EDGAR 10-K Filing

Company CIK: 1413909
Filing Year: 2021
Filename: 1413909_10-K_2021_0001493152-21-005426.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
Business Overview
When used in the Annual Report, the terms “Company,” “we,” “our,” “us,” “DSG,” or “VTS” mean DSG Global, Inc., its subsidiary Vantage Tag Systems Inc., and its wholly owned subsidiaries DSG Tag Systems International, Ltd. and Imperium Motor Company (“Imperium”).
DSG Global Inc. is a technology development company based in Surrey, British Columbia, Canada, engaged in the design, manufacture, and marketing of fleet management solutions for the golf industry, as well as commercial, government and military applications. In 2020, we established an electric vehicle marketing and distribution division, Imperium Motor Company. The principal activities of our fleet management and golf division are the development, sale and rental of GPS tracking devices and interfaces for golf vehicles, and related support services. More recently, we are developing the PACER line of single passenger golf carts. Meanwhile, our electric vehicle division is engaged in the importation, marketing and distribution of a 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 automotive retail, wholesale, distribution, and manufacturing.
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. The Company was initially formed to option and package rights for feature film and television projects.
Upon incorporation we received our initial funding of $9,000 through the sale of common stock to our then sole officer and director, who purchased 3,000,000 pre-reverse split shares of common stock at $0.003 per share and $45,000 from the sale of 3,000,000 pre-reverse split shares of common stock issued to 30 un-affiliated investors at $0.015 per share. On June 11, 2008, we effected a five for one forward stock split of our authorized and issued and outstanding common stock. As a result, our authorized capital increased from 75,000,000 to 375,000,000 pre-reverse split shares of common stock and our outstanding share capital increased from 6,000,000 shares of pre-reverse split common stock to 30,000,000 shares of pre-reverse split common stock.
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 share exchange agreement. Pursuant to the terms of the share exchange agreement, we agreed to acquire not less than 75% and up to 100% of the issued and outstanding shares of VTS’s common stock in exchange for the issuance by our company of up to 20,000,000 pre-reverse split shares of our common stock to the shareholders of VTS on the basis of one of our pre-reverse split common shares for 5.4935 common shares of VTS.
Previously, in anticipation of the share exchange agreement with VTS, we undertook to change our name and effect a reverse stock split of our authorized and issued common stock. Accordingly, on January 19, 2015, our board of directors approved an agreement and plan of merger to merge with our wholly owned subsidiary DSG Global Inc., a Nevada corporation, to effect a name change from Boreal Productions Inc. to DSG Global Inc. Our company remains the surviving company. DSG Global Inc. was formed solely for the change of name.
Also, on January 19, 2015, our company’s board of directors approved a resolution to effect a reverse stock split of our authorized and issued and outstanding shares of common stock on a three (3) old for one (1) new basis. Upon effect of the reverse split, our authorized capital will decrease from 375,000,000 pre-reverse split shares of common stock to 125,000,000 pre-reverse split shares of common stock and correspondingly, our issued and outstanding shares of common stock will decrease from 30,000,000 to 10,000,000 pre-reverse split shares of common stock, all with a par value of $0.001.
Articles of Merger to effect the merger and change of name and a Certificate of Change to affect the reverse stock split were filed with the Nevada Secretary of State on January 22, 2015, with an effective date of February 2, 2015. The name change and forward split were reviewed by the Financial Industry Regulatory Authority (FINRA) were approved for filing with an effective date of February 23, 2015.
The name change became effective with the Over-the-Counter Bulletin Board and OTC Markets quotation system at the opening of trading on February 23, 2015 under the symbol “BRPOD”. Effective March 19, 2015 our stock symbol changed to “DSGT”. Our new CUSIP number following the symbol change is 23340C104. The first trade of our common shares occurred on March 25, 2015.
On May 6, 2015, we completed the acquisition of approximately 75% (82,435,748 common shares) of the issued and outstanding common shares of DSG TAG Systems as contemplated by the share exchange agreement by issuing 15,185,875 shares of our common stock to shareholders of DSG TAG Systems who became parties to the agreement. In addition, concurrent with the closing of the share exchange agreement, we issued an additional 179,823 shares of our common stock to Westergaard Holdings Ltd. in partial settlement of accrued interest on outstanding indebtedness of DSG TAG Systems.
Following the initial closing of the share exchange agreement and through October 22, 2015, we acquired an additional 101,200 shares of common stock of DSG TAG from shareholders who became parties to the share exchange agreement and issued to these shareholders an aggregate of 18,422 pre-reverse split shares of our common stock. Following completion of these additional purchases, DSG Global Inc. owns 100% of the issued and outstanding shares of common stock of DSG TAG.
The reverse acquisition was accounted for as a recapitalization effected by a share exchange, wherein DSG TAG Systems is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of the acquired entity have been brought forward at their book value and no goodwill has been recognized. We adopted the business and operations of DSG TAG Systems upon the closing of the share exchange agreement.
Subsequent to the closing of the share exchange agreement with DSG TAG, we adopted the business and operations of DSG TAG.
DSG TAG was incorporated under the laws of the State of Nevada on April 17, 2008 and extra provincially registered in British Columbia, Canada in 2008. In March 2011, DSG TAG formed DSG Tag Systems International, Ltd. in the United Kingdom (“DSG UK”). DSG UK is a wholly owned subsidiary of DSG TAG.
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. This Form 10-K gives retroactive effect to such reverse stock split named above and all share and per share amounts have been adjusted accordingly, unless otherwise noted.
Subsequent to the closing of the share exchange agreement with DSG Tag Systems, Inc. (“DSG TAG”), we adopted the business and operations of DSG TAG. DSG TAG is now known as Vantage Tag Systems, Inc. (“VTS”).
Recent Business Developments
Fleet Management and Golf Division
We have developed the TAG suite of products that we believe is the first completely modular fleet management solution for the golf industry. The TAG suite of products is currently sold and installed around the world in golf facilities, and in commercial settings, through a network of established distributors and in partnership with some of the most notable brands in fleet and equipment manufacture.
DSG stands for “Digital Security Guard”, which is our primary value statement giving fleet operator’s new capabilities to track and control their vehicles. We have developed a proprietary combination of hardware and software that is marketed around the world as the TAG system. We have primarily focused on the golf industry where the TAG system is deployed to help golf course operators manage their fleet of golf carts, turf equipment, and utility vehicles. We are a leader in the category of fleet management in the golf industry and were awarded “Best Technology of the Year” in 2010 by Boardroom magazine, a publication of the National Golf Course Owners Association. To date the TAG system is installed on over 8,000 vehicles and has been used to monitor over 6,000,000 rounds of golf.
The TAG system fills a void in the marketplace by offering a modular structure that allows the customer to customize their system to meet desired functionality and budget constraints. In addition to the core TAG system vehicle control functionality, which can operate independently, we offer two golfer information display systems - the alphanumeric INFINITY 7” and high-definition INFINITY XL 12” - providing the operator with two display options which is unique in the industry.
The primary market for our TAG system is the 40,000 golf operations worldwide. While the golf industry remains the primary focus of our sales and marketing efforts, we have completed several successful pilots of the TAG system in other markets such as agriculture and commercial fleet operations. With appropriate resources, we intend to expand our sales and marketing efforts into these new markets.
We have a direct sales force in North America, which comprises the most significant portion of the golf fleet market and have developed key relationships with distributors and golf equipment manufacturers such as E-Z-GO, Yamaha and Ransomes Jacobsen to help drive sales for the North American and worldwide markets.
In order to successfully deliver products, increase sales, and maintain customer satisfaction, we need to have a reliable supplier of our hardware units and components at competitive prices. Presently, we source our INFINITY XL 12” units from one supplier in China and our TAG units from one supplier in the United Kingdom. We have recently established a new relationship with a supplier for our INFINITY XL 12” units in China to provide us with higher quality, newer technology at competitive pricing. We are also exploring the opportunity of a partnership with a US manufacturer.
PACER Golf Cart Line
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.
Electric Vehicle Division
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 at 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.
Other Recent Developments
On September 30, 2020, the Company entered into an Exchange Agreement to settle outstanding convertible debt and accrued interest in exchange for 2,347 shares of Series C preferred shares with an aggregate carrying amount of $2,348,208. The shares were issued on October 14, 2020.
On September 30, 2020, the Company entered into a Securities Purchase Agreement (the “SPA”) whereby the Company agrees to sell and the Purchaser agrees to purchase, in a series of closings (the “Closings”), up to 200 shares of Series C preferred shares at a price of $1,000 per share. At the First Closing, the Company agrees to issue 250 shares of Series C preferred shares, representing 200 Purchased Shares and 50 Commitment Shares, the First Closing shares were issued on October 14, 2020. The Second Closing occurred on November 6, 2020 for 300 Series C preferred shares for gross proceeds of $300,000. The Third Closing occurred on December 7, 2020 for 200 Series C preferred shares for gross proceeds of $200,000.
