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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended September 30, 2021

 

or

 

Transition Report Pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from _____________ to _____________.

 

Commission file number 000-53988

 

DSG GLOBAL, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   26-1134956

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

207 - 15272 Croydon Drive

Surrey, British Columbia, V3Z 6T3, Canada

(Address of principal executive offices, zip code)

 

(604) 575-3848

(Registrant’s telephone number, including area code)

 

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

 

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

 

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

 

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

 

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

 

Title of each classss   Trading Symbols(s)   Name of each exchange on which registered
None   N/A   N/A

 

As at November 15, 2021, the issuer had 125,360,380 shares of common stock issued and outstanding.

 

 

 

 

 

 

DSG GLOBAL, INC.

TABLE OF CONTENTS

 

    Page No.
PART I — FINANCIAL INFORMATION  
     
Item 1. Financial Statements (unaudited) 3
     
  Interim Condensed Consolidated Balance Sheets 4
     
  Interim Condensed Consolidated Statements of Operations and Comprehensive Loss 5
     
  Interim Condensed Consolidated Statements of Stockholders’ Deficit 6
     
  Interim Condensed Consolidated Statements of Cash Flows 7
     
  Notes to Interim Condensed Consolidated Financial Statements 8
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 57
     
Item 4. Controls and Procedures 57
     
PART II — OTHER INFORMATION  
     
Item 1. Legal Proceedings 58
     
Item 1A. Risk Factors 58
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 72
     
Item 3. Defaults Upon Senior Securities 72
     
Item 4. Mine Safety Disclosures 72
     
Item 5. Other Information 72
     
Item 6. Exhibits 73
     
Signatures 76

 

  2  

 

 

PART I: FINANCIAL INFORMATION

 

ITEM 1: Financial Statements (unaudited)

 

The accompanying unaudited interim condensed consolidated financial statements of DSG Global Inc. as at September 30, 2021, have been prepared by our management in conformity with accounting principles generally accepted in the United States of America and in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders’ equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.

 

Operating results for the nine-month period ended September 30, 2021, are not necessarily indicative of the results that can be expected for the year ending December 31, 2021.

 

  3  

 

 

DSG GLOBAL, INC.

CONSOLIDATED BALANCE SHEETS

AS AT SEPTEMBER 30, 2021, AND DECEMBER 31, 2020

(Expressed in U.S. dollars)

(UNAUDITED)

 

               
   

September 30,

2021

   

December 31,

2020

 
             
ASSETS                
CURRENT ASSETS                
Cash   $ 1,317,646     $ 1,372,016  
Trade receivables, net     165,206       27,874  
Lease receivable     86,386       4,297  
Inventories, net of inventory allowance of $183,701 and $146,292, respectively     647,733       254,362  
Prepaid expenses and deposits     630,772       124,144  
TOTAL CURRENT ASSETS     2,847,743       1,782,693  
                 
Lease receivable     512,145       38,559  
Fixed assets, net     201,581       268,981  
Equipment on lease, net     -       496  
Intangible assets, net     11,911       12,833  
TOTAL ASSETS   $ 3,573,380     $ 2,103,562  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
CURRENT LIABILITIES                
Trade and other payables   $ 913,780     $ 1,786,313  
Deferred revenue     222,382       93,548  
Lease liability     123,688       125,864  
Loans payable     1,956,328       9,981  
Convertible notes payable     319,548       513,328  
TOTAL CURRENT LIABILITIES     3,535,726       2,529,034  
                 
Lease liability     58,010       150,877  
Loans payable     212,980       232,834  
TOTAL LIABILITIES     3,806,716       2,912,745  
                 
Going concern (Note 2)                
Commitments (Note 15)                
Contingencies (Note 16)                
Subsequent events (Note 18)                
                 
MEZZANINE EQUITY                
Redeemable preferred stock, $0.001 par value, 6,020,000 shares authorized (2020 – 6,010,000), 2,737 issued and outstanding (2020 -1,024), 48,956 to be issued (2020 – 49,706)    

2,753,375

      2,239,936  
                 
STOCKHOLDERS’ DEFICIT                
Preferred stock, $0.001 par value, 3,010,000 shares authorized (2020 – 3,010,000), 200,471 issued and outstanding (2020 – 200,508)     1,295,360       2,084,680  
Common stock, $0.001 par value, 350,000,000 shares authorized, (2020 – 350,000,000); 121,645,186 issued and outstanding (2020 – 95,765,736)     121,650       94,018  
Additional paid in capital, common stock     49,943,132       43,299,937  
Discounts on common stock     (69,838 )     (69,838 )
Common stock to be issued     -       1,436,044  
Obligation to issue warrants     138,066       163,998  
Accumulated other comprehensive income     1,271,466       1,252,082  
Accumulated deficit     (55,686,547 )     (51,310,040 )
TOTAL STOCKHOLDERS’ DEFICIT     (2,986,711 )     (3,049,119 )
                 
TOTAL LIABILITIES MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT   $ 3,573,380     $ 2,103,562  

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

  4  

 

 

DSG GLOBAL, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE LOSS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Expressed in U.S. dollars)

(UNAUDITED)

 

                       
    Three months ending     Nine months ending  
   

September 30,

2021

   

September 30,

2020

   

September 30,

2021

   

September 30,

2020

 
                         
Revenue   $ 498,380     $ 334,161     $ 1,380,324     $ 608,328  
Cost of revenue     226,452       168,211       558,298       246,862  
Gross profit     271,928       165,950       822,026       361,466  
                                 
Operating expenses                                
Compensation expense     665,894       127,932       2,568,795       1,794,304  
General and administration expense     1,407,770       427,171       2,507,188       1,143,880  
Bad debt expense     22,159       1,921       32,959       17,141  
Depreciation and amortization expense     6,781       808       17,954       2,110  
Total operating expense     2,102,604       557,832       5,126,896       2,957,435  
Loss from operations     (1,830,676 )     (391,882 )     (4,304,870 )     (2,595,969 )
                                 
Other income (expense)                                
Foreign currency exchange     (316 )     51,006       (22,665 )     (15,141 )
Other (expense) income     (54 )     99,171       16,849       99,171  
Change in fair value of derivative instruments     -       (623,321 )     -       (2,795,630 )
(Loss) Gain on extinguishment of debt     (76,454 )     (1,954,383 )     902       (2,772,276 )
Finance costs     (41,178 )     (339,833 )     (66,723 )     (1,204,251 )
Total other expense     (118,002 )     (2,767,360 )     (71,637 )     (6,688,127 )
Net loss   $ (1,948,678 )   $ (3,159,242 )   $ (4,376,507 )   $ (9,284,096 )
                                 
Net loss per share                                
Basic and diluted   $ (0.02 )   $ (0.08 )   $ (0.04 )   $ (0.47 )
                                 
Weighted average number of shares used in computing basic and diluted net income (loss) per share:                                
Basic and diluted     119,761,619       40,655,321       111,233,810       19,577,948  
                                 
Other comprehensive income (loss)                                
Foreign currency translation adjustments     29,181       (52,199 )     19,384       45,292  
                                 
Comprehensive loss   $ (1,919,497 )   $ (3,211,441 )   $ (4,357,123 )   $ (9,238,804 )

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

  5  

 

 

DSG GLOBAL, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Expressed in U.S. dollars)

(UNAUDITED)

 

                                                                                 
    Common Stock                                
    Shares     Amount     Additional paid in capital     Discount on common stock     To be issued     Obligation to issue warrants     Preferred Stock Amount     Accumulated other comprehensive income     Accumulated deficit    

Total

stockholders’ deficit

 
Balance, December 31, 2019     1,146,302     $ 1,146     $ 28,097,710     $ (69,838 )   $ 7,402,254     $ -     $ 200     $ 1,372,345     $ (45,132,941 )   $ (8,329,124 )
                                                                                 
