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.
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.
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.
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.
On
September 17, 2021, The Company incorporated AC Golf Carts, Inc. (“AC Golf Carts”), under the laws of the State of Nevada,
for which it subscribed to all authorized stock, 100 common shares at a price of $0.001 par value per share. AC Golf Carts is a wholly
owned subsidiary of the Company.
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.
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.
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 |
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 |
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 |
PROGRAMMATIC
Advertising Platform
A
unique feature of the INFINITY XL 12” system is the advertising display capability. This can be used by the operator for internal
promotion of services or for generating revenue by selling the ad real estate since the golf demographic is very desirable to advertisers.
The INFINITY XL 12” displays banner, panel, full page, pro tip, and Green view ads. There is also ad real estate on the interactive
feature screens for Food and Beverage ordering and the scorecard. The Infinity XL 12” System can also display animated GIF files
or play video for added impact.
Advertising
displayed in multiple formats including animated GIF and video
DSG
has developed proprietary “Ad Manager” software which is used to place and change the ads on the system(s) from a central
NOC (Network Operations Center) in real time. The Ad Manager can deploy to a single system or multiple systems. This creates a network
of screens that is also very desirable to advertisers as ad content can be deployed locally, regionally, or nationally. The advertising
platform is an important part of the company’s future marketing and sales strategy.
DSG
R3 Advertising Platform
The
DSG R3 program delivers advance ROI (Revenue Optimization Intelligence). Utilizing all streams of advertising delivery, such as automated,
direct, and self-serve. The R3 program has the ability to deliver relevant advertising to golfers the moment they sit in the cart. The
R3 model is more effective than the previous advertising model of ‘One to One’, these are local ads only sold through direct
sales by courses, or 3 rd party advertising sales firms. The new R3 model offers ‘Many to one’ advertising options,
delivering thousands of national, regional, and local advertisers an opportunity to advertise on our screens through our R3 Marketplace.
Previous
‘One to One’ model vs the new R3 model ‘Many to One’
TAG
TURF/ECO TAG
The
TAG Turf and the new ECO TAG were developed to give course operators the same back end management features for their turf equipment and
utility vehicles. Turf equipment is expensive, and a single piece can run over $100,000 and represents a large portion of a golf course
operating budget. The TAG Turf and ECO TAG have comprehensive reporting that the operator can utilize to implement programs that can
increase efficiencies, reduce labor costs, help lower idle times, provide fuel consumption and equipment performance, provide historical
data on cutting patterns, and reduce pollution from emissions by monitoring idle times. Since the golf course needs to be maintained
regardless of volume these cost saving measures directly impact the operator’s bottom line.
Features
and Benefits:
| ●
|
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 |
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.
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.
DSG
has dedicated a team to create specific collateral for this market and has assigned a senior executive to have direct responsibility
to manage these relationships.
Competition
We
compete with a number of established producers and distributors of vehicle fleet management systems. Our competitors include producers
of golf specific applications, such as GPS Industries, LLC., one of the leading suppliers of golf cart fleet management systems, as well
as producers of non-golf specific utility vehicle fleet management systems, such as Toro. Many of our competitors have longer operating
histories, better brand recognition and greater financial resources than we do. In order for us to successfully compete in our industry
we must:
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demonstrate
our products’ competitive advantages; |
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develop
a comprehensive marketing system; and |
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increase
our financial resources. |
However,
there can be no assurance that even if we do these things, we will be able to compete effectively with the other companies in our industry.
We
believe that we will be able to compete effectively in our industry because of the versatility, reliability, and relative affordability
of our products when compared to those of our competitors. We will attempt to build awareness of our competitive advantages among existing
and potential customers through trade shows, sales visits and demonstrations, online marketing, and positive word of mouth advertising.
However,
as we are a newly established company relative to our competitors, we face the same problems as other new companies starting up in an
industry, such as limited access to capital. Our competitors may be substantially larger and better funded than us, and have significantly
longer histories of research, operation and development than us. In addition, they may be able to provide more competitive products than
we can and generally be able to respond more quickly to new or emerging technologies and changes in legislation and regulations relating
to the industry. Additionally, our competitors may devote greater resources to the development, promotion and sale of their products
or services than we do. Increased competition could also result in loss of key personnel, reduced margins or loss of market share, any
of which could harm our business.
Our
primary competitor in the field of golf course fleet management is GPS Industries, a company that was founded in 1996 by our sole officer,
founder and one of our directors, Mr. Bob Silzer. GPS Industries is currently the largest player in the marketplace with an installed
base of approximately 750 golf courses worldwide. GPS Industries was consolidated by various mergers and acquisitions with a diversity
of hardware platforms and application software. Since 2009, when GPS Industries has introduced their latest product offering called the
Visage, in an exclusive partnership with Club Car, their strategy has been to target mostly their existing customers and motivate them
into replacing their existing, older GPS system, with the Visage system.
GPS
Industries is leveraging very heavily their partnership with Club Car, which is one of the three largest golf cart manufacturers in the
world and at times is benefiting from golf operators’ preference for Club Car and their vehicles when they select their management
system.
Market
Mix
Since
the introduction of the DSG product line, we have shown golf course operators that they have now access to a budget-friendly fleet management
tool that works not only on golf carts but also with all other vehicles used on the golf course such as turf maintenance, shuttles, and
other utility vehicles.
Marketing
studies have identified that half of the golf course operators only need a fleet management system and only 15% need a high-end GPS golf
system. This illustrates the strong competitive advantage that VTS TAG Systems has versus GPS Industries since their product can only
address the needs of a relatively small fraction of the marketplace.
Consequently,
GPS Industries’ installed base has steadily declined since most of their new product installations have replaced older product
for existing customers and some customers have opted for a lower budget system and switched over to VTS TAG Systems.
Marketing
Activities
The
Company has a multi-layered approach marketing the TAG suite of products. One of the foundations of this plan is attending industry trade
shows which are well attended by golf operators. The two largest shows are the PGA Merchandise Show and the Golf Industry Show which
are held in Florida at the end of January. The Company also attends a number of regional shows around North America. International events
are attended by our distributors and partners.
The
second layer of marketing is memberships in key organizations such as the National Golf Course Owners Association, Golf Course Superintendents
Association, and Club Managers Association of America. These are very influential in the industry and have marketing channels such as
publications, email blasts, and web-based marketing. The Company also markets directly to course operators through email, surveys direct
mail programs.
Lead
Generation
One
of the primary sources of lead generation is through the Company’s strategic partnerships with E-Z-GO, Yamaha, and Ransomes Jacobson.
These relationships provide the Company with a great deal of market intelligence. The sales forces of the partners work in tandem with
the DSG sales team by passing on the leads, creating joint proposals, and distributing TAG sales material. The Company has also created
co-branded materials for specific value items of interest to operators such as Pace of Play solutions. DSG sale s and marketing staff
attend partner sales events to conduct training and discuss marketing strategies.
The
Company is in the process of testing an internal telemarketing program in several key markets to gauge whether this particular channel
warrants larger scale implementation.
Competitive
Advantages
Pricing
One
of the “heroes” of the TAG System is providing the course operator a range of modular fleet management options that are very
competitively priced. Pricing options range from the TURF, TAG, Infinity 7”, and Infinity XL 12” System, giving the customer
a wide range of pricing options.
Functional
advantages
DSG
has the distinctive advantage of being able to offer a true fleet management system, encompassing all the vehicles on the golf course,
not just the golf carts. Due to the modular nature of the system, customers have now the option to configure their system’s configuration
to match exactly their needs and their budget.
Product
advantages
DSG
products are the robust, reliable, and user-friendly systems in the world. DSG is the only company currently providing systems that are
waterproof with internal batteries to ensure our partners retain the full golf cart manufacturer’s warranty.
Operational
Plan
Our
Operations Department’s main functions are outlined below:
Product
Supply Chain Management
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Product
procurement, lead-time management |
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Inventory
Control |
Customer
Service
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Training |
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Troubleshooting
& Support |
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Hardware
Repairs |
Installations
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Content
& graphics procurement |
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System
configurations |
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Shipping
and Installation |
Infrastructure
Management
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Communication
Servers Management |
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Cellular
Data Carriers |
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Service
and administration tools |
Product
Supply Chain
In
order to maintain high product quality and control, as well as benefiting from cost savings, the Company is currently procuring all main
hardware components offshore. Final assembly is locally performed in order to ensure product quality. Other main components are also
procured directly from manufacturers or from local suppliers that outsource components office in order to keep the price as low as possible.
The
Company is requesting the suppliers to perform a complete set of quality testing and minimum 24 hours’ burn-in before the product
is delivered. The local hardware assembler and components supplier offers a 12-month warranty. The main hardware components offshore
supplier offers a warranty plan of 15 months from the date the product is shipped. With an extended 90 days beyond the current warranty,
such repair service would be paid by the supplier except for component replacement costs, which would be paid by DSG.
Another
important activity related to the management of the product supply chain is working closely with the suppliers and ensuring that we have
alternate sources for the main components and identify well in advance any components that may go “end-of-life” and find
suitable replacements before product shortages may occur.
Inventory
Control
The
Company has implemented strict inventory management procedures that govern the inbound flow of products from suppliers, the outgoing
flow to customers as well as the internal movement of inventory between warehouses (Canada, US and UK). There are also procedures in
place to control the flow of equipment returning from customers for repairs and their replacements.
Installation
The
Company is utilizing a small number of its own field engineers, geographically positioned to be in close proximity of areas with high
concentrations of current and future customers. Occasionally, when new installations exceed the internal capacity, the company employs
a number of external contractors, on a project-by-project basis. Each contractor has been trained extensively to perform product installations
and the Company has created an extensive collection of Installation Manuals for all products and vehicle types.
The
product was designed with ease of installation as one of its features. Additionally, the installation process includes a pre-shipping
configuration process that prepares each device with all the settings and graphics content (if applicable) required for the specific
location it will be deployed. This makes the installation process a lot simpler and less time consuming in the field which reduces costs
(accommodations, food, travel) for internal staff as well as external contractor cost (less billable time).