On October 21, 2020, the Company entered into an Advisory Services Agreement with a third party for an initial term of nine (9) months, and which may be renewed for an additional nine (9) month term upon mutual written agreement, whereby the Company agreed to issue 500,000 common shares for services valued at $100,000. Additionally, the Company entered into a Data Delivery Agreement with the same third party for the delivery of 1,500,000 sector-specific data records, on a non-exclusive basis, whereby the Company agreed to issue 1,500,000 common shares for data records valued at $300,000. The Company cannot assign, transfer, share or in any other manner allow another party to use the data, The Company issued 2,000,000 common shares on October 30, 2020 in full and final settlement of these agreements.
On October 26, 2020, the Company amended an Investor Relations Agreement, originally dated April 17, 2020, with a third party for a term of one year, ending on October 3, 2021. In exchange for investor relations services, the Company agreed to issue 100 Series B preferred shares convertible into 1,000,000 shares of common share and to grant 1,000,000 warrants exercisable for a period of three years at an exercise price of $0.25. The aggregate fair value of the agreement was determined to be $1,503,676, with a portion equal to $163,676 allocated to the warrants. The Company issued the Series B preferred shares on January 18, 2021.
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 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.
On November 10, 2020, the Company paid cash of $100,000, pursuant to a Settlement Agreement (the “Settlement Agreement”), in full and final satisfaction of $110,740 in outstanding principal and accrued interest on a convertible note and corresponding pending litigation.
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 (“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.
On December 23, 2020, the Company agreed to issue 300,000 restricted common shares at a fair value of $0.525 per share in exchange for legal services rendered.
On December 30, 2020, the Company entered into an Assignment of Debt agreement, whereby the Company agreed to issue 300,000 common shares priced at $1.26 in full and final satisfaction of $378,000 in outstanding debt. The shares were issued subsequently on February 9, 2021.
On December 30, 2020, the Company entered into an Assignment of Debt agreement, whereby the Company agreed to issue 35,148 common shares priced at $0.885 in full and final satisfaction of $31,106 (CDN$39,600) in outstanding debt for accounting services rendered. The shares were issued subsequently on February 9, 2021.
On December 31, 2020, the Company entered into a Debt Conversion and Settlement agreement whereby the Company agreed to issue 375,000 shares of common stock and 250,000 two-year warrants convertible to common shares at $1.00 per shares in full and final settlement of $1,097,4900 in outstanding principal debt and accrued interest. The shares were issued subsequently on February 11, 2021.
On December 31, 2020, the Company entered into a Debt Settlement agreement whereby the Company agreed to pay cash of $250,000 and issue 200,000 shares of common stock in full and final settlement of $321,243 in outstanding convertible debt and accrued interest. The Company paid $250,000 in cash on February 11, 2021 and the shares were issued subsequently on February 19, 2021.
On January 5, 2021, the Company issued 3,264,285 shares of common stock in full and final settlement of outstanding principal in the aggregate amount of $111,184 for two debt settlement agreements dated May 15,2020 and September 8, 2020, respectively.
On January 26, 2021, the Company entered into a Consulting Services agreement whereby the Company agreed to issue 150,000 shares of restricted common stock as a commencement bonus upon execution of the agreement and in exchange for consulting services.
On January 29, 2021, the Company issued a preliminary prospectus (the “Registration Statement”) to offer and sell up to 10,000,000 shares of common stock, which will consist of up to 3,000,000 shares of common stock issuable upon exercise of outstanding warrants to purchase shares of common stock and up to 7,000,000 shares of common stock upon conversion of certain shares of Series F Preferred Stock of the Company.
Our Business
DSG Global Inc. is a technology development company based in Surrey, British Columbia, Canada, engaged in the design, manufacture, and marketing of fleet management solutions for the golf industry, as well as commercial, government and military applications. In 2020, we established an electric vehicle marketing and distribution division, Imperium Motor Company. The principal activities of our fleet management and golf division are the development, sale and rental of GPS tracking devices and interfaces for golf vehicles, and related support services. More recently, we are developing the PACER line of single passenger golf carts. Meanwhile, our electric vehicle division is engaged in the importation, marketing and distribution of a range a low-speed and high-speed electric passenger vehicles for commuter, family, commercial, and public use.
Imperium Motor Company - Electric Vehicle Division
Company Overview
Imperium Motor Company (“Imperium”) is a global technology company - specializing in fleet management, vehicle charging network, lithium air battery development, and marketing and distribution of electric vehicles.
Market Overview
e-Rickshaw Potential:
● Global three wheelers market is projected to reach $39.9 billion by 2024.
● 11,00 new e-Rickshaws hit the streets every month, with annual sales expected to increase about nine percent (9%) by 2021.
● Research on car-data-monetization trends and characteristics suggests that this value pool could be as large as $750 billion by 2030.
Low Speed Electric Vehicles (LSEV)
● The global market size for LSEVs is expected to reach $68B by 2025.
● Imperium LSEV and HSEV sales are on track to reach $40 million by 2021.
High Speed Electric Vehicles (HSEV)
● The global electric vehicle market size was valued at $11.9B in 2017 and is projected to reach $56.7B by 2025, growing at a CAGR of 22.3% from 2018 to 2025.
● Imperium LSEV and HSEV sales are on track to reach $40 million by 2021.
Production Partners
Zhejiang Jonway Automobile Co.
Imperium has exclusive distribution rights in the United States, Canada, Mexico and the Carribean 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.
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 LatAm 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.
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.
Imperium’s Green Story
Gas powered combustion engines are not the future of transportation, they are the past. Our line of electric vehicles produces no emissions, almost no heat, little noise, and can be fully powered by renewable electricity producing resources like solar and wind energy. Imperium intends to offer a combination solar/wind home charging station for a 100% sustainable, 100% zero carbon solution.
Imperium EV Passenger Vehicles
IMPERIUM ET5 by Skywell
● SEATING for five passengers
● MOTOR 150 kW max power
● SPEED up to 150 kp/h
● RANGE up to 404 km or 520 km NEDC estimate
● BATTERY 55.33 or 71.98 kWh Li-ion
● 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
IMPERIUM Terra-e by ZXAUTO in development
● SEATING for five passengers
● MOTOR 135 kW max power
● SPEED up to 145 kp/h
● RANGE up to 322 to 435 km estimate
● BATTERY 53.84 or 75.22 kWh Li-ion
● 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
IMPERIUM W Coupe
● SEATING for four and Unibody Construction
● MOTOR 4.5 kW or optional 7.5 kW Brushless DC Motor available
● SPEED of 40 km/h for LSV model or 75 km/h for mid speed model
● RANGE of up to 120km on Lead Acid Battery Pack or up to 150km with optional Lithium Battery Pack
● BATTERY 72-volt 720 Ah Battery Power with Lead Acid or Optional Lithium Battery Pack available
● 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
IMPERIUM Maxi “SUV” Style
● SEATING for four with Steel Safety Cell Construction
● MOTOR 4.5 kW or optional 7.5 kW Brushless DC Motor available
● SPEED up to 40 km/h for LSV model or 60 km/h for mid speed model
● RANGE up to 120 km on Lead Acid Battery Pack or up to 150 km with optional Lithium Battery Pack
● BATTERY 72-volt 720 Ah with Lead Acid or Optional Lithium Battery Pack available
● 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
IMPERIUM Maxi Sport Sedan
● SEATING for four with Steel Safety Cell Construction
● MOTOR 4.5 kW or optional 7.5 kW Brushless DC Motor available
● SPEED up to 40 km/h for LSV model or 60 km/h for mid speed model
● RANGE up to 120 km on Lead Acid Battery Pack or up to 150 km with optional Lithium Battery Pack
● BATTERY 72-volt 720 Ah with Lead Acid or Optional Lithium Battery Pack available
● 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
IMPERIUM Euro Coupe
● SEATING for four with Steel Safety Cell Construction
● MOTOR 4.5 kW to 7.5 kW Brushless DC
● SPEED of up to 45 km/h or up to 55 km/h with optional Performance Package
● RANGE up to 120 km on a single charge
● BATTERY 60-volt 600 Ah Maintenance Free Lead Acid or Lithium Battery Pack with Optional Performance Package
● 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
IMPERIUM Urbee 4S
● SEATING for four with Steel Safety Cell Construction
● MOTOR 4.5 kW Brushless DC
● SPEED up to 40 km/h
● RANGE up to 120 km on a single charge
● BATTERY 60-volt 600 Ah Maintenance Free Lead Acid
● EQUIPPED with Alloy Wheels, Sunroof, Rear Locking Trunk Heater, Power Windows, Optional Air Conditioning, Alloy Wheels, Am-Fm USB/SD Stereo and more
IMPERIUM Urbee 2S
● SEATING for two with Steel Safety Cell Construction
● MOTOR 2.8 kW or optional 4.0 kW Brushless DC
● SPEED up to 55 km/h
● RANGE up to 140 km on a single charge
● BATTERY 60-volt 600 Ah Maintenance Free Lead Acid
● EQUIPPED with Sunroof, Lockable Rear Trunk, Heater, Power Windows, Optional Air Conditioning, Alloy Wheels, Am-Fm USB/SD Stereo and more
IMPERIUM Urbee Cargo Van
● SEATING for two with Steel Safety Cell Construction
● MOTOR 4.5 kW Brushless DC Motor Standard
● SPEED up to 45 km/h
● RANGE up to 120 km on a single charge
● BATTERY 60-volt 600 Ah Maintenance Free Lead Acid
● 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
IMPERIUM Five Star Van
● SEATING for two or five Passengers for Cargo Van
● MOTOR up to 18 kW and 320 volt rated
● SPEED up to 55 km/h for LSV and 100 km/h for Mid Speed Model
● RANGE up to 150 km for Lead Acid Battery Pack or up to 300 km with optional Lithium Battery Pack
● BATTERY Quick Change Swappable Battery Packs with level one, two and optional level 3 DC Fast Charging
● EQUIPPED with Dual Air Conditioning, Heater, Power Windows, Power Door Locks, Am-Fm USB/SD Stereo and more
IMPERIUM T-Truck
● READY for the road or use inside a warehouse with no tailpipe emissions
● CARGO BED with fold down sides and tailgate
● PERSONAL transportation or commercial ready
● MOTOR 2.0 kW Permanent Magnet DC
● ADJUSTABLE SPEED up to 55 kp/h
● BATTERY Maintenance Free Lead Acid or optional Lithium
● EQUIPPED with Alloy Wheels and Radial Tires, Full Lighting, Turn Signals, Windshield Wiper, Motorcycle Style Front Controls and more
IMPERIUM T-Van
● READY for the road or use inside a warehouse with no tailpipe emissions
● STEEL VAN BOX with HD locking dual doors
● PERSONAL transportation or commercial use
● MOTOR 2.0 kW Permanent Magnet DC
● ADJUSTABLE SPEED up to 55 kp/h
● BATTERY Maintenance Free Lead Acid or optional Lithium
● EQUIPPED with Alloy Wheels and Radial Tires, Full Lighting, Turn Signals, Windshield Wiper, Motorcycle Style Front Controls and more
IMPERIUM e-Trike
● SEATING for three passengers or Taxi open style model
● MOTOR .08 kW Permanent Magnet DC with optional 1 kW Motor Available
● SPEED up to 25 km/h
● RANGE up to 80 km
● BATTERY 60V 225 Ah Maintenance Free Lead Acid
● 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 six
● 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
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.
