UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
DSG
GLOBAL, INC.
(Exact
name of registrant as specified in its charter)
Nevada
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7373
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26-1134956
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(State
of
Incorporation)
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(Primary
Standard Industrial
Classification
Number)
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(IRS
Employer
Identification
Number)
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312
– 2630 Croydon Drive
Surrey,
British Columbia, V3Z 6T3, Canada
(604)
575-3848
(Address,
including zip code, and telephone number, including area code,
of
registrant’s principal executive offices)
Please
send copies of all communications to:
BRUNSON
CHANDLER & JONES, PLLC
175
South Main Street, Suite 1410
Salt
Lake City, Utah 84111
801-303-5772
(Address,
including zip code, and telephone, including area code)
Approximate
date of proposed sale to the public: From time to time after the effective date of this registration statement.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box. [X]
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration statement number of the earlier effective registration statement
for the same offering. [ ]
If
this Form is a post-effective amendment filed pursuant to rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
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 definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large
accelerated filer
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[ ]
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Accelerated
filer
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[ ]
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Non-accelerated
filer
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[ ]
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Smaller
reporting company
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[X]
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(do
not check if a smaller reporting company)
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Emerging
Growth Company
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[ ]
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CALCULATION
OF REGISTRATION FEE
Title of Each Class of
securities to be registered
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Amount of
shares of
common
stock to
be registered (1)
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Proposed
Maximum
Offering
Price Per
Share (2)
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Proposed
Maximum
Aggregate
Offering
Price
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Amount of
Registration
Fee (3)
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Common Stock
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230,000
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$
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1.08
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$
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248,400
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$
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32.24
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(1)
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In
accordance with Rule 416(a), this registration statement shall also cover an indeterminate number of shares that may be issued
and resold resulting from stock splits, stock dividends or similar transactions.
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(2)
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Based
on the lowest traded price of the Company’s common stock during the ten (10) consecutive trading day period immediately
preceding October 3, 2019 of $1.08. The shares offered, hereunder, may be sold by the selling stockholder from
time to time in the open market, through privately negotiated transactions, or a combination of these methods at market prices
prevailing at the time of sale or at negotiated prices.
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(3)
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The
fee is calculated by multiplying the aggregate offering amount by .0001212, pursuant to Section 6(b) of the Securities Act
of 1933.
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We
hereby amend this registration statement on such date or dates as may be necessary to delay our effective date until the registrant
shall file a further amendment which specifically states that this registration statement shall, thereafter, become effective
in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such
date as the Commission, acting pursuant to Section 8(a) may determine.
PRELIMINARY
PROSPECTUS SUBJECT TO COMPLETION DATED OCTOBER ____, 2019
The
information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities
and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
DSG
Global, Inc.
230,000
Common Shares
The
selling stockholder identified in this prospectus may offer an indeterminate number of shares of its common stock, which will
consist of up to 230,000 shares of common stock to be sold by GHS Investments LLC (“GHS”) pursuant to an Equity Financing
Agreement (the “Financing Agreement”) dated September 18, 2019. If issued presently, the 230,000 of common
stock registered for resale by GHS would represent 20.26% of our issued and outstanding shares of common stock as of October
3, 2019.
The
selling stockholder may sell all or a portion of the shares being offered pursuant to this prospectus at fixed prices and prevailing
market prices at the time of sale, at varying prices, or at negotiated prices.
We
will not receive any proceeds from the sale of the shares of our common stock by GHS. However, we will receive proceeds from our
initial sale of shares to GHS pursuant to the Financing Agreement. We will sell shares to GHS at a price equal to 82% of
the lowest trading price of our common stock during the ten (10) consecutive trading day period preceding on the date on
which we deliver a put notice to GHS (the “Market Price”).
GHS
is an underwriter within the meaning of the Securities Act of 1933, and any broker-dealers or agents that are involved in selling
the shares may be deemed to be “underwriters” within the meaning of the Securities Act of 1933 in connection with
such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares
purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act of 1933.
Our
common stock is traded on OTC Markets under the symbol “DSGT”. On October 2, 2019, the last reported sale price
for our common stock was $1.56 per share.
Prior
to this offering, there has been a very limited market for our securities. While our common stock is on the OTC Markets, there
has been negligible trading volume. There is no guarantee that an active trading market will develop in our securities.
This
offering is highly speculative, and these securities involve a high degree of risk and should be considered only by persons who
can afford the loss of their entire investment. See “Risk Factors” beginning on page 18. Neither the Securities and
Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The
date of this prospectus is ________________, 2019.
Table
of Contents
The
following table of contents has been designed to help you find information contained in this prospectus. We encourage you to read
the entire prospectus.
We
have not authorized any person to give you any supplemental information or to make any representations for us. You should not
rely upon any information about our company that is not contained in this prospectus. Information contained in this prospectus
may become stale. You should not assume the information contained in this prospectus or any prospectus supplement is accurate
as of any date other than their respective dates, regardless of the time of delivery of this prospectus, any prospectus supplement
or of any sale of the shares. Our business, financial condition, results of operations, and prospects may have changed since those
dates. The selling stockholders are offering to sell and seeking offers to buy shares of our common stock only in jurisdictions
where offers and sales are permitted.
In
this prospectus, “DSG Global” the “Company,” “we,” “us,” and “our”
refer to DSG Global, Inc., a Nevada corporation.
Item
3. SUMMARY INFORMATION
You
should carefully read all information in the prospectus, including the financial statements and their explanatory notes under
the Financial Statements prior to making an investment decision.
Company
Organization
Boreal
Productions Inc. (the Company) was incorporated under the laws of the State of Nevada on September 24, 2007. Andrea Fehsenfeld
was then appointed sole officer and director. The Company was formed to option feature films and TV projects and then package
them to sell at a profit to various studios and production companies.
At
that time the board of directors voted to seek capital and begin development of our business plan. We received our initial funding
of $9,000 through the sale of common stock to Ms. Fehsenfeld who purchased 3,000,000 shares of common stock at $0.003 per share
and $45,000 from the sale of 3,000,000 shares of common stock issued to 30 un-affiliated investors at $0.015 per share. On June
11, 2008, we effected a five for one forward stock split of our authorized and issued and outstanding common stock. As a result,
our authorized capital increased from 75,000,000 to 375,000,000 shares of common stock and our outstanding share capital increased
from 6,000,000 shares of common stock to 30,000,000 shares of common stock.
We
have not achieved revenues and have accrued a Net Loss of $153,964 since inception through May 6, 2015, the date of the reverse
merger. We have been issued a going concern opinion by our auditors and rely upon the sale of our securities to fund operations.
To date we have been unable to raise sufficient capital to finance the production of any film or television production and, consequently,
our management has sought alternative strategies, such as business combinations or acquisitions, to create value for our shareholders.
On
April 13, 2015, we entered into a share exchange agreement with DSG TAG and the shareholders of DSG TAG who become parties to
the share exchange 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 shares of DSG TAG’s common stock in exchange for the issuance by our company of
up to 20,000,000 shares of our common stock to the shareholders of DSG TAG on the basis of one of our common shares for 5.4935
common shares of DSG TAG.
Previously,
in anticipation of the share exchange agreement with DSG TAG, we undertook to change our name and effect a reverse stock split
of our authorized and issued common stock. Accordingly, on January 19, 2015, our board of directors approved an agreement and
plan of merger to merge with our wholly-owned subsidiary DSG Global Inc., a Nevada corporation, to effect a name change from Boreal
Productions Inc. to DSG Global Inc. Our company remains the surviving company. DSG Global Inc. was formed solely for the change
of name.
Also
on January 19, 2015, our company’s board of directors approved a resolution to effect a reverse stock split of our authorized
and issued and outstanding shares of common stock on a three (3) old for one (1) new basis. Upon effect of the reverse split,
our authorized capital will decrease from 375,000,000 shares of common stock to 125,000,000 shares of common stock and correspondingly,
our issued and outstanding shares of common stock will decrease from 30,000,000 to 10,000,000 shares of common stock, all with
a par value of $0.001.
Articles
of Merger to effect the merger and change of name and a Certificate of Change to effect the reverse stock split were filed with
the Nevada Secretary of State on January 22, 2015, with an effective date of February 2, 2015. The name change and forward split
were reviewed by the Financial Industry Regulatory Authority (FINRA) were approved for filing with an effective date of February
23, 2015.
The
name change became effective with the Over-the-Counter Bulletin Board and OTC Markets quotation system at the opening of trading
on February 23, 2015 under the symbol “BRPOD”. Effective March 19, 2015 our stock symbol changed to “DSGT”.
Our new CUSIP number following the symbol change is 23340C104. The first trade of our common shares occurred on March 25, 2015.
On
May 6, 2015, we completed the acquisition of approximately 75% (82,435,748 common shares) of the issued and outstanding common
shares of DSG TAG Systems as contemplated by the share exchange agreement by issuing 15,185,875 shares of our common stock to
shareholders of DSG TAG Systems who became parties to the agreement. In addition, concurrent with the closing of the share exchange
agreement, we issued an additional 179,823 shares of our common stock to Westergaard Holdings Ltd. in partial settlement of accrued
interest on outstanding indebtedness of DSG TAG Systems.
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 DSG TAG 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 100% of the issued and outstanding shares of common stock of DSG TAG.
The
reverse acquisition was accounted for as a recapitalization effected by a share exchange, wherein DSG TAG Systems 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 DSG TAG Systems upon
the closing of the share exchange agreement.
Subsequent
to the closing of the share exchange agreement with DSG TAG, we adopted the business and operations of DSG TAG.
DSG
TAG was 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, DSG TAG formed DSG Tag Systems International, Ltd. in the United Kingdom (“DSG UK”).
DSG UK is a wholly owned subsidiary of DSG TAG.
Our
principal executive office is located at 312 – 2630 Croydon Drive Surrey, British Columbia, V3Z 6T3, Canada. The telephone
number at our principal executive office is 1 (877) 589-8806. The Company’s stock symbol is DSGT
Our
Business
Subsequent
to the closing of the share exchange agreement with DSG Tag Systems, Inc. (“DSG TAG”), we have adopted the business
and operations of DSG TAG. DSG TAG is now known as Vantage Tag Systems, Inc. (“VTS”).
DSG
Global, Inc. (“DSG”) is a technology development company based in Surrey, British Columbia, Canada, engaged in the
design, manufacture, and marketing of fleet management solutions for the golf industry, as well as commercial, government and
military applications. Our principal activities are the sale and rental of GPS tracking devices and interfaces for golf vehicles,
and related support services. We were founded by a group of individuals who have dedicated their careers to fleet management technologies
and have been at the forefront of the industry’s most innovative developments, and our executive team has over 50 years
of experience in the design and manufacture of wireless, GPS, and fleet tracking solutions. We have developed the TAG suite of
products that we believe is the first completely modular fleet management solution for the golf industry. The TAG suite of products
is currently sold and installed around the world in golf facilities and as commercial applications through a network of established
distributors and partnerships with some of the most notable brands in fleet and equipment manufacture.
VTS
is giving fleet operator’s new capabilities to track and control their vehicles through the new INFINITY XL system and the
new 3G-4G TAG. We have developed inhouse a proprietary combination of hardware and software that is marketed around the world
as the INFINITY TAG system. We have primarily focused on the golf industry where the TAG system is deployed to help golf course
operators manage their fleet of golf carts, turf equipment, and utility vehicles. We are a leader in the category of fleet management
in the golf industry and were awarded “Best Technology of the Year” in 2010 by Boardroom magazine, a publication of
the National Golf Course Owners Association. To date the TAG system is installed on vehicles around the world and has been used
to monitor millions of rounds of golf.
The
TAG system fills a void in the marketplace by offering a modular structure that allows the customer to customize their system
to meet desired functionality and budget constraints. In addition to the core TAG system vehicle control functionality, which
can operate independently, we offer 3 information display systems to the golf courses management and golfer — the alphanumeric
TEXT and high definition 12” INFINITY XL, 10” INFINITY RM and 7” INFINITY DM— providing the operator with
three display options which is unique in the industry. VTS also offers inhouse financing thru purchase or lease.
The
primary market for our TAG system is the 40,000 golf operations worldwide. While the golf industry remains the primary focus of
our sales and marketing efforts, we have completed several successful pilots of the TAG system in other markets such as agriculture
and commercial fleet operations. With appropriate resources, we intend to expand our sales and marketing efforts into these new
markets.
We
are expanding our sales force in North America, which comprises the most significant portion of the golf fleet market and have
developed key relationships with privately owned distributors and golf equipment manufacturers such as E-Z-GO, Yamaha and Ransomes
Jacobsen to help drive sales through-out Europe, Asia, UK and many other markets worldwide Including our most recent move to New
Zealand and Australia.
In
order to successfully deliver products, increase sales, and maintain customer satisfaction, we need to have a reliable supplier
of our hardware units and components at competitive prices. Presently, we source our TAG and INFINITY fleet from one fortune 200
companies in NA who has manufacturing in China and our RAPTORS from one supplier in the United Kingdom and Asia. This new relationship
that has been established provides us with higher quality, newer technology at competitive pricing.
In
addition, VTS recently engaged with a telecommunications provider to provide new technology in hardware and wireless access through-out
the world therefor allowing VTS to substantially reduce cellular cost.
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.
On
March 26, 2019, our company effected a reverse stock split of our authorized and issued and outstanding shares of common stock
on a four thousand (4,000) old for one (1) new basis. Upon effect of the reverse split, our authorized capital decreased from
3,000,000,000 pre-reverse split shares of common stock to 750,000 shares of common stock and correspondingly, our issued and outstanding
shares of common stock decreased from 2,761,333,254 pre-reverse split to 690,403 shares of common stock, all with a par value
of $0.001. Our shares of Preferred Stock remain unchanged.
Products
and Services
Technology
Overview
DSG
produces a “modular” suite of products to provide fleet management solution for any vehicle required for a golf operation
and provides two golfer information display options to meet the operators budget requirements. DSG believes that it is currently
the only company in the golf fleet management industry with these capabilities.
The
VTS TAG System is designed from the ground up to be a golf/turf vehicle fleet management system. Its main function is addressing
the golf course operator needs. While employing same core technology (cellular wireless and GPS) as traditional commercial vehicle
fleet management systems, DSG has created patent pending solutions to adapt it to the very specific requirements of the golf environment.
Compared to mainstream fleet tracking products, DSG collects 10 to 50 times more data points per MB (megabyte) of cellular data
due to its proprietary data collection and compression algorithms. Also the relative positioning accuracy is improved by almost
one order of magnitude by the use of application-specific geo-data validation and correction methods.
DSG’s
proprietary methods make it possible to offer a solution suitable for use on golf courses at a price low enough to be affordable
in the industry. Every system component incorporates state-of-the-art technology (server, mobile trackers, display). In developing
its products VTS TAG Systems has adopted an application oriented approach placing the most emphasis (and research & development)
on server and end-user software by taking advantage of the commodity level reached by mainstream technologies such as Global Positioning
(GPS) and M2M (Machine to Machine) Cellular Data in the wider context of Commercial Fleet Management.
DSG
leveraged the existence of an abundance of very cost-effective telematics solutions by selecting an “off-the-shelf”
hardware platform that meets all the main performance and environmental requirements for operation in the harsh, outdoor golf
course environment. While removing all risk and cost associated with developing a proprietary hardware platform, DSG has maintained
the unique nature of its hardware solution by developing a set of proprietary adapters and interfaces specifically for the golf
application.
DSG
has secured an exclusive supply agreement with the third-party hardware manufacturers for the vertical of golf industry. Additionally,
DSG owns the design of all proprietary adapters and interfaces. This removes the risk of a potential competitor utilizing the
same hardware platform. Competitors could attempt to reverse engineer or copycat the TAG technology and equipment. This risk factor
is mitigated by the fact that our product does not rely on a particular technology or hardware platform to be successful but on
a very specific vertical software application that is far more difficult to copy (and respectively easier to protect).
The
application software contains patent features implemented in every core component of the system. The TAG device runs DSG proprietary
firmware incorporating unique data collection and compression algorithms. The web server software which powers the end-user application
is also proprietary and incorporates the industry knowledge accumulated through the over 70 years of collective experience of
the DSG team.
This
approach has given the product line a high level of endurance against technology obsolescence. At any point in time, if a hardware
component is discontinued or a better/less expensive hardware platform becomes available, the software application can be easily
adapted to operate on the new platform or with the new component. The company benefits from the constant increase of performance
and cost reduction of mainstream hardware technology without any additional cost.
The
web-based Software-as-a-Service (SaaS) model used by VTS TAG System is optimal for low operating and support costs and rapid-cycle
release for software updates. It is also a major factor in eliminating or substantially reducing the need for any end-user premises
equipment. Customers have access to the service through any internet connected computer or mobile device, there is no need for
a local wireless network on the facility and installation time and cost are minimal.
DSG
is positioned to take advantage of mainstream technology and utilize “best of breed” hardware platforms to create
new generations of products. Our software is designed to be “portable” to future new platforms with better GPS and
wireless technology in order to maintain the Company competitive edge.
All
new product development effort of DSG is following the same model: select the best of breed third-party hardware platform, design
and produce custom proprietary accessories while focusing the bulk of the development efforts on vertical software application
to address a very specific set of end-customer needs.
The
latest addition to the TAG family of products, the TAG INFINITY is a perfect example of this development philosophy in action:
the main component is a last-generation Android tablet PC wrapped in a custom designed outdoor enclosure containing the power
supply and interface components required for the golf environment. The software application is taking advantage of all the advanced
high-resolution graphics, touch user interface and computing power of the Android OS delivering a vastly superior user experience
compared to competitive systems. The time to market for this product was 30% of how long it took to develop and launch this type
of products in the past.
The
TAG Control Unit
The
company’s flagship product is the TAG Control unit. The TAG can operate as a “stand alone” unit or with one
of two displays; the INFINITY 7” alphanumeric display or the INFINITY high definition “touch activated” screen.
The TAG is GPS enabled and communicates with the TAG software using cellular GSM networks. Utilizing the cellular networks rather
than erecting a local Wi-Fi network assures carrier grade uptime, and vehicle tracking “off- property”. GSM is the
de facto global standard for mobile communications.
The
TAG unit itself is discreetly installed usually in the nose of the vehicle to give the GPS clear line of site. It is then connected
to the vehicle battery and ignition. The property is then mapped using the latest satellite imagery that is graphically enhanced
and loaded into the TAG System as a map.
Once
installed the vehicle owner utilizes the TAG software to locate the vehicle in real time using any computer, smartphone, or tablet
that has an internet connection and perform various management operations.
The
operator can use the geo-fencing capabilities to create “zones” on the property where they can control the vehicles
behavior such as shutting down a vehicle that is entering a sensitive or dangerous area. The TAG System also monitors the strength
of the vehicle’s battery helping to prevent sending out vehicles undercharged batteries which can be an inconvenience for
the course and negatively impact the golfer experience.
Features
and Benefits
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Internal
battery utilizing Smart Power technology which charges the battery only when the vehicle is running (gas) or being charged
(electric)
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Pace
of Play management and reporting which is a critical statistic for the golf operator
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No
software to install
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Web
based access on any computer, smartphone, or tablet
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Set
up restricted zones to protect property, vehicles, and customers
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Real
time tracking both on and off property (using Street Maps)
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Email
alerts of zone activity
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Cart
lockdown
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Detailed
usage reporting for improved maintenance, proper vehicle rotation, and staff efficiency
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Geo
fencing security features
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Ability
to enforce cart path rules which is key to protecting course on wet weather days
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Modular
system allows for hardware and feature options to fit any budget or operations
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INFINITY
7” Display
The
INFINITY 7” is paired with the TAG Control unit as DSG’s entry level display system for operators who desire to provide
basic hole distance information and messaging to the golf customer. The INFINITY 7” is a very cost-effective solution for
operators who desire to give their customers GPS services with the benefits of a Fleet Management back end. The INFINITY 7”
can be mounted on the steering column or the dash depending on the customer’s preference.
VTS’s
entry level alphanumeric golf information display
Features
and benefits
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Hole
information display
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Yardage
displays for front, middle, back locations of the pin
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Messaging
capabilities – to individual carts or fleet broadcast
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Zone
violation warnings
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Pace
of Play notifications
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Smart
battery technology to prevent power drain
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Versatile
mounting option
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INFINITY
XL 12” Display
The
INFINITY XL 12” is a solution for operators who desire to provide a high-level visual information experience to their
customers. The INFINITY XL 12” is a high definition “Infinity XL 12” ” activated display screen
mounted in the golf cart integrated with the TAG Control unit to provide a full back/front end Fleet Management solution. The
INFINITY XL 12” displays hole graphics, yardage, and detailed course information to the golfer and provides interactive
features such as Food and Beverage ordering and scorekeeping.
The
industry leading Infinity XL 12” HD – the most sophisticated display in the market.
Features
and Benefits
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Integrated
Food and Beverage ordering
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Pro
Tips
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Flyover
capability
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Daily
pin placement display
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Interactive
Scorecard with email capability
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Multiple
language choices
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No
power drain with Smart Battery technology
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Full
broadcast messaging capabilities
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Pace
of Play display
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Vivid
hole graphics
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Option
of steering or roof mount
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Generate
advertising revenue and market additional services
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PROGRAMMATIC
Advertising Platform
A
unique feature of the INFINITY XL 12” system is the advertising display capability. This can be used by the operator for
internal promotion of services or for generating revenue by selling the ad real estate since the golf demographic is very desirable
to advertisers. The INFINITY XL 12” displays banner, panel, full page, pro tip, and Green view ads. There is also ad real
estate on the interactive feature screens for Food and Beverage ordering and the scorecard. The Infinity XL 12” System can
also display animated GIF files or play video for added impact.
Advertising
displayed in multiple formats including animated GIF and video
DSG
has developed proprietary “Ad Manager” software which is used to place and change the ads on the system(s) from a
central NOC (Network Operations Center) in real time. The Ad Manager can deploy to a single system or multiple systems. This creates
a network of screens that is also very desirable to advertisers as ad content can be deployed locally, regionally, or nationally.
The advertising platform is an important part of the company’s future marketing and sales strategy.
DSG
R3 Advertising Platform
The
DSG R3 program delivers advance ROI (Revenue Optimization Intelligence). Utilizing all streams of advertising delivery, such as
automated, direct, and self-serve. The R3 program has the ability to deliver relevant advertising to golfers the moment they sit
in the cart. The R3 model is more effective than the previous advertising model of ‘One to One’, these are local ads
only sold through direct sales by courses, or 3 rd party advertising sales firms. The new R3 model offers ‘Many
to one’ advertising options, delivering thousands of national, regional, and local advertisers an opportunity to advertise
on our screens through our R3 Marketplace.
Previous
‘One to One’ model vs the new R3 model ‘Many to One’
TAG
TURF/ECO TAG
The
TAG Turf and the new ECO TAG were developed to give course operators the same back end management features for their turf equipment
and utility vehicles. Turf equipment is expensive, and a single piece can run over $100,000 and represents a large portion of
a golf course operating budget. The TAG Turf and ECO TAG have comprehensive reporting that the operator can utilize to implement
programs that can increase efficiencies, reduce labor costs, help lower idle times, provide fuel consumption and equipment performance,
provide historical data on cutting patterns, and reduce pollution from emissions by monitoring idle times. Since the golf course
needs to be maintained regardless of volume these cost saving measures directly impact the operator’s bottom line.
Features
and Benefits
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Can
be installed on any turf, utility, or service vehicle
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|
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Work
activity tracking and management
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Work
breakdown and analysis per area, work group, activity type or specific vehicle
|
|
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|
Vehicle
idling alerts
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Zone
entry alerts
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|
Detailed
travel (cutting patterns) history
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Detailed
usage reports with mileage and hours
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|
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Protection
for ecological areas through geo fencing
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Vehicle
lock down and ‘off property’ locating features
|
The
TAG Turf provides detailed trail history and cutting patterns
Revenue
Model
DSG
derives revenue from four different sources.
Systems
Sales Revenue, which consists of the sales price paid by those customers who purchase our TAG system hardware 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 INFINITY 7”, or a TAG and INFINITY XL 12”).
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.
We
recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable,
and collectability is reasonably assured. 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 2 – Summary of Significant Accounting Policies”
in the notes to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
Markets
Sales
and Marketing Plan
The
market for the TAG System is the worldwide golf cart and Turf equipment fleets. There are 40,000 golf courses around the world
with North America being the largest individual market with 20,000. This represents over 3,000,000 vehicles. The golf market has
five distinct types of operations. Municipal, Private Country Clubs, Destination Resorts, Public Commercial, Military and University
affiliated. VTS has deployed and has case studies developed TAG systems in each of these categories.
Our
marketing strategy is focused on building brand awareness, generating quality leads, and providing excellent customer service.
North
America Sales
Since
the largest market is North America the Company employs a direct sales team and sales agents that provide full sales coverage.
Our sales agents are experienced golf industry professionals who maintain established relationships with the golf industry and
carry multiple golf lines. Our sales objective is to offer our existing and prospective customers a dedicated, knowledgeable,
and outstanding customer service team.
In
addition, our team is dedicated to existing accounts that focus on up-selling and cross-selling additional products to our current
customer base, securing renewal agreements, and providing excellent customer service. The current regions are:
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|
Western
Canada
|
|
|
●
|
Eastern
Canada
|
|
|
●
|
Northeast
USA
|
|
|
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|
Western
USA
|
|
|
●
|
Southeastern
USA
|
|
|
●
|
Midwest
USA
|
International
Sales
DSG
focuses on select global golf markets that offer significant volume opportunities and that value the benefits that our products
deliver.
We
utilize strategic distributor partnerships in each targeted region/country to sell, install and service our products. Distributors
are selected based on market strength, market share, technical and selling capability, and overall reputation. We believe that
DSG solutions appeal to all distributors because they are universal and fit any make or model of vehicle. We maintain and leverage
our strong relationship with Yamaha, E-Z-GO and Ransomes Jacobsen (sister company to E-Z-GO) in developing our distributor network
around the world. Today, many of our distributor partners are the leading distributors for E-Z-GO and RJ and hold a dominant position
in their respective markets. While they are Yamaha or E-Z-GO distributors, most sell DSG products to all courses regardless of
their choice of golf car as a value add to their customers and to generate additional revenue. We complement this distributor
base with independent distributors as needed to ensure we have sufficient coverage in critical markets.
Currently
DSG is focused on expanding in Europe, Asia and South Africa. The Company has expand next into Australia, New Zealand and Latin
America.
Management
Companies
Many
golf facilities are managed by management companies. The portfolios of these companies vary from a few to hundreds of golf courses.
Troon®, the world’s largest player in golf course management, has over 200 courses under management. The
management companies provide everything from branding, staffing, management systems, marketing, and procurement. DSG is currently
providing products and services to Troon, OB Sports, Kemper Sports, Trump, Marriott Golf, Blue Green, Crown Golf, American Golf,
Billy Casper, Club Corp, and Club Link.
DSG
has been successful in completing installations and developing relationships with several of the key players who control a substantial
number of courses. DSG will continue to implement system developments that are driven by the needs of these management companies
such as combined reporting, multiple course access through a centralized dashboard. This development will become a competitive
advantage for DSG in the management company market.
DSG
has dedicated a team to create specific collateral for this market and has assigned a senior executive to have direct responsibility
to manage these relationships.
Competition
We
compete with a number of established producers and distributors of vehicle fleet management systems. Our competitors include producers
of golf specific applications, such as GPS Industries, LLC., one of the leading suppliers of golf cart fleet management systems,
as well as producers of non-golf specific utility vehicle fleet management systems, such as Toro. Many of our competitors have
longer operating histories, better brand recognition and greater financial resources than we do. In order for us to successfully
compete in our industry we must:
|
●
|
demonstrate
our products’ competitive advantages;
|
|
|
|
|
●
|
develop
a comprehensive marketing system; and
|
|
|
|
|
●
|
increase
our financial resources.
|
However,
there can be no assurance that even if we do these things, we will be able to compete effectively with the other companies in
our industry.
We
believe that we will be able to compete effectively in our industry because of the versatility, reliability, and relative affordability
of our products when compared to those of our competitors. We will attempt to build awareness of our competitive advantages among
existing and potential customers through trade shows, sales visits and demonstrations, online marketing, and positive word of
mouth advertising.
However,
as we are a newly-established company relative to our competitors, we face the same problems as other new companies starting up
in an industry, such as limited access to capital. Our competitors may be substantially larger and better funded than us, and
have significantly longer histories of research, operation and development than us. In addition, they may be able to provide more
competitive products than we can and generally be able to respond more quickly to new or emerging technologies and changes in
legislation and regulations relating to the industry. Additionally, our competitors may devote greater resources to the development,
promotion and sale of their products or services than we do. Increased competition could also result in loss of key personnel,
reduced margins or loss of market share, any of which could harm our business.
Our
primary competitor in the field of golf course fleet management is GPS Industries, a company that was founded in 1996 by Mr. Bob
Silzer, the founder of VTS TAG Systems Inc. GPS Industries is currently the largest player in the marketplace with an installed
base of approximately 750 golf courses worldwide. GPS Industries was consolidated by various mergers and acquisitions with a diversity
of hardware platforms and application software. Since 2009, when GPS Industries has introduced their latest product offering called
the Visage, in an exclusive partnership with Club Car, their strategy has been to target mostly their existing customers and motivate
them into replacing their existing, older GPS system, with the Visage system.
GPS
Industries is leveraging very heavily their partnership with Club Car, which is one of the three largest golf cars manufacturers
in the world and at times is benefiting from golf operators’ preference for Club Car and their vehicles when they select
their management system.
Market
Mix
Since
the introduction of the DSG product line, the golf course operators realized that they have now access to a budget-friendly fleet
management tool that works not only on golf cars but also with all other vehicles used on the golf course such as turf maintenance,
shuttles, and other utility vehicles.
Marketing
studies have identified that half of the golf course operators only need a fleet management system and only 15% need a high-end
GPS golf system. This illustrates the strong competitive advantage that VTS TAG Systems has versus GPS Industries since their
product can only address the needs of a relatively small fraction of the marketplace.
Consequently,
GPS Industries installed base has steadily declined since most of their new product installations have replaced older product
for existing customers and some customers have opted for a lower budget system and switched over to VTS TAG Systems.
Marketing
Activities
The
Company has a multi layered approach marketing the TAG suite of products. One of the foundations of this plan is attending industry
trade shows which are well attended by golf operators. The two largest shows are the PGA Merchandise Show and the Golf Industry
Show which are held in Florida at the end of January. The Company also attends a number of regional shows around North America.
International events are attended by our distributors and partners.
The
second layer is memberships in key organizations such as the National Golf Course Owners Association, Golf Course Superintendents
Association, and Club Managers Association of America. These are very influential in the industry and have marketing channels
such as publications, email blasts, and web-based marketing. The Company also markets directly to course operators through email,
surveys direct mail programs.
Lead
Generation
One
of the primary sources of lead generation is through the Company’s strategic partnerships with E-Z-GO, Yamaha, and Ransomes
Jacobson. These relationships provide the Company with a great deal of market intelligence. The sales forces of the partners work
in tandem with the DSG sales team by passing on the leads, creating joint proposals, and distributing TAG sales material. The
Company has also created co-branded materials for specific value items of interest to operators such as Pace of Play solutions.
DSG sale s and marketing staff attend partner sales events to conduct training and discuss marketing strategies.
The
Company is in the process of testing an internal telemarketing program in several key markets to gauge whether this particular
channel warrants larger scale implementation.
Competitive
Advantages
Pricing
One
of the “heroes” of the TAG System is providing the course operator a range of modular fleet management options that
are very competitively priced. Pricing options range from the TURF, TAG, Infinity 7”, and Infinity XL 12” System,
giving the customer a wide range of pricing options.
Functional
advantages
DSG
has the distinctive advantage of being able to offer a true fleet management system, encompassing all the vehicles on the golf
course not just the golf carts. Due to the modular nature of the system, customers have now the option to configure their system’s
configuration to match exactly their needs and their budget.
Product
advantages
DSG
products are the robust, reliable, and user-friendly systems in the world. DSG is the only company currently providing systems
that are waterproof with internal batteries to ensure our partners retain the full golf cart manufacturer’s warranty.
Operational
Plan
Our
Operations Department’s main functions are outlined below:
Product
Supply Chain Management
●
|
Product
procurement, lead-time management
|
●
|
Inventory
Control
|
Customer
Service
●
|
Training
|
●
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Troubleshooting
& Support
|
●
|
Hardware
Repairs
|
Installations
●
|
Content
& graphics procurement
|
●
|
System
configurations
|
●
|
Shipping
and Installation
|
Infrastructure
Management
●
|
Communication
Servers Management
|
●
|
Cellular
Data Carriers
|
●
|
Service
and administration tools
|
Product
Supply Chain
In
order to maintain high product quality and control, as well as benefiting from cost savings, the Company is currently procuring
all main hardware components offshore. Final assembly is locally performed in order to ensure product quality. Other main components
are also procured directly from manufacturers or from local suppliers that outsource components office in order to keep the price
as low as possible.
The
Company is requesting the suppliers to perform a complete set of quality testing and minimum 24 hours’ burn-in before the
product is delivered. The local hardware assembler and components supplier offers 12 months’ warranty. The main hardware
components offshore supplier offers a warranty plan of 15 months from the date the product is shipped. With an extended 90 days
beyond the current warranty, such repair service would be paid by the supplier except for component replacement costs, which would
be paid by DSG.
Another
important activity related to the management of the product supply chain is working closely with the suppliers and ensuring that
we have alternate sources for the main components and identify well in advance any components that may go “end-of-life”
and find suitable replacements before product shortages may occur.
Inventory
Control
The
Company has implemented strict inventory management procedures that govern the inbound flow of products from suppliers, the outgoing
flow to customers as well as the internal movement of inventory between warehouses (Canada, US and UK). There are also procedures
in place to control the flow of equipment returning from customers for repairs and their replacements.
Installation
The
Company is utilizing a small number of its own field engineers, geographically positioned to be in close proximity of areas with
high concentrations of current and future customers. Occasionally, when new installations exceed the internal capacity, the company
employs a number of external contractors, on a project by project basis. Each contractor has been trained extensively to perform
product installations and the Company has created an extensive collection of Installation Manuals for all products and vehicle
types.
The
product was designed with ease of installation as one of its features. Additionally, the installation process includes a pre-shipping
configuration process that prepares each device with all the settings and graphics content (if applicable) required for the specific
location it will be deployed. This makes the installation process a lot simpler and less time consuming in the field which reduces
costs (accommodations, food, travel) for internal staff as well as external contractor cost (less billable time).
Another
benefit of the simplified installation procedure is increased scalability in anticipation of increased number of installs in the
future by reducing the skill level and training time requirements for additional contractors.
Customer
Service
The
Company has deployed its Customer Service staff strategically, so it has at least one service representative active during business
hours in North America, Europe and South Africa.
The
Company is handling Customer Service directly in North America and UK, offering telephone and on-line support to end-customers.
In other international markets, the first-line customer service is handled by local distributor’s staff while DSG is supplying
training and more advanced support to the distributors.
For
the management of the customer service activities, the Company is utilizing SalesForce.com CRM system which allows creating, updating,
closing and escalation of service cases, including the issuance of RMA (Return Material Authorization) numbers for defective equipment.
Using SalesForce.com also allows generation of management reports for service issues, customer satisfaction, and equipment failures
in order to quickly identify trends, problem accounts or systemic issues.
In
addition, DSG began offering the DSG Par 72 Service & Support Plan to guarantee service and support to client courses in the
golf business, during fiscal 2016. This program for client courses which guarantees service and support programs within 24 hours
of a problem arising.
Product
Development and Engineering
The
Company employs a team of software engineers in house to develop and maintain the main components of the server software and firmware.
All
product development is derived from business needs assessment and customer requests.
The
Product Manager is reviewing periodically the list of feature requests with the Sales, establishes priorities and updates the
Product Roadmap.
The
software engineers are also responsible for developing specialized tools and systems utilized increase efficiency in the operation
of the Company. These projects include functionality such as: automated system monitoring, automatic service alerts, improved
remote troubleshooting tools, cellular data monitoring and reporting. All these tools are critical in future ability to support
more customers with less resources, streamline support, and improve internal efficiency.
All
hardware development (electronics and mechanical) is generally outsourced, however small projects like mounting solutions or cabling
are handled in house.
GHS
Equity Financing Agreement and Registration Rights Agreement
Summary
of the Offering
Shares
currently outstanding:
|
|
904,969
|
|
|
|
Shares
being offered:
|
|
230,000
|
|
|
|
Offering
Price per share:
|
|
The
selling stockholders may sell all or a portion of the shares being offered pursuant to this prospectus at fixed prices and
prevailing market prices at the time of sale, at varying prices or at negotiated prices.
|
|
|
|
Use
of Proceeds:
|
|
We
will not receive any proceeds from the sale of the shares of our common stock by the selling stockholder. However, we will
receive proceeds from our initial sale of shares to GHS, pursuant to the Financing Agreement. The proceeds from the initial
sale of shares will be used for the purpose of working capital and for potential acquisitions.
|
|
|
|
OTC
Markets Symbol:
|
|
DSGT
|
|
|
|
Risk
Factors:
|
|
See
“Risk Factors” beginning on page 18 and the other information in this prospectus for a discussion of the factors
you should consider before deciding to invest in shares of our common stock.
|
Financial
Summary
The
tables and information below are derived from our consolidated financial statements for the six ended June 30, 2019 and the 12
months ended December 31, 2018. Our total stockholder’s deficit as of June 30, 2019 was $13,491,805. Our total stockholder’s
deficit as of December 31, 2018 was $13,370,783. As of June 30, 2019, we had $31,820 of cash on hand.
|
|
June 30, 2019
|
|
|
Year End
December 31, 2018
|
|
|
|
|
|
|
|
|
Cash
|
|
|
31,820
|
|
|
$
|
5,059
|
|
Total Assets
|
|
|
550,111
|
|
|
|
352,713
|
|
Total Current Liabilities
|
|
|
7,339,466
|
|
|
|
7,021,046
|
|
Total Stockholder’s Equity (Deficit)
|
|
|
(13,491,805
|
)
|
|
|
(13,370,783
|
)
|
Statement
of Operations
|
|
Six Months Ended
June 30, 2019
|
|
|
Year End
December 31, 2018
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
786,070
|
|
|
|
1,281,024
|
|
Other Income (Expense)
|
|
|
6,997,648
|
|
|
|
(8,641,587
|
)
|
Net Income (Loss) for the Period
|
|
|
6,893,187
|
|
|
|
(9,825,404
|
)
|
Net Loss per Share
|
|
|
9.80
|
|
|
|
(28.88
|
)
|
RISK
FACTORS
This
investment has a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below
and the other information in this prospectus. If any of the following risks actually occur, our business, operating results and
financial condition could be harmed, and the value of our stock could go down. This means you could lose all or a part of your
investment.
Special
Information Regarding Forward-Looking Statements
Some
of the statements in this prospectus are “forward-looking statements.” These forward-looking statements involve certain
known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be
materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.
These factors include, among others, the factors set forth herein under “Risk Factors.” The words “believe,”
“expect,” “anticipate,” “intend,” “plan,” and similar expressions identify forward-looking
statements. We caution you not to place undue reliance on these forward-looking statements. We undertake no obligation to update
and revise any forward-looking statements or to publicly announce the result of any revisions to any of the forward-looking statements
in this document to reflect any future or developments. However, the Private Securities Litigation Reform Act of 1995 is not available
to us as a non- reporting issuer. Further, Section 27A(b)(2)(D) of the Securities Act and Section 21E(b)(2)(D) of the Securities
Exchange Act expressly state that the safe harbor for forward looking statements does not apply to statements made in connection
with an initial public offering.