Another
benefit of the simplified installation procedure is increased scalability in anticipation of increased number of installs in the future
by reducing the skill level and training time requirements for additional contractors.
Customer
Service
The
Company has deployed its Customer Service staff strategically, so it has at least one service representative active during business hours
in North America, Europe and South Africa.
The
Company is handling Customer Service directly in North America and UK, offering telephone and on-line support to end-customers. In other
international markets, the first-line customer service is handled by local distributor’s staff while DSG is supplying training
and more advanced support to the distributors.
For
the management of the customer service activities, the Company is utilizing SalesForce.com CRM system which allows creating, updating,
closing and escalation of service cases, including the issuance of RMA (Return Material Authorization) numbers for defective equipment.
Using SalesForce.com also allows generation of management reports for service issues, customer satisfaction, and equipment failures in
order to quickly identify trends, problem accounts or systemic issues.
In
addition, DSG began offering the DSG Par 72 Service & Support Plan to guarantee service and support to client courses in the golf
business, during fiscal 2016. This program for client courses which guarantees service and support programs within 24 hours of a problem
arising.
Product
Development and Engineering
The
Company employs a team of software engineers in house to develop and maintain the main components of the server software and firmware.
All product development is derived from business needs assessment and customer requests. The Product Manager is reviewing periodically
the list of feature requests with the Sales, establishes priorities and updates the Product Roadmap. The software engineers are also
responsible for developing specialized tools and systems utilized increase efficiency in the operation of the Company. These projects
include functionality such as: automated system monitoring, automatic service alerts, improved remote troubleshooting tools, cellular
data monitoring and reporting. All these tools are critical in future ability to support more customers with less resources, streamline
support, and improve internal efficiency.
All
hardware development (electronics and mechanical) is generally outsourced, however small projects like mounting solutions or cabling
are handled in house.
Vantage
TAG Golf Carts
PACER
Single Rider Golf Cart
In
2021, after rigorous testing and consultation with industry leaders and partners, DSG has introduced the PACER Single Rider Golf Cart.
The PACER furthers Vantage TAG’s mandate to optimize the game for players and operators alike, increasing pace of play, comfort,
accessibility, and performance. The PACER can complete up to four rounds of golf on a single charge, is factory equipped with the TAG
Control Unit, and upgradable to the TAG Infinity Display at any time. DSG’s PACER program allows operators to buy, lease, or install
a PACER fleet on a zero overhead, revenue-sharing basis, making it accessible to the widest range of golf courses, venues, campuses and
communities.
The
Vantage TAG PACER Golf Cart
In
2020, DSG/Vantage Tag was working with manufacturers in China to develop and launch our planned single rider “PACER” golf
carts for a 2021 launch. After testing several prototypes and consulting with industry leaders and partners, we have delayed launch of
the PACER in order to undertake PACER manufacturing in North America, under the close supervision of our designers and marketing partners,
and in proximity to our largest anticipated customer base. We believe this decision will allow us to produce an industry-leading product,
maintain quality control, reduce fulfillment delays and capitalize on manufacturing synergies between our divisions. We anticipate that
we will secure PACER manufacturing capacity within 90 days based on general availability of commercial space and labor. We continue to
proceed with PACER sales development and during this transition.
100E
Golf Cart
Most
recently, Vantage TAG has also introduced the premium 100E Golf Cart, built for serious and casual riders seeking a luxury experience.
Available for sale or lease, the 100E combines real world range, performance, and safety into a premium Low Speed Vehicle that only Vantage
Tag can offer. Our first low speed, street legal vehicle, the 100E achieves a 90 mile range per charge, is Department of Transportation
certified, and comes equipped with a whole package of premium options starting at under $9,998 before discounts and incentives. Available
in a range of colors, the 100E brings style, performance, sustainability and fun, from the golf course to town and everywhere in between.
The
Vantage 100E Golf Cart.
In
2020, DSG/Vantage Tag was working with manufacturers in China to develop and launch our planned single rider “PACER” golf
carts for a 2021 launch. After testing several prototypes and consulting with industry leaders and partners, we have delayed launch of
the PACER in order to undertake PACER manufacturing in North America, under the close supervision of our designers and marketing partners,
and in proximity to our largest anticipated customer base. We believe this decision will allow us to produce an industry-leading product,
maintain quality control, reduce fulfillment delays and capitalize on manufacturing synergies between our divisions. We anticipate that
we will secure PACER manufacturing capacity within 90 days based on general availability of commercial space and labor. We continue to
proceed with PACER sales development and during this transition.
IMPERIUM
MOTOR COMPANY®—MAKING GREEN TRANSPORTATION AVAILABLE TO EVERYONE
In
2019, DSG Global founded Imperium Motor Company with a mission to bring the worlds most effective and cost-efficient electric vehicles
to North America and beyond. Our range of commuter, family, and commercial vehicles offer a lower cost alternative to competitive offerings,
with an emphasis on great design, performance, and functionality. Through our exclusive North American manufacturing partnership with
Zhejiang Jonway Group Co., Ltd. (“Jonway Group”), and Skywell New Energy Automobile Group (“Skywell”), two of
the world’s most prolific manufacturers of electric vehicles and components, Imperium now offers one of the largest selections
of electric vehicles in North America, including ebikes and scooters, e-rickshaws, low speed cars, trucks, vans and scooters, high speed
SUVs and pickups, as well as buses, cargo trucks, and sanitation vehicles.
On
October 2, 2019, we entered into an exclusive cooperation agreement dated September 17, 2019 with Zhejiang Jonway Group Co., Ltd. (“Jonway
Group”), a leading manufacturer of electric vehicles in China. Pursuant to the Agreement, we have received the exclusive right
to purchase, homologate, and distribute Jonway Group’s range of electric low speed vehicles in the Americas (including the United
States, Canada, Mexico and the Caribbean) for a term of 10 years. The distribution rights are subject to the inspection and approval
of eligible vehicles by the Company.
Pursuant
to the Agreement, the Company was to place an initial order of 17 sample vehicles by January 30, 2020. The sample vehicles are for homologation
purposes and subject to inspection and approval by the Company. The initial order was delayed by mutual agreement due to manufacturing
and shipping delays resulting from COVID-19. However, as of the date of this Annual Report, the initial order of 17 vehicles has been
placed and fulfilled. We have since approved and are currently homologating the vehicles for conformance with North America road &
safety standards. The written agreement between Jonway Group and the Company does not specify what percentage of each vehicle purchase
price is payable upon order placement. Currently, the parties have agreed to a 30% payment upon order placement with the balance payable
upon shipping.
On
February 4, 2020, we announced the establishment of our automotive subsidiary, Imperium Motor Company®, and a planned Electric Vehicle
(EV) Experience Centre in California. Imperium Motor Company was incorporated in the State of Nevada on September 10, 2020.
On
August 21, 2020, we announced the opening of our Electric Vehicle Experience and Training Center located in Fairfield, California, where
we plan to offer a range of electric vehicles at the EV Vehicle Experience Centre and to provide dealer support, training, and education.
On
October 5, 2020, through Imperium Motor Corp., we entered into a Memorandum of Understanding dated September 10, 2020 with Skywell Shenzen
Vehicles Co. Ltd. aka Skywell New Energy Automobile Group Co., Ltd. (“Skywell”), a leading manufacturer of electric vehicles
in China. Pursuant to the Memorandum of Understanding, Imperium has received the exclusive right, subject to placement of an initial
vehicle order and corresponding payment to Skywell, to purchase, homologate, and distribute Skywell’s range of ET5 electric sport
utility vehicles in North America and the Caribbean. The Memorandum of Understanding, while stated to be non-binding, provides for the
conclusion of a definitive agreement by the parties following the placement of an initial vehicle order by the Company. The definitive
agreement was to have a minimum term of 3 years, and will renew automatically for successive 3-year terms, subject to the right of each
party to terminate the agreement by giving 30 days notice prior to renewal.
Effective
February 9, 2021, we entered into a definitive OEM Cooperation Agreement with Skywell dated February 5, 2021, which agreement modifies
and replaces the Memorandum of Understanding. Pursuant to the OEM Cooperation Agreement, Skywell has granted to the Company the exclusive
right to distribute Skywell’s electric passenger cars, trucks (including but not limited to the ET5 sport utility vehicle), buses
and spare parts in the United States and Canada for a term of 5 years. In order to maintain the distributions rights accorded by the
agreement, the Company must purchase and deliver 1,000 units within the first year of the term, 2,000 units in the second year, 3,000
units in the third year, 4,000 units in the fourth year, and 5,000 units in the fifth and final year of the term. Skywell may terminate
the agreement in its distribution with 30 days’ notice if the Company fails to satisfy sales quotas. Product price, terms of payment
and logistical matters are subject to the ongoing approval and agreement of the parties from time to time.
Effective
February 15, 2021, we entered into a Cooperation Agreement with Rumble Motors, a manufacturer and distributor of electric bikes and other
vehicles. Pursuant to the Cooperation Agreement, Rumble has granted to the Company the exclusive right to distribute the Rumble Rover,
Rumble Air, and other electric bikes in India, Pakistan, Bangladesh, the United States, Canada, Mexico and the Caribbean for a term of
5 years. The Rumble vehicles remain subject to the Company’s testing, approval, and homologation in the respective territories.