DSG Technologies and Products-Fleet Management and Golf Division
We have developed the TAG suite of products that we believe is the first completely modular fleet management solution for the golf industry. The TAG suite of products is currently sold and installed around the world in golf facilities and as commercial applications through a network of established distributors and partnerships with some of the most notable brands in fleet and equipment manufacture.
VTS is giving fleet operator’s new capabilities to track and control their vehicles through the new INFINITY XL system and the new 3G-4G TAG. We have developed in-house a proprietary combination of hardware and software that is marketed around the world as the INFINITY TAG system. We have primarily focused on the golf industry where the TAG system is deployed to help golf course operators manage their fleet of golf carts, turf equipment, and utility vehicles. We are a leader in the category of fleet management in the golf industry and were awarded “Best Technology of the Year” in 2010 by Boardroom magazine, a publication of the National Golf Course Owners Association. To date, the TAG system is installed on vehicles around the world and has been used to monitor millions of rounds of golf.
The TAG system fills a void in the marketplace by offering a modular structure that allows the customer to customize their system to meet desired functionality and budget constraints. In addition to the core TAG system vehicle control functionality, which can operate independently, we offer 3 information display systems to the golf courses management and golfer - the alphanumeric TEXT and high definition 12” INFINITY XL, 10” INFINITY RM and 7” INFINITY DM- providing the operator with three display options which is unique in the industry. VTS also offers inhouse financing thru purchase or lease.
The primary market for our TAG system is the golf industry, with over 40,000 golf operations worldwide. While the golf industry remains the primary focus of our sales and marketing efforts, we have completed several successful pilots of the TAG system in other markets such as agriculture and commercial fleet operations. With appropriate resources, we intend to expand our sales and marketing efforts into these new markets.
We are expanding our sales force in North America, which comprises the most significant portion of the golf fleet market and have developed key relationships with privately owned distributors and golf equipment manufacturers such as E-Z-GO, Yamaha and Ransomes Jacobsen to help drive sales through-out Europe, Asia, UK and many other markets worldwide Including our most recent move to New Zealand and Australia.
Our most recent product that is used to increase the pace of play on the course by up to 90 minutes per round is the RAPTOR. Our 3- wheel single rider cart allows the course to revenue share with VTS as the RAPTOR is put on the course free of charge and then allows the course to revenue share with VTS along the way. Each seat is rented to the customers for a minimum of $25 per round.
In order to successfully deliver products, increase sales, and maintain customer satisfaction, we need to have a reliable supplier of our hardware units and components at competitive prices. Presently, we source our TAG and INFINITY fleet from a Fortune 200 company in North America who has manufacturing in China and our RAPTORS from a supplier in the United Kingdom and Asia. This new relationship that has been established provides us with higher quality, newer technology at competitive pricing.
In addition, VTS recently engaged with a telecommunications provider to provide new technology in hardware and wireless access through-out the world therefor allowing VTS to substantially reduce cellular cost.
Technology Overview
DSG produces a “modular” suite of products to provide fleet management solution for any vehicle required for a golf operation and provides two golfer information display options to meet the operators budget requirements. DSG believes that it is currently the only company in the golf fleet management industry with these capabilities.
The VTS TAG System is designed from the ground up to be a golf/turf vehicle fleet management system. Its main function is addressing the golf course operator needs. While employing same core technology (cellular wireless and GPS) as traditional commercial vehicle fleet management systems, DSG has created patent pending solutions to adapt it to the very specific requirements of the golf environment. Compared to mainstream fleet tracking products, DSG collects 10 to 50 times more data points per MB (megabyte) of cellular data due to its proprietary data collection and compression algorithms. Also, the relative positioning accuracy is improved by almost one order of magnitude by the use of application-specific geo-data validation and correction methods.
DSG’s proprietary methods make it possible to offer a solution suitable for use on golf courses at a price low enough to be affordable in the industry. Every system component incorporates state-of-the-art technology (server, mobile trackers, display). In developing its products VTS TAG Systems has adopted an application-oriented approach placing the most emphasis (and research & development) on server and end-user software by taking advantage of the commodity level reached by mainstream technologies such as Global Positioning (GPS) and M2M (Machine to Machine) Cellular Data in the wider context of Commercial Fleet Management.
DSG leveraged the existence of an abundance of very cost-effective telematics solutions by selecting an “off-the-shelf” hardware platform that meets all the main performance and environmental requirements for operation in the harsh, outdoor golf course environment. While removing all risk and cost associated with developing a proprietary hardware platform, DSG has maintained the unique nature of its hardware solution by developing a set of proprietary adapters and interfaces specifically for the golf application.
DSG has secured an exclusive supply agreement with the third-party hardware manufacturers for the vertical of golf industry. Additionally, DSG owns the design of all proprietary adapters and interfaces. This removes the risk of a potential competitor utilizing the same hardware platform. Competitors could attempt to reverse engineer or copycat the TAG technology and equipment. This risk factor is mitigated by the fact that our product does not rely on a particular technology or hardware platform to be successful but on a very specific vertical software application that is far more difficult to copy (and respectively easier to protect).
The application software contains patent features implemented in every core component of the system. The TAG device runs DSG proprietary firmware incorporating unique data collection and compression algorithms. The web server software which powers the end-user application is also proprietary and incorporates the industry knowledge accumulated through the over 70 years of collective experience of the DSG team.
This approach has given the product line a high level of endurance against technology obsolescence. At any point in time, if a hardware component is discontinued or a better/less expensive hardware platform becomes available, the software application can be easily adapted to operate on the new platform or with the new component. The company benefits from the constant increase of performance and cost reduction of mainstream hardware technology without any additional cost.
The web-based Software-as-a-Service (SaaS) model used by VTS TAG System is optimal for low operating and support costs and rapid-cycle release for software updates. It is also a major factor in eliminating or substantially reducing the need for any end-user premises equipment. Customers have access to the service through any internet connected computer or mobile device, there is no need for a local wireless network on the facility and installation time and cost are minimal.
DSG is positioned to take advantage of mainstream technology and utilize “best of breed” hardware platforms to create new generations of products. Our software is designed to be “portable” to future new platforms with better GPS and wireless technology in order to maintain the Company competitive edge.
All new product development effort of DSG is following the same model: select the best of breed third-party hardware platform, design and produce custom proprietary accessories while focusing the bulk of the development efforts on vertical software application to address a very specific set of end-customer needs.
The latest addition to the TAG family of products, the TAG INFINITY is a perfect example of this development philosophy in action: the main component is a last-generation Android tablet PC wrapped in a custom designed outdoor enclosure containing the power supply and interface components required for the golf environment. The software application is taking advantage of all the advanced high-resolution graphics, touch user interface and computing power of the Android OS delivering a vastly superior user experience compared to competitive systems. The time to market for this product was 30% of how long it took to develop and launch this type of products in the past.
The TAG Control Unit
The company’s flagship product is the TAG Control unit. The TAG can operate as a “stand alone” unit or with one of two displays; the INFINITY 7” alphanumeric display or the INFINITY high definition “touch activated” screen. The TAG is GPS enabled and communicates with the TAG software using cellular GSM networks. Utilizing the cellular networks rather than erecting a local Wi-Fi network assures carrier grade uptime, and vehicle tracking “off- property”. GSM is the de facto global standard for mobile communications.
