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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2022

 

or

 

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

 

For the transition period from _____________ to _____________.

 

Commission file number 000-53988

 

DSG GLOBAL, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   26-1134956

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

207 - 15272 Croydon Drive

Surrey, British Columbia, V3Z 6T3, Canada

(Address of principal executive offices, zip code)

 

(604) 575-3848

(Registrant’s telephone number, including area code)

 

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

 

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

 

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

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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

 

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

 

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

 

As at August 15, 2022, the issuer had 141,865,636 shares of common stock issued and outstanding.

 

 

 

 
 

 

DSG GLOBAL, INC.

TABLE OF CONTENTS

 

    Page No.
PART I — FINANCIAL INFORMATION    
     
Item 1. Financial Statements (unaudited) 3
     
  Interim Condensed Consolidated Balance Sheets 4
     
  Interim Condensed Consolidated Statements of Operations and Comprehensive Loss 5
     
  Interim Condensed Consolidated Statements of Stockholders’ Deficit 7
     
  Interim Condensed Consolidated Statements of Cash Flows 8
     
  Notes to Interim Condensed Consolidated Financial Statements 9
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 57
     
Item 4. Controls and Procedures 57
     
PART II — OTHER INFORMATION    
     
Item 1. Legal Proceedings 58
     
Item 1A. Risk Factors 58
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 72
     
Item 3. Defaults Upon Senior Securities 72
     
Item 4. Mine Safety Disclosures 72
     
Item 5. Other Information 72
     
Item 6. Exhibits 73
     
Signatures 76

 

2  
 

 

PART I: FINANCIAL INFORMATION

 

ITEM 1: Financial Statements (unaudited)

 

The accompanying unaudited interim condensed consolidated financial statements of DSG Global Inc. as at June 30, 2022, have been prepared by our management in conformity with accounting principles generally accepted in the United States of America and in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders’ equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.

 

Operating results for the six-month period ended June 30, 2022, are not necessarily indicative of the results that can be expected for the year ending December 31, 2022.

 

3  
 

 

DSG GLOBAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS AT JUNE 30, 2022, AND DECEMBER 31, 2021

(Expressed in U.S. dollars)

(UNAUDITED)

 

                 
   

June 30, 2022

   

December 31, 2021

 
             
ASSETS                
CURRENT ASSETS                
Cash   $ 1,576,718     $ 275,383  
Trade receivables, net     348,284       239,822  
Lease receivable     3,352       87,020  
Inventories     602,211       712,678  
Prepaid expenses and deposits     277,617       385,323  
TOTAL CURRENT ASSETS     2,808,182       1,700,226  
                 
Lease receivable     17,845       723,216  
Fixed assets, net     110,246       177,194  
Intangible assets, net     10,990       11,604  
TOTAL ASSETS   $ 2,947,263     $ 2,612,240  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
CURRENT LIABILITIES                
Trade and other payables   $ 2,833,047     $ 1,202,598  
Deferred revenue     469,442       255,984  
Lease liability     75,073       121,270  
Loans payable     2,976,636       2,115,049  
Convertible notes payable     319,514       319,488  
TOTAL CURRENT LIABILITIES     6,673,712       4,014,389  
                 
Lease liability     12,042       38,696  
Loans payable     150,000       212,898  
TOTAL LIABILITIES     6,835,754       4,265,983  
                 
Contingencies (Note 16)     -         -  
                 
MEZZANINE EQUITY                
Redeemable preferred stock, $0.001 par value, 24,010,000 shares authorized (2021 – 24,010,000), 50,914 issued and outstanding, 1,290 to be issued (2021 – 50,804 issued and outstanding, 1,206 to be issued)     2,869,583       3,143,402  
                 
STOCKHOLDERS’ DEFICIT                
Preferred stock, $0.001 par value, 3,010,000 shares authorized (2021 – 3,010,000), 200,454 issued and outstanding (2021 – 200,454 issued and outstanding)     1,976,480       1,199,480  
Common stock, $0.001 par value, 350,000,000 shares authorized, (2021 – 350,000,000); 131,515,955 issued and outstanding (2021 – 128,345,183)     131,521       128,350  
Additional paid in capital, common stock     50,750,826       50,068,418  
Discounts on common stock     (69,838 )     (69,838 )
Common stock to be issued     -       19,647  
Obligation to issue warrants     261,934       261,934  
Accumulated other comprehensive income     1,339,844       1,289,559  
Accumulated deficit     (61,148,841 )     (57,694,695 )
TOTAL STOCKHOLDERS’ DEFICIT     (6,758,074 )     (4,797,145 )
                 
TOTAL LIABILITIES MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT   $ 2,947,263     $ 2,612,240  

 

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

 

4  
 

 

DSG GLOBAL, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE LOSS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(Expressed in U.S. dollars)

(UNAUDITED)

 

                                 
    Three months ended     Six months ended  
   

June 30, 2022

   

June 30, 2021

   

June 30, 2022

   

June 30, 2021

 
                         
Revenue   $ 1,174,878     $ 494,838     $ 1,919,129     $ 881,944  
Cost of revenue     814,882       201,154       1,301,839       331,846  
Gross profit     359,996       293,684       617,290       550,098  
                                 