Imperium
EV Passenger Vehicles
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IMPERIUM ET5 by Skywell |
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SEATING
for five passengers |
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MOTOR
150 kW max power |
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SPEED
up to 150 kp/h |
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RANGE
up to 404 km or 520 km NEDC estimate |
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BATTERY
55.33 or 71.98 kWh Li-ion |
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EQUIPPED
with Automatic Transmission, Air Conditioning, Heater, Power Windows, Power Door Locks, Rear Camera, Push Button Start, Alloy
Wheels, Am-Fm USB/SD Stereo and more |
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IMPERIUM
Terra-e by ZXAUTO in development |
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SEATING
for five passengers |
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MOTOR
135 kW max power |
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SPEED
up to 145 km/h |
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RANGE
up to 322 to 435 km estimate |
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BATTERY
53.84 or 75.22 kWh Li-ion |
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EQUIPPED
with Automatic Transmission, Air Conditioning, Heater, Power Windows, Power Door Locks, Rear Camera, Push Button Start, Alloy
Wheels, Am-Fm USB/SD Stereo and more |
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IMPERIUM
W Coupe |
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SEATING
for four and Unibody Construction |
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MOTOR
4.5 kW or optional 7.5 kW Brushless DC Motor available |
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SPEED
of 40 km/h for LSV model or 75 km/h for mid speed model |
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RANGE
of up to 120km on Lead Acid Battery Pack or up to 150km with optional Lithium Battery Pack |
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BATTERY
72-volt 720 Ah Battery Power with Lead Acid or Optional Lithium Battery Pack available |
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EQUIPPED
with Automatic Transmission, Air Conditioning, Heater, Power Windows, Power Door Locks, Rear Camera, Push Button Start, Alloy
Wheels, Am-Fm USB/SD Stereo and more |
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IMPERIUM
Maxi “SUV” Style |
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SEATING
for four with Steel Safety Cell Construction |
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MOTOR
4.5 kW or optional 7.5 kW Brushless DC Motor available |
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SPEED
up to 40 km/h for LSV model or 60 km/h for mid speed model |
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RANGE
up to 120 km on Lead Acid Battery Pack or up to 150 km with optional Lithium Battery Pack |
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BATTERY
72-volt 720 Ah with Lead Acid or Optional Lithium Battery Pack available |
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EQUIPPED
with Automatic Transmission, Alloy Wheels, Air Conditioning, Heater, Power Windows, Power Door Locks, Rear Camera, Push Button
Start, Am-Fm USB/SD Stereo, Rear Mounted Spare Tire and more |
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IMPERIUM
Maxi Sport Sedan |
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SEATING
for four with Steel Safety Cell Construction |
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MOTOR
4.5 kW or optional 7.5 kW Brushless DC Motor available |
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SPEED
up to 40 km/h for LSV model or 60 km/h for mid speed model |
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RANGE
up to 120 km on Lead Acid Battery Pack or up to 150 km with optional Lithium Battery Pack |
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BATTERY
72-volt 720 Ah with Lead Acid or Optional Lithium Battery Pack available |
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EQUIPPED
with Automatic Transmission, Alloy Wheels, Air Conditioning, Heater, Power Windows, Power Door Locks, Rear Camera, Push Button
Start, Am-Fm USB/SD Stereo, Rear Mounted Spare Tire and more |
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IMPERIUM
Euro Coupe |
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SEATING
for four with Steel Safety Cell Construction |
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MOTOR
4.5 kW to 7.5 kW Brushless DC |
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SPEED
of up to 45 km/h or up to 55 km/h with optional Performance Package |
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RANGE
up to 120 km on a single charge |
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BATTERY
60-volt 600 Ah Maintenance Free Lead Acid or Lithium Battery Pack with Optional Performance Package |
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EQUIPPED
with Automatic Transmission, Alloy Wheels, Air Conditioning, Heater, Power Windows, Power Door Locks, Rear Camera, Push Button
Start, Rear Hatch Am-Fm USB/SD Stereo and more |
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IMPERIUM
Urbee 4S |
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SEATING
for four with Steel Safety Cell Construction |
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MOTOR
4.0 kW Brushless DC |
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SPEED
up to 40 km/h |
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RANGE
up to 120 km on a single charge |
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BATTERY
60-volt 600 Ah Maintenance Free Lead Acid |
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EQUIPPED
with Alloy Wheels, Sunroof, Rear Locking Trunk Heater, Power Windows, Optional Air Conditioning, Alloy Wheels, Am-Fm USB/SD Stereo
and more |
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IMPERIUM
Urbee 2S |
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SEATING
for two with Steel Safety Cell Construction |
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MOTOR
2.8 kW or optional 4.0 kW Brushless DC |
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SPEED
up to 55 km/h |
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RANGE
up to 140 km on a single charge |
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BATTERY
60-volt 600 Ah Maintenance Free Lead Acid |
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EQUIPPED
with Sunroof, Lockable Rear Trunk, Heater, Power Windows, Optional Air Conditioning, Alloy Wheels, Am-Fm USB/SD Stereo and more |
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IMPERIUM
Urbee Cargo Van |
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SEATING
for two with Steel Safety Cell Construction |
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MOTOR
4.5 kW Brushless DC Motor Standard |
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SPEED
up to 45 km/h |
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RANGE
up to 120 km on a single charge |
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BATTERY
60-volt 600 Ah Maintenance Free Lead Acid |
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EQUIPPED
with Large All Steel Locking Cargo Box with Dual Doors, Heater, Power Windows, Optional Air Conditioning, Alloy Wheels, Am-Fm
USB/SD Stereo and more |
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IMPERIUM
Five Star Van |
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SEATING
for two or five Passengers for Cargo Van |
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MOTOR
up to 18 kW and 320 volt rated |
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SPEED
up to 55 km/h for LSV and 100 km/h for Mid Speed Model |
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RANGE
up to 150 km for Lead Acid Battery Pack or up to 300 km with optional Lithium Battery Pack |
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BATTERY
Quick Change Swappable Battery Packs with level one, two and optional level 3 DC Fast Charging |
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EQUIPPED
with Dual Air Conditioning, Heater, Power Windows, Power Door Locks, Am-Fm USB/SD Stereo and more |
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IMPERIUM
T-Truck |
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READY
for the road or use inside a warehouse with no tailpipe emissions |
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CARGO
BED with fold down tailgate |
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PERSONAL
transportation or commercial ready |
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MOTOR
2.0 kW Permanent Magnet DC |
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ADJUSTABLE
SPEED up to 55 kp/h |
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BATTERY
Maintenance Free Lead Acid or optional Lithium |
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EQUIPPED
with Alloy Wheels and Radial Tires, Full Lighting, Turn Signals, Windshield Wiper, Motorcycle Style Front Controls and more |
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IMPERIUM
T-Van |
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READY
for the road or use inside a warehouse with no tailpipe emissions |
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STEEL
VAN BOX with HD locking dual doors |
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PERSONAL
transportation or commercial use |
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MOTOR
2.0 kW Permanent Magnet DC |
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ADJUSTABLE
SPEED up to 55 kp/h |
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BATTERY
Maintenance Free Lead Acid or optional Lithium |
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EQUIPPED
with Alloy Wheels and Radial Tires, Full Lighting, Turn Signals, Windshield Wiper, Motorcycle Style Front Controls and more |
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IMPERIUM
T01 |
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SEATING
for three passengers or Taxi open style model |
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MOTOR
1.0 kW Permanent Magnet DC with optional 1.5 kW Motor Available |
| |
|
● |
SPEED
up to 40 km/h |
| |
|
● |
RANGE
up to 80 km |
| |
|
● |
BATTERY
60V 225 Ah Maintenance Free Lead Acid or Optional Lithium Ion Battery. |
| |
|
● |
EQUIPPED
with Auto Trans, Stereo, Heater, Alloy Wheels, Full or Half Doors, DOT Lighting, Turn Signals and more |
 |
|
IMPERIUM
e-Rickshaw Extended Deluxe |
| |
|
|
|
| |
|
● |
SEATING
for five |
| |
|
● |
MOTOR
1.5kW or optional 2.0kW Permanent Magnet Motor |
| |
|
● |
SPEED
32 km/h |
| |
|
● |
RANGE
60 km or 80 km with optional Battery |
| |
|
● |
BATTERY
45Ah or 60Ah Optional Colloid Battery Maintenance Free |
| |
|
● |
E-TAXI
style with side seating, roof rack, stereo, alloy wheels, safety steel frame and more |
| |
|
|
|
 |
|
Imp-Moto
Product Lineup |
| |
|
|
|
| |
|
● |
Full
Lineup of Electric Scooters, ATVs, UTVs and Motorbikes |
| |
|
● |
Lithium
Battery power available on most models |
| |
|
● |
Off-Road
or on road models |
| |
|
● |
Low
Maintenance EV Units |
| |
|
● |
Units
for most every purpose including specialized delivery models and ride share Scooters with quick change battery packs |
Imperium’s
Production Partners
Zhejiang
Jonway Automobile Co.
Imperium
has exclusive distribution rights in the United States, Canada, Mexico and the Caribbean for Jonway built EVs.
Zhejiang
Jonway Automobile Co., Ltd (“Jonway”) began manufacturing in May 2003. The Taizhou city, Zhejiang province manufacturing
plant has an area of 57.3 hectares with more than 800 employees. It has invested more than 600 million RMB in producing the three and
five-door SUVs, with a capacity to produce up to 30,000 units per year. The manufacturing operations include pressing, welding, painting
and assembling lines. It has also gained the TS16949:2009, GCC, SASO, SONCAP and CCC certification. Jonway offers a network of more than
500 auto dealerships in China alone and has started a distribution network in Italy.
As
a national first-class production enterprise, Jonway has passed the ISO 9001 quality management system certification, the product has
passed the European certification and the American DOT, EPA certification, and has been exported to more than 80 countries in the world.
Jonway has announced its third assembly plant in the city of Xuzhou, China.
Skywell
New Energy Automobile Group Co. Ltd.
Sky-well
New Energy Automobile Group Co. Ltd. was founded in 2011. Primarily engaged in the manufacturing and sales of large, medium and light
buses, passenger cars and related components, it has gradually become a leading enterprise of China’s new energy automobile industry.
By the end of 2016, the total assets of the company were 7.838 billion Yuan, with the net assets of 1.429 billion Yuan.
