UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2018

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to ____________.

 

Commission file number 000-53988

 

DSG GLOBAL INC.

(Exact Name of Registrant as Specified in Its charter)

 

Nevada   26-1134956

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

312 – 2630 Croydon Drive

Surrey, British Columbia, V3Z 6T3, Canada

(Address of Principal Executive Offices) (Zip Code)

 

(604) 575-3848
(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Securities registered pursuant to Section 12(g) of the Act:

 

Common Stock, $0.001 par value

(Title of Class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [  ] No [X]

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

 

Large accelerated filer [  ] Accelerated filer [  ]

Non-accelerated filer [  ]

(Do not check if smaller reporting company)

Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [  ] No [X]

 

As of December 31, 2018, the aggregate market value of the voting and non-voting common equity held by non-affiliates was $2,019,974 based on the closing price on that date. As of May 23, 2019, the registrant had 690,403 shares of common stock issued and outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Portions of the registrant’s Proxy Statement for the registrant’s 2018 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report on Form 10-K. Such Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of December 31, 2018, the last day of the fiscal year covered by this Annual Report on Form 10-K.

 

 

 

     
     

 

DSG GLOBAL INC.
FORM 10-K
TABLE OF CONTENTS

 

    Page
     
Special Note Regarding Forward-Looking Statements 3
     
PART I
     
Item 1. Business 4
Item 1A. Risk Factors 24
Item 1B. Unresolved Staff Comments 29
Item 2. Properties 29
Item 3. Legal Proceedings 29
Item 4. Mine Safety Disclosures 29
     
PART II
     
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 30
Item 6. Selected Financial Data 30
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 44
Item 8. Financial Statements and Supplementary Data 45
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 78
Item 9A. Controls and Procedures 78
Item 9B. Other Information 78
     
PART III
     
Item 10. Directors, Executive Officers and Corporate Governance 79
Item 11. Executive Compensation 84
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 86
Item 13. Certain Relationships and Related Transactions and Director Independence 88
Item 14. Principal Accountant Fees and Services 90
     
PART IV
     
Item 15. Exhibits and Financial Statement Schedules 91
Signatures S-1

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Annual Report on Form 10-K contains forward-looking statements that include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation, and availability of resources. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements concerning the following:

 

  ● our future financial and operating results;
     
  ● our intentions, expectations and beliefs regarding anticipated growth, market penetration and trends in our business;
     
  ● the timing and success of our business plan;
     
  ● our plans regarding future financings;
     
  ● our ability to attract and retain customers;
     
  ● our dependence on growth in our customers’ businesses;
     
  ● the effects of market conditions on our stock price and operating results;
     
  ● our ability to maintain our competitive technological advantages against competitors in our industry;
     
  ● the expansion of our business in our core golf market as well as in new markets like commercial fleet management and agriculture;
     
  ● our ability to timely and effectively adapt our existing technology and have our technology solutions gain market acceptance;
     
  ● our ability to introduce new offerings and bring them to market in a timely manner;
     
  ● our ability to maintain, protect and enhance our intellectual property;
     
  ● the effects of increased competition in our market and our ability to compete effectively;
     
  ● the attraction and retention of qualified employees and key personnel;
     
  ● future acquisitions of or investments in complementary companies or technologies; and
     
  ● our ability to comply with evolving legal standards and regulations, particularly concerning requirements for being a public company.

 

These forward-looking statements speak only as of the date of this Form 10-K and are subject to uncertainties, assumptions and business and economic risks. As such, our actual results could differ materially from those set forth in the forward-looking statements as a result of the factors set forth below in Part I, Item 1A, “Risk Factors,” and in our other reports filed with the Securities and Exchange Commission. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Form 10-K may not occur, and actual results could differ materially and adversely from those anticipated or implied in our forward-looking statements.

 

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances described in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Form 10-K to conform these statements to actual results or to changes in our expectations, except as required by law.

 

You should read this Annual Report on Form 10-K and the documents that we reference in this Annual Report on Form 10-K and have filed with the Securities and Exchange Commission as exhibits thereto with the understanding that our actual future results and circumstances may be materially different from what we expect.

 

3
 

 

PART I

 

ITEM 1. BUSINESS

 

Corporate History

 

DSG Global Inc. (formerly 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. The Company is currently 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.

 

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 pre-reverse split shares of common stock at $0.003 per share and $45,000 from the sale of 3,000,000 pre-reverse split 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 pre-reverse split shares of common stock and our outstanding share capital increased from 6,000,000 shares of pre-reverse split common stock to 30,000,000 shares of pre-reverse split 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 attain profitable operations and continue to be dependent upon continued financial support from our shareholders and note holders in order to continue operations.

 

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 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 pre-reverse split shares of our common stock to the shareholders of DSG TAG on the basis of one of our pre-reverse split 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 pre-reverse split shares of common stock to 125,000,000 pre-reverse split shares of common stock and correspondingly, our issued and outstanding shares of common stock will decrease from 30,000,000 to 10,000,000 pre-reverse split 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.

 

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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 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 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.

 

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.

 

When used the terms “Company,” “we,” “our,” “us,” “DSG,” or “DSG TAG,” means DSG Global, Inc. and its subsidiary DSG Tag Systems, Inc. and its wholly-owned subsidiary DSG Tag Systems International, Ltd.

 

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. Its principal activities are the sale and rental of GPS tracking devices and interfaces for golf vehicles, and related support services. The Company was 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. The Company has developed the TAG suite of products that represents a major breakthrough as the first completely modular fleet management solution for the golf industry. The Executive Team has over 50 years’ combined experience in the design and manufacture of wireless, GPS, and fleet tracking solutions. The TAG suite of products is currently sold and installed around the world in golf facilities and commercial applications through a network of established distributors and partnerships with some of the most notable brands in fleet and equipment manufacture.