Operating expenses                                
Compensation expense     1,211,309       639,517       1,667,263       1,902,901  
General and administration expense     566,176       697,875       1,244,665       1,099,418  
Research and development     36,750       -       36,750       -  
Bad debt expense     -       6,220       12,482       10,800  
Depreciation and amortization expense     3,093       6,050       6,230       11,173  
Total operating expenses     1,817,328       1,349,662       2,967,390       3,024,292  
Loss from operations     (1,457,332 )     (1,055,978 )     (2,350,100 )     (2,474,194 )
                                 
Other income (expense)                                
Foreign currency exchange     1,721       (7,523 )     (26,712 )     (22,349 )
Other income     -       258       -       16,903  
Loss on sale of lease receivable     (3,923 )     -       (3,923 )     -  
Gain on extinguishment of debt     -       1,040       10,240       77,356  
Gain on disposal     -               3,960          
Interest on preferred shares     -       -       (3,062 )        
Finance costs     (527,937 )     (14,055       (1,084,549 )     (25,545 )
Total other income (expense)     (530,139 )     (20,280 )     (1,104,046 )     46,365  
Net loss   $ (1,987,471 )   $ (1,076,258 )   $ (3,454,146 )   $ (2,427,829 )
                                 
Net loss per share                                
Basic and diluted   $ (0.02 )   $ (0.01 )   $ (0.03 )   $ (0.02 )
                                 
Weighted average number of shares used in computing basic and diluted net income (loss) per share:                                
Basic and diluted     131,515,955       111,593,682       130,622,598       106,899,232  

 

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

 

5  
 

 

DSG GLOBAL, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(Expressed in U.S. dollars)

(UNAUDITED)

 

                                 
    Three months ended     Six months ended  
   

June 30, 2022

   

June 30, 2021

   

June 30, 2022

   

June 30, 2021

 
                         
Net loss   $ (1,987,471 )   $ (1,076,258 )   $ (3,454,146 )   $ (2,427,829 )
Other comprehensive (loss) income                                
                                 
Foreign currency translation adjustments     27,236       (3,877 )     50,285       (9,797 )
                                 
Comprehensive loss     (1,960,235 )     (1,080,135 )     (3,403,861 )     (2,437,626 )

 

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

 

6  
 

 

DSG GLOBAL, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Expressed in U.S. dollars)

(UNAUDITED)

 

                                                                                                         
    Common Stock     Preferred stock (equity)  
    Shares     Amount     Additional paid in capital     Discount on common stock     To be issued     Obligation to issue warrants     Shares     Par value     Additional
paid in
capital
    To be issued     Accumulated
other
comprehensive
income
    Accumulated deficit         Total
stockholders’
deficit
 
Balance, December 31, 2020     95,765,736     $ 94,018     $ 43,299,937     $ (69,838 )   $ 1,436,044     $ 163,998       200,508     $ 200     $ 744,480     $ 1,340,000     $ 1,252,082     $ (51,310,040 )   $ (3,049,119 )
                                                                                                         
Shares issued for debt settlement     8,253,975       8,254       1,488,625       -       (1,436,044 )     -       -       -       -       -       -       -       60,835  
Shares and warrants issued for services     1,780,000       1,780       577,968       -       149,500       (163,998 )     -       -       -       -       -       -       565,250  
Cancellation of shares due to duplicate issuance     (1,751,288       -       -       -       -       -       -       -       -       -       -       -       -  
Preferred shares issued for services     -       -       -       -       -       -       116               2,189,600       (1,340,200 )     -       -       849,600  
Shares issued on conversion of preferred shares     10,839,138       10,840       2,130,136       -       -       -       (87 )             (878,680 )     -       -       -       1,262,296  
Net loss for the period     -       -       -       -       -       -       -       -       -       -       (9,797 )     (2,427,829 )     (2,437,626 )
Balance, June 30, 2021     114,887,561     $ 114,892     $ 47,496,666     $ (69,838 )   $ 149,500     $ -       200,537     $ 200     $ 2,055,400       -     $ 1,242,285     $ (53,737,869 )   $ (2,748,764 )
                                                                                                         
Balance, December 31, 2021     128,345,183     $ 128,350     $ 50,068,418     $ (69,838 )   $ 19,647     $ 261,934       200,454     $ 200     $ 1,199,280       -     $ 1,289,559     $ (57,694,695 )   $ (4,797,145 )
                                                                                                         
Shares issued for debt settlement     500,000       500       46,500       -       (500 )     -       -       -       -       -       -       -       46,500  
Shares and warrants issued for services     660,000       660       114,100       -       (19,147 )     -       105       -       777,000       -       -             872,613  
Dividends     -       -       455,500       -       -       -       -       -       -       -       -       -       455,500  
Shares issued on conversion of preferred shares     2,010,772       2,011       66,308       -       -       -               -       -       -       -       -       68,319  
Net loss for the period     -       -       -       -       -       -       -       -       -       -       50,285       (3,454,146 )     (3,403,861 )
Balance, June 30, 2022     131,515,955     $ 131,521     $ 50,750,826     $ (69,838 )   $ -     $ 261,934       200,559     $ 200     $ 1,976,280       -     $ 1,339,844     $ (61,148,841 )   $ (6,758,074 )

 

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

 

7  
 

 

DSG GLOBAL INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2022, AND 2021

(Expressed in U.S. Dollars)

(UNAUDITED)

 

                 
   

June 30, 2022

   

June 30, 2021

 
             
Net loss   $ (3,454,146 )   $ (2,427,829 )
                 