Skywell
owns Nanjing Jinlong Bus Manufacturing Co., Ltd., Wuhan Sky-well New Energy Automobile Co., Ltd., Shenzhen Sky-well Automobile Co., Ltd,
Nanjing Sky Source World Power Technology Co., Ltd and Qingdao Sky-well New Energy Automobile Group Co. Ltd. Its products include the
3.6-18 m series of electric passenger cars and passenger vehicles, which are widely sold in many countries and regions in Southeast Asia
and widely used in public transport, tourism, commuting, leasing and other markets. Skywell is also one of the first companies to enter
the clean energy bus industry. Known for its emphasis on technology research and development, its skilled workforce, its innovative designs
and high-quality products, it has achieved excellent results. Since 2014, Skywell has ranked as the leading seller of new energy passenger
cars in the China.
Skywell
has granted to the Company the exclusive right to distribute Skywell’s electric passenger cars, trucks (including but not limited
to the ET5 sport utility vehicle), buses and spare parts in the United States and Canada for a term of 5 years.
Imperium
Motor Company Experience Center
Our
Imperium Electric Vehicle Northern California Experience Center is located in Fairfield, Solano County, California. Solano County is
situated between two of the largest Electric Vehicle markets in California, the San Francisco Bay Area and Greater Sacramento with a
combined population of over 10 million people. California is historically the top EV sales volume state with 50% of sales within the
United States. The building sits right next to the crossroads of Freeway 80 and Freeway 680 in one of the best economic areas in the
nation.
The
Experience Center will feature the various models of new Electric Cars, Trucks, Vans, UTVs, ATVs and Scooters arriving soon from the
manufacturer. The new building will not only display our new selection of Electric Vehicles but will also host the center for Dealer
training and Parts and Service support.
Imperium
Distribution Network
We
are currently marketing and offering direct sales of our electric vehicles at our Imperium Motor Company Experience Center. However,
it is our objective to establish a network of experienced, authorized automotive dealers across the United States and throughout our
territory. We are currently recruiting and vetting applicant dealerships and expect to announce our inaugural group of authorized dealers
in 2021.
Electric
Vehicle Market Overview
United
States
The
number of electric vehicles (EVs) on U.S. roads is projected to reach 18.7 million in 2030, up from 1 million at the end of 2018. This
is about 7% of the 259 million vehicles (cars and light trucks) expected to be on U.S. roads in 2030. EV sales in the United States were
up 79% in 2018 while global EV sales grew 64% in the same year.
Canada
Sales
for 2018 were over 150% higher than 2017 and saw more EVs sold across the country in 2018 than in the previous three years combined.
Nearly 3% of all new vehicles are electric, a higher rate than in the United States.
Mexico
EV
sales in Latin America increased by 90% in 2018 due to growing demand in Mexico, Colombia and Costa Rica. While the Latin American EV
market is far smaller than East Asia, Europe and North America, accounting for less than 1% of global EV sales in 2018, it is starting
to grow thanks to a handful of incentives and targets. Mexico and Costa Rica, for example, exempt EVs from numerous taxes while Colombia
has an ambitious target of 600,000 EVs on its roads by 2030.
Companies
are also increasing their activity. BYD Co. now sells electric buses across the region and Tesla Inc. recently launched its best-selling
Model 3 in Mexico.
Caribbean
While
most Caribbean islands are rapidly modernizing their electric grids, the modernization of transportation systems has lagged. Is change
in the air? In November, the government of Bermuda signed a memorandum of understanding with the Rocky Mountain Institute (RMI), embracing
a plan to fully transition the island’s transportation sector to EVs.
The
case for EVs is strong in Bermuda, as it is across the Caribbean. With predominantly flat terrain and driving distances that are short
enough to eliminate “range anxiety,” EVs make perfect sense.
Caribbean
nations are uniquely positioned to reap major benefits from EVs with the abundance of sunshine that could provide renewable solar power
on a significant scale. EV adoption would also reduce reliance on fuel imports, which creates extreme economic vulnerability linked to
oil price fluctuations as well as contribute to disaster resilience through energy storage—EV batteries can serve as backup power
sources during hurricanes.
Competition
in the EV Market
The
EV market is highly competitive and evolving rapidly, with new manufacturers and distributors consistently entering the industry to satisfy
actual and expected growth in the demand for competitively priced vehicles. As a result, we expect that we will experience significant
competition from new and established manufacturers, marketers and distributors. These include niche manufacturers of specialty electric
vehicles, and large established manufacturers of automobiles. These, including manufacturers of EVs such as the Tesla Model S, the Chevrolet
Volt and the Nissan Leaf.
Most
of our current and potential competitors have significantly greater financial, technical, manufacturing, marketing and other resources
than we do and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and support
of their products. Virtually all of our competitors have more extensive customer bases and broader customer and industry relationships
than we do. In addition, almost all of these companies have longer operating histories and greater name recognition than we do. Our competitors
may be in a stronger position to respond quickly to new technologies and may be able to design, develop, market and sell their products
more effectively.
Other
Recent Developments
On
November 1, 2020, the Company entered into an Advisory Services and Consulting Agreement with a third party for a term of twelve (12)
months, and which may be terminated by either party after six (6) months, whereby the Company agrees to pay a non-refundable cash consulting
fee of $3,500 per month as well as consideration of a number of restricted common shares of the Company’s to be mutually determined
by the parties upon the Company’s listing on a U.S. national exchange.
On
December 23, 2020, the Company entered into a two-year redeemable stock purchase agreement (the “Series F SPA”) with a third
party for the purchase of shares of the Company’s Series F Preferred stock at a price of $1,000 per share. In addition, the Company
agreed to issued 3,000,000 Warrants, exercisable into one common share per warrant at an exercise price of $0.50, for a term of 5 years
and are not eligible for cashless exercise. On the date of the SPA, the third party purchased 1,500 Series F Preferred shares in exchange
for $1,500,000. Further, under the terms of the SPA, the third party agreed to purchase an additional 1,500 Series F Preferred shares
upon the filing by the Company of a registration statement with the Securities and Exchange Commission (the “Registration Statement”)
registering the common shares underlying the Series F Preferred shares and underlying the warrants. At the Company’s request, the
third party agrees to purchase an additional 1,000 Series F Preferred shares every thirty days (an “Additional Closing”)
as long as the Registration Statement remains effective and the Company’s average daily trading volume for the third trading days
prior to an Additional Closing is at least $500,000 per day.
On
January 29, 2021, the Company issued a preliminary prospectus (the “Registration Statement”) to offer and sell up to 10,000,000
common shares, which will consist of up to 3,000,000 common shares issuable upon exercise of outstanding warrants, and up to 7,000,000
common shares upon conversion of certain Series F Preferred shares of the Company.
On
April 21, 2021, the Company filed with the Securities and Exchange Commission a Registration Statement on Form S-1 to register a firm
commitment underwritten public offering of Units consisting of common shares and common share purchase warrants in the aggregate amount
of $15,000,000 (the “Offering”). The offering price of the Units will be determined between the underwriter and the Company
at the time of pricing, considering the Company’s historical performance and capital structure, prevailing market conditions, and
overall assessment of the Company’s business, and may be at a discount to the then current market price.
In
connection with the Offering, the Company has applied to list its common stock and warrants on the Nasdaq Capital Market under the symbols
“DSGT” and “DSGTW”. No assurance can be given that the Company’s application will be approved or that the
trading prices of its common stock on the OTCQB market will be indicative of the prices of its common stock if its common stock were
traded on the Nasdaq Capital Market. If the listing application is not approved by the Nasdaq Stock Market, the Company will not be able
to consummate the Offering and will terminate the Offering.
On
September 13, 2021, the Company entered into a securities purchase agreement with a third 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. 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.
On
February 17, 2022, the Company entered into a Waiver of Conditions to the Share Purchase Agreement (the “SPA”) dated December
13, 2021. The Company received two payments in the amount of $250,000 on each of February 28, 2022 and March 31, 2022. The Company agrees
to repay these amounts, on an ongoing basis, with an amount equaling 20% of any gross proceeds collected by the Company until such time
that 250 shares of the Series F Preferred Stock issued pursuant to this agreement and the SPA are redeemed in full. Under the original
terms of the SPA, the redemption required a 15% premium, and due to the redemption being mandatory, the above transactions were treated
as loans and not as mezzanine equity. A Redemption Premium of $75,000 was recognized, and recorded as part of the loan.
During
the period ended June 30, 2022, the Company made required payments in the amount of $20,411, which was applied against the loan payable.
Material
Contracts
On
March 2, 2020, we entered into an advisory services agreement with a third party. Under the terms of this five-year agreement, the third
party has agreed to provide the Company with strategic brand and business positioning, strategic marketing, concept development and ongoing
strategic consulting services. In consideration of the services to be rendered by the third party, the Company has agreed to (1) make
a cash payment in the amount of $350,000 payable in several tranches following the Company’s completion of future financings of
the Company, and monthly payments of $10,000 following the first twelve months of the engagement, and (2) issue a five-year warrant to
purchase 2,829,859 at an exercise price of $0.25 per share, upon the execution of the agreement (the “First Warrant”), and
a five-year warrant to purchase such number the Company’s common shares that is equal to 10% of the Company’s common shares
calculated on a fully diluted basis as of the closing date of the future financing, at an exercise price per share equal to the 80% of
the price of the Company’s securities in such future financing less the number of shares represented by the First Warrant.
The warrants contains, among other provisions customary for the instruments of this nature, provisions pertaining to cashless exercise,
and two-year piggy-back registration rights which entitle the holders of the warrants to register the common shares underlying their
warrants alongside other registrable securities of the Company, subject to underwriter cutbacks in case of underwritten public offering(s)
of the Company’s securities, if any.
On
July 10, 2020, we signed a two-year operating lease agreement for retail, showroom and warehouse space in Fairfield, CA expiring on August
31, 2022 and with the first right of refusal for a 3–5-year lease extension, if written notice is provided prior to the expiration
of the current term. The annual rent for the premises starts at $93,000. The lease includes a rent-free period with rent payments commencing
on October 1, 2020.
On
July 14, 2020, we signed a three-year operating lease agreement expiring on July 31, 2023 for office space in Surrey, BC with two rights
to renew, each for an additional two-year term, if written notice is provided no later than 9 months prior to the expiration of the current
term. The annual base rent for the premises starts at CAD$51,552, with additional rent of CAD$1,551 per month for operating expenses.