 

The Company specializes in the vehicle fleet management industry. DSG stands for “Digital Security Guard” which is the Company’s primary value statement giving fleet operator’s new capabilities to track and control their vehicles. The Company has developed a proprietary combination of hardware and software that is marketed around the world as the TAG System. The Company has 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. DSG is now a leader in the category of Fleet Management in the golf industry and was awarded “Best Technology of the Year” by Boardroom magazine the publication of the National Golf Course Owners Association in 2010. To date the TAG is installed on over 8,000 vehicles and the Company has monitored over 6,000,000 rounds.

 

5
 

 

The TAG system fills a void in the marketplace by offering a modular structure which allows the customer to customize their system depending on desired functionality and budget constraints. In addition to the core TAG vehicle control functionality which can operate independently, DSG has two golfer information display systems; the alphanumeric TEXT and high definition TOUCH providing the operator two options which is unique in the industry.

 

The market for the TAG System is the 40,000 golf operations worldwide. While the golf industry is still the primary sales and marketing focus, the Company has completed several successful pilots of the TAG in other vertical markets such as agriculture, and commercial fleet deployments. With appropriate resources in place the Company will implement a sales and marketing strategy expanding into these 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.

 

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. This Form 10K gives retroactive effect to such reverse stock split named above and all share and per share amounts have been adjusted accordingly, unless otherwise noted.

 

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.

 

Emerging Growth Company

 

We are an Emerging Growth Company as defined in the Jumpstart Our Business Startups (JOBS) Act.

 

We shall continue to be deemed an emerging growth company until the earliest of:

 

(A) the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Securities Exchange Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more;

 

(B) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective registration statement under this title;

 

(C) the date on which such issuer has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or

 

(D) the date on which such issuer is deemed to be a ‘large accelerated filer’, as defined in section 240.12b-2 of title 17, Code of Federal Regulations, or any successor thereto.’.

 

As an emerging growth company we are exempt from Section 404(b) of Sarbanes Oxley. Section 404(a) requires Issuers to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures.

 

Section 404(b) requires that the registered accounting firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting.

 

As an emerging growth company we are exempt from Section 14A and B of the Securities Exchange Act of 1934 which require the shareholder approval of executive compensation and golden parachutes.

 

We have elected not to opt out of the extended transition period for complying with any new or revised accounting standards pursuant to Section 107(b) of the JOBS Act.

 

6
 

 

DSG Technologies and Products

 

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 DSG 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, DSG TAG 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 DSG TAG 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.

 

7
 

 

The latest addition to the TAG family of products, the TAG TOUCH 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 Control unit can operate as a “stand alone” unit or with one of two displays; the TEXT alphanumeric display or the TOUCH high definition “touch activated” screen. The TAG Control unit 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 Control 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

 

● Internal battery utilizing Smart Power technology which charges the battery only when the vehicle is running (gas) or being charged (electric)
   
● Pace of Play management and reporting which is a critical statistic for the golf operator
   
● No software to install
   
● Web based access on any computer, smartphone, or tablet
   
● Set up restricted zones to protect property, vehicles, and customers
   
● Real time tracking both on and off property (using Street Maps)
   
● Email alerts of zone activity
   
● Cart lockdown
   
● Detailed usage reporting for improved maintenance, proper vehicle rotation, and staff efficiency
   
● Geo fencing security features
   
● Ability to enforce cart path rules which is key to protecting course on wet weather days
   
● Modular system allows for hardware and feature options to fit any budget or operations

 

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TEXT Display

 

The TEXT 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 TEXT 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 TEXT can be mounted on the steering column or the dash depending on the customer’s preference.

 

 

DSG’s entry level alphanumeric golf information’s display

 

Features and benefits

 

● Hole information display
   
● Yardage displays for front, middle, back locations of the pin
   
● Messaging capabilities – to individual carts or fleet broadcast
   
● Zone violation warnings
   
● Pace of Play notifications
   
● Smart battery technology to prevent power drain
   
● Versatile mounting option

 

TOUCH Display

 

The TOUCH is a solution for operators who desire to provide a high level visual information experience to their customers. The TOUCH is a high definition “Touch” 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 TOUCH displays hole graphics, yardage, and detailed course information to the golfer and provides interactive features such as Food and Beverage ordering and scorekeeping.

 

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The industry leading Touch HD – the most sophisticated display in the market.

 

Features and Benefits

 

● Integrated Food and Beverage ordering
   
● Pro Tips
   
● Flyover capability
   
● Daily pin placement display
   
● Interactive Scorecard with email capability
   
● Multiple language choices
   
● No power drain with Smart Battery technology
   
● Full broadcast messaging capabilities
   
● Pace of Play display
   
● Vivid hole graphics
   
● Option of steering or roof mount
   
● Generate advertising revenue and market additional services

 

Advertising Platform

 

A unique feature of the TOUCH 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 TOUCH 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 Touch System can also display animated GIF files or play video for added impact.

 

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Advertising displayed in multiple formats including animated GIF and video

 

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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’

 

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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

 

● Can be installed on any turf, utility, or service vehicle
   
● Work activity tracking and management
   
● Work breakdown and analysis per area, work group, activity type or specific vehicle
   
● Vehicle idling alerts
   
● Zone entry alerts
   
● Detailed travel (cutting patterns) history
   
● Detailed usage reports with mileage and hours
   
● Protection for ecological areas through geo fencing
   
● Vehicle lock down and ‘off property’ locating features

 

13
 

 

 

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.