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     70,189       10,960  
Accretion of discounts on debt     315,065       -  
Bad debt expense     12,482       10,800  
Loss on sale of lease receivable     3,923          
Accretion on lease liability     27,224       -  
Preferred shares issued for services     777,000       849,600  
Shares and warrants issued for services     76,276       565,250  
Gain on extinguishment of debt     (10,240 )     (77,356 )
Unrealized foreign exchange (gain) loss     2,977       (11,257 )
Gain on asset disposal     (3,960 )     -  
                 
Changes in non-cash working capital:                
Trade receivables, net     (177,714 )     (55,114 )
Inventories     110,467       (478,943 )
Prepaid expense and deposits     183,783       (67,038 )
Lease receivable     (21,641 )     (596,389 )
Trade payables and accruals     1,629,447       (687,564 )
Deferred revenue     213,458       85,109  
Operating lease liabilities     (101,051 )     (16,591 )
Interest on mandatorily redeemable preferred shares     3,062       -  
Net cash used in operating activities     (343,399 )     (2,896,362 )
                 
Cash flows from investing activities                
Purchase of equipment     (8,892 )     (25,637 )
Disposal of property and equipment     10,225       -  
Net cash provided by (used in) investing activities     1,333       (25,637 )
                 
Cash flows from financing activities                
Proceeds from issuing preferred shares     250,000       1,850,000  
Proceeds from notes payable     500,000       -  
Proceeds from sale of lease receivable     863,527       -  
Payments on notes payable     (20,411 )     (193,889 )
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 the end of the period   $ 1,576,718     $ 148,084  
                 
Supplemental Cash Flow Information (Note 17)                

 

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

 

8  
 

 

DSG GLOBAL, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(UNAUDITED)

 

Note 1 – ORGANIZATION

 

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

 

The Company is a technology development company engaged in the design, manufacture, and marketing of fleet management solutions in the golf industry. The Company’s principal activities are the sale and rental of GPS tracking devices and interfaces for golf vehicles and related support services. Starting during the year ended December 31, 2021, the Company began to market low speed electric vehicles, and e-bikes, recognizing its first sales in this space. Sales from these product lines have not reached a level of materiality to be disclosed as separate segments of the business. The Company also began the start of the homologation project for electric vehicles.

 

On April 13, 2015, the Company entered into a share exchange agreement with DSG Tag Systems Inc. (“DSG”), now a wholly-owned subsidiary of the Company, incorporated under the laws of the State of Nevada on April 17, 2008 and extra provincially registered in British Columbia, Canada in 2008. In March 2011, DSG formed DSG Tag Systems International, Ltd. in the United Kingdom (“DSG UK”). DSG UK is a wholly owned subsidiary of DSG.

 

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

 

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

 

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.

 

Note 2 – GOING CONCERN

 

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

 

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

 

As of June 30, 2022, the Company had working capital deficit of $3,865,530 and had an accumulated deficit of $61,148,841 since inception. Furthermore, the Company incurred a net loss of $3,454,146 and used $343,399 of cash flows for operating activities during the six months ended June 30, 2022. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These unaudited interim condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. These adjustments could be material.

 

Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

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

 

9  
 

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to U.S. GAAP rules and regulations for presentation of interim financial information. Therefore, the unaudited interim condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto, included in the Company’s Annual Report on the Form 10-K for the year ended December 31, 2021. Current and future financial statements may not be directly comparable to the Company’s historical financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

 

Principles of Consolidation

 

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

 

Use of Estimates

 

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

 

Recently Adopted Accounting Pronouncements

 

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

 

Significant Accounting Policies

 

Revenue from Contracts with Customers

 

The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer. Revenue is measured based on the consideration the Company expects to receive in exchange for those products. In instances where final acceptance of the product is specified by the customer, revenue is deferred until all acceptance criteria have been met. Revenues are recognized under Topic 606 in a manner that reasonably reflects the delivery of its products and services to customers in return for expected consideration and includes the following elements:

 

  ●  executed contracts with the Company’s customers that it believes are legally enforceable;
  ●  identification of performance obligations in the respective contract;
  ●  determination of the transaction price for each performance obligation in the respective contract;
  ●  allocation the transaction price to each performance obligation; and
  ●  recognition of revenue only when the Company satisfies each performance obligation.

 

10  
 

 

Performance Obligations and Signification Judgments

 

The Company’s revenue streams can be categorized into the following performance obligations and recognition patterns:

 

1. Sale, delivery and installation of Tag, Text and Infinity products, along with digital mapping and customer training. The Company recognizes revenue at a point in time when final sign-off on the installation is obtained from the General Manager and/or Director of Golf.

2. Provision of internet connectivity, regular software updates, software maintenance and basic customer support service. The Company recognizes revenue over time, evenly over the term of the service.

3. Sale and delivery of Fairway Rider products. The Company recognizes revenue at a point in time when control transfers to the customer.

4. Sale and delivery of Electric Vehicles. The Company recognizes revenue at a point in time when control transfers to the customer.

 

Transaction prices for performance obligations are explicitly outlined in relevant agreements, therefore, the Company does not believe that significant judgments are required with respect to the determination of the transaction price, including any variable consideration identified.

 

Warranty Reserve

 

The Company accrues for warranty costs, sales returns, and other allowances based on its historical experience. During the period ended June 30, 2022 and the comparable period of June 30, 2021, the Company did not provide a warranty for any of its products sold during those periods. The warranty reserve was $Nil as at June 30, 2022 and 2021.