RISKS
RELATED TO OUR COMPANY
Our
limited operating history may not serve as an adequate basis to judge our future prospects and results of operations.
DSG
Global has a relatively limited operating history. Our limited operating history and the unpredictability of the wealth management
industry make it difficult for investors to evaluate our business. An investor in our securities must consider the risks, uncertainties
and difficulties frequently encountered by companies in rapidly evolving markets.
We
will need additional financing to implement our business plan.
The
Company will need additional financing to fully implement its business plan in a manner that not only continues to expand an already
established direct-to-consumer approach, but also allows the Company to establish a stronger brand name in all the areas in which
it operates. In particular, the Company will need additional financing to:
|
●
|
Effectuate
its business plan and further develop its product and service lines;
|
|
|
|
|
●
|
Expand
its facilities, human resources, and infrastructure; and
|
|
|
|
|
●
|
Increase
its marketing efforts and lead generation.
|
There
are no assurances that additional financing will be available on favorable terms, or at all. If additional financing is not available,
the Company will need to reduce, defer or cancel development programs, planned initiatives and overhead expenditures. The failure
to adequately fund its capital requirements could have a material adverse effect on the Company’s business, financial condition
and results of operations. Moreover, the sale of additional equity securities to raise financing will result in additional dilution
to the Company’s stockholders and incurring additional indebtedness could involve the imposition of covenants that restrict
the Company’s operations.
Our
products and services are subject to changes in applicable laws and regulations.
The
Company’s business is particularly subject to changing federal and state laws and regulations related to the provision of
financial services to consumers. The Company’s continued success depends in part on its ability to anticipate and respond
to these changes, and the Company may not be able to respond in a timely or commercially appropriate manner. If the Company fails
to adjust its products and services in response to changing legal and/or regulatory requirements, the ability to deliver its products
and services may be hindered, which in turn could have an adverse effect on the Company’s business, financial condition
and results of operations.
We
may continue to encounter substantial competition in our business.
The
Company believes that existing and new competitors will continue to improve their products and services, as well as introduce
new products and services with competitive price and performance characteristics. The Company expects that it must continue to
innovate, and to invest in product development and productivity improvements, to compete effectively in the several markets in
which the Company participates. The Company’s competitors could develop a more efficient product or service or undertake
more aggressive and costly marketing campaigns than those implemented by the Company, which could adversely affect the Company’s
marketing strategies and have an adverse effect on the Company’s business, financial condition and results of operations.
Important
factors affecting the Company’s current ability to compete successfully include:
|
●
|
lead
generation and marketing costs;
|
|
|
|
|
●
|
service
delivery protocols;
|
|
|
|
|
●
|
branded
name advertising; and
|
|
|
|
|
●
|
product
and service pricing.
|
In
periods of reduced demand for the Company’s products and services, the Company can either choose to maintain market share
by reducing product and service pricing to meet the competition, or maintain its product and service pricing, which would likely
sacrifice market share. Sales and overall profitability may be reduced in either case. In addition, there can be no assurance
that additional competitors will not enter the Company’s existing markets, or that the Company will be able to continue
to compete successfully against its competition.
We
may not successfully manage our growth.
Our
success will depend upon the expansion of our operations and the effective management of our growth, which will place a significant
strain on our management and on our administrative, operational and financial resources. To manage this growth, we must expand
our facilities, augment our operational, financial and management systems, and hire and train additional qualified personnel.
If we are unable to manage our growth effectively, our business would be harmed.
We
rely on key executive officers, and their knowledge of our business and technical expertise would be difficult to replace.
We
are highly dependent on our executive officers. If one or more of the Company’s senior executives or other key personnel
are unable or unwilling to continue in their present positions, the Company may not be able to replace them easily or at all,
and the Company’s business may be disrupted. Competition for senior management personnel is intense, the pool of qualified
candidates is very limited, and we may not be able to retain the services of our senior executives or attract and retain high-quality
senior executives in the future. Such failure could have a material adverse effect on the Company’s business, financial
condition and results of operations.
We
may never pay dividends to our common stockholders.
The
Company currently intends to retain its future earnings to support operations and to finance expansion; accordingly, the Company
does not anticipate paying any cash dividends in the foreseeable future.
The
declaration, payment and amount of any future dividends on common stock will be at the discretion of the Company’s Board
of Directors, and will depend upon, among other things, earnings, financial condition, capital requirements, level of indebtedness
and other considerations the Board of Directors considers relevant. There is no assurance that future dividends will be paid on
common stock or, if dividends are paid, the amount thereof.
Our
common stock is quoted through the OTC Markets, which may have an unfavorable impact on our stock price and liquidity.
The
Company’s common stock is quoted on the OTC Markets, which is a significantly more limited market than the New York Stock
Exchange or NASDAQ. The trading volume may be limited by the fact that many major institutional investment funds, including mutual
funds, follow a policy of not investing in OTC Markets stocks and certain major brokerage firms restrict their brokers from recommending
OTC Markets stocks because they are considered speculative and volatile.
The
trading volume of the Company’s common stock has been and may continue to be limited and sporadic. As a result, the quoted
price for the Company’s common stock on the OTC Markets may not necessarily be a reliable indicator of its fair market value.
Additionally,
the securities of small capitalization companies may trade less frequently and in more limited volume than those of more established
companies. The market for small capitalization companies is generally volatile, with wide price fluctuations not necessarily related
to the operating performance of such companies.
Our
common stock is subject to price volatility unrelated to our operations.
The
market price of the Company’s common stock could fluctuate substantially due to a variety of factors, including market perception
of the Company’s ability to achieve its planned growth, operating results of the Company and of other companies in the same
industry, trading volume in the Company’s common stock, changes in general conditions in the economy and the financial markets
or other developments affecting the Company or its competitors.
Our
common stock is classified as a “penny stock.”
Rule
3a51-1 of the Securities Exchange Act of 1934 establishes the definition of a “penny stock,” for purposes relevant
to us, as any equity security that has a minimum bid price of less than $5.00 per share or with an exercise price of less than
$5.00 per share, subject to a limited number of exceptions which are not available to us. It is likely that the Company’s
common stock will be considered to be a penny stock for the immediately foreseeable future.
For
any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person’s
account for transactions in penny stocks and the broker or dealer receive from the investor a written agreement to the transaction,
setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions
in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the investor,
make a reasonable determination that transactions in penny stocks are suitable for that person, and make a reasonable determination
that that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions
in penny stocks.
The
broker or dealer must also provide disclosure to its customers, prior to executing trades, about the risks of investing in penny
stocks in both public offerings and in secondary trading, the commissions payable to both the broker-dealer and the registered
representative, and the rights and remedies available to an investor in cases of fraud in penny stock transactions.
Because
of these regulations, broker-dealers may not wish to furnish the necessary paperwork and disclosures and/or may encounter difficulties
in their attempt to buy or sell shares of the Company’s common stock, which may in turn affect the ability of Company stockholders
to sell their shares.
Accordingly,
the penny stock classification adversely affects any market liquidity for the Company’s common stock and subjects the shares
to certain risks associated with trading in penny stocks. These risks include difficulty for investors in purchasing or disposing
of shares, difficulty in obtaining accurate bid and ask quotations, difficulty in establishing the market value of the shares,
and a lack of securities analyst coverage.
Because
we may never earn revenues from our operations, our business may fail and investors may lose all of their investment in our company.
In
addition to other information in this current report, the following risk factors should be carefully considered in evaluating
our business because such factors may have a significant impact on our business, operating results, liquidity and financial condition.
As a result of the risk factors set forth below, actual results could differ materially from those projected in any forward-looking
statements. Additional risks and uncertainties not presently known to us, or that we currently consider to be immaterial, may
also impact our business, operating results, liquidity and financial condition. If any such risks occur, our business, operating
results, liquidity, and financial condition could be materially affected in an adverse manner. Under such circumstances, the trading
price of our securities could decline, and you may lose all or part of your investment.
We
have limited revenues from operations. We have yet to generate positive earnings and there can be no assurance we will ever operate
profitably. Our company has a limited operating history and has yet to launch its first commercial product. The success of our
company is significantly dependent on uncertain events, with respect to supply chain, system development, and operation of the
system on the scale we currently envision. If our business plan is not successful and we are not able to operate profitably, our
stock may become worthless and investors may lose all of their investment in our Company. Should any of the following material
risks occur, our business may experience catastrophic and unrecoverable losses, as said risks may harm our current business operations,
as well as any future results of operations, resulting in the trading price of our common stock declining and a partial or complete
loss of your investment. It is important to note these risks are not the only ones we face. Additional risks not presently known
or that we currently consider to be immaterial may also impair our business operations and trading price of our common stock.
We
may not achieve profitability or positive cash flow.
Our
ability to achieve and maintain profitability and positive cash flow will be dependent upon such factors as our ability to deliver
quality risk management and custom app development services. Based upon current plans, we expect to incur operating losses in
future periods because we expect to incur expenses that will exceed revenues for an unknown period of time. We cannot guarantee
that we will be successful in generating sufficient revenues to support operations in the future.
We
have limited operating capital and we may have to seek additional financing.
If
we are unable to fund our operations and, therefore, not be able to sustain future operations or support the manufacturing of
additional systems, we may be required to delay, reduce and/or cease our operations and/or seek bankruptcy protection.
We
cannot assure anyone with any degree of certainty that any necessary additional financing will be available on terms favorable
to us, now or at any point in the future. It may be a significant challenge to raise additional funds and there can be no assurance
as to the availability of additional financing or the terms upon which additional financing may be available. Even if we raise
sufficient capital through additional equity or debt financings, strategic alternatives or otherwise, there can be no assurance
the revenue or capital infusion will be sufficient to enable us to develop our business to a level where it will be profitable
or generate positive cash flow.
If
we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders
could be significantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of
existing stockholders; and if we incur additional debt, a substantial portion of our operating cash flow may be dedicated to the
payment of principal and interest on such indebtedness, thus limiting funds available for our business activities. The terms of
any debt securities issued could also impose significant restrictions on our operations.
If
we and our suppliers cannot obtain financing under favorable terms, and our clients are not able to receive the requisite guarantees
for payment to us, our business may be negatively impacted.
Markets
for stock are highly volatile.
As
a result of market volatility in the U.S. and in international stock markets since 2008, a high degree of uncertainty has been
seen in the markets, which may result in an increase in the return required by investors, with respect to their expectations for
the financing of our projects. Current and ongoing global conditions could lead to an extended recession in the U.S. and around
the world. We currently have no revenue producing assets, which may have a materially adverse impact on our business and financial
conditions and results, which places our investors at risk.
Capital
and credit markets continue to be unpredictable and the availability of funds from those markets is extremely uncertain. Further,
arising from concerns about the stability of financial markets generally and the solvency of borrowers specifically, the cost
of accessing the credit markets has increased as many lenders have raised interest rates, enacted tighter lending standards or
altogether ceased to provide funding to borrowers. Due to these capital and credit market conditions, we cannot be certain that
funding will be available to us in amounts or on terms that we believe are acceptable.
The
market price of our common stock may be adversely affected by market conditions affecting the stock markets in general, including
price and trading fluctuations on OTC Markets. Market conditions may result in volatility in the level of, and fluctuations in,
the market prices of stocks generally and, in turn, our common stock and sales of substantial amounts of our common stock in the
market, in each case being unrelated or disproportionate to changes in our operating performance.
The
overall weakness in the economy has recently contributed to the extreme volatility of the markets which may have an effect on
the market price of our common stock. Our stock price has been and could remain volatile, which could further adversely affect
the market price of our stock, our ability to raise additional capital and/or cause us to be subject to securities class action
litigation.
We
may also be subject to additional securities class action litigation as a result of volatility in the price of our common stock,
which could result in substantial costs and a significant diversion of management’s time and attention and intellectual
and capital resources and could harm our stock price, business, prospects, and results of operations.
Sales
of a significant number of shares of our common stock could depress the market price of our common stock, which could happen in
the public market at any time. These sales, or the market perception that the holders of a large number of shares intend to sell
shares, could reduce the market price of our common stock. Should industry analysts choose not to publish, or any time discontinue
reporting on us, our business or our market, or if they change their recommendations regarding our stock adversely, our stock
price and trading volume could decline. Also, the trading market for our common stock will be influenced by the research and reports
that industry or securities analysts may publish about us, our business, our market or our competitors. If any of the analysts
who may cover us change their recommendation regarding our stock adversely, or provide more favorable relative recommendations
about our competitors, our stock price would likely decline.
We
may become subject to litigation.
There
is the potential that we could be party to disputes for which an adverse outcome could result in us incurring significant expenses,
being liable for damages, and subject to indemnification claims. In connection with any disputes or litigation in which we are
involved, we may be forced to incur costs and expenses in connection with defending ourselves or in connection with the payment
of any settlement or judgment or compliance with any injunctions in connection, therewith, if there is an unfavorable outcome.
The expense of defending litigation may be significant, as is the amount of time to resolve lawsuits unpredictable and defending
ourselves may divert management’s attention from the day-to-day operations of our business, which could adversely affect
our business, results of operations, financial condition, and cash flows. Additionally, an unfavorable outcome in any such litigation
could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Product
liability or defects could also negatively impact our results of operations. The risk of product liability claims and associated
adverse publicity is possible in the development, manufacturing, marketing, and sale of our product offerings. Any liability for
damages resulting from malfunctions or design defects could be substantial and could materially adversely affect our business,
financial condition, results of operations and prospects.
Also,
a highly-publicized problem, whether actual or perceived, could adversely affect the market’s perception of our product,
resulting in a decline in demand for our product and could divert the attention of our management, having a materially adverse
effect our business, financial condition, results of operations and prospects.
Our
success depends on attracting and retaining key personnel.
Our
future plans could be harmed if we are unable to attract or retain key personnel, and our future success will depend, in part,
on our ability to attract and retain qualified management and technical personnel. Equally, our success depends on the ability
of our management and employees to interpret market data correctly and to interpret and respond to economic market and other conditions
in order to locate and adopt appropriate investment opportunities, monitor such investments, and ultimately, if required, to successfully
divest such investments. Further, no assurance can be given that our key personnel will continue their association or employment
with us or that replacement personnel with comparable skills can be found. We have sought to and will continue to ensure that
management and any key employees are appropriately compensated, however, their services cannot be guaranteed. If we are unable
to attract and retain key personnel, our business may be adversely affected.
We
do not know whether we will be successful in hiring or retaining qualified personnel, and our inability to hire qualified personnel
on a timely basis, or the departure of key employees, could materially and adversely affect our development and profitable commercialization
plans, our business prospects, results of operations, and financial condition.
Should
we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or
prevent fraud, which could harm our brand and operating results. Our compliance with the annual internal control report requirement
for each fiscal year will depend on the effectiveness of our financial reporting and data systems and controls. Inferior internal
controls could cause investors to lose confidence in our reported financial information, which could have a negative effect on
the trading price of our stock and our access to capital. In addition, our internal control systems rely on people trained in
the execution of the controls. Loss of these people or our inability to replace them with similarly skilled and trained individuals
or new processes in a timely manner could adversely impact our internal control mechanisms.
The
requirements of being a public company may strain our resources, divert management’s attention and affect our ability to
attract and retain qualified board members and officers. Compliance with these rules and regulations increase our legal and financial
compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources.
Protecting
our intellectual property is necessary to protect our brand.
We
may not be able to protect important intellectual property and we could incur substantial costs defending against claims that
our products infringe on the proprietary rights of others. Our ability to compete effectively will depend, in part, on our ability
to protect our proprietary system-level technologies, systems designs, and manufacturing processes.
We
will rely on patents, trademarks, and other policies and procedures related to confidentiality to protect our intellectual property.
However, some of our intellectual property is not covered by any patent or patent application. We could incur substantial costs
in prosecuting or defending patent infringement suits or otherwise protecting our intellectual property rights. While we have
attempted to safeguard and maintain our proprietary rights, we do not know whether we have been or will be completely successful
in doing so. Moreover, patent applications and enforcement, thereof, filed in foreign countries may be subject to laws, rules
and procedures that are substantially different from those of the United States, and any resulting foreign patents may be difficult
and expensive to enforce. We could incur substantial costs in prosecuting or defending trademark infringement suits.
Further,
our competitors may independently develop or patent technologies or processes that are substantially equivalent or superior to
ours. In the event we are found to be infringing third party patents, we could be required to pay substantial royalties and/or
damages, and we do not know whether we will be able to obtain licenses to use such patents on acceptable terms, if at all.
Failure
to obtain needed licenses could delay or prevent the development, manufacture, or sale of our products, and could necessitate
the expenditure of significant resources to develop or acquire non-infringing intellectual property.
Asserting,
defending and maintaining our intellectual property rights could be difficult and costly and failure to do so may diminish our
ability to compete effectively and may harm our operating results. As a result, we may need to pursue legal action in the future
to enforce our intellectual property rights, to protect our trade secrets and domain names, and to determine the validity and
scope of the proprietary rights of others. If third parties prepare and file applications for trademarks used or registered by
us, we may oppose those applications and be required to participate in proceedings to determine the priority of rights to the
trademark.
Similarly,
competitors may have filed applications for patents, may have received patents and may obtain additional patents and proprietary
rights relating to products or technology that block or compete with ours. We may have to participate in interference proceedings
to determine the priority of invention and the right to a patent for the technology.
Confidentiality
agreements to which we are party may be breached, and we may not have adequate remedies for any breach. Also, our trade secrets
may also be known without breach of such agreements or may be independently developed by competitors. Inability to maintain the
proprietary nature of our technology and processes could allow our competitors to limit or eliminate any competitive advantages
we may have.
As
part of our business strategy, we intend to consider acquisitions of companies, technologies and products that we believe could
improve our ability to compete in our core markets or allow us to enter new markets. Acquisitions, involve numerous risks, any
of which could harm our business, including, difficulty in integrating the technologies, products, operations and existing contracts
of a target company and realizing the anticipated benefits of the combined businesses; difficulty in supporting and transitioning
customers, if any, of the target company; inability to achieve anticipated synergies or increase the revenue and profit of the
acquired business; potential disruption of our ongoing business and distraction of management; the price we pay or other resources
that we devote may exceed the value we realize; or the value we could have realized if we had allocated the purchase price or
other resources to another opportunity and inability to generate sufficient revenue to offset acquisition costs.
If
we finance acquisitions by issuing equity securities, our existing stockholders may be diluted; and as a result, if we fail to
properly evaluate acquisitions or investments, we may not achieve the anticipated benefits of any such acquisitions, and we may
incur costs in excess of what we anticipate.
RISKS
ASSOCIATED WITH OUR COMMON STOCK
If
we issue additional shares in the future our existing shareholders will experience dilution.
Our
certificate of incorporation authorizes the issuance of up to 125,000,000 shares of common stock with a par value of $0.001. Our
board of directors may choose to issue some or all of such shares to acquire one or more businesses or to provide additional financing
in the future. The issuance of any such shares will result in a reduction of the book value and market price of the outstanding
shares of our common stock. If we issue any such additional shares, such issuance will cause a reduction in the proportionate
ownership and voting power of all current shareholders. Further, such issuance may result in a change of control of our corporation.
Trading
on the OTC Markets may be volatile and sporadic, which could depress the market price of our common stock and make it difficult
for our stockholders to resell their shares.
Our
common stock is quoted on OTC Markets. Trading in stock quoted on OTC Markets is often thin and characterized by wide fluctuations
in trading prices due to many factors that may have little to do with our operations or business prospects. This volatility could
depress the market price of our common stock for reasons unrelated to operating performance. Moreover, OTC Markets is not a stock
exchange, and trading of securities on the OTC Markets is often more sporadic than the trading of securities listed on a quotation
system like NASDAQ or a stock exchange like the American Stock Exchange. Accordingly, our shareholders may have difficulty reselling
any of their shares.
Our
stock is a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations and FINRA’s sales
practice requirements, which may limit a stockholder’s ability to buy and sell our stock.
Our
stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock”
to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00
per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The
term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with
a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level
of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for
the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing
the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer
and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special
written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written
agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the
secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the
ability of broker-dealers to trade our securities. We believe the penny stock rules discourage investor interest in, and limit
the marketability of, our common stock.
FINRA
sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
In
addition to the “penny stock” rules promulgated by the Securities and Exchange Commission (see above for a discussion
of penny stock rules), FINRA rules require that in recommending an investment to a customer, a broker-dealer must have reasonable
grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities
to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s
financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes
that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA
requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit
your ability to buy and sell our stock and have an adverse effect on the market for our shares.
RISKS
RELATED TO THE OFFERING
Our
existing stockholders may experience significant dilution from the sale of our common stock pursuant to the GHS Financing Agreement.
The
sale of our common stock to GHS Investments LLC in accordance with the Financing Agreement may have a dilutive impact on our shareholders.
As a result, the market price of our common stock could decline. In addition, the lower our stock price is at the time we exercise
our put options, the more shares of our common stock we will have to issue to GHS in order to exercise a put under the Financing
Agreement. If our stock price decreases, then our existing shareholders would experience greater dilution for any given dollar
amount raised through the offering.
The
perceived risk of dilution may cause our stockholders to sell their shares, which may cause a decline in the price of our common
stock. Moreover, the perceived risk of dilution and the resulting downward pressure on our stock price could encourage investors
to engage in short sales of our common stock. By increasing the number of shares offered for sale, material amounts of short selling
could further contribute to progressive price declines in our common stock.
The
issuance of shares pursuant to the GHS Financing Agreement may have a significant dilutive effect.
Depending
on the number of shares we issue pursuant to the GHS Financing Agreement, it could have a significant dilutive effect upon our
existing shareholders. Although the number of shares that we may issue pursuant to the Financing Agreement will vary based on
our stock price (the higher our stock price, the less shares we have to issue), there may be a potential dilutive effect to our
shareholders, based on different potential future stock prices, if the full amount of the Financing Agreement is realized. Dilution
is based upon common stock put to GHS and the stock price discounted to GHS’s purchase price of 82% of the lowest
trading price during the pricing period.
GHS
Investments LLC will pay less than the then-prevailing market price of our common stock which could cause the price of our common
stock to decline.
Our
common stock to be issued under the GHS Financing Agreement will be purchased at a eighteen percent (18%) discount,
or eighty percent (82%) of the lowest trading price during the ten (10) consecutive trading days immediately preceding
our notice to GHS of our election to exercise our “put” right.
GHS
has a financial incentive to sell our shares immediately upon receiving them to realize the profit between the discounted price
and the market price. If GHS sells our shares, the price of our common stock may decrease. If our stock price decreases, GHS may
have further incentive to sell such shares. Accordingly, the discounted sales price in the Financing Agreement may cause the price
of our common stock to decline.
We
may not have access to the full amount under the Financing Agreement.
On
October 3, 2019, the lowest traded price of the Company’s common stock during the ten (10) consecutive trading
day period immediately preceding the filing of this Registration Statement was $1.08. At that price we would be able to
sell shares to GHS under the Financing Agreement at the discounted price of $0.886. At that discounted price, the 230,000
shares registered for issuance to GHS under the Financing Agreement would, if sold by us to GHS, result in aggregate proceeds
of $203,780. There is no assurance the price of our common stock will remain the same as the market price or increase.
Unless
an active trading market develops for our securities, investors may not be able to sell their shares.
We
are a reporting company and our common shares are quoted on OTC Markets (OTC Pink) under the symbol “DSGT”. However,
there is a very limited active trading market for our common stock; and an active trading market may never develop or, if it does
develop, may not be maintained. Failure to develop or maintain an active trading market will have a generally negative effect
on the price of our common stock, and you may be unable to sell your common stock or any attempted sale of such common stock may
have the effect of lowering the market price, and therefore, your investment may be partially or completely lost.
Since
our common stock is thinly traded it is more susceptible to extreme rises or declines in price, and you may not be able to sell
your shares at or above the price paid.
Since
our common stock is thinly traded its trading price is likely to be highly volatile and could be subject to extreme fluctuations
in response to various factors, many of which are beyond our control, including (but not necessarily limited to):
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the
trading volume of our shares;
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the
number of securities analysts, market-makers and brokers following our common stock;
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new
products or services introduced or announced by us or our competitors;
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actual
or anticipated variations in quarterly operating results;
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conditions
or trends in our business industries;
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announcements
by us of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;
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additions
or departures of key personnel;
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sales
of our common stock; and
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general
stock market price and volume fluctuations of publicly-traded, and particularly microcap, companies.
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Investors
may have difficulty reselling shares of our common stock, either at or above the price they paid for our stock, or even at fair
market value. The stock markets often experience significant price and volume changes that are not related to the operating performance
of individual companies, and because our common stock is thinly traded it is particularly susceptible to such changes. These broad
market changes may cause the market price of our common stock to decline regardless of how well we perform as a company. In addition,
there is a history of securities class action litigation following periods of volatility in the market price of a company’s
securities. Although there is no such litigation currently pending or threatened against us, such a suit against us could result
in the incursion of substantial legal fees, potential liabilities and the diversion of management’s attention and resources
from our business. Moreover, and as noted below, our shares are currently traded on the OTC Link (OTC Pink tier) and, further,
are subject to the penny stock regulations. Price fluctuations in such shares are particularly volatile and subject to potential
manipulation by market-makers, short-sellers and option traders.
Item
4. USE OF PROCEEDS
The
Company will use the proceeds from the sale of the Shares for general corporate and working capital purposes and acquisitions
or assets, businesses or operations or for other purposes that the Board of Directors, in good faith deem to be in the best interest
of the Company.
Item
5. DETERMINATION OF OFFERING PRICE
We
have not set an offering price for the shares registered hereunder, as the only shares being registered are those sold pursuant
to the GHS Financing Agreement. GHS may sell all or a portion of the shares being offered pursuant to this prospectus at fixed
prices and prevailing market prices at the time of sale, at varying prices or at negotiated prices.
Item
6. DILUTION
Not
applicable. The shares registered under this registration statement are not being offered for purchase. The shares are being registered
on behalf of our selling shareholders pursuant to the GHS Financing Agreement.
Item
7. SELLING SECURITY HOLDER
The
selling stockholder identified in this prospectus may offer and sell up to 230,000 shares of our common stock, which consists
of shares of common stock to be sold by GHS pursuant to the Financing Agreement. If issued presently, the shares of common stock
registered for resale by GHS would represent 20.26% of our issued and outstanding shares of common stock as of October
3, 2019.
We
may require the selling stockholder to suspend the sales of the shares of our common stock being offered pursuant to this prospectus
upon the occurrence of any event that makes any statement in this prospectus or the related registration statement untrue in any
material respect or that requires the changing of statements in those documents in order to make statements in those documents
not misleading.
The
selling stockholder identified in the table below may from time to time offer and sell under this prospectus any or all of the
shares of common stock described under the column “Shares of Common Stock Being Offered” in the table below.
GHS
will be deemed to be an underwriter within the meaning of the Securities Act. Any profits realized by such selling stockholder
may be deemed to be underwriting commissions.
Information
concerning the selling stockholder may change from time to time and, if necessary, we will amend or supplement this prospectus
accordingly. We cannot give an estimate as to the number of shares of common stock that will actually be held by the selling stockholder
upon termination of this offering, because the selling stockholders may offer some or all of the common stock under the offering
contemplated by this prospectus or acquire additional shares of common stock. The total number of shares that may be sold, hereunder,
will not exceed the number of shares offered, hereby. Please read the section entitled “Plan of Distribution” in this
prospectus.
The
manner in which the selling stockholder acquired or will acquire shares of our common stock is discussed below under “The
Offering.”
The
following table sets forth the name of each selling stockholder, the number of shares of our common stock beneficially owned by
such stockholder before this offering, the number of shares to be offered for such stockholder’s account and the number
and (if one percent or more) the percentage of the class to be beneficially owned by such stockholder after completion of the
offering. The number of shares owned are those beneficially owned, as determined under the rules of the SEC, and such information
is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any
shares of our common stock as to which a person has sole or shared voting power or investment power and any shares of common stock
which the person has the right to acquire within 60 days, through the exercise of any option, warrant or right, through conversion
of any security or pursuant to the automatic termination of a power of attorney or revocation of a trust, discretionary account
or similar arrangement, and such shares are deemed to be beneficially owned and outstanding for computing the share ownership
and percentage of the person holding such options, warrants or other rights, but are not deemed outstanding for computing the
percentage of any other person. Beneficial ownership percentages are calculated based on 904,969 shares of our common stock
outstanding as of October 3, 2019.
Unless
otherwise set forth below, (a) the persons and entities named in the table have sole voting and sole investment power with respect
to the shares set forth opposite the selling stockholder’s name, subject to community property laws, where applicable, and
(b) no selling stockholder had any position, office or other material relationship within the past three years, with us or with
any of our predecessors or affiliates. The number of shares of common stock shown as beneficially owned before the offering is
based on information furnished to us or otherwise based on information available to us at the timing of the filing of the registration
statement of which this prospectus forms a part.
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Shares
Owned by
the Selling
Stockholders
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Shares of
Common
Stock
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Number of Shares to
be Owned by Selling
Stockholder After the
Offering and Percent
of Total Issued and
Outstanding Shares
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Name of Selling Stockholder
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before the
Offering (1)
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Being
Offered
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# of
Shares (2)
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% of
Class (2)
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GHS Investments LLC (3)
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0
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230,000
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(4)
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0
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0
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%
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Notes:
(1)
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Beneficial
ownership is determined in accordance with Securities and Exchange Commission rules and generally includes voting or investment
power with respect to shares of common stock. Shares of common stock subject to options, warrants and convertible debentures
currently exercisable or convertible, or exercisable or convertible within 60 days, are counted as outstanding. The actual
number of shares of common stock issuable upon the conversion of the convertible debentures is subject to adjustment depending
on, among other factors, the future market price of our common stock, and could be materially less or more than the number
estimated in the table.
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(2)
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Because
the selling stockholders may offer and sell all or only some portion of the 230,000 shares of our common stock being offered
pursuant to this prospectus and may acquire additional shares of our common stock in the future, we can only estimate the
number and percentage of shares of our common stock that any of the selling stockholders will hold upon termination of the
offering.
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(3)
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Mark
Grober exercises voting and dispositive power with respect to the shares of our common stock that are beneficially owned by
GHS Investments LLC.
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(4)
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Consists
of up to 230,000 shares of common stock to be sold by GHS pursuant to the Financing Agreement.
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THE
OFFERING
On
September 18, 2019, we entered into an Equity Financing Agreement (the “Financing Agreement”) with GHS Investments
LLC (“GHS”). Although we are not mandated to sell shares under the Financing Agreement, the Financing Agreement gives
us the option to sell to GHS, up to $7,000,000 worth of our common stock over the period ending forty-eight (48) months
after the date this Registration Statement is deemed effective. The $7,000,000 was stated as the total amount of available funding
in the Financing Agreement because this was the maximum amount that GHS agreed to offer us in funding. There is no assurance the
market price of our common stock will increase in the future. The number of common shares that remain issuable may not be sufficient,
dependent upon the share price, to allow us to access the full amount contemplated under the Financing Agreement. If the bid/ask
spread remains the same, we will not be able to place a put for the full commitment under the Financing Agreement. Based on the
lowest traded price of our common stock during the ten (10) consecutive trading day period preceding October 3,
2019 of $1.08, the registration statement covers the offer and possible sale of $203,780 worth of our shares.
The
purchase price of the common stock will be set at eighty percent (82%) of the lowest trading price of the common stock
during the ten (10) consecutive trading day period immediately preceding the date on which the Company delivers a put notice
to GHS. In addition, there is an ownership limit for GHS of 4.99%.
GHS
is not permitted to engage in short sales involving our common stock during the term of the commitment period. In accordance with
Regulation SHO, however, sales of our common stock by GHS after delivery of a put notice of such number of shares reasonably expected
to be purchased by GHS under a put will not be deemed a short sale.
In
addition, we must deliver the other required documents, instruments and writings required. GHS is not required to purchase the
put shares unless:
|
●
|
Our
registration statement with respect to the resale of the shares of common stock delivered in connection with the applicable
put shall have been declared effective;
|
|
●
|
we
shall have obtained all material permits and qualifications required by any applicable state for the offer and sale of the
registrable securities; and
|
|
●
|
we
shall have filed all requisite reports, notices, and other documents with the SEC in a timely manner.
|
As
we draw down on the equity line of credit, shares of our common stock will be sold into the market by GHS. The sale of these shares
could cause our stock price to decline. In turn, if our stock price declines and we issue more puts, more shares will come into
the market, which could cause a further drop in our stock price. You should be aware that there is an inverse relationship between
the market price of our common stock and the number of shares to be issued under the equity line of credit. If our stock price
declines, we will be required to issue a greater number of shares under the equity line of credit. We have no obligation to utilize
the full amount available under the equity line of credit.
Neither
the Financing Agreement nor any of our rights or GHS’s rights thereunder may be assigned to any other person.
Item
8. PLAN OF DISTRIBUTION
Each
of the selling stockholders named above and any of their pledgees and successors-in-interest may, from time to time, sell any
or all of their shares of common stock on OTC Markets or any other stock exchange, market or trading facility on which the shares
of our common stock are traded or in private transactions. These sales may be at fixed prices and prevailing market prices at
the time of sale, at varying prices or at negotiated prices. The selling stockholders may use any one or more of the following
methods when selling shares:
|
●
|
ordinary
brokerage transactions and transactions in which the broker-dealer solicits purchasers;
|
|
●
|
block
trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
|
|
●
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its account;
|
|
●
|
privately
negotiated transactions;
|
|
●
|
broker-dealers
may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;
|
|
●
|
a
combination of any such methods of sale; or
|
Broker-dealers
engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from
the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal
transaction a markup or markdown in compliance with FINRA IM-2440.
GHS
is an underwriter within the meaning of the Securities Act of 1933 and any broker-dealers or agents that are involved in selling
the shares may be deemed to be “underwriters” within the meaning of the Securities Act of 1933 in connection with
such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares
purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act of 1933. GHS has informed
us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute
the common stock of our company. Pursuant to a requirement by FINRA, the maximum commission or discount to be received by any
FINRA member or independent broker-dealer may not be greater than 8% of the gross proceeds received by us for the sale of any
securities being registered pursuant to Rule 415 promulgated under the Securities Act of 1933.
Discounts,
concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by the selling
stockholder. The selling stockholder may agree to indemnify any agent, dealer, or broker-dealer that participates in transactions
involving sales of the shares if liabilities are imposed on that person under the Securities Act of 1933.
We
are required to pay certain fees and expenses incurred by us incident to the registration of the shares covered by this prospectus.
We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act of 1933. We will not receive any proceeds from the resale of any of the shares of our common stock by
the selling stockholders. We may, however, receive proceeds from the sale of our common stock under the Financing Agreement with
GHS. Neither the Financing Agreement with GHS nor any rights of the parties under the Financing Agreement with GHS may be assigned
or delegated to any other person.
We
have entered into an agreement with GHS to keep this prospectus effective until GHS has sold all of the common shares purchased
by it under the Financing Agreement and has no right to acquire any additional shares of common stock under the Financing Agreement.
The
resale shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities
laws. In addition, in certain states, the resale shares may not be sold unless they have been registered or qualified for sale
in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
Under
applicable rules and regulations under the Securities Exchange Act of 1934, any person engaged in the distribution of the resale
shares may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted
period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling stockholders will
be subject to applicable provisions of the Securities Exchange Act of 1934 and the rules and regulations thereunder, including
Regulation M, which may limit the timing of purchases and sales of shares of the common stock by the selling stockholders or any
other person. We will make copies of this prospectus available to the selling stockholders.
Item
9. DESCRIPTION OF SECURITIES TO BE REGISTERED
General
We
are authorized to issue an aggregate of one hundred fifty million (150,000,000) shares of common stock, $0.001 par value per share.
As of October 3, 2019, we had 904,969 shares of common stock are outstanding.
Each
share of common stock shall have one (1) vote per share. Our common stock does not provide a preemptive, subscription or conversion
rights and there are no redemption or sinking fund provisions or rights. Our common stock holders are not entitled to cumulative
voting for election of Board of Directors.
Dividends
We
have not paid any cash dividends to our shareholders. The declaration of any future cash dividends is at the discretion of our
board of directors and depends upon our earnings, if any, our capital requirements and financial position, our general economic
conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future,
but rather to reinvest earnings, if any, in our business operations.
Warrants
There
are no outstanding warrants to purchase our securities.
Options
There
are no outstanding options to purchase our securities.
Nevada
Anti-Takeover Laws
As
a Nevada corporation, we are subject to certain anti-takeover provisions that apply to public corporations under Nevada law. Pursuant
to Section 607.0901 of the Nevada Business Corporation Act, or the Nevada Act, a publicly held Nevada corporation may not engage
in a broad range of business combinations or other extraordinary corporate transactions with an interested shareholder without
the approval of the holders of two-thirds of the voting shares of the corporation (excluding shares held by the interested shareholder),
unless:
|
●
|
the
transaction is approved by a majority of disinterested directors before the shareholder becomes an interested shareholder;
|
|
●
|
the
interested shareholder has owned at least 80% of the corporation’s outstanding voting shares for at least five years
preceding the announcement date of any such business combination;
|
|
●
|
the
interested shareholder is the beneficial owner of at least 90% of the outstanding voting shares of the corporation, exclusive
of shares acquired directly from the corporation in a transaction not approved by a majority of the disinterested directors;
or
|
|
●
|
the
consideration paid to the holders of the corporation’s voting stock is at least equal to certain fair price criteria.
|
An
interested shareholder is defined as a person who, together with affiliates and associates, beneficially owns more than 10% of
a corporation’s outstanding voting shares. We have not made an election in our amended Articles of Incorporation to opt
out of Section 607.0901.
In
addition, we are subject to Section 607.0902 of the Nevada Act which prohibits the voting of shares in a publicly held Nevada
corporation that are acquired in a control share acquisition unless (i) our board of directors approved such acquisition prior
to its consummation or (ii) after such acquisition, in lieu of prior approval by our board of directors, the holders of a majority
of the corporation’s voting shares, exclusive of shares owned by officers of the corporation, employee directors or the
acquiring party, approve the granting of voting rights as to the shares acquired in the control share acquisition. A control share
acquisition is defined as an acquisition that immediately thereafter entitles the acquiring party to 20% or more of the total
voting power in an election of directors.
Penny
Stock Considerations
Our
shares will be “penny stocks” as that term is generally defined in the Securities Exchange Act of 1934 to mean equity
securities with a price of less than $5.00 per share. Thus, our shares will be subject to rules that impose sales practice and
disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock. Under the penny stock regulations,
a broker-dealer selling a penny stock to anyone other than an established customer must make a special suitability determination
regarding the purchaser and must receive the purchaser’s written consent to the transaction prior to the sale, unless the
broker-dealer is otherwise exempt.