 

Monthly Service Fees are paid by all customers for the wireless data fee charges required to operate the GPS tracking on the TAG systems.

 

Monthly Rental Fees are paid by those customers that rent the TAG system hardware. The amount of a customer’s monthly payment varies based on the type of equipment rented (a TAG, a TAG and TEXT, or a TAG and TOUCH).

 

Advertising Revenue is a source of revenue that has not been taken full advantage of. We believe it has the potential to be strategic for us in the future. Currently, courses can deliver their own advertising to our TOUCH units and soon we’ll be introducing our R3 program which automates the delivery of advertising.

 

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. DSG 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.

 

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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:

 

● Western Canada
   
● Eastern Canada
   
● Northeast USA
   
● 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 is looking to expand next into Australia 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.

 

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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 DSG 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 DSG TAG Systems has versus GPS Industries since their product can only address the needs of a relatively small fraction of the marketplace.

 

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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 DSG 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 EZ-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, Text, and Touch 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.

 

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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
● 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

 

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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.

 

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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.

 

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Material Contracts

 

On January 18, 2018, we issued a convertible promissory note in the principal amount of $55,000. The note is unsecured, bears interest at 10% per annum, was overdue 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.

 

On January 19, 2018, we issued a convertible promissory note in the principal amount of $55,000. The note is unsecured, bears interest at 10% per annum, was overdue 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.

 

On January 19, 2018, we 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 9(g) of the consolidated financial statements. The note is unsecured, bears interest at 10% per annum, was overdue 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.

 

In January 2018, we 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 overdue 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 $0.00005.

 

On February 2, 2018, we issued a convertible promissory note in the principal amount of $107,500. The note is unsecured, bears interest at 10% per annum, was overdue 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.

 

On March 2, 2018, we issued a convertible promissory note in the principal amount of $128,000. The note is unsecured, bears interest at 10% per annum, was overdue 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.

 

On March 2, 2018, we 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) of the consolidated financial statements. The note is unsecured, bears interest at 10% per annum, was overdue 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.

 

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On March 2, 2018, we 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 9(j) of the consolidated financial statements. The note is unsecured, bears interest at 10% per annum, was overdue 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.

 

On March 19, 2018, we issued a convertible promissory note in the principal amount of up to $900,000. The note is unsecured, bears interest at 12% per annum, was overdue 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, we 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 our bank account in the amount of $5,562 per calendar day or $27,812 per week until we has paid or the holder has converted an amount equal to the principal balance, interest, accrued interest, and default amount.

 

On May 1, 2018, we entered into an investor relations agreement with Chesapeake Group Inc., to assist in all phases of our investor relations including broker/dealer relations. The contract will commence on May 1, 2018 and ending on April 30, 2019. In consideration for the agreement, we are committed to providing 23,750 restricted common shares. The shares of common stock were issued on October 18, 2018, refer to Note 13 of the consolidated financial statements.

 

On May 8, 2018, we issued a convertible note in the principal amount of $51,500. The note is unsecured, bears interest at 10% per annum, and was overdue on February 8, 2019. The note is convertible into common shares at a 32% discount to the lowest intra-day trading price of our common stock for the ten trading days immediately preceding the conversion date.

 

On May 28, 2018 we issued a convertible note in the principal amount of $180,000. The note is unsecured, bears interest at 10% per annum, and was overdue on February 28, 2019. The note is convertible into common shares at a 32% discount to the lowest intra-day trading price of our common stock for the ten trading days immediately preceding the conversion date.

 

On June 1, 2018, we 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.

 

On August 31, 2018, we 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.

 

On August 27, 2018, pursuant to a debt exchange agreement, we 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 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 of the consolidated financial statements.

 

During the year ended December 31, 2018, pursuant to a series of debt exchange agreements, we 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.

 

During the year ended December 31, 2018, pursuant to a series of debt exchange agreements, we 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. The Series B preferred shares are classified as permanent equity. Refer to Note 12 of the consolidated financial statements.

 

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Description of Property

 

On June 1, 2018, we 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.

 

For the year ended December 31, 2017, the aggregate rental expense was CAD$92,913 (approximately USD$71,549). Rent expense included other amounts paid in Canada for warehouse storage and offices under month to month or as needed basis.

 

For the year ended December 31, 2018, the aggregate rental expense was CAD$91,511 (approximately USD$70,654). Rent expense included other amounts paid in Canada for warehouse storage and offices under month to month or as needed basis.

 

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.
   
● US Patent No. 9,280,902 for a “Facilities Management” was issued March 8, 2016 and expires January 24, 2032.

 

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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 had accrued all liabilities related to this matter in the consolidated financial statements. The litigation has been fully settled.

 

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 Text”, “TAG Touch”, “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 May 20, 2019, 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.

 

ITEM 1A. RISK FACTORS

 

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Form 10-K, including our consolidated financial statements and related notes, before investing in our common stock. If any of the following risks materialize, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the price of our common stock could decline, and you could lose part or all of your investment.

 

Risks Related to Our Business

 

We have a limited operating history with significant losses and expect losses to continue for the foreseeable future.

 

We have yet to establish any history of profitable operations and have incurred net losses since our inception. We have generated only nominal revenues since our inception and do not anticipate that we will generate revenues which will be sufficient to sustain our operations in the near future. Our profitability will require the successful commercialization and sales of our products. We may not be able to successfully achieve any of these requirements or ever become profitable.

 

There is doubt about our ability to continue as a going concern due to recurring losses from operations, accumulated deficit and insufficient cash resources to meet our business objectives, all of which means that we may not be able to continue operations.