Shares to be issued for cash     191,865       192       99,839       -       -       -       -       -       -       100,031  
Shares and warrants issued for services     2,003,000       2,003       781,896       -       -       -       -       -       -       783,899  
Shares issued on conversion of debt     52,937,999       52,941       3,524,064       -       -       -       -       -       -       3,577,005  
Shares issued for share-settled debt     6,462,244       6,462       129,995       -       77,829       -       -       -       -       214,286  
Preferred shares issued for services     -       -       -       -       -       -       767,040       -       -       767,040  
Issuance of shares to be issued     9,430,146       9,430       7,392,824       -       (7,402,254 )     -       -       -       -       -  
Net loss for the period     -       -       -       -       -       -       -       45,292       (9,284,096 )     (9,238,804 )
Balance, September 30, 2020     72,171,556     $ 72,174     $ 40,026,328     $ (69,838 )   $ 77,829     $ -     $ 767,240     $ 1,417,637     $ (54,417,037 )   $ (12,125,667 )
                                                                                 
Balance, December 31, 2020     95,765,736     $ 94,018     $ 43,299,937     $ (69,838 )   $ 1,436,044     $ 163,998     $ 2,084,680     $ 1,252,082     $ (51,310,040 )   $ (3,049,119 )
                                                                                 
Shares issued for debt settlement     8,853,975       8,854       1,618,425       -       (1,436,044 )     -       -       -       -       191,235  
Shares and warrants issued for services     2,430,000       2,430       1,805,704       -       -       (25,932 )     -       -       -       1,782,202  
Cancellation of shares due to duplicate issuance     (1,751,288 )     -       -       -       -       -       -       -       -       -  
Preferred shares issued for services     -       -       -       -       -       -       849,600       -       -       849,600  
Shares issued on conversion of preferred shares     16,346,763       16,348       3,221,066       -       -       -       (1,638,920 )     -       -       1,598,494  
Share issuance costs     -       -       (2,000 )     -       -       -       -       -       -       (2,000 )
Net loss for the period     -       -       -       -       -       -       -       19,384       (4,376,507 )     (4,357,123 )

Balance, September 30,

2021

    121,645,186     $ 121,650     $ 49,943,132     $ (69,838 )   $ -     $

138,066

    $ 1,295,360     $ 1,271,466     $ (55,686,547 )   $ (2,986,711 )

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

  6  

 

 

DSG GLOBAL INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021, AND 2020

(Expressed in U.S. Dollars)

(UNAUDITED)

 

                 
   

September 30,

2021

   

September 30,

2020

 
             
Net loss   $ (4,376,507 )   $ (9,284,096 )
                 
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     17,954       2,110  
Accretion of discounts on debt     28,763       792,378  
Bad debt expense     32,959       17,141  
Change in fair value of derivative liabilities     -       2,795,630  
Change in inventory allowance     -       27,478  
Preferred shares issued for services     849,600       -  
Shares and warrants issued for services     1,782,202       1,550,939  
(Gain) Loss on extinguishment of debt     (902 )     2,772,276  
Unrealized foreign exchange (gain) loss     (1,509 )     27,740  
                 
Changes in non-cash working capital:                
Trade receivables, net     (169,705 )     (79,200 )
Inventories     (392,837 )     (63,708 )
Prepaid expense and deposits     (506,580 )      (2,586 )
Lease receivable     (555,563 )     -  
Trade payables and accruals     (683,954 )     697,685  
Deferred revenue     128,588       65,103  
Operating lease liabilities     75,340     12,014  
Net cash used in operating activities     (3,772,151 )     (669,096 )
                 
Cash flows from investing activities                
Purchase of equipment     (25,344 )     (2,233 )
Net cash used in investing activities     (25,344 )     (2,233 )
                 
Cash flows from financing activities                
Proceeds from issuing shares     -       100,031  
Proceeds from issuing preferred shares     2,109,934       -  
Proceeds from notes payable     2,000,000       922,845  
Debt issue costs    

(102,500

)     -  
Repayment on lease liabilities    

(94,509

)     -  
Payments on notes payable     (193,889 )     (305,526 )
Net cash provided by financing activities     3,719,036       717,350  
                 
Effect of exchange rate changes on cash     24,089       (9,178 )
                 
Net increase (decrease) in cash     (54,370 )     36,843  
Cash at beginning of period     1,372,016       25,494  
                 
Cash at the end of the period   $ 1,317,646     $ 62,337  
                 
Supplemental Cash Flow Information (Note 17)                

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

  7  

 

 

DSG GLOBAL, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(UNAUDITED)

 

Note 1 – ORGANIZATION

 

DSG Global, Inc. (the “Company”) was incorporated under the laws of the State of Nevada on September 24, 2007.

 

The Company is a technology development company engaged in the design, manufacture, and marketing of fleet management solutions in the golf industry. The Company’s principal activities are the sale and rental of GPS tracking devices and interfaces for golf vehicles and related support services.

 

On April 13, 2015, the Company entered into a share exchange agreement with DSG Tag Systems Inc. (“DSG”), now a 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 formed DSG Tag Systems International, Ltd. in the United Kingdom (“DSG UK”). DSG UK is a wholly owned subsidiary of DSG.

 

On September 15, 2020, the Company incorporated Imperium Motor Corp. (“Imperium”), under the laws of the State of Nevada on September 10, 2020, for which it subscribed to all authorized capital stock, 100 shares of Preferred Class A Stock, at a price of $0.001 per share. Imperium is a wholly owned subsidiary of the Company.

 

On August 12, 2021, the Company incorporated Imperium Motor of Canada Corporation (“Imperium Canada”), under the laws of British Columbia, Canada, for which it subscribed to all authorized capital stock, 100 shares of Class A Voting Participating common shares, at a price of $0.10 per share. Imperium Canada is a wholly owned subsidiary of the Company.

 

Note 2 – GOING CONCERN

 

These unaudited interim condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders and note holders, the ability of the Company to obtain necessary equity financing to continue operations, and ultimately the attainment of profitable operations.

 

The outbreak of the coronavirus, also known as “COVID-19”, has spread across the globe and is impacting worldwide economic activity. Conditions surrounding the coronavirus continue to rapidly evolve and government authorities have implemented emergency measures to mitigate the spread of the virus. The outbreak and the related mitigation measures may have an adverse impact on global economic conditions as well as on the Company’s business activities. The extent to which the coronavirus may impact the Company’s business activities will depend on future developments, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions, business disruptions, and the effectiveness of actions taken in Canada and other countries to contain and treat the disease. These events are highly uncertain and as such, the Company cannot determine their financial impact at this time. While certain restrictions are presently in the process of being relaxed, it is unclear when the world will return to the previous normal, if ever. This may adversely impact the expected implementation of the Company’s plans moving forward.

 

As of September 30, 2021, the Company had working capital deficit of $687,983 and had an accumulated deficit of $55,686,547 since inception. Furthermore, the Company incurred a net loss of $4,376,507 and used $3,772,151 of cash flows for operating activities during the nine months ended September 30, 2021. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These unaudited interim condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. These adjustments could be material.

 

Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying interim condensed consolidated financial statements were prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) and with the instructions to Form 10-Q.

 

  8  

 

 

DSG GLOBAL, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(UNAUDITED)

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to U.S. GAAP rules and regulations for presentation of interim financial information. Therefore, the unaudited interim condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto, included in the Company’s Annual Report on the Form 10-K for the year ended December 31, 2020. Current and future financial statements may not be directly comparable to the Company’s historical financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

 

Principles of Consolidation

 

The interim condensed consolidated financial statements include the accounts of DSG Global Inc. and its wholly owned subsidiaries Vantage Tag Systems Inc., DSG Tag Systems Inc., Imperium Motor Corp., Imperium Motor Company of Canada Corporation, and DSG UK, collectively referred to as the “Company”. All intercompany accounts, transactions and profits were eliminated in the consolidated financial statements.

 

Use of Estimates

 

The preparation of interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the interim condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the condensed consolidated financial statements in the period they are determined. There were no new estimates in the period.

 

Recently Adopted Accounting Pronouncements

 

Recent accounting pronouncements issued by FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s interim condensed consolidated financial statements.