The lease includes a rent-free period with rent payments commencing on November 1, 2020.
On
October 21, 2020, we entered into an Advisory Services and Data Delivery Agreement with a third party for a term of nine (9) months,
and which may be renewed for an additional nine (9) months upon mutual written agreement, whereby the Company agrees to issue 500,000
common shares for advisory services valued at $100,000 and 1,500,000 common shares valued at $300,000 for the purchase of sector-specific
data records for marketing purposes.
On
October 26, 2020, we entered into an amended Investor Relations Agreement with a third party for a term of twelve (months), expiring
on October 3, 2021, whereby the Company agrees to issue 100 Series B preferred shares convertible into 1,000,000 common shares and 1,000,000
warrants exercisable into common shares at an exercise price of $0.25 for a period of three years.
On
November 1, 2020, we entered into an Advisory Services and Consulting Agreement with a third party for a term of twelve (12) months,
and which may be terminated by either party after six (6) months, whereby the Company agrees to pay a non-refundable cash consulting
fee of $3,500 per month as well as consideration of an amount of restricted shares of the Company’s common stock to be determined
as mutually agreed upon by the parties upon the Company’s listing on a U.S. national exchange. (Encore)
On
December 23, 2020, we entered into a two-year redeemable stock purchase agreement (the “Series F SPA”) with a third party
for the purchase of shares of the Company’s Series F Preferred stock (“Series F”) at a price of $1,000 per share. In
addition, the Company agreed to issued 3,000,000 Warrants, exercisable into one common share per Warrant at an exercise price of $0.50,
for a term of 5 years and are not eligible for cashless exercise. On the date of the SPA, the third party purchased 1,500 shares of Series
F in exchange for $1,500,000. Further, under the terms of the SPA, the third party agreed to purchase an additional 1,500 shares of Series
F upon the filing by the Company of a registration statement with the Securities and Exchange Commission (the “Registration Statement”)
registering the shares underlying the Series F and underlying the Warrants. At the Company’s request, the third party agrees to
purchase an additional 1,000 shares of Series F every thirty days (an “Additional Closing”) as long as the Registration Statement
remains effective and the Company’s average daily trading volume for the third trading days prior to an Additional Closing is at
least $500,000 per day.
Description
of Property
Our
principal executive office is located at 207-15272 Croydon Drive, Surrey, BC, V3Z 0Z5 Canada, where we lease approximately 2,024 square
feet of office space. On July 14, 2020, the Company entered into a three-year operating lease agreement expiring on July 31, 2023 for
office space in Surrey, BC with two rights to renew, each for an additional two-year term, if written notice is provided no later than
9 months prior to the expiration of the current term. The annual base rent for the premises starts at CAD$51,552, with additional rent
of CAD$1,551 per month for operating expenses. The lease includes a rent-free period with rent payments commencing on November 1, 2020.
Imperium
Motors has an office located at 4670 Central Way, Unit D, Fairfield, California 94534, which is also the location of our Imperium Experience
Center. On July 10, 2020, the Company entered into a two-year operating lease agreement for retail, showroom and warehouse space in Fairfield,
CA expiring on August 31, 2022 and with the first right of refusal for a 3–5-year lease extension, if written notice is provided
prior to the expiration of the current term. The annual rent for the premises starts at $93,000. The lease includes a rent-free period
with rent payments commencing on October 1, 2020.
Intellectual
Property
General
Our
success will depend in part on our ability to protect our products and product candidates by obtaining and maintaining a strong proprietary
position both in the United States and in other countries. To develop and maintain our proprietary position, we will rely on patent protection,
trade secrets, know-how, continuing technological innovations and licensing opportunities. In that regard, we retain and rely on the
advice of legal counsel specialized in the field of intellectual property.
Patents
DSG
owns two U.S. patents:
| ● |
US
Patent No. 8,836,490 for a “Vehicle Management” was issued September 16, 2014 and expires June 29, 2031. |
| |
|
| ● |
US
Patent No. 9,280,902 for a “Facilities Management” was issued March 8, 2016 and expires January 24, 2032. |
Domain
Names
We
have registered and own the domain name of our websites www.vantage-tag.com, www.dsgtglobal.com, and www.imperiummotorcompany.com.
Copyright
We
own the common law copyright in the contents of our websites (www.vantage-tag.com, www.dsgtglobal.com, www.imperiummotorcompany.com)
and our various promotional materials.
Trademarks
We
own the common-law trademark rights in our corporate names, product names, and associated logos, including “DSG TAG”, “TAG
Golf”, “ECO TAG”, “TAG Text”, “TAG Touch”, “TAG”, “TAG Commercial”,
“TAG Military”, “Imperium”, and “Imperium Motors”. We have not applied to register any trademarks
with the U.S. Patent and Trademark Office or with any other national or multi-national trademark authority. We assert common law trademark
rights in our corporate name and those of our subsidiaries.
Employees
As
of the date of this quarterly report we have thirty full-time employees in general and administrative, operations, engineering, research
and development, business development, sales and marketing, and finance. We also engage independent contractors and consultants from
time to time on an as-needed basis to supplement our core staff.
Government
Regulation
As
a vehicle importer and distributor, we are required to ensure that all vehicles meet applicable safety and environmental standards. In
the United States, our vehicles must meet the applicable provisions of the U.S. Code of Federal Regulations (“CFR”) Title
49 — Transportation. This includes providing Manufacture Identification information (49 CFR Part 566), VIN-deciphering
information (49 CFR Part 565, and certifying that our vehicles meet or exceed the applicable sections of the Federal Motor Vehicle Safety
Standards (40 CFR Part 571) and Environmental Protection Agency noise emission standards (40 CFR 205).
In
Canada, issuance of the National Safety Mark (the “NSM”) by the Minister of Transport for Canada will be required to distribute
vehicles in Canada for the Canadian market. Receipt of the NSM is contingent on us demonstrating that our vehicles are designed and manufactured
to meet or exceed the applicable sections of the Canadian Motor Vehicle Safety Act (C.R.C. Chapter 1038) and that appropriate records
are maintained.
Automotive
dealers, including us and the members of our dealership network, are also regulated by, among other agencies, the Federal Trade Commission
(FTC) and the Federal Reserve Board. Congress even enhanced the FTC’s rulemaking authority over motor vehicle dealers as part of
the Wall Street Reform law. The major federal statutes and regulations that currently cover automobile dealers include the Truth in Lending
Act, Federal Consumer Leasing Act, Equal Credit Opportunity Act, Fair Credit Reporting Act, Gramm-Leach-Blilely Act, Federal Trade Commission
Act, etc.
In
addition to federal laws, motor vehicle dealers are subject to rigorous state laws and regulations, licensed in every state, and bonded
in virtually in every state. Dealers are subject to state consumer protection statutes, enforced by 50 state consumer protection agencies
and state attorneys general.
In
addition to regulations applicable to businesses in general, we may also be subject to direct regulation by governmental agencies, including
the FCC and Department of Defense.
Components
of Our Results of Operations
Revenue
We
derive revenue from four different sources, as follows:
| |
●
|
Systems
sales revenue, which consists of the sales price paid by those customers who purchase or lease our TAG system hardware. |
| |
|
|
| |
● |
Monthly
service fees are paid by all customers for the wireless data fee charges required to operate the GPS tracking on the TAG
systems. |
| |
|
|
| |
●
|
Monthly
rental fees are paid by those customers that rent the TAG system hardware. The amount of a customer’s monthly payment
varies based on the type of equipment rented (a TAG, a TAG and TEXT, or a TAG and INFINITY). |
| |
|
|
| |
●
|
Programmatic
advertising revenue is a new source of revenue that we believe has the potential to be strategic for us in the future. We
are in the process of implementing and designing software to provide advertising and other media functionality on our INFINITY units. |
| |
|
|
| |
●
|
Electronic
fleet sales revenue is a new source of revenue which consists primarily of wholesale distribution sales of our electronic
fleet including vehicles, e-bikes and e-scooters. |
We
recognize revenue when it satisfies a performance obligation by transferring control over a product to a customer. Revenue is measured
based on the consideration the Company expects to receive in exchange for those products. In instances where final acceptance of the
product is specified by the customer, revenue is deferred until all acceptance criteria have been met. We accrue for warranty costs,
sales returns, and other allowances based on its historical experience.
Our
revenue recognition policies are discussed in more detail under “Note 3 – Summary of Significant Accounting Policies”
in the notes to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
Cost
of Revenue
Our
cost of revenue consists primarily of hardware purchases, wireless data fees, mapping, installation costs, freight expenses and inventory
adjustments.
| |
●
|
Hardware
purchases. Our equipment purchases consist primarily of TAG system control units, TEXT display, and INFINITY displays. The
TAG system control unit is sold as a stand-alone unit or in conjunction with our TEXT alphanumeric display or INFINITY high definition
“touch activated” display. Hardware purchases also include costs of components used during installations, such as cables,
mounting solutions, and other miscellaneous equipment. |
| |
|
|
| |
●
|
Wireless
data fees. Our wireless data fees consist primarily of the data fees charged by outside providers of GPS tracking used in
all of our TAG system control units. |
| |
|
|
| |
●
|
Mapping.
Our mapping costs consist of aerial mapping, course map, geofencing, and 3D flyovers for golf courses. This cost is incurred
at the time of hardware installation. |
| |
|
|
| |
●
|
Installation.
Our installation costs consist primarily of costs incurred by our employed service technicians for the cost of travel, meals,
and miscellaneous components required during installations. In addition, these costs also include fees paid to external contractors
for installations on a project-by-project basis. |
| |
|
|
| |
●
|
Electronic
fleet purchases. Our electronic fleet purchases consists of the landed cost of electronic vehicles, e-bikes and e-scooters
which includes the cost of the unit, and any relevant freight and import fees. |
| |
|
|
| |
●
|
Freight
expenses and Inventory adjustments. Our freight expenses consist primarily of costs to ship hardware to courses for installations.