 

Re-classification

 

During the period ended June 30, 2022, the Company re-classified dividends that were accrued on its redeemable preferred shares during the year ended December 31, 2021. An amount of $455,500 was re-classified from additional paid in capital on common stock, to additional paid in capital preferred stock – mezzanine equity (Note 13). This change is reflected in the interim condensed consolidated statement of changes in stockholders’ deficit.

 

Note 4 – TRADE RECEIVABLES, NET

 

As of June 30, 2022, and December 31, 2021, trade receivables consist of the following:

 

                 
    June 30, 2022     December 31,2021  
Accounts receivable   $ 392,486     $ 271,950  
Allowance for doubtful accounts     (44,202 )     (32,128 )
Total trade receivables, net   $ 348,284     $ 239,822  

 

Note 5 – INVENTORIES

 

As of June 30, 2022, and December 31, 2021, inventories consist of the following:

 

                 
    June 30, 2022     December 31, 2021  
Parts and accessories   $ 127,570     $ 226,230  
Golf carts     255,301       158,588  
E-bikes     27,780       35,060  
Electric vehicles     191,560       292,800  
Total inventories   $ 602,211     $ 712,678  

 

11  
 

 

Note 6 – FIXED ASSETS AND EQUIPMENT ON LEASE

 

As of June 30, 2022, and December 31, 2021, fixed assets consisted of the following:

 

                 
    June 30, 2022     December 31, 2021  
Machinery   $ 5,040     $ 5,040  
Furniture and equipment     2,587       2,350  
Computer equipment     50,781       41,784  
Vehicles     19,989       28,360  
Right-of-use assets     312,280       312,410  
Accumulated depreciation     (280,431 )     (212,750 )
 Fixed assets, net   $ 110,246     $ 177,194  

 

For the three and six months ended June 30, 2022, total depreciation expense for fixed assets was $3,093 and $6,230, respectively (June 30, 2021 - $6,050 and $11,173, respectively) and is included in depreciation and amortization expense. For the three and six months ended June 30, 2022, total depreciation for right-of-use assets was $32,264 and $63,915 (June 30, 2021 - $28,971 and $56,551, respectively) and is included in general and administration expense as operating lease expense. An allocation of depreciation to cost of sales is not applicable for the Company.

 

Note 7 – INTANGIBLE ASSETS

 

As of June 30, 2022, and December 31, 2021, intangible assets consist of the following:

 

                 
    June 30, 2022     December 31, 2021  
Intangible asset – Patent   $ 22,353     $ 22,353  
Accumulated amortization     (11,363 )     (10,749 )
Intangible asset, net    $ 10,990     $ 11,604  

 

Patents are amortized on a straight-line basis over their estimated useful life of 20 years. For the three and six months ended June 30, 2022, total amortization expense for intangible assets was $307 and $614, respectively (June 30, 2021 - $308 and $615, respectively).

 

Note 8 – TRADE AND OTHER PAYABLES

 

As of June 30, 2022, and December 31, 2021, trade and other payables consist of the following:

 

                 
    June 30, 2022     December 31, 2021  
Accounts payable and accrued expenses   $ 1,868,109     $ 949,937  
Accrued interest     958,635       248,610  
Other liabilities     6,303       4,051  
Total payables   $ 2,833,047     $ 1,202,598  

 

12  
 

 

Note 9 – LOANS PAYABLE

 

As of June 30, 2022, and December 31, 2021, loans payable consisted of the following:

  

    June 30, 2022     December 31, 2021  
  $     $  
Unsecured loan payable in the amount of CAD$40,000, due on or before December 31, 2025(a)   $ 31,935     $ 31,449  
Unsecured loan payable in the amount of CAD$40,000, due on or before December 31, 2025(b)     31,935       31,449  
Unsecured loan payable, due on May 21, 2022, interest at 1% per annum(c)     30,115       30,115  
Secured loan payable, due on June 5, 2050, interest at 3.75% per annum(d)     150,000       150,000  
Unsecured loan payable, due on June 20, 2022, interest at 9% per annum(e)     2,400,000       2,084,934  
Preferred F series shares issued with mandatory redemption(f)     482,651       -  
      3,126,636       2,327,947  
Current portion     (2,976,636 )     (2,115,049 )
Loans payable, Long term   $ 150,000     $ 212,898  

 

(a) On April 17, 2020, the Company received a loan in the principal amount of $31,935 (CAD$40,000) under the Canada Emergency Business Account program. 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.
   
(b) On April 21, 2020, the Company received a loan in the principal amount of $31,935 (CAD$40,000) under the Canada Emergency Business Account program. 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.
   
(c) On May 21, 2020, the Company received a loan in the principal amount of $30,115 under the Paycheck Protection Program. The loan bears interest at 1% per annum and is due on May 21, 2022 with payments deferred for the first six months of the term.
   
(d) On June 5, 2020, the Company received a loan in the principal amount of $150,000. The loan bears interest at 3.75% per annum and is due on June 5, 2050. The loan is secured by all tangible and intangible assets of Company. Fixed payments of $731 are due monthly and begin 12 months from the date of the loan. The payments are applied against any accrued interest before principal amounts are repaid.
   