 

Note 4 – TRADE RECEIVABLES, NET

 

As of September 30, 2021, and December 31, 2020, trade receivables consist of the following:

 

   

September 30,

2021

   

December 31,

2020

 
Accounts receivable   $ 183,094     $ 44,296  
Allowance for doubtful accounts     (17,888 )     (16,422 )
Total trade receivables, net   $ 165,206     $ 27,874  

 

  9  

 

 

DSG GLOBAL, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(UNAUDITED)

 

Note 5 – FIXED ASSETS AND EQUIPMENT ON LEASE

 

As of September 30, 2021, and December 31, 2020, fixed assets consisted of the following:

 

   

September 30,

2021

   

December 31,

2020

 
Machinery and equipment   $ 5,040     $ -  
Furniture and equipment     2,349       2,342  
Computer equipment     40,506       28,804  
Vehicles     28,345       19,619  
Right-of-use assets     312,404       302,477  
Accumulated depreciation     (187,063 )     (84,261 )
    $ 201,581     $ 268,981  

 

As of September 30, 2021, and December 31, 2020, equipment on lease to customers consisted of the following:

 

   

September 30,

2021

   

December 31,

2020

 
Tags   $ 129,873     $ 129,533  
Text     28,705       28,629  
Infinity/Touch     23,777       23,716  
Accumulated depreciation     (182,355 )     (181,382 )
    $ -     $ 496  

 

For the three and nine months ended September 30, 2021, total depreciation expense for fixed assets, excluding right-of-use assets was $6,781 and $17,954, respectively (2020 - $808 and $2,110, respectively) and is included in depreciation and amortization expense. For the three and nine months ended September 30, 2021, total depreciation for right-of-use assets was $29,871 and $86,422, respectively (2020 - $19,052 and $42,397, respectively) and is included in general and administration expense as operating lease expense.

 

Note 6 – INTANGIBLE ASSETS

 

As of September 30, 2021, and December 31, 2020, intangible assets consist of the following:

 

   

September 30,

2021

   

December 31,

2020

 
Intangible asset – Patent   $ 22,353     $ 22,353  
Accumulated depreciation     (10,442 )     (9,520 )
Intangible asset, net    $ 11,911     $ 12,833  

 

The estimated useful life of the patent is 20 years. Patents are amortized on a straight-line basis. For the three and nine months ended September 30, 2021, total amortization expense was $307 and $922 respectively (2020 - $307 and $921 respectively).

 

Note 7 – TRADE AND OTHER PAYABLES

 

As of September 30, 2021, and December 31, 2020, trade and other payables consist of the following:

 

   

September 30,

2021

   

December 31,

2020

 
Accounts payable and accrued expenses   $ 805,213     $ 1,519,379  
Accrued interest     106,613       148,682  
Other liabilities     1,954       118,252  
Total payables   $ 913,780     $ 1,786,313  

 

  10  

 

 

DSG GLOBAL, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(UNAUDITED)

 

Note 8 – LOANS PAYABLE

 

As of September 30, 2021, and December 31, 2020, loans payable consisted of the following:

 

   

September 30,

2021

   

December 31,

2020

 
Unsecured loan payable in the amount of CDN$40,000, due on or before December 31, 2025(a)   $ 31,490     $ 31,350  
Unsecured loan payable in the amount of CDN$40,000, due on or before December 31, 2025(b)     31,490       31,350  
Unsecured loan payable, due on May 21, 2022, interest at 1% per annum(c)     30,065       30,115  
Secured loan payable, due on June 5, 2050, interest at 3.75% per annum(d)     150,000       150,000  
Unsecured loan payable, due on June 20, 2022, interest at 9% per annum(e)    

1,926,263

      -  
      2,169,308       242,815  
Current portion     (1,956,328 )     (9,981 )
Loans payable   $ 212,980     $ 232,834  

 

(a) On April 17, 2020, the Company received a loan in the principal amount of $31,490 (CDN$40,000) under the Canada Emergency Business Account program. The loan is non-interest bearing and eligible for CDN$10,000 forgiveness if repaid by December 31, 2022. If not repaid by December 31, 2022, the loan bears interest at 5% per annum and is due on December 31, 2025.
   
(b) On April 21, 2020, the Company received a loan in the principal amount of $31,490 (CDN$40,000) under the Canada Emergency Business Account program. The loan is non-interest bearing and eligible for CDN$10,000 forgiveness if repaid by December 31, 2022. If not repaid by December 31, 2022, the loan bears interest at 5% per annum and is due on December 31, 2025.
   
(c) On May 21, 2020, the Company received a loan in the principal amount of $30,065 under the Paycheck Protection Program. The loan bears interest at 1% per annum and is due on May 21, 2022 with payments deferred for the first six months of the term.
   
(d) On June 5, 2020, the Company received a loan in the principal amount of $150,000. The loan bears interest at 3.75% per annum and is due on June 5, 2050. The loan is secured by all tangible and intangible assets of Company. Fixed payments of $731 are due monthly and begin 12 months from the date of the loan. The payments are applied against any accrued interest before principal amounts are repaid. During the nine months ended September 30, 2021, the Company made a payment of $1,000 which was applied towards accrued interest included in trade and other payables.
   
(e) On September 13, 2021, the Company entered into a securities purchase agreement with a non-related party. Pursuant to the agreement, the Company received cash proceeds of $2,000,000 on September 13, 2021 in exchange for the issuance of an unsecured convertible promissory note in the principal amount of $2,400,000, which was inclusive of a $400,000 original issue discount and bears interest at 9% per annum to the holder and matures June 20, 2022. If the convertible note is not paid in full before December 12, 2021, an additional $100,000 of guaranteed interest will be added to the note. An additional $100,000 of guaranteed interest will be added to the note on the 12th day of each succeeding month during which any portion of the convertible note remains unpaid. Any principal or interest on the convertible note that is not paid when due or during any period of default bears interest at 24% per annum.
   
  In the event of a default, the note is convertible at the price that is equal to a 40% discount to the lowest trading price of the Company’s common shares during the 30 day trading period prior to the conversion date.
   
  As at September 30, 2021, the carrying value of the convertible promissory note was $1,926,263 (December 31, 2020 - $Nil).

 

Note 9 – CONVERTIBLE NOTES

 

As of September 30, 2021, and December 31, 2020, convertible loans payable consisted of the following:

 

Third Party Convertible Notes Payable

 

(a) On March 31, 2015, the Company issued a convertible promissory note in the principal amount of $310,000 to a company owned by a former director of the Company for marketing services. The note is unsecured, bears interest at 5% per annum, is convertible at $1.25 per common share, and is due on demand. As at September 30, 2021, the carrying value of the convertible promissory note was $310,000 (December 31, 2020 - $310,000).
   
(b) 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.

 

  11  

 

 

DSG GLOBAL, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(UNAUDITED)

 

  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.
   
  During the year ended December 31, 2019, the Company issued 72,038 common shares with a fair value of $59,097 for the conversion of $32,000 of principal resulting in a loss on settlement of debt of $27,097.
   
  On December 31, 2020, the Company entered into a Debt Settlement agreement whereby the Company agreed to pay cash of $250,000 and issue 200,000 shares of common stock, fair valued at $268,000, in full and final satisfaction of all pending litigation, principal debt and accrued interest outstanding totalling $321,243. The Company recorded a loss on settlement of debt totalling $196,757 and wrote down the derivative liability to $Nil.
   
  During the three months ended March 31, 2021, the Company repaid the note of $193,889 and interest of $56,111 for a total of $250,000. The Company issued 200,000 shares to satisfy the terms of the Debt Settlement agreement.
   
  As of September 30, 2021, the carrying value of the note was $Nil (December 31, 2020 - $193,841).
   
(c) On June 5, 2017, the Company issued a convertible promissory note in the principal amount of $110,000. As at September 30, 2021, the carrying value of the note was $9,439 (December 31, 2020 - $9,487), relating to an outstanding penalty.

 

Note 10 - LEASES

 

Lessor

 

During the year ended December 31, 2020, the Company began financing the lease of certain assets under rental revenue contracts with its customers and accounts for them in accordance with ASC 842 as outlined under “Leases” in Note 3 of the consolidated financial statements for the year ended December 31, 2020.

