments for non-cash items. Non-cash and working capital
adjustments consisted primarily of non-cash change in fair value of
derivative liabilities of $945,594, non-cash shares and warrants
issued for services of $636,448, loss on extinguishment of debt of
$428,465, increase in trade payables and accruals of $394,350 and
non-cash accretion of discounts on debt of $242,447.
Net Cash (Used in) Provided by Investing Activities. The
Company had no investing activities in the three months ended March
31, 2020.
Net Cash Provided by Financing Activities. Net cash from
financing activities during the three months ended March 31, 2020
totaled $239,965, from various note and loan facilities entered
into during the period and issuance of common shares, partially
offset by repayments of notes payable. Net cash provided by
financing activities during the three months ended March 31, 2020
was $275,000 primarily from various note and loan facilities
entered during the period.
Outstanding Indebtedness
Our
current indebtedness as of March 31, 2020 is comprised of the
following:
|
● |
Unsecured
loan payable with an outstanding principal amount of $317,500
(CAD$413,258), bearing interest at 18% per annum; |
|
|
|
|
● |
Unsecured
loan payable with an outstanding principal amount of $250,000,
bearing interest at 10% per annum, with a minimum interest amount
of $25,000, mature and in default; |
|
|
|
|
● |
Unsecured
loan payable with an outstanding principal amount of $150,000,
bearing interest at 10% per annum, is due on demand, and
convertible into common shares at $1.75 per share; |
|
|
|
|
● |
Unsecured,
convertible note payable to a former related party with an
outstanding principal amount of $310,000, bearing interest at 5%
per annum, mature and in default; |
|
|
|
|
● |
Senior
secured, convertible note payable with an outstanding principal
amount of $213,889, bearing interest at 8% per annum. Repayable in
cash or common shares at the lower of (i) twelve cents ($0.12) and
(ii) the closing sales price of the Common Stock on the date of
conversion; |
|
|
|
|
● |
Unsecured,
convertible note payable with an outstanding principal amount of
$81,470, bearing interest at 10% per annum. Matures on July 17,
2018. Principal is repayable in cash or common shares at the lower
of (i) six cents ($0.06) (ii) 55% of the lowest trading price
during the 20 Trading Days immediately preceding the date of
conversion; |
|
|
|
|
● |
Unsecured,
convertible note payable in the principal amount of $51,500, bears
interest at 10% per annum, is due on February 8, 2019, and is
convertible into common shares at a conversion price equal to the
lower of (i) 32% discount off of the lowest intra-day trading price
during previous (10) trading days immediately preceding a
conversion date; |
|
|
|
|
● |
Unsecured,
convertible note payable with an outstanding principal amount of
$180,000, bears interest at 10% per annum, is due on February 28,
2019, and is convertible into common shares at a conversion price
equal to the lower of (i) 32% discount off of the lowest intra-day
trading price during previous (15) trading days immediately
preceding a conversion date; |
|
● |
Unsecured,
convertible note payable with an outstanding principal amount of
$39,037, bears interest 10% per annum, is due on August 2, 2018,
and is convertible into common shares at a conversion price equal
to the lower of (i) lowest trading price during previous (25)
trading days prior to the date of note or (ii) lowest trading price
during previous (25) trading days prior to the date of
conversion; |
|
|
|
|
● |
Unsecured,
convertible promissory note in the principal amount of $226,000,
bears interest at 12% per annum, is due on August 31, 2019, and is
convertible into common shares at a conversion price equal to 55%
of the lowest trading price during the previous fifteen trading
days prior to the conversion date, including the conversion date.