(e) On September 13, 2021, the Company entered into a securities purchase agreement with a non-related party. Pursuant to the agreement, the Company received cash proceeds of $2,000,000 on September 13, 2021 in exchange for the issuance of an unsecured convertible promissory note in the principal amount of $2,400,000, which was inclusive of a $400,000 original issue discount and bears interest at 9% per annum to the holder and matures June 20, 2022. If the convertible note is not paid in full before December 12, 2021, an additional $100,000 of guaranteed interest will be added to the note. An additional $100,000 of guaranteed interest will be added to the note on the 12th day of each succeeding month during which any portion of the convertible note remains unpaid. Any principal or interest on the convertible note that is not paid when due or during any period of default bears interest at 24% per annum.
   
  In the event of a default, the note is convertible at the price that is equal to a 40% discount to the lowest trading price of the Company’s common shares during the 30 day trading period prior to the conversion date.
   
  During the three and six months ended June 30, 2022, the Company recorded $492,110 and $1,013,465 in interest expense including $344,400 and $698,400 of additional interest, respectively. As at June 30, 2022, the carrying value of the convertible promissory note was $2,400,000 (December 31, 2021 - $2,084,935).
   
   
(f) On February 17, 2022, the Company entered into a Waiver of Conditions (the “Waiver”) 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 for 500 preferred series F shares in total. Under the Waiver, the Company agrees to repay these amounts, on an ongoing basis, by remitting 20% of all gross sales back to the subscriber until such time that the 500 shares of the Series F Preferred Stock issued pursuant to this Waiver agreement are redeemed in full. As these preferred F series shares subscribed for under the Waiver are mandatorily redeemable, the two amounts of $250,000 were recorded as liabilities, as per ASC 480-10. 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 total Redemption Premium of $75,000 will be paid on the redemption as part of the 20% gross sales remittance, and will be amortized as the repayments are made. During the period ended June 30, 2022, $3,062 was recognized, and recorded as interest expense, included as part of the loan.
   
  During the six months ended June 30, 2022, the Company made required payments in the amount of $20,411, which was applied against the loan payable.

 

13  
 

 

Note 10 – CONVERTIBLE NOTES

 

As of June 30, 2022, and December 31, 2021, convertible loans payable consisted of the following:

 

Third Party Convertible Notes Payable

 

(a) On March 31, 2015, the Company issued a convertible promissory note in the principal amount of $310,000 to a company owned by a former director of the Company for marketing services. The note is unsecured, bears interest at 5% per annum, is convertible at $1.25 per common share, and is due on demand. As at June 30, 2022, the carrying value of the convertible promissory note was $310,000 (December 31, 2021 - $310,000).
   
(b) On June 5, 2017, the Company issued a convertible promissory note in the principal amount of $110,000. As at June 30, 2022, the carrying value of the note was $9,514 (December 31, 2021 - $9,439), relating to an outstanding penalty.

 

Note 11 - LEASES

 

Lessor

 

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

 

During the six months ended June 30, 2022, the Company recognized new lease receivables of $143,630, net of the $nil of leases transferred to third party management (December 31, 2021 - $817,619 net of $120,231 of leases transferred to third party management). The lease receivable reflects lease payments expected to be received over the terms of the agreements and derecognized $12,240 (December 31, 2021 - $492,096) in inventory related to the underlying assets, being recorded to cost of goods sold. During the six months ended June 30, 2022, the Company sold $867,450 of lease receivables to a third party for $863,527. As a result of the sale, the Company derecognized the carrying value of $867,450 for the leases sold on the date of the transaction and recognized a loss of $3,923 in other income.

 

14  
 

  

                 
Lease receivable   June 30, 2022     December 31, 2021  
Balance, beginning of the period   $ 810,236     $ 42,856  
Additions     143,630       937,850  
Transfer to third party     (867,450 )     (120,231 )
Interest on lease receivables     19,268       19,452  
Receipt of payments     (78,754 )     (60,445 )
              -  
Foreign exchange     (5,733 )     (9,246 )
Balance, end of the period     21,197       810,236  
Current portion of lease receivables     (3,352 )     (87,020 )
Long term potion of lease receivables   $ 17,845     $ 723,216  

 

Lease receivables are measured at the commencement date based on the present value of future lease payments less the present value of the unguaranteed residual asset. The Company uses the rate implicit in the rental revenue contracts to calculate the present value of future payments and unguaranteed residual asset at the date of commencement.

 

Lessee

 

The Company leases certain assets under lease agreements.

 

On October 1, 2019, the Company entered into a 5-year lease agreement for a photocopier (the “Copier Lease”). Upon recognition of the lease, the Company recognized right-of-use assets of $8,683 and lease liabilities of $8,683. As of June 30, 2022, the Copier Lease had a remaining term of 2.25 years.

 

On July 10, 2020, the Company entered into a lease agreement for retail, showroom and warehouse space in Fairfield, CA (the “Fairfield Lease”). Upon initial recognition of the lease, the Company recognized right-of-use assets of $164,114 and lease liabilities of $156,364. The difference between the recorded operating lease assets and lease liabilities is due to prepaid rent deposits to be applied to first months’ rent of $7,750. The lease included a rent-free period with rent payments commencing on October 1, 2020. The Fairfield Lease also included a refundable security deposit of $7,750 which is included in prepaid expenses and deposits at June 30, 2022. As of June 30, 2022, Fairfield Lease had a remaining term of 0.17 years.