 

During the year ended December 31, 2020, the Company recognized lease receivables of $45,856, to reflect lease payments expected to be received over the term of the agreements and derecognized $30,000 in inventory related to the underlying asset.

 

  12  

 

 

DSG GLOBAL, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(UNAUDITED)

 

During the nine months ended September 30, 2021, the Company recognized lease receivables of $720,285 to reflect lease payments expected to be received over the term of the agreements and derecognized $306,735 in inventory related to the underlying assets.

 

Lease receivable  

September 30,

2021

   

December 31,

2020

 
Balance, beginning of the period   $ 42,856     $ -  
Additions     720,285       45,856  
Transfer to third party     (120,231 )     -  
Interest on lease receivables     9,036       -  
Receipt of payments     (53,415 )     (3,000 )
Balance, end of the period     598,531       42,856  
Current portion of lease receivables     (86,386 )     (4,297 )
Long term potion of lease receivables   $ 512,145     $ 38,559  

 

Lessee

 

The Company leases certain assets under lease agreements.

 

On October 1, 2019, the Company entered into a 5-year lease agreement for a photocopier (the “Copier Lease”). Upon recognition of the lease, the Company recognized right-of-use assets of $8,683 and lease liabilities of $8,683. As of September 30, 2021, the Copier Lease had a remaining term of 3years.

 

On July 10, 2020, the Company entered into a lease agreement for retail, showroom and warehouse space in Fairfield, CA (the “Fairfield Lease”). Upon initial recognition of the lease, the Company recognized right-of-use assets of $164,114 and lease liabilities of $156,364. The difference between the recorded operating lease assets and lease liabilities is due to prepaid rent deposits to be applied to first months’ rent of $7,750. The lease included a rent-free period with rent payments commencing on October 1, 2020. The Fairfield Lease also included a refundable security deposit of $7,750 which is included in prepaid expenses and deposits at September 30, 2021. As of September 30, 2021, Fairfield Lease had a remaining term of 0.92 years.

 

On July 14, 2020, the Company entered into a lease agreement for office space in Surrey, BC (the “Croydon Lease”). Upon initial recognition of the lease, the Company recognized right-of-use assets of $133,825 (CDN$175,843) and lease liabilities of $125,014 (CDN$163,895). The difference between the recorded operating lease assets and lease liabilities is due to prepaid rent deposits to be applied to first months’ rent of $8,811 (CDN$11,948). The lease included a rent-free period with rent payments commencing on September 1, 2020. As of September 30, 2021, the Croydon Lease had a remaining term of 1.83 years.

 

On April 1, 2021, the Company entered into a lease agreement for a credit card processing machine (the “FD 150 Lease”). Upon initial recognition of the lease, the Company recognized right-of-use assets of $1,018 and lease liabilities of $1,018. As of September 30, 2021, the FD 150 Lease had a remaining term of 2.58 years.

 

On June 2, 2021, the Company entered into a lease agreement for a trailer (the “Trailer Lease”). Upon recognition of the lease, the Company recognized right-of-use assets of $8,886 (CDN$11,016) and lease liabilities of $8,886 (CDN$11,016). As of September 30, 2021, the Trailer Lease had a remaining term of 3.67 years.

 

  13  

 

 

DSG GLOBAL, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(UNAUDITED)

 

Right-of-use assets have been included within fixed assets, net and lease liabilities have been included in operating lease liability on the Company’s consolidated balance sheet.

 

Right-of-use assets  

September 30,

2021

   

December 31,

2020

 
Cost   $ 312,404     $ 302,477  
Accumulated depreciation     (139,278 )     (53,158 )
Total right-of-use assets   $ 173,126     $ 249,319  

 

Lease liability  

September 30,

2021

   

December 31,

2020

 
Current portion   $ 123,688     $ 125,864  
Long-term portion     58,010       150,877  
Total lease liability   $ 181,698     $ 276,741  

 

Future minimum lease payments to be paid by the Company as a lessee for operating leases as of September 30, 2021, for the next three years are as follows:

 

Lease commitments and lease liability  

September 30,

2021

 
Remainder of 2021   $ 26,940  
2022     127,855  
2023     40,288  
2024     4,578  
2025     1,141  
Total future minimum lease payments     200,802  
Discount     (19,104 )
Total     181,698  
         
Current portion of operating lease liabilities     (123,688 )
Long-term portion of operating lease liabilities   $ 58,010  

 

Note 11 – MEZZANINE EQUITY

 

Authorized

 

10,000 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 shares of common stock at a conversion rate equal to the lowest traded price for the fifteen trading days immediately preceding the date of conversion.

 

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.

 

10,000 shares of redeemable Series F preferred shares, authorized, each having a par value of $0.001 per share. Each share of Series F preferred shares is convertible into common stock at an amount equal to the lesser of (a) one hundred percent of the lowest traded price for the Company’s stock for the fifteen trading days immediately preceding the relevant Conversion and (b) a twenty percent discount to the price of the common stock in an offering with gross proceeds of at least $10,000,000.

 

Mezzanine Preferred Equity Transactions

 

During the nine months ended September 30, 2021:

 

  1,512 Series C Preferred Shares were converted into common shares, see note 13.
     
  On November 6, 2020, the Company received gross proceeds of $300,000 for 300 Series C Preferred Shares in lieu of the Second Closing for the Series C SPA. The shares were included in preferred shares to be issued at December 31, 2020. The preferred shares were issued during the nine months ended September 30, 2021.
     
  On December 7, 2020, the Company received gross proceeds of $200,000 for 200 Series C Preferred Shares in lieu of the Second Closing for the Series C SPA. The shares are included in preferred shares to be issued as at December 31, 2020. The preferred shares were issued during the nine months ended September 30, 2021.

 

  14  

 

 

DSG GLOBAL, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(UNAUDITED)

 

  On December 23, 2020, the Company entered into a Securities Purchase Agreement (the “Series F SPA”) whereby the Company agreed to sell and the Purchaser agrees to purchase, in a series of closings (the “Closings”) of at least 1,000 Series F preferred shares at a price of $1,000 per share. The First and Second Closings, will each be for 1,500 Preferred Shares at a purchase price of $1,500,000, the Second Closing which will follow the filing of the Registration Statement. Any Additional Closings will be for the purchase of at least 1,000 Series F preferred shares, every thirty calendar days, and shall follow the Registration Statement being declared effective. The Company granted 3,000,000 warrants, with a relative fair value of $768,008, concurrently with the execution of the Series F SPA and First Closing. The First Closing shares were included in preferred shares to be issued at December 31, 2020 with a relative fair value of $731,992.
     
    On February 4, 2021, the Company issued 1,500 Series F preferred shares pursuant to the First Closing of the Series F SPA with a relative fair value of $731,992. Additionally, the Company issued 1,500 Series F preferred shares pursuant to the Second Closing of the Series F SPA for gross proceeds for $1,500,000.
     
  On June 10, 2021, pursuant to the Series F SPA, the Company received $350,000 for the subscription of an additional 350 Series F preferred shares to be issued.
     
  On July 20, 2021, pursuant to another Securities Purchase Agreement (the “July Series F SPA”), the Company received $400,000 for the subscription of 400 Series F preferred shares with a relative fair value of $261,934 and 1,180,000 warrants with a relative fair value of $138,066 valued on the agreement date which are recorded as obligation to issue shares and warrants respectively at September 30, 2021, see note 13.
     
  275 Series F Preferred Shares were converted into common shares, see note 13.

 

During the year ended December 31, 2020:

 

  On September 30, 2020, the Company entered into an Exchange Agreement to settle outstanding convertible debt and accrued interest in exchange for 2,347 shares of Series C preferred shares with an aggregate carrying amount of $2,348,208. The shares were issued October 14, 2020.
     
  On September 30, 2020, the Company entered into a Securities Purchase Agreement (the “Series C SPA”) whereby the Company agrees to sell and the Purchaser agrees to purchase, in a series of closings (the “Closings”), up to 200 shares of Series C preferred shares at a price of $1,000 per share. At the First Closing, the Company agrees to issue 250 shares of Series C preferred shares, representing 200 Purchased Shares and 50 Commitment Shares. On October 14, 2020, the Company issued 250 Series C shares for gross proceeds of $200,000 in full satisfaction of the First Closing.
     