Interest will be accrued and payable at the time of promissory note
repayment; |
|
|
|
|
● |
Unsecured,
convertible note payable in the principal amount of $258,736, bears
interest 12% per annum, is due on September 19, 2018, and is
convertible into common shares at a conversion price equal to the
lower of (i) the lowest trading price during the previous fifteen
trading days prior to the date of the promissory note; or (ii) 55%
of the lowest trading price during the previous fifteen days prior
to the latest complete trading day prior to the conversion
date; |
|
|
|
|
● |
Unsecured,
convertible promissory note with an outstanding principal amount of
$137,500, bears interest at 12% per annum, is due on January 22,
2020, and is convertible into common shares at a conversion price
equal to 55% of the lowest trading price during the previous
fifteen trading days prior to the conversion date, including the
conversion date. Interest will be accrued and payable at the time
of promissory note repayment; |
|
|
|
|
● |
Unsecured,
convertible bridge loan agreement with an outstanding principal
amount of $150,000, bears interest at 4.99% per month, is due on
May 7, 2019 and is convertible into restricted common shares of the
Company at the lender’s option at the market price per share less a
30% discount to market; Settlement by conversion into common shares
would result in settlement for share of common stock of the Company
with a fair value of $214,286. Effective September 1, 2019,
interest was reduced to 2% per month and effective December 1,
2019, the loan became non-interest bearing; |
|
|
|
|
● |
Unsecured,
convertible promissory note with an outstanding principal amount of
$413,590, bears interest at 12% per annum, is convertible into
common shares after 180 days from issuance date at a conversion
price equal to the lessor of (i) the lowest trading price during
the previous fifteen trading days prior to the date of the
promissory note; or (ii) 55% of the lowest trading price during the
previous fifteen days prior to the latest complete trading day
prior to the conversion date. Interest will be accrued and payable
at the time of promissory note repayment; |
|
|
|
|
● |
Secured,
convertible promissory note, bears interest at 10% per annum with
four tranches of $62,605, totaling $250,420, due on May 7, 2020,
June 28, 2020, July 8, 2020 and August 8, 2020 and is convertible
into common shares at a conversion price equal to 62% of the lowest
trading price of the Company’s common stock during the 10 trading
days immediately preceding the conversion of the note. Interest
will be accrued and payable at the time of promissory note
repayment; |
|
|
|
|
● |
Unsecured,
convertible promissory note with an outstanding principal amount of
$220,000, bears interest at 10% per annum, is due on July 30, 2020,
and is convertible into common shares at a conversion price equal
to the lesser of (i) 60% of the lowest trading price during the
previous twenty trading days prior to the issuance date, or (ii)
the lowest trading price for the Common Stock during the twenty day
period ending one trading day prior to conversion of the
note; |
|
|
|
|
● |
Unsecured,
convertible promissory note with an outstanding principal amount of
$137,500, bears interest at 10% per annum, is due on June 3, 2020,
and is convertible during the first six months from the issuance
date at a price of $0.50 per share. For the subsequent period until
repayment the conversion price shall equal the lesser of (i) 60%
multiplied by the lowest traded price of the Common Stock during
the previous twenty trading days before the issuance date of the
note, or (ii) the lowest traded price for the Common Stock during
the twenty day period ending on the last complete trading day
before conversion; |
|
● |
Unsecured,
convertible promissory note with an outstanding principal amount of
$55,000, bears interest at 10% per annum, is due on September 19,
2020, and is convertible during the first six months from the
issuance date at a price of $0.50 per share. For the subsequent
period until repayment the conversion price shall equal the lesser
of (i) 60% multiplied by the lowest traded price of the Common
Stock during the previous twenty trading days before the issuance
date of the note, or (ii) the lowest traded price for the Common
Stock during the twenty day period ending on the last complete
trading day before conversion; |
|
|
|
|
● |
Unsecured,
convertible promissory note with an outstanding principal amount of
$141,900, bears interest at 10% per annum, is due on September 19,
2020, and is convertible during the first six months from the
issuance date at a price of $0.50 per share. For the subsequent
period until repayment the conversion price shall equal the lesser
of (i) 60% multiplied by the lowest traded price of the Common
Stock during the previous twenty trading days before the issuance
date of the note, or (ii) the lowest traded price for the Common
Stock during the twenty day period ending on the last complete
trading day before conversion; |
|
|
|
|
● |
Unsecured
loan payable with an outstanding principal amount of CDN$10,000,
non-interest bearing and due on demand; |
|
|
|
|
● |
Unsecured,
convertible promissory note with an outstanding principal amount of
$82,500, bears interest at 10% per annum, is due on September 30,
2020, and is convertible during the first six months from the
issuance date at a price of $0.50 per share. For the subsequent
period until repayment the conversion price shall equal the lesser
of (i) 60% multiplied by the lowest traded price of the Common
Stock during the previous twenty trading days before the issuance
date of the note, or (ii) the lowest traded price for the Common
Stock during the twenty day period ending on the last complete
trading day before conversion; |
|
|
|
|
● |
Unsecured,
convertible promissory note with an outstanding principal amount of
$119,600, bears interest at 8% per annum and is due on February 10,
2021. The note is convertible into common shares of the Company,