 

On July 14, 2020, the Company entered into a lease agreement for office space in Surrey, BC (the “Croydon Lease”). Upon initial recognition of the lease, the Company recognized right-of-use assets of $133,825 (CAD$175,843) and lease liabilities of $125,014 (CAD$163,895). The difference between the recorded operating lease assets and lease liabilities is due to prepaid rent deposits to be applied to first months’ rent of $8,811 (CAD$11,948). The lease included a rent-free period with rent payments commencing on September 1, 2020. As of June 30, 2022, the Croydon Lease had a remaining term of 1.08 years.

 

On April 1, 2021, the Company entered into a lease agreement for a credit card processing machine (the “FD 150 Lease”). Upon initial recognition of the lease, the Company recognized right-of-use assets of $1,018 and lease liabilities of $1,018. As of June 30, 2022, the FD 150 Lease had a remaining term of 1.83 years.

 

On June 2, 2021, the Company entered into a lease agreement for a trailer (the “Trailer Lease”). Upon recognition of the lease, the Company recognized right-of-use assets of $8,886 (CAD$11,016) and lease liabilities of $8,886 (CAD$11,016). As of June 30, 2022, the Trailer Lease had a remaining term of 2.92 years.

 

15  
 

 

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

  

                 
Right-of-use assets   June 30, 2022     December 31, 2021  
Cost   $ 312,280     $ 312,318  
Accumulated depreciation     (235,064 )     (170,530 )
Foreign exchange     -       29  
Total right-of-use assets   $ 77,216     $ 141,880  

 

                 
Lease liability   June 30, 2022     December 31, 2021  
Current portion   $ 75,073     $ 121,270  
Long-term portion     12,042       38,696  
Total lease liability   $ 87,115     $ 159,966  

 

Lease liabilities are measured at the commencement date based on the present value of future lease payments. As the Company’s leases did not provide an implicit rate, the Company used its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The Company used a weighted average discount rate of 11.98% in determining its lease liabilities. The discount rate was derived from the Company’s assessment of borrowings.

 

Right-of-use assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The lease terms may include options to extend or terminate the lase if it is reasonably certain that the Company will exercise that option.

 

Lease expense for the six months ended June 30, 2022, was $70,866 (2021 - $73,302 and is recorded in general and administration expense).

 

Future minimum lease payments to be paid by the Company as a lessee for operating leases as of June 30, 2022, for the next three years are as follows:

  

           
Lease commitments and lease liability     June 30, 2022  
2022     $ 48,425  
2023       40,325  
2024       4,597  
2025       1,159  
Total future minimum lease payments       94,506  
Discount       (7,391 )
Total       87,115  
           
Current portion of operating lease liabilities       (75,073 )
Long-term portion of operating lease liabilities     $ 12,042  

 

16  
 

 

Note 12 – MEZZANINE EQUITY

 

Authorized

 

5,000,000 shares of redeemable Series C preferred shares, authorized, each having a par value of $0.001 per share. Each share of Series C preferred shares is convertible into shares of common stock at a conversion rate equal to the lowest traded price for the fifteen trading days immediately preceding the date of conversion.

 

1,000,000 shares of redeemable Series D preferred shares, authorized, each having a par value of $0.001 per share. Each share of Series D preferred shares is convertible into 5 shares of common stock.

 

5,000,000 shares of redeemable Series E preferred shares, authorized, each having a par value of $0.001 per share. Each share of Series E preferred shares is convertible into 4 shares of common stock.

 

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

 

The following table summarizes the Company’s redeemable preferred share activities for the period ended June 30, 2022, and for the comparative June 30, 2021 period.

  

                                         
    Shares     Par     Additional paid in capital     To be issued     Total  
Balance December 31, 2020     49,230     $ 49     $ 1,007,895     $ 1,265,799     $ 2,273,743  
Issuance     3,500       3       2,731,989       (881,991 )     1,850,001  
Converted for common shares     (1,312 )     (1 )     (1,262,295 )     -       (1,262,296 )
Balance, June 30, 2021     51,418     $ 51     $ 2,477,589     $ 383,808     $ 2,511,448  
                                         
Balance December 31, 2021     50,804     $ 51     $ 2,201,786     $ 975,373     $ 3,177,210  
Issuance     500       -       250,000       -       250,000  
Converted for common shares     (140 )     -       (68,319 )     (33,808 )     (2) 102,127  
Accrued preferred stock dividends(1)     -       -       (628,940 )     173,440       (455,500 )
Balance, June 30, 2022     51,164     $ 51     $ 1,754,527     $ 1,115,005     $ 2,869,583  

 

(1) The amount of $628,940 accrued against additional paid in capital includes the $455,500 of accrued dividends on redeemable preferred stock related to the year ended December 31, 2021, and is the reclass described above in Note 3.
   
(2) $33,808 was a balance carried in the redeemable preferred shares to be issued from prior years, but does not relate to any shares that are required to be issued. It should have been cleared out in fiscal 2019 when the Company completed its reverse stock split. It has been adjusted in the current quarter.

 

Mezzanine Preferred Equity Transactions

 

During the six months ended June 30, 2022:

 

  140 Series F Preferred Shares were converted into common shares (see note 13).
     
  On March 31, 2022, pursuant to the December Series F SPA, the Company received $250,000 for the subscription of 250 Series F preferred shares (see note 9(f)). The shares were issued on April 1, 2022.
     
  On February 7, 2022, pursuant to the December Series F SPA, the Company received $250,000 for the subscription of 250 Series F preferred shares (see note 9(f)).
     