In
addition, under the penny stock regulations, the broker-dealer is required to:
|
●
|
Deliver,
prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission
relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;
|
|
●
|
Disclose
commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;
|
|
●
|
Send
monthly statements disclosing recent price information pertaining to the penny stock held in a customer’s account, the
account’s value, and information regarding the limited market in penny stocks; and
|
|
●
|
Make
a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s
written agreement to the transaction, prior to conducting any penny stock transaction in the customer’s account.
|
Because
of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our common stock, which may
affect the ability of selling shareholders or other holders to sell their shares in the secondary market, and have the effect
of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements
could impede the sale of our securities, if our securities become publicly traded. In addition, the liquidity for our securities
may be decreased, with a corresponding decrease in the price of our securities. Our shares in all probability will be subject
to such penny stock rules and our shareholders will, in all likelihood, find it difficult to sell their securities.
Item
10. INTERESTS OF NAMED EXPERTS AND COUNSEL
The
audited financial statements for the Company for the year ended December 31, 2017 included in this prospectus have been audited
by Saturna Group Chartered Professional Accountants LLP, an independent registered public accounting firm, to the extent and for
the periods set forth in our report and are incorporated herein in reliance upon such report given upon the authority of said
firm as experts in auditing and accounting.
The
audited financial statements for the Company for the year ended December 31, 2018 included in this prospectus have been audited
by Buckley Dodds LLP, an independent registered public accounting firm, to the extent and for the periods set forth in our report
and are incorporated herein in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.
The
legality of the shares offered under this registration statement is being passed upon by Brunson Chandler, & Jones, PLLC.
Item
11. INFORMATION WITH RESPECT TO THE REGISTRANT
DESCRIPTION
OF BUSINESS
DSG
Global, Inc. is a technology development company based in Surrey, British Columbia, Canada, engaged in the design, manufacture,
and marketing of fleet management solutions for the golf industry, as well as commercial, government and military applications.
Our principal activities are the sale and rental of GPS tracking devices and interfaces for golf vehicles, and related support
services. We were founded by a group of individuals who have dedicated their careers to fleet management technologies and have
been at the forefront of the industry’s most innovative developments, and our executive team has over 50 years of experience
in the design and manufacture of wireless, GPS, and fleet tracking solutions. We have developed the TAG suite of products that
we believe is the first completely modular fleet management solution for the golf industry. The TAG suite of products is currently
sold and installed around the world in golf facilities and as commercial applications through a network of established distributors
and partnerships with some of the most notable brands in fleet and equipment manufacture.
DSG
stands for “Digital Security Guard”, which is our primary value statement giving fleet operator’s new capabilities
to track and control their vehicles. We have developed a proprietary combination of hardware and software that is marketed around
the world as the TAG system. We have primarily focused on the golf industry where the TAG system is deployed to help golf course
operators manage their fleet of golf carts, turf equipment, and utility vehicles. We are a leader in the category of fleet management
in the golf industry and were awarded “Best Technology of the Year” in 2010 by Boardroom magazine, a publication of
the National Golf Course Owners Association. To date the TAG system is installed on over 8,000 vehicles and has been used to monitor
over 6,000,000 rounds of golf.
The
TAG system fills a void in the marketplace by offering a modular structure that allows the customer to customize their system
to meet desired functionality and budget constraints. In addition to the core TAG system vehicle control functionality, which
can operate independently, we offer two golfer information display systems — the alphanumeric INFINITY 7” and high
definition INFINITY XL 12” — providing the operator with two display options which is unique in the industry.
The
primary market for our TAG system is the 40,000 golf operations worldwide. While the golf industry remains the primary focus of
our sales and marketing efforts, we have completed several successful pilots of the TAG system in other markets such as agriculture
and commercial fleet operations. With appropriate resources, we intend to expand our sales and marketing efforts into these new
markets.
We
have a direct sales force in North America, which comprises the most significant portion of the golf fleet market and have developed
key relationships with distributors and golf equipment manufacturers such as E-Z-GO, Yamaha and Ransomes Jacobsen to help drive
sales for the North American and worldwide markets.
In
order to successfully deliver products, increase sales, and maintain customer satisfaction, we need to have a reliable supplier
of our hardware units and components at competitive prices. Presently, we source our INFINITY XL 12” units from one supplier
in China and our TAG units from one supplier in the United Kingdom. We have recently established a new relationship with a supplier
for our INFINITY XL 12” units in China to provide us with higher quality, newer technology at competitive pricing. We are
also exploring the opportunity of a partnership with a US manufacturer.
Competition
We
compete with a number of established producers and distributors of vehicle fleet management systems, as well as producers of non-golf
specific utility vehicle fleet management systems. Many of our competitors have longer operating histories, better brand recognition
and greater financial resources than we do. In order for us to successfully compete in our industry we must demonstrate our products’
competitive advantages, develop a comprehensive marketing system, and increase our financial resources.
We
believe that we will be able to compete effectively in our industry because of the versatility, reliability, and relative affordability
of our products when compared to those of our competitors. We will attempt to build awareness of our competitive advantages among
existing and potential customers through trade shows, sales visits and demonstrations, online marketing, and positive word of
mouth advertising. However, there can be no assurance that even if we do these things, we will be able to compete effectively
with the other companies in our industry.
Intellectual
Property
General
Our
success will depend in part on our ability to protect our products and product candidates by obtaining and maintaining a strong
proprietary position both in the United States and in other countries. To develop and maintain our proprietary position, we will
rely on patent protection, trade secrets, know-how, continuing technological innovations and licensing opportunities. In that
regard, we retain and rely on the advice of legal counsel specialized in the field of intellectual property.
Patents
|
|
DSG
owns two U.S. patents
|
|
|
|
|
●
|
US
Patent No. 8,836,490 for a “Vehicle Management” was issued September 16, 2014 and expires June 29, 2031.
|
|
|
|
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●
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US
Patent No. 9,280,902 for a “Facilities Management” was issued March 8, 2016 and expires January 24, 2032.
|
Patent
Litigation
On
December 30, 2012, a corporation filed an action against DSG in the United States courts claiming patent infringement. On March
8, 2013, the parties agreed to a settlement, with the Company admitting no wrong doing, in the amount of $125,000. The settlement
is to be paid over an 18-month period in equal installments of $7,500 with annual interest rate of 8%. DSG has accrued all liabilities
related to this matter in the financial statements.
Domain
Names
We
have registered and own the domain name of our website www.dsgtag .com.
Copyright
We
own the common law copyright in the contents of our website (www.dsgtag.com) and our various promotional materials.
Trademarks
We
own the common-law trademark rights in our corporate name, product names, and associated logos, including “DSG TAG”,
“TAG Golf”, “ECO TAG”, “TAG Infinity 7”, “TAG Infinity XL 12”, “TAG Turf”,
“TAG Commercial” and “TAG Military”. We have not applied to register any trademarks with the U.S. Patent
and Trademark Office.
Employees
As
of April 28, 2017, we have 5 full-time employees in general and administrative, operations, engineering, research and development,
business development, sales and marketing, and finance. We also engage independent contractors and consultants from time to time
on an as-needed basis to supplement our core staff.
Legal
Proceedings
On
June 4, 2015, a lawsuit was commenced against VTS TAG Systems Inc. in the Supreme Court of British Columbia, captioned Amanda
McGuire v. DSG TAG Systems Inc., No. S-154634, Vancouver Registry. The plaintiff alleges that a promissory note in the principal
amount of $100,000 CDN issued by DSG TAG Systems was not converted into common shares of DSG TAG Systems, as asserted by DSG TAG
Systems, and the plaintiff seeks repayment of indebtedness in the amount of $100,000 CDN plus interest and costs. An agreement
was reached on August 13, 2015 between DSG TAG Systems and the plaintiff, pursuant to which DSG TAG Systems agreed to pay the
plaintiff $119,700 CDN in monthly installations of $17,100 CDN, the first payment commencing on October 1, 2015, and the plaintiff
agreed to exchange 101,200 shares of common stock of DSG Tag Systems for 18,422 shares of common stock of DSG Global, which exchange
occurred on October 22, 2015. On October 17, 2016, the Supreme Court of British Columbia made an order in relating to the above
discussed lawsuit from a shareholder to recover a loan of CAD$100,000. DSG TAG was ordered to repay the remaining loan plus costs
in the amount of $77,589 to the shareholder in 14 monthly payments of $5,500 each plus $589 at the 15th month, starting February
15, 2017.
On
September 7, 2016, Chetu Inc. has filed a Complaint for Damage in Florida to recover unpaid invoice amounts of $27,335 plus interest
of $4,939. The invoice was not paid due to a dispute that DSG TAG did not think that vendor had delivered the service according
to the agreement between the two parties. As at December 31, 2018, we have accrued $22,396 related to this unpaid invoice plus
additional interest and legal fees.
On
May 24, 2017, we 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
December 31, 2018, 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.
No accrual has been recorded because the Company is of the opinion that no obligation exists since the vendors have not performed
their contractual duties.
On
February 9, 2017, we received a notice of default from Auctus Fund LLC (“Auctus”), on a 12% convertible promissory
note issued to the Company in the principal amount of $75,000 and commenced a lawsuit on February 2, 2018 in the United States
District Court, District of Massachusetts. Auctus alleges that the Company failed to honor a conversion notice under the terms
of the note, and thus giving rise to an event of default. Auctus seeks damages in excess of $306,681, which consists of the principal
amount of the note, liquidated damages, and default interest, and legal fees incurred by Auctus with respect to the lawsuit. On
June 1, 2018 the remaining $58,167 note balance, including principal and interest, was reassigned to another unrelated note holder
and the note was extinguished. Refer to Note 9(e) and 9(z) of the consolidated financial statements.
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 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. As at December 31, 2018, the principal balance
and accrued interest on this convertible note is included on the consolidated balance sheet under convertible notes payable.
We
may, from time to time, be party to litigation and subject to claims incident to the ordinary course of business. As our growth
continues, we may become party to an increasing number of litigation matters and claims. The outcome of litigation and claims
cannot be predicted with certainty, and the resolution of any future matters could materially affect our future financial position,
results of operations or cash flows.
Government
Regulation
In
addition to regulations applicable to businesses in general, we may also be subject to direct regulation by governmental agencies,
including the FCC and Department of Defense.
Other
Information
None.
DESCRIPTION
OF PROPERTY
Our
principal executive office is located at 312 – 2630 Croydon Drive, Surrey, BC, V3Z 6T3 Canada, where we lease approximately
2,024 square feet of office space. On June 1, 2018, the Company signed a two-year operating lease agreement which commenced on
July 1, 2018 and expires on May 31, 2020 with the right to renew for an additional two-year term if written notice is provided
within 120 days prior to the expiration of the current term.
MARKET
PRICE OF THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Common
Stock
Our
common stock is currently quoted on the OTC Market’s OTCQB Venture Marketplace (“OTCQB”) under the symbol “DSGT”.
The following table sets forth for the periods indicated the high and low price per share of our common stock as reported
on the OTCQB. The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not
represent actual transactions:
OTC
Markets Group Inc. OTCQB (1)
|
|
High
$
|
|
|
Low
$
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
|
3.75
|
|
|
|
0.98
|
|
March 31, 2019
|
|
|
4.00
|
|
|
|
0.80
|
|
December 31, 2018
|
|
|
6.00
|
|
|
|
2.40
|
|
September 30, 2018
|
|
|
10.40
|
|
|
|
2.40
|
|
June 30, 2018
|
|
|
33.20
|
|
|
|
4.60
|
|
March 31, 2018
|
|
|
26.00
|
|
|
|
4.00
|
|
December 31, 2017
|
|
|
2,320
|
|
|
|
400
|
|
September 30, 2017
|
|
|
2,520
|
|
|
|
280
|
|
(1)
Over-the-counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent
actual transactions.
Holders
of Record
As
of December 31, 2018, we had 76 holders of record of our common stock. The actual number of stockholders is greater than this
number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers
and other nominees.
Dividends
We
have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future
earnings for use in the operation of our business and do not anticipate paying any dividends on our common stock in the foreseeable
future, if at all. Any future determination to declare dividends will be made at the discretion of our board of directors and
will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors
that our board of directors may deem relevant.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
You
should read the following discussion of our financial condition and results of operations in conjunction with financial statements
and notes thereto included elsewhere in this prospectus. The following discussion contains forward-looking statements that reflect
our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.
Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly
in the section labeled “Risk Factors.”
This
section of the prospectus includes a number of forward-looking statements that reflect our current views with respect to future
events and financial performance. Forward-looking statements are often identified by words like “believe,” “expect,”
“estimate,” “anticipate,” “intend,” “project,” and similar expressions, or words
that, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which
apply only as of the date of this prospectus. These forward-looking statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from historical results or our predictions.
Overview
DSG
Global, Inc. is a technology development company based in Surrey, British Columbia, Canada, engaged in the design, manufacture,
and marketing of fleet management solutions for the golf industry, as well as commercial, government and military applications.
Our principal activities are the sale and rental of GPS tracking devices and interfaces for golf vehicles, and related support
services. We were founded by a group of individuals who have dedicated their careers to fleet management technologies and have
been at the forefront of the industry’s most innovative developments, and our executive team has over 50 years of experience
in the design and manufacture of wireless, GPS, and fleet tracking solutions. We have developed the TAG suite of products that
we believe is the first completely modular fleet management solution for the golf industry. The TAG suite of products is currently
sold and installed around the world in golf facilities and as commercial applications through a network of established distributors
and partnerships with some of the most notable brands in fleet and equipment manufacture.
DSG
stands for “Digital Security Guard”, which is our primary value statement giving fleet operator’s new capabilities
to track and control their vehicles. We have developed a proprietary combination of hardware and software that is marketed around
the world as the TAG system. We have primarily focused on the golf industry where the TAG system is deployed to help golf course
operators manage their fleet of golf carts, turf equipment, and utility vehicles. We are a leader in the category of fleet management
in the golf industry and were awarded “Best Technology of the Year” in 2010 by Boardroom magazine, a publication of
the National Golf Course Owners Association. To date the TAG system is installed on over 8,000 vehicles and has been used to monitor
over 6,000,000 rounds of golf.
The
TAG system fills a void in the marketplace by offering a modular structure that allows the customer to customize their system
to meet desired functionality and budget constraints. In addition to the core TAG system vehicle control functionality, which
can operate independently, we offer two golfer information display systems — the alphanumeric INFINITY 7” and high
definition INFINITY XL 12” — providing the operator with two display options which is unique in the industry.
The
primary market for our TAG system is the 40,000 golf operations worldwide. While the golf industry remains the primary focus of
our sales and marketing efforts, we have completed several successful pilots of the TAG system in other markets such as agriculture
and commercial fleet operations. With appropriate resources, we intend to expand our sales and marketing efforts into these new
markets.
We
have a direct sales force in North America, which comprises the most significant portion of the golf fleet market and have developed
key relationships with distributors and golf equipment manufacturers such as E-Z-GO, Yamaha and Ransomes Jacobsen to help drive
sales for the North American and worldwide markets.
Reverse
Acquisition
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 DSG TAG Systems Inc. (“DSG Tag”) and the shareholders
of DSG TAG 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 DSG TAG 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 DSG TAG.
On
May 6, 2015, we completed the acquisition of approximately 75% (82,435,748 common shares) of the issued and outstanding common
shares of DSG TAG as contemplated by the share exchange agreement by issuing 15,185,875 pre-reverse split shares of our common
stock to shareholders of DSG TAG 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 DSG TAG.
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 DSG TAG 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 DSG TAG. An aggregate of 4,229,384 shares
of Series A Convertible Preferred Stock of DSG TAG 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.
The
reverse acquisition was accounted for as a recapitalization effected by a share exchange, wherein DSG TAG 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 DSG TAG upon the closing of the
share exchange agreement.
Factors
Affecting Our Performance
We
believe that the growth of our business and our future success depend on various opportunities, challenges and other factors,
including the following:
Inventory
Sourcing
In
order to successfully deliver products, increase sales, and maintain customer satisfaction, we need to have a reliable supplier
of our hardware units and components at competitive prices. Presently, we source our INFINITY XL 12” units from one supplier
in China and our TAG units from one supplier in the United Kingdom. We have recently established a new relationship with a supplier
for our INFINITY XL 12” units in China to provide us with higher quality, newer technology at competitive pricing.
In
addition, DSG is currently in negotiations with a telecommunications provider to provide new technology in hardware and wireless
access.
Competition
We
compete with a number of established producers and distributors of vehicle fleet management systems, as well as producers of non-golf
specific utility vehicle fleet management systems. Many of our competitors have longer operating histories, better brand recognition
and greater financial resources than we do. In order for us to successfully compete in our industry we must demonstrate our products’
competitive advantages, develop a comprehensive marketing system, and increase our financial resources.
We
believe that we will be able to compete effectively in our industry because of the versatility, reliability, and relative affordability
of our products when compared to those of our competitors. We will attempt to build awareness of our competitive advantages among
existing and potential customers through trade shows, sales visits and demonstrations, online marketing, and positive word of
mouth advertising. However, there can be no assurance that even if we do these things, we will be able to compete effectively
with the other companies in our industry.
Additional
Capital
We
require additional capital to continue to develop software and products, meet our contractual 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.
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 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 INFINITY 7”, or a TAG and INFINITY XL 12” ).
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 XL 12”
units.
We
recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable,
and collectability is reasonably assured. 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 2 – 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, INFINITY 7” display, and INFINITY
XL 12” display tablets. The TAG system control unit is sold as a stand-alone unit or in conjunction with our INFINITY 7”
alphanumeric display or INFINITY XL 12” high definition “Infinity XL 12” 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, research and development, 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.
Research
and development. Our research and development expenses consist primarily of personnel costs and professional services
associated with the ongoing development and maintenance of our technology.
Research
and development expenses include payroll, and other headcount-related expenses associated with product development. Research and
development expenses also include third-party development and programming costs. Such costs related to software development are
included in research and development expense until the point that technological feasibility is reached. Research and development
is expensed and is included in operating expenses.
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.
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.
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.
Results
of Operations
We
recognized net income of $6,893,187 for the three-month period ended June 30, 2019, which was $2,392,177 or 53.1% more than the
net income of $4,501,010 for the three-month period ended June 30, 2018. The primary reasons are attributable to the increase
in gain from change in fair value of derivative liabilities, decrease in loss on extinguishment of debt and decrease in finance
costs. Also contributing to this increase in gain is a decrease in loss from operations.
We
recognized a net loss of $279,786 for the six-month period ended June 30, 2019, which was $4,041,621 or 93.5% less than the net
loss of $4,321,407 for the six-month period ended June 30, 2018. The primary reasons are attributable to decrease in loss on extinguishment
of debt, decrease in finance costs the increase in gain from change in fair value of derivative liabilities. Also contributing
to this increase in gain is a decrease in loss from operations and increase in gain from change in fair value of derivative liabilities.
Comparison
of the three and six months ended June 30, 2019 and 2018:
Revenue
|
|
For the Three Months Ended June 30,
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
% Change
|
|
|
2019
|
|
|
2018
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
284,646
|
|
|
$
|
237,046
|
|
|
|
20.1
|
|
|
$
|
786,070
|
|
|
|
347,942
|
|
|
|
125.9
|
|
Revenue
increased by $47,600 or 20.1%, for the three months ended June 30, 2019 as compared to the three months ended June 30, 2018. Revenue
increased by $438,128 or 125.9%, for the six months ended June 30, 2019 as compared to the three months ended June 30, 2018.
Sales
increased as the result of aggressive marketing and installation of the new infinity suite of products compared to lower sales
in the comparative period.
Cost
of Revenue
|
|
For the Three Months Ended June 30,
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
% Change
|
|
|
2019
|
|
|
2018
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
$
|
32,886
|
|
|
$
|
79,552
|
|
|
|
(58.7
|
)
|
|
$
|
338,954
|
|
|
$
|
97,881
|
|
|
|
246.3
|
|
Cost
of revenue decreased by $46,666, or 58.7%, for the three months ended June 30, 2019 as compared to the three months June 30, 2018.
The overall decrease was due to the decrease of cost of goods sold, partially offset by an increase in wireless fees. The table
below outlines the differences in detail:
|
|
For the Three Months Ended
|
|
|
|
June
30,
2019
|
|
|
June
30,
2018
|
|
|
Difference
|
|
|
%
Difference
|
|
Cost of Goods
|
|
$
|
8,576
|
|
|
$
|
64,570
|
|
|
$
|
(55,994
|
)
|
|
|
(86.7
|
)
|
Labour
|
|
|
(28
|
)
|
|
|
-
|
|
|
|
(28
|
)
|
|
|
(100.0
|
)
|
Mapping & Freight Costs
|
|
|
(38
|
)
|
|
|
4,478
|
|
|
|
(4,516
|
)
|
|
|
(100.8
|
)
|
Wireless Fees
|
|
|
24,368
|
|
|
|
10,504
|
|
|
|
13,864
|
|
|
|
132.0
|
|
Inventory Write-off/Adjustments
|
|
|
8
|
|
|
|
-
|
|
|
|
8
|
|
|
|
100.0
|
|
|
|
$
|
32,886
|
|
|
$
|
79,552
|
|
|
$
|
(46,666
|
)
|
|
|
(58.7
|
)
|
Cost
of revenue increased by $241,073, or 246.3%, for the six months ended June 30, 2019 as compared to the six months June 30, 2018.
The overall increase was due to the increase of cost of goods sold and labour, partially offset by a decrease in wireless fees.
The table below outlines the differences in detail:
|
|
For the Six Months Ended
|
|
|
|
June
30,
2019
|
|
|
June
30,
2018
|
|
|
Difference
|
|
|
%
Difference
|
|
Cost of Goods
|
|
$
|
296,270
|
|
|
$
|
64,570
|
|
|
$
|
231,700
|
|
|
|
358.8
|
|
Labour
|
|
|
8,967
|
|
|
|
-
|
|
|
|
8,967
|
|
|
|
100.0
|
|
Mapping & Freight Costs
|
|
|
12,112
|
|
|
|
5,138
|
|
|
|
6,974
|
|
|
|
135.7
|
|
Wireless Fees
|
|
|
24,368
|
|
|
|
28,173
|
|
|
|
(3,805
|
)
|
|
|
(13.5
|
)
|
Inventory Write-off/Adjustments
|
|
|
(2,763
|
)
|
|
|
-
|
|
|
|
(2,763
|
)
|
|
|
(100.0
|
)
|
|
|
$
|
338,954
|
|
|
$
|
97,881
|
|
|
$
|
241,073
|
|
|
|
246.3
|
|
Compensation
Expense
|
|
For the Three Months Ended June 30,
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
% Change
|
|
|
2019
|
|
|
2018
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation Expense
|
|
$
|
144,673
|
|
|
$
|
209,174
|
|
|
|
(30.8
|
)
|
|
$
|
279,756
|
|
|
$
|
417,802
|
|
|
|
(33.0
|
)
|
Compensation
expense decreased by $64,501, or 30.8%, for the three months ended June 30, 2019 as compared to the three months ended June 30,
2018 due to a reduction in headcount and employees. Compensation expense decreased by $138,046, or 33.0%, for the six months ended
June 30, 2019 as compared to the six months ended June 30, 2018 due to a reduction in headcount and employees.
General
and Administration Expense
General
& administration expense decreased by $71,542 or 26.0% for the three months ended June 30, 2019 compared to the three months
ended June 30, 2018. The table below outlines the differences in detail:
|
|
For the Three Months Ended
|
|
|
|
June
30,
2019
|
|
|
June
30,
2018
|
|
|
Difference
|
|
|
%
Difference
|
|
Accounting & Legal
|
|
$
|
75,534
|
|
|
$
|
96,884
|
|
|
$
|
(21,350
|
)
|
|
|
(22.0
|
)
|
Marketing & Advertising
|
|
|
24,887
|
|
|
|
7,535
|
|
|
|
17,352
|
|
|
|
230.3
|
|
Subcontractor & Commissions
|
|
|
36,435
|
|
|
|
64,854
|
|
|
|
(28,419
|
)
|
|
|
(43.8
|
)
|
Hardware
|
|
|
1,091
|
|
|
|
21,632
|
|
|
|
(20,541
|
)
|
|
|
(95.0
|
)
|
Office Expense, Rent, Software, Bank & Credit Card Charges, Telephone, Travel, & Meals
|
|
|
65,991
|
|
|
|
84,575
|
|
|
|
(18,584
|
)
|
|
|
(22.0
|
)
|
|
|
$
|
203,938
|
|
|
$
|
275,480
|
|
|
$
|
(71,542
|
)
|
|
|
(26.0
|
)
|
The
overall decrease in general and administrative expenses was primary related to a decrease in subcontractor and commissions. Also
contributing to this decrease was a decrease in office expense, rent, software and other charges primarily due to a reduction
in rent expense and travel and other expenses. Rent expense decreased as the Company relocating to a new office space. Travel
and other expenses decreased as the Company began providing remote service and support, rather than on-site support and attended
a trade show in the prior but not current period.
General
& administration expense decreased by $201,799 or 31.9% for the six months ended June 30, 2019 compared to the three months
ended June 30, 2018. The table below outlines the differences in detail:
|
|
For the Six Months Ended
|
|
|
|
June 30,
2019
|
|
|
June
30,
2018
|
|
|
Difference
|
|
|
%
Difference
|
|
Accounting & Legal
|
|
$
|
84,855
|
|
|
$
|
144,670
|
|
|
$
|
(59,815
|
)
|
|
|
(41.3
|
)
|
Marketing & Advertising
|
|
|
45,793
|
|
|
|
20,218
|
|
|
|
25,575
|
|
|
|
126.5
|
|
Subcontractor & Commissions
|
|
|
127,311
|
|
|
|
121,162
|
|
|
|
6,149
|
|
|
|
5.1
|
|
Hardware
|
|
|
3,814
|
|
|
|
37,240
|
|
|
|
(33,426
|
)
|
|
|
(89.8
|
)
|
Office Expense, Rent, Software, Bank & Credit Card Charges, Telephone, Travel, & Meals
|
|
|
169,921
|
|
|
|
310,203
|
|
|
|
(140,282
|
)
|
|
|
(45.2
|
)
|
|
|
$
|
431,694
|
|
|
$
|
633,493
|
|
|
$
|
(201,799
|
)
|
|
|
(31.9
|
)
|
The
overall decrease in general and administrative expenses was primary related to a decrease in office expense, rent, software and
other charges of $140,282 or 45.2% primarily due to a reduction in rent expense and travel and other expenses. Rent expense decreased
as the Company relocating to a new office space. Travel and other expenses decreased as the Company began providing remote service
and support, rather than on-site support and attended a trade show in the prior but not current period.
Foreign
Currency Exchange
|
|
For the Three Months Ended June 30,
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
% Change
|
|
|
2019
|
|
|
2018
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange (gain) loss
|
|
$
|
(13,526
|
)
|
|
$
|
(410,454
|
)
|
|
|
(96.7
|
)
|
|
$
|
(31,163
|
)
|
|
$
|
150,212
|
|
|
|
(120.7
|
)
|
For
the three months ended June 30, 2019, we recognized a $13,526 foreign exchange gain as compared to a $410,454 foreign exchange
gain for the three months ended June 30, 2018. The change was primarily due to settlement of various foreign currency denominated
debt instruments in the prior year as well as beneficial changes in foreign currency rates on payables, receivables and other
foreign exchange transactions 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 Canadian Dollar, Euro and British pound.
For
the six months ended June 30, 2019, we recognized a $31,163 foreign exchange gain as compared to a $150,212 foreign exchange loss
for the six months ended June 30, 2018. The change was primarily due to settlement of various foreign currency denominated debt
instruments in the prior year as well as beneficial changes in foreign currency rates on payables, receivables and other foreign
exchange transactions 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 Canadian Dollar, Euro and British pound.
Unrealized
(Gain) Loss on Derivative
|
|
For the Three Months Ended June 30,
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
% Change
|
|
|
2019
|
|
|
2018
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (gain) loss on derivative
|
|
$
|
(7,356,541
|
)
|
|
$
|
(6,013,778
|
)
|
|
|
22.3
|
|
|
$
|
(720,624
|
)
|
|
$
|
(397,517
|
)
|
|
|
81.3
|
|
Derivative
gain increased by $1,342,763 or 22.3%, for the three months ended June 30, 2019 as compared to the three months ended June 30,
2018 due to the change in fair value as of June 30, 2018 triggering of unrealized gains on derivative instruments in the current
quarter ending on convertible notes payable. The change in fair value was impacted heavily due to the volatility in the Company’s
stock price.
Derivative
gain increased by $323,107 or 81.3%, for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018
due to the change in fair value as of June 30, 2018 triggering of unrealized gains on derivative instruments in the current quarter
ending on convertible notes payable. The change in fair value was impacted heavily due to the volatility in the Company’s
stock price.
|
|
For the Three Months Ended June 30,
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
% Change
|
|
|
2019
|
|
|
2018
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs
|
|
$
|
318,274
|
|
|
$
|
776,506
|
|
|
|
(59.0
|
)
|
|
$
|
620,030
|
|
|
$
|
1,517,068
|
|
|
|
(59.1
|
)
|
Finance
costs decreased by $458,232 or 59.0%, for the three months ended June 30, 2019 as compared to the three months ended June 30,
2018. Finance costs decreased due to the large number of conversions of settlement of notes in the current period and prior year.
Finance
costs decreased by $897,038 or 59.1%, for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018.
Finance costs decreased due to the large number of conversions of settlement of notes in the current period and prior year.
Net
Loss
|
|
For the Three Months Ended June 30,
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
% Change
|
|
|
2019
|
|
|
2018
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
6,893,187
|
|
|
$
|
4,501,010
|
|
|
|
53.1
|
|
|
$
|
(279,786
|
)
|
|
$
|
(4,321,407
|
)
|
|
|
(93.5
|
)
|
As
a result of the above factors, net income increased by $2,392,177 or 53.1% and net loss decreased by $4,041,621 or 93.5% for the
three and six months ended June 30, 2019 as compared to the three and six months ended June 30, 2018, respectively.
Liquidity
and Capital Resources
From
our incorporation in April 17, 2008 through June 30, 2019, 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 June 30, 2019, we had $7,346,720 in outstanding indebtedness, all of which matures
within the next twelve months.
We
had cash in the amount of $31,820 as of June 30, 2019, as compared to $5,059 as of December 31, 2018. We had a working capital
deficit of $6,839,345 as of June 30, 2019 compared to working capital deficit of $6,687,807 as of December 31, 2018.
Liquidity
and Financial Condition
Our
financial position as of June 30, 2019 and 2018, and the changes for the periods then ended are as follows:
Working
Capital
|
|
At
June 30,
2019
|
|
|
At December 31,
2018
|
|
Current Assets
|
|
$
|
500,121
|
|
|
$
|
333,239
|
|
Current Liabilities
|
|
$
|
7,339,466
|
|
|
$
|
7,021,046
|
|
Working Capital
|
|
$
|
(6,839,345
|
)
|
|
$
|
(6,687,807
|
)
|
Cash
Flow Analysis
Our
cash flows from operating, investing, and financing activities are summarized as follows:
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Net cash used in by operating activities
|
|
$
|
(248,239
|
)
|
|
$
|
(991,604
|
)
|
Net cash used in investing activities
|
|
|
-
|
|
|
|
(1,544
|
)
|
Net cash provided by financing activities
|
|
|
275,000
|
|
|
|
1,003,659
|
|
Net increase in cash
|
|
|
26,761
|
|
|
|
10,511
|
|
Cash at beginning of period
|
|
|
5,059
|
|
|
|
5,488
|
|
Cash at end of period
|
|
$
|
31,820
|
|
|
$
|
15,999
|
|
Net
Cash Used in Operating Activities. During the six months ended June 30, 2019, cash used in operations totaled $248,239.
This reflects the net loss of $279,786 less $31,547 provided by changes in operating assets and liabilities and adjustments for
non-cash items. Non-cash items and working capital items consisted primarily of non-cash change in fair value of derivative liabilities
of $720,624, non-cash accretion of discounts on debt of $328,055 and increase in trade payables and accruals of $554,903.
Net
Cash (Used in) Provided by Investing Activities . The Company had no investing activities in the six months ended June
30, 2019. Investing activities reduced cash by $1,544 in the six months ended June 30, 2018, related to the purchase of property,
plant and equipment.
Net
Cash Provided by Financing Activities . Net cash from financing activities during the six months ended June 30, 2019 totaled
$275,000, from various note and loan facilities entered during the period. Net cash provided by financing activities during the
six months ended June 30, 2018 was $1,003,659, primarily from various note and loan facilities entered during the period in addition
to the issuance of shares.
Outstanding
Indebtedness
Our
current indebtedness as of June 30, 2019 is comprised of the following:
|
●
|
Unsecured
loan payable in the amount of $190,896 bearing interest at 15% per annum and due on demand;
|
|
|
|
|
●
|
Unsecured
loan payable in the amount of $317,500 bearing interest at 18% per annum;
|
|
|
|
|
●
|
Unsecured
note payable in the amount of $46,701, bearing interest at 36% per annum, matured and in default;
|
|
|
|
|
●
|
Unsecured
loan payable in the 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 in the amount of $250,000, 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 related party in the amount of $310,000, bearing interest at 5% per annum, mature and in default;
|
|
|
|
|
●
|
Senior
secured, convertible note payable in the amount of $245,889 interest 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 in the amount of $81,470 interest 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 promissory note in the principal amount of up to $900,000, 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. As at June 30, 2019,
the Company had received $665,000 from the note. $300,000 was due on September 19, 2018 and was assigned to another lender
along with accrued interest on August 31, 2018. $166,667 was due on November 3, 2018 and was assigned to another lender along
with accrued interest in two tranches on April 26, 2019 and May 22, 2019. $198,333 was due on November 3, 2018, $77,844 of
which was assigned to another lender along with accrued interest in two tranches on June 24, 2019 and June 30, 2019. Interest
will be accrued and payable at the time of promissory note repayment;
|
|
●
|
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 in the 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 in the principal amount of $88,725, 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 $100,791, 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 $273,978, bears interest 12% per annum, is due on demand, 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 in the 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 in the principal amount of $150,000, bears interest at 4.99% per month, is 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. 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;
|
|
|
|
|
●
|
Unsecured,
convertible promissory note in the principal amount of $290,724, 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; and
|
|
|
|
|
●
|
Unsecured,
convertible promissory note in the principal amount of $125,210, 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.
|
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 June 30, 2020
|
Management compensation
|
|
$
|
500,000
|
|
Professional fees
|
|
$
|
150,000
|
|
General and administrative
|
|
$
|
1,900,000
|
|
Total
|
|
$
|
2,550,000
|
|
As
noted earlier, during the six months ended June 30, 2019, cash used in operations totaled $241,038. 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 $39,021 in cash as of June 30, 2019 and a working capital deficit of $6,839,398. 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.
Comparison
of the Years Ended December 31, 2018 and 2017
Revenue
|
|
For the Years Ended
December 31,
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,281,024
|
|
|
$
|
1,100,577
|
|
|
|
16.4
|
%
|
Revenue
increased by $180,447, or 16.4%, for the year ended December 31, 2018 as compared to the year ended December 31, 2017. Sales increased
as the result of aggressive marketing and installation of the new infinity suite of products compared to lower sales in 2017 from
continued design and redevelopment of our product line.
Cost
of Revenue
|
|
For the Years Ended
December 31,
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
$
|
191,560
|
|
|
$
|
388,220
|
|
|
|
(50.6
|
)%
|
Cost
of revenue decreased by $196,570 or 50.6%, for the year ended December 31, 2018 as compared to the year ended December 31, 2017.
The table below outlines the differences in detail:
|
|
For the Years Ended
|
|
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
Difference
|
|
|
% Difference
|
|
Cost of Goods
|
|
$
|
86,832
|
|
|
$
|
92,019
|
|
|
$
|
(5,187
|
)
|
|
|
(5.6
|
)
|
Mapping & Freight Costs
|
|
|
12,332
|
|
|
|
20,952
|
|
|
|
(8,620
|
)
|
|
|
(41.1
|
)
|
Wireless Fees
|
|
|
14,483
|
|
|
|
264,426
|
|
|
|
(249,943
|
)
|
|
|
(94.5
|
)
|
Inventory Adjustments & Write offs
|
|
|
78,003
|
|
|
|
10,823
|
|
|
|
67,180
|
|
|
|
620.7
|
|
|
|
$
|
191,650
|
|
|
$
|
388,220
|
|
|
$
|
(196,570
|
)
|
|
|
(50.6
|
)
|
The
decrease was primarily due manufacturing and supply efficiencies and better negotiated rates with suppliers, specifically the
Company’s wireless carrier. Cost of revenue was partially offset by an increase of $67,180 in inventory allowance and adjustments
recorded in 2018 compared to 2017 related to an allowance recorded on used inventory to account for amounts expected to be written
off.
Compensation
Expense
|
|
For the Years Ended
December 31,
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense
|
|
$
|
726,520
|
|
|
$
|
746,739
|
|
|
|
(2.7
|
)%
|
Compensation
expense decreased by $20,219 or 2.7%, for the year ended December 31, 2018 as compared to the year ended December 31, 2017. The
decrease was insignificant.
General
and Administration Expense
|
|
For the Years Ended
December 31,
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General & administration expense
|
|
$
|
1,561,000
|
|
|
$
|
1,414,983
|
|
|
|
10.3
|
%
|
General
& administration expense increased by $146,017 or 10.3% for the year ended December 31, 2018 as compared to the year ended
December 31, 2017. The table below outlines the differences in detail:
|
|
December 2018
|
|
|
December 2017
|
|
|
Difference
|
|
|
% Difference
|
|
Accounting & Legal, & Setup Costs for Public Company
|
|
|
283,445
|
|
|
|
160,515
|
|
|
|
122,930
|
|
|
|
76.6
|
%
|
Marketing & Advertising
|
|
|
404,391
|
|
|
|
581,653
|
|
|
|
(177,262
|
)
|
|
|
(30.5
|
)%
|
Subcontractor & Commissions
|
|
|
334,490
|
|
|
|
166,623
|
|
|
|
167,867
|
|
|
|
100.7
|
%
|
Hardware
|
|
|
47,604
|
|
|
|
14,486
|
|
|
|
33,118
|
|
|
|
228.6
|
%
|
Office Expense, Rent, Software, Bank & Credit Card Charges, Telephone & Meals
|
|
|
491,070
|
|
|
|
491,706
|
|
|
|
(636
|
)
|
|
|
(0.1
|
)%
|
|
|
|
1,561,000
|
|
|
|
1,414,983
|
|
|
|
146,017
|
|
|
|
10.3
|
%
|
For
the year ended December 31, 2018 as compared to the year ended December 31, 2017, the overall increase in expenses is primary
related to increases in accounting and legal of $122,930 or 76.6% due to additional legal fees incurred pursuant to new debt agreements
as well as subcontractor and commission increases of $167,897 or 100.7%. This increase was partially offset by decreases in marketing
expenses of $177,262 or 30.5% due to shares issued as compensation for marketing services in the prior year which were not issued
in the current year.
Warranty
Expense
|
|
For the Years Ended
December 31,
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warranty expense
|
|
$
|
(89,037
|
)
|
|
$
|
90,284
|
|
|
|
(198.6
|
)%
|
Warranty
expense decreased by $179,231, or 198.6% for the year ended December 31, 2018 as compared to the year ended December 31, 2017.
The decrease in warranty expense from 2018 to 2017 was primarily due to fewer breakdowns, warranty costs were expensed as incurred,
and we recorded a recovery on our warranty reserve due to a change in warranty policies.
As
of December 31, 2018, our balance sheet included a reserve of $Nil for future warranty costs (December 31, 2017 - $165,523).