  1,573 Series C Preferred Shares were converted into common shares.

 

Note 12 – PREFERRED STOCK

 

Authorized

 

3,000,000 shares of Series A preferred shares authorized each having a par value of $0.001 per share.

 

10,000 shares of Series B convertible preferred shares authorized each having a par value of $0.001 per share. Each share of Series B convertible preferred shares is convertible into 100,000 shares of common stock.

 

  15  

 

 

DSG GLOBAL, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(UNAUDITED)

 

Preferred Stock Transactions

 

During the nine months ended September 30, 2021:

 

  On October 26, 2020, the Company agreed to issue Series B preferred shares that are convertible into 1,000,000 common shares and 1,000,000 warrants for investor relations services. The preferred shares were valued at $1,340,000 based on the fair value of the underlying common stock and included in preferred shares to be issued at December 31, 2020. On February 17, 2021, the Company issued 100 shares of Series B preferred shares and 1,000,000 warrants, see note 13. 1 Series B preferred share is convertible into 100,000 shares of common stock and 10 shares of Series B preferred shares should have been issued. On May 26, 2021, 50 shares of Series B preferred shares, instead of 5 shares of Series B preferred shares, were converted into 500,000 shares of common stock with a fair value of $670,000. On September 16, 2021, the Company cancelled 45 shares of Series B preferred shares and 5 shares of Series B preferred shares were converted into 500,000 shares of common stock with a fair value of $670,000.
     
  On March 4, 2021, the Company issued an aggregate of 16 shares of Series B preferred shares to the Company’s board of directors for past services. These preferred shares were valued at $849,600 based on the fair value of the underlying common stock.
     
  108 Series B preferred shares were converted into common shares, see note 13.

 

During the year ended December 31, 2020:

 

  On May 21, 2020, the Company issued an aggregate of 136 shares of Series B preferred shares to various parties for past services to the Company, which included 122 issued to related parties and 2 issued to a former director of the Company. These preferred shares were valued at $767,040, based on the fair value of the underlying common stock, discounted for the six months hold period before the preferred shares can be converted. The issuance is recorded under compensation expense.
     
  On December 11, 2020, 4 Series B preferred shares were converted into common shares.

 

Note 13 – COMMON STOCK AND ADDITIONAL PAID IN CAPITAL

 

Authorized

 

350,000,000 common shares, authorized, each having a par value of $0.001 per share.

 

Common Stock Transactions

 

During the nine months ended September 30, 2021:

 

  The Company issued an aggregate of 8,138,975 shares of common stock to satisfy shares to be issued at December 31, 2020 for debt settlement.
     
  The Company issued 715,000 shares of common stock with a fair value of $191,235 pursuant to a legal settlement, see note 16.
     
  The Company issued 2,430,000 shares of common stock with a fair value of $565,250 for consulting services.
     
  The Company issued 16,346,763 shares of common stock with a fair value of $3,237,414 and share issue costs of $2,000 for conversion of 108 Series B Preferred Shares with a fair value of $1,638,920, conversion of 1,512 Series C Preferred Shares with a fair value of $1,462,296, and conversion of 275 Series F Preferred Shares with a fair value of $134,198.
     
  The Company cancelled 1,751,288 shares of common stock which were returned to treasury due to a duplicated issuance for share settled debt during the year ended December 31, 2020.

 

During the year ended December 31, 2020:

 

  The Company issued an aggregate of 191,865 shares of common stock for cash proceeds of $100,031.
     
  The Company issued an aggregate of 4,303,000 shares of common stock with a fair value of $1,360,784 in exchange for services.
     
  The Company issued an aggregate of 16,880,146 shares of common stock with a fair value of $7,521,454 to satisfy shares to be issued.
     
  The Company issued 2,363,532 shares of common stock with a fair value of $214,286 for share-settled debt.

 

  16  

 

 

DSG GLOBAL, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(UNAUDITED)

 

  The Company issued an aggregate of 52,937,999 shares of common stock with a fair value of $3,577,005 upon the conversion of $777,872 of convertible debentures and accrued interest per the table below:

 

Date issued   Common shares
issued (#)
    Fair value(1)     Converted balance(2)     Loss on conversion  
January 7, 2020     53,764     $ 53,226     $ 20,000     $ (33,226 )
February 4, 2020     135,802       127,654       20,000       (107,654 )
February 7, 2020     151,234       142,160       24,500       (117,660 )
February 26, 2020     151,515       45,455       20,000       (25,455 )
February 26, 2020     140,151       39,242       18,500       (20,742 )
March 9, 2020     170,000       27,200       13,090       (14,110 )
March 9, 2020     195,547       68,441       13,000       (55,441 )
March 11, 2020     180,505       63,177       12,000       (51,177 )
April 1, 2020     140,000       9,800       3,889       (5,911 )
April 1, 2020     220,000       15,400       6,666       (8,734 )
April 2, 2020     218,678       16,379       7,000       (9,379 )
April 21, 2020     264,026       24,649       8,000       (16,649 )
May 15, 2020     258,000       25,800       7,166       (18,634 )
May 19, 2020     426,000       80,940       17,338       (63,602 )
May 19, 2020     675,675       100,000       30,000       (70,000 )
May 19, 2020     350,000       33,250       12,705       (20,545 )
May 19, 2020     337,837       50,000       15,000       (35,000 )
May 21, 2020     298,606       56,735       13,258       (43,477 )
May 21, 2020     611,111       116,111       27,750       (88,361 )
July 8, 2020     500,000       45,000       10,500       (34,500 )
July 8, 2020     857,142       72,857       18,000       (54,857 )
July 8, 2020     600,000       22,800       11,549       (11,251 )
July 8, 2020     639,846       51,188       13,437       (37,751 )
July 8, 2020     880,952       70,476       18,500       (51,976 )
July 10, 2020     809,523       29,952       17,000       (12,952 )
July 17, 2020     1,121,212       55,948       18,500       (37,448 )
July 17, 2020     1,151,515       46,291       19,500       (26,791 )
July 20, 2020     1,130,000       45,426       17,091       (28,335 )
July 23, 2020     879,157       43,870       14,506       (29,364 )
August 3, 2020     1,309,824       35,234       14,146       (21,088 )
August 3, 2020     1,638,117       33,991       17,692       (16,299 )
August 10, 2020     1,412,525       30,553       15,255       (15,298 )
August 13, 2020     1,000,000       20,100       15,000       (5,100 )
August 13, 2020     1,130,000       25,877       11,311       (14,566 )
August 13, 2020     1,465,201       29,451       16,000       (13,451 )
August 19, 2020     1,484,615       22,269       19,300       (2,969 )
August 25, 2020     1,750,000       125,125       11,340       (113,785 )
August 25, 2020     1,483,146       106,045       13,200       (92,845 )
August 25, 2020     620,033       44,332       4,018       (40,314 )
August 25, 2020     1,490,000       106,535       8,851       (97,684 )
August 25, 2020     1,893,939       135,417       12,500       (122,917 )
August 26, 2020     1,818,182       130,000       12,000       (118,000 )
August 27, 2020     1,808,989       156,839       16,100       (140,739 )
August 31, 2020     1,808,989       84,842       16,100       (68,742 )
September 1, 2020     1,560,000       79,560       9,266       (70,294 )
September 2, 2020     1,808,989       80,283       16,100       (64,183 )
September 9, 2020     1,808,989       66,119       16,100       (50,019 )
September 10, 2020     2,727,273       92,045       18,000       (74,045 )
September 14, 2020     1,560,000       46,566       9,266       (37,300 )
September 17, 2020     345,291       12,879       7,700       (5,179 )
September 18, 2020     2,938,117       113,705       19,039       (94,666 )
September 22, 2020     1,515,151       57,879       10,000       (47,879 )
September 24, 2020     412,831       51,232       5,699       (45,533 )
September 29, 2020     2,600,000       310,700       15,444       (295,256 )
Total     52,937,999     $ 3,577,005     $ 777,872     $ (2,799,133 )

 

  (1) Fair values are derived based on the closing price of the Company’s common stock on the date of the conversion notice.
     