  On January 4, 2022, pursuant to the December Series F SPA, the Company received $250,000 for the subscription of 250 Series F preferred shares (see note 9(f)). These shares were issued April 1, 2022 and recorded as such.

 

17  
 

 

During the year ended December 31, 2021:

 

  1,512 Series C Preferred Shares were converted into common shares, see note 14.
     
  On November 6, 2020, the Company received gross proceeds of $300,000 for 300 Series C Preferred Shares in lieu of the Second Closing for the Series C Share Purchas Agreement (the “Series C SPA”). The shares were included in preferred shares to be issued at December 31, 2020. The preferred shares were issued April 13, 2021.
     
  On December 7, 2020, the Company received gross proceeds of $200,000 for 200 Series C Preferred Shares in lieu of the Second Closing for the Series C SPA. The shares are included in preferred shares to be issued as at December 31, 2020. The preferred shares were issued April 13, 2021.
     
  On December 23, 2020, the Company entered into a Securities Purchase Agreement (the “Series F SPA”) whereby the Company agreed to sell and the Purchaser agrees to purchase, in a series of closings (the “Closings”) of at least 1,000 Series F preferred shares at a price of $1,000 per share. The First and Second Closings, will each be for 1,500 Preferred Shares at a purchase price of $1,500,000, the Second Closing which will follow the filing of the Registration Statement. Any Additional Closings will be for the purchase of at least 1,000 Series F preferred shares, every thirty calendar days, and shall follow the Registration Statement being declared effective. The Company granted 3,000,000 warrants, with a relative fair value of $768,008, concurrently with the execution of the Series F SPA and First Closing. The First Closing shares were included in preferred shares to be issued at December 31, 2020 with a relative fair value of $731,992.
     
  On February 4, 2021, the Company issued 1,500 Series F preferred shares pursuant to the First Closing of the Series F SPA with a relative fair value of $731,992. Additionally, the Company issued 1,500 Series F preferred shares pursuant to the Second Closing of the Series F SPA for gross proceeds for $1,500,000.
     
  On June 10, 2021, pursuant to the Series F SPA, the Company received $350,000 for the subscription of an additional 350 Series F preferred shares to be issued.
     
  On July 20, 2021, pursuant to another Securities Purchase Agreement (the “July Series F SPA”), the Company received $400,000 for the subscription of 400 Series F preferred shares with a relative fair value of $138,066 and 1,180,000 warrants with a relative fair value of $261,934 valued on the agreement date which are recorded as obligation to issue shares and obligation to issue warrants respectively at December 31, 2021, see note 14.
     
  On August 3, 2021, 275 Series F Preferred Shares were converted into common shares, see note 14.
     
  On October 22, 2021, 210 Series F Preferred Shares were converted into common shares, see note 14.
     
  On November 30, 2021, 491 Series F Preferred Shares were converted into common shares, see note 14.
     
  On December 14, 2021, pursuant to another Securities Purchase Agreement (the “December Series F SPA”), the Company received $312,000 for the subscription of 312 Series F preferred shares. $12,000 was incurred as share issuance costs.
     
  On December 31, 2021, pursuant to the December Series F SPA, the Company received $250,000 for the subscription of 250 Series F preferred shares.

 

Mezzanine preferred equity, series C and series F, carry a dividend policy which entitles each preferred share to receive, and the Company to pay, cumulative dividends of 10% per annum, payable quarterly, beginning on the original issuance date and ending on the date that such preferred shares has been converted or redeemed. At the option of the Company, accrued dividends can be settled in preferred shares of the same series, or in cash. Any dividends that are not paid quarterly on the dividend payment date shall entail a late fee, which must be paid in cash at the rate of 18% per annum, which accrues and compounds daily from the dividend payment date, through to and including the date of the actual payment in full. As at June 30, 2022 the Company recorded $173,440 in dividends to be settled in preferred shares, and $45,032 in penalty interest.

 

Note 13 – PREFERRED STOCK

 

Authorized

 

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

 

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

 

18  
 

 

Preferred Stock Transactions

 

During the six months ended June 30, 2022:

 

  On June 27, 2022, the Company issued an aggregate of 105 shares of Series B preferred shares to the Company’s board of directors for past services. These preferred shares were value at $777,000 based on the fair value of the underlying common stock.

 

During the year ended December 31, 2021:

 

  On October 26, 2020, the Company agreed to issue Series B preferred shares that are convertible into 1,000,000 common shares and 1,000,000 warrants for investor relations services. The preferred shares were valued at $1,340,000 based on the fair value of the underlying common stock and included in preferred shares to be issued at December 31, 2020. On February 17, 2021, the Company issued 100 shares of Series B preferred shares and 1,000,000 warrants, see note 14. 1 Series B preferred share is convertible into 100,000 shares of common stock, which meant that only 10 shares of Series B preferred shares should have been issued. On May 26, 2021, 50 shares of Series B preferred shares, instead of 5 shares of Series B preferred shares, were converted into 500,000 shares of common stock with a fair value of $670,000. On September 16, 2021, the Company cancelled 45 shares of Series B preferred shares and 5 shares of Series B preferred shares were converted into 500,000 shares of common stock with a fair value of $670,000.
     
  On March 4, 2021, the Company issued an aggregate of 16 shares of Series B preferred shares to the Company’s board of directors for past services. These preferred shares were valued at $849,600 based on the fair value of the underlying common stock.
     