 

Our independent auditors have added an explanatory paragraph to their audit opinion issued in connection with the consolidated financial statements for the years ended December 31, 2018 and 2017 with respect to their doubt about our ability to continue as a going concern. As discussed in Note 2 to our consolidated financial statements for the years ended December 31, 2018 and 2017, we have generated operating losses since inception, and our cash resources are insufficient to meet our planned business objectives, which together raise doubt about our ability to continue as a going concern.

 

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Our inability to complete our future research and development and engineering projects in a timely manner could have a material adverse effect of our results of operations, financial condition, and cash flows.

 

If our research and development projects are not completed in a timely fashion, we could experience:

 

  ● substantial additional cost to obtain a marketable product;
     
  ● additional competition resulting from competitors in the surveillance and facial recognition market, and;
     
  ● delay in obtaining future inflow of cash from financing or partnership activities.

 

We face intense competition, which could result in lower revenues and higher research and development expenditures and could adversely affect our results of operations.

 

Unless we keep pace with changing technologies, we could lose existing customers and fail to win new customers. In order to compete effectively in the fleet management systems market, we must continually design, develop and market new and enhanced technologies. Our future success will depend, in part, upon our ability to address the changing and sophisticated needs of the marketplace. Fleet management technologies have achieved widespread commercial acceptance and our strategy of expanding our fleet management technologies business could adversely affect our business operations and financial condition.

 

Further, we expect to derive revenue from government contracts, which are often non-standard, involve competitive bidding, may be subject to cancellation with or without penalty and may produce volatility in earnings and revenue.

 

The market for our technologies is still developing and if the industry adopts technology standards that are different from our own our competitive position would be negatively affected.

 

Parts of our company’s business plan are dependent on business relationships with various parties.

 

We expect to rely in part upon original equipment manufacturers (OEM), and distribution partners to sell and install our products, and we may be adversely affected if those parties do not actively promote our products or pursue installations that use our products. Further, if our products are not timely delivered or do not perform as promised, we could experience increased costs, lower margins, liquidated damage payment obligations and reputational harm.

 

We must attract and maintain key personnel, or our business will fail.

 

Success depends on the acquisition of key personnel. We will have to compete with other companies both within and outside the electronics industry to recruit and retain competent employees. If we cannot maintain qualified employees to meet the needs of our anticipated growth, this could have a material adverse effect on our business and financial condition.

 

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We may not be able to secure additional financing to meet our future capital needs due to changes in general economic conditions.

 

We anticipate requiring significant capital to fulfill our contractual obligations, continue development of our planned products to meet market evolution, and execute our business plan, generally. We may use capital more rapidly than currently anticipated and incur higher operating expenses than currently expected, and we may be required to depend on external financing to satisfy our operating and capital needs. We may need new or additional financing in the future to conduct our operations or expand our business. Any sustained weakness in the general economic conditions and/or financial markets in the United States and Europe, or globally could adversely affect our ability to raise capital on favorable terms or at all. From time to time we have relied, and may also rely in the future, on access to financial markets as a source of liquidity to satisfy working capital requirements and for general corporate purposes. We may be unable to secure debt or equity financing on terms acceptable to us, or at all, at the time when we need such funding. If we do raise funds by issuing additional equity or convertible debt securities, the ownership percentages of existing stockholders would be reduced, and the securities that we issue may have rights, preferences or privileges senior to those of the holders of our common stock or may be issued at a discount to the market price of our common stock which would result in dilution to our existing stockholders. If we raise additional funds by issuing debt, we may be subject to debt covenants, which could place limitations on our operations including our ability to declare and pay dividends. Our inability to raise additional funds on a timely basis would make it difficult for us to achieve our business objectives and would have a negative impact on our business, financial condition and results of operations.

 

Our business and operating results could be harmed if we fail to manage our growth or change.

 

Our business may experience periods of rapid change and/or growth that could place significant demands on our personnel and financial resources. To manage possible growth and change, we must continue to try to locate skilled engineers and professionals and adequate funds in a timely manner.

 

Our business depends on GPS technology owned and controlled by others. If we do not have continued access to GPS technology, we will be unable to deliver our services and our revenues will decrease.

 

Our services rely on signals from GPS satellites built and maintained by the U.S. Department of Defense. GPS satellites and their ground support systems are subject to electronic and mechanical failures and sabotage. If one or more satellites malfunction, there could be a substantial delay before they are repaired or replaced, if at all, and our services may cease, and customer satisfaction would suffer.

 

Our GPS technology depends on the use of radio frequency spectrum controlled by others.

 

Our GPS technology is dependent on the use of radio frequency spectrum. The assignment of spectrum is controlled by an international organization known as the International Telecommunications Union, or ITU. The Federal Communications Commission, or FCC, is responsible for the assignment of spectrum for non-government use in the United States in accordance with ITU regulations. Any ITU or FCC reallocation of radio frequency spectrum, including frequency band segmentation or sharing of spectrum, could cause interference with the reception of GPS signals and may materially and adversely affect the utility and reliability of our products, which would, in turn, cause a material adverse effect on our operating results. In addition, emissions from mobile satellite service and other equipment operating in adjacent frequency bands or in band may materially and adversely affect the utility and reliability of our products, which could result in a material adverse effect on our operating results.

 

Government regulations and standards may harm our business and could increase our costs or reduce our opportunities to earn revenues.

 

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. A number of legislative and regulatory proposals under consideration by federal, state, provincial, local and foreign governmental organizations may lead to laws or regulations concerning various aspects of wireless communications and GPS technology. Additionally, it is uncertain how existing laws governing issues such as taxation, intellectual property, libel, user privacy and property ownership, will be applied to our services. The adoption of new laws or the application of existing laws may expose us to significant liabilities and additional operational requirements, which could decrease the demand for our services and increase our cost of doing business.