  (2) Converted balance includes portions of principal, accrued interest, financing fees, interest penalties and other fees converted upon the issuance of shares of common stock.

 

  17  

 

 

DSG GLOBAL, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(UNAUDITED)

 

Warrants

 

During the nine months ended September 30, 2021:

 

  The Company granted 1,000,000 warrants with a contractual life of three years and exercise price of $0.25 per share pursuant to an investor relations agreement dated October 26, 2020. The warrants were valued at $163,998.
     
  The Company granted 500,000 warrants with a contractual life of four years and exercise price of $1.00 per share. The warrants were valued at $668,461.
     
  The Company granted 2,000,000 warrants with a contractual life of five years and exercise price of $0.35 per share. The warrants were valued at $410,425.
     
  On July 20, 2021, pursuant to the July Series F SPA, the Company is to issue 1,180,000 warrants with a relative fair value of $138,066 valued on the agreement date, see note 11. The warrants have a contractual life of 5 years and exercise price of $0.30 per share. As at September 30, 2021, these warrants have not been issued.

 

The fair values of the warrants were calculated using the following assumptions for the Black Sholes Option Pricing Model:

 

    September 30, 2021  
Risk-free interest rate     0.180.82 %
Expected life     3.295.11 years  
Expected dividend rate     0 %
Expected volatility     285.40300.18 %

 

The continuity of the Company’s common stock purchase warrants issued and outstanding is as follows:

 

    Warrants    

Weighted

average
exercise

price

 
Outstanding at year December 31, 2020     12,939,813     $ 0.60  
Granted     3,500,000       0.41  
Outstanding as of September 30, 2021     16,439,813     $ 0.56  

 

As of September 30, 2021, the weighted average remaining contractual life of warrants outstanding was 2.78 years with an intrinsic value of $68,937.

 

Note 14 – RELATED PARTY TRANSACTIONS

  

During the nine months ended September 30, 2021 the Company incurred $387,052 (2020 - $100,000) in salaries which includes a bonus of $132,120 and $60,000 (2020 - $nil) in fees to the President, CEO, and CFO of the Company. The Company also repaid $317,997 of management fees and salaries previously owing to the President, CEO, and CFO of the Company as of December 31, 2020. As at September 30, 2021, the Company owed $Nil (December 31, 2020 - $317,997) to the President, CEO, and CFO of the Company for management fees and salaries. Amounts owed and owing are unsecured, non-interest bearing, and due on demand.

 

On March 4, 2021, the Company issued an aggregate of 16 shares of Series B convertible preferred shares to the Company’s board of directors for past services. These preferred shares were valued at $849,600 based on the fair value of the underlying common stock. The issuance is recorded under compensation expense.

 

Note 15 – COMMITMENTS

 

Product Warranties

 

The Company’s warranty policy generally covers a period of two years which is also covered by the manufacturer warranty. Thus, any warranty costs incurred by the Company are immaterial.

 

  18  

 

 

DSG GLOBAL, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(UNAUDITED)

 

Indemnifications

 

In the normal course of business, the Company indemnifies other parties, including customers, lessors, and parties to other transactions with the Company, with respect to certain matters. The Company has agreed to hold the other parties harmless against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, the Company has entered into indemnification agreements with its officers and directors, and the Company’s bylaws contain similar indemnification obligations to the Company’s agents. It is not possible to determine the maximum potential amount under these indemnification agreements due to the Company’s limited history with prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements have not had a material effect on the Company’s operating results, financial position, or cash flows.

 

Note 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 September 30, 2021, included in trade and other payables is $41,353 (December 31, 2020 - $47,023) 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 contract damages, and legal fees incurred by Coastal with respect to the lawsuit. On June 13, 2017, Coastal filed a complaint and motion for a preliminary injunction seeking conversion of the principal amount of a note issued by it to the Company into common stock of the Company. The Court issued an Order to Show Cause as to why a preliminary injunction should not be issued on June 27, 2017, and the Company opposed Coastal’s motion. A hearing on the motion for preliminary injunction was held on July 26, 2017. For the following reasons, the Court denied Coastal’s motion for a preliminary injunction. The Company also filed a cross motion to dismiss on the grounds that the $72,500 Note violates New York’s criminal usury law. The Court did not address this motion at that time and has set a separate briefing schedule. On December 31, 2020, the Company entered into a Settlement Agreement with Coastal for full and final satisfaction of its claims and all outstanding principal debt and accrued interest for $250,000 paid in cash and 200,000 shares of common stock fair valued at $268,000. As at December 31, 2020, $250,000 was included in loans and accrued interest and $268,000 was included in shares to be issued in relation to the settlement. During the nine months ended September 30, 2021, the Company paid $250,000 and issued 200,000 common shares with a fair value of $268,000 in full and final satisfaction of the agreement.

 

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 a complaint in the same filing for $72,000 as part of a consulting agreement the Company executed. As at December 31, 2020, a contingent liability of $115,000 was included in accrued liabilities for the expected financial impact of the settlement. During the nine months ended September 30, 2021, the Company issued 715,000 shares of restricted common stock pursuant to the settlement with a fair value of $191,235 which resulted in a loss on settlement of $76,235. On October 12, 2021, a Request for Dismissal was filed to the court and the claim was dismissed.

 

Note 17 – SUPPLEMENTAL CASH FLOW INFORMATION

 

         
    Nine-months ended  
   

September 30,

2021

   

September 30,

2020

 
             
Cash paid during the period for:                
Income tax payments   $ -     $ -  
Interest payments   $ 57,111     $ 2,676  
                 
Non-cash investing and financing transactions:                
Shares issued for convertible notes payable and accrued interest   $ -     $ 3,577,005  
Shares issued for debt settlement   $ 191,235     $ 214,286  
Initial recognition of lease assets   $ 9,904     $ -  
Shares issued on conversion of preferred shares   $ 3,235,414     $ -  

 

Note 18 – SUBSEQUENT EVENTS

 

Management has evaluated events subsequent to the period ended for transactions and other events that may require adjustment of and/or disclosure in such interim condensed consolidated financial statements.

 

Subsequent to September 30, 2021:

 

  The Company issued 1,700,000 shares of common stock to a related party for conversion of 17 Series B Preferred Shares with a fair value of $95,880.
     
  The Company issued 2,015,194 shares of common stock for conversion of 210 Series F Preferred Shares with a fair value of $252,000.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis is based on, and should be read in conjunction with, the condensed, consolidated interim financial statements and the related notes thereto of DSG Global, Inc. contained in this Quarterly Report on Form 10-Q (this “Report”).

 

As used in this section, unless the context otherwise requires, references to “we,” “our,” “us,” and “our company” refer to DSG Global, Inc. a Nevada corporation, together with our consolidated subsidiaries,

 

FORWARD LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements.

 

In particular, without limiting the generality of the foregoing disclosure, the forward-looking statements contained in this Quarterly Report on Form 10-Q and which are inherently subject to a variety of risks and uncertainties that could cause actual results, performance or achievements to differ significantly include but are not limited to:

 

  our ability to successfully homologate our electric vehicles offerings;
  anticipated timelines for product deliveries;
  the production capacity of our manufacturing partners and suppliers;
  the stability, availability and cost of international shipping services;
  our ability to establish and maintain dealership network for our electric vehicles;
  our ability to attract and retain customers;
  the availability of adequate manufacturing facilities for our PACER golf carts;
  the consistency of current labor and material costs;
  the availability of current government economic incentives for electric vehicles;
  the expansion of our business in our core golf market as well as in new markets like electric vehicles, commercial fleet management and agriculture;
  the stability of general economic and business conditions, including changes in interest rates;
  the Company’s ability to obtain financing to execute our business plans, as and when required and on reasonable terms;
  our ability to accurately assess and respond to market demand in the electric vehicle and golf industries;
  our ability to compete effectively in our chosen markets;
  consumer willingness to accept and adopt the use of our products;
  the anticipated reliability and performance of our product offerings;
  our ability to attract and retain qualified employees and key personnel;
  our ability to maintain, protect and enhance our intellectual property;
  our ability to comply with evolving legal standards and regulations, particularly concerning requirements for being a public company.
  the ability of our Chairman, President and Chief Executive Officer to control a significant number of shares of our voting capital;
  the impact of the COVID-19 pandemic on capital markets;
  frustration or cancellation of key contracts;
  short selling activities;
  our ability to complete an offering of our common stock and warrants pursuant to the Registration Statement on Form S-1 filed by with the Securities and Exchange Commission on April 21, 2021 (the “Offering”) and the concurrent listing of our common stock and of the warrants on the Nasdaq Capital Market.
  the immediate and substantial dilution of the net tangible book value of our common stock by the Offering;
  our ability to meet the initial or continuing listing requirements of the Nasdaq Capital Market; and
  our intention to effect a reverse stock split of our outstanding common stock immediately following the effective date of the Offering but prior to the closing of the Offering.