Our inventory adjustments include inventory write offs, write downs, and other adjustments to the cost of inventory. |
| |
|
|
| |
●
|
Operating
expenses & other income (expenses) We classify our operating expenses and other income (expenses) into six categories:
compensation, general and administrative, warranty, foreign currency exchange, and finance costs. Our operating expenses consist
primarily of sales and marketing, salaries and wages, consulting fees, professional fees, trade shows, software development, and
allocated costs. Allocated costs include charges for facilities, office expenses, telephones and other miscellaneous expenses. Our
other income (expenses) primarily consists of financing costs and foreign exchange gains or losses. |
| |
●
|
Compensation
expense. Our compensation expenses consist primarily of personnel costs, such as employee salaries, payroll expenses, and
employee benefits. This includes salaries for management, administration, engineering, sales and marketing, and service support technicians.
Salaries and wages directly related to projects or research and development are expensed as incurred to their operating expense category. |
| |
|
|
| |
●
|
General
and administrative. Our general and administrative expenses consist primarily of sales and marketing, commissions, travel,
trade shows, consultant fees, insurance, and compliance and other administrative functions, as well as accounting and legal professional
services fees, allocated costs and other corporate expenses. Sales and marketing includes brand marketing, marketing materials, and
media management. |
| |
|
|
| |
●
|
Warranty
expense (recovery). Our warranty expenses consist primarily of associated material product costs, labor costs for technical
support staff, and other associated overhead. Warranty costs are expensed as they are incurred. |
| |
●
|
Bad
debt. Our bad debt expense consists primarily of amounts written down for doubtful accounts recorded on trade receivables. |
| |
|
|
| |
●
|
Depreciation
and amortization. Our depreciation and amortization costs consist primarily of depreciation and amortization on fixed assets,
equipment on lease and intangible assets. |
| |
|
|
| |
●
|
Foreign
currency exchange. Our foreign currency exchange consists primarily of foreign exchange fluctuations recorded in Canadian
dollar (CAD), British Pounds (GBP), or Euro (EUR) at the rates of exchange in effect when the transaction occurred. |
| |
|
|
| |
●
|
Finance
costs. Our finance costs consist primarily of investor interest expense, investor commission fees, and other financing charges
for obtaining debt financing. |
We
expect to continue to invest in corporate infrastructure and incur additional expenses associated with being a public company, including
increased legal and accounting costs, investor relations costs, higher insurance premiums and compliance costs associated with Section
404 of the Sarbanes-Oxley Act of 2002. In addition, we expect sales and marketing expenses to increase in absolute dollars in future
periods. In particular, we expect to incur additional marketing costs to support the expansion of our offerings in new markets like commercial
fleet management and agriculture.
Results
of Operations
The
following table summarizes key items of comparison and their related increase (decrease) for the three months ended June 30, 2022, and
2021:
| | |
Three
months ended | | |
Increase
(Decrease) | | |
Six
months ended | | |
Increase
(Decrease) | |
| | |
30-Jun-22 | | |
30-Jun-21 | | |
2022
– 2021 | | |
30-Jun-22 | | |
30-Jun-21 | | |
2022
– 2021 | |
| | |
($) | | |
($) | | |
(%) | | |
($) | | |
($) | | |
(%) | |
| Revenues | |
$ | 1,174,878 | | |
| 494,838 | | |
| 137.4 | | |
$ | 1,919,129 | | |
$ | 881,944 | | |
| 117.6 | |
| Cost of revenue | |
| 814,882 | | |
| 201,154 | | |
| 305.1 | | |
| 1,301,839 | | |
| 331,846 | | |
| 292.3 | |
| Gross
profit | |
| 359,996 | | |
| 293,684 | | |
| 22.6 | | |
| 617,290 | | |
| 550,098 | | |
| 12.2 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Operating expenses: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Compensation expense | |
| 1,211,309 | | |
| 639,517 | | |
| 89.4 | | |
| 1,667,263 | | |
| 1,902,901 | | |
| (12.4 | ) |
| General and administrative expense | |
| 566,176 | | |
| 697,875 | | |
| (18.9 | ) | |
| 1,244,665 | | |
| 1,099,418 | | |
| 13.2 | |
| Research and development | |
| 36,750 | | |
| - | | |
| 100.0 | | |
| 36,750 | | |
| - | | |
| 100.0 | |
| Bad debt expense | |
| - | | |
| 6,220 | | |
| (100.0 | ) | |
| 12,482 | | |
| 10,800 | | |
| 15.6 | |
| Depreciation and amortization
expense | |
| 3,093 | | |
| 6,050 | | |
| (48.9 | ) | |
| 6,230 | | |
| 11,173 | | |
| (44.2 | ) |
| Total
operating expenses | |
| 1,817,328 | | |
| 1,349,662 | | |
| 34.7 | | |
| 2,967,390 | | |
| 3,024,292 | | |
| (1.9 | ) |
| Loss
from operations | |
| (1,457,332 | ) | |
| (1,055,978 | ) | |
| 38.0 | | |
| (2,350,100 | ) | |
| (2,474,194 | ) | |
| (5.0 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Other income (expense) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Foreign currency exchange | |
| 1,721 | | |
| (7,523 | ) | |
| (122.9 | ) | |
| (26,712 | ) | |
| (22,349 | ) | |
| 19.5 | |
| Other income | |
| - | | |
| 258 | | |
| (100.0 | ) | |
| - | | |
| 16,903 | | |
| (100.0 | ) |
| Redemption premium | |
| - | | |
| - | | |
| - | | |
| (3,062 | ) | |
| - | | |
| (100.0 | ) |
| Gain (Loss) on sale | |
| (3,923 | ) | |
| - | | |
| (100.0 | ) | |
| (3,923 | ) | |
| - | | |
| (100.0 | ) |
| Gain (Loss) on disposal | |
| - | | |
| - | | |
| - | | |
| 3,960 | | |
| - | | |
| 100.0 | |
| Gain (Loss) on extinguishment of debt | |
| - | | |
| 1,040 | | |
| (100.0 | ) | |
| 10,240 | | |
| 77,356 | | |
| (86.8 | ) |
| Finance costs | |
| (527,937 | ) | |
| (14,055 | ) | |
| 3656.2 | | |
| (1,084,549 | ) | |
| (25,545 | ) | |
| 4145.6 | |
| Total
other expense | |
| (530,139 | ) | |
| (20,280 | ) | |
| 2514.1 | | |
| (1,104,046 | ) | |
| 46,365 | | |
| (2481.2 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net
loss | |
$ | (1,987,471 | ) | |
| (1,076,258 | ) | |
| 84.7 | | |
$ | (3,454,146 | ) | |
| (2,427,829 | ) | |
| 42.3 | |
As
of June 30, 2022, the Company had signed contracts totaling over $2.75 million in gross sales, inclusive of recurring revenue on GPS
tracking system. Due to delays related to manufacturing and shipment of product, fulfilment was not yet completely satisfied for the
fleet management solution (GPS and Infinity), and only $1,919,129 was recognizable as a revenue stream including our new line of Shelby
and Vantage golf carts, for the six months ended June 30, 2022. As product becomes available, DSG expects to satisfy its performance
obligations on the remaining contracts for fleet management solution during the third quarter of fiscal 2022.
Comparison
of the six months ended June 30, 2022, and 2021:
Revenue
| | |
For
the Three Months Ended
June 30, | | |
For
the Six Months Ended
June 30, | |
| | |
2022 | | |
2021 | | |
%
Change | | |
2022 | | |
2021 | | |
%
Change | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Revenue | |
$ | 1,174,878 | | |
$ | 494,838 | | |
| 137.4 | | |
$ | 1,919,129 | | |
$ | 881,944 | | |
| 117.6 | |
Revenue
increased by $680,040 or137.4% for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. Revenue
increased by $1,037,185 or 117.6% for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.
Sales
increased for the three and six months ended, year over year, as a result of the Company’s new licensed Shelby Golf Cart product
release, in addition to GPS Infinity sales. 85% or approximately $1,674,000 of the revenue recognized as of June 30, 2022 was associated
to GPS and Fleet management solution, the remaining 12% of the revenue is attributed to new line of Licensed Shelby golf carts and electric
low speed vehicle division.
Cost
of Revenue
| | |
For
the Three Months Ended
June 30, | | |
For
the Six Months Ended
June 30, | |
| | |
2022 | | |
2021 | | |
%
Change | | |
2022 | | |
2021 | | |
%
Change | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Cost of revenue | |
$ | 814,882 | | |
$ | 201,154 | | |
| 305.1 | | |
$ | 1,301,839 | | |
$ | 331,846 | | |
| 292.3 | |
Cost
of revenue increased by $613,728 or 305.1% for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.
The table below outlines the differences in detail:
| | |
For
the Three Months Ended | |
| | |
| June
30, 2022 | | |
| June
30, 2021 | | |
| Difference | | |
| % Difference | |
| Cost of goods | |
$ | 796,661 | | |
$ | 179,049 | | |
$ | 617,612 | | |
| 344.9 | |
| Mapping & freight costs | |
| 10,425 | | |
| 8,656 | | |
| 1,769 | | |
| 20.4 | |
| Wireless fees | |
| 7,796 | | |
| 13,449 | | |
| (5,653 | ) | |
| (42.0 | ) |
| | |
$ | 814,882 | | |
$ | 201,154 | | |
$ | 613,728 | | |
| 305.1 | |
Cost
of revenue increased by $969,993, or 292.3%, for the six months ended June 30, 2022 as compared to the six months June 30, 2021. The
table below outlines the differences in detail:
| | |
For
the Six Months Ended | |
| | |
June
30, 2022 | | |
June
30, 2021 | | |
Difference | | |
% Difference | |
| Cost of goods | |
$ | 1,250,302 | | |
$ | 288,969 | | |
$ | 961,333 | | |
| 332.7 | |
| Mapping & freight costs | |
| 13,324 | | |
| 10,708 | | |
| 2,616 | | |
| 24.4 | |
| Wireless fees | |
| 38,213 | | |
| 32,169 | | |
| 6,044 | | |
| 18.8 | |
| | |
$ | 1,301,839 | | |
$ | 331,846 | | |
$ | 969,993 | | |
| 292.3 | |
Cost
of sales increased by 305.1% and 292.3% for the three and six months ended June 30, 2022, respectively. After introducing our new line
of licensed Shelby golf carts, our cost of goods and revenue expanded considerably. The increase in the cost of goods as compared to
the six months ended June 30, 2021 is due to chip shortages, increase of manufacturing cost of our primary part of our technology, and
increase of freight costs. Our Wireless fees increased due to new satisfied installations of our fleet management solution (GPS and Infinity)
which is correlated to our increase of revenue.