beginning 180 days from the date of the note up to maturity or
repayment, at a price equal to 80% of the average of the lowest two
trading prices for the common stock during the fifteen trading days
before conversion; and |
|
|
|
|
● |
Unsecured,
convertible promissory note with an outstanding principal amount of
$60,950, bears interest at 8% per annum and is due on March 2,
2021. The note is convertible into common shares of the Company,
beginning 180 days from the date of the note up to maturity or
repayment, at a price equal to 80% of the average of the lowest two
trading prices for the common stock during the fifteen trading days
before conversion. |
Prospective Capital Needs
We
estimate our operating expenses and working capital requirements
for the twelve-month period to be as follows:
Estimated Expenses for the Twelve-Month Period ending March 31,
2021 |
Management
compensation |
|
$ |
500,000 |
|
Professional fees |
|
$ |
150,000 |
|
General and
administrative |
|
$ |
1,900,000 |
|
Total |
|
$ |
2,550,000 |
|
As
noted earlier, during the three months ended March 31, 2020, cash
used in operations totaled $245,599. The relatively low level of
cash used compared to our estimated working capital needs in the
future was the result of an accumulation of vendor payables,
customer receivables, and an increasing loan payable balance. We
need to reduce the current level of payables in the near future to
keep a good relationship with our vendors and expand our sales and
service team to achieve our operational objectives. At present, our
cash requirements for the next 12 months outweigh the funds
available. Of the $2,550,000 that we require for the next 12
months, we had $16,398 in cash as of March 31, 2020 and a working
capital deficit of $9,822,843. Our principal sources of liquidity
are cash generated from product sales. In order to achieve
sustained profitability and positive cash flows from operations, we
will need to increase revenue and/or reduce operating expenses. Our
ability to maintain, or increase, current revenue levels to achieve
and sustain profitability will depend, in part, on demand for our
products.
In
order to improve our liquidity, we also plan to pursue additional
equity financing from private investors or possibly a registered
public offering. We do not currently have any definitive
arrangements in place for the completion of any further private
placement financings and there is no assurance that we will be
successful in completing any further private placement financings.
To help finance our day to day working capital needs, the founder
and CEO of the company has made a total payment of $113,475 since
late 2015. If we are unable to achieve the necessary additional
financing, then we plan to reduce the amounts that we spend on our
business activities and administrative expenses in order to be
within the amount of capital resources obligations and execute our
business plan. There can be no assurances that we will be able to
raise additional capital on acceptable terms or at all, which would
adversely affect our ability to achieve our business
objectives.
Off-Balance
Sheet Transactions
We do
not have any off-balance sheet arrangements.
Critical
Accounting Policies and Estimates
We
prepare our consolidated financial statements in accordance with
U.S. GAAP. The preparation of consolidated financial statements
also requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue, costs and
expenses, and related disclosures. We base our estimates on
historical experience and on various other assumptions that we
believe to be reasonable under the circumstances. Actual results
could differ significantly from the estimates made by our
management. To the extent that there are differences between our
estimates and actual results, our future financial statements
presentation, financial condition, results of operations, and cash
flows will be affected.
We
believe that the assumptions and estimates associated with revenue
recognition, foreign currency and foreign currency transactions and
comprehensive loss have the greatest potential impact on our
consolidated financial statements. Therefore, we consider these to
be our critical accounting policies and estimates. For further
information on all of our significant accounting policies, see the
notes to our condensed consolidated financial
statements.
Item 3. Quantitative and Qualitative
Disclosures About Market Risk
Not
Applicable
Item 4. Controls and
Procedures
Evaluation
of Disclosure Controls and Procedures
The
phrase “disclosure controls and procedures” refers to controls and
procedures designed to ensure that information required to be
disclosed in our reports filed or submitted under the Securities
Exchange Act of 1934, as amended, or the Exchange Act, such as this
Quarterly Report on Form 10-Q, is recorded, processed, summarized
and reported within the time periods specified in the rules and
forms of the U.S. Securities and Exchange Commission, or SEC.
Disclosure controls and procedures are also designed to ensure that
such information is accumulated and communicated to our management,
including our interim chief executive officer, or Interim CEO, and
chief financial officer, or CFO, as appropriate to allow timely
decision regarding required disclosure.
Our
management, with the participation of our CEO and CFO, has
evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act), as of March 31, 2020, the end of the period covered
by this Quarterly Report on Form 10-Q. Based on such evaluation,
our CEO and CFO have concluded that as of September 30, 2016, our
disclosure controls and procedures were designed at a reasonable
assurance level and were effective to provide reasonable assurance
that information we are required to disclose in reports that we
file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
rules and forms of the SEC, and that such information is
accumulated and communicated to our management, including our CEO
and CFO, as appropriate, to allow timely decisions regarding
required disclosure.