 

Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions, which may have been used.

 

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

 

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

 

Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Principles. The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

 

ABOUT DSG GLOBAL INC.

 

DSG Global Inc. is a technology development, manufacturing and distribution company based in British Columbia, Canada and Fairfield, California. DSG stands for “Digital Security Guard”, our first fleet management technology and primary value statement. Through Vantage TAG, our golf and fleet management division, we are engaged in the design, manufacture, and sale of fleet and player experience management solutions for the golf industry, and for commercial, government and military applications. More recently, Vantage TAG has introduced a range of innovative single player and luxury golf carts. In 2020, we established an electric vehicle division, Imperium Motor Company, headquartered at our Imperium Experience Centre in Fairfield, California. Imperium Motors is engaged in the importation, marketing and distribution of a wide range a low-speed and high-speed electric passenger vehicles for commuter, family, commercial, and public use.

 

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. Our executive team has over 50 years of experience in the design and manufacture of wireless, GPS, and fleet tracking solutions, and over 40 years of experience in automotive retail, wholesale, distribution, and manufacturing.

 

Powered by patented analytics and an extraordinary depth of industry knowledge, DSG’s mandate is to improve lives and businesses with intelligent, affordable, adaptable and environmentally responsible transportation technologies and electric vehicles.

 

Our principal executive office is located at 207 - 15272 Croydon Drive Surrey, British Columbia, V3Z 0Z5, Canada. The telephone number at our principal executive office is 1 (877) 589-8806. Our electric vehicle division, Imperium Motor Company, is headquartered at our Imperium Experience Center, Located at 4670 Central Way, Suite D, Fairfield, CA 95605. Imperium’s telephone number is 1 (707) 266-7575. The Company’s stock symbol is DSGT.

 

Corporate History

 

DSG Global, Inc. (formerly Boreal Productions Inc.) was incorporated under the laws of the State of Nevada on September 24, 2007. We were formed to option feature films and TV projects to be packaged and sold to movie studios and production companies.

 

In January 2015, we changed our name to DSG Global, Inc. and effected a one-for-three reverse stock split of our issued and outstanding common stock in anticipation of entering in a share exchange agreement with DSG TAG Systems, Inc., a corporation incorporated under the laws of the State of Nevada on April 17, 2008 and extra provincially registered in British Columbia, Canada in 2008.

 

On April 13, 2015, we entered into a share exchange agreement with Vantage Tag Systems Inc. (“VTS”) (formerly DSG Tag Systems Inc.) and the shareholders of VTS who become parties to the agreement. Pursuant to the terms of the share exchange agreement, we agreed to acquire not less than 75% and up to 100% of the issued and outstanding common shares in the capital stock of VTS in exchange for the issuance to the selling shareholders of up to 20,000,000 pre-reverse split shares of our common stock on the basis of 1 common share for 5.4935 common shares of VTS.

 

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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 VTS as contemplated by the share exchange agreement by issuing 15,185,875 pre-reverse split shares of our common stock to shareholders of VTS who became parties to the agreement. In addition, concurrent with the closing of the share exchange agreement, we issued an additional 179,823 pre-reverse split shares of our common stock to Westergaard Holdings Ltd. in partial settlement of accrued interest on outstanding indebtedness of VTS.

 

Following the initial closing of the share exchange agreement and through October 22, 2015, we acquired an additional 101,200 shares of common stock of VTS from shareholders who became parties to the share exchange agreement and issued to these shareholders an aggregate of 18,422 pre-reverse split shares of our common stock. Following completion of these additional purchases, DSG Global Inc. owns approximately 100% of the issued and outstanding shares of common stock of VTS. An aggregate of 4,229,384 shares of Series A Convertible Preferred Stock of VTS were exchanged for 51 Series B and 3,000,000 Series E preferred shares during the year ended December 31, 2018 by Westergaard Holdings Ltd., an affiliate of Keith Westergaard, a previous member of our board of directors which have not been issued as of September 30, 2021.

 

The reverse acquisition was accounted for as a recapitalization effected by a share exchange, wherein VTS is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of the acquired entity have been brought forward at their book value and no goodwill has been recognized. We adopted the business and operations of VTS upon the closing of the share exchange agreement.

 

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.

 

On March 26, 2019, we effected a reverse stock split of our authorized and issued and outstanding shares of common stock on a four thousand (4,000) for one (1) 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 outstanding shares of Preferred Stock remain unchanged.

 

On December 22, 2020, we amended our Articles of Incorporation to increase our authorized common shares from 150,000,000 to 350,000,000, and to designate 14,010,000 shares of preferred stock, par value $0.001 per share, including 3,000,000 Series A Preferred stock, 10,000 Series B Convertible Preferred stock, 10,000 Series C Convertible Preferred stock, 1,000,000 Series D Convertible Preferred stock, 5,000,000 Series E Convertible Preferred stock and 10,000 Series F Convertible Preferred Stock.

 

Imperium Motor Corp. was incorporated under the laws of the State of Nevada on September 15, 2020. Imperium Motor of Canada Corporation was incorporated under the laws of British Columbia, Canada, on August 12, 2021.

 

About our Business Divisions

 

VANTAGE TAG FLEET MANAGEMENT AND GOLF DIVISION

 

Vantage Tag Golf and Fleet Management Technologies

 

Vantage TAG Systems has developed a patented combination of hardware and software which we believe is the first completely modular and scalable fleet management solution for the golf industry and beyond. Marketed around the world, the TAG System and suite of products are deployed to help golf course operators manage their fleets of golf carts, turf equipment, and utility vehicles, providing real time vehicle global positioning, geofencing, remote control, and remote vehicle lockdown security features. The TAG System optimizes course efficiencies and pace of play, all while integrating a customizable array of player experience features such as player messaging, course mapping and 3d flyover, course & tournament marshalling, pro tips, food & beverage ordering, and ad streaming, among others.

 

The Vantage 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, Vantage TAG has created patent pending solutions to adapt it to the very specific requirements of the golf environment. Compared to mainstream fleet tracking products, Vantage TAG 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.

 

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Vantage TAG’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 vantage TAG Systems has adopted an application-oriented approach placing the most emphasis (and research & development) on server and end-user software by taking advantage of the commodity level reached by mainstream technologies such as Global Positioning (GPS) and M2M (Machine to Machine) Cellular Data in the wider context of Commercial Fleet Management.

 

Vantage TAG 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, Vantage TAG has maintained the unique nature of its hardware solution by developing a set of proprietary adapters and interfaces specifically for the golf application.

 

Vantage TAG has secured an exclusive supply agreement with the third-party hardware manufacturers for the vertical of golf industry. Additionally, Vantage TAG 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 Global 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 the Vantage TAG System is optimal for low operating and support costs and rapid-cycle release for software updates. It is also a major factor in eliminating or substantially reducing the need for any end-user premises equipment. Customers have access to the service through any internet connected computer or mobile device, there is no need for a local wireless network on the facility and installation time and cost are minimal.