 

If we are not able to adequately protect our intellectual property, then we may not be able to compete effectively, and we may not be profitable.

 

Our commercial success may depend, in part, on obtaining and maintaining patent protection of our technologies and product as well as successfully defending third-party challenges to such technologies and products. We will be able to protect our technologies and product candidates from use by third parties only to the extent that valid and enforceable patents cover them and we have exclusive rights to use them. The ability of our licensors, collaborators and suppliers to maintain their patent rights against third-party challenges to their validity, scope or enforceability will also play an important role in determining our future.

 

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The copyright and patent positions of software and technology related companies can be highly uncertain and involve complex legal and factual questions that include unresolved principles and issues. No consistent policy regarding the breadth of claims allowed regarding such companies’ patents has emerged to date in the United States, and the patent situation outside the United States is even more uncertain. Changes in either the patent laws or in interpretations of patent laws in the United States or other countries may diminish the value of our intellectual property. Accordingly, we cannot predict with any certainty the range of claims that may be allowed or enforced concerning our patents.

 

We may also rely on trade secrets to protect our technologies, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. While we seek to protect confidential information, in part, through confidentiality agreements with our consultants and scientific and other advisors, they may unintentionally or willfully disclose our information to competitors. Enforcing a claim against a third party related to the illegal acquisition and use of trade secrets can be expensive and time consuming, and the outcome is often unpredictable. If we are not able to maintain patent or trade secret protection on our technologies and product candidates, then we may not be able to exclude competitors from developing or marketing competing products, and we may not be able to operate profitability.

 

If we are the subject of an intellectual property infringement claim, the cost of participating in any litigation could cause us to go out of business.

 

There has been, and we believe that there will continue to be, significant litigation and demands for licenses in our industry regarding patent and other intellectual property rights. Although we anticipate having a valid defense to any allegation that our current products, production methods and other activities infringe the valid and enforceable intellectual property rights of any third parties, we cannot be certain that a third party will not challenge our position in the future. Other parties may own patent rights that we might infringe with our products or other activities, and our competitors or other patent holders may assert that our products and the methods we employ are covered by their patents. These parties could bring claims against us that would cause us to incur substantial litigation expenses and, if successful, may require us to pay substantial damages. Some of our potential competitors may be better able to sustain the costs of complex patent litigation, and depending on the circumstances, we could be forced to stop or delay our research, development, manufacturing or sales activities. Any of these costs could cause us to go out of business.

 

Risks Relating to Ownership of Our Securities

 

Trading on the OTCQB® Venture Marketplace 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 the OTCQB Venture Marketplace operated by the OTC Markets Group. Trading in stock quoted on the OTCQB 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, the OTCQB is not a stock exchange, and trading of securities on the OTCQB is often more sporadic than the trading of securities listed on a stock exchange like the Nasdaq Stock Market or New York Stock Exchange. Accordingly, our shareholders may have difficulty reselling any of their shares.

 

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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 that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.

 

In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission, FINRA has adopted rules that 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.

 

We do not anticipate paying any cash dividends to our common shareholders.

 

We presently do not anticipate that we will pay dividends on any of our common stock in the foreseeable future. If payment of dividends does occur at some point in the future, it would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any common stock dividends will be within the discretion of our Board of Directors. We presently intend to retain all earnings after paying the interest for the preferred stock, if any, to implement our business plan; accordingly, we do not anticipate the declaration of any dividends for common stock in the foreseeable future.

 

Volatility in Our Common Share Price May Subject Us to Securities Litigation.

 

The market for our common stock is characterized by significant price volatility as compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.

 

The Elimination of Monetary Liability Against our Directors, Officers and Employees under Nevada law and the Existence of Indemnification Rights of our Directors, Officers and Employees May Result in Substantial Expenditures by our Company and may Discourage Lawsuits Against our Directors, Officers and Employees.

 

Our articles of incorporation do not contain any specific provisions that eliminate the liability of our directors for monetary damages to our company and shareholders; however, we are prepared to give such indemnification to our directors and officers to the extent provided for by Nevada law. We may also have contractual indemnification obligations under our employment agreements with our officers. The foregoing indemnification obligations could result in our company incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and resultant costs may also discourage our company from bringing a lawsuit against directors and officers for breaches of their fiduciary duties and may similarly discourage the filing of derivative litigation by our shareholders against our directors and officers even though such actions, if successful, might otherwise benefit our company and shareholders.

 

Our business is subject to changing regulations related to corporate governance and public disclosure that have increased both our costs and the risk of noncompliance.

 

Because our common stock is publicly traded, we are subject to certain rules and regulations of federal, state and financial market exchange entities charged with the protection of investors and the oversight of companies whose securities are publicly traded. These entities, including the Public Company Accounting Oversight Board, the SEC and FINRA, have issued requirements and regulations and continue to develop additional regulations and requirements in response to corporate scandals and laws enacted by Congress, most notably the Sarbanes-Oxley Act of 2002. Our efforts to comply with these regulations have resulted in, and are likely to continue resulting in, increased general and administrative expenses and diversion of management time and attention from revenue-generating activities to compliance activities. Because new and modified laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices.

 

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ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES

 

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.

 

ITEM 3. LEGAL PROCEEDINGS

 

On June 4, 2015, a lawsuit was commenced against DSG 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.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

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PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market Information for 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 bid 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)

 

Quarter Ended  

High

$

   

Low

$

 
             
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  
June 30, 2017     320       80  
March 31, 2017     160       8.40  

 

(1) Over-the-counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions. (2) The first trade of our common shares occurred on March 25, 2015.