The TAG unit itself is discreetly installed usually in the nose of the vehicle to give the GPS clear line of site. It is then connected to the vehicle battery and ignition. The property is then mapped using the latest satellite imagery that is graphically enhanced and loaded into the TAG System as a map.
Once installed the vehicle owner utilizes the TAG software to locate the vehicle in real time using any computer, smartphone, or tablet that has an internet connection and perform various management operations.
The operator can use the geo-fencing capabilities to create “zones” on the property where they can control the vehicles behavior such as shutting down a vehicle that is entering a sensitive or dangerous area. The TAG System also monitors the strength of the vehicle’s battery helping to prevent sending out vehicles undercharged batteries which can be an inconvenience for the course and negatively impact the golfer experience.
Features and Benefits:
● 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 in the market.
Features and Benefits:
● Integrated Food and Beverage ordering
● Pro Tips
● Flyover capability
● Daily pin placement display
● Interactive Scorecard with email capability
● Multiple language choices
● No power drain with Smart Battery technology
● Full broadcast messaging capabilities
● Pace of Play display
● Vivid hole graphics
● Option of steering or roof mount
● Generate advertising revenue and market additional services
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:
● demonstrate our products’ competitive advantages;
● develop a comprehensive marketing system; and
● increase our financial resources.
However, there can be no assurance that even if we do these things, we will be able to compete effectively with the other companies in our industry.
We believe that we will be able to compete effectively in our industry because of the versatility, reliability, and relative affordability of our products when compared to those of our competitors. We will attempt to build awareness of our competitive advantages among existing and potential customers through trade shows, sales visits and demonstrations, online marketing, and positive word of mouth advertising.
However, as we are a newly established company relative to our competitors, we face the same problems as other new companies starting up in an industry, such as limited access to capital. Our competitors may be substantially larger and better funded than us, and have significantly longer histories of research, operation and development than us. In addition, they may be able to provide more competitive products than we can and generally be able to respond more quickly to new or emerging technologies and changes in legislation and regulations relating to the industry. Additionally, our competitors may devote greater resources to the development, promotion and sale of their products or services than we do. Increased competition could also result in loss of key personnel, reduced margins or loss of market share, any of which could harm our business.
Our primary competitor in the field of golf course fleet management is GPS Industries, a company that was founded in 1996 by 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
● Product procurement, lead-time management
● Inventory Control
Customer Service
● Training
● Troubleshooting & Support
● Hardware Repairs
Installations
● Content & graphics procurement
● System configurations
● Shipping and Installation
Infrastructure Management
● Communication Servers Management
● Cellular Data Carriers
● Service and administration tools
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.
Material Contracts
On February 10, 2020, we issued a convertible promissory note in the principal amount of $119,600. The note is unsecured, bears interest at 8% per annum, is due on February 10, 2021, and is convertible into common shares of the Company, beginning 180 days from the date of the note up to maturity or repayment, at a price equal to 80% of the average of the lowest two trading prices for the common stock during the fifteen trading days before conversion. Deferred financing fees and original issuance discount on the note were $22,135.
On March 2, 2020, we issued a convertible promissory note in the principal amount of $60,950. The note is unsecured, bears interest at 8% per annum, is due on March 2, 2021, and is convertible into common shares of the Company, beginning 180 days from the date of the note up to maturity or repayment, at a price equal to 80% of the average of the lowest two trading prices for the common stock during the fifteen trading days before conversion. Deferred financing fees and original issuance discount on the note were $10,950.
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 of shares of the Company’s common stock that is equal to 10% of the Company’s shares of common stock 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 allows the holders of the warrants to have the shares of the Company’s common stock underlying the warrants registered 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 April 15, 2020, we issued a convertible promissory note in the principal amount of $60,950. The note is unsecured, bears interest at 8% per annum, is due on April 15, 2021, and is convertible into common shares of the Company, beginning 180 days from the date of the note up to maturity or repayment, at a price equal to 80% of the average of the lowest two trading prices for the common stock during the fifteen trading days before conversion. Deferred financing fees and original issuance discount on the note were $10,950.
On April 17, 2020, the Company received a loan in the principal amount of $29,890 (CDN$40,000) under the Canada Emergency Business Account program. The loan is non-interest bearing and eligible for CDN$10,000 forgiveness if repaid by December 31, 2022. If not repaid by December 31, 2022, the loan bears interest at 5% per annum and is due on December 31, 2025.
On April 21, 2020, the Company received a loan in the principal amount of $29,889 (CDN$40,000) under the Canada Emergency Business Account program. The loan is non-interest bearing and eligible for CDN$10,000 forgiveness if repaid by December 31, 2022. If not repaid by December 31, 2022, the loan bears interest at 5% per annum and is due on December 31, 2025.
On May 21, 2020, the Company received a loan in the principal amount of $30,065 under the Paycheck Protection Program. The loan bears interest at 1% per annum and is due on May 21, 2022 with payments deferred for the first six months of the term.
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.
On August 31, 2020, we issued a convertible promissory note in the principal amount of $166,650 with a 10% original issuance discount totaling $16,650, for net proceeds of $150,000. The note is unsecured, bears interest at 10% per annum, is due and payable on demand, and is convertible into common shares of the Company, at a price equal to the lesser of (a) five cents ($0.05) per share or (b) seventy percent (70%) of the lowest traded price for the Company’s common stock during the fifteen (15) trading days preceding the relevant conversion.
On September 17, 2020, we issued a convertible promissory note in the principal amount of $288,860 with a 10% original issuance discount totaling $28,860, for net proceeds of $260,000. The note is unsecured, bears interest at 10% per annum, is due on June 17, 2021, and is convertible into common shares of the Company at a price equal to the lesser of (a) four cents ($0.04) per share or (b) seventy percent (70%) of the lowest traded price for the Company’s common stock during the fifteen (15) trading days preceding the relevant conversion.
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 CDN$51,552, with additional rent of CDN$1,551 per month for operating expenses. The lease includes a rent-free period with rent payments commencing on November 1, 2020.
On September 30, 2020, we entered into a redeemable stock purchase agreement (the “Series C SPA”) whereby the Company agrees to sell and the Purchaser agrees to purchase, in a series of closings (the “Closings”), up to 200 shares of Series C preferred shares at a price of $1,000 per share. At the First Closing, the Company agrees to issue 250 shares of Series C preferred shares, representing 200 Purchased Shares and 50 Commitment Shares.
On October 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
On June 1, 2018, the Company signed a two-year operating lease agreement with the right to renew for an additional two-year term if written notice is provided within 120 days prior to the expiration of the current term. The annual rent for the premises in Canada is approximately CDN$46,552 and commenced on July 1, 2018. This lease expired on May 31, 2020.
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 CDN$51,552, with additional rent of CDN$1,551 per month for operating expenses. The lease includes a rent-free period with rent payments commencing on November 1, 2020.
On October 13, 2019, we signed a three-year operating lease agreement expiring on November 30, 2022 with the right to renew for an additional two-year term if written notice is provided within 10 months prior to the expiration of the current term. The annual rent for the premises started at approximately $47,400 and commenced on December 1, 2019. On April 1, 2020, the Company terminated this lease.
On July 10, 2020, the Company entered into a two-year operating lease agreement for retail, showroom and warehouse space in Fairfield, CA (the “Fairfield Lease”) 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.
For the year ended December 31, 2019, the Company made gross operating lease payments of $44,875 which are included in general and administration expense.
For the year ended December 31, 2020, the Company made gross operating lease payments of $89,978 which are included in general and administration expense.
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 name, product names, and associated logos, including “DSG TAG”, “TAG Golf”, “ECO TAG”, “TAG Text”, “TAG Touch”, “TAG Turf”, “TAG Commercial” and “TAG Military”. We have not applied to register any trademarks with the U.S. Patent and Trademark Office 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 February 15, 2021, we have fifteen full-time employees and contractors 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.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Form 10-K, including our consolidated financial statements and related notes, before investing in our common stock. If any of the following risks materialize, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the price of our common stock could decline, and you could lose part or all of your investment.
Risks Related to Our Business
We have limited cash on hand and we will require a significant amount of capital to carry out our proposed business plan to import, market and sell electric vehicles, to continue to expand our fleet management technology sales and service operations, and to manufacture, market and sell our new line of PACER golf carts. There is no assurance that we will raise sufficient capital to execute our business plan or to continue to fund operations of our Company. There is substantial doubt as to the ability of our Company to continue as a going concern.
We incurred a comprehensive loss of $6,297,312 and $3,171,164 during the years ended December 31, 2020, and 2021, respectively. Although we had a cash of $1,372,016 as at December 31, 2020, our working capital deficit was $746,341. As at December 31, 2019 we had cash of $25,494 and a working capital deficit of $8,376,433. We believe that we will need significant additional equity financing to execute our business plan and to continue as a going concern, given that, among other things:
● we have begun the importation and homologation of our range of electric vehicles, and we expect to incur significant ramp-up in costs and expenses through the establishment and supply of our dealership network and the fulfillment of anticipated product orders;
● we have endeavored to manufacture and assemble our new line of PACER golf carts in North America, and we anticipate significant ramp-up costs and expenses through the establishment of a manufacturing facility;
● we anticipate that the gross profit generated from the sale of our electric vehicle and golf cart offerings will not be sufficient to cover our operating expenses until we achieve a high volume of sales, and our achieving profitability will depend, in part, on our ability to materially reduce the bill of materials and per unit manufacturing cost of our products; and
● we do not anticipate that we will be eligible to obtain bank loans, or other forms of debt financing on terms that would be acceptable to us.