Foreign
Currency Exchange
|
|
For the Years Ended
December 31,
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange (gain) loss
|
|
$
|
59,050
|
|
|
$
|
(107,096
|
)
|
|
|
(155.1
|
)%
|
For
the year ended December 31, 2018, we recognized $59,050 in foreign currency transaction losses as compared to $107,096 in foreign
currency transaction gains for the year ended December 31, 2017. The loss was primarily due to the losses arising from exchange
rate fluctuations on payables, receivables, and other foreign exchange transactions 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
Canadian Dollar, Euro and British pound.
Unrealized
(gain) loss on derivative
|
|
For the Years Ended
December 31,
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (gain) loss on derivative
|
|
$
|
(1,005,458
|
)
|
|
$
|
824,986
|
|
|
|
(221.9
|
)%
|
Derivative
loss decreased by $1,830,444 to a gain of $1,005,4585 or 221.9%, for the year ended December 31, 2018 as compared to the year
ended December 31, 2017 due to the change in fair value as of December 31, 2018 triggering unrealized gains on derivative instruments
in the current year ending on convertible notes payable. The change in fair value was impacted heavily due to the volatility in
the Company’s stock price.
Finance
Costs
|
|
For the Years Ended
December 31,
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs
|
|
$
|
2,698,330
|
|
|
$
|
1,731,921
|
|
|
|
55.8
|
%
|
Finance
costs increased by $966,409 or 55.8%, for the year ended December 31, 2018 as compared to the year ended December 31, 2017. Significant
finance costs were incurred in relation to the restructuring work, which resulted in additional accretion and extinguishment of
debt costs.
Net
Loss
|
|
For
the Years Ended
December 31,
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(9,825,404
|
)
|
|
$
|
(4,116,831
|
)
|
|
|
138.7
|
%
|
As
a result of the above factors, net loss increased by $5,708,573 or 138.7% for the year ended December 31, 2018 as compared to
the year ended December 31, 2017. The overall increase was primarily due to the $8,641,587 in other expenses inclusive of losses
on extinguishment of debt of $6,889,665 and finance costs of $2,698,330. This was partially offset by a gain on change in derivative
instruments of $1,005,458 and an overall decrease in operating losses of $461,053 or 28.0%.
Liquidity
and Capital Resources
From
our incorporation in April 17, 2008 through December 31, 2018, 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 December 31, 2018, we had $7,021,046 in outstanding liabilities which has either
already reached maturity or matures within the next twelve months.
We
had cash in the amount of $5,059 as of December 31, 2018 as compared to $5,488 as of December 31, 2017. We had a working capital
deficit of $6,687,807 as of December 31, 2018 compared to working capital deficit of $8,487,059 as of December 31, 2017.
Liquidity
and Financial Condition
|
|
At December 31, 2018
|
|
|
At December 31, 2017
|
|
|
Percentage
Increase/(Decrease)
|
|
Current Assets
|
|
$
|
333,239
|
|
|
$
|
59,542
|
|
|
|
459.7
|
%
|
Current Liabilities
|
|
$
|
7,021,046
|
|
|
$
|
8,546,601
|
|
|
|
(17.8
|
)%
|
Working Capital
|
|
$
|
(6,687,807
|
)
|
|
$
|
(8,487,059
|
)
|
|
|
(21.2
|
)%
|
Cash
Flow Analysis
Our
cash flows from operating, investing, and financing activities are summarized as follows:
|
|
December 31
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
$
|
(1,421,237
|
)
|
|
$
|
(568,972
|
)
|
Net cash (used in) provided by investing activities
|
|
|
(2,670
|
)
|
|
|
-
|
|
Net cash (used in) provided by financing activities
|
|
|
1,328,659
|
|
|
|
984,684
|
|
Net (decrease) increase in cash
|
|
|
(95,248
|
)
|
|
|
415,712
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
94,819
|
|
|
|
(410,224
|
)
|
Cash at beginning of period
|
|
|
5,488
|
|
|
|
-
|
|
Cash and equivalents at end of period
|
|
$
|
5,059
|
|
|
$
|
5,488
|
|
Net
Cash (Used in) Provided by Operating Activities. During the year ended December 31, 2018, cash used in operations totaled
$1,421,237. This reflects the net loss of $9,825,404 less $8,404,167 provided by changes in operating assets and liabilities and
adjustments for non-cash items. Cash provided by working capital items was primarily impacted by increases in deferred revenue
of $55,997 and trade payables and accruals of $568,132 and offset by increases in trade receivables of $216,538 and inventory
purchases of $278,659.
During
the year ended December 31, 2017, cash used in operations totaled $568,972. This reflects the net loss of $4,116,821 less $3,547,849
provided by changes in operating assets and liabilities and adjustments for non-cash items. Cash provided by working capital items
was primarily impacted by increases in warranty reserve of $53,808 and trade payables and accruals of $719,127, decreases in inventory
purchases of $71,644 and offset by increases in trade receivables of $9,238 and related party receivables of $2,560.
Net
Cash (Used in) Provided by Investing Activities. Investing activities used $2,670 of cash in the year ended December 31,
2018, for the addition of property, plant, and equipment. Investing activities used $Nil of cash in the year ended December 31,
2017.
Net
Cash (Used in) Provided by Financing Activities. Net cash provided by financing activities during the year ended December
31, 2018 totaled $1,328,659 provided primarily by proceeds of $1,292,000 from various note and loan facilities entered during
the period and proceeds of $81,659 for the issuances of shares. Net cash provided by financing activities during the year ended
December 31, 2017 totaled $984,684 provided primarily by proceeds of $946,750 from various note and loan facilities entered during
the period and proceeds of $50,000 for the issuances of shares.
Outstanding
Indebtedness
Our
current indebtedness as of December 31, 2018 is comprised of the following:
|
●
|
Unsecured
loan payable in the amount of $183,258 bearing interest at 15% per annum and due on demand;
|
|
|
|
|
●
|
Unsecured
loan payable in the amount of $317,500 bearing interest at 18% per annum;
|
|
|
|
|
●
|
Unsecured
note payable in the amount of $44,830, bearing interest at 36% per annum, matured and in default;
|
|
|
|
|
●
|
Unsecured
loan payable in the 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 in the amount of $250,000, 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 related party in the amount of $310,000, bearing interest at 5% per annum, mature and in default;
|
|
|
|
|
●
|
Senior
secured, convertible note payable in the amount of $245,889 interest 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 in the amount of $81,470 interest 10% per annum. Matures on July 17, 2018. Principal is repayable
in cash or common shares at the lower of (i) nine cents ($0.06) (ii) 55% of the lowest trading price during the 20 Trading
Days immediately preceding the date of conversion;
|
|
●
|
Unsecured,
convertible promissory note in the principal amount of up to $900,000, 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. As at December 31,
2018, the Company has received $665,000 from the note. $300,000 was due on September 19, 2018 and was assigned to another
lender along with accrued interest on August 31, 2018. $166,667 is due on November 3, 2018 and $198,333 is due on November
3, 2018. Interest will be accrued and payable at the time of promissory note repayment;
|
|
|
|
|
●
|
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 in the 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 in the principal amount of $102,049, 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 $315,978, bears interest 12% per annum, is due on demand, 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;
|
Preferred
Stock Redemption Obligations
Westergaard
Holdings Ltd., an affiliate of Keith Westergaard, a member of our board of directors, owned 4,229,384 shares (the “Series
A Shares”) of Series A Convertible Preferred Stock of DSG TAG Systems. Pursuant to a Subscription / Debt Settlement Agreement
dated September 26, 2014 between DSG TAG Systems and Westergaard Holdings, as amended on November 10, 2015, DSG TAG Systems has
agreed that DSG Global, Inc. will complete financings for gross proceeds of at least $10 million and use a portion of the proceeds
to redeem all of the Series A Shares at a price of $1.25 per share, as follows:
|
●
|
On
or before August 1, 2016, we must complete a financing for gross proceeds of at least $2.5 million and use at least $1.125
million to redeem a minimum of 900,000 Series A Shares;
|
|
|
|
|
●
|
On
or before September 1, 2016, we must complete an additional financing for gross proceeds of at least $2.5 million and use
at least $1.125 million to redeem a minimum of 900,000 additional Series A Shares; and
|
|
|
|
|
●
|
On
or before October 1, 2016, we must complete an additional financing for gross proceeds of at least $5.0 million and use at
least $3.14 million to redeem the remaining 2,509,384 Series A Shares.
|
If
we failed to satisfy the above described financing and share redemption schedule, we would have been in default of the Subscription
and Debt Settlement Agreement which would entitle the holder of the Preferred Shares to convert the Series A Convertible Preferred
Shares into common shares in the capital of DSG Global at the price of $1.25 per share.
As
described in Note 11 of the consolidated financial statements, on August 27, 2018, pursuant to a debt exchange agreement, the
Company exchanged all 4,229,384 issued and outstanding DSG TAG Series A Shares with a fair value of $5,873,481 ($7,627,303 CDN),
for 51 and 3,000,000 shares of Series B and Series E preferred shares, respectively.
Related
Party Transactions
As
at December 31, 2018, the Company owed $139,835 ($190,764 CDN) (December 31, 2017 - $204,929 ($257,084 CDN)) 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 year ended December 31, 2018 the Company incurred
$200,000 (2017 - $200,000) in salaries to the President, CEO, and CFO of the Company.
As
at December 31, 2018, the Company owes $Nil (2017 - $52,838) to the Senior Vice President of Global Sales of the Company, which
has been recorded in trade and other payables. The amount owing is unsecured, non-interest bearing, and due on demand.
As
at December 31, 2018, the Company owed $12,791 ($17,450 CDN) (December 31, 2017 - $22,280 ($27,950 CDN)) 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.
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 December 31, 2019
|
Management compensation
|
|
$
|
500,000
|
|
Professional fees
|
|
$
|
150,000
|
|
General and administrative
|
|
$
|
1,900,000
|
|
Total
|
|
$
|
2,550,000
|
|
During
the year ended December 31, 2018, cash used in operations totaled $1,421,237. 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 $5,059 in
cash as of December 31, 2018, and a working capital deficit of $6,687,807. Our principal sources of liquidity are cash generated
from product sales and debt financings. 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 total payments 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.
Contractual
Obligations and Known Future Cash Requirements
Indemnification
Agreements
In
the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which we agree to indemnify customers,
vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising
out of breach of such agreements, services to be provided by us or from intellectual property infringement claims made by third
parties. In addition, we have entered into indemnification agreements with directors and certain officers and employees that will
require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service
as directors, officers or employees. No demands have been made upon us to provide indemnification under such agreements and there
are no claims that we are aware of that could have a material effect on our consolidated balance sheet, consolidated statements
of operations, consolidated statements of comprehensive loss or consolidated statements of cash flows.
Operating
Leases
We
currently lease our corporate headquarters in Surrey, British Columbia, under operating lease agreements that expire through to
May 31, 2020. The terms of the lease agreements provide for rental payments on a graduated basis. We recognize rent expense on
a straight-line basis over the lease periods.
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 consolidated financial statements.
Recently
Issued and Adopted Accounting Pronouncements
Recently
Adopted Accounting Pronouncements
In
May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue
recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace
it with a principle-based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue
based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure
about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant
judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective
for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods
beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either
retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company adopted this ASU beginning on January
1, 2018 and used the modified retrospective method of adoption. The adoption of this ASU did not have a material impact on the
Company’s consolidated financial statements and disclosures.
Recently
Issued Accounting Pronouncements
Applicable
for fiscal years beginning after December 15, 2018:
In
February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” This accounting standard seeks to increase
transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and
disclosing key information about leasing arrangements. Current U.S. GAAP does not require lessees to recognize assets and liabilities
arising from operating leases on the balance sheet. This standard also provides guidance from the lessees’ perspective on
how to determine if a lease is an operating lease or a financing lease and the differences in accounting for each. In January
2018, the FASB issued ASU No. 2018-01, which allows for an entity to elect an optional transition practical expedient for land
easements that exist or expired before adoption of Topic 842. The adoption of this standard is required for interim and fiscal
periods beginning after December 15, 2018 and it is required to be applied using the modified retrospective approach. The Company
will adopt this standard effective January 1, 2019 and is currently evaluating the impact of the above standard on its consolidated
financial statements. The Company expects to recognize right-of-use assets and lease liabilities on its consolidated balance sheets
pursuant to its operating lease commitment, see Note 15 of the consolidated financial statements.
In
March 2017, the “FASB” issued ASU 2017-08 “Receivables – Nonrefundable Fees and Other Costs (Subtopic
310-20) – Premium Amortization on Purchased Callable Debt Securities” an amendment to shorten the amortization
period for certain callable debt securities held at a premium to the earliest call date. The amendments do not require an accounting
change for securities held at a discount.
In
July 2017, the FASB issued ASU 2017-11 “Earnings Per Share (Topic 260), Distinguishing Liability from Equity (Topic 480),
and Derivatives and Hedging (Topic 815) – (i) Accounting for Certain Financial Instruments with Down Round Features (ii)
Replace of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments.” The amendments in (i) change the
classification analysis of certain equity-linked financial instruments (or embedded features) with down round features and to
help clarify existing disclosure requirements. The amendments in (ii) characterize the indefinite deferral of certain provisions
and do not have an accounting effect.
The
Company is currently evaluating the impact of the above standards on its consolidated financial statements. Other recent accounting
pronouncements issued by the 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
consolidated financial statements.
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
The
Board of Directors elects our executive officers annually. A majority vote of the directors who are in office is required to fill
vacancies. Each director shall be elected for the term of one year, and until his successor is elected and qualified, or until
the earlier of his resignation or removal. Information on our Board of Directors and executive officers is included below. Our
executive officers are appointed annually by our Board of Directors. Our executive officers hold their offices until they resign,
are removed by the Board, or their successor is elected and qualified.
Directors
and Executive Officers
The
following sets forth information about our director and executive officer as of the date of this report:
NAME
|
|
AGE
|
|
POSITION
|
|
DATE
FIRST ELECTED OR APPOINTED
|
|
|
|
|
|
|
|
Robert
Silzer
|
|
72
|
|
Director,
President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer
|
|
May
6, 2015 (as President, Chief Executive Officer, Chief Financial Officer, Secretary, and Treasurer) June 16, 2015 (as Director)
|
|
|
|
|
|
|
|
Stephen
Johnston
|
|
67
|
|
Director
|
|
June
16, 2015
|
|
|
|
|
|
|
|
James
Singerling
|
|
74
|
|
Director
|
|
June
16, 2015
|
|
|
|
|
|
|
|
Jason
Sugarman
|
|
47
|
|
Director
|
|
June
16, 2015
|
|
|
|
|
|
|
|
Rupert
Wainwright (1)
|
|
57
|
|
Former
Director
|
|
June
16, 2015
|
(1)
Rupert Wainwright resigned from his position as director in February 2018.
Our
directors will serve in that capacity until our next annual shareholder meeting or until his successor is elected and qualified.
Officers hold their positions at the will of our Board of Directors. There are no arrangements, agreements or understandings between
non-management security holders and management under which non-management security holders may directly or indirectly participate
in or influence the management of our affairs.
Executive
Management
Our
executive management team represents a significant depth of experience in biometrics and facial recognition technologies, intelligent
security and surveillance, high-growth and technology marketing, and domestic and international sales and business development.
The team represents a cross-disciplinary approach to management and business development.
Robert
Silzer, Director, President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer.
Robert
Silzer has over 20 years’ experience in the GPS tracking and fleet solutions industries. He is the founder of DSG TAG Systems
Inc. and has served as Chief Executive Officer of DSG TAG since its inception in April 2008. Mr. Silzer is a product designer
who has developed multiple new product concepts and successfully introduced these products to market including the world’s
first handheld bingo gaming unit, the first handheld and color handheld GPS golf units and the first Wi-Fi enabled GPS golf business
solution. Prior to establishing DSG Tag, Mr. Silzer’s designed and a total golf solution that addressed the growing needs
in Golf Course management. Through a series of mergers and acquisitions different companies with diversified hardware and software
platforms, he founded GPS Industries in 1996, serving as its president, CEO, Chairman and director until 2007. Under his leadership,
it became the largest operator of golf GPS systems in the world and with a remarkable 750 golf courses worldwide using the installed
system. Prior to founding GPSI, Mr. Silzer founded XGA, an online golf store and website company in 1993. He also founded Advanced
Gaming Technology, Inc. in 1992, an electronic gaming company, where he served as Chief Executive Officer until 1998. From 1986
to 1992, Mr. Silzer founded and operated the private company Supercart International. With over 30 years as an entrepreneur in
the technology and other markets, Mr. Silzer has developed expertise in taking companies to market, growing start-up business,
initial public offerings, raising funds, operations, marketing and international licensing.
Stephen
Johnston, Director
Stephen
Johnston is the founding Partner of Global Golf Advisors and one of the leading authorities on operational analysis and financial
solutions for golf businesses. Steve began his career at the accounting firm of Thorne Gunn/Thorne Riddell in Toronto in 1973.
He earned his Chartered Accountant designation while with Thorne Riddell in 1976 and in 1984 was promoted to Partner and given
responsibility for major client accounts. His audit experience with major accounts subsequently expanded into real estate, communications
and insurance.
When
the firm became known as KPMG, Steve continued as an Audit Partner and in 1992 created the KPMG Golf Industry Practice and assumed
responsibility as National Director. In 2006 Steve purchased the KPMG Golf Industry Practice and created Global Golf Advisors
Inc., bringing with him the entire staff complement and client files to the new firm.
Steve
is a graduate of the University of Toronto with a Bachelor of Science degree and business courses complement relevant to his Chartered
Accountant designation. Steve’s main focus is developing financial and business solutions for private clubs, public golf
courses and resorts, golf communities, investors and lenders. He provides a keen insight for banking and finance solutions arising
from his years of advising numerous international financial institutions.
He
has completed due diligence and valuation assignments for some of the largest golf-related transactions in North America and has
completed multiple market studies to reposition various golf assets. In addition, Steve has been actively involved with workouts/receiverships,
providing operational and financial guidance. These assignments typically lead to member buyouts/transitions from developers or
to an outright disposition of property. Steve has been recognized as one of the Top Powerbrokers in Canadian Golf by The National
Post over the past 15 years.
James
Singerling, Director
From
1990 until his retirement in 2015, James Singerling, CCM, served as the CEO of Club Managers Association of America (CMAA), the
foremost professional association for managers of membership clubs in the US. In this role Mr. Singerling was credited for elevating
the professional role of club managers by creating industry-standard development and certification programs. For over two decades,
he spearheaded efforts to adopt the general manager/chief operating officer model at clubs nationwide, raising the qualifications
and quality of club managers. Mr. Singerling is also recognized for building new relationships for the industry with federal and
state governments and within the association community.
In
addition to his work within the U.S., Mr. Singerling was instrumental in the development of professional club management associations
internationally, helping other nations elevate the role of club managers by adopting professional standards and certifications.
Regions where his leadership is recognized include South America, Australia, China, South Africa and the Asian-Pacific corridor,
among others.
Prior
to becoming chief executive at CMAA, Mr. Singerling was a leader in the golf course design and management companies of Robert
Trent Jones, Sr., and also served as vice president and general manager of the Coral Ridge Country Club in Ft. Lauderdale, FL.
Mr.
Singerling has been recognized as Industry Leader of the Year by the University of Nevada, Las Vegas, and Michigan State University,
in addition to receiving awards from Florida State University, Pennsylvania State University, Oklahoma State University and Sun
Yat Sen University – China. He also was elected to the Association Committee of 100 by the U.S. Chamber of Commerce, widely
recognized as the most prestigious organization of chief executives in the United States.
Jason
Sugarman, Director
With
over 20 years’ experience, Jason Sugarman is a leader in the finance industry in the areas of asset-based lending, private
equity, and debt investments. He has been a principal investor and financier of all asset classes and has led real estate, financial
services, and infrastructure investments both domestically and overseas.
Mr.
Sugarman’s current concentration is on private equity transactions. He serves on the boards of a number of private and public
companies and has invested in several professional sports teams including Los Angeles Football Club and Oklahoma City Dodgers.
He
is married with three boys and lives in Los Angeles, California.”
Significant
Employees
Other
than Bob Silzer, we have no full-time employees whose services are materially significant to our business and operations who are
employed at will by DSG Global, Inc.
Family
Relationships
There
are no family relationships among any of our directors or officers.
Involvement
in Certain Legal Proceedings
To
the best of our knowledge, none of our directors or executive officers has, during the past ten years:
1.
|
been
convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other
minor offences);
|
|
|
2.
|
had
any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or
business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or
within two years prior to that time;
|
|
|
3.
|
been
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction
or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement
in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities,
or to be associated with persons engaged in any such activity;
|
|
|
4.
|
been
found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to
have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
|
|
|
5.
|
been
the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an
alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial
institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement
or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or
any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
|
|
|
6.
|
been
the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined
in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or
organization that has disciplinary authority over its members or persons associated with a member.
|
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Section
16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors and persons who own more than 10% of
our common stock to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes
in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and
5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish
us with copies of all Section 16(a) reports that they file.
Based
solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we
believe that during fiscal year ended December 31, 2016, all filing requirements applicable to our officers, directors and greater
than 10% percent beneficial owners were complied with.
Corporate
Governance Guidelines, Code of Ethics, and Business Conduct
The
Board has adopted Corporate Governance Guidelines (the “Guidelines”) to assist it in the exercise of its responsibilities.
These Guidelines reflect the Board’s commitment to monitor the effectiveness of policy and decision making both at the Board
and at the management level, with a view to enhancing stockholder value over the long term.
We
have adopted a written code of ethics and business conduct to provide guidance to all Company’s directors, officers and
employees, for each employee, including our including the Company’s principal executive officer, principal accounting officer
or controller or persons performing similar functions. The code of ethics is posted on our website at www.dsgtag.com. If we make
certain amendments to or waivers of our code of ethics, we intend to satisfy the SEC disclosure requirements by promptly posting
the amendment or waiver on our website.
Audit
Committee and Audit Committee Financial Expert
Our
board of directors has determined that it does not have a member of its audit committee that qualifies as an “audit committee
financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K, and is “independent” as the term is used
in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.
We
believe that our board of directors is capable of analyzing and evaluating our financial statements and understanding internal
controls and procedures for financial reporting. We believe that retaining an independent director who would qualify as an “audit
committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early
stages of our development and the fact that we have not generated any material revenues to date. In addition, we currently do
not have nominating, compensation or audit committees or committees performing similar functions nor do we have a written nominating,
compensation or audit committee charter. Our sole director does not believe that it is necessary to have such committees because
believes the functions of such committees can be adequately performed by the sole member of our board of directors.
Code
of Ethics
Our
Board of Directors has not adopted a code of ethics due to the fact that we presently only have one director who also serves as
the sole executive officer of the Company and the Board of Directors chose not to reduce to writing standards designed to deter
wrongdoing and promote honest and ethical conduct. The Board of Directors believes that the Company’s small size and the
limited number of personnel who are responsible for its operations make a formal Code of Ethics unnecessary. We anticipate that
we will adopt a code of ethics when we increase either the number of our directors and officers or the number of our employees.
Compliance
with Section 16(a) of the Exchange Act
Section
16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires officers, directors and persons
who beneficially own more than 10% of a class of our equity securities registered under the Exchange Act to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. Based solely upon a review of Forms 3 and 4 and amendments
thereto furnished to us during fiscal year 2011 and Forms 5 and amendments thereto furnished to us with respect to fiscal year
2011, or written representations that Form 5 was not required for fiscal year 2011, we believe that all Section 16(a) filing requirements
applicable to each of our officers, directors and greater-than-ten percent stockholders were fulfilled in a timely manner. We
have notified all known beneficial owners of more than 10% of our common stock of their requirement to file ownership reports
with the Securities and Exchange Commission.
EXECUTIVE
COMPENSATION
Summary
Compensation Table — Fiscal Years of DSG Global Inc. Years Ended December 31, 2018 & 2017
The
particulars of the compensation paid to the following persons:
(a)
|
our
principal executive officer;
|
|
|
(b)
|
our
principal financial officer;
|
|
|
(c)
|
each
of our three most highly compensated executive officers who were serving as executive officers at the end of the years ended
December 31, 2018 and 2017; and
|
|
|
(d)
|
up
to two additional individuals for whom disclosure would have been provided under (c) but for the fact that the individual
was not serving as our executive officer at the end of the years ended December 31, 2018 and 2017,
|
who
we will collectively refer to as the named executive officers of our company, are set out in the following summary compensation
table, except that no disclosure is provided for any named executive officer, other than our principal executive officers, whose
total compensation did not exceed $100,000 for the respective fiscal year:
EXECUTIVE
SUMMARY COMPENSATION TABLE
Name and
principal
position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($)
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
|
Robert Silzer,
|
|
|
2018
|
|
|
|
200,000
|
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
|
200,000
|
|
Director, President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer
|
|
|
2017
|
|
|
|
200,000
|
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
|
200,000
|
|
As
of December 31, 2018, we had no employment agreements with any of our executive officers or employees.
Summary
of Employment Agreements and Material Terms
We
have not entered into any employment or consulting agreements with any of our current officers, directors or employees.
Outstanding
Equity Awards at Fiscal Year Ended December 31, 2018 and 2017 of DSG Global, Inc.
For
the years ended December 31, 2018 and 2017, no director or executive officer of DSG Global, Inc. has received compensation from
us pursuant to any compensatory or benefit plan. There is no plan or understanding, express or implied, to pay any compensation
to any director or executive officer pursuant to any compensatory or benefit plan, although we anticipate that we will compensate
our officers and directors for services to us with stock or options to purchase stock, in lieu of cash.
Compensation
of Directors
The
particulars of the compensation paid to each of our director during our fiscal years ended December 31, 2018 are set out in the
following summary compensation table, except that no disclosure is provided for any director who’s also a named executive
officer and whose compensation is fully reflected in the above Executive Summary Compensation Table:
DIRECTOR
COMPENSATION TABLE
Name and
principal
position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($)
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
Stephen Johnston,
|
|
2018
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
Director
|
|
2017
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
James Singerling,
|
|
2018
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
Director
|
|
2017
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
Jason Sugarman,
|
|
2018
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
Director
|
|
2017
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
Rupert Wainwright,
|
|
2018
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
Former Director
|
|
2017
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The
following table sets forth information regarding beneficial ownership of our common stock as of December 31, 2018 (i) by each
person who is known by us to beneficially own more than 5% of our common stock; (ii) by each of our officers and directors; and
(iii) by all of our officers and directors as a group.
Name and Address of Beneficial Owner
|
|
Office, If Any
|
|
Title of Class
|
|
Amount and Nature of Beneficial
Ownership (1)
|
|
|
Percent
of Class (2)
|
|
Officers and Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Silzer
312-2630 CROYDON DRIVE
Surrey, British Columbia, Canada
V3Z 6T3
|
|
Director, president, chief executive officer, chief financial officer, secretary, and treasurer
|
|
Common Stock
|
|
|
2,018
|
|
|
|
0.32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Director
|
|
Common Stock
|
|
|
813
|
(3)
|
|
|
0.13
|
%
|
Jason Sugarman
214 - 5455 152nd Street
Surrey, British Columbia, Canada
V3S 5A5
|
|
Director
|
|
Common Stock
|
|
|
|
(4)
|
|
|
|
(4)
|
Rupert Wainwright
214 - 5455 152nd Street
Surrey, British Columbia, Canada
V3S 5A5
|
|
Former Director
|
|
Common Stock
|
|
|
|
(4)
|
|
|
|
(4)
|
Stephen Johnston
214 - 5455 152nd Street
Surrey, British Columbia, Canada
V3S 5A5
|
|
Director
|
|
Common Stock
|
|
|
|
(4)
|
|
|
|
(4)
|
James Singerling
214 - 5455 152nd Street Surrey, British Columbia, Canada
V3S 5A5
|
|
Director
|
|
Common Stock
|
|
|
|
(4)
|
|
|
|
(4)
|
All officers and directors as a group
|
|
|
|
Common stock, $0.001 par value
|
|
|
2,831
|
|
|
|
0.45
|
%
|
5%+ Security Holders
|
|
|
|
|
|
|
|
|
|
|
|
|
616796 BC Ltd.
|
|
n/a
|
|
Common Stock
|
|
|
43,428
|
|
|
|
6.85
|
%
|
Cede & Co
|
|
n/a
|
|
Common Stock
|
|
|
61,547
|
|
|
|
9.7
|
%
|
All 5%+ Security Holders
|
|
|
|
Common stock, $0.001 par value
|
|
|
104,975
|
|
|
|
16.55
|
%
|
(1)
|
Under
Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement,
understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct
the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares.
Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to
vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person
has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information
is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the
amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.
|
|
|
(2)
|
Percentages
are based on 634,471 shares of our Company’s common stock issued and outstanding; as of the date of this report there
were 904,969 common stock issued and outstanding.
|
|
|
(3)
|
The
813 common shares are held by Westergaard Holdings Ltd. Keith Westergaard has voting and dispositive control over securities
held by Westergaard Holdings Ltd.
|
|
|
(4)
|
None.
|
TRANSACTIONS
WITH RELATED PERSONS
Transactions
with Related Persons of DSG Global Inc.
Except
as disclosed herein, no director, executive officer, shareholder holding at least 5% of shares of our common stock, or any family
member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction since the year ended
December 31, 2018, in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of
the average of our total assets at the year-end for the last three completed fiscal years.
As
at December 31, 2018, we owed $139,835 ($190,764 CDN) (December 31, 2017 - $205,963 ($258,381 CDN)) to our Director and sole Officer,
Robert Silzer, for management fees and salaries, $12,791 ($17,450 CDN) (December 31, 2017 - $22,280 ($27,950 CDN)) to a company
controlled by Robert Silzer, Jr., the son of Robert Silzer, our Director and sole Officer for subcontractor services, and $Nil
(2017 - $52,838 to the Senior Vice President of Global Sales of the Company of which have been recorded in trade and other payables.
The amounts owed and owing are unsecured, non-interest bearing, and due on demand.
On
September 26, 2014 DSG TAG entered into a Subscription and Debt Settlement Agreement (as amended on October 7, 2014) whereby Westergaard
Holdings Ltd., a corporation owned and controlled by our current director Keith Westergaard, purchased: (i) 4,229,384 Series A
Preferred Shares of DSG TAG at a deemed price of $1.25 per share in consideration for the settlement of $5,386,731 in debt payable
to Westergaard Holdings; and (ii) 2,001,735 common shares of DSG TAG at a deemed price of $0.25 per share in consideration of
$2,502,168.23 in interest and expenses accrued in respect of the debt. Until such time as all Series A Shares had been redeemed
by DSG TAG, Westergaard Holdings may have converted any or all of its remaining Series A Shares and accrued interest into common
shares of DSG Global at $1.25 per share.
Pursuant
to the Agreement, DSG TAG agreed to complete a going public transaction by share exchange within 60 days of the Agreement, and
a private placement financing of not less than $5,000,000 in gross proceeds within 60 days of going public., the Company shall
have completed a financing for gross proceeds of at least $5,000.000. DSG TAG agreed to pay $2,500,000 of the financing proceeds
to Westergaard Holdings to redeem 2,000,000 of the Series A Preferred Shares at the deemed redemption price of $1.25 per share.
DSG TAG further agreed to raise additional gross proceeds of $5,000,000 and to redeem an additional 2,000,000 Series A Preferred
Shares from Westergaard Holdings (at a redemption price of $1.25 per share or $2,500,000 in the aggregate). within 150 days following
the going public transaction. Subsequent to the Agreement, DSG TAG completed its going public transaction on May 6, 2015 but did
not raise sufficient capital to redeem the Series A Preferred Shares. The Subscription and Debt Settlement Agreement was subsequently
amended by letter of agreement dated December 31, 2015, as described below.
On
March 5, 2016, by letter agreement dated December 31, 2015 with Westergaard Holdings Ltd., a corporation owned by our Director
Keith Westergaard, we amended the Subscription and Debt Settlement Agreement dated September 26, 2014 between DSG Tag Systems,
Inc. and Westergaard Holdings, as previously amended on October 4, 2015. Westergaard Holdings owns 4,229,384 shares Series A Convertible
Preferred Stock of DSG TAG. Pursuant to the settlement agreement, the parties have agreed that DSG Global will complete financings
for gross proceeds of at least $10 million and use a portion of the proceeds to redeem all of the Series A Convertible Preferred
Shares. The letter agreement modifies the redemption provisions of the original agreement, which now obligate us to raise capital
and redeem the Series A Convertible Preferred Shares at a price of $1.25 per share as follows: (i) on or before May 1, 2016, DSG
Global must complete a financing for gross proceeds of at least $2.5 million and use at least $1.125 million to redeem a minimum
of 900,000 Series A Shares; (ii) on or before June 1, 2016, DSG Global must complete an additional financing for gross proceeds
of at least $2.5 million and use at least $1.125 million to redeem a minimum of 900,000 additional Series A Shares; and (iii)
on or before July 1, 2016, DSG Global must complete an additional financing for gross proceeds of at least $5.0 million and use
at least $3.04 million to redeem the remaining 2,429,384 Series A Shares.
As
described in Note 11 of the consolidated financial statements above, on August 27, 2018, pursuant to a debt exchange agreement,
the Company agreed to exchange all 4,229,384 issued and outstanding DSG TAG Series A Shares with a fair value of $5,873,481 ($7,627,303
CDN), for 51 and 3,000,000 shares of Series B and Series E preferred shares, respectively.
On
March 31, 2015, DSG entered into an agreement with Adore Creative Agency Inc., a corporation owned by our director Rupert Wainwright
pursuant to which Adore will provide marketing services to DSG. The terms included cash payment of $17,500 and a note in the amount
of $310,000, with 5% interest per annum, convertible at the election of the holder into 248,000 common shares in the capital stock
of DSG Global, Inc. at a price of $1.25 per share, maturing on March 30, 2016. As of December 31, 2018, 100% of the marketing
services have been expensed in the amount of $310,000.
On
April 6, 2016, DSG TAG entered into a loan agreement with Westergaard Holdings Ltd. a corporation owned by our director Keith
Westergaard, pursuant to which we raised proceeds of $120,000 CAD. DSG TAG agrees to pay the loan plus fees no later than the
final due date of July 6, 2016. The fees for service are as follows: (a) DSG TAG agrees to pay a fee for service equal to 5% of
the amount of the loan or $6,000 CAD if the loan is paid in full, including fees on or before May 6, 2016; (b) DSG TAG agrees
to pay a fee for service equal to 10% of the amount of the original loan, or $12,000 CAD if the loan is paid in full, including
fees, between May 7, 2016 and June 5, 2016; and (c) DSG TAG agrees to pay a fee for service equal to 20% of the amount of the
original loan, or $24,000 CAD if the loan is paid full, including fees, between June 6, 2016 and July 5, 2016. DSG TAG agrees
to pay partial payments towards the principal amount of the loan and fees. DSG TAG agrees that fees will be charged on the initial
amount of the loan. On August 1, 2018, the loan and all accrued interest was assigned to 616796 BC Ltd.
On
December 16, 2016, a convertible loan was received by Brent Silzer, the son of our President and CEO Robert Silzer, in the amount
of $29,791 (CAD $40,000). Interest is 8% annual rate for one month and 4% monthly rate thereafter if not paid by January 15, 2017.
The note is convertible at $200 per share. On April 3, 2017, this convertible loan and all unpaid interest and penalties was settled
in cash of CDN$45,500 and the issuance of 132 common shares pursuant to a debt settlement and subscription agreement.
Promoters
and Certain Control Persons
We
did not have any promoters at any time during the past five fiscal years.
Director
Independence
We
currently act with five (5) directors consisting of Robert Silzer, Jason Sugarman, Rupert Wainwright, Stephen Johnston, and James
Singerling. We have not made any determination as to whether any of our directors are independent directors, as that term is used
in Rule 4200(a) (15) of the Rules of National Association of Securities Dealers.
PART
II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item
13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The
following table is an itemization of all expenses, without consideration to future contingencies, incurred or expected to be incurred
by our Corporation in connection with the issuance and distribution of the common shares being offered by this Prospectus. Items
marked with an asterisk (*) represent estimated expenses. We have agreed to pay all the costs and expenses of this offering except
the GHS has agreed to pay the legal fees associated with the preparation of this registration statement.
Item
|
|
Amount
|
|
|
|
|
|
SEC
Registration Fee
|
|
$
|
30.11
|
|
Legal
Fees and Expenses*
|
|
$
|
10,000.00
|
|
Accounting
Fees and Expenses*
|
|
$
|
NIL
|
|
Miscellaneous*
|
|
$
|
NIL
|
|
Total*
|
|
$
|
10,001.11
|
|
Audit
Fees, Audit Related Fees, and All Other Fees
The
following represents fees for professional services rendered by our independent registered public accounting firm for each of
the years ended December 31, 2018 and 2017.
|
|
2018
|
|
|
2017
|
|
Audit Fees
|
|
$
|
66,220
|
|
|
$
|
52,800
|
|
Audit Related Fees
|
|
|
Nil
|
|
|
|
Nil
|
|
Tax Fees
|
|
|
Nil
|
|
|
|
Nil
|
|
All Other Fees
|
|
|
Nil
|
|
|
|
Nil
|
|
Total
|
|
$
|
66,220
|
|
|
$
|
52,800
|
|
Lichter,
Yu and Associates has served as our independent registered public accounting firm from September 2014 to October 2017.
Saturna
Group Chartered Professional Accountants, LLP has served as our independent registered public accounting firm from October 2017
to January 2019.
Buckley
Dodds, LLP is our independent registered public accounting firm since March 2019.
Item
14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Pursuant
to Section 607.0850 of the Nevada Revised Statutes, we have the power to indemnify any person made a party to any lawsuit by reason
of being a director or officer of the Registrant, or serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’
fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action,
suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was
unlawful. Our Bylaws provide that the Registrant shall indemnify its directors and officers to the fullest extent permitted by
Nevada law.
With
regard to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid
by a director, officer or controlling person of the Corporation in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the common shares being registered, we will, unless
in the opinion of our counsel the matter has been settled by a controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by us is against public policy as expressed in the Securities Act of 1933, as amended,
and will be governed by the final adjudication of such case.