Compensation
Expense
| | |
For
the Three Months Ended
June 30, | | |
For
the Six Months Ended
June 30, | |
| | |
2022 | | |
2021 | | |
%
Change | | |
2022 | | |
2021 | | |
%
Change | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Compensation expense | |
$ | 1,211,309 | | |
$ | 639,517 | | |
| 89.4 | | |
$ | 1,667,263 | | |
$ | 1,902,901 | | |
| (12.4 | ) |
Compensation
expense increased by $571,792, or 89.4%, for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021.
This is related to an increase of employees and subcontractors, that were hired after the first quarter of 2021 that carried forward
to today. Compensation expense decreased by $235,638, or 12.4%, for the six months ended June 30, 2022, as compared to the six months
ended June 30, 2021. This is related to a reduction of cost of labor of internal projects allocated to the GPS tracking system that came
to completion by the end of 2021 and beginning of 2022.
General
and Administration Expense
| | |
For
the Three Months Ended
June 30, | | |
For
the Six Months Ended
June 30, | |
| | |
2022 | | |
2021 | | |
%
Change | | |
2022 | | |
2021 | | |
%
Change | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| General & administration expense | |
$ | 566,176 | | |
$ | 697,875 | | |
| (18.9 | ) | |
$ | 1,244,665 | | |
$ | 1,099,418 | | |
| 13.2 | |
General
& administration expense decreased by $131,699 or 18.9% for the three months ended June 30, 2022, compared to the three months ended
June 30, 2021. The table below outlines the differences in detail:
| | |
For
the Three Months Ended | |
| | |
June
30,
2022 | | |
June
30, 2021 | | |
Difference | | |
% Difference | |
| Accounting & legal | |
$ | 39,056 | | |
$ | 94,060 | | |
$ | (55,004 | ) | |
| (58.5 | ) |
| Marketing & advertising | |
| 77,198 | | |
| 39,518 | | |
| 37,680 | | |
| 95.3 | |
| Subcontractor & commissions | |
| 51,936 | | |
| 196,070 | | |
| (144,134 | ) | |
| (73.5 | ) |
| Hardware | |
| 18,848 | | |
| 4,485 | | |
| 14,363 | | |
| 320.2 | |
| Amortization on ROU asset | |
| 62,946 | | |
| 56,596 | | |
| 6,450 | | |
| 11.4 | |
| Office expense, rent,
software, bank & credit card charges, telephone & meals (“Other”) | |
| 316,192 | | |
| 307,246 | | |
| 8,946 | | |
| 2.9 | |
| | |
$ | 566,176 | | |
$ | 697,875 | | |
$ | (131,699 | ) | |
| (18.9 | ) |
The
overall decrease in general and admin expenses was primarily due to decreases in account & legal expense that had previously been
incurred for legal assistance for NASDAQ related documentation, and subcontractor & commissions expense due to a reduction of investor
relations subcontractors hired in 2021 that did not carry over into the first half of 2022. The increased of these general and administration
expenses are related to the company’s participation on the annual PGA show, to introduce our Vantage golf cart line of products,
Licensed Shelby golf cart and new 10’ Infinity. Due to COVID, by the three months ended June 30, 2021, the PGA show was performed
online not incurring in extra cost by the company to assist the annual show.
General
& administration expense increased by $145,247 or 13.2% for the six months ended June 30, 2022, compared to the six months ended
June 30, 2021. The table below outlines the differences in detail:
| | |
For
the Six Months Ended | |
| | |
June
30,
2022 | | |
June
30, 2021 | | |
Difference | | |
% Difference | |
| Accounting & legal | |
$ | 63,677 | | |
$ | 148,608 | | |
$ | (84,931 | ) | |
| (57.2 | ) |
| Marketing & advertising | |
| 162,333 | | |
| 47,739 | | |
| 114,594 | | |
| 240.0 | |
| Subcontractor & commissions | |
| 191,903 | | |
| 364,169 | | |
| (172,266 | ) | |
| (47.3 | ) |
| Hardware | |
| 34,907 | | |
| 13,259 | | |
| 21,648 | | |
| 163.3 | |
| Amortization on ROU asset | |
| 63,915 | | |
| 56,496 | | |
| 7,419 | | |
| 13.1 | |
| Office expense, rent,
software, bank & credit card charges, telephone & meals (“Other”) | |
| 727,930 | | |
| 469,147 | | |
| 258,783 | | |
| 55.2 | |
| | |
$ | 1,244,665 | | |
$ | 1,099,418 | | |
$ | 145,247 | | |
| 13.2 | |
The
overall increase in general and admin expenses was primarily due to increases in office expense, rent, software, bank & credit card
charges, telephone & meals, and marketing & advertising expense. The increased of these general and administration expenses are
related to the company’s participation on the annual PGA show, to introduce our Vantage golf cart line of products, Licensed Shelby
golf cart and new 10’ Infinity. Due to COVID, by the six months ended June 30, 2021, the PGA show was performed online not incurring
in extra cost by the company to assist the annual show.
Foreign
Currency Exchange
| | |
For the Three Months Ended
June 30, | | |
For the Six Months Ended
June 30, | |
| | |
2022 | | |
2021 | | |
%
Change | | |
2022 | | |
2021 | | |
%
Change | |
| Foreign currency exchange | |
$ | 1,721 | | |
$ | (7,523 | ) | |
| (122.9 | ) | |
$ | (26,712 | ) | |
$ | (22,349 | ) | |
| (66.2 | ) |
For
the three months ended June 30, 2022, we recognized a foreign exchange gain of $1,721 compared to a loss of $7,523 for the three months
ended June 30, 2021. For the six months ended June 30, 2022, we recognized a foreign exchange loss of $26,712 compared to a loss of $22,349
for the six months ended June 30, 2021. The changes were due to changes in foreign currency rates on payables, receivables, loans and
other foreign balances denominated in currencies other than the functional currencies of the legal entities in which the transactions
are recorded. Foreign currency fluctuations are primarily from the United States dollar, Canadian dollar, Euro and British pound.
Gain
(Loss) on extinguishment of debt
| | |
For
the Three Months Ended
June 30, | | |
For
the Six Months Ended
June 30, | |
| | |
2022 | | |
2021 | | |
%
Change | | |
2022 | | |
2021 | | |
%
Change | |
| Gain (Loss) on extinguishment of
debt | |
$ | - | | |
$ | 1,040 | | |
| (100.0 | ) | |
$ | 10,240 | | |
$ | 77,356 | | |
| (86.8 | ) |
The
Company recorded a gain of $nil for the three months ended June 30, 2022 compared to a gain of $1,040 for the comparative period. The
Company recorded a gain of $10,240 for the six months ended March 31, 2022 compared to a gain of $77,356 for the comparative period.
The Company recorded a gain for amounts owing to various vendors as not deemed payable or as settled. Loss was recorded in the comparative
period as a result of conversions of convertible debt and accrued interest.
Research
and development
| | |
For the Three Months Ended
June 30, | | |
For the Six Months Ended
June 30, | |
| | |
2022 | | |
2021 | | |
%
Change | | |
2022 | | |
2021 | | |
%
Change | |
| Research and development | |
$ | 36,750 | | |
$ | - | | |
| 100.0 | | |
$ | 36,750 | | |
$ | - | | |
| 100.0 | |
Research
and development expense increased by $36,750 or 100.0% for the three months ended June 30, 2022 as compared to the three months ended
June 30, 2021. Research and development expense increased by $36,750 or 100.0% for the six months ended June 30, 2022 as compared to
the six months ended June 30, 2022. The increase is a result of homologation testing on electric vehicles.
Finance
Costs
| |
|
For
the Three Months Ended
June 30, |
|
|
For
the Six Months Ended
June 30, |
|
| |
|
2022 |
|
|
2021 |
|
|
%
Change |
|
|
2022 |
|
|
2021 |
|
|
%
Change |
|
| Finance
costs |
|
$ |
(527,937 |
) |
|
$ |
(14,055 |
) |
|
|
3656.2 |
|
|
$ |
(1,084,549 |
) |
|
$ |
(25,545 |
) |
|
|
4145.6 |
|
Finance
costs increased by $513,882 or 3656.2% for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.
Finance costs increased by $1,059,004 or 4145.6% for the six months ended June 30, 2022 as compared to the six months ended June 30,
2021. The increase is as a result of interest on convertible debt being recorded in the three and six months ended June 30, 2022, where
none existed in the prior comparable quarters.
Net
Loss
| | |
For
the Three Months Ended
June 30, | | |
For
the Six Months Ended
June 30, | |
| | |
2022 | | |
2021 | | |
%
Change | | |
2022 | | |
2021 | | |
%
Change | |
| Net loss | |
$ | (1,987,471 | ) | |
$ | (1,076,258 | ) | |
| 84.7 | | |
$ | (3,454,146 | ) | |
$ | (2,427,829 | ) | |
| 42.3 | |
As
a result of the above factors, net loss increased by $911,213 or 84.7% for the three months ended June 30, 2022 as compared to the three
months ended June 30, 2021 and decreased by $1,026,317 or 42.3% for the six months ended June 30, 2022 as compared to the six months
ended June 30, 2021.