We anticipate generating a significant loss for the current fiscal year. The report of independent registered public accounting firm on our audited financial statements includes an explanatory paragraph relating to our ability to continue as a going concern.
We expect significant increases in costs and expenses to forestall profits for the foreseeable future, even if we generate increased revenues in the near term. Our recently introduced and planned products might not become commercially successful. If we are to ever achieve profitability we must have a successful introduction and acceptance of our electric vehicles and golf carts, which may not occur. We expect that our operating losses will increase substantially in 2021, and thereafter, and we also expect to continue to incur operating losses and to experience negative cash flows for the next several years.
There is no assurance that any amount raised through this offering will be sufficient to continue to fund the operations of our Company.
We will need additional financing to implement our business plan.
The Company will need additional financing to fully implement its business plan in a manner that not only continues to expand an already established direct-to-consumer approach, but also allows the Company to establish a stronger brand name in all the areas in which it operates. In particular, the Company will need additional financing to:
● Effectuate its business plan and further develop its golf products and service division, and its electric vehicle marketing and distribution division;
● Expand its facilities, human resources, and infrastructure; and
● Increase its marketing efforts and lead generation.
There are no assurances that additional financing will be available on favorable terms, or at all. If additional financing is not available, the Company will need to reduce, defer or cancel development programs, planned initiatives and overhead expenditures. The failure to adequately fund our capital requirements could have a material adverse effect on the Company’s business, financial condition and results of operations. Moreover, the sale of additional equity securities to raise financing will result in additional dilution to the Company’s stockholders and incurring additional indebtedness could involve the imposition of covenants that restrict the Company’s operations.
We currently have negative operating cash flows, and if we are unable to generate positive operating cash flows in the future our viability as an operating business will be adversely affected.
We have made significant up-front investments in research and development, sales and marketing, and general and administrative expenses to rapidly develop and expand our business. We are currently incurring expenditures related to our operations that have generated a negative operating cash flow. Operating cash flow may decline in certain circumstances, many of which are beyond our control. We might not generate sufficient revenues in the near future. Because we continue to incur such significant future expenditures for research and development, sales, marketing, general, and administrative expenses, we may continue to experience negative cash flow until we reach a sufficient level of sales with positive gross margins to cover operating expenses. An inability to generate positive cash flow until we reach a sufficient level of sales with positive gross margins to cover operating expenses or raise additional capital on reasonable terms will adversely affect our viability as an operating business.
To carry out our proposed business plan for the next 12 months to develop, manufacture, sell and service electric vehicles we will require additional capital.
To carry out our proposed business plan for the next 12 months, we estimate that we will need approximately $19.6 million in addition to cash on hand at December 31, 2021. If cash on hand, revenue from the sale of our cars, if any, and cash received upon the exercise of outstanding warrants, if any are exercised, are not sufficient to cover our cash requirements, we will need to raise additional funds through the sale of our equity securities, in either private placements or registered offerings and/or shareholder loans. If we are unsuccessful in raising enough funds through such capital-raising efforts we may review other financing possibilities such as bank loans. Financing might not be available to us or, if available, may not be available on terms that are acceptable to us.
Our ability to obtain the necessary financing to carry out our business plan is subject to a number of factors, including general market conditions and investor acceptance of our business plan. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to us. If we are unable to raise sufficient funds, we will have to significantly reduce our spending, delay or cancel our planned activities or substantially change our current corporate structure. We might not be able to obtain any funding, and we might not have sufficient resources to conduct our business as projected, either of which could mean that we would be forced to curtail or discontinue our operations.
Terms of future financings may adversely impact your investment.
We may have to engage in common equity, debt or preferred stock financing in the future. Your rights and the value of your investment in our securities could be reduced. Interest on debt securities could increase costs and negatively impacts operating results. Preferred stock could be issued in series from time to time with such designation, rights, preferences and limitations as needed to raise capital. The terms of preferred stock could be more advantageous to those investors than to the holders of common shares. In addition, if we need to raise equity capital from the sale of common shares, institutional or other investors may negotiate terms at least as, and possibly more, favorable than the terms of your investment. Common shares which we sell could be sold into any market which develops, which could adversely affect the market price.
Our future growth depends upon consumers’ willingness to adopt our range of electric vehicles.
Our growth highly depends upon the adoption by consumers of, and we are subject to an elevated risk of, any reduced demand for alternative fuel vehicles in general and electric vehicles in particular. If the market for low speed or for high speed electric vehicles does not develop as we expect, or develops more slowly than we expect, our business, prospects, financial condition and operating results will be negatively impacted. The market for alternative fuel vehicles is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, frequent new vehicle announcements and changing consumer demands and behaviors. Factors that may influence the adoption of alternative fuel vehicles, and specifically electric vehicles, include:
● perceptions about electric vehicle quality, safety (in particular with respect to lithium-ion battery packs), design,
performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of electric vehicles;
● the limited range over which electric vehicles may be driven on a single battery charge;
● the decline of an electric vehicle’s range resulting from deterioration over time in the battery’s ability to hold a charge;
● concerns about electric grid capacity and reliability, which could derail our efforts to promote electric vehicles as a practical solution to vehicles which require gasoline;
● the availability of alternative fuel vehicles, including plug-in hybrid electric vehicles;
● the availability of service for electric vehicles;
● volatility in the cost of oil and gasoline;
● government regulations and economic incentives promoting fuel efficiency and alternate forms of energy;
● access to charging stations, standardization of electric vehicle charging systems and consumers’ perceptions about convenience and cost to charge an electric vehicle;
The influence of any of the factors described above may cause current or potential customers not to purchase our electric vehicles, which would materially adversely affect our business, operating results, financial condition and prospects.
The range of our electric vehicles on a single charge declines over time which may negatively influence potential customers’ decisions whether to purchase our vehicles.
The range of our electric vehicles on a single charge declines principally as a function of usage, time and charging patterns. For example, a customer’s use of their vehicle as well as the frequency with which they charge the battery of their vehicle can result in additional deterioration of the battery’s ability to hold a charge. Battery deterioration will be variable as between our various offered vehicles. Such battery deterioration and the related decrease in range may negatively influence potential customer decisions whether to purchase our vehicles, which may harm our ability to market and sell our vehicles.
If we are unable to keep up with advances in electric vehicle technology, we may suffer a decline in our competitive position.
We may be unable to keep up with changes in electric vehicle technology and, as a result, may suffer a decline in our competitive position. Any failure to keep up with advances in electric vehicle technology would result in a decline in our competitive position which would materially and adversely affect our business, prospects, operating results and financial condition. Our research and development efforts may not be sufficient to adapt to changes in electric vehicle technology. As technologies change we plan to upgrade or adapt our vehicles and introduce new models to continue to provide vehicles with the latest technology and, in particular, battery cell technology. However, our vehicles may not compete effectively with alternative vehicles if we are not able to source and integrate the latest technology into our vehicles. For example, we do not manufacture battery cells which makes us depend upon other suppliers of battery cell technology for our battery packs.
Demand in the vehicle industry is highly volatile.
Volatility of demand in the vehicle industry may materially and adversely affect our business, prospects, operating results and financial condition. The markets in which we will be competing have been subject to considerable volatility in demand in recent periods. Demand for automobile sales depends to a large extent on general, economic, political and social conditions in a given market and the introduction of new vehicles and technologies. As a new start-up manufacturer we will have fewer financial resources than more established vehicle manufacturers to withstand changes in the market and disruptions in demand.
We depend on third-parties for our electric vehicle manufacturing needs.
The delivery of our licensed vehicles to future customers and the revenue derived therefrom depends on the ability of our suppliers, including Jonway and Skywell, to fulfil their obligations under their respective license and distribution agreement with our company. Fulfilment of these obligations is outside of our control and depends on a variety of factors, including their respective operations, financial condition and geopolitical and economic risks that could affect China. The novel coronavirus (COVID-19) pandemic or measures taken by the Chinese government relating thereto may also result in non-performance by our suppliers. If they are unable to fulfil their obligations or are only able to partially fulfil their obligations under our existing agreements with them, or if they are forced to terminate our agreements with them, either as a result of the coronavirus outbreak, the Chinese government’s measures relating thereto or otherwise, we will not be able to produce or sell our licensed vehicles in the volumes anticipated and on the timetable that we anticipate, if at all.
The impact of the novel coronavirus (COVID-19) pandemic on the global economy and our operations remains uncertain, which could have a material adverse impact on our business, results of operations and financial condition and on the market price of our common shares.