Item
15. RECENT SALES OF UNREGISTERED SECURITIES
During
the year ended December 31, 2017:
|
●
|
On
February 15, 2017, the Company issued 563 shares of common stock, with a fair value of $562,500, in connection with an investor
relations agreement.
|
|
|
|
|
●
|
On
April 6, 2017, the Company issued 138 shares of common stock, with a fair value of $198,000, in connection with a commitment
fee granted convertible note issued on April 3, 2017.
|
|
|
|
|
●
|
On
April 7, 2017, the Company issued 125 shares of common stock for cash proceeds of $50,000.
|
|
|
|
|
●
|
The
Company issued an aggregate of 17,072 shares of common stock with a fair value of $797,287 upon the conversion of convertible
debentures and accrued interest per the table below:
|
Date Issued
|
|
Common Shares
Issued (#)
|
|
|
Fair Value
|
|
|
Converted
Balance
|
|
|
Gain (loss) on Conversion
|
|
April 3, 2017(3)
|
|
|
131
|
|
|
$
|
26,252
|
|
|
$
|
26,252
|
|
|
$
|
-
|
|
May 4, 2017
|
|
|
750
|
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
-
|
|
May 8, 2017
|
|
|
25
|
|
|
|
42,000
|
|
|
|
35,000
|
|
|
|
(7,000
|
)
|
May 25, 2017
|
|
|
53
|
|
|
|
71,400
|
|
|
|
73,500
|
|
|
|
2,100
|
|
July 24, 2017
|
|
|
200
|
|
|
|
40,000
|
|
|
|
63,007
|
|
|
|
23,007
|
|
July 28, 2017
|
|
|
125
|
|
|
|
21,500
|
|
|
|
15,356
|
|
|
|
(6,144
|
)
|
September 7, 2017
|
|
|
188
|
|
|
|
22,575
|
|
|
|
21,936
|
|
|
|
(639
|
)
|
October 10, 2017
|
|
|
250
|
|
|
|
34,000
|
|
|
|
6,821
|
|
|
|
(27,179
|
)
|
October 11, 2017
|
|
|
354
|
|
|
|
42,456
|
|
|
|
22,273
|
|
|
|
(20,183
|
)
|
October 11, 2017
|
|
|
188
|
|
|
|
25,500
|
|
|
|
22,019
|
|
|
|
(3,481
|
)
|
October 18, 2017
|
|
|
531
|
|
|
|
8,494
|
|
|
|
6,508
|
|
|
|
(1,986
|
)
|
October 19, 2017
|
|
|
1,100
|
|
|
|
43,200
|
|
|
|
41,874
|
|
|
|
(1,326
|
)
|
October 19, 2017
|
|
|
557
|
|
|
|
26,753
|
|
|
|
28,795
|
|
|
|
2,042
|
|
October 20, 2017
|
|
|
557
|
|
|
|
11,147
|
|
|
|
11,358
|
|
|
|
211
|
|
October 23, 2017
|
|
|
610
|
|
|
|
19,524
|
|
|
|
21,849
|
|
|
|
2,325
|
|
October 25, 2017
|
|
|
675
|
|
|
|
16,200
|
|
|
|
15,251
|
|
|
|
(949
|
)
|
October 26, 2017
|
|
|
448
|
|
|
|
12,540
|
|
|
|
14,789
|
|
|
|
2,249
|
|
October 27, 2017
|
|
|
750
|
|
|
|
21,000
|
|
|
|
19,479
|
|
|
|
(1,521
|
)
|
October 27, 2017
|
|
|
754
|
|
|
|
21,122
|
|
|
|
24,056
|
|
|
|
2,934
|
|
October 31, 2017
|
|
|
625
|
|
|
|
17,505
|
|
|
|
17,998
|
|
|
|
493
|
|
October 31, 2017
|
|
|
750
|
|
|
|
21,000
|
|
|
|
19,479
|
|
|
|
(1,521
|
)
|
November 2, 2017
|
|
|
375
|
|
|
|
8,996
|
|
|
|
10,704
|
|
|
|
1,708
|
|
November 7, 2017
|
|
|
917
|
|
|
|
18,335
|
|
|
|
32,478
|
|
|
|
14,143
|
|
November 13, 2017
|
|
|
754
|
|
|
|
18,104
|
|
|
|
20,704
|
|
|
|
2,600
|
|
November 22, 2017
|
|
|
1,000
|
|
|
|
12,002
|
|
|
|
21,711
|
|
|
|
9,709
|
|
December 27, 2017
|
|
|
1,050
|
|
|
|
12,600
|
|
|
|
9,142
|
|
|
|
(3,458
|
)
|
December 27, 2017
|
|
|
1,050
|
|
|
|
13,420
|
|
|
|
6,062
|
|
|
|
(7,358
|
)
|
December 29, 2017
|
|
|
1,150
|
|
|
|
9,200
|
|
|
|
3,920
|
|
|
|
(5,280
|
)
|
December 29, 2017
|
|
|
1,155
|
|
|
|
10,462
|
|
|
|
12,816
|
|
|
|
2,354
|
|
Total
|
|
|
17,072
|
|
|
$
|
797,287
|
|
|
$
|
775,137
|
|
|
$
|
(22,150
|
)
|
During
the year ended December 31, 2018 the Company issued an aggregate of:
|
●
|
On
February 7, 2018, the Company issued 5,186 shares of common stock and on March 19, 2018 the Company issued 7,315 shares of
common stock for aggregate cash proceeds of $81,659.
|
|
|
|
|
●
|
On
June 5, 2018, the Company issued 188 shares of common stock, with a fair value of $2,250, in connection with a 5% commission
granted on referral of sales totaling $45,000.
|
|
|
|
|
●
|
On
October 18, 2018, the Company issued 23,750 shares of common stock, with a fair value of $332,500, in connection with an investor
relations agreement.
|
|
|
|
|
●
|
The
Company issued an aggregate of 572,547 shares of common stock with a fair value of $4,315,958 upon the conversion of $1,302,077
of convertible debentures, accrued interest and finance fees per the table below:
|
Date Issued
|
|
Common Shares
Issued (#)
|
|
|
Fair Value
|
|
|
Converted
Balance
|
|
|
Gain (loss) on Conversion
|
|
January 2, 2018
|
|
|
1,270
|
|
|
$
|
11,683
|
|
|
$
|
3,733
|
|
|
$
|
(7,950
|
)
|
January 5, 2018
|
|
|
1,325
|
|
|
|
10,600
|
|
|
|
5,300
|
|
|
|
(5,300
|
)
|
January 5, 2018
|
|
|
1,334
|
|
|
|
10,666
|
|
|
|
2,986
|
|
|
|
(7,680
|
)
|
January 9, 2018
|
|
|
1,450
|
|
|
|
11,600
|
|
|
|
5,800
|
|
|
|
(5,800
|
)
|
January 11, 2018
|
|
|
1,525
|
|
|
|
15,860
|
|
|
|
6,100
|
|
|
|
(9,760
|
)
|
January 11, 2018
|
|
|
1,539
|
|
|
|
15,997
|
|
|
|
3,446
|
|
|
|
(12,551
|
)
|
January 12, 2018
|
|
|
1,692
|
|
|
|
16,911
|
|
|
|
3,788
|
|
|
|
(13,123
|
)
|
January 16, 2018
|
|
|
1,675
|
|
|
|
13,400
|
|
|
|
6,701
|
|
|
|
(6,699
|
)
|
January 16, 2018
|
|
|
1,776
|
|
|
|
14,204
|
|
|
|
3,977
|
|
|
|
(10,227
|
)
|
January 17, 2018
|
|
|
1,948
|
|
|
|
15,581
|
|
|
|
4,363
|
|
|
|
(11,218
|
)
|
January 19, 2018
|
|
|
2,045
|
|
|
|
18,812
|
|
|
|
4,580
|
|
|
|
(14,232
|
)
|
January 22, 2018
|
|
|
2,045
|
|
|
|
35,170
|
|
|
|
4,580
|
|
|
|
(30,590
|
)
|
January 23, 2018
|
|
|
2,125
|
|
|
|
27,200
|
|
|
|
8,500
|
|
|
|
(18,700
|
)
|
January 24, 2018
|
|
|
2,249
|
|
|
|
29,685
|
|
|
|
5,038
|
|
|
|
(24,647
|
)
|
January 26, 2018
|
|
|
2,468
|
|
|
|
27,632
|
|
|
|
5,526
|
|
|
|
(22,106
|
)
|
January 31, 2018
|
|
|
2,133
|
|
|
|
36,678
|
|
|
|
7,506
|
|
|
|
(29,172
|
)
|
January 31, 2018
|
|
|
2,591
|
|
|
|
27,975
|
|
|
|
5,802
|
|
|
|
(22,173
|
)
|
February 1, 2018
|
|
|
2,591
|
|
|
|
25,903
|
|
|
|
5,802
|
|
|
|
(20,101
|
)
|
February 6, 2018
|
|
|
1,511
|
|
|
|
14,501
|
|
|
|
3,806
|
|
|
|
(10,695
|
)
|
February 6, 2018
|
|
|
2,956
|
|
|
|
28,370
|
|
|
|
6,620
|
|
|
|
(21,750
|
)
|
February 7, 2018
|
|
|
2,821
|
|
|
|
29,076
|
|
|
|
10,550
|
|
|
|
(18,526
|
)
|
February 8, 2018
|
|
|
1,511
|
|
|
|
12,084
|
|
|
|
4,350
|
|
|
|
(7,734
|
)
|
February 9, 2018
|
|
|
3,500
|
|
|
|
32,200
|
|
|
|
14,000
|
|
|
|
(18,200
|
)
|
February 9, 2018
|
|
|
3,653
|
|
|
|
33,607
|
|
|
|
8,182
|
|
|
|
(25,425
|
)
|
February 12, 2018
|
|
|
3,613
|
|
|
|
36,124
|
|
|
|
15,100
|
|
|
|
(21,024
|
)
|
February 12, 2018
|
|
|
4,010
|
|
|
|
40,098
|
|
|
|
9,543
|
|
|
|
(30,555
|
)
|
February 13, 2018
|
|
|
2,450
|
|
|
|
18,816
|
|
|
|
9,800
|
|
|
|
(9,016
|
)
|
February 14, 2018
|
|
|
3,588
|
|
|
|
28,696
|
|
|
|
10,331
|
|
|
|
(18,365
|
)
|
February 14, 2018
|
|
|
4,513
|
|
|
|
36,099
|
|
|
|
10,740
|
|
|
|
(25,359
|
)
|
February 16, 2018
|
|
|
4,917
|
|
|
|
33,433
|
|
|
|
9,637
|
|
|
|
(23,796
|
)
|
February 20, 2018
|
|
|
3,276
|
|
|
|
19,654
|
|
|
|
10,089
|
|
|
|
(9,565
|
)
|
February 22, 2018
|
|
|
2,470
|
|
|
|
15,610
|
|
|
|
7,064
|
|
|
|
(8,546
|
)
|
February 22, 2018
|
|
|
5,326
|
|
|
|
27,692
|
|
|
|
9,692
|
|
|
|
(18,000
|
)
|
February 28, 2018
|
|
|
3,588
|
|
|
|
18,652
|
|
|
|
8,394
|
|
|
|
(10,258
|
)
|
February 28, 2018
|
|
|
5,715
|
|
|
|
29,714
|
|
|
|
8,000
|
|
|
|
(21,714
|
)
|
March 2, 2018
|
|
|
6,179
|
|
|
|
81,556
|
|
|
|
8,650
|
|
|
|
(72,906
|
)
|
March 5, 2018
|
|
|
1,068
|
|
|
|
11,099
|
|
|
|
1,494
|
|
|
|
(9,605
|
)
|
March 5, 2018
|
|
|
2,583
|
|
|
|
26,859
|
|
|
|
3,616
|
|
|
|
(23,243
|
)
|
March 6, 2018
|
|
|
6,137
|
|
|
|
81,000
|
|
|
|
13,500
|
|
|
|
(67,500
|
)
|
March 6, 2018
|
|
|
6,068
|
|
|
|
60,671
|
|
|
|
10,921
|
|
|
|
(49,750
|
)
|
March 7, 2018
|
|
|
5,428
|
|
|
|
54,280
|
|
|
|
7,599
|
|
|
|
(46,681
|
)
|
March 8, 2018
|
|
|
5,946
|
|
|
|
64,213
|
|
|
|
8,324
|
|
|
|
(55,889
|
)
|
March 8, 2018
|
|
|
3,476
|
|
|
|
40,318
|
|
|
|
8,064
|
|
|
|
(32,254
|
)
|
March 12, 2018
|
|
|
5,942
|
|
|
|
64,167
|
|
|
|
8,318
|
|
|
|
(55,849
|
)
|
March 13, 2018
|
|
|
5,244
|
|
|
|
50,335
|
|
|
|
11,535
|
|
|
|
(38,800
|
)
|
March 14, 2018
|
|
|
6,549
|
|
|
|
70,726
|
|
|
|
11,788
|
|
|
|
(58,938
|
)
|
March 14, 2018
|
|
|
5,507
|
|
|
|
57,263
|
|
|
|
7,708
|
|
|
|
(49,555
|
)
|
March 15, 2018
|
|
|
5,669
|
|
|
|
56,683
|
|
|
|
7,936
|
|
|
|
(48,747
|
)
|
March 19, 2018
|
|
|
8,316
|
|
|
|
76,501
|
|
|
|
11,641
|
|
|
|
(64,860
|
)
|
March 22, 2018
|
|
|
6,537
|
|
|
|
52,291
|
|
|
|
9,151
|
|
|
|
(43,140
|
)
|
March 26, 2018
|
|
|
5,825
|
|
|
|
72,230
|
|
|
|
8,155
|
|
|
|
(64,075
|
)
|
March 27, 2018
|
|
|
4,567
|
|
|
|
42,016
|
|
|
|
10,047
|
|
|
|
(31,969
|
)
|
March 29, 2018
|
|
|
1,558
|
|
|
|
19,938
|
|
|
|
10,000
|
|
|
|
(9,938
|
)
|
April 2, 2018
|
|
|
4,580
|
|
|
|
75,105
|
|
|
|
18,135
|
|
|
|
(56,970
|
)
|
April 5, 2018
|
|
|
11,087
|
|
|
|
319,277
|
|
|
|
19,955
|
|
|
|
(299,322
|
)
|
April 6, 2018
|
|
|
2,190
|
|
|
|
21,893
|
|
|
|
3,941
|
|
|
|
(17,952
|
)
|
April 19, 2018
|
|
|
12,050
|
|
|
|
173,512
|
|
|
|
66,272
|
|
|
|
(107,240
|
)
|
May 14, 2018
|
|
|
18,068
|
|
|
|
252,948
|
|
|
|
113,174
|
|
|
|
(139,774
|
)
|
May 25, 2018
|
|
|
10,000
|
|
|
|
112,000
|
|
|
|
52,800
|
|
|
|
(59,200
|
)
|
June 13, 2018
|
|
|
3,250
|
|
|
|
26,000
|
|
|
|
9,750
|
|
|
|
(16,250
|
)
|
June 13, 2018
|
|
|
10,000
|
|
|
|
72,000
|
|
|
|
33,000
|
|
|
|
(39,000
|
)
|
June 19, 2018
|
|
|
9,975
|
|
|
|
59,850
|
|
|
|
32,918
|
|
|
|
(26,932
|
)
|
June 25, 2018
|
|
|
10,840
|
|
|
|
60,704
|
|
|
|
28,618
|
|
|
|
(32,086
|
)
|
July 2, 2018
|
|
|
3,438
|
|
|
|
19,250
|
|
|
|
7,906
|
|
|
|
(11,344
|
)
|
July 2, 2018
|
|
|
12,327
|
|
|
|
69,028
|
|
|
|
31,186
|
|
|
|
(37,842
|
)
|
July 12, 2018
|
|
|
11,000
|
|
|
|
61,600
|
|
|
|
25,300
|
|
|
|
(36,300
|
)
|
July 23, 2018
|
|
|
4,774
|
|
|
|
21,006
|
|
|
|
10,503
|
|
|
|
(10,503
|
)
|
July 24, 2018
|
|
|
14,250
|
|
|
|
62,700
|
|
|
|
28,500
|
|
|
|
(34,200
|
)
|
July 25, 2018
|
|
|
10,626
|
|
|
|
38,253
|
|
|
|
21,039
|
|
|
|
(17,214
|
)
|
August 2, 2018
|
|
|
18,500
|
|
|
|
88,800
|
|
|
|
22,200
|
|
|
|
(66,600
|
)
|
August 3, 2018
|
|
|
9,581
|
|
|
|
45,988
|
|
|
|
12,647
|
|
|
|
(33,341
|
)
|
August 10, 2018
|
|
|
10,399
|
|
|
|
41,593
|
|
|
|
13,726
|
|
|
|
(27,867
|
)
|
August 23, 2018
|
|
|
2,723
|
|
|
|
23,956
|
|
|
|
4,192
|
|
|
|
(19,764
|
)
|
September 4, 2018
|
|
|
13,887
|
|
|
|
116,644
|
|
|
|
15,000
|
|
|
|
(101,644
|
)
|
September 10, 2018
|
|
|
17,073
|
|
|
|
122,922
|
|
|
|
26,292
|
|
|
|
(96,631
|
)
|
September 10, 2018
|
|
|
10,792
|
|
|
|
43,167
|
|
|
|
12,950
|
|
|
|
(30,217
|
)
|
September 25, 2018
|
|
|
21,250
|
|
|
|
95,200
|
|
|
|
32,725
|
|
|
|
(62,475
|
)
|
October 5, 2018
|
|
|
16,352
|
|
|
|
77,834
|
|
|
|
35,974
|
|
|
|
(41,860
|
)
|
October 17, 2018
|
|
|
18,121
|
|
|
|
79,729
|
|
|
|
31,892
|
|
|
|
(47,837
|
)
|
October 24, 2018
|
|
|
15,132
|
|
|
|
54,474
|
|
|
|
26,632
|
|
|
|
(27,842
|
)
|
October 24, 2018
|
|
|
22,500
|
|
|
|
90,000
|
|
|
|
39,600
|
|
|
|
(50,400
|
)
|
November 2, 2018
|
|
|
9,705
|
|
|
|
34,936
|
|
|
|
14,945
|
|
|
|
(19,991
|
)
|
November 7, 2018
|
|
|
43,428
|
|
|
|
121,598
|
|
|
|
86,856
|
|
|
|
(34,742
|
)
|
December 28, 2018
|
|
|
8,851
|
|
|
|
31,861
|
|
|
|
15,576
|
|
|
|
(16,285
|
)
|
Total
|
|
|
572,547
|
|
|
$
|
4,315,958
|
|
|
$
|
1,302,077
|
|
|
$
|
(3,013,881
|
)
|
During
the three months ended March 31, 2019 the Company had the following transactions:
|
●
|
The
Company issued an aggregate of 55,932 shares of common stock with a fair value of $119,977 upon the conversion of $45,868
of convertible debentures and accrued interest per the table below:
|
Date
Issued
|
|
Common
Shares Issued (#)
|
|
|
Fair
Value
|
|
|
Converted
Balance
|
|
|
Gain
(loss) on
Conversion
|
|
January
22, 2019
|
|
|
10,189
|
|
|
$
|
28,527
|
|
|
$
|
15,690
|
|
|
$
|
(12,837
|
)
|
March
11, 2019
|
|
|
18,606
|
|
|
|
37,212
|
|
|
|
12,280
|
|
|
|
(24,932
|
)
|
March
15, 2019
|
|
|
27,137
|
|
|
|
54,238
|
|
|
|
17,898
|
|
|
|
(36,340
|
)
|
Total
|
|
|
55,932
|
|
|
$
|
119,977
|
|
|
$
|
45,868
|
|
|
$
|
(74,109
|
)
|
Subsequent
to March 31, 2019, the Company had the following transactions:
|
●
|
On
June 4, 2019, the Company issued 8,750 shares of common stock with a fair value of $10,850 to a consultant in exchange for
investor relations services.
|
The
above referenced shares have been adjusted to reflect a four thousand (4,000) old for one (1) new common share as a result of
the reverse stock split of the Company’s common shares on March 26, 2019.
The
above referenced shares were issued in reliance on an exemption from registration under the Securities Act of 1933 set forth in
Section 4(2) thereof and/or Rule 506 of Regulation D promulgated thereunder.
DSG
GLOBAL, INC.
INTERIM
CONDENSED CONSOLIDATED BALANCE SHEETS
AS
AT JUNE 30, 2019 AND DECEMBER 31, 2018
(Expressed
in U.S. dollars)
(UNAUDITED)
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
31,820
|
|
|
$
|
5,059
|
|
Trade receivables, net
|
|
|
227,350
|
|
|
|
139,400
|
|
Inventories, net of inventory allowance of $149,577 and $146,292, respectively
|
|
|
162,104
|
|
|
|
141,296
|
|
Prepaid expenses and deposits
|
|
|
78,847
|
|
|
|
47,484
|
|
TOTAL CURRENT ASSETS
|
|
|
500,121
|
|
|
|
333,239
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Intangible assets, net
|
|
|
14,675
|
|
|
|
15,289
|
|
Fixed assets, net
|
|
|
33,195
|
|
|
|
869
|
|
Equipment on lease, net
|
|
|
2,120
|
|
|
|
3,316
|
|
TOTAL NON-CURRENT ASSETS
|
|
|
49,990
|
|
|
|
19,474
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
550,111
|
|
|
$
|
352,713
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
$
|
2,368,800
|
|
|
$
|
1,897,530
|
|
Deferred revenue
|
|
|
147,288
|
|
|
|
215,662
|
|
Operating lease liability
|
|
|
32,695
|
|
|
|
-
|
|
Convertible note payable to related party
|
|
|
310,000
|
|
|
|
310,000
|
|
Loans payable
|
|
|
1,019,383
|
|
|
|
795,588
|
|
Derivative liability
|
|
|
1,717,939
|
|
|
|
2,188,354
|
|
Convertible loans payable, net of unamortized discounts and premiums of $212,401 and $213,461, respectively
|
|
|
1,743,361
|
|
|
|
1,613,912
|
|
TOTAL CURRENT LIABILITIES
|
|
|
7,339,466
|
|
|
|
7,021,046
|
|
|
|
|
|
|
|
|
|
|
Going concern (Note 2)
|
|
|
|
|
|
|
|
|
Commitments (Note 16)
|
|
|
|
|
|
|
|
|
Contingencies (Note 17)
|
|
|
|
|
|
|
|
|
Subsequent events (Note 18)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MEZZANINE EQUITY
|
|
|
|
|
|
|
|
|
Redeemable preferred stock, (2019 and 2018 - to be issued)
|
|
$
|
6,702,450
|
|
|
$
|
6,702,450
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
Preferred stock to be issued
|
|
|
4,872,732
|
|
|
|
4,872,732
|
|
Common stock, $0.001 par value, 150,000,000 shares authorized, (2018 - 750,000); 787,569
issued and outstanding (2018 - 634,471)
|
|
|
788
|
|
|
|
634
|
|
Additional paid in capital
|
|
|
22,649,842
|
|
|
|
22,415,121
|
|
Discounts on common stock
|
|
|
(69,838
|
)
|
|
|
(69,838
|
)
|
Other accumulated comprehensive income
|
|
|
1,389,278
|
|
|
|
1,465,389
|
|
Accumulated deficit
|
|
|
(42,334,607
|
)
|
|
|
(42,054,821
|
)
|
TOTAL STOCKHOLDERS’ DEFICIT
|
|
|
(13,491,805
|
)
|
|
|
(13,370,783
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
550,111
|
|
|
$
|
352,713
|
|
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 AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(Expressed
in U.S. dollars)
(UNAUDITED)
|
|
Three months ending
|
|
|
Six months ending
|
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
284,646
|
|
|
$
|
237,046
|
|
|
$
|
786,070
|
|
|
$
|
347,942
|
|
Cost of revenue
|
|
|
32,886
|
|
|
|
79,552
|
|
|
|
338,954
|
|
|
|
97,881
|
|
Gross profit
|
|
|
251,760
|
|
|
|
157,494
|
|
|
|
447,116
|
|
|
|
250,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense
|
|
|
144,673
|
|
|
|
209,174
|
|
|
|
279,756
|
|
|
|
417,802
|
|
General and administration expense
|
|
|
203,938
|
|
|
|
275,480
|
|
|
|
431,694
|
|
|
|
633,493
|
|
Warranty expense
|
|
|
-
|
|
|
|
46,273
|
|
|
|
-
|
|
|
|
46,273
|
|
Bad debt
|
|
|
(3,290
|
)
|
|
|
2,099
|
|
|
|
(1,866
|
)
|
|
|
30,992
|
|
Depreciation and amortization expense
|
|
|
10,900
|
|
|
|
2,220
|
|
|
|
20,821
|
|
|
|
8,914
|
|
Total operating expense
|
|
|
356,221
|
|
|
|
535,246
|
|
|
|
730,405
|
|
|
|
1,137,474
|
|
Loss from operations
|
|
|
(104,461
|
)
|
|
|
(377,752
|
)
|
|
|
(283,289
|
)
|
|
|
(887,413
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange gain (loss)
|
|
|
13,526
|
|
|
|
410,454
|
|
|
|
31,163
|
|
|
|
(150,212
|
)
|
Change in fair value of derivative instruments
|
|
|
7,356,541
|
|
|
|
6,013,778
|
|
|
|
720,624
|
|
|
|
397,517
|
|
Loss on extinguishment of debt
|
|
|
(54,145
|
)
|
|
|
(768,964
|
)
|
|
|
(128,254
|
)
|
|
|
(2,164,231
|
)
|
Finance costs
|
|
|
(318,274
|
)
|
|
|
(776,506
|
)
|
|
|
(620,030
|
)
|
|
|
(1,517,068
|
)
|
Total other income (expense)
|
|
|
6,997,648
|
|
|
|
4,878,762
|
|
|
|
3,503
|
|
|
|
(3,433,994
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
6,893,187
|
|
|
$
|
4,501,010
|
|
|
$
|
(279,786
|
)
|
|
$
|
(4,321,407
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
9.80
|
|
|
$
|
16.80
|
|
|
$
|
(0.41
|
)
|
|
$
|
(23.26
|
)
|
Diluted
|
|
$
|
9.80
|
|
|
$
|
16.80
|
|
|
$
|
(0.41
|
)
|
|
$
|
(23.26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares used in computing basic and diluted net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
703,437
|
|
|
|
267,903
|
|
|
|
677,426
|
|
|
|
185,772
|
|
Diluted
|
|
|
703,437
|
|
|
|
267,903
|
|
|
|
677,426
|
|
|
|
185,772
|
|
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 AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(Expressed
in U.S. dollars)
(UNAUDITED)
|
|
Three months ending
|
|
|
Six months ending
|
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
6,893,187
|
|
|
$
|
4,501,010
|
|
|
$
|
(279,786
|
)
|
|
$
|
(4,321,407
|
)
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
(6,476
|
)
|
|
|
(361,594
|
)
|
|
|
(76,111
|
)
|
|
|
279,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
6,886,711
|
|
|
$
|
4,139,416
|
|
|
$
|
(355,897
|
)
|
|
$
|
(4,041,910
|
)
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
paid in capital
|
|
|
Discount
on
common stock
|
|
|
Preferred
Stock
To be
issued
|
|
|
Accumulated
comprehensive
income
|
|
|
Accumulated
deficit
|
|
|
Total
stockholders’
deficit
|
|
Balance, December 31, 2017
|
|
|
25,485
|
|
|
$
|
25
|
|
|
$
|
17,613,525
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
873,250
|
|
|
$
|
(32,229,417
|
)
|
|
$
|
(13,742,617
|
)
|
Shares issued for cash
|
|
|
12,501
|
|
|
|
12
|
|
|
|
81,647
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
81,659
|
|
Shares issued on conversion of debt
|
|
|
185,798
|
|
|
|
186
|
|
|
|
1,802,955
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,803,141
|
|
Net loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
641,091
|
|
|
|
(8,822,417
|
)
|
|
|
(8,181,326
|
)
|
Balance, March 31, 2018
|
|
|
223,784
|
|
|
$
|
223
|
|
|
$
|
19,498,127
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,514,341
|
|
|
$
|
(41,051,834
|
)
|
|
$
|
(20,039,143
|
)
|
Shares issued for commission
|
|
|
188
|
|
|
|
-
|
|
|
|
2,250
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,250
|
|
Shares issued on conversion of debt
|
|
|
92,040
|
|
|
|
92
|
|
|
|
1,172,185
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,172,277
|
|
Net loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(361,594
|
)
|
|
|
4,501,010
|
|
|
|
4,139,416
|
|
Balance, June 30, 2018
|
|
|
316,012
|
|
|
$
|
315
|
|
|
$
|
20,672,562
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,152,747
|
|
|
$
|
(36,550,824
|
)
|
|
$
|
(14,725,200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
)
|
Shares issued for services
|
|
|
17,500
|
|
|
|
18
|
|
|
|
19,582
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,600
|
|
Shares issued on conversion of debt
|
|
|
79,666
|
|
|
|
80
|
|
|
|
95,218
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
95,298
|
|
Net loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,476
|
)
|
|
|
6,893,187
|
|
|
|
6,886,711
|
|
Balance, June 30, 2019
|
|
|
787,569
|
|
|
$
|
788
|
|
|
$
|
22,649,842
|
|
|
$
|
(69,838
|
)
|
|
$
|
4,872,732
|
|
|
$
|
1,389,278
|
|
|
$
|
(42,334,607
|
)
|
|
$
|
(13,491,805
|
)
|
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 SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(Expressed
in U.S. Dollars)
(UNAUDITED)
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(279,786
|
)
|
|
$
|
(4,321,407
|
)
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
20,821
|
|
|
|
8,914
|
|
Change in inventory allowance
|
|
|
(2,814
|
)
|
|
|
-
|
|
Non-cash financing costs
|
|
|
-
|
|
|
|
224,956
|
|
Accretion of discounts on debt
|
|
|
328,055
|
|
|
|
924,905
|
|
Change in fair value of derivative liabilities
|
|
|
(720,624
|
)
|
|
|
(397,517
|
)
|
Reserve for bad debt
|
|
|
(1,866
|
)
|
|
|
30,992
|
|
Shares issued for services
|
|
|
19,600
|
|
|
|
2,250
|
|
Loss on extinguishment of debt
|
|
|
128,254
|
|
|
|
2,164,231
|
|
Unrealized foreign exchange loss (gain)
|
|
|
(81,146
|
)
|
|
|
152,901
|
|
(Increase) decrease in assets:
|
|
|
|
|
|
|
|
|
Trade receivables, net
|
|
|
(81,051
|
)
|
|
|
(107,836
|
)
|
Inventories
|
|
|
(12,103
|
)
|
|
|
(47,868
|
)
|
Prepaid expense and deposits
|
|
|
(35,880
|
)
|
|
|
(33,629
|
)
|
Related party receivable
|
|
|
-
|
|
|
|
1,034
|
|
Increase (decrease) in current liabilities:
|
|
|
|
|
|
|
|
|
Trade payables and accruals
|
|
|
554,903
|
|
|
|
313,849
|
|
Deferred revenue
|
|
|
(68,374
|
)
|
|
|
123,204
|
|
Warranty reserve
|
|
|
-
|
|
|
|
(30,583
|
)
|
Operating lease liabilities
|
|
|
(16,228
|
)
|
|
|
-
|
|
Net cash used in operating activities
|
|
|
(248,239
|
)
|
|
|
(991,604
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
|
|
-
|
|
|
|
(1,544
|
)
|
Net cash used in investing activities
|
|
|
-
|
|
|
|
(1,544
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuing shares
|
|
|
-
|
|
|
|
81,659
|
|
Repayments of notes payable
|
|
|
-
|
|
|
|
(45,000
|
)
|
Proceeds from notes payable
|
|
|
275,000
|
|
|
|
967,000
|
|
Net cash provided by financing activities
|
|
|
275,000
|
|
|
|
1,003,659
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
26,761
|
|
|
|
10,511
|
|
Cash at beginning of period
|
|
|
5,059
|
|
|
|
5,488
|
|
|
|
|
|
|
|
|
|
|
Cash at the end of the period
|
|
$
|
31,820
|
|
|
$
|
15,999
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Income tax payments
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest payments
|
|
$
|
2,513
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of non-cash financing activities:
|
|
|
|
|
|
|
|
|
Convertible debenture issued for financing fees
|
|
$
|
-
|
|
|
$
|
15,000
|
|
Initial recognition of lease asset
|
|
$
|
51,203
|
|
|
$
|
-
|
|
Initial recognition of lease liability
|
|
$
|
47,118
|
|
|
$
|
-
|
|
Shares issued for convertible notes payable
|
|
$
|
215,275
|
|
|
$
|
2,975,418
|
|
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. Subsequently, on May 23, 2019, an increase in common shares to 150,000,000
was authorized, 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 June 30, 2019, the Company has a working capital deficit of $6,839,345 and has an accumulated deficit of $42,334,607 since
inception. Furthermore, the Company incurred a net loss of $279,786 and used $248,239 of cash flows for operating activities during
the six months ended June 30, 2019. 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 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 condensed interim 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, 2018. 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, 2018 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 six months ended June 30, 2019 are not necessarily
indicative of the results that may be expected for the year ending December 31, 2019.
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 material intercompany accounts, transactions and profits were eliminated
in consolidation.
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. New
estimates in the period relate to determining the Company’s estimated incremental borrowing rate in recognizing right-of-use
assets and lease liabilities. Differences in the estimated incremental borrowing rate could result in materially different lease
liabilities and right-of-use assets.
Recently
Adopted Accounting Pronouncements
In
February 2016, the Financial Accounting Standards Board, or FASB, established Topic 842, Leases, by issuing Accounting Standards
Update (“ASU”) No. 2016-02, which requires lessors to classify leases as a sales-type, direct financing, or operating
lease and requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic
842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10,
Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements.
The
Company adopted the new standard effective January 1, 2019 and elected the modified retrospective for the transition. The Company
elected the following practical expedients:
●
|
Transition
method practical expedient – permits the Company to use the effective date as the date of initial application. Upon
adoption, the Company did not have a cumulative-effect adjustment to the opening balance of retained earnings. Financial information
and disclosures for periods before January 1, 2019 were not updated.
|
|
|
|
|
●
|
Package
of practical expedients – permits the Company not to reassess under the new standard its prior conclusions about lease
identification, lease classification, and initial direct costs. This allowed the Company to continue classifying its leases
at transition in substantially the same manner.
|
|
|
|
|
●
|
Single
component practical expedient – permits the Company to not separate lease and non-lease components of leases. Upon transition,
rental income, expense reimbursement, and other were aggregated into a single line within rental and other revenues on the
condensed consolidated statement of operations.
|
|
|
|
|
●
|
Short-term
lease practical expedient – permits the Company not to recognize leases with a term equal to or less than 12 months.
|
|
Lessee
Accounting
The
new standard requires lessees to recognize a right-of-use asset and lease liability on the balance sheet for all leases with a
term longer than 12 months. Leases are classified as finance or operating at inception, with classification affecting the pattern
and recording of expenses in the statement of operations. Upon transition the Company recognized lease assets and lease liabilities
principally for its office lease. When measuring lease liabilities for leases that were classified as operating leases, the Company
discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average incremental borrowing
rate applied was 11.98%. Refer to Notes 5 and 11.
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 June 30, 2019, and December 31, 2018, trade receivables consist of the following:
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
Accounts receivables
|
|
$
|
272,132
|
|
|
$
|
184,214
|
|
Allowance for doubtful accounts
|
|
|
(44,782
|
)
|
|
|
(44,814
|
)
|
Total trade receivables, net
|
|
$
|
227,350
|
|
|
$
|
139,400
|
|
Note
5 – FIXED ASSETS AND EQUIPMENT ON LEASE
As
of June 30, 2019 and December 31, 2018, fixed assets consisted of the following:
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
Furniture and equipment
|
|
$
|
16,250
|
|
|
$
|
20,509
|
|
Computer equipment
|
|
|
25,459
|
|
|
|
28,460
|
|
Right-of-use lease asset
|
|
|
51,203
|
|
|
|
-
|
|
Accumulated depreciation
|
|
|
(59,717
|
)
|
|
|
(48,100
|
)
|
|
|
$
|
33,195
|
|
|
$
|
869
|
|
As
of June 30, 2019 and December 31, 2018, equipment on lease consisted of the following:
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
Tags
|
|
$
|
126,042
|
|
|
$
|
120,998
|
|
Text
|
|
|
27,858
|
|
|
|
26,743
|
|
Touch
|
|
|
23,076
|
|
|
|
22,152
|
|
Accumulated depreciation
|
|
|
(174,856
|
)
|
|
|
(166,577
|
)
|
|
|
$
|
2,120
|
|
|
$
|
3,316
|
|
For
the three months ended June 30, 2019 and 2018, total depreciation expense for fixed assets and leased equipment was $10,593 and
$1,937, respectively.
For
the six months ended June 30, 2019 and 2018, total depreciation expense for fixed assets and leased equipment was $20,207 and
$8,348, respectively.
Note
6 – INTANGIBLE ASSETS
Intangible
assets consist of the following as of June 30, 2019 and December 31, 2018:
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
Intangible asset – Patent
|
|
$
|
22,353
|
|
|
$
|
22,353
|
|
Accumulated depreciation
|
|
|
(7,678
|
)
|
|
|
(7,064
|
)
|
|
|
$
|
14,675
|
|
|
$
|
15,289
|
|
The
estimated useful life of the patent is 20 years. Patents are amortized on a straight-line basis. For the three months ended June
30, 2019 and 2018, total amortization expense was $307 and $283, respectively.
For
the six months ended June 30, 2019 and 2018, total amortization expense was $614 and $566, respectively.
Note
7 – TRADE AND OTHER PAYABLES
As
of June 30, 2019, and December 31, 2018, trade and other payables consist of the following:
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
Accounts payable
|
|
$
|
1,190,174
|
|
|
$
|
978,770
|
|
Accrued expenses
|
|
|
252,502
|
|
|
|
245,737
|
|
Accrued interest
|
|
|
906,052
|
|
|
|
686,354
|
|
Other liabilities
|
|
|
20,072
|
|
|
|
(13,331
|
)
|
Total payables
|
|
$
|
2,368,800
|
|
|
$
|
1,897,530
|
|
Note
8 – LOANS PAYABLE
As
of June 30, 2019 and December 31, 2018, loans payable consisted of the following:
Loans Payable
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
Unsecured, due on demand, interest at 15% per annum
|
|
$
|
190,896
|
|
|
$
|
183,258
|
|
Unsecured, due on demand, interest at 36% per annum
|
|
|
46,701
|
|
|
|
44,830
|
|
Unsecured, loan payable, due on demand, interest at 18% per annum
|
|
|
317,500
|
|
|
|
317,500
|
|
Unsecured, loan payable, interest 10% per annum, with a minimum interest amount of $25,000, due on demand.
|
|
|
250,000
|
|
|
|
250,000
|
|
Unsecured share-settled debt, interest at 4.99% per month, due on May 7, 2019.
|
|
|
214,286
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,019,383
|
|
|
$
|
795,588
|
|
On
March 8, 2019, the Company entered into a convertible bridge loan agreement (the “Share-Settled Loan”). The Share-Settled
Loan bears 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 June 30, 2019, 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.
Note
9 – CONVERTIBLE NOTES
As
of June 30, 2019 and December 31, 2018, convertible loans payable consisted of the following:
Related
Party Convertible Loans 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 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 June 30, 2019, the carrying value of the convertible promissory note was
$310,000 (December 31, 2018 - $310,000).
|
Third
Party Convertible Loans Payable
(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 June 30,
2019, the carrying value of the convertible promissory note was $250,000 (December 31, 2018 - $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.
|
|
|
|
As
at June 30, 2019, the carrying value of the note was $245,889 (December 31, 2018 - $245,889) and the fair value of the derivative
liability was $307,641 (December 31, 2018 - $606,710).
|
|
|
(d)
|
On
June 5, 2017, the Company issued a convertible promissory note in the principal amount of $110,000. The note is unsecured,
bears interest at 10% per annum, was due on December 5, 2017, 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-five trading day period ending
on the latest complete trading day prior to the date of this note and (ii) the alternate conversion price which means 55%
multiplied by the lowest trading price during the previous twenty-five trading day period ending on the latest complete trading
day prior to the conversion date. Interest will be accrued and payable at the time of promissory note repayment. Financing
fees on the note were $7,000. The derivative liability applied as a discount on the note was $103,000 and is accreted over
the life of the note.
|
|
|
|
During
the year ended December 31, 2018, $75,000 of the note was reassigned to another unrelated note holder and the note was treated
as an extinguishment. There were no material changes to the note upon reassignment.
|
|
|
|
During
the year ended December 31, 2018, the Company issued 51,749 common shares with a fair value of $524,487 for the conversion
of the remaining principal balance of $35,000, and default penalties and finance costs of $37,448 resulting in a loss on settlement
of debt of $452,039.
|
|
|
|
As
at June 30, 2019, the carrying value of the note was $9,487 (December 31, 2018 - $9,487), relating to a 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.