Liquidity
and Capital Resources
From
our incorporation on April 17, 2008 through June 30, 2022, we have financed our operations, capital expenditures and working capital
needs through the sale of common shares and the incurrence of indebtedness, including term loans, convertible loans, revolving lines
of credit and purchase order financing. As of June 30, 2022, we had $6,835,754 in total liabilities, the majority of which matures within
the next twelve months.
We
had cash in the amount of $1,576,718 as of June 30, 2022, as compared to $275,383 as of December 31, 2021. We had a working capital deficit
of $3,865,530 as of June 30, 2022 compared to working capital deficit of $2,314,163 as of December 31, 2021.
Liquidity
and Financial Condition
Our
financial position as of June 30, 2022, and December 31, 2021, and the changes for the periods then ended are as follows:
Working
Capital
| | |
June
30, 2022 | | |
December
31, 2021 | |
| Current assets | |
$ | 2,808,182 | | |
$ | 1,700,226 | |
| Current liabilities | |
$ | 6,673,712 | | |
$ | 4,014,389 | |
| Working capital | |
$ | (3,865,530 | ) | |
$ | (2,314,163 | ) |
Cash
Flow Analysis
Our
cash flows from operating, investing, and financing activities are summarized as follows:
| | |
June
30, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| Net cash used in by operating activities | |
$ | (343,399 | ) | |
$ | (2,896,362 | ) |
| Net cash provided by (used in) investing activities | |
| 1,333 | | |
| (25,637 | ) |
| Net cash provided by financing activities | |
| 1,593,116 | | |
| 1,656,111 | |
| Effect of exchange rate
changes on cash | |
| 50,285 | | |
| 41,956 | |
| Net increase (decrease) in cash | |
| 1,301,335 | | |
| (1,223,932 | ) |
| Cash at beginning of period | |
| 275,383 | | |
| 1,372,016 | |
| Cash at end of period | |
$ | 1,576,718 | | |
$ | 148,084 | |
Net
Cash Used in Operating Activities.
During
the six months ended June 30, 2022, cash used in operations totaled $343,399. This reflects the net loss of $3,454,146 adjusted for $3,110,747
changes in non-cash working capital items and adjustments for non-cash items. Non-cash and working capital adjustments consisted primarily
of non-cash change in accretion of discounts on debt of $315,065, offset by increase in prepaid expense of $183,783, increase in trade
payables and accruals of $1,629,447, decrease in accounts receivable and other receivables of $177,714, an increase in deferred revenue
of $213,458, and the settlement of payables for services with preferred shares in the amount of $777,000.
Net
Cash Used in Investing Activities.
The
Company purchased equipment for $8,892, and disposed of equipment for proceeds of $10,225.
Net
Cash Provided by Financing Activities.
Net
cash from financing activities during the six months ended June 30, 2022 totaled $1,593,116, which mainly relates to $250,000 received
from issuing preferred shares, $500,000 received from notes payable, and $863,527 received from the sale of lease receivables partially
offset by repayments made of $20,411 on notes payable.
Outstanding
Indebtedness
Our
current indebtedness as of June 30, 2022 is comprised of the following:
| |
● |
Unsecured,
convertible note payable to a former related party with an outstanding principal amount of $310,000, bearing interest at 5% per annum,
mature and in default; |
| |
|
|
| |
● |
Senior
secured, convertible note payable with an outstanding principal amount of $Nil, and a carrying value of $9,487 relating to an outstanding
penalty; |
| |
|
|
| |
● |
Unsecured,
promissory note with carrying value of $1,897,500 and outstanding principal amount of $2,400,000, bearing interest at 9% per annum
and 24% per annum in default, maturing June 20, 2022. If not repaid by December 12, 2021, an additional $100,000 of guaranteed interest
will be added on December 12, 2021 and the 12th day of each succeeding month during which any portion of the convertible note remains
unpaid. 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; |
| |
● |
Unsecured
loan payable with an outstanding principal amount of $31,935 (CAD$40,000). The loan is non-interest bearing and eligible for CAD$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; |
| |
|
|
| |
● |
Unsecured
loan payable with an outstanding principal amount of $31,935 (CAD$40,000). The loan is non-interest bearing and eligible for CAD$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; |
| |
|
|
| |
● |
Unsecured
loan payable with an outstanding principal amount of $30,115. 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; |
| |
|
|
| |
● |
Secured
loan payable with an outstanding 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 which is applied against any accrued interest first. |
| |
|
|
| |
● |
Series
F Preferred Stock payments, two payments of $250,000 received on each of February 28, 2022 and March 31, 2022. Until such time that
the 5000 shares of the Series F Preferred Stock are redeemed in full, an amount equal to 20% of any gross proceeds collected by the
Company are also required to be remitted. Under the original terms of the SPA, redemption of preferred F series shares requires a
15% premium payment on the face value. As such, a Redemption Premium of $75,000 was recognized, and recorded as interest expense,
included as part of the loan, and will be repaid as part of the 20% gross sales remittance. As at June 30, 2022, there was a balance
of $482,651 outstanding. |
Related
Party Transactions
During
the six months ended June 30, 2022 the Company incurred $376,153 (2021 - $280,262) in salaries which includes a bonus of $60,000 (2021
- $109,705) in fees to the President, CEO, and CFO of the Company. The Company also repaid $28,118 of management fees and salaries previously
owing to the President, CEO, and CFO of the Company as of December 31, 2021. As at June 30, 2022, the Company owed $38,891 (December
31, 2021 - $28,118) 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.
| Director | |
#
of Preferred Shares | |
| Stephen Johnston | |
| 4 | |
| James B Singerling | |
| 4 | |
| Robert Silzer | |
| 4 | |
| Carol Cookerly | |
| 2 | |
| Michael Leemhuis | |
| 2 | |
| Total | |
| 16 | |
The
Series B preferred stock is convertible on a 1 for 100,000 basis into common shares.
On
June 27, 2022, the Company issued an aggregate of 105 shares of Series B convertible preferred shares to the Company’s board of
directors for past services. These preferred shares were valued at $777,000 based on the fair value of the underlying common stock. The
issuance is recorded under compensation expense.
| Director | |
#
of Preferred Shares | |
| Stephen Johnston | |
| 25 | |
| James B Singerling | |
| 25 | |
| Robert Silzer | |
| 25 | |
| Carol Cookerly | |
| 15 | |
| Michael Leemhuis | |
| 15 | |
| Total | |
| 105 | |
The
Series B preferred stock is convertible on a 1 for 100,000 basis into common shares.
Prospective
Capital Needs
We
estimate our operating expenses and working capital requirements for the twelve-month period to be as follows:
| Estimated
Expenses for the Twelve-Month Period ending June 30, 2023 |
| General and administrative | |
$ | 2,404,000 | |
| Research and development | |
| 2,043,600 | |
| Marketing | |
| 755,000 | |
| Sales and dealer network | |
| 540,000 | |
| Payroll overhead | |
| 1,259,000 | |
| Service and maintenance | |
| 785,900 | |
| Assembly facility | |
| 1,750,000 | |
| Inventory | |
| 10,700,000 | |
| Total | |
$ | 20,237,500 | |
As
noted earlier, during the six months ended June 30, 2022, cash used in operations totaled $343,399 and is expected to increase in the
future periods as the Company obtains more contract sales. At present, our cash requirements for the next 12 months outweigh the funds
available. Of the $20,237,500 that we require for the next 12 months, we had $1,576,718 in cash as of June 30, 2022, and working capital
deficit of $3,865,530. Our principal sources of liquidity are cash generated from product sales, securities purchase agreements and debt
financings. As at June 30, 2022, the Company had secured signed contracts of over $2.75 million of which approximately $0.7 million was
recognized in the first quarter of fiscal 2022, $1.10 million was recognized in the second quarter of fiscal 2022, and
the Company expects to satisfy the majority of its performance obligations
during the third quarter of fiscal 2022 for the remaining $0.95 million. In order to achieve sustained profitability and positive
cash flows from operations, we will need to increase revenue and/or reduce operating expenses. Our ability to maintain, or increase,
current revenue levels to achieve and sustain profitability will depend, in part, on demand for our products.
In
order to improve our liquidity, we also plan to pursue additional equity financing from private investors and a registered public offering.
We do not currently have any definitive arrangements in place for the completion of any further private placement financings and there
is no assurance that we will be successful in completing any further private placement financings. If we are unable to achieve the necessary
additional financing, then we plan to reduce the amounts that we spend on our business activities and administrative expenses in order
to be within the amount of capital resources obligations and execute our business plan. There can be no assurances that we will be able
to raise additional capital on acceptable terms or at all, which would adversely affect our ability to achieve our business objectives.
On
April 21, 2021, we filed with the Securities and Exchange Commission a Registration Statement on Form S-1 to register a firm commitment
underwritten public offering of Units consisting of common shares and common share purchase warrants in the aggregate amount of $15,000,000
(the “Offering”). The offering price of the Units will be determined between the underwriter and the Company at the time
of pricing, considering our historical performance and capital structure, prevailing market conditions, and overall assessment of our
business, and may be at a discount to the then current market price.
In
connection with the Offering, we have applied to list its common stock and warrants on the Nasdaq Capital Market under the symbols “DSGT”
and “DSGTW”. No assurance can be given that our application will be approved or that the trading prices of its common stock
on the OTCQB market will be indicative of the prices of its common stock if its common stock were traded on the Nasdaq Capital Market.
If the listing application is not approved by the Nasdaq Stock Market, we will not be able to consummate the Offering and will terminate
the Offering.
Off-Balance
Sheet Transactions
We
do not have any off-balance sheet arrangements.
Critical
Accounting Policies and Estimates
We
prepare our consolidated financial statements in accordance with U.S. GAAP. The preparation of consolidated financial statements also
requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and
related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable
under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there
are differences between our estimates and actual results, our future financial statements presentation, financial condition, results
of operations, and cash flows will be affected.
We
believe that the assumptions and estimates associated with revenue recognition, foreign currency and foreign currency transactions and
comprehensive loss have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our
critical accounting policies and estimates. For further information on all of our significant accounting policies, see the notes to our
condensed consolidated financial statements.