In December 2019, a strain of novel coronavirus (now commonly known as COVID-19) was reported to have surfaced in Wuhan, China. COVID-19 has since spread rapidly throughout many countries, and, on March 11, 2020, the World Health Organization declared COVID-19 to be a pandemic. In an effort to contain and mitigate the spread of COVID-19, many countries, including the United States, Canada and China, have imposed unprecedented restrictions on travel, and there have been business closures and a substantial reduction in economic activity in countries that have had significant outbreaks of COVID-19. Although our manufacturing partners now report that their operations have largely recovered, significant uncertainty remains as to the potential impact of the COVID-19 pandemic on our and our partners’ operations (including, without limitation, staffing levels), supply chains for parts and sales channels for our products, and on the global economy as a whole. It is currently not possible to predict how long the pandemic will last or the time that it will take for economic activity to return to prior levels. The COVID-19 pandemic has resulted in significant financial market volatility and uncertainty in recent weeks. A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to access capital, on our business, results of operations and financial condition, and on the market price of our common shares.
We do not currently have all arrangements in place that are required to fully execute our business plan.
To sell our electric vehicles and PACER golf carts as envisioned we must enter into certain additional agreements and arrangements that are not currently in place. These include entering into agreements with distributors, arranging for the transportation and storage for our planned electric vehicles, arranging for a facility for the assembly of our electric vehicles, and obtaining battery and other essential supplies in the quantities that we require. If we are unable to enter into such agreements, or are only able to do so on terms that are unfavorable to us, we may not be able to fully carry out our business plans.
We are subject to numerous environmental and health and safety laws and any breach of such laws may have a material adverse effect on our business and operating results.
We are subject to numerous environmental and health and safety laws, including statutes, regulations, bylaws and other legal requirements. These laws relate to the generation, use, handling, storage, transportation and disposal of regulated substances, including hazardous substances (such as batteries), dangerous goods and waste, emissions or discharges into soil, water and air, including noise and odors (which could result in remediation obligations), and occupational health and safety matters, including indoor air quality. These legal requirements vary by location and can arise under federal, provincial, state or municipal laws. Any breach of such laws and/or requirements would have a material adverse effect on our Company and its operating results.
Our vehicles are subject to motor vehicle standards and the failure to satisfy such mandated safety standards would have a material adverse effect on our business and operating results.
All vehicles sold must comply with federal, state and provincial motor vehicle safety standards. In both Canada and the United States vehicles that meet or exceed all federally mandated safety standards are certified under the federal regulations. In this regard, Canadian and U.S. motor vehicle safety standards are substantially the same. Rigorous testing and the use of approved materials and equipment are among the requirements for achieving federal certification. Failure by us to have the SOLO, the Tofino or any future model EV satisfy motor vehicle standards would have a material adverse effect on our business and operating results.
If we are unable to reduce and adequately control the costs associated with operating our business, including our costs of manufacturing, sales and materials, our business, financial condition, operating results and prospects will suffer.
If we are unable to reduce and/or maintain a sufficiently low level of costs for designing, manufacturing, marketing, selling and distributing and servicing our electric vehicles relative to their selling prices, our operating results, gross margins, business and prospects could be materially and adversely impacted.
We have very limited experience servicing our vehicles. If we are unable to address the service and warranty requirements of our future customers our business will be materially and adversely affected.
If we are unable to address the service requirements of our future customers our business and prospects will be materially and adversely affected. In addition, we anticipate the level and quality of the service we will provide our customers will have a direct impact on the success of our future vehicles. If we are unable to offer satisfactory service to our customers, our ability to generate customer loyalty, grow our business and sell additional vehicles could be impaired.
We will continue to encounter substantial competition in our business.
The Company believes that existing and new competitors will continue to improve their products and services, as well as introduce new products and services with competitive price and performance characteristics. The Company expects that it must continue to innovate, and to invest in product development and productivity improvements, to compete effectively in the several markets in which the Company participates. The Company’s competitors could develop a more efficient product or service or undertake more aggressive and costly marketing campaigns than those implemented by the Company, which could adversely affect the Company’s marketing strategies and have an adverse effect on the Company’s business, financial condition and results of operations.
Important factors affecting the Company’s current ability to compete successfully include:
● lead generation and marketing costs;
● service delivery protocols;
● branded name advertising; and
● product and service pricing.
In periods of reduced demand for the Company’s products and services, the Company can either choose to maintain market share by reducing product and service pricing to meet the competition, or maintain its product and service pricing, which would likely sacrifice market share. Sales and overall profitability may be reduced in either case. In addition, there can be no assurance that additional competitors will not enter the Company’s existing markets, or that the Company will be able to continue to compete successfully against its competition.
The unavailability, reduction or elimination of government and economic incentives could have a material adverse effect on our business, financial condition, operating results and prospects.
Any reduction, elimination or discriminatory application of government subsidies and economic incentives that are offered to purchasers of EVs or persons installing home charging stations, the reduced need for such subsidies and incentives due to the perceived success of the electric vehicle, fiscal tightening or other reasons may result in the diminished competitiveness of the alternative fuel vehicle industry generally or our electric vehicles in particular. This could materially and adversely affect the growth of the alternative fuel automobile markets and our business, prospects, financial condition and operating results.
If we fail to manage future growth effectively, we may not be able to market and sell our vehicles successfully.
Any failure to manage our growth effectively could materially and adversely affect our business, prospects, operating results and financial condition. We plan to expand our operations in the near future in connection with the planned marketing and sale of our licensed vehicles and our PACER golf carts. Our future operating results depend to a large extent on our ability to manage this expansion and growth successfully. Risks that we face in undertaking this expansion include:
● training new personnel
● forecasting production, sales and revenue;
● controlling expenses and investments in anticipation of expanded operations;
● establishing or expanding design, manufacturing, sales and service facilities;
● implementing and enhancing administrative infrastructure, systems and processes;
● addressing new markets; and
● establishing international operations.
We intend to continue to hire a number of additional personnel, including design and manufacturing personnel and service technicians, for our electric vehicles and golf carts. Competition for individuals with experience in designing, manufacturing and servicing electric vehicles is intense, and we may not be able to attract, assimilate, train or retain additional highly qualified personnel in the future. The failure to attract, integrate, train, motivate and retain these additional employees could seriously harm our business and prospects.
Our business may be adversely affected by labor and union activities.
Although none of our employees are currently represented by a labor union, it is common throughout the automobile industry generally for many employees at automobile companies to belong to a union, which can result in higher employee costs and increased risk of work stoppages. We will also directly and indirectly depend upon other companies with unionized work forces, such as parts suppliers and trucking and freight companies, and work stoppages or strikes organized by such unions could have a material adverse impact on our business, financial condition or operating results. If a work stoppage occurs within our business, or that of our key suppliers, it could delay the manufacture and sale of our electric vehicles and have a material adverse effect on our business, prospects, operating results or financial condition. Additionally, if we expand our business to include full in-house manufacturing of our vehicles, our employees might join or form a labor union and we may be required to become a union signatory.
We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.
We may become subject to product liability claims, which could harm our business, prospects, operating results and financial condition. The automobile industry experiences significant product liability claims and we face inherent risk of exposure to claims in the event our vehicles do not perform as expected or malfunction resulting in personal injury or death. Our risks in this area are particularly pronounced given we have limited field experience of our vehicles. A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product liability claim could generate substantial negative publicity about our vehicles and business and inhibit or prevent commercialization of other future vehicle candidates which would have a material adverse effect on our brand, business, prospects and operating results. We plan to maintain product liability insurance for all our vehicles, but any such insurance might not be sufficient to cover all potential product liability claims. Any lawsuit seeking significant monetary damages either in excess of our coverage or outside of our coverage may have a material adverse effect on our reputation, business and financial condition. We may not be able to secure additional product liability insurance coverage on commercially acceptable terms or at reasonable costs when needed, particularly if we do face liability for our products and are forced to make a claim under our policy.
We rely on key executive officers, and their knowledge of our business and technical expertise would be difficult to replace.
We are highly dependent on our executive officer. If the Company’s senior executive or other key personnel are unable or unwilling to continue in their present positions, the Company may not be able to replace them easily or at all, and the Company’s business may be disrupted. Competition for senior management personnel is intense, the pool of qualified candidates is very limited, and we may not be able to retain the services of our senior executives or attract and retain high-quality senior executives in the future. Such failure could have a material adverse effect on the Company’s business, financial condition and results of operations.
We may never pay dividends to our common stockholders.
The Company currently intends to retain its future earnings to support operations and to finance expansion; accordingly, the Company does not anticipate paying any cash dividends in the foreseeable future.
The declaration, payment and amount of any future dividends on common stock will be at the discretion of the Company’s Board of Directors, and will depend upon, among other things, earnings, financial condition, capital requirements, level of indebtedness and other considerations the Board of Directors considers relevant. There is no assurance that future dividends will be paid on common stock or, if dividends are paid, the amount thereof.
Our common stock is quoted through the OTC Markets, which may have an unfavorable impact on our stock price and liquidity.
The Company’s common stock is quoted on the OTC Markets, which is a significantly more limited market than the New York Stock Exchange or NASDAQ. The trading volume may be limited by the fact that many major institutional investment funds, including mutual funds, follow a policy of not investing in OTC Markets stocks and certain major brokerage firms restrict their brokers from recommending OTC Markets stocks because they are considered speculative and volatile.
The trading volume of the Company’s common stock has been and may continue to be limited and sporadic. As a result, the quoted price for the Company’s common stock on the OTC Markets may not necessarily be a reliable indicator of its fair market value.