 

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.

 

Dividend Policy

 

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.

 

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

We did not purchase any of our shares of common stock or other securities during 2018 and 2017.

 

Recent Sale of Unregistered Securities

 

Not applicable.

 

  ITEM 6. SELECTED FINANCIAL DATA

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

 

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and the related notes to the consolidated financial statements included later in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs and expectations that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”

 

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 TEXT and high definition TOUCH — 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.

 

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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 TOUCH 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 TOUCH 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.

 

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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 TEXT, or a TAG and TOUCH).

 

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 TOUCH units.

 

We recognize revenue when it satisfies a performance obligation by transferring control over a product to a customer. Revenue is measured based on the consideration the Company expects to receive in exchange for those products. In instances where final acceptance of the product is specified by the customer, revenue is deferred until all acceptance criteria have been met. We accrue for warranty costs, sales returns, and other allowances based on its historical experience.

 

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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, TEXT display, and TOUCH display tablets. The TAG system control unit is sold as a stand-alone unit or in conjunction with our TEXT alphanumeric display or TOUCH high definition “touch activated” display. Hardware purchases also include costs of components used during installations, such as cables, mounting solutions, and other miscellaneous equipment.

 

Wireless data fees. Our wireless data fees consist primarily of the data fees charged by outside providers of GPS tracking used in all of our TAG system control units.

 

Mapping. Our mapping costs consist of aerial mapping, course map, geofencing, and 3D flyovers for golf courses. This cost is incurred at the time of hardware installation.

 

Installation. Our installation costs consist primarily of costs incurred by our employed service technicians for the cost of travel, meals, and miscellaneous components required during installations. In addition, these costs also include fees paid to external contractors for installations on a project by project basis.

 

Freight expenses and Inventory adjustments. Our freight expenses consist primarily of costs to ship hardware to courses for installations. Our inventory adjustments include inventory write offs, write downs, and other adjustments to the cost of inventory.

 

Operating Expenses & Other Income (Expenses) We classify our operating expenses and other income (expenses) into five categories: compensation, general and administrative, warranty expense (recovery), bad debt, and depreciation and amortization. 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.

 

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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.

 

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Results of Operations

 

The following tables set forth our consolidated results of operations as a percentage of revenue for the periods presented:

 

    For the year ended  
    December 31, 2018     December 31, 2017  
Revenue     100.0 %     100.0 %
Cost of revenue     15.0 %     35.3 %
Gross profit     85.0 %     64.7 %
Operating expenses                
Compensation expense     56.7 %     67.8 %
Research and development expense     0.0 %     0.0 %
General and administration expense     121.9 %     128.6 %
Warranty expense     (7.0 )%     8.2 %
Bad debt     4.8 %     6.9 %
Depreciation and amortization expense     1.1 %     2.7 %
Total operating expense     177.50 %     214.2 %
Loss from operations     (92.4 )%     (149.5 )%
Other income (expense)                
Foreign currency exchange     (4.6 )%     9.7 %
Other (expenses) income     0.0 %     0.0 %
Unrealized on derivative instruments     78.5 %     (75.0 )%
Loss on extinguishment of debt    

(537.8

)%     (2.0 )%
Finance costs     (210.6 )%     (157.4 )%
Total other expense     (674.6 )%     (224.6 )%
Loss from continuing operations before income taxes     (767.0 )%     (374.1 )%
Provision for income taxes     0.0 %     0.0 %
Net loss     (767.0 )%     (374.1 )%
Other comprehensive income (expense)                
Foreign currency translation     46.2 %     (38.5 )%
Comprehensive loss     (720.8 )%     (412.5 )%

 

36
 

 

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.

 

37
 

 

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).

 

38
 

 

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%.

 

39
 

 

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.

 

40
 

 

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;

 

 

41
 

 

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 paybles. 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.

 

42
 

 

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.

 

43
 

 

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.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

44
 

 

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

 

DSG GLOBAL INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

  Page
   
Report of Independent Registered Public Accounting Firm 46
   
Consolidated Financial Statements:  
Consolidated Balance Sheets 48
Consolidated Statements of Operations 49
Consolidated Statements of Comprehensive Loss 50
Consolidated Statements of Stockholders’ Deficit 51
Consolidated Statements of Cash Flows 52
Notes to Consolidated Financial Statements 53

 

45
 

 

 

 

 

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.

 

 

46
 

 

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  

 

47
 

 

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                
P referred 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

 

48
 

 

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

 

49
 

 

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

 

50
 

 

DSG GLOBAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

AS AT DECEMBER 31, 2018 AND 2017

(Expressed in U.S. Dollars)

 

    Common Stock     Preferred Stock                    
    Shares     Amount     Additional
paid in
capital 		    Discount on common
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

 

51
 

 

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

  

52
 

 

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.

 

O n 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.

 

53
 

 

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).

 

54
 

 

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.

 

55
 

 

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.

 

56
 

 

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:

 

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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.

 

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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.

 

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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  
Text     26,743       27,475  
Touch     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.

 

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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.

 

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  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.
   
(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.

 

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(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).
   
  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).
   
  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.
   
(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.

   
  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.
   
(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.

   
  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.
   
(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.

 

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  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).
   
  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.
   
(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.
   
 

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).

   
  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.
   
  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).
   
  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.
   
(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.
   
  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).
   
  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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(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.

   
  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.
   
(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.

   
  During the year ended December 31, 2018, the Company accreted $50,000 of the debt discount to finance costs.
   
(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).
   
  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.
   
(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.