During
the year ended December 31, 2018, the Company issued 25,000 common shares with a fair value of $227,222 for the conversion
of $53,530 of principal balance resulting in a loss on settlement of debt of $173,692.
|
|
|
|
As
at June 30, 2019, the carrying value of the note was $81,470 (December 31, 2018 - $81,470) and the fair value of the derivative
liability was $106,863 (December 31, 2018 - $121,485). During the six months ended June 30, 2019, the Company accreted $nil
(2018 - $64,282) of the debt discount to finance costs.
|
(f)
|
On
March 19, 2018, the Company issued a convertible promissory note in the principal amount of up to $900,000. 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.
On
May 3, 2018, the Company amended the convertible promissory note to include that at any time after the 100th calendar
day after the funds are issued, and at the option of the holder in addition to the right of conversion, the holder may
deduct daily payments from the Company’s bank account in the amount of $5,562 per calendar day or $27,812 per week
until the Company has paid or the holder has converted an amount equal to the principal balance, interest, accrued interest,
and default amount.
|
|
|
|
First
Tranche
On
March 19, 2018, the Company received $270,000 pursuant to the first tranche of the note, which is $300,000 in the principal
amount, net of the original issuance discount of $30,000. The derivative liability applied as a discount on the note was
$270,000.
|
|
|
|
On
August 31, 2018, the principal balance of $300,000 and accrued interest of $15,978 for the first tranche of the note was reassigned
to another unrelated note holder. There were no material changes to the note upon reassignment. Refer to Note 9(l).
|
|
|
|
Second
Tranche
|
|
|
|
On
May 3, 2018, the Company received $146,500, net of $3,500 in legal fees, pursuant to the second tranche of the note, which
is $166,667 in the principal amount, net of the original issuance discount of $16,667. The derivative liability applied as
a discount on the note was $150,000 and is accreted over the life of the note.
|
|
|
|
On
April 26, 2019 and May 22, 2019, an aggregate principal balance of $166,667 and accrued interest of $3,567 for the second
tranche of the note was reassigned to another unrelated note holder. There were no material changes to the note upon reassignment.
Refer to Note 9(n).
|
|
|
|
As
at June 30, 2019, the carrying value of the second tranche of the note was $nil (December 31, 2018 - $166,667) and the fair
value of the derivative liability was $87,975 (December 31, 2018 - $229,951). During the six months ended June 30, 2019, the
Company accreted $nil (2018 - $52,536) of the debt discount to finance costs.
|
|
|
|
Third
Tranche
|
|
|
|
On
July 16, 2018, the Company received $125,000, net of $53,500 in legal and financing fees, pursuant to the third tranche of
the agreement, which is $198,333 in the principal amount, net of the original issuance discount of $19,833. The derivative
liability applied as a discount on the note was $125,000 and is accreted over the life of the note.
|
|
|
|
On
June 24, 2019, the principal balance of $77,844 and accrued interest of $42,656 for the third tranche of the note was reassigned
to another unrelated note holder. There were no material changes to the note upon reassignment. Refer to Note 9(n).
|
|
|
|
As
at June 30, 2019, the carrying value of the third tranche of the note was $120,489 (December 31, 2018 - $181,087) and the
fair value of the derivative liability was $100,506 (December 31, 2018 - $231,250). During the six months ended June 30, 2019,
the Company accreted $17,246 (2018 - $nil) of the debt discount to finance costs.
|
|
|
(g)
|
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 June 30, 2019, the carrying value of the note was $5,000 (December 31, 2018 - $5,000) and the fair value of the derivative
liability was $3,076 (December 31, 2018 - $2,714).
|
(h)
|
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.
|
|
|
|
As
at June 30, 2019, the carrying value of the note was $51,500 (December 31, 2018 - $44,223) and the fair value of the derivative
liability was $46,432 (December 31, 2018 - $44,543). During the six months ended June 30, 2019, the Company accreted $7,277
(2018 - $9,889) of the debt discount to finance costs.
|
|
|
(i)
|
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 is 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 June 30, 2019, the carrying value of the note was $180,000 (December 31, 2018 - $141,522) and the fair value of the
derivative liability was $160,460 (December 31, 2018 - $165,742). During the six months ended June 30, 2019, the Company
accreted $38,478 (2018 - $21,522) of the debt discount to finance costs.
|
|
|
(j)
|
On
June 18, 2018, the Company reassigned convertible note balances from 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, 2018, the Company issued 43,750 common shares with a fair value of $185,200 for the conversion
of $66,672 of principal and $5,653 of accrued interest resulting in a loss on settlement of debt of $112,875.
|
|
|
|
During
the six months ended June 30, 2019, the Company issued 34,450 common shares with a fair value of $36,517 for the conversion
of $13,324 of principal and $6,571 of accrued interest resulting in a loss on settlement of debt of $16,622.
|
|
|
|
As
at June 30, 2019, the carrying value of the note was $88,725 (December 31, 2018 - $102,049) and the fair value of the derivative
liability was $43,846 (December 31, 2018 - $53,896). During the six months ended June 30, 2019, the Company accreted $nil
(2018 - $73,669) of the debt discount to finance costs.
|
|
|
(k)
|
On
August 31, 2018, the Company issued a convertible promissory note in the principal amount of $226,000. The note is unsecured,
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. Deferred financing fees and original
issuance discount on the note were $26,000. The derivative liability applied as a discount on the note was $200,000 and is
accreted over the life of the note.
|
|
|
|
On
May 7, 2019 and June 28, 2019, an aggregate principal balance of $125,209 was purchased by another unrelated note holder.
There were no material changes to the note upon purchase. Refer to Note 9(o). The deferred financing fees and derivative liability
applied as discounts on the purchase portion of the note were fully extinguished at the time of the transfer.
|
|
|
|
As
at June 30, 2019, the carrying value of the note was $81,597 (December 31, 2018 - $75,540) and the fair value of the derivative
liability was $129,531 (December 31, 2018 - $305,890). During the six months ended June 30, 2019, the Company accreted $131,266
(2018 - $nil) of the debt discount to finance costs.
|
|
|
(l)
|
On
August 31, 2018, the Company reassigned the first tranche of a convertible note balance from another unrelated party in the
principal amount of $315,978. The first tranche of the note is unsecured, bears interest at 12% per annum, which is due on
demand, 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.
|
|
The
deferred financing fees and derivative liability applied as discounts on the reassigned note were fully amortized at the time
of the transfer.
|
|
|
|
During
the six months ended June 30, 2019, the Company issued 55,915 common shares with a fair value of $119,977 for the conversion
of $42,000 of principal and $3,868 of accrued interest resulting in a loss on settlement of debt of $74,109.
|
|
|
|
As
at June 30, 2019, the carrying value of the note was $273,978 (December 31, 2018 - $315,978) and the fair value of the derivative
liability was $362,395 (2018 - $426,173).
|
|
|
(m)
|
On
January 22, 2019, the Company issued a convertible promissory note in the principal amount of $137,500. The note is unsecured,
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. Deferred financing fees and original
issuance discount on the note were $12,500. The derivative liability applied as a discount on the note was $125,000 and is
accreted over the life of the note.
|
|
|
|
As
at June 30, 2019, the carrying value of the note was $59,897 and the fair value of the derivative liability was $202,332.
During the six months ended June 30, 2019, the Company accreted $59,897 of the debt discount to finance costs.
|
|
|
(n)
|
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. Refer to Note 9(f).
Pursuant to this agreement, the seller desires 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 June 30, 2019, $290,724 in principal
and accrued interest had been assigned to the purchaser.
|
|
|
|
As
at June 30, 2019, the carrying value of the note was $290,724.
|
|
|
(o)
|
On
May 7, 2019, the Company entered into a securities purchase agreement with an unrelated party pursuant to a certain secured
inventory convertible promissory note issued on August 31, 2018 in the principal amount of $226,000. Refer to Note 9(k). Pursuant
to this agreement, the investor desired to purchase from the Company the balance owing under the original note in four separate
closings on or about May 7 and up to three additional tranches, each at the investor’s discretion. As at June 30, 2019,
two tranches totaling $125,209 had been purchased by the investor. The derivative liability applied as a discount on the note
was $125,209 and is accreted over the life of the note.
|
|
|
|
As
at June 30, 2019, the carrying value of the note was $9,605 and the fair value of the derivative liability was $166,881. During
the six months ended June 30, 2019, the Company accreted $9,605 of the debt discount to finance costs.
|
Note
10 – DERIVATIVE LIABILITIES
The
Company records the fair value of the of the conversion price of the convertible debentures disclosed in Note 9 in accordance
with ASC 815, Derivatives and Hedging. The fair value of the derivative was calculated using a multi-nominal lattice model. The
fair value of the derivative liabilities is revalued on each balance sheet date with corresponding gains and losses recorded in
the consolidated statement of operations. For the three and six months ended June 30, 2019, the Company recorded a gain on the
change in fair value of derivative liability of $7,356,541 and $720,624, respectively (2018 – $6,013,778 and $397,517, respectively).
As at June 30, 2019, the Company’s derivative liability had a balance of $1,717,939 (December 31, 2018 - $2,188,354).
The
following inputs and assumptions were used to value the derivative liabilities outstanding at June 30, 2019 and December 31, 2018,
assuming no dividend yield:
|
|
|
2019
|
|
|
|
2018
|
|
Expected
volatility
|
|
|
218
- 350
|
%
|
|
|
180
- 447
|
%
|
Risk
free interest rate
|
|
|
1.92
- 2.44
|
%
|
|
|
1.63
- 2.59
|
%
|
Expected
life (in years)
|
|
|
0.25
- 1.0
|
|
|
|
0.1
- 1.0
|
|
A
summary of the activity of the derivative liabilities is shown below:
|
|
$
|
|
Balance, December 31, 2018
|
|
|
2,188,354
|
|
New issuances
|
|
|
250,209
|
|
Mark to market adjustment
|
|
|
(720,624
|
)
|
|
|
|
|
|
Balance, June 30, 2019
|
|
|
1,717,939
|
|
Note
11 - LEASES
The
Company leases certain assets under lease agreements. The lease liability consists of a single lease for office space. Upon adoption
of Topic 842, on January 1, 2019 the Company recognized right-of-use assets of $51,203 and lease liabilities of $47,118. The difference
between the recorded operating lease assets and lease liabilities is mainly due to the reclassification of prepaid rent deposits.
As of June 30, 2019, the lease had a remaining term of 0.92 years. 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 interim condensed consolidated
balance sheet as follows:
Right-of-use asset
|
|
June 30, 2019
|
|
Right-of-use asset
|
|
$
|
51,203
|
|
Depreciation
|
|
|
(18,072
|
)
|
Total right-of-use asset
|
|
$
|
33,131
|
|
Lease liability
|
|
June 30, 2019
|
|
Lease liability
|
|
$
|
47,118
|
|
Lease payments
|
|
|
(18,741
|
)
|
Interest
|
|
|
2,513
|
|
Change in foreign exchange rate
|
|
|
1,805
|
|
Total lease liability
|
|
$
|
32,695
|
|
Current portion
|
|
$
|
32,695
|
|
Long-term portion
|
|
|
-
|
|
Total lease liability
|
|
$
|
32,695
|
|
Operating
lease liabilities are measured at the commencement date based on the present value of future lease payments. As the Company’s
lease did not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at
the commencement date in determining the present value of future payments. The Company used a weighted average discount rate of
11.98% in determining its lease liabilities. The discount rate was derived from the Company’s assessment of current borrowings.
Right-of-use
assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred. Lease expense for
minimum lease payments is recognized on a straight-line basis over the lease term. The lease terms may include options to extend
or terminate the lease if it is reasonably certain that the Company will exercise that option.
Interest
on operating lease liabilities for the three and six months ended June 30, 2019 was $1,125 and $2,513, respectively. Total payments
for principal and interest on operating lease liabilities for the three and six months ended June 30, 2019 were $9,288 and $18,741,
respectively.
Future
minimum lease payments to be paid by the Company as a lessee for operating leases as of June 30, 2019 for the next two years and
thereafter are as follows:
2019
|
|
$
|
18,919
|
|
2020
|
|
|
15,766
|
|
|
|
|
|
|
Total future minimum lease payments
|
|
$
|
34,685
|
|
Discount
|
|
|
(1,990
|
)
|
|
|
|
|
|
Total
|
|
$
|
32,695
|
|
Note
12 – MEZZANINE EQUITY
Authorized
5,000,000
shares of convertible, 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 convertible, 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 convertible, 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.
The
Series C, D and E preferred shares are mandatorily redeemable upon a major transaction which includes a change in control. As
a result, they are classified as mezzanine equity.
Mezzanine
equity transactions
During
the six months ended June 30, 2019, the Company did not have any mezzanine equity transactions.
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 1,000,000 shares of common stock.
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. Preferred share amounts remained unchanged.
Preferred
Equity Transactions
During
the six months ended June 30, 2019, the Company did not have any preferred share equity transactions.
Note
14 – COMMON STOCK
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.
There
were 787,569 and 634,971 shares of common stock of the Company issued and outstanding as of June 30, 2019 and December 31, 2018,
respectively. Each share of common stock is entitled to one (1) vote.
Common
Equity Transactions
During
the six months ended June 30, 2019 the Company had the following transactions:
|
●
|
The
Company issued an aggregate of 17,500 shares of common stock with a fair value of $19,600 in exchange for services.
|
|
●
|
The
Company issued an aggregate of 135,598 shares of common stock with a fair value of $215,274 upon the conversion of
$87,020 of convertible debentures, accrued interest and accounts payable, as noted in Note 9, per the table below:
|
Date Issued
|
|
Common Shares Issued (#)
|
|
|
Fair
Value(1)
|
|
|
Converted
Balance(2)
|
|
|
Gain (loss) on
Conversion
|
|
January 22, 2019
|
|
|
10,189
|
|
|
$
|
28,527
|
|
|
$
|
15,690
|
|
|
$
|
(12,837
|
)
|
March 11, 2019
|
|
|
18,606
|
|
|
|
37,212
|
|
|
|
12,280
|
|
|
|
(24,932
|
)
|
March 15, 2019
|
|
|
27,137
|
|
|
|
54,238
|
|
|
|
17,898
|
|
|
|
(36,340
|
)
|
June 17, 2019
|
|
|
45,216
|
|
|
|
58,780
|
|
|
|
21,257
|
|
|
|
(37,523
|
)
|
June 27, 2019
|
|
|
34,450
|
|
|
|
36,517
|
|
|
|
19,895
|
|
|
|
(16,622
|
)
|
Total
|
|
|
135,598
|
|
|
$
|
215,274
|
|
|
$
|
87,020
|
|
|
$
|
(128,254
|
)
|
|
(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, derivative liabilities, financing fees and interest
penalties converted upon the issuance of shares of common stock.
|
Note
15 – RELATED PARTY TRANSACTIONS
As
at June 30, 2019, the Company owed $216,579 ($283,632 CDN) (December 31, 2018 - $139,835 ($190,764 CDN)) 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 six months ended June 30, 2019 the Company incurred
$100,000 (2018 - $100,000) in salaries to the President, CEO, and CFO of the Company.
As
at June 30, 2019, the Company owed $13,325 ($17,450 CDN) (December 31, 2018 - $12,791 ($17,450 CDN)) 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
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 June 30, 2019, included in trade and other payables is $44,804
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. Refer to Note 9. 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 but management’s assessment is that an unfavorable outcome is not probable. As at June
30, 2019, 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 462 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. No accrual has been recorded because the Company is of the opinion that no obligation exists since the vendors
have not performed their contractual duties. The outcome of this breach is undecided and the company will defend its position
if so required.
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 June 30,
2019, JSJ has negotiated a reduced amount with a private investor. As at June 30, 2019, the principal balance and accrued
interest on this convertible note is included on the consolidated balance sheet under convertible notes payable.
Note
18 – SUBSEQUENT EVENTS
Management
has evaluated events subsequent to June 30, 2019, for transactions and other events that may require adjustment of and/or disclosure
in such financial statements.
On
July 24, 2019, the Company issued 37,900 shares of common stock pursuant to the conversion of outstanding convertible debentures
and related accrued interest.
REPORT
OF INDEPENDENT PUBLIC ACCOUNTING FIRM
To
the Shareholders and Board of Directors of DSG Global, Inc.
Opinion
on the Consolidated Financial Statements
We
have audited the accompanying consolidated balance sheets of DSG Global Inc. and subsidiaries (the “Company”) as of
December 31, 2018, and the related consolidated statements of operations, comprehensive loss, stockholders’ deficit, and
cash flows for the year then ended and the related notes (collectively referred to as the financial statements). In our opinion,
the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018,
and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We are required to be independent with respect to the
Company in accordance with the relevant ethical requirements relating to our audit.
We
conducted our audits in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States)
and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures including examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Emphasis
of Matter
The
accompanying financial statements have been prepared assuming that DSG Global Inc. will continue as a going concern. As discussed
in Note 2 to the consolidated financial statements, the Company has a working capital deficit, and has incurred significant operating
losses and negative cash flows from operations since inception. These factors raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 2 to the
consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/
BUCKLEY DODDS LLP
|
|
Vancouver,
Canada
|
|
|
|
May
24, 2019
|
|
We
have served as the Company’s auditor since March 2019.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of DSG Global, Inc.
Opinion
on the Consolidated Financial Statements
We
have audited the accompanying consolidated balance sheet of DSG Global, Inc. (the “Company”) as of December 31, 2017,
and the related consolidated statements of operations and comprehensive loss, stockholders’ deficit, and cash flows for
the year then ended and related notes (collectively, the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December
31, 2017, and the results of their operations and their cash flows for the year ended December 31, 2017, in conformity with accounting
principles generally accepted in the United States of America.
Explanatory
Paragraph Regarding Going Concern
The
accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed
in Note 2 to the consolidated financial statements, the Company has a working capital deficit, and has incurred significant operating
losses and negative cash flows from operations since inception. As at December 31, 2017, the Company has an accumulated deficit
of $32,229,417. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s
plans in regard to these matters are also discussed in Note 2 to the consolidated financial statements. The consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to fraud or error. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls
over financial reporting. As part of our audit, we are required to obtain an understanding of the Company’s internal controls
over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
controls over financial reporting. Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/
SATURNA GROUP CHARTERED PROFESSIONAL ACCOUNTANTS LLP
Saturna Group Chartered Professional Accountants LLP
We have served as the Company’s auditor since 2017.
Vancouver, Canada
April 18, 2018
DSG
GLOBAL, INC.
CONSOLIDATED
BALANCE SHEETS
AS
AT DECEMBER 31, 2018 AND 2017
(Expressed
in U.S. Dollars)
|
|
December
31, 2018
|
|
|
December
31, 2017
|
|
|
|
|
|
|
|
|
(revised
– Note 17)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
5,059
|
|
|
$
|
5,488
|
|
Trade
receivables, net
|
|
|
139,400
|
|
|
|
23,736
|
|
Inventories,
net of inventory allowance of $146,292 and $Nil, respectively
|
|
|
141,296
|
|
|
|
8,929
|
|
Prepaid
expenses and deposits
|
|
|
47,484
|
|
|
|
20,355
|
|
Receivable
from related party
|
|
|
-
|
|
|
|
1,034
|
|
TOTAL
CURRENT ASSETS
|
|
|
333,239
|
|
|
|
59,542
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
Intangible
assets, net
|
|
|
15,289
|
|
|
|
15,395
|
|
Fixed
assets, net
|
|
|
869
|
|
|
|
964
|
|
Equipment
on lease, net
|
|
|
3,316
|
|
|
|
14,814
|
|
TOTAL
NON-CURRENT ASSETS
|
|
|
19,474
|
|
|
|
31,173
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
352,713
|
|
|
$
|
90,715
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Trade
and other payables
|
|
$
|
1,897,530
|
|
|
$
|
3,328,851
|
|
Deferred
revenue
|
|
|
215,662
|
|
|
|
159,665
|
|
Warranty
reserve
|
|
|
-
|
|
|
|
165,523
|
|
Convertible
note payable to related party
|
|
|
310,000
|
|
|
|
310,000
|
|
Loans
payable
|
|
|
795,588
|
|
|
|
887,275
|
|
Derivative
liability
|
|
|
2,188,354
|
|
|
|
1,676,155
|
|
Convertible
notes payable, net of unamortized discount of $213,461 and $301,360, respectively
|
|
|
1,613,912
|
|
|
|
2,019,132
|
|
TOTAL
CURRENT LIABILITIES
|
|
|
7,021,046
|
|
|
|
8,546,601
|
|
|
|
|
|
|
|
|
|
|
Going
concern (Note 2)
|
|
|
|
|
|
|
|
|
Commitments
(Note 15)
|
|
|
|
|
|
|
|
|
Contingencies
(Note 16)
|
|
|
|
|
|
|
|
|
Subsequent
events (Note 20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MEZZANINE
EQUITY
|
|
|
|
|
|
|
|
|
Redeemable
preferred stock, (2018 - to be issued, 2017 – issued)
|
|
$
|
6,702,450
|
|
|
$
|
5,286,731
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT
|
|
|
|
|
|
|
|
|
Preferred
stock to be issued
|
|
|
4,872,732
|
|
|
|
|
|
Common
stock, $0.001 par value, 750,000 shares authorized, (2017 - 500,000); 634,471 issued and outstanding (2017 - 25,485)
|
|
|
634
|
|
|
|
25
|
|
Additional
paid in capital, common stock
|
|
|
22,415,121
|
|
|
|
17,613,525
|
|
Discounts
on common stock
|
|
|
(69,838
|
)
|
|
|
-
|
|
Other
accumulated comprehensive income
|
|
|
1,465,389
|
|
|
|
873,250
|
|
Accumulated
deficit
|
|
|
(42,054,821
|
)
|
|
|
(32,229,417
|
)
|
TOTAL
STOCKHOLDERS’ DEFICIT
|
|
|
(13,370,783
|
)
|
|
|
(13,742,617
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
352,713
|
|
|
$
|
90,715
|
|
The
accompanying notes are an integral part of the audited consolidated financial statements
DSG
GLOBAL, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR
THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(Expressed
in U.S. Dollars)
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
(revised
– Note 17)
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,281,024
|
|
|
$
|
1,100,577
|
|
Cost
of revenue
|
|
|
191,650
|
|
|
|
388,220
|
|
Gross
profit
|
|
|
1,089,374
|
|
|
|
712,357
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
Compensation
expense
|
|
|
726,520
|
|
|
|
746,739
|
|
General
and administration expense
|
|
|
1,561,000
|
|
|
|
1,414,983
|
|
Warranty
(recovery) expense
|
|
|
(89,037
|
)
|
|
|
90,284
|
|
Bad
debt
|
|
|
61,059
|
|
|
|
75,540
|
|
Depreciation
and amortization expense
|
|
|
13,649
|
|
|
|
29,681
|
|
Total
operating expense
|
|
|
2,273,191
|
|
|
|
2,357,227
|
|
Loss
from operations
|
|
|
(1,183,817
|
)
|
|
|
(1,644,870
|
)
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense)
|
|
|
|
|
|
|
|
|
Foreign
currency exchange
|
|
|
(59,050
|
)
|
|
|
107,096
|
|
Unrealized
gains (losses) on derivative instruments, net
|
|
|
1,005,458
|
|
|
|
(824,986
|
)
|
Loss
on extinguishment of debt
|
|
|
(6,889,665
|
)
|
|
|
(22,150
|
)
|
Finance
costs
|
|
|
(2,698,330
|
)
|
|
|
(1,731,921
|
)
|
Total
Other Expense
|
|
|
(8,641,587
|
)
|
|
|
(2,471,961
|
)
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations before income taxes
|
|
|
(9,825,404
|
)
|
|
|
(4,116,831
|
)
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(9,825,404
|
)
|
|
|
(4,116,831
|
)
|
|
|
|
|
|
|
|
|
|
Net
loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(28.88
|
)
|
|
$
|
(372.67
|
)
|
Diluted
|
|
$
|
(28.88
|
)
|
|
$
|
(372.67
|
)
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares used in computing basic and diluted net loss per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
340,264
|
|
|
|
11,047
|
|
Diluted
|
|
|
340,264
|
|
|
|
11,047
|
|
The
accompanying notes are an integral part of the audited consolidated financial statements
DSG
GLOBAL, INC.
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
FOR
THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(Expressed
in U.S. Dollars)
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
(revised
– Note 17)
|
|
Net
loss
|
|
$
|
(9,825,404
|
)
|
|
$
|
(4,116,831
|
)
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
Change
in foreign currency translation adjustments
|
|
|
592,139
|
|
|
|
(423,402
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss
|
|
|
(9,233,265
|
)
|
|
|
(4,540,233
|
)
|
The
accompanying notes are an integral part of the audited consolidated financial statements
DSG
GLOBAL, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT
AS
AT DECEMBER 31, 2018 AND 2017
(Expressed
in U.S. Dollars)
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
paid in
capital
|
|
|
Discount
on common
stock
|
|
|
Preferred
Stock
To be issued
|
|
|
Accumulated
Comprehensive Income
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders’ Deficit
|
|
Balance,
December 31, 2016
|
|
|
7,587
|
|
|
$
|
7
|
|
|
$
|
16,012,506
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,296,652
|
|
|
$
|
(28,112,586
|
)
|
|
$
|
(10,803,421
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for cash
|
|
|
125
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
Shares
issued for services
|
|
|
563
|
|
|
|
1
|
|
|
|
562,499
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
562,500
|
|
Shares
issued for commitment fee
|
|
|
138
|
|
|
|
-
|
|
|
|
198,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
198,000
|
|
Shares
issued on conversion of debt
|
|
|
17,072
|
|
|
|
17
|
|
|
|
797,270
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
797,287
|
|
Share
issuance costs
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,750
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,750
|
)
|
Net
loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(423,402
|
)
|
|
|
(4,116,831
|
)
|
|
|
(4,540,233
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2017 (revised – Note 17)
|
|
|
25,485
|
|
|
$
|
25
|
|
|
$
|
17,613,525
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
873,250
|
|
|
$
|
(32,229,417
|
)
|
|
$
|
(13,742,617
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for cash
|
|
|
12,501
|
|
|
|
12
|
|
|
|
81,647
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
81,659
|
|
Shares
issued for services
|
|
|
23,750
|
|
|
|
24
|
|
|
|
332,476
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
332,500
|
|
Shares
issued for commission
|
|
|
188
|
|
|
|
-
|
|
|
|
2,250
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,250
|
|
Shares
issued on conversion of debt
|
|
|
572,547
|
|
|
|
573
|
|
|
|
4,385,223
|
|
|
|
(69,838
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,315,958
|
|
Preferred
shares to be issued for restructure of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,872,732
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,872,732
|
|
Net
loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
592,139
|
|
|
|
(9,825,404
|
)
|
|
|
(9,233,265
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2018
|
|
|
634,971
|
|
|
$
|
634
|
|
|
$
|
22,415,121
|
|
|
$
|
(69,838
|
)
|
|
$
|
4,872,732
|
|
|
$
|
1,465,389
|
|
|
$
|
(42,054,821
|
)
|
|
$
|
(13,370,783
|
)
|
The
accompanying notes are an integral part of the audited consolidated financial statements
DSG
GLOBAL INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(Expressed
in U.S. Dollars)
|
|
December
31, 2018
|
|
|
December
31, 2017
|
|
|
|
|
|
|
(revised
– Note 17)
|
|
Net loss
|
|
$
|
(9,825,404
|
)
|
|
$
|
(4,116,831
|
)
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to
net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
13,649
|
|
|
|
29,681
|
|
Change in inventory
allowance
|
|
|
146,292
|
|
|
|
-
|
|
Depreciation included
in cost of revenue
|
|
|
-
|
|
|
|
5,359
|
|
Non-cash financing
costs
|
|
|
261,220
|
|
|
|
-
|
|
Accretion of discounts
on convertible debt
|
|
|
1,742,705
|
|
|
|
950,613
|
|
Change in fair value
of derivative liabilities
|
|
|
(1,005,458
|
)
|
|
|
824,986
|
|
Reserve for bad
debt
|
|
|
75,951
|
|
|
|
75,540
|
|
Shares issued for
services
|
|
|
334,750
|
|
|
|
760,500
|
|
Loss on extinguishment
of debt
|
|
|
6,897,744
|
|
|
|
22,150
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in assets:
|
|
|
|
|
|
|
|
|
Trade receivables,
net
|
|
|
(216,538
|
)
|
|
|
(9,238
|
)
|
Inventories
|
|
|
(278,659
|
)
|
|
|
71,644
|
|
Prepaid expense
and deposits
|
|
|
(27,129
|
)
|
|
|
35,721
|
|
Related party receivable
|
|
|
1,034
|
|
|
|
(2,560
|
)
|
Increase (decrease) in current liabilities:
|
|
|
|
|
|
|
|
|
Trade payables and
accruals
|
|
|
568,132
|
|
|
|
719,127
|
|
Warranty reserve
|
|
|
55,997
|
|
|
|
53,808
|
|
Deferred
revenue
|
|
|
(165,523
|
)
|
|
|
10,518
|
|
Net
cash used in operating activities
|
|
|
(1,421,237
|
)
|
|
|
(568,972
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase of fixed
assets
|
|
|
(1,570
|
)
|
|
|
-
|
|
Purchase
of intangible assets
|
|
|
(1,100
|
)
|
|
|
-
|
|
Net
cash used in investing activities
|
|
|
(2,670
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Bank overdraft
|
|
|
-
|
|
|
|
(5,316
|
)
|
Proceeds from issuing
shares
|
|
|
81,659
|
|
|
|
50,000
|
|
Share issuance costs
|
|
|
-
|
|
|
|
(6,750
|
)
|
Payments on notes
payable
|
|
|
(45,000
|
)
|
|
|
-
|
|
Proceeds
from notes payable
|
|
|
1,292,000
|
|
|
|
946,750
|
|
Net
cash provided by financing activities
|
|
|
1,328,659
|
|
|
|
984,684
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
(95,248
|
)
|
|
|
415,712
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
|
94,819
|
|
|
|
(410,224
|
)
|
Cash and cash
equivalents at beginning of period
|
|
|
5,488
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at the end of the period
|
|
$
|
5,059
|
|
|
$
|
5,488
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Cash Flow Information (Note 19)
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the audited consolidated financial statements
DSG
GLOBAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed
in U.S. Dollars)
Note
1 –ORGANIZATION
DSG
Global, Inc. (the “Company”)
was incorporated under the laws of the State of Nevada on September 24, 2007. The Company was formed to option feature
films and TV projects to be packaged for sale to movie studios and production companies.
On
January 19, 2015, the Board of Directors approved an agreement and plan of merger to merge with wholly-owned subsidiary
DSG Global Inc., a Nevada corporation, and affected a name change from Boreal Productions Inc. to DSG Global, Inc.
On
April 13, 2015, the Company entered into a share exchange agreement with DSG Tag Systems Inc. (“DSG Tag”), 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, DSG TAG formed DSG Tag Systems International, Ltd. in the United Kingdom (“DSG
UK”). DSG UK is a wholly owned subsidiary of DSG TAG.
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
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. 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
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 December 31,
2018, the Company has a working capital deficit of $6,687,807 and has an accumulated deficit of $42,054,821 since inception. Furthermore,
the Company incurred a net loss of $9,825,404 and used $1,421,237 of cash flows for operating activities during the year ended
December 31, 2018. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
These 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
consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted
in the United States (“U.S. GAAP”) and are expressed in U.S. dollars. These consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been
eliminated. Certain comparative information has been reclassified to conform with the financial statement presentation adopted
in the current year.
Principles
of Consolidation
The
consolidated financial statements include the accounts of DSG Global Inc. and its subsidiary DSG Tag Systems, Inc. and its wholly
owned subsidiary DSG UK, collectively referred to as the Company. All material intercompany accounts, transactions and profits
were eliminated in the consolidated financial statements.
Use
of Estimates
The
preparation of 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 financial statements and the reported amounts of revenues and expenses during the reporting period. The
Company regularly evaluates estimates and assumptions related to the collectability of accounts receivable, valuation of inventory,
useful lives and recoverability of long-lived assets, valuation of loans payable, fair value of convertible debentures, derivative
liabilities, warranty reserves, stock-based compensation, and deferred income tax asset valuation allowances. The Company bases
its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced
by the Company may differ materially and adversely from those estimates. Estimates and assumptions are reviewed periodically,
and the effects of revisions are reflected in the consolidated financial statements in the period they are determined.
The
Company’s policy for equipment requires judgment in determining whether the present value of future expected economic benefits
exceeds capitalized costs. The policy requires management to make certain estimates and assumptions about future economic benefits
related to its operations. Estimates and assumptions may change if new information becomes available. If information becomes available
suggesting that the recovery of capitalized cost is unlikely, the capitalized cost is written off to the consolidated statement
of operations.
The
assessment of whether the going concern assumption is appropriate requires management to take into account all available information
about the future, which is at least, but is not limited to, 12 months from the end of the reporting period. The Company is aware
that material uncertainties related to events or conditions may cast significant doubt upon the Company’s ability to continue
as a going concern.
Foreign
Currency Translation
The
Company’s functional and reporting currency is the U.S. dollar. The functional currency of DSG TAG is in Canadian dollars.
The functional currency of DSG UK is in British Pounds. Monetary assets and liabilities denominated in foreign currencies are
translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets, liabilities, and items recorded
in income arising from transactions denominated in foreign currencies are translated at rates of exchange in effect at the date
of the transaction. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances
are included in the determination of income.
The
accounts of DSG TAG and DSG UK are translated to U.S. dollars using the current rate method. Accordingly, assets and liabilities
are translated into U.S. dollars at the period-end exchange rate while revenues and expenses are translated at the average exchange
rates during the period. Related exchange gains and losses are included in a separate component of stockholders’ equity
as accumulated other comprehensive income (loss).
Reportable
Segment
The
Company has one reportable segment. The Company’s activities are interrelated, and each activity is dependent upon and supportive
of the other. Accordingly, all significant operating decisions are based on analysis of financial products provided as a single
global business.
Revenue
Recognition and Warranty Reserve
In
May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). The Company adopted
this standard on a modified retroactive basis on January 1, 2018. No financial statement impact occurred upon adoption.
Revenue
from Contracts with Customers
Accounting
Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”),
became effective for the Company on January 1, 2018. The Company’s revenue recognition disclosure reflects its updated accounting
policies that are affected by this new standard. The Company applied the “modified retrospective” transition method
for open contracts for the implementation of Topic 606. As sales are and have been primarily from product
sales, delivery and installation, and customer support services and the Company has no significant post-delivery obligations,
this new standard did not result in a material recognition of revenue on the Company’s accompanying consolidated
financial statements for the cumulative impact of applying this new standard. The Company made no adjustments to its previously-reported
total revenues, as those periods continue to be presented in accordance with its historical accounting practices under Topic
605, Revenue Recognition.
The
Company recognizes 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. Revenues are recognized under Topic 606 in a manner that reasonably reflects the delivery of its products
and services to customers in return for expected consideration and includes the following elements:
|
●
|
executed
contracts with the Company’s customers that it believes are legally enforceable;
|
|
●
|
identification
of performance obligations in the respective contract;
|
|
●
|
determination
of the transaction price for each performance obligation in the respective contract;
|
|
●
|
allocation
the transaction price to each performance obligation; and
|
|
●
|
recognition
of revenue only when the Company satisfies each performance obligation.
|
Performance
Obligations and Signification Judgments
The
Company’s revenue streams can be categorized into the following performance obligations and recognition patterns:
|
1.
|
Sale,
delivery and installation of Tag, Text and Infinity products, along with digital mapping and customer training. The Company
recognizes revenue at a point in time when final sign-off on the installation is obtained from the General Manager and/or
Director of Golf.
|
|
2.
|
Provision
of internet connectivity, regular software updates, software maintenance and basic customer support service. The Company recognizes
revenue over time, evenly over the term of the service.
|
|
3.
|
Sale
and delivery of Fairway Rider products. The Company recognizes revenue at a point in time when control transfers to the customer.
|
Transaction
prices for performance obligations are explicitly outlined in relevant agreements, therefore, the Company does not believe that
significant judgments are required with respect to the determination of the transaction price, including any variable consideration
identified.
Warranty
Reserve
The
Company accrued for warranty costs, sales returns, and other allowances based on its historical experience. During the fiscal
year ending December 31, 2018, the Company determined it no longer required a warranty reverse due to changes in the warranty
policies on new products. The warranty reserve was $Nil and $165,523 as at December 31, 2018 and 2017, respectively.
Research
and Development
Research
and development expenses include payroll, employee benefits, and other headcount-related expenses associated with product development.
Research and development expenses also include third-party development and programming costs, localization costs incurred to translate
software for international markets, and the amortization of purchased software code and services content. Such costs related to
software development are included in research and development expense until the point that technological feasibility is reached.
Research and development is expensed and is included in operating expenses.
Income
Taxes
The
Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Income Taxes. The asset and
liability method provides that deferred income tax assets and liabilities are recognized for the expected future tax consequences
of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax
credit carryforwards. Deferred income tax assets and liabilities are measured using the currently enacted tax rates and laws that
will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred income
tax assets to the amount that is believed more likely than not to be realized.
The
Company has not recorded any amounts pertaining to uncertain tax positions.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk are cash, and trade receivables
arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions.
The Company has a diversified customer base, most of which are in Canada, United States and the United Kingdom. The Company controls
credit risk related to trade receivables through credit approvals, credit limits and monitoring procedures. The
Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes
an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk
exposure beyond such allowance is limited.
Risks
and Uncertainties
The
Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated
with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange
rates and the volatility of public markets.
Contingencies
Certain
conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the
Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management
and legal counsel assess such contingent liabilities, and such assessment inherently involves judgment. In assessing loss contingencies
related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the
Company’s legal counsel evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived
merits of the amount of relief sought or expected to be sought.
If
the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability
can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements.
If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable
but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss
if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed
unless they involve guarantees, in which case the guarantee would be disclosed.
Cash
and Cash Equivalents
Cash
and equivalents include cash in hand and cash in demand deposits, certificates of deposit and all highly liquid debt instruments
with original maturities of three months or less. At December 31, 2018 and 2017, there were no uninsured balances for accounts
in Canada, the United States and the United Kingdom. The Company has not experienced any losses in such accounts and believes
it is not exposed to any risks on its cash in bank accounts.
Accounts
Receivable
All
accounts receivable are due thirty (30) days from the date billed. If the funds are not received within thirty (30) days, the
customer is contacted to arrange payment. The Company uses the allowance method to account for uncollectable accounts receivable.
The allowance for doubtful accounts as of December 31, 2018 and 2017 was $44,814 and $28,637, respectively.
Financing
Receivables and Guarantees
The
Company provides financing arrangements, including operating leases and financed service contracts for certain qualified customers.