Additionally, the securities of small capitalization companies may trade less frequently and in more limited volume than those of more established companies. The market for small capitalization companies is generally volatile, with wide price fluctuations not necessarily related to the operating performance of such companies.
Our stock price has been volatile, and your investment in our common stock could suffer a decline in value.
There has been significant volatility in the market price and trading volume of equity securities, which is unrelated to the financial performance of the companies issuing the securities. These broad market fluctuations may negatively affect the market price of our common stock. We have, and may in the future, incur rapid and substantial increases or decreases in our stock price that do not coincide in timing with the disclosure of news or developments by us. The stock market in general, and the market for mining companies in particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. You may not be able to resell your shares at or above the price you pay for those shares due to fluctuations in the market price of our Common Stock caused by changes in our operating performance or prospects and other factors.
Some specific factors that may have a significant effect on our Common Stock market price include:
● actual or anticipated fluctuations in our operating results or future prospects;
● our announcements or our competitors’ announcements of new products;
● the public’s reaction to our press releases, our other public announcements and our filings with the SEC;
● strategic actions by us or our competitors, such as acquisitions or restructurings;
● new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
● changes in accounting standards, policies, guidance, interpretations or principles;
● changes in our growth rates or our competitors’ growth rates;
● developments regarding our patents or proprietary rights or those of our competitors;
● our inability to raise additional capital as needed;
● substantial sales of Common Stock underlying warrants and preferred stock;
● concern as to the efficacy of our products;
● changes in financial markets or general economic conditions;
● sales of Common Stock by us or members of our management team; and
● changes in stock market analyst recommendations or earnings estimates regarding our Common Stock, other comparable companies or our industry generally.
Our future sales of our Common Stock could adversely affect its price and our future capital-raising activities could involve the issuance of equity securities, which would dilute shareholders’ investments and could result in a decline in the trading price of our Common Stock.
We may sell securities in the public or private equity markets if and when conditions are favorable, even if we do not have an immediate need for additional capital at that time. Sales of substantial amounts of our common stock, or the perception that such sales could occur, could adversely affect the prevailing market price of our common stock and our ability to raise capital. We may issue additional common stock in future financing transactions or as incentive compensation for our executive management and other key personnel, consultants and advisors. Issuing any equity securities would be dilutive to the equity interests represented by our then-outstanding shares of common stock. The market price for our common stock could decrease as the market takes into account the dilutive effect of any of these issuances. Furthermore, we may enter into financing transactions at prices that represent a substantial discount to the market price of our common stock. A negative reaction by investors and securities analysts to any discounted sale of our equity securities could result in a decline in the trading price of our common stock.
Our common stock is classified as a “penny stock.”
Rule 3a51-1 of the Securities Exchange Act of 1934 establishes the definition of a “penny stock,” for purposes relevant to us, as any equity security that has a minimum bid price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to a limited number of exceptions which are not available to us. It is likely that the Company’s common stock will be considered to be a penny stock for the immediately foreseeable future.
For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person’s account for transactions in penny stocks and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the investor, make a reasonable determination that transactions in penny stocks are suitable for that person, and make a reasonable determination that that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also provide disclosure to its customers, prior to executing trades, about the risks of investing in penny stocks in both public offerings and in secondary trading, the commissions payable to both the broker-dealer and the registered representative, and the rights and remedies available to an investor in cases of fraud in penny stock transactions.
Because of these regulations, broker-dealers may not wish to furnish the necessary paperwork and disclosures and/or may encounter difficulties in their attempt to buy or sell shares of the Company’s common stock, which may in turn affect the ability of Company stockholders to sell their shares.
Accordingly, the penny stock classification adversely affects any market liquidity for the Company’s common stock and subjects the shares to certain risks associated with trading in penny stocks. These risks include difficulty for investors in purchasing or disposing of shares, difficulty in obtaining accurate bid and ask quotations, difficulty in establishing the market value of the shares, and a lack of securities analyst coverage.
Our success depends on attracting and retaining key personnel.
Our future plans could be harmed if we are unable to attract or retain key personnel, and our future success will depend, in part, on our ability to attract and retain qualified management and technical personnel. Equally, our success depends on the ability of our management and employees to interpret market data correctly and to interpret and respond to economic market and other conditions in order to locate and adopt appropriate investment opportunities, monitor such investments, and ultimately, if required, to successfully divest such investments. Further, no assurance can be given that our key personnel will continue their association or employment with us or that replacement personnel with comparable skills can be found. We have sought to and will continue to ensure that management and any key employees are appropriately compensated, however, their services cannot be guaranteed. If we are unable to attract and retain key personnel, our business may be adversely affected.
We do not know whether we will be successful in hiring or retaining qualified personnel, and our inability to hire qualified personnel on a timely basis, or the departure of key employees, could materially and adversely affect our development and profitable commercialization plans, our business prospects, results of operations, and financial condition.
Should we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud, which could harm our brand and operating results. Our compliance with the annual internal control report requirement for each fiscal year will depend on the effectiveness of our financial reporting and data systems and controls. Inferior internal controls could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock and our access to capital. In addition, our internal control systems rely on people trained in the execution of the controls. Loss of these people or our inability to replace them with similarly skilled and trained individuals or new processes in a timely manner could adversely impact our internal control mechanisms.
The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members and officers. Compliance with these rules and regulations increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources.
Protecting our intellectual property is necessary to protect our brand.
We may not be able to protect important intellectual property and we could incur substantial costs defending against claims that our products infringe on the proprietary rights of others. Our ability to compete effectively will depend, in part, on our ability to protect our proprietary system-level technologies, systems designs, and manufacturing processes.
We will rely on patents, trademarks, and other policies and procedures related to confidentiality to protect our intellectual property. However, some of our intellectual property is not covered by any patent or patent application. We could incur substantial costs in prosecuting or defending patent infringement suits or otherwise protecting our intellectual property rights. While we have attempted to safeguard and maintain our proprietary rights, we do not know whether we have been or will be completely successful in doing so. Moreover, patent applications and enforcement, thereof, filed in foreign countries may be subject to laws, rules and procedures that are substantially different from those of the United States, and any resulting foreign patents may be difficult and expensive to enforce. We could incur substantial costs in prosecuting or defending trademark infringement suits.
Further, our competitors may independently develop or patent technologies or processes that are substantially equivalent or superior to ours. In the event we are found to be infringing third party patents, we could be required to pay substantial royalties and/or damages, and we do not know whether we will be able to obtain licenses to use such patents on acceptable terms, if at all.
Failure to obtain needed licenses could delay or prevent the development, manufacture, or sale of our products, and could necessitate the expenditure of significant resources to develop or acquire non-infringing intellectual property.
Asserting, defending and maintaining our intellectual property rights could be difficult and costly and failure to do so may diminish our ability to compete effectively and may harm our operating results. As a result, we may need to pursue legal action in the future to enforce our intellectual property rights, to protect our trade secrets and domain names, and to determine the validity and scope of the proprietary rights of others. If third parties prepare and file applications for trademarks used or registered by us, we may oppose those applications and be required to participate in proceedings to determine the priority of rights to the trademark.
Similarly, competitors may have filed applications for patents, may have received patents and may obtain additional patents and proprietary rights relating to products or technology that block or compete with ours. We may have to participate in interference proceedings to determine the priority of invention and the right to a patent for the technology.
Confidentiality agreements to which we are party may be breached, and we may not have adequate remedies for any breach. Also, our trade secrets may also be known without breach of such agreements or may be independently developed by competitors. Inability to maintain the proprietary nature of our technology and processes could allow our competitors to limit or eliminate any competitive advantages we may have.
As part of our business strategy, we intend to consider acquisitions of companies, technologies and products that we believe could improve our ability to compete in our core markets or allow us to enter new markets. Acquisitions, involve numerous risks, any of which could harm our business, including, difficulty in integrating the technologies, products, operations and existing contracts of a target company and realizing the anticipated benefits of the combined businesses; difficulty in supporting and transitioning customers, if any, of the target company; inability to achieve anticipated synergies or increase the revenue and profit of the acquired business; potential disruption of our ongoing business and distraction of management; the price we pay or other resources that we devote may exceed the value we realize; or the value we could have realized if we had allocated the purchase price or other resources to another opportunity and inability to generate sufficient revenue to offset acquisition costs.
If we finance acquisitions by issuing equity securities, our existing stockholders may be diluted; and as a result, if we fail to properly evaluate acquisitions or investments, we may not achieve the anticipated benefits of any such acquisitions, and we may incur costs in excess of what we anticipate.
Risks Relating to Ownership of Our Securities
If we issue additional shares in the future our existing shareholders will experience dilution.
Our certificate of incorporation authorizes the issuance of up to 350,000,000 shares of common stock with a par value of $0.001. Our board of directors may choose to issue some or all of such shares to acquire one or more businesses or to provide additional financing in the future. The issuance of any such shares will result in a reduction of the book value and market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will cause a reduction in the proportionate ownership and voting power of all current shareholders. Further, such issuance may result in a change of control of our corporation.
Trading on the OTC Markets may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.
Our common stock is quoted on OTC Markets. Trading in stock quoted on OTC Markets is often thin and characterized by wide fluctuations in trading prices due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, OTC Markets is not a stock exchange, and trading of securities on the OTC Markets is often more sporadic than the trading of securities listed on a quotation system like NASDAQ or a stock exchange like the American Stock Exchange. Accordingly, our shareholders may have difficulty reselling any of their shares.