   
  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.

 

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(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.

   
  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.

   
  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.
   
(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.

   
 

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.

 

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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.
   
  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.
   
(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.

 

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(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.

 

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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  

 

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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.

 

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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.

 

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  ● 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.

 

72
 

 

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.

 

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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.

 

74
 

 

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.

 

75
 

 

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 )

 

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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

 

77
 

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

The phrase “disclosure controls and procedures” refers to controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended, or the Exchange Act, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission, or SEC. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our chief executive officer, or CEO, and chief financial officer, or CFO, as appropriate to allow timely decision regarding required disclosure.

 

Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Exchange Act), as of December 31, 2015, the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our CEO and CFO have concluded that as of December 31, 2018, our disclosure controls and procedures were designed at a reasonable assurance level and were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles.

 

Our management, with the participation of our CEO and CFO, has assessed the effectiveness of the internal control over financial reporting as of December 31, 2018. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated Framework (2013 Framework) . Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2018.

 

This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm on our internal control over financial reporting due to an exemption established by the JOBS Act for “emerging growth companies.”

 

Changes in Internal Controls over Financial Reporting

 

There was no change in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended December 31, 2018 that materially affected, or is reasonable likely to materially affect, our internal control over financial reporting.

 

Limitations on Effectiveness of Controls and Procedures

 

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

ITEM 9B. OTHER INFORMATION

 

None.

 

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PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

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 (“GPSI”) 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.

 

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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.

 

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Jason Sugarman, Director

 

Jason Sugarman has over 20 years in the finance business with focus on asset back lending and private equity investments. As the founder of two asset management firms and the lead outside investor in numerous financial service companies and real estate projects, he has funded over $1 billion in direct loan and equity placements and is the Sr. VP of Valor Group LTD.

 

Beginning in 1993.Mr. Sugarman started developing land and single family real estate in Southern California. He was a founder and principal of a successful regional homebuilding and mortgage company from 1994-1999. During the 7-year period Mr. Sugarman was involved with over a dozen subdivision developments as well as developing many condominiums and townhomes. He sold out his interest in the development company to a Lehman Brother financed entity in 1999. In 2000 Mr. Sugarman started an investment firm which specialized in equity joint ventures and turned it into one of the premier mezz-real estate lending funds in the country with peak assets under management exceeding $700mm. Mr. Sugarman oversaw the expansion into new markets (Nevada, Colorado, Hawaii, Texas, Utah, Oregon, Arizona, Florida, and Washington) and the diversification of real estate assets (office, office condo, storage, hotel, condo-hotel, mixed use and agriculture).

 

In addition to real estate, he also personally sponsored in a number of highly successful early stage investments which have included the founding of BANC OF CALIFORNIA (a $7B bank holding company), COR Securities Holdings (the owner of the largest independent securities clearing company in the US), COR International Towers Inc. (a cell tower developer and manager in Central America), and COR Finance LTD (a company which has both telecom and solar infrastructure assets in Asia).

 

Mr. Sugarman is the Sr. VP of Valor Group LTD a $5 billion dollar Bermuda Insurance Company, a managing partner of Camden Capital, International Tower Group, and COR Finance LTD. He serves as a director of New Olympia Re, VL Life, DSG TAG, and is an advisor and investor in Ban of California (NASDAQ: BANC), COR Securities Holdings (COR Clearing) and Corum Financial Group.

 

81
 

 

Mr. Sugarman is on the board of a number of charities with a focus on elementary education, health care research and Jewish causes. He is a Graduate of Stanford University where he was a Scholar Athlete and member of the baseball team. He is married to Elizabeth Guber Sugarman’ and has three children. He is an active golf and tennis player and is a partner in Marucci Sports, the Oklahoma City Dodgers (AAA affiliate of the Los Angeles Dodgers), and the LA Football Club (MLS franchise).

 

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.

 

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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, 2018, 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.

 

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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 consolidated 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 officer does not believe that it is necessary to have such committees because believes the functions of such committees can be adequately performed by the members of our Board of Directors.

 

ITEM 11. 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:

 

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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.

 

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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  

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

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.

 

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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
214 - 5455 152nd Street
Surrey, British Columbia, Canada
V3S 5A5 		  Director, president, chief executive officer, chief financial officer, secretary, and treasurer   Common Stock     2,018       0.32 %
Keith Westergaard
214 - 5455 152nd Street
Surrey, British Columbia, Canada
V3S 5A5 		  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 690,403 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.

 

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

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.

 

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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.

 

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

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.

 

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PART IV

 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

  We have filed the following documents as part of this Annual Report on Form 10-K:
     
  1. Consolidated Financial Statements
     
    Our consolidated financial statements are listed in the “Index to Consolidated Financial Statements” under Part II, Item 8 of this Annual Report on Form 10-K.
     
  2. Financial Statement Schedules
     
    All schedules have been omitted because they are not required, not applicable, not present in amounts sufficient to require submission of the schedule, or the required information is otherwise included in our consolidated financial statements and related notes.
     
  3. Exhibits
     
   

See the Exhibit Index immediately following the signature pages of this Annual Report on Form 10-K.

 

ITEM 16. FORM 10-K SUMMARY

 

None.

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated: May 23, 2019 DSG Global Inc.
   