  125 Series B preferred shares with a fair value of $1,734,800, were converted into common shares, inclusive of the conversion noted above, see note 14.

 

Note 14 – COMMON STOCK AND ADDITIONAL PAID IN CAPITAL

 

Authorized

 

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

 

Common Stock Transactions

 

During the six months ended June 30, 2022:

 

  The Company issued an aggregate of 500,000 shares of common stock to satisfy shares to be issued at December 31, 2021 for investor relations. The shares had a fair value of $101,000 of which $24,904 of expense was recognized for the period, $19,647 of expense was recorded during the year ended December 31, 2021 and $56,449 was recorded as prepaid.
     
  The Company issued 160,000 shares of common stock with a fair value of $13,760 for investor relations services.
     
  The Company issued 500,000 shares of common stock with a fair value of $47,000 for prepaid legal services.
     
  The Company issued 2,010,772 shares of common stock with a fair value of $68,319 for conversion of 140 Series F Preferred Shares.

 

During the year ended December 31, 2021:

 

  The Company issued an aggregate of 8,138,975 shares of common stock with a fair value of $1,436,044, to satisfy shares to be issued at December 31, 2020 for debt settlement.
     
  The Company issued 715,000 shares of common stock with a fair value of $191,235 pursuant to a legal settlement, see note 17.
     
  The Company issued 2,430,000 shares of common stock with a fair value of $565,250 for consulting services.
     
  The Company issued 23,046,760 shares of common stock with a fair value of $3,822,829 and share issue costs of $2,000 for conversion of 125 Series B Preferred Shares with a fair value of $1,734,800, conversion of 1,512 Series C Preferred Shares with a fair value of $1,462,296, and conversion of 976 Series F Preferred Shares with a fair value of $625,803.
     
  The Company cancelled 1,751,288 shares of common stock which were returned to treasury due to a duplicated issuance for share settled debt during the year ended December 31, 2020.

 

19  
 

 

Common Stock to be Issued

 

Common stock to be issued as at June 30, 2022 consists of:

 

None

 

Common stock to be issued as at December 31, 2021 consists of:

 

  97,260 shares valued at $19,647 to be issued pursuant to a service agreement. These were issued February 11, 2022.

 

Warrants

 

During the six months ended June 30, 2022:

 

No warrant activity took place in the six months ended June 30, 2022.

 

During the year ended December 31, 2021:

 

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

 

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

  

    December 31, 2021  
Risk-free interest rate     0.180.82 %  
Expected life     3.295.11 years  
Expected dividend rate     0 %
Expected volatility     285.40300.18 %  

 

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

  

      Warrants     Weighted average exercise price  
Outstanding at year December 31, 2021       16,439,813     $ 0.56  
Outstanding as of June 30, 2022       16,439,813     $ 0.56  

 

As of June 30, 2022, the weighted average remaining contractual life of warrants outstanding was 2.03 years with an intrinsic value of $nil (December 31, 2021 - $nil).

 

Note 15 – 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.

 

20  
 

 

Indemnifications

 

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

 

Note 16 – CONTINGENCIES

 

On September 7, 2016, Chetu Inc. filed a Complaint for Damage in Florida to recover an unpaid invoice amount of $27,335 plus interest of $4,939. The invoice was not paid due to a service dispute. As at June 30, 2022, included in trade and other payables is $17,983 (December 31, 2021 - $29,329) related to this unpaid invoice, interest and legal fees.

 

Note 17 – SUPPLEMENTAL CASH FLOW INFORMATION

 

             
    Six-months ended  
    June 30, 2022     June 30, 2021  
             
Cash paid during the period for:                
Taxes   $ -     $ -  
Interest payments     -       57,111  
                 
Non-cash investing and financing transactions:                
Shares issued for debt settlement   $ 44,551     $ 60,835  
Dividends payable with preferred shares to be issued     173,440       -  
Initial recognition of lease assets     143,630       -  
Initial recognition of lease liabilities     143,630       -  
Shares issued on conversion of preferred shares     158,045       2,140,976  
Shares issued for convertible notes payable and accrued interest     -       9,904  

 

Note 18 – SUBSEQUENT EVENTS

 

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

 

Subsequent to June 30, 2022:

 

  On July 1, 2022, the Company issued 6,000,000 common shares with a fair value $78,079 of for the conversion of 160 Series F preferred shares.
     
  On July 29, 2022, pursuant to the December Series F SPA, the Company received $90,000 for the subscription of 90 Series F preferred shares, as well as issued 368 Series F preferred shares to settle $368,000 in dividends payable.
     
  On August 1, 2022, the Company issued 4,349,681 common shares with a fair value $82,959 of for the conversion of 170 Series F preferred shares.
     
  On August 10, 2022, the Company issued 191 Series B preferred shares with a fair value of $897,700 to the CEO of the Company.  

 

21  
 

 

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

 

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

 

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

 

FORWARD LOOKING STATEMENTS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ABOUT DSG GLOBAL INC.

 

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

 

We were founded by a group of individuals who have dedicated their careers to fleet management technologies and have been at the forefront of the industry’s most innovative developments. Our executive team has over 50 years of experience in the design and manufacture of wireless, GPS, and fleet tracking solutions, and over 40 years of experience in automotive retail, wholesale, distribution, and manufacturing.

 

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

 

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

 

Corporate History

 

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

 

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

 

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