Our stock is a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations and FINRA’s sales practice requirements, which may limit a stockholder’s ability to buy and sell our stock.
Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.
FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission (see above for a discussion of penny stock rules), FINRA rules require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
Our business is subject to changing regulations related to corporate governance and public disclosure that have increased both our costs and the risk of noncompliance.
Because our common stock is publicly traded, we are subject to certain rules and regulations of federal, state and financial market exchange entities charged with the protection of investors and the oversight of companies whose securities are publicly traded. These entities, including the Public Company Accounting Oversight Board, the SEC and FINRA, have issued requirements and regulations and continue to develop additional regulations and requirements in response to corporate scandals and laws enacted by Congress, most notably the Sarbanes-Oxley Act of 2002. Our efforts to comply with these regulations have resulted in, and are likely to continue resulting in, increased general and administrative expenses and diversion of management time and attention from revenue-generating activities to compliance activities. Because new and modified laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
Our principal executive office is located at 207 - 15272 Croydon Drive, Surrey, BC, V3Z 0Z5 Canada, where we lease approximately 2,864 square feet of office space. On July 10, 2020, the Company signed a three-year operating lease agreement which commenced on August 1, 2020 and expires on July 31, 2023 with the right to renew for two additional two-year terms, if written notice is provided no later than 9 months prior to the expiration of the current term.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
On September 7, 2016, Chetu Inc. has filed a Complaint for Damage in Florida to recover unpaid invoice amounts of $27,335 plus interest of $4,939. The invoice was not paid due to a dispute that the Company did not think that vendor had delivered the service according to the agreement between the two parties. As at December 31, 2020, included in trade and other payables is $47,023 (December 31, 2019 - $40,227) related to this unpaid invoice, interest and legal fees.
On May 24, 2017, the Company received a notice of default from Coastal Investment Partners LLC (“Coastal”), on three 8% convertible promissory notes issued by the Company in aggregate principal amount of $261,389 and commenced a lawsuit on June 12, 2017 in the United States District Court, Southern District of New York. Coastal alleges that the Company failed to deliver shares of common stock underlying the Coastal notes, and thus giving rise to an event of default. Coastal seeks damages in excess of $250,000 for breach of contact damages, and legal fees incurred by Coastal with respect to the lawsuit. On June 13, 2017, Coastal filed a complaint and motion for a preliminary injunction seeking conversion of the principal amount of a note issued by it to the Company into common stock of the Company. The Court issued an Order to Show Cause as to why a preliminary injunction should not be issued on June 27, 2017, and the Company opposed Coastal’s motion. A hearing on the motion for preliminary injunction was held on July 26, 2017. For the following reasons, the Court denied Coastal’s motion for a preliminary injunction. The Company also filed a cross motion to dismiss on the grounds that the $72,500 Note violates New York’s criminal usury law. The Court did not address this motion at that time and has set a separate briefing schedule for it. This action is still pending. On December 31, 2020, the Company entered into a Settlement Agreement with Coastal for full and final satisfaction of its claims and all outstanding principal debt and accrued interest for $250,000 paid in cash and 200,000 shares of common stock fair valued at $268,000. As at December 31, 2020, $250,000 is included in loans and accrued interested and $268,000 is included in shares to be issued in relation to the settlement. The Company paid cash of $250,000 on February 11, 2021, in satisfaction of the agreement.
On October 10, 2017, a vendor filed a complaint for Breach of Contract with Superior Court of the State of California. The Complainant is alleging that it is contractually owed 1,848,130 shares of the Company’s common stock and is seeking damages of $270,000. In addition, a related vendor filed in the same filing a complaint for $72,000 as part of a consulting agreement the Company executed. Subsequent to year end, the Company reached a settlement of which the terms have not, as yet, occurred. As at December 31, 2020, included in accrued liabilities is a contingent liability of $115,000 for the expected financial impact of the settlement .
On April 9, 2018, we received a share-reserve increase letter from JSJ Investments Inc. (“JSJ”) pursuant to the terms of a 10% convertible promissory note issued to the Company in the principal amount of $135,000. On April 24, 2018, the Company received a notice of default from JSJ for failure to comply with the share-reserve increase and on April 30, 2018 demanded payment in full of the default amount totaling $172,845. On May 7, 2018, JSJ commenced a lawsuit in the United States District Court, District of Dallas County, Texas. JSJ alleged that the Company failed to comply with the share-reserve increase letter, thus giving rise to an event of default, and failed to pay the outstanding default amount due under the terms of the note. JSJ sought damages in excess of $200,000 but not more than $1,000,000, consisting of the principal amount of the note, default interest, and legal fees incurred by JSJ with respect to the lawsuit. On August 31, 2018 final judgement was entered against DSG Global in the amount of $187,908, which includes $172,846 in damages, $2,450 in legal fees, $1,982 in pre-judgement interest and $10,631 in post-judgment interest. The appeal period expired on September 30, 2018. As at the date of this Annual Report, the plaintiff is seeking to enforce the Texas judgement against DSG Global in British Columbia, Canada. As at September 30, 2020, the principal balance and accrued interest on this convertible note is included on the consolidated balance sheet under convertible notes payable. In November 2020, the Company entered into a Settlement Agreement with JSJ for full and final satisfaction of its claims for $100,000 paid in cash on or before November 10, 2020. Upon receipt of the Settlement Payment, JSJ agreed to provide (a) a settlement agreement and release of all its claims against the Company; and (b) a consent dismissal order in B.C. Supreme Court Action No. 1911876 on a “without costs” basis, The Company paid cash of $100,000 on November 10, 2020 in satisfaction of the agreement.
We may, from time to time, be party to litigation and subject to claims incident to the ordinary course of business. As our growth continues, we may become party to an increasing number of litigation matters and claims. The outcome of litigation and claims cannot be predicted with certainty, and the resolution of any future matters could materially affect our future financial position, results of operations or cash flows.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information for Common Stock
Our common stock is currently quoted on the OTC Market’s OTCQB Venture Marketplace (“OTCQB”) under the symbol “DSGT”. The following table sets forth for the periods indicated the high and low bid price per share of our common stock as reported on the OTCQB. The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions:
OTC Markets Group Inc. OTCQB (1)
Quarter Ended High
$
Low
$
December 31, 2020 1.34 0.11
September 30, 2020 0.18 0.01
June 30, 2020 0.20 0.04
March 31, 2020 1.00 0.07
December 31, 2019 1.64 0.76
September 30, 2019 1.50 0.29
June 30, 2019 3.36 1.00
March 31, 2019 3.60 1.18
(1) Over-the-counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions.
Holders of Record
As of December 31, 2020, there were 92 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
Dividend Policy
We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our common stock in the foreseeable future, if at all. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We did not purchase any of our shares of common stock or other securities during 2020 and 2019.
Recent Sale of Unregistered Securities
Not applicable.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. SELECTED FINANCIAL DATA
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and the related notes to the consolidated financial statements included later in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs and expectations that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”
Business Overview
DSG Global, Inc., under the brand name Vantage Tag Systems Inc. (“VTS”) provides patented electronic tracking systems and fleet management solutions to golf courses and other avenues that allow for remote management of the course’s fleet of golf carts, turf equipment and utility vehicles. Their clients use VTS’s unique technology to significantly reduce operational costs, improve the efficiency plus profitability of their fleet operations, increase safety, and enhance customer satisfaction. VTS has grown to become a leader in the category of Fleet Management in the golf industry, with its technology installed in vehicles worldwide. VTS is now aggressively branching into several new streams of revenue, through programmatic advertising, licensing and distribution, as well as expanding into Commercial Fleet Management, PACER a single rider golf cart and Agricultural applications. Additional information is available at http://vantage-tag.com/
Ready Golf Ready: Our roots as a company are in golf, and our technology is changing the way golf is being played and driving new revenue for courses.
● Vantage TAG equipped golf carts enhance fleet management.
● Single rider carts speed up pace of play and drive rental revenue.
● Onboard touchscreens drive revenue and offer an enhanced course experience.
● Combination of technology and single rider carts has the ability to decrease average play time to 2:20 and drive numerous extra plays per hour.
● Our “Pennies A Day, Pennies A Round” model provides easy entry to leasing single-rider vehicles.
In Development: DSG’s Infinity On-Board Screen Offers Gaming Revenue Potential
● In the next 2 years, sports betting will generate $10B / licensed in 20+ States.
● In negotiations with leading mobile gaming developers.
● DSG’s existing infinity screens work with current gaming technology.
Business Unit Overview: On Board Media
● 38,000 courses globally.
● 26,000 courses capable of installing the DSG TAG SYSTEM with the TAG and INFINITIY.
● Courses with INFINITY screens in carts can generate $90,000 - $110,000 in additional revenue.
● Screens for free and own revenue generated by 250 golf courses.
● DSG single-rider golf cars are available in any quantity for most courses on a revenue share basis with no upfront cost to the golf course.
● Programmatic Advertising has the ability to increase revenue 4x more than standard advertising, an average increase of $200,000 - $300,000 per course.
Business Unit Overview: TAG / Fleet Management Vantage