Changes
in Internal Control
There
were no changes in our internal control over financial reporting
identified in management’s evaluation pursuant to Rules 13a-15(d)
or 15d-15(d) of the Exchange Act during the first quarter of 2019
that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Limitations
on Effectiveness of Controls and Procedures
In
designing and evaluating the disclosure controls and procedures,
management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives. In addition,
the design of disclosure controls and procedures must reflect the
fact that there are resource constraints and that management is
required to apply judgment in evaluating the benefits of possible
controls and procedures relative to their costs.
PART II: OTHER
INFORMATION
ITEM 1. LEGAL
PROCEEDINGS
On
April 9, 2018, we received a share-reserve increase letter from JSJ
Investments Inc. (“JSJ”) pursuant to the terms of a 10% convertible
promissory note issued to the Company in the principal amount of
$135,000. On April 24, 2018, the Company received a notice of
default from JSJ for failure to comply with the share-reserve
increase and on April 30, 2018 demanded payment in full of the
default amount totaling $172,845. On May 7, 2018, JSJ commenced a
lawsuit in the United States District Court, District of Dallas
County, Texas. JSJ alleged that the Company failed to comply with
the share-reserve increase letter, thus giving rise to an event of
default, and failed to pay the outstanding default amount due under
the terms of the note. JSJ sought damages in excess of $200,000 but
not more than $1,000,000, consisting of the principal amount of the
note, default interest, and legal fees incurred by JSJ with respect
to the lawsuit. On August 31, 2018 final judgement was entered
against DSG Global in the amount of $187,908, which includes
$172,846 in damages, $2,450 in legal fees, $1,982 in pre-judgement
interest and $10,631 in post-judgment interest. The appeal period
expired on September 30, 2018. As at the date of this Annual
Report, the plaintiff is seeking to enforce the Texas judgement
against DSG Global in British Columbia, Canada. As at March 31,
2020, the principal balance and accrued interest on this
convertible note is included on the consolidated balance sheet
under convertible notes payable.
ITEM 1A. RISK FACTORS
As a
smaller reporting company, we are not required to provide the
information required by this item.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior
Securities
None.
Item 4. Mine Safety
Disclosures
Not
Applicable.
Item 5. Other
Information
Not
Applicable.
Item 6. Exhibits
Exhibit
Number
|
|
Exhibit
Description |
|
Filed
Form
|
|
Exhibit |
|
Filing
Date |
|
Herewith |
3.1.1 |
|
Articles
of Incorporation of the Registrant |
|
SB-2 |
|
3.1 |
|
10-22-07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1.2 |
|
Certificate
of Change of the Registrant |
|
8-K |
|
3.1 |
|
06-24-08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1.3 |
|
Articles
of Merger of the Registrant |
|
8-K |
|
3.1 |
|
02-23-15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1.4 |
|
Certificate
of Change of the Registrant |
|
8-K |
|
3.2 |
|
02-23-15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1.5 |
|
Certificate
of Correction of the Registrant |
|
8-K |
|
3.3 |
|
02-23-15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1.6 |
|
Certificate
of Change of the Registrant |
|
8-K |
|
3.1 |
|
03-26-19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1.7 |
|
Certificate
of Correction of the Registrant |
|
8-K |
|
3.2 |
|
03-26-19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1.8 |
|
Certificates
of Amendment and Designation dated November 22,
2019 |
|
10-K |
|
3.1.8 |
|
05-15-20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2.1 |
|
Bylaws
of the Registrant |
|
SB-2 |
|
3.2 |
|
10-22-07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2.2 |
|
Amendment
No. 1 to Bylaws of the Registrant |
|
8-K |
|
3.2 |
|
06-19-15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4.1.2 |
|
DSG
Global, Inc. 2015 Omnibus Incentive Plan |
|
10-Q |
|
10.3 |
|
11-13-15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1 |
|
Subscription
Agreement / Debt Settlement, dated September 26, 2014, between DSG
TAG Systems Inc. and Westergaard Holdings Ltd. |
|
8-K |
|
10.1 |
|
08-17-15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.2 |
|
Addendum
to Subscription Agreement / Debt Settlement, dated October 7, 2014,