 

Vantage TAG 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 Vantage TAG is following the same model: select the best of breed third-party hardware platform, design and produce custom proprietary accessories while focusing the bulk of the development efforts on vertical software application to address a very specific set of end-customer needs.

 

The latest addition to the TAG family of products, the TAG INFINITY is a perfect example of this development philosophy in action: the main component is a last-generation Android tablet PC wrapped in a custom designed outdoor enclosure containing the power supply and interface components required for the golf environment. The software application is taking advantage of all the advanced high-resolution graphics, touch user interface and computing power of the Android OS delivering a vastly superior user experience compared to competitive systems. The time to market for this product was 30% of how long it took to develop and launch this type of products in the past.

 

The TAG Control Unit

 

The company’s flagship product is the TAG Control unit. The TAG can operate as a “stand alone” unit or with one of two displays; the INFINITY 7” alphanumeric display or the INFINITY high definition “touch activated” screen. The TAG is GPS enabled and communicates with the TAG software using cellular GSM networks. Utilizing the cellular networks rather than erecting a local Wi-Fi network assures carrier grade uptime, and vehicle tracking “off- property”. GSM is the de facto global standard for mobile communications.

 

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The TAG unit itself is discreetly installed usually in the nose of the vehicle to give the GPS clear line of site. It is then connected to the vehicle battery and ignition. The property is then mapped using the latest satellite imagery that is graphically enhanced and loaded into the TAG System as a map.

 

Once installed the vehicle owner utilizes the TAG software to locate the vehicle in real time using any computer, smartphone, or tablet that has an internet connection and perform various management operations.

 

 

The operator can use the geo-fencing capabilities to create “zones” on the property where they can control the vehicles behavior such as shutting down a vehicle that is entering a sensitive or dangerous area. The TAG System also monitors the strength of the vehicle’s battery helping to prevent sending out vehicles undercharged batteries which can be an inconvenience for the course and negatively impact the golfer experience.

 

Features and Benefits:

 

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
   
Geofencing 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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INFINITY 7” Display

 

The INFINITY 7” is paired with the TAG Control unit as DSG’s entry level display system for operators who desire to provide basic hole distance information and messaging to the golf customer. The INFINITY 7” is a very cost-effective solution for operators who desire to give their customers GPS services with the benefits of a Fleet Management back end. The INFINITY 7” can be mounted on the steering column or the dash depending on the customer’s preference.

 

 

VTS’s entry level alphanumeric golf information display

 

Features and Benefits:

 

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

 

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INFINITY XL 12” Display

 

The INFINITY XL 12” is a solution for operators who desire to provide a high-level visual information experience to their customers. The INFINITY XL 12” is a high definition “Infinity XL 12” “ activated display screen mounted in the golf cart integrated with the TAG Control unit to provide a full back/front end Fleet Management solution. The INFINITY XL 12” displays hole graphics, yardage, and detailed course information to the golfer and provides interactive features such as Food and Beverage ordering and scorekeeping.

 

 

The industry leading Infinity XL 12” HD – the most sophisticated display on 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

 

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PROGRAMMATIC Advertising Platform

 

A unique feature of the INFINITY XL 12” system is the advertising display capability. This can be used by the operator for internal promotion of services or for generating revenue by selling the ad real estate since the golf demographic is very desirable to advertisers. The INFINITY XL 12” displays banner, panel, full page, pro tip, and Green view ads. There is also ad real estate on the interactive feature screens for Food and Beverage ordering and the scorecard. The Infinity XL 12” System can also display animated GIF files or play video for added impact.

 

 

Advertising displayed in multiple formats including animated GIF and video

 

DSG has developed proprietary “Ad Manager” software which is used to place and change the ads on the system(s) from a central NOC (Network Operations Center) in real time. The Ad Manager can deploy to a single system or multiple systems. This creates a network of screens that is also very desirable to advertisers as ad content can be deployed locally, regionally, or nationally. The advertising platform is an important part of the company’s future marketing and sales strategy.

 

 

DSG R3 Advertising Platform

 

The DSG R3 program delivers advance ROI (Revenue Optimization Intelligence). Utilizing all streams of advertising delivery, such as automated, direct, and self-serve. The R3 program has the ability to deliver relevant advertising to golfers the moment they sit in the cart. The R3 model is more effective than the previous advertising model of ‘One to One’, these are local ads only sold through direct sales by courses, or 3 rd party advertising sales firms. The new R3 model offers ‘Many to one’ advertising options, delivering thousands of national, regional, and local advertisers an opportunity to advertise on our screens through our R3 Marketplace.

 

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Previous ‘One to One’ model vs the new R3 model ‘Many to One’

 

 

TAG TURF/ECO TAG

 

The TAG Turf and the new ECO TAG were developed to give course operators the same back end management features for their turf equipment and utility vehicles. Turf equipment is expensive, and a single piece can run over $100,000 and represents a large portion of a golf course operating budget. The TAG Turf and ECO TAG have comprehensive reporting that the operator can utilize to implement programs that can increase efficiencies, reduce labor costs, help lower idle times, provide fuel consumption and equipment performance, provide historical data on cutting patterns, and reduce pollution from emissions by monitoring idle times. Since the golf course needs to be maintained regardless of volume these cost saving measures directly impact the operator’s bottom line.

 

Features and Benefits:

 

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

 

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The TAG Turf provides detailed trail history and cutting patterns

 

Revenue Model

 

DSG derives revenue from four different sources.

 

Systems Sales Revenue, which consists of the sales price paid by those customers who purchase our TAG system hardware lease our TAG system hardware.

 

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

 

Monthly Rental Fees are paid by those customers that rent the TAG system hardware. The amount of a customer’s monthly payment varies based on the type of equipment rented (a TAG, a TAG and INFINITY 7”, or a TAG and INFINITY XL 12”).

 

Programmatic Advertising Revenue is a new source of revenue that we believe has the potential to be strategic for us in the future. We are in the process of implementing and designing software to provide advertising and other media functionality on our INFINITY.

 

We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is reasonably assured. In instances where final acceptance of the product is specified by the customer, revenue is deferred until all acceptance criteria have been met. We accrue for warranty costs, sales returns, and other allowances based on its historical experience.

 

Our revenue recognition policies are discussed in more detail under “Note 2 – Summary of Significant Accounting Policies” in the notes to our Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.

 

Markets

 

Sales and Marketing Plan

 

The market for the TAG System is the worldwide golf cart and Turf equipment fleets. There are 40,000 golf courses around the world with North America being the largest individual market with 20,000. This represents over 3,000,000 vehicles. The golf market has five distinct types of operations. Municipal, Private Country Clubs, Destination Resorts, Public Commercial, Military and University affiliated. VTS has deployed and has case studies developed TAG systems in each of these categories.

 

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Our marketing strategy is focused on building brand awareness, generating quality leads, and providing excellent customer service.

 

North America Sales

 

Since the largest market is North America, the Company employs a direct sales team and sales agents that provide full sales coverage. Our sales agents are experienced golf industry professionals who maintain established relationships with the golf industry and carry multiple golf lines. Our sales objective is to offer our existing and prospective customers a dedicated, knowledgeable, and outstanding customer service team.

 

In addition, our team is dedicated to existing accounts that focus on up-selling and cross-selling additional products to our current customer base, securing renewal agreements, and providing excellent customer service. The current regions are:

 

Western Canada
   
Central 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 plans to expand next into Australia, New Zealand and Latin America.

 

Management Companies

 

Many golf facilities are managed by management companies. The portfolios of these companies vary from a few to hundreds of golf courses. Troon®, the world’s largest player in golf course management, has over 200 courses under management. The management companies provide everything from branding, staffing, management systems, marketing, and procurement. DSG is currently providing products and services to Troon, OB Sports, Kemper Sports, Trump, Marriott Golf, Blue Green, Crown Golf, American Golf, Billy Casper, Club Corp, and Club Link.

 

DSG has been successful in completing installations and developing relationships with several of the key players who control a substantial number of courses. DSG will continue to implement system developments that are driven by the needs of these management companies such as combined reporting, multiple course access through a centralized dashboard. This development will become a competitive advantage for DSG in the management company market.

 

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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.