  By: /s/ Robert Silzer
   

Robert Silzer

Chief Executive Officer and Chief Financial Officer

(Principal Executive Officer and

Principal Financial and Accounting Officer)

 

POWER OF ATTORNEY

 

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert Silzer as his true and lawful attorneys-in-fact and agents, with full power of substitution for him, and in his name in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature   Title   Date
         
/s/ Robert Silzer   Chief Executive Officer, Chief Financial Officer and Chairman of the   May 23, 2019
Robert Silzer   Board of Directors (Principal Executive Officer and Principal Financial and Accounting Officer)    
         
/s/ Stephen Johnston   Director   May 23, 2019
Stephen Johnston        
         
/s/ James Singerling   Director   May 23, 2019
James Singerling        
         
/s/ Jason Sugarman   Director   May 23, 2019
Jason Sugarman        

 

  S- 1  
 

 

EXHIBIT INDEX

 

Exhibit

Number

  Exhibit Description  

Filed 

Form

  Exhibit   Filing Date   Herewith
3.1.1   Articles of Incorporation of the Registrant   SB-2   3.1   10-22-07    
                     
3.1.2   Certificate of Change of the Registrant   8-K   3.1   06-24-08    
                     
3.1.3   Articles of Merger of the Registrant   8-K   3.1   02-23-15    
                     
3.1.4   Certificate of Change of the Registrant   8-K   3.2   02-23-15    
                     
3.1.5   Certificate of Correction of the Registrant   8-K   3.3   02-23-15    
                     
3.1.6   Certificate of Change of the Registrant   8-K   3.1   03-26-19    
                     
3.1.7   Certificate of Correction of the Registrant   8-K   3.2   03-26-19    
                     
3.2.1   Bylaws of the Registrant   SB-2   3.2   10-22-07    
                     
3.2.2   Amendment No. 1 to Bylaws of the Registrant   8-K   3.2   06-19-15    
                     
4.1.2   DSG Global, Inc. 2015 Omnibus Incentive Plan   10-Q   10.3   11-13-15    
                     
10.1   Subscription Agreement / Debt Settlement, dated September 26, 2014, between DSG TAG Systems Inc. and Westergaard Holdings Ltd.   8-K   10.1   08-17-15    
                     
10.2   Addendum to Subscription Agreement / Debt Settlement, dated October 7, 2014, between DSG TAG Systems Inc. and Westergaard Holdings Ltd.   8-K   10.2   08-17-15    
                     
10.3   Second Addendum to Subscription Agreement / Debt Settlement, dated April 29, 2015, between DSG TAG Systems Inc. and Westergaard Holdings Ltd.   8-K   10.3   08-17-15    
                     
10.4   Third Addendum to Subscription Agreement / Debt Settlement, dated August 11, 2015, between DSG TAG Systems Inc. and Westergaard Holdings Ltd.   8-K   10.4   08-17-15    
                     
10.5  

Letter from Westergaard Holdings Ltd., dated September 1, 2015, extending dates of redemption obligations.

  8-K   10.1   09-08-15    

 

  EX- 1  
 

 

Exhibit

Number

  Exhibit Description  

Filed

Form

  Exhibit   Filing Date   Herewith
                     
10.6   Letter from Westergaard Holdings Ltd., dated November 10, 2015, extending dates of redemption obligations   10-Q   10.1   11-13-15    
                     
10.7   Letter fromWestergaard Holdings Ltd., dated December 31, 2015, extending dates of redemption obligations   8-K   10.1   03-09-16    
                     
10.8   Convertible Note of DSG TAG Systems Inc., dated March 31, 2015, payable to Adore Creative Agency, Inc.   8-K   10.5   08-14-15    
                     
10.9   Convertible Note Agreement, dated August 25, 2015, between the Registrant and Jerry Katell, Katell Productions, LLC and Katell Properties, LLC   10-Q   10.2   11-13-15    
                     
10.10   Agreement (TAG Touch) dated February 15, 2014 between DSG TAG Systems Inc. and DSG Canadian Manufacturing Corp.   8-K   10.10   05-06-15    
                     
10.11   Loan agreement, dated October 24, 2014 between DSG TAG Systems Inc. and A.Bosa & Co (Kootenay) Ltd.   10-K   10.11   05-02-16  
                     
10.12   Lease agreement (Modified), dated January 21, 2016 and February 1, 2016 between DSG TAG Systems Inc. and Benchmark Group   10-K    10.12    05-02-16  
                     
10.13   Loan agreement, dated February 11, 2016 between DSG TAG Systems Inc. and Jeremy Yaseniuk   10-K    10.13    05-02-16  
                     
10.14   Loan agreement, dated March 31, 2016 between DSG TAG Systems Inc. and E. Gary Risler   10-K    10.14    05-02-16  
                     
10.15   Letter from Westergaard Holdings Ltd., dated April 29, 2016   10-K   10.15   05-20-16    
                     
10.16   Security purchase agreement between DSG Global Inc. and Coastal Investment Partners, dated November 7 2016   8-K   10.16   11-15-16    
                     
10.17   Letter of Resignation by Board Member Keith Westergaard   10-Q   10.17   12-16-16    
                     
21   List of Subsidiary:   10-K    21.1    05-02-16    

 

 

  EX- 2  
 

 

Exhibit

Number

  Exhibit Description   Filed Form   Exhibit   Filing Date   Herewith
31.1   Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                       X
                             
32.1#   Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                       X
                             
101*   Interactive Data File                        
                             
101.INS   XBRL Instance Document                       X
                             
101.SCH   XBRL Taxonomy Extension Schema Document                       X
                             
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document                       X
                             
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document                       X
                             
101.LAB   XBRL Taxonomy Extension Label Linkbase Document                       X
                             
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document                       X

 

#* The information in this exhibit is furnished and deemed not filed with the Securities and Exchange Commission for purposes of section 18 of the Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of DSG Global Inc. under the Securities Act of 1933, as amended, or the Exchange Act of 1934, as amended, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

  EX- 3  
 

 

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