between DSG TAG Systems Inc. and Westergaard Holdings
Ltd. |
|
8-K |
|
10.2 |
|
08-17-15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.3 |
|
Second
Addendum to Subscription Agreement / Debt Settlement, dated April
29, 2015, between DSG TAG Systems Inc. and Westergaard Holdings
Ltd. |
|
8-K |
|
10.3 |
|
08-17-15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.4 |
|
Third
Addendum to Subscription Agreement / Debt Settlement, dated August
11, 2015, between DSG TAG Systems Inc. and Westergaard Holdings
Ltd. |
|
8-K |
|
10.4 |
|
08-17-15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.5 |
|
Letter
from Westergaard Holdings Ltd., dated September 1, 2015, extending
dates of redemption obligations. |
|
8-K |
|
10.1 |
|
09-08-15 |
|
|
Exhibit
Number
|
|
Exhibit
Description |
|
Filed
Form
|
|
Exhibit |
|
Filing
Date |
|
Herewith |
|
|
|
|
|
|
|
|
|
|
|
10.6 |
|
Letter
from Westergaard Holdings Ltd., dated November 10, 2015, extending
dates of redemption obligations |
|
10-Q |
|
10.1 |
|
11-13-15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.7 |
|
Letter
fromWestergaard Holdings Ltd., dated December 31, 2015, extending
dates of redemption obligations |
|
8-K |
|
10.1 |
|
03-09-16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.8 |
|
Convertible
Note of DSG TAG Systems Inc., dated March 31, 2015, payable to
Adore Creative Agency, Inc. |
|
8-K |
|
10.5 |
|
08-14-15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.9 |
|
Convertible
Note Agreement, dated August 25, 2015, between the Registrant and
Jerry Katell, Katell Productions, LLC and Katell Properties,
LLC |
|
10-Q |
|
10.2 |
|
11-13-15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.10 |
|
Agreement
(TAG Touch) dated February 15, 2014 between DSG TAG Systems Inc.
and DSG Canadian Manufacturing Corp. |
|
8-K |
|
10.10 |
|
05-06-15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.11 |
|
Loan
agreement, dated October 24, 2014 between DSG TAG Systems Inc. and
A.Bosa & Co (Kootenay) Ltd. |
|
10-K |
|
10.11 |
|
05-02-16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.12 |
|
Lease
agreement (Modified), dated January 21, 2016 and February 1, 2016
between DSG TAG Systems Inc. and Benchmark Group |
|
10-K |
|
10.12 |
|
05-02-16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.13 |
|
Loan
agreement, dated February 11, 2016 between DSG TAG Systems Inc. and
Jeremy Yaseniuk |
|
10-K |
|
10.13 |
|
05-02-16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.14 |
|
Loan
agreement, dated March 31, 2016 between DSG TAG Systems Inc. and E.
Gary Risler |
|
10-K |
|
10.14 |
|
05-02-16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.15 |
|
Letter
from Westergaard Holdings Ltd., dated April 29,
2016 |
|
10-K |
|
10.15 |
|
05-20-16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.16 |
|
Security
purchase agreement between DSG Global Inc. and Coastal Investment
Partners, dated November 7 2016 |
|
8-K |
|
10.16 |
|
11-15-16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.17 |
|
Letter
of Resignation by Board Member Keith Westergaard |
|
10-Q |
|
10.17 |
|
12-16-16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.8 |
|
Equity
Financing Agreement with GHS dated September 18,
2019 |
|
8-k |
|
10.1 |
|
10-11-19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.9 |
|
Registration
Rights Agreement with GHS dated September 18, 2019 |
|
8-k |
|
10.2 |
|
10-11-19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.10 |
|
Advisory
Services Agreement dated as of March 2, 2020 Graj + Gustavsen, Inc.
. |
|
8-k |
|
10.1 |
|
03-06-19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
21 |
|
List
of Subsidiary |
|
10-K |
|
21.1 |
|
05-02-16 |
|
|
#* |
The
information in this exhibit is furnished and deemed not filed with
the Securities and Exchange Commission for purposes of section 18
of the Exchange Act of 1934, as amended, and is not to be
incorporated by reference into any filing of DSG Global Inc. under
the Securities Act of 1933, as amended, or the Exchange Act of
1934, as amended, whether made before or after the date hereof,
regardless of any general incorporation language in such
filing. |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date:
June 29, 2020 |
DSG
Global Inc. |
|
(Registrant) |
|
|
|
|
By: |
/s/
Robert Silzer |
|
|
Robert
Silzer |
|
|
Chief
Executive Officer and Chief Financial Officer |
|
|
(Principal
Executive Officer and |
|
|
Principal
Financial and Accounting Officer) |