Lease receivables primarily represent sales-type and direct-financing leases. Leases typically have two- to three-year terms and
are collateralized by a security interest in the underlying assets. The Company makes an allowance for uncollectible financing
receivables based on a variety of factors, including the risk rating of the portfolio, macroeconomic conditions, historical experience,
and other market factors. At December 31, 2018 and 2017 management determined that there was no allowance necessary. The Company
also provides financing guarantees, which are generally for various third-party financing arrangements to channel partners and
other customers. The Company could be called upon to make payment under these guarantees in the event of nonpayment to the third
party. As at December 31, 2018, no financing receivables are outstanding.
Advertising
Costs
The
Company expenses all advertising costs as incurred. Advertising and marketing costs were $404,391 and $581,653 for the years ended
December 31, 2018 and 2017, respectively.
Inventory
Inventories
are valued at the lower of cost or net realizable value. Cost is determined using the first-in-first-out basis for finished
goods. Net realizable value is determined on the basis of anticipated sales proceeds less the estimated selling expenses.
Management compares the cost of inventories with the net realizable value and an allowance is made to write down
inventories to net realizable value, if lower. The inventory allowance as at December 31, 2018 and 2017 was $146,292 and
$Nil, respectively.
Fixed
Assets and Equipment on Lease
Fixed
assets and equipment on lease are stated at cost and depreciated using the straight-line method over the shorter of the
estimated useful life of the asset or the lease term. The estimated useful lives of fixed assets are generally as follows:
Furniture
and equipment
|
5-years
straight-line
|
Computer
equipment
|
3-years
straight-line
|
Equipment
on lease
|
5-years
straight-line
|
Intangible
Assets
Intangible
assets are stated at cost less accumulated amortization and are comprised of patents. The patents are amortized straight-line
over the estimated useful life of 17 years and are reviewed annually for impairment.
Impairment
of Long-Lived Assets
The
Company reviews long-lived assets such as equipment, equipment on lease, and intangible assets with finite useful lives for impairment
whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. If the total of the expected
undiscounted future cash flows is less than the carrying value of the asset, a loss is recognized for the excess of the carrying
amount over the fair value of the asset.
Financial
Instruments and Fair Value Measurements
For
certain of the Company’s financial instruments, including cash, trade receivables, trade and other payables,
accrued liabilities and other short-term debt, the carrying amounts approximate their fair values due to their short maturities.
ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial
instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes
a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value
measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify
as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination
of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy
are defined as follows:
Level
1
Level
1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level
2
Level
2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability
such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in
markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant
inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level
3
Level
3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to
the measurement of the fair value of the assets or liabilities.
The
Company’s financial instruments consist principally of cash, trade receivables, amounts due from and to related
parties, trade and other payables, convertible note payable to related party, loans payable, derivative liabilities,
and convertible notes payable.
The Company analyzes all
financial instruments with features of both liabilities and equity under ASC Topic 480, “Distinguishing Liabilities from
Equity,” and ASC Topic 815 “Derivatives and Hedging”.
The
following table represents assets and liabilities that are measured and recognized at fair value as of December 31, 2018, on a
recurring basis:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
5,059
|
|
|
|
-
|
|
|
|
-
|
|
Derivative
liabilities
|
|
|
-
|
|
|
|
2,188,354
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5,059
|
|
|
|
2,188,354
|
|
|
|
-
|
|
The
recorded values of all other financial instruments approximate their current fair values because of their nature and respective
maturity dates or durations.
During
the year ended December 31, 2018, the Company recognized a gain on the change in fair value of derivative liabilities of $1,005,458
(2017 – loss of $824,986).
Loss
per Share
The
Company computes net income (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of
both basic and diluted earnings per share (“EPS”) on the face of the consolidated statement of operations. Basic EPS
is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares
outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during
the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted
EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise
of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As at December
31, 2018, the Company had 35,173,897 (2017 – 146,259) potentially dilutive shares outstanding.
Stock-Based
Compensation
The
Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation”, using
the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments
are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever
is more reliably measurable.
The
Company uses the Black-Scholes option pricing model to calculate the fair value of stock-based awards. This model is affected
by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables
include but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and
projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest
is recognized as an expense in the consolidated statement of operations over the requisite service period. As at December 31,
2018, there was no stock-based compensation.
Recently
Adopted Accounting Pronouncements
In
May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue
recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace
it with a principle-based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue
based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure
about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant
judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective
for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods
beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either
retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company adopted this ASU beginning on January
1, 2018 and used the modified retrospective method of adoption. The adoption of this ASU did not have a material impact on the
Company’s consolidated financial statements and disclosures.
Recently
Issued Accounting Pronouncements
Applicable
for fiscal years beginning after December 15, 2018:
In
February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” This accounting standard seeks to increase
transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and
disclosing key information about leasing arrangements. Current U.S. GAAP does not require lessees to recognize assets and liabilities
arising from operating leases on the balance sheet. This standard also provides guidance from the lessees’ perspective on
how to determine if a lease is an operating lease or a financing lease and the differences in accounting for each. In January
2018, the FASB issued ASU No. 2018-01, which allows for an entity to elect an optional transition practical expedient for land
easements that exist or expired before adoption of Topic 842. The adoption of this standard is required for interim and fiscal
periods beginning after December 15, 2018 and it is required to be applied using the modified retrospective approach. The
Company will adopt this standard effective January 1, 2019 and is currently evaluating the impact of the above standard on its
consolidated financial statements. The Company expects to recognize right-of-use assets and lease liabilities on its consolidated
balance sheets pursuant to its operating lease commitment, see Note 15.
In
March 2017, the “FASB” issued ASU 2017-08 “Receivables – Nonrefundable Fees and Other Costs (Subtopic
310-20) – Premium Amortization on Purchased Callable Debt Securities” an amendment to shorten the amortization
period for certain callable debt securities held at a premium to the earliest call date. The amendments do not require an accounting
change for securities held at a discount.
In
July 2017, the FASB issued ASU 2017-11 “Earnings Per Share (Topic 260), Distinguishing Liability from Equity (Topic 480),
and Derivatives and Hedging (Topic 815) – (i) Accounting for Certain Financial Instruments with Down Round Features (ii)
Replace of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments.” The amendments in (i) change the
classification analysis of certain equity-linked financial instruments (or embedded features) with down round features and to
help clarify existing disclosure requirements. The amendments in (ii) characterize the indefinite deferral of certain provisions
and do not have an accounting effect.
The
Company is currently evaluating the impact of the above standards on its consolidated financial statements. Other recent accounting
pronouncements issued by the 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
consolidated financial statements.
Reclassification
and Restatement
Certain
prior year amounts have been reclassified for consistency with the current period presentation. Certain prior year amounts
have been restated, refer to Note 17.
Note
4 – TRADE RECEIVABLES
As
of December 31, 2018, and 2017, trade receivables consists of the following:
|
|
December
31, 2018
|
|
|
December
31, 2017
|
|
Accounts receivables
|
|
$
|
184,214
|
|
|
$
|
52,373
|
|
Allowance for
doubtful accounts
|
|
|
(44,814
|
)
|
|
|
(28,637
|
)
|
Total trade
receivables, net
|
|
$
|
139,400
|
|
|
$
|
23,736
|
|
Note
5 – FIXED ASSETS AND EQUIPMENT ON LEASE
As
of December 31, 2018, and December 31, 2017, fixed assets consisted of the following:
|
|
December
31, 2018
|
|
|
December
31, 2017
|
|
Furniture and equipment
|
|
$
|
20,509
|
|
|
$
|
17,914
|
|
Computer equipment
|
|
|
28,460
|
|
|
|
26,435
|
|
Accumulated depreciation
|
|
|
(48,100
|
)
|
|
|
(43,385
|
)
|
|
|
$
|
869
|
|
|
$
|
964
|
|
As
of December 31, 2018, and December 31, 2017, equipment on lease consisted of the following:
|
|
December
31, 2018
|
|
|
December
31, 2017
|
|
Tags
|
|
$
|
120,998
|
|
|
$
|
124,314
|
|
TextInfinity 7”
|
|
|
26,743
|
|
|
|
27,475
|
|
Infinity XL 12”
|
|
|
22,152
|
|
|
|
22,759
|
|
Accumulated depreciation
|
|
|
(166,577
|
)
|
|
|
(159,734
|
)
|
|
|
$
|
3,316
|
|
|
$
|
14,814
|
|
For
the year ended December 31, 2018 and 2017, total depreciation expense for fixed assets and leased equipment was $12,443 and $33,855,
respectively, of which $Nil and $5,359 was recorded in cost of revenue, respectively.
Note
6 – INTANGIBLE ASSETS
As
of December 31, 2018,
and 2017, intangible assets consisted of the following:
|
|
December
31, 2018
|
|
|
December
31, 2017
|
|
Intangible Asset - Patents
|
|
$
|
22,353
|
|
|
$
|
21,253
|
|
Accumulated Amortization
|
|
|
(7,064
|
)
|
|
|
(5,858
|
)
|
|
|
$
|
15,289
|
|
|
$
|
15,395
|
|
The
estimated useful life of the Patent is twenty years. Patents are amortized on a straight-line basis. For the year ended December
31, 2018 and 2017, total amortization expense for intangible assets was $1,206 and $1,185, respectively.
Note
7 – TRADE AND OTHER PAYABLES
As
of December 31, 2018, and 2017, trade and other payables consist of the following:
|
|
December
31, 2018
|
|
|
December
31, 2017
|
|
Accounts payable
|
|
$
|
978,770
|
|
|
$
|
1,121,841
|
|
Accrued expenses
|
|
|
245,737
|
|
|
|
255,542
|
|
Accrued interest
|
|
|
686,354
|
|
|
|
1,889,537
|
|
Other liabilities
|
|
|
(13,331
|
)
|
|
|
61,931
|
|
Total payables
|
|
$
|
1,897,530
|
|
|
$
|
3,328,851
|
|
Note
8 – LOANS PAYABLE
As
of December 31, 2018, and 2017, loans payable consisted of the following:
Loans Payable
|
|
December
31, 2018
|
|
|
December
31, 2017
|
|
|
|
|
|
|
|
|
Unsecured, due on demand,
interest at 15% per annum
|
|
$
|
183,258
|
|
|
$
|
199,283
|
|
Unsecured, due on demand, interest at
36% per annum
|
|
|
44,830
|
|
|
|
48,750
|
|
Unsecured, loan payable, due on demand,
interest at 18% per annum
|
|
|
317,500
|
|
|
|
317,500
|
|
Unsecured, loan payable,
fee for services payable on the original loan amount of 5% by May 6, 2016, 10% payable by June 5, 2016, or 20% payable by
July 5, 2016, non-interest bearing, due on demand(1)
|
|
|
-
|
|
|
|
71,742
|
|
Unsecured, loan
payable, interest 10% per annum, with a minimum interest amount of $25,000, due on demand.
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
795,588
|
|
|
$
|
887,275
|
|
(1)
|
On
August 1, 2018, the outstanding loan payable in the principal amount of $69,219 (CDN$90,000) and accrued interest of $17,637
(CDN$24,000) was reassigned to another unrelated party in the principal amount of $86,856 (CDN$114,000). On August 26,
2018, the Company issued 43,428 common shares with a fair value of $121,598 for the conversion of $86,856 of principal
resulting in a loss on settlement of debt of $34,742. As at December 31, 2018, the carrying value of the note was
$Nil.
|
During
the year ending December 31, 2018, the Company entered into a debt settlement agreement to issue 73 and 699,908 shares of Series
B and Series E preferred shares, respectively, with a fair value of $3,908,614 ($5,075,2752
CDN) for the settlement of outstanding debt, which was recorded in the consolidated financial statements at a fair value of $Nil. The Company recorded a loss on extinguishment
of the debt of $3,908,614 in connection with the settlement. The Series E preferred shares are classified as mezzanine equity.
Refer to Note 11 and 12. As at December 31, 2018, these Series B and Series E preferred shares have not been issued.
Note
9 – CONVERTIBLE LOANS
As
of December 31, 2018, and 2017, convertible loans payable consisted of the following:
Related
Party Convertible Loans 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 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 December 31, 2018, the carrying value of the convertible promissory note
was $310,000 (December 31, 2017 - $310,000).
|
Third
Party Convertible Loans Payable
(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
December 31, 2018, the carrying value of the convertible promissory note was $250,000 (December 31, 2017 - $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 16.
|
|
|
|
As
at December 31, 2018, the carrying value of the note was $245,889 (December 31, 2017 - $245,889) and the fair value of the
derivative liability was $606,710 (December 31, 2017 - $629,759). During the year ended December 31, 2018, the Company
accreted $Nil (2017 - $179,333) of the debt discount to finance costs.
|
|
|
(d)
|
On
December 21, 2016, the Company entered into a convertible note agreement for the principal amount of $74,500 for consideration
of $72,250 which was received on January 10, 2017. The note is unsecured, bears interest at 12% per annum, was due on December
21, 2017, and is convertible into common shares at a conversion price equal to the lessor of: (i) the closing sale price of
the Company’s common stock on the trading day immediately preceding the closing date, and (ii) 50% of the lowest sale
price for the Company’s common stock during the twenty-five consecutive trading days immediately preceding the conversion
date. Interest will be accrued and payable at the time of repayment of the note. Financing fees on the note were $4,750. The
derivative liability applied as a discount on the note was $69,750 and is being accreted over the life of the note.
|
|
|
|
During
the year ended December 31, 2017, the Company issued 5,925 common shares with a fair value of $199,940 for the conversion
of $44,613 of principal, $6,750 of conversion finance fees, and $3,200 of penalty interest resulting in a loss on settlement
of debt of $147,141.
|
|
|
|
During
the year ended December 31, 2018, the Company incurred a default fee of $36,000 for failure to honor the conversion notice
in a timely manner and issued 14,050 common shares with a fair value of $129,676 for the conversion of $13,461 of principal,
$37,491 of default fees and finance costs, $5,250 for conversion fees resulting in a loss on settlement of debt of $73,475.
|
|
On
May 8, 2018, the Company paid $45,000 to settle the balance of the $74,500 convertible note including accrued interest. The
Company recognized a gain on the settlement of this convertible note totaling $24,571.
|
|
|
|
As
at December 31, 2018, the carrying value of the note was $nil (December 31, 2017 - $65,887) and the fair value of the derivative
liability was $Nil (December 31, 2017 - $31,431). During the year ended December 31, 2018, the Company accreted $nil
(2017 - $62,711) of the debt discount to finance costs.
|
|
|
(e)
|
On
January 18, 2017, the Company issued a convertible promissory note in the principal amount of $75,000. The note is unsecured,
bears interest at 12% per annum, was due on October 18, 2017, and is convertible into common shares at a conversion price
equal to the lessor of (i) 60% multiplied by the lowest trading price (representing a discount rate of 40%) during the previous
twenty-five trading day period ending on the latest complete trading day prior to the date of the note; and (ii) the variable
conversion price which means 50% multiplied by the lowest trading price (representing a discount rate of 50%) during the previous
twenty five trading day period ending on the latest complete trading day prior to the conversion date. Interest will be accrued
and payable at the time of promissory note repayment. Financing fees on the note were $2,750. The derivative liability applied
as a discount on the note was $72,250 and is being accreted over the life of the note.
|
|
|
|
On
November 7, 2017, the Company incurred a loan penalty of $15,000 for the conversion price
being below the Company’s par value.
During the year ended December 31, 2017, the
Company issued 2,729 common shares for the conversion of $33,856 of principal and $6,956 in accrued interest.
|
|
|
|
On
June 1, 2018, the remaining $56,144 principal balance and $2,023 in accrued interest were reassigned to another unrelated
note holder and the note was treated as an extinguishment. Upon reassignment, the Company incurred a finance fee of $46,833
which was added to the principle balance of the new convertible note totaling $105,000. Refer to Note 9(z).
|
|
|
|
As
at December 31, 2018, the carrying value of the note was $Nil (December 31, 2017 - $56,144) and the fair value of the
derivative liability was $Nil (December 31, 2017 - $70,818). During the year ended December 31, 2018, the Company accreted
$Nil (2017 - $75,000) of the debt discount to finance costs.
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|
|
(f)
|
On
April 3, 2017, the Company issued a convertible promissory note in the principal amount of $110,000. The note is unsecured,
bears interest at 10% per annum, was due on October 3, 2017, 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-five trading day period ending
on the latest complete trading day prior to the date of this note and (ii) the alternate conversion price which means 55%
multiplied by the lowest trading price during the previous twenty-five trading day period ending on the latest complete trading
day prior to the conversion date. Interest will be accrued and payable at the time of promissory note repayment. In connection
with the issuance, the Company issued 138 common shares as a commitment fee, however, these common shares must be returned
if the note is fully repaid and satisfied prior to the maturity date. Financing fees on the note were $10,000. The derivative
liability applied as a discount on the note was $100,000 and is being accreted over the life of the note.
|
|
|
|
During
the year ended December 31, 2017, the Company issued 7,464 common shares with a fair
value of $197,283 for the conversion of $40,048 of principal and $10,145 in accrued interest
resulting in a loss on settlement of debt of $147,090.
During
the year ended December 31, 2018, the Company issued 61,874 common shares with a fair value of $571,886 for the conversion
of $69,952 of the remaining principal and $56,227 of default fees and finance costs resulting in a loss on settlement
of debt of $445,707.
|
|
|
|
As
at December 31, 2018, the carrying value of the note was $Nil (December 31, 2017 - $69,952) and the derivative liability
was $Nil (December 31, 2017 - $108,326). During the year ended December 31, 2018, the Company accreted $Nil (2017
- $100,000) of the debt discount and $Nil (2017 - $10,000) of the financing fees to interest expense.
|
(g)
|
On
June 5, 2017, the Company issued a convertible promissory note in the principal amount of $110,000. The note is unsecured,
bears interest at 10% per annum, was due on December 5, 2017, 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-five trading day period ending
on the latest complete trading day prior to the date of this note and (ii) the alternate conversion price which means 55%
multiplied by the lowest trading price during the previous twenty-five trading day period ending on the latest complete trading
day prior to the conversion date. Interest will be accrued and payable at the time of promissory note repayment. Financing
fees on the note were $7,000. The derivative liability applied as a discount on the note was $103,000 and is being accreted
over the life of the note.
|
|
|
|
On
January 19, 2018, $50,000 of the note was reassigned to another unrelated note holder and the note was treated as an extinguishment.
There were no material changes to the note upon reassignment. Refer to Note 9(o).
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|
|
|
On
March 2, 2018, $25,000 of the note was reassigned to another unrelated note holder and the note was treated as an extinguishment.
There were no material changes to the note upon reassignment. Refer to Note 9(r).
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|
|
|
During
the year ended December 31, 2018, the Company issued 51,749 common shares with a fair value of $524,487 for the conversion
of the remaining principal balance of $35,000, and default penalties and finance costs of $37,448 resulting in a loss on settlement
of debt of $452,039.
|
|
|
|
As
at December 31, 2018, the carrying value of the note was $9,487 (December 31, 2017 - $110,000), relating to a penalty and
the fair value of the derivative liability was $Nil (December 31, 2017 - $188,798). During the year ended December
31, 2018, the Company accreted $Nil (2017 - $103,000) of the debt discount and $Nil (2017 - $7,000) of the financing fees
to interest expense.
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|
|
(h)
|
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 being accreted over the life of the note.
During
the year ended December 31, 2018, the Company issued 25,000 common shares with a fair value of $227,222 for the conversion
of $53,530 of principal balance resulting in a loss on settlement of debt of $173,692.
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|
|
|
As
at December 31, 2018, the carrying value of the note was $81,470 (December 31, 2017 - $70,718) and the fair value of the derivative
liability was $121,485 (December 31, 2017 - $205,563). During the year ended December 31, 2018, the Company accreted $64,282
(2017 - $54,218) of the debt discount to finance costs.
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|
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(i)
|
On
August 17, 2017, the Company issued a convertible promissory note in the principal amount
of $110,250. The note is unsecured, bears interest at 8% per annum, is due on August
16, 2018, and is convertible at 58% of to the lowest trading price during the previous
ten trading days to the date of a conversion notice. Interest will be accrued and payable
at the time of promissory note repayment. Deferred financing fees on the note were $5,250.
The derivative liability applied as a discount on the note was $105,000 and is being
accreted over the life of the note.
During
the year ended December 31, 2018, the Company issued 21,544 common shares with a fair value of $293,267 for the conversion
of $121,240 of principal and interest resulting in a loss on settlement of debt of $172,027.
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|
|
|
As
at December 31, 2018, the carrying value of the note was $Nil (December 31, 2017 - $44,661) and the fair value of the
derivative liability was $Nil (December 31, 2017 - $166,460). During the year ended December 31, 2018, the Company
accreted $65,589 (2017 - $39,411) of the debt discount to finance costs.
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|
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(j)
|
On
September 6, 2017, the Company issued a convertible promissory note in the principal amount of $107,000. The note is unsecured,
bears interest at 10% per annum, is due on March 6, 2018, and is convertible into common shares at a conversion price equal
to the lessor 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 will be accrued and payable at the time
of promissory note repayment. Deferred financing fees on the note were $7,000. The derivative liability applied as a discount
on the note was $100,000 and is being accreted over the life of the note.
|
|
On
March 2, 2018, $111,808 of the note was reassigned to another unrelated note holder and the note was treated as an extinguishment.
There were no material changes to the terms of the note upon reassignment. Refer to Note 9(s).
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|
|
|
As
at December 31, 2018, the carrying value of the note was $Nil (December 31, 2017 - $71,088) and the fair value of the
derivative liability was $Nil (December 31, 2017 - $100,000). During the year ended December 31, 2018, the Company
accreted $35,912 (2017 - $64,088) of the debt discount to finance costs.
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|
|
(k)
|
On
October 30, 2017, the Company issued a convertible promissory note in the principal amount of $107,000. The note is unsecured,
bears interest at 10% per annum, is due on April 30, 2018, and is convertible into common shares at a conversion price equal
to the lessor 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 will be accrued and payable at the time
of promissory note repayment. Deferred financing fees on the note were $7,000. The derivative liability applied as a discount
on the note was $100,000 and is being accreted over the life of the note.
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|
|
|
On
April 3, 2018, the Company issued 11,086 common shares with a fair value of $319,277
for the conversion of $19,955 of principal resulting in a loss on settlement of debt
of $299,322.
On
May 22, 2018, the principal balance of $87,045 and accrued interest of $5,543 was reassigned to another unrelated note
holder. There were no material changes to the note upon reassignment. Refer to Note 9(y).
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|
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|
As
at December 31, 2018, the carrying value of the note was $Nil (December 31, 2017 - $41,066) and the fair value of the
derivative liability was $Nil (December 31, 2017 - $100,000). During the year ended December 31, 2018, the Company
accreted $65,934 (2017 - $34,066) of the debt discount to finance costs.
|
(l)
|
On
December 18, 2017, the Company issued a convertible promissory note in the principal amount of $82,000. The note is unsecured,
bears interest at 10% per annum, is due on June 18, 2018, and is convertible into common shares at a conversion price equal
to the lessor 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 will be accrued and payable at the time
of promissory note repayment. Deferred financing fees on the note were $7,000. The derivative liability applied as a discount
on the note was $75,000 and is being accreted over the life of the note.
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|
|
|
On
May 22, 2018, the principal balance of $82,000 and accrued interest of $3,055 was reassigned to another unrelated note holder.
There were no material changes to the note upon reassignment. Refer to Note 9(y).
|
|
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|
As
at December 31, 2018, the carrying value of the note was $Nil (December 31, 2017 - $12,357) and the fair value of the
derivative liability was $Nil (December 31, 2017 - $75,000). During the year ended December 31, 2018, the Company accreted
$69,643 (2017 - $5,357) of the debt discount to finance costs.
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|
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(m)
|
On
January 18, 2018, the Company issued a convertible promissory note in the principal amount of $55,000. The note is unsecured,
bears interest at 10% per annum, was due on July 18, 2018, and is convertible into common shares at a conversion price
equal to the lessor 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 will be accrued and payable
at the time of promissory note repayment. The derivative liability applied as a discount on the note was $55,000 and was
being accreted over the life of the note.
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|
|
|
On
June 18, 2018, the principal balance of $55,000 and accrued interest of $2,215 was reassigned to another unrelated note holder.
There were no material changes to the note upon reassignment. Refer to Note 9(aa).
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|
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|
As
at December 31, 2018, the carrying value of the note was $Nil and the fair value of the derivative liability was $Nil.
During the year ended December 31, 2018, the Company accreted $55,000 of the debt discount to finance costs.
|
(n)
|
On
January 19, 2018, 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 January
19, 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. The derivative liability applied as a discount on the note
was $55,000 and is being accreted over the life of the note.
During
the year ended December 31, 2018, the Company issued 35,380 common shares with a fair value of $146,839 to convert
principal balance of $55,000 and accrued interest of $2,915 resulting in a loss on settlement of debt of $88,925.
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|
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|
As
at December 31, 2018, the carrying value of the note was $Nil and the fair value of the derivative liability was $Nil.
During the year ended December 31, 2018, the Company accreted $55,000 of the debt discount to finance costs.
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(o)
|
On
January 19, 2018, the Company issued a convertible promissory note in the principal amount
of $50,000, as partial replacement for a convertible promissory note originally issued
on June 5, 2017 in the amount of $110,000. Refer to Note 8(g). The note is unsecured,
bears interest at 10% per annum, is due on January 19, 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.
The derivative liability applied as a discount on the note was $50,000 and is being accreted
over the life of the note.
During
the year ended December 31, 2018, the Company issued 14,312 common shares with a fair value of $137,143 to convert principal
balance of $50,000 and accrued interest of $309 resulting in a loss on settlement of debt of $86,834.
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|
|
|
During
the year ended December 31, 2018, the Company accreted $50,000 of the debt discount to finance costs.
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|
|
(p)
|
On
February 2, 2018, the Company issued a convertible promissory note in the principal amount of $107,500. The note is unsecured,
bears interest at 10% per annum, is 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 will be accrued and payable at the time
of promissory note repayment. The derivative liability applied as a discount on the note was $107,500 and is being accreted
over the life of the note.
|
|
On
June 18, 2018, the principal balance of $107,500 and accrued interest of $4,005 was reassigned to another unrelated note holder.
There were no material changes to the note upon reassignment. Refer to Note 9(aa).
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|
|
|
As
at December 31, 2018, the carrying value of the note was $Nil and the fair value of the derivative liability was $Nil.
During the year ended December 31, 2018, the Company accreted $107,500 of the debt discount to finance costs.
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|
|
(q)
|
On
March 2, 2018, the Company issued a convertible promissory note in the principal amount
of $128,000. The note is unsecured, bears interest at 10% per annum, is due on March
2, 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. The derivative liability applied as a discount on the note
was $128,000 and is being accreted over the life of the note.
During
the year ended December 31, 2018, the Company issued 76,381 common shares with a fair value of $369,896 to convert principal
balance of $128,000 and accrued interest of $7,734 resulting in a loss on settlement of debt of $234,162.
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|
|
|
As
at December 31, 2018, the carrying value of the note was $Nil and the fair value of the derivative liability was $Nil.
During the year ended December 31, 2018, the Company accreted $128,000 of the debt discount to finance costs.
|
(r)
|
On
March 2, 2018, the Company issued a convertible promissory note in the principal amount
of $25,000, as partial replacement for a convertible promissory note originally issued
on June 5, 2017 in the amount of $110,000. Refer to Note 9(g). The note is unsecured,
bears interest at 10% per annum, is due on March 2, 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. The derivative
liability applied as a discount on the note was $25,000 and is being accreted over the
life of the note.
During
the year ended December 31, 2018, the Company issued 11,380 common shares with a fair value of $131,335 for the conversion
of $25,000 of principal and accrued interest of $35 resulting in a loss on settlement of debt of $106,300.
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|
|
|
During
the year ended December 31, 2018, the Company accreted $25,000 of the debt discount to finance costs.
|
|
|
(s)
|
On
March 2, 2018, the Company issued a convertible promissory note in the principal amount
of $111,808, as partial replacement for a convertible promissory note originally issued
on September 6, 2017 in the amount of $107,000 plus accrued interest. Refer to Note 8(j).
The note is unsecured, bears interest at 10% per annum, is due on March 2, 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. The derivative liability applied as a discount on the note was $25,000 and
is being accreted over the life of the note.
During
the year ended December 31, 2018, the Company issued 32,769 common shares with a fair value of $346,448 for the conversion
of $111,808 of principal and $2,415 of accrued interest resulting in a loss on settlement of debt of $232,226.
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|
|
|
As
at December 31, 2018, the carrying value of the note was $Nil and the fair value of the derivative liability was $Nil.
During the year ended December 31, 2018, the Company accreted $111,808 of the debt discount to finance costs.
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|
|
(t)
|
On
March 19, 2018, the Company issued a convertible promissory note in the principal amount
of up to $900,000. 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.
On
May 3, 2018, the Company amended the convertible promissory note to include that at any time after the 100th calendar
day after the funds are issued, and at the option of the holder in addition to the right of conversion, the holder may
deduct daily payments from the Company’s bank account in the amount of $5,562 per calendar day or $27,812 per week
until the Company has paid or the holder has converted an amount equal to the principal balance, interest, accrued interest,
and default amount.
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|
|
|
First
Tranche
On
March 19, 2018, the Company received $270,000 pursuant to the first tranche of the note, which is $300,000 in the principal
amount, net of the original issuance discount of $30,000. The derivative liability applied as a discount on the note was
$270,000 and is being accreted over the life of the note.
|
|
On
August 31, 2018, the Company incurred a default fee of $15,000 subject to conditions
of the convertible note dated March 19, 2018 and issued 13,886 common shares with a fair
value of $144,417 for the conversion of $15,000 of default fees resulting in a
loss on settlement of debt of $129,417.
|
|
On
August 31, 2018, the principal balance of $300,000 and accrued interest of $15,978 for
the first tranche of the note was reassigned to another unrelated note holder. There
were no material changes to the note upon reassignment. Refer to Note 9(ac).
|
|
As
at December 31, 2018, the carrying value of the first tranche of the note was $Nil and the fair value of the derivative
liability was $Nil. During the year ended December 31, 2018, the Company accreted $300,000 of the debt discount to
finance costs.
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|
|
|
Second
Tranche
|
|
|
|
On
May 3, 2018, the Company received $146,500, net of $3,500 in legal fees, pursuant to the second tranche of the note, which
is $166,667 in the principal amount, net of the original issuance discount of $16,667. The derivative liability applied as
a discount on the note was $150,000 and is being accreted over the life of the note.
|
|
|
|
As
at December 31, 2018, the carrying value of the second tranche of the note was $166,667
and the fair value of the derivative liability was $229,951. During the year ended December
31, 2018, the Company accreted $166,667 of the debt discount to finance costs.
Third
Tranche
|
|
|
|
On
July 16, 2018, the Company received $125,000, net of $53,500 in legal and financing fees, pursuant to the third tranche of
the agreement, which is $198,333 in the principal amount, net of the original issuance discount of $19,833. The derivative
liability applied as a discount on the note was $125,000 and is being accreted over the life of the note.
|
|
|
|
As
at December 31, 2018, the carrying value of the third tranche of the note was $181,087 and the fair value of the derivative
liability was $231,250. During the year ended December 31, 2018, the Company accreted $181,087 of the debt discount to finance
costs.
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|
|
(u)
|
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,
is 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.
On
March 28, 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 December 31, 2018, the carrying value of the note was $5,000 and the fair value of the derivative liability was $2,714.
|
|
|
(v)
|
During
the year ended December
31, 2018, the Company converted a promissory note in the principal amount of $948,043 ($1,231,128 CDN)
(as at December 31, 2017 - $981,370 ($1,231,128 CDN)) and accrued interest of $753,100 ($977,976 CDN)
(as at December 31, 2017 – $549,886 ($689,832 CDN)) recorded in trade and other payables. The convertible
promissory note was unsecured, bore interest at 17.2% per annum, was due on demand, and was convertible
into common shares at the average closing price of the 120 days period prior to conversion date. On August 27, 2018,
pursuant to a debt exchange agreement, the Company agreed to issue 8 and 950,000 shares of Series B and Series E preferred
shares, respectively, for the settlement of this outstanding convertible loan and accrued interest. Refer to Note 12.
|
(w)
|
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.
|
|
|
|
As
at December 31, 2018, the carrying value of the note was $44,223 and the fair value of the derivative liability was $44,543.
During the year ended December 31, 2018, the Company accreted $44,223 of the debt discount to finance costs.
|
|
|
(x)
|
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 is 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 December 31, 2018, the carrying value of the note was $141,522 and the fair value of the derivative liability was $165,742.
During the year ended December 31, 2018, the Company accreted $141,522 of the debt discount to finance costs.
|
|
|
(y)
|
On
May 22, 2018 the Company reassigned convertible note balances from another unrelated
party in the principal amount of $177,643. Refer to Notes 8(k) and 8(l). The note is
unsecured, bears interest at 10% per annum, became due and payable on June 18, 2018,
and is convertible into common shares at a conversion price equal to the lessor 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 will be accrued and payable at the time of promissory note repayment.
During
the year ended December 31, 2018, the Company issued 53,142 common shares with a fair value of $373,582 for the conversion
of $177,643 of principal and $878 of accrued interest resulting in a loss on settlement of debt of $195,061.
|
|
|
|
As
at December 31, 2018, the carrying value of the note was $Nil and the fair value of the derivative liability was $Nil.
|
|
|
(z)
|
On
June 1, 2018, the Company reassigned a convertible note from another unrelated party
in the principal amount of $105,000; $58,167 in assigned principal and accrued interest
and a finance fee of $46,833 Refer to Note 8(e). The note is unsecured, bears interest
at 12% per annum, was due on October 18, 2017, and is convertible into common shares
at a conversion price equal to the lessor of (i) 60% multiplied by the lowest trading
price (representing a discount rate of 40%) during the previous twenty-five trading day
period ending on the latest complete trading day prior to the date of the note; and (ii)
the variable conversion price which means 50% multiplied by the lowest trading price
(representing a discount rate of 50%) during the previous twenty five trading day period
ending on the latest complete trading day prior to the conversion date. Interest will
be accrued and payable at the time of promissory note repayment.
During
the year ended December 31, 2018, the Company issued 61,230 common shares with a fair value of $301,517 for the conversion
of $105,000 of principal and $1,606 of accrued interest resulting in a loss on settlement of debt of $194,911.
|
|
|
|
As
at December 31, 2018, the carrying value of the note was $Nil and the fair value of the derivative liability was $Nil.
|
|
|
(aa)
|
On
June 18, 2018, the Company reassigned convertible note balances from another unrelated
party in the principal amount of $168,721. Refer to Note 8(m) and 8(p). The note is unsecured,
bears interest at 10% per annum, which is 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 will be
accrued 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 being accreted
over the remaining life of the note.
|
|
During
the year ended December 31, 2018, the Company issued 43,750 common shares with
a fair value of $185,200 for the conversion of $66,672 of principal and $5,653 of accrued
interest resulting in a loss on settlement of debt of $112,875.
|
|
|
|
As
at December 31, 2018, the carrying value of the note was $102,049 and the fair value of the derivative liability was $53,896.
During the year ended December 31, 2018, the Company accreted $162,500 of the debt discount to finance costs.
|
|
|
(ab)
|
On
August 31, 2018, the Company issued a convertible promissory note in the principal amount of $226,000. The note is unsecured,
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. Deferred financing fees and original
issuance discount on the note were $26,000. The derivative liability applied as a discount on the note was $200,000 and is
being accreted over the life of the note.
|
|
|
|
As
at December 31, 2018, the carrying value of the note was $75,540 and the fair value of the derivative liability was $305,890.
During the year ended December 31, 2018, the Company accreted $75,540 of the debt discount to finance costs.
|
|
|
(ac)
|
On
August 31, 2018, the Company reassigned the first tranche of a convertible note balance
from another unrelated party in the principal amount of $315,978. Refer to Note 9(t).
The first tranche of the note is unsecured, bears interest at 12% per annum, which is
due on demand, 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.
The deferred financing fees and derivative liability applied as discounts on the reassigned
note were fully amortized at the time of the transfer.
|
|
|
|
As
at December 31, 2018, the carrying value of the note was $315,978 and the fair value of the derivative liability was $426,173.
|
Note
10 – DERIVATIVE LIABILITIES
The
Company records the fair value of the of the conversion price of the convertible loans payable disclosed in Note 9 in accordance
with ASC 815, Derivatives and Hedging. The fair value of the derivative was calculated using a multi-nominal lattice model. The
fair value of the derivative liabilities is revalued on each balance sheet date with corresponding gains and losses recorded in
the consolidated statement of operations. For the year ended December 31, 2018, the Company recorded a gain on the change in fair
value of derivative liability of $1,005,458 (December 31, 2017 – $824,986 loss). As at December 31, 2018 and December 31,
2017, the Company recorded derivative liability of $2,188,354 and $1,676,155, respectively.
The
following inputs and assumptions were used to value the derivative liabilities outstanding during the period and year ended December
31, 2018 and December 31, 2017 respectively, assuming no dividend yield:
|
|
|
2018
|
|
|
|
2017
|
|
Expected volatility
|
|
|
180
- 447
|
%
|
|
|
96
- 533
|
%
|
Risk free interest rate
|
|
|
1.63
- 2.59
|
%
|
|
|
0.11
- 1.76
|
%
|
Expected life (in years)
|
|
|
0.1
- 1.0
|
|
|
|
0.1
- 1.0
|
|
A
summary of the activity of the derivative liabilities is shown below:
|
|
$
|
|
Balance, January 1, 2017
|
|
|
365,944
|
|
Derivative loss due to new issuances
|
|
|
920,999
|
|
Extinguishment upon conversion
|
|
|
(435,774
|
)
|
Mark-to-market
adjustment
|
|
|
824,986
|
|
Balance, December 31, 2017
|
|
|
1,676,155
|
|
|
|
|
|
|
Balance, January 1, 2018
|
|
|
1,676,155
|
|
Derivative loss due to new issuances
|
|
|
1,517,657
|
|
Mark-to-market
adjustment
|
|
|
(1,005,458
|
)
|
Balance, December 31, 2018
|
|
|
2,188,354
|
|
Note
11 – 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
equity transactions
The
Company designated 5,000,000
shares as Series A Convertible Preferred Stock (“Series A Shares”) and on October 24, 2014 issued 4,309,384 Series
A Shares to a company controlled by a director of the Company for conversion of its debt of $5,386,731. The Series A Shares
have no general voting rights and carried a 5% per annum interest rate. Series A Shares that are converted to common shares
are entitled to the same voting rights as other common shareholders. The Series A Shares were subject to a redemption obligation
at $1.25 per common share pursuant to the following terms:
|
●
|
On or before August
1, 2016, the Company must complete a financing for gross proceeds of at least $2,500,000 and use at least $1,125,000 to redeem
a minimum of 900,000 Series A Shares;
|
|
|
|
|
●
|
On or before September
1, 2016, the Company must complete an additional financing for gross proceeds of at least $2,500,000 and use at least $1,125,000
to redeem a minimum of 900,000 additional Series A Shares; and
|
|
|
|
|
●
|
On or before October
1, 2016, the Company must complete an additional financing for gross proceeds of at least $5,000,000 and use at least $3,140,000
to redeem the remaining 2,509,384 Series A Shares.
|
During
the year ended December 31, 2015, 80,000 Series A Shares with a value of $100,000 were purchased by an unrelated third-party and
exchanged for 80,000 shares of common stock of the Company.
The
Series A Shares were recorded in the consolidated financial statements as Mezzanine Equity.
On
August 27, 2018, pursuant to a debt exchange agreement, the Company agreed to exchange all 4,229,384 issued and outstanding Series
A Shares with a fair value of $5,873,481 ($7,627,303 CDN) for 51 shares of Series B and 3,000,000 shares of Series E preferred
shares, respectively. The Series B preferred shares are classified as permanent equity. Refer to Note 12. As at December
31, 2018, these Series B and Series E preferred shares have not been issued.
During
the year ended December 31, 2018, pursuant to a series of debt exchange agreements, the Company agreed to issue an aggregate of
148,706 shares of Series D preferred shares for the settlement of outstanding accounts payable with a fair value of $91,944. As
at December 31, 2018, these Series D preferred shares have not been issued.
During
the year ended December 31, 2018, pursuant to a series of debt exchange agreements, the Company agreed to issue an aggregate of
81 shares of Series B and 1,649,908 shares of Series E preferred shares, respectively, for the settlement of outstanding convertible
loans with a fair value of $5,609,757 ($7,284,831 CDN). The Series B preferred shares are classified as permanent equity.
Refer to Note 12. As at December 31, 2018, these Series B and Series E preferred shares have not been issued.
Note
12 – PREFERRED STOCK
Authorized
On
August 27, 2018, the Company amended its Articles of Incorporation to authorize and designate Series A through Series E preferred
shares for the collective issuance of up to 14,010,000 shares having a par value of $0.001 per share. The preferred shares are
designated as: 3,000,000 Series A preferred shares, 10,000 Series B convertible preferred shares, 5,000,000 Series C convertible
preferred shares, 1,000,000 Series D convertible preferred shares and 5,000,000 Series E convertible preferred shares. The Series
C, D and E preferred shares are mandatorily redeemable upon a major transaction which includes a change in control. As a result,
they are classified as mezzanine equity. Refer to Note 11.
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. Preferred share amounts remained unchanged.
Equity
Transactions
During
the year ended December 31, 2018 the Company agreed to issue an aggregate of:
|
●
|
81 and 1,649,908
shares of Series B and Series E preferred shares, respectively, for the settlement of outstanding convertible loans with a
fair value of $5,609,757 ($7,284,831 CDN), of which $3,908,614 ($5,075,727 CDN) was recorded in the consolidated financial
statements at a fair value of $Nil. The Company recorded a loss on extinguishment of debt of $3,908,614 in connection
with the settlement. The Series E preferred shares are classified as mezzanine equity. Refer to Note 11. As at December
31, 2018, these Series B and Series E preferred shares have not been issued.
|
|
|
|
|
●
|
51 and 3,000,000
shares of Series B and Series E preferred shares, respectively, for the settlement all 4,229,384 issued and outstanding DSG
TAG Series A Shares with a fair value of $5,873,481 ($7,627,303 CDN). The Series E preferred shares are classified as mezzanine
equity. Refer to Note 11. As at December 31, 2018, these Series B and Series E preferred shares have not been issued.
|
Note
13 – COMMON STOCK
Authorized
On
August 27, 2018, the Company amended its Articles of Incorporation to increase the shares of common stock authorized from 2,000,000,000
to 3,000,000,000.
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. 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.
There
were 634,971 and 25,485 shares of common stock of the Company issued and outstanding as of December 31, 2018 and 2017, respectively.
Each share of common stock is entitled to one (1) vote.
Equity
Transactions
During
the year ended December 31, 2018 the Company issued an aggregate of:
|
●
|
On
February 7, 2018, the Company issued 5,186 shares of common stock and on March 19, 2018 the Company issued 7,315 shares of
common stock for aggregate cash proceeds of $81,659.
|
|
|
|
|
●
|
On
June 5, 2018, the Company issued 188 shares of common stock, with a fair value of $2,250, in connection with a 5% commission
granted on referral of sales totaling $45,000.
|
|
|
|
|
●
|
On
October 18, 2018, the Company issued
23,750 shares of common stock, with a fair value of $332,500, in connection with an investor relations agreement.
|
|
●
|
The
Company issued an aggregate of 572,547 shares of common stock with a fair value of $4,315,958 upon the conversion of $1,302,077
of convertible debentures, accrued interest and finance fees, as noted in Note 9, per the table below:
|
Date
Issued
|
|
Common
Shares Issued (#)
|
|
|
Fair
Value(1)
|
|
|
Converted
Balance(2)
|
|
|
Gain
(loss) on Conversion
|
|
January 2, 2018
|
|
|
1,270
|
|
|
$
|
11,683
|
|
|
$
|
3,733
|
|
|
$
|
(7,950
|
)
|
January 5, 2018
|
|
|
1,325
|
|
|
|
10,600
|
|
|
|
5,300
|
|
|
|
(5,300
|
)
|
January 5, 2018
|
|
|
1,334
|
|
|
|
10,666
|
|
|
|
2,986
|
|
|
|
(7,680
|
)
|
January 9, 2018
|
|
|
1,450
|
|
|
|
11,600
|
|
|
|
5,800
|
|
|
|
(5,800
|
)
|
January 11, 2018
|
|
|
1,525
|
|
|
|
15,860
|
|
|
|
6,100
|
|
|
|
(9,760
|
)
|
January 11, 2018
|
|
|
1,539
|
|
|
|
15,997
|
|
|
|
3,446
|
|
|
|
(12,551
|
)
|
January 12, 2018
|
|
|
1,692
|
|
|
|
16,911
|
|
|
|
3,788
|
|
|
|
(13,123
|
)
|
January 16, 2018
|
|
|
1,675
|
|
|
|
13,400
|
|
|
|
6,701
|
|
|
|
(6,699
|
)
|
January 16, 2018
|
|
|
1,776
|
|
|
|
14,204
|
|
|
|
3,977
|
|
|
|
(10,227
|
)
|
January 17, 2018
|
|
|
1,948
|
|
|
|
15,581
|
|
|
|
4,363
|
|
|
|
(11,218
|
)
|
January 19, 2018
|
|
|
2,045
|
|
|
|
18,812
|
|
|
|
4,580
|
|
|
|
(14,232
|
)
|
January 22, 2018
|
|
|
2,045
|
|
|
|
35,170
|
|
|
|
4,580
|
|
|
|
(30,590
|
)
|
January 23, 2018
|
|
|
2,125
|
|
|
|
27,200
|
|
|
|
8,500
|
|
|
|
(18,700
|
)
|
January 24, 2018
|
|
|
2,249
|
|
|
|
29,685
|
|
|
|
5,038
|
|
|
|
(24,647
|
)
|
January 26, 2018
|
|
|
2,468
|
|
|
|
27,632
|
|
|
|
5,526
|
|
|
|
(22,106
|
)
|
January 31, 2018
|
|
|
2,133
|
|
|
|
36,678
|
|
|
|
7,506
|
|
|
|
(29,172
|
)
|
January 31, 2018
|
|
|
2,591
|
|
|
|
27,975
|
|
|
|
5,802
|
|
|
|
(22,173
|
)
|
February 1, 2018
|
|
|
2,591
|
|
|
|
25,903
|
|
|
|
5,802
|
|
|
|
(20,101
|
)
|
February 6, 2018
|
|
|
1,511
|
|
|
|
14,501
|
|
|
|
3,806
|
|
|
|
(10,695
|
)
|
February 6, 2018
|
|
|
2,956
|
|
|
|
28,370
|
|
|
|
6,620
|
|
|
|
(21,750
|
)
|
February 7, 2018
|
|
|
2,821
|
|
|
|
29,076
|
|
|
|
10,550
|
|
|
|
(18,526
|
)
|
February 8, 2018
|
|
|
1,511
|
|
|
|
12,084
|
|
|
|
4,350
|
|
|
|
(7,734
|
)
|
February 9, 2018
|
|
|
3,500
|
|
|
|
32,200
|
|
|
|
14,000
|
|
|
|
(18,200
|
)
|
February 9, 2018
|
|
|
3,653
|
|
|
|
33,607
|
|
|
|
8,182
|
|
|
|
(25,425
|
)
|
February 12, 2018
|
|
|
3,613
|
|
|
|
36,124
|
|
|
|
15,100
|
|
|
|
(21,024
|
)
|
February 12, 2018
|
|
|
4,010
|
|
|
|
40,098
|
|
|
|
9,543
|
|
|
|
(30,555
|
)
|
February 13, 2018
|
|
|
2,450
|
|
|
|
18,816
|
|
|
|
9,800
|
|
|
|
(9,016
|
)
|
February 14, 2018
|
|
|
3,588
|
|
|
|
28,696
|
|
|
|
10,331
|
|
|
|
(18,365
|
)
|
February 14, 2018
|
|
|
4,513
|
|
|
|
36,099
|
|
|
|
10,740
|
|
|
|
(25,359
|
)
|
February 16, 2018
|
|
|
4,917
|
|
|
|
33,433
|
|
|
|
9,637
|
|
|
|
(23,796
|
)
|
February 20, 2018
|
|
|
3,276
|
|
|
|
19,654
|
|
|
|
10,089
|
|
|
|
(9,565
|
)
|
February 22, 2018
|
|
|
2,470
|
|
|
|
15,610
|
|
|
|
7,064
|
|
|
|
(8,546
|
)
|
February 22, 2018
|
|
|
5,326
|
|
|
|
27,692
|
|
|
|
9,692
|
|
|
|
(18,000
|
)
|
February 28, 2018
|
|
|
3,588
|
|
|
|
18,652
|
|
|
|
8,394
|
|
|
|
(10,258
|
)
|
February 28, 2018
|
|
|
5,715
|
|
|
|
29,714
|
|
|
|
8,000
|
|
|
|
(21,714
|
)
|
March 2, 2018
|
|
|
6,179
|
|
|
|
81,556
|
|
|
|
8,650
|
|
|
|
(72,906
|
)
|
March 5, 2018
|
|
|
1,068
|
|
|
|
11,099
|
|
|
|
1,494
|
|
|
|
(9,605
|
)
|
March 5, 2018
|
|
|
2,583
|
|
|
|
26,859
|
|
|
|
3,616
|
|
|
|
(23,243
|
)
|
March 6, 2018
|
|
|
6,137
|
|
|
|
81,000
|
|
|
|
13,500
|
|
|
|
(67,500
|
)
|
March 6, 2018
|
|
|
6,068
|
|
|
|
60,671
|
|
|
|
10,921
|
|
|
|
(49,750
|
)
|
March 7, 2018
|
|
|
5,428
|
|
|
|
54,280
|
|
|
|
7,599
|
|
|
|
(46,681
|
)
|
March 8, 2018
|
|
|
5,946
|
|
|
|
64,213
|
|
|
|
8,324
|
|
|
|
(55,889
|
)
|
March 8, 2018
|
|
|
3,476
|
|
|
|
40,318
|
|
|
|
8,064
|
|
|
|
(32,254
|
)
|
March 12, 2018
|
|
|
5,942
|
|
|
|
64,167
|
|
|
|
8,318
|
|
|
|
(55,849
|
)
|
March 13, 2018
|
|
|
5,244
|
|
|
|
50,335
|
|
|
|
11,535
|
|
|
|
(38,800
|
)
|
March 14, 2018
|
|
|
6,549
|
|
|
|
70,726
|
|
|
|
11,788
|
|
|
|
(58,938
|
)
|
March 14, 2018
|
|
|
5,507
|
|
|
|
57,263
|
|
|
|
7,708
|
|
|
|
(49,555
|
)
|
March 15, 2018
|
|
|
5,669
|
|
|
|
56,683
|
|
|
|
7,936
|
|
|
|
(48,747
|
)
|
March 19, 2018
|
|
|
8,316
|
|
|
|
76,501
|
|
|
|
11,641
|
|
|
|
(64,860
|
)
|
March 22, 2018
|
|
|
6,537
|
|
|
|
52,291
|
|
|
|
9,151
|
|
|
|
(43,140
|
)
|
March 26, 2018
|
|
|
5,825
|
|
|
|
72,230
|
|
|
|
8,155
|
|
|
|
(64,075
|
)
|
March 27, 2018
|
|
|
4,567
|
|
|
|
42,016
|
|
|
|
10,047
|
|
|
|
(31,969
|
)
|
March 29, 2018
|
|
|
1,558
|
|
|
|
19,938
|
|
|
|
10,000
|
|
|
|
(9,938
|
)
|
April 2, 2018
|
|
|
4,580
|
|
|
|
75,105
|
|
|
|
18,135
|
|
|
|
(56,970
|
)
|
April 5, 2018
|
|
|
11,087
|
|
|
|
319,277
|
|
|
|
19,955
|
|
|
|
(299,322
|
)
|
April 6, 2018
|
|
|
2,190
|
|
|
|
21,893
|
|
|
|
3,941
|
|
|
|
(17,952
|
)
|
April 19, 2018
|
|
|
12,050
|
|
|
|
173,512
|
|
|
|
66,272
|
|
|
|
(107,240
|
)
|
May 14, 2018
|
|
|
18,068
|
|
|
|
252,948
|
|
|
|
113,174
|
|
|
|
(139,774
|
)
|
May 25, 2018
|
|
|
10,000
|
|
|
|
112,000
|
|
|
|
52,800
|
|
|
|
(59,200
|
)
|
June 13, 2018
|
|
|
3,250
|
|
|
|
26,000
|
|
|
|
9,750
|
|
|
|
(16,250
|
)
|
June 13, 2018
|
|
|
10,000
|
|
|
|
72,000
|
|
|
|
33,000
|
|
|
|
(39,000
|
)
|
June 19, 2018
|
|
|
9,975
|
|
|
|
59,850
|
|
|
|
32,918
|
|
|
|
(26,932
|
)
|
June 25, 2018
|
|
|
10,840
|
|
|
|
60,704
|
|
|
|
28,618
|
|
|
|
(32,086
|
)
|
July 2, 2018
|
|
|
3,438
|
|
|
|
19,250
|
|
|
|
7,906
|
|
|
|
(11,344
|
)
|
July 2, 2018
|
|
|
12,327
|
|
|
|
69,028
|
|
|
|
31,186
|
|
|
|
(37,842
|
)
|
July 12, 2018
|
|
|
11,000
|
|
|
|
61,600
|
|
|
|
25,300
|
|
|
|
(36,300
|
)
|
July 23, 2018
|
|
|
4,774
|
|
|
|
21,006
|
|
|
|
10,503
|
|
|
|
(10,503
|
)
|
July 24, 2018
|
|
|
14,250
|
|
|
|
62,700
|
|
|
|
28,500
|
|
|
|
(34,200
|
)
|
July 25, 2018
|
|
|
10,626
|
|
|
|
38,253
|
|
|
|
21,039
|
|
|
|
(17,214
|
)
|
August 2, 2018
|
|
|
18,500
|
|
|
|
88,800
|
|
|
|
22,200
|
|
|
|
(66,600
|
)
|
August 3, 2018
|
|
|
9,581
|
|
|
|
45,988
|
|
|
|
12,647
|
|
|
|
(33,341
|
)
|
August 10, 2018
|
|
|
10,399
|
|
|
|
41,593
|
|
|
|
13,726
|
|
|
|
(27,867
|
)
|
August 23, 2018
|
|
|
2,723
|
|
|
|
23,956
|
|
|
|
4,192
|
|
|
|
(19,764
|
)
|
September 4, 2018
|
|
|
13,887
|
|
|
|
116,644
|
|
|
|
15,000
|
|
|
|
(101,644
|
)
|
September 10, 2018
|
|
|
17,073
|
|
|
|
122,922
|
|
|
|
26,292
|
|
|
|
(96,631
|
)
|
September 10, 2018
|
|
|
10,792
|
|
|
|
43,167
|
|
|
|
12,950
|
|
|
|
(30,217
|
)
|
September 25, 2018
|
|
|
21,250
|
|
|
|
95,200
|
|
|
|
32,725
|
|
|
|
(62,475
|
)
|
October 5, 2018
|
|
|
16,352
|
|
|
|
77,834
|
|
|
|
35,974
|
|
|
|
(41,860
|
)
|
October 17, 2018
|
|
|
18,121
|
|
|
|
79,729
|
|
|
|
31,892
|
|
|
|
(47,837
|
)
|
October 24, 2018
|
|
|
15,132
|
|
|
|
54,474
|
|
|
|
26,632
|
|
|
|
(27,842
|
)
|
October 24, 2018
|
|
|
22,500
|
|
|
|
90,000
|
|
|
|
39,600
|
|
|
|
(50,400
|
)
|
November 2, 2018
|
|
|
9,705
|
|
|
|
34,936
|
|
|
|
14,945
|
|
|
|
(19,991
|
)
|
November 7, 2018
|
|
|
43,428
|
|
|
|
121,598
|
|
|
|
86,856
|
|
|
|
(34,742
|
)
|
December 28, 2018
|
|
|
8,851
|
|
|
|
31,861
|
|
|
|
15,576
|
|
|
|
(16,285
|
)
|
Total
|
|
|
572,547
|
|
|
$
|
4,315,958
|
|
|
$
|
1,302,077
|
|
|
$
|
(3,013,881
|
)
|
|
(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, derivative liabilities, financing fees and interest penalties converted
upon the issuance of shares of common stock.
|
During
the year ended December 31, 2017:
|
●
|
On
February 15, 2017, the Company issued
563 shares of common stock, with a fair value of $562,500, in connection with an investor relations agreement.
|
|
|
|
|
●
|
On
April 6, 2017, the Company issued
138 shares of common stock, with a fair value of $198,000, in connection with a commitment fee granted convertible note issued
on April 3, 2017, see Note 9.
|
|
|
|
|
●
|
On
April 7, 2017, the Company issued 125 shares of common stock for cash proceeds of $50,000.
|
|
|
|
|
●
|
The
Company issued an aggregate of 17,072 shares of common stock with a fair value of $797,287 upon the conversion of convertible
debentures and accrued interest, as noted in Note 9, per the table below:
|
Date
Issued
|
|
Common
Shares Issued (#)
|
|
|
Fair
Value(1)
|
|
|
Converted
Balance(2)
|
|
|
Gain
(loss) on Conversion
|
|
April 3,
2017(3)
|
|
|
131
|
|
|
$
|
26,252
|
|
|
$
|
26,252
|
|
|
$
|
-
|
|
May 4, 2017
|
|
|
750
|
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
-
|
|
May 8, 2017
|
|
|
25
|
|
|
|
42,000
|
|
|
|
35,000
|
|
|
|
(7,000
|
)
|
May 25, 2017
|
|
|
53
|
|
|
|
71,400
|
|
|
|
73,500
|
|
|
|
2,100
|
|
July 24, 2017
|
|
|
200
|
|
|
|
40,000
|
|
|
|
63,007
|
|
|
|
23,007
|
|
July 28, 2017
|
|
|
125
|
|
|
|
21,500
|
|
|
|
15,356
|
|
|
|
(6,144
|
)
|
September 7, 2017
|
|
|
188
|
|
|
|
22,575
|
|
|
|
21,936
|
|
|
|
(639
|
)
|
October 10, 2017
|
|
|
250
|
|
|
|
34,000
|
|
|
|
6,821
|
|
|
|
(27,179
|
)
|
October 11, 2017
|
|
|
354
|
|
|
|
42,456
|
|
|
|
22,273
|
|
|
|
(20,183
|
)
|
October 11, 2017
|
|
|
188
|
|
|
|
25,500
|
|
|
|
22,019
|
|
|
|
(3,481
|
)
|
October 18, 2017
|
|
|
531
|
|
|
|
8,494
|
|
|
|
6,508
|
|
|
|
(1,986
|
)
|
October 19, 2017
|
|
|
1,100
|
|
|
|
43,200
|
|
|
|
41,874
|
|
|
|
(1,326
|
)
|
October 19, 2017
|
|
|
557
|
|
|
|
26,753
|
|
|
|
28,795
|
|
|
|
2,042
|
|
October 20, 2017
|
|
|
557
|
|
|
|
11,147
|
|
|
|
11,358
|
|
|
|
211
|
|
October 23, 2017
|
|
|
610
|
|
|
|
19,524
|
|
|
|
21,849
|
|
|
|
2,325
|
|
October 25, 2017
|
|
|
675
|
|
|
|
16,200
|
|
|
|
15,251
|
|
|
|
(949
|
)
|
October 26, 2017
|
|
|
448
|
|
|
|
12,540
|
|
|
|
14,789
|
|
|
|
2,249
|
|
October 27, 2017
|
|
|
750
|
|
|
|
21,000
|
|
|
|
19,479
|
|
|
|
(1,521
|
)
|
October 27, 2017
|
|
|
754
|
|
|
|
21,122
|
|
|
|
24,056
|
|
|
|
2,934
|
|
October 31, 2017
|
|
|
625
|
|
|
|
17,505
|
|
|
|
17,998
|
|
|
|
493
|
|
October 31, 2017
|
|
|
750
|
|
|
|
21,000
|
|
|
|
19,479
|
|
|
|
(1,521
|
)
|
November 2, 2017
|
|
|
375
|
|
|
|
8,996
|
|
|
|
10,704
|
|
|
|
1,708
|
|
November 7, 2017
|
|
|
917
|
|
|
|
18,335
|
|
|
|
32,478
|
|
|
|
14,143
|
|
November 13, 2017
|
|
|
754
|
|
|
|
18,104
|
|
|
|
20,704
|
|
|
|
2,600
|
|
November 22, 2017
|
|
|
1,000
|
|
|
|
12,002
|
|
|
|
21,711
|
|
|
|
9,709
|
|
December 27, 2017
|
|
|
1,050
|
|
|
|
12,600
|
|
|
|
9,142
|
|
|
|
(3,458
|
)
|
December 27, 2017
|
|
|
1,050
|
|
|
|
13,420
|
|
|
|
6,062
|
|
|
|
(7,358
|
)
|
December 29, 2017
|
|
|
1,150
|
|
|
|
9,200
|
|
|
|
3,920
|
|
|
|
(5,280
|
)
|
December 29, 2017
|
|
|
1,155
|
|
|
|
10,462
|
|
|
|
12,816
|
|
|
|
2,354
|
|
Total
|
|
|
17,072
|
|
|
$
|
797,287
|
|
|
$
|
775,137
|
|
|
$
|
(22,150
|
)
|
|
(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, derivative liabilities, financing fees and interest penalties converted
upon the issuance of shares of common stock.
|
|
(3)
|
No
gain/loss was recorded on conversion as the loan holder is a related party.
|
Note
14 – RELATED PARTY TRANSACTIONS
As
at December 31, 2018, the Company owed $139,835 ($190,764 CDN) (December 31, 2017 - $204,929 ($257,084 CDN)) 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 year ended December
31, 2018 the Company incurred $200,000 (2017 - $200,000) in salaries to the President, CEO, and CFO of the Company.
As
at December 31, 2018, the Company owes $Nil (2017 - $52,838) to the Senior Vice President of Global Sales of the Company, which
has been recorded in trade and other payables. The amount owing is unsecured, non-interest bearing, and due on demand.
As
at December 31, 2018, the Company owed $12,791 ($17,450 CDN) (December 31, 2017 - $22,280 ($27,950 CDN)) 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
15 – COMMITMENTS
Lease
Obligations
On
June 1, 2018, the Company signed a two-year operating lease agreement expiring on May 31, 2020 with the right to renew for an
additional two-year term if written notice is provided within 120 days prior to the expiration of the current term. The annual
rent for the premises in Canada is approximately $46,552 CDN and commenced on July 1, 2018.
Product
Warranties
Previously,
the Company’s product warranty costs are part of its cost of sales based on associated material product costs, labor
costs for technical support staff, and associated overhead. The products sold were generally covered by a warranty for
a period of one year. During the year ending December 31, 2018, the Company’s warranty policy change to generally cover
a period of two years which is also covered by the manufacturer warranty. Thus, any warranty costs incurred by the Company are
immaterial. Due to this, as of December 31, 2018, the Company has reserved $Nil (December 31, 2017 - $165,523) for future
warranty costs. The Company’s past experience with warranty related costs was used as a basis for the reserve. During the
year ended December 31, 2018, the Company recorded a warranty recovery of $89,037 (2017 – warranty expense of $90,284) for
the write down of the warranty reserve.
A
tabular reconciliation of the Company’s aggregate product warranty liability for the reporting periods is as follows:
|
|
Year
ended
|
|
|
Year
ended
|
|
|
|
December
31, 2018
|
|
|
December
31, 2017
|
|
Opening balance
|
|
$
|
165,523
|
|
|
$
|
111,715
|
|
Accruals for product warranties issued
in the period
|
|
|
-
|
|
|
|
99,699
|
|
Adjustments to liabilities for pre-existing
warranties
|
|
|
(71,284
|
)
|
|
|
(45,891
|
)
|
Write down warranty
for change in policy
|
|
|
(94,239
|
)
|
|
|
-
|
|
Ending liability
|
|
$
|
-
|
|
|
$
|
165,523
|
|
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
16 – 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 December 31, 2018, included in trade and other payables
is $46,533 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 December 31, 2018, 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.
No accrual has been recorded because the Company is of the opinion that no obligation exists since the vendors have not performed
their contractual duties.
On
February 9, 2017, the Company received a notice of default from Auctus Fund LLC (“Auctus”), on a 12% convertible promissory
note issued to the Company in the principal amount of $75,000 and commenced a lawsuit on February 2, 2018 in the United States
District Court, District of Massachusetts. Auctus alleges that the Company failed to honor a conversion notice under the terms
of the note, and thus giving rise to an event of default. Auctus seeks damages in excess of $306,681, which consists of the principal
amount of the note, liquidated damages, and default interest, and legal fees incurred by Auctus with respect to the lawsuit. On
June 1, 2018 the remaining $58,167 note balance, including principal and interest, was reassigned to another unrelated note holder
and the note was extinguished. Refer to Note 9(e) and 9(z).
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. As at December 31, 2018,
the principal balance and accrued interest on this convertible note is included on the consolidated balance sheet under convertible
notes payable.
Note
17 – REVISION OF PRIOR YEAR FINANCIAL STATEMENTS
While
preparing the interim condensed consolidated financial statements for the period ending March 31, 2018, the Company noted that
there was a revision of the fair value of the derivative liabilities and during the period ended June 30, 2018, determined that
no non-controlling interest exists. Accordingly, the Company has revised its consolidated financial statements as at and for the
year ended December 31, 2017 to reflect the change in fair value of derivative liabilities and retained earnings during the period
and the fair value of the derivative liabilities and retained earnings as at December 31, 2017. This revision resulted in an increase
to deficit of $1,819,564, an increase to net loss of $484,759, an increase to comprehensive loss of $720,424 and an increase to
net loss per share of $43.89. There was no impact on the consolidated statement of cash flows. In accordance with the guidance
provided by the SEC’s Staff Accounting Bulletin 99, Materiality and Staff Accounting Bulletin No. 108, “Considering
the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”, the Company
has determined that the impact of adjustments relating to the correction of this accounting error was derived from an estimate,
has no impact on compliance with regulatory requirements or loan covenants, and has no impact on the Company’s cash flows.
Accordingly, these changes are disclosed herein and have been disclosed prospectively.
The
impact of the revision as at December 31, 2017 and for the year then ended is summarized below:
Consolidated
Balance Sheet
|
|
As
at December 31, 2017
|
|
|
|
As
reported
$
|
|
|
Adjustment
$
|
|
|
As
restated
$
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities
|
|
|
1,191,396
|
|
|
|
484,759
|
|
|
|
1,676,155
|
|
Total Current Liabilities
|
|
|
8,061,842
|
|
|
|
484,759
|
|
|
|
8,546,601
|
|
Total Liabilities
|
|
|
8,061,842
|
|
|
|
484,759
|
|
|
|
8,546,601
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
(30,409,853
|
)
|
|
|
(1,819,564
|
)
|
|
|
(32,229,417
|
)
|
Noncontrolling interest
|
|
|
(1,334,805
|
)
|
|
|
1,334,805
|
|
|
|
-
|
|
Total Stockholders’
Deficit
|
|
|
(13,257,858
|
)
|
|
|
(484,759
|
)
|
|
|
(13,742,617
|
)
|
Consolidated
Statement of Operations and Comprehensive Loss
|
|
Year
ended December 31, 2017
|
|
|
|
As
reported
$
|
|
|
Adjustment
$
|
|
|
As
restated
$
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in fair value of derivative liabilities
|
|
|
(340,227
|
)
|
|
|
(484,759
|
)
|
|
|
(824,986
|
)
|
Total other income (expense)
|
|
|
(1,987,202
|
)
|
|
|
(484,759
|
)
|
|
|
(2,471,961
|
)
|
Net loss for the year
|
|
|
(3,632,072
|
)
|
|
|
(484,759
|
)
|
|
|
(4,116,831
|
)
|
Net loss attributed to non-controlling
interest
|
|
|
235,665
|
|
|
|
(235,665
|
)
|
|
|
-
|
|
Comprehensive loss
|
|
|
(3,819,809
|
)
|
|
|
(720,424
|
)
|
|
|
(4,540,233
|
)
|
Consolidated
Statement of Stockholders’ Equity
|
|
Year
ended December 31, 2017
|
|
|
|
As
reported
$
|
|
|
Adjustment
$
|
|
|
As
restated
$
|
|
Deficit
|
|
|
(30,409,853
|
)
|
|
|
(1,819,564
|
)
|
|
|
(32,229,417
|
)
|
Non-controlling interest
|
|
|
(1,334,805
|
)
|
|
|
1,334,805
|
|
|
|
-
|
|
Stockholders’
Deficit
|
|
|
(13,257,858
|
)
|
|
|
(484,759
|
)
|
|
|
(13,742,617
|
)
|
Consolidated
Statement of Cash Flows
|
|
Year
ended December 31, 2017
|
|
|
|
As
reported
$
|
|
|
Adjustment
$
|
|
|
As
restated
$
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(3,632,072
|
)
|
|
|
(484,759
|
)
|
|
|
(4,116,831
|
)
|
Adjustments to reconcile net loss to
net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in fair value of derivative liabilities
|
|
|
(340,227
|
)
|
|
|
(484,759
|
)
|
|
|
(824,986
|
)
|
Note
18 – INCOME TAX
For
the years ended December 31, 2018 and 2017, there is $Nil and $Nil current and deferred income tax expense, respectively,
reflected in the Statement of Operations.
The
following are the components of income before income tax reflected in the Statement of Operations for the years ended December
31, 2018 and 2017:
Component
of Loss Before Income Tax
|
|
December
31, 2018
|
|
|
December
31, 2017
|
|
Loss before income tax
|
|
$
|
(9,825,404
|
)
|
|
$
|
(4,116,821
|
)
|
Income Tax
|
|
$
|
-
|
|
|
$
|
-
|
|
Effective tax rate
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
Deferred
income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating
the ability to recover the deferred tax assets within the jurisdiction from which they arise, the Company considered all available
positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax
planning strategies and recent financial operations. In projecting future taxable income, the Company began with historical results
adjusted for changes in accounting policies and incorporates assumptions including the amount of future pretax operating income,
the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions
require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimate the Company
are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, the Company
consider three years of cumulative operating income (loss).
On
December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the “Act”), which
reduced the corporate tax rate for businesses from a maximum of 35% to a flat 21% rate. The rate reduction is effective on January
1, 2018. As a result of the rate reduction, the Company reduced the deferred tax asset balance as of December 31, 2017 by $4,257,379.
Due to the Company’s full valuation allowance position, there was no net impact on the Company’s income tax provision
at December 31, 2017 as the reduction in the deferred tax asset balance was fully offset by a corresponding decrease in the valuation
allowance.
As
of December 31, 2018, the Company had net operating losses of $42,054,821 (2017 - $30,409,853) to offset future taxable income
in Canada and the United Kingdom. The deferred tax assets at December 31, 2018 were fully reserved. Management believes it is
more likely than not that these assets will not be realized in the near future.
Note
19 – SUPPLEMENTAL CASH FLOW INFORMATION
|
|
Year
Ended
|
|
|
|
December
31, 2018
|
|
|
December
31, 2017
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Income
tax payments
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest
payments
|
|
$
|
-
|
|
|
$
|
29,952
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing transactions:
|
|
|
|
|
|
|
|
|
Convertible
debenture issued for financing fees
|
|
$
|
15,000
|
|
|
$
|
-
|
|
Shares
issued for convertible loans payable
|
|
$
|
4,343,730
|
|
|
$
|
771,035
|
|
Preferred
shares issued in exchange for mezzanine preferred
shares and accrued interest
|
|
$
|
1,751,740
|
|
|
$
|
-
|
|
Preferred
shares issued in exchange for convertible debt and
accrued interest
|
|
$
|
3,120,992
|
|
|
$
|
-
|
|
Mezzanine
preferred shares issued in exchange for mezzanine
preferred shares and accrued interest
|
|
$
|
4,121,741
|
|
|
$
|
-
|
|
Mezzanine
preferred shares issued in exchange for convertible
debt and accrued interest
|
|
$
|
2,488,765
|
|
|
$
|
-
|
|
Preferred
shares issued for accounts payable
|
|
$
|
91,944
|
|
|
$
|
-
|
|
Shares
issued for convertible related party payable
|
|
$
|
-
|
|
|
$
|
26,252
|
|
Returnable
shares issued for commitment fee
|
|
$
|
-
|
|
|
$
|
198,000
|
|
Note
20 – SUBSEQUENT EVENTS
Management
has evaluated events subsequent to the year ended December 31, 2018 through May 24, 2019 for transactions and other events
that may require adjustment of and/or disclosure in such consolidated financial statements.
On
April 26, 2019, the Company entered into a note purchase and assignment agreement (the “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. Refer to Note 9(t). Pursuant to the Assignment Agreement, the Seller desires 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).
Subsequent
to December 31, 2018, the Company issued:
|
●
|
55,915
shares of common stock to settle outstanding convertible debentures
|
|
|
|
|
●
|
17
shares of common stock for reverse stock split rounding errors
|
Item
16 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2.1
|
|
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
|
|
11-16-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.1
|
|
Opinion of Counsel re: legality
|
|
S-1
|
|
5.1
|
|
|
|
x
|
|
|
|
|
|
|
|
|
|
|
|
10.1.1
|
|
Subscription Agreement / Debt Settlement, dated September 26, 2014, between DSG TAG Systems Inc. and Westergaard Holdings Ltd.
|
|
8-K
|
|
10.1
|
|
08-17-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1.2
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1.3
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1.4
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1.5
|
|
Letter from Westergaard Holdings Ltd., dated September 1, 2015, extending dates of redemption obligations.
|
|
8-K
|
|
10.1
|
|
09-08-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1.6
|
|
Letter from Westergaard Holdings Ltd., dated November 10, 2015, extending dates of redemption obligations
|
|
10-Q
|
|
10.1
|
|
11-16-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1.7
|
|
Letter fromWestergaard Holdings Ltd., dated December 31, 2015, extending dates of redemption obligations
|
|
8-K
|
|
10.1
|
|
03-09-16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.2
|
|
Convertible Note of DSG TAG Systems Inc., dated March 31, 2015, payable to Adore Creative Agency, Inc.
|
|
8-K
|
|
10.5
|
|
08-17-15
|
|
|
10.3
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.4
|
|
Agreement (TAG Infinity XL 12” ) dated February 15, 2014 between DSG TAG Systems Inc. and DSG Canadian Manufacturing Corp.
|
|
8-K
|
|
10.2
|
|
12-05-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.5
|
|
Loan agreement, dated October 24, 2014 between DSG TAG Systems Inc. and A.Bosa & Co (Kootenay) Ltd.
|
|
10-K
|
|
10.5
|
|
05-28-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.6
|
|
Lease agreement (Modified), dated January 21, 2016 and February 1, 2016 between DSG TAG Systems Inc. and Benchmark Group
|
|
10-K
|
|
10.6
|
|
05-28-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.7
|
|
Loan agreement, dated February 11, 2016 between DSG TAG Systems Inc. and Jeremy Yaseniuk
|
|
10-K
|
|
10.7
|
|
05-28-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.8
|
|
Loan agreement, dated March 31, 2016 between DSG TAG Systems Inc. and E. Gary Risler
|
|
10-K
|
|
10.8
|
|
05-28-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.9
|
|
Equity Financing Agreement dated September 18, 2019 between DSG Global, Inc. and GHS Investments, LLC
|
|
S-1
|
|
10.9
|
|
|
|
x
|
|
|
|
|
|
|
|
|
|
|
|
10.10
|
|
Registration Rights Agreement dated September 18, 2019 between DSG Global, Inc. and GHS Investments, LLC
|
|
S-1
|
|
10.10
|
|
|
|
x
|
|
|
|
|
|
|
|
|
|
|
|
23.1
|
|
Consent of Saturna Group Chartered Professional Accountants LLP
|
|
|
|
|
|
|
|
x
|
|
|
|
|
|
|
|
|
|
|
|
23.2
|
|
Consent of Buckley Dodds LLP
|
|
|
|
|
|
|
|
x
|
Item
17. UNDERTAKINGS
The
undersigned registrant hereby undertakes
|
1.
|
To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
|
|
i.
|
To
include any Prospectus required by section 10(a)(3) of the Securities Act of 1933;
|
|
|
|
|
ii.
|
To
reflect in the Prospectus any facts or events arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information
set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low
or high end of the estimated maximum offering range may be reflected in the form of Prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
|
|
|
|
|
iii.
|
To
include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
|
|
2.
|
That,
for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
|
|
|
|
|
3.
|
To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
|
|
|
|
|
4.
|
That,
for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned
registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned
registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
|
|
i.
|
Any
Preliminary Prospectus or Prospectus of the undersigned registrant relating to the offering required to be filed pursuant
to Rule 424;
|
|
|
|
|
ii.
|
Any
free writing Prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred
to by the undersigned registrant;
|
|
|
|
|
iii.
|
The
portion of any other free writing Prospectus relating to the offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the undersigned registrant; and
|
|
|
|
|
iv.
|
Any
other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
|
|
5.
|
That,
for the purpose of determining liability under the Securities Act of 1933 to any purchaser: Each Prospectus filed pursuant
to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on
Rule 430B or other than Prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration
statement or Prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or Prospectus that is part of the registration statement will, as to a purchaser
with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration
statement or Prospectus that was part of the registration statement or made in any such document immediately prior to such
date of first use.
|
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling
persons, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person
of the corporation in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled
by a controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by us is
against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of
such case.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized on October 4, 2019.
|
DSG
Global, Inc.
|
|
|
|
|
/s/
Robert Silzer
|
|
By:
|
Robert
Silzer
|
|
Its:
|
Principal
Executive Officer and Principal Accounting Officer and Director
|
In
accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons
in the capacities and on the dates stated:
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Robert Silzer
|
|
President,
CEO, CFO, Principal Executive Officer, Principal
|
|
October
4, 2019
|
|
|
Financial
Officer, Secretary, Treasurer, Director
|
|
|
|
|
|
|
|
/s/
Stephen Johnson
|
|
Director
|
|
October
4, 2019
|
|
|
|
|
|
|
|
|
|
|
/s/
James Singerling
|
|
Director
|
|
October
4, 2019
|
|
|
|
|
|
|
|
|
|
|
/s/Jason
Sugarman
|
|
Director
|
|
October
4, 2019
|
|
|
|
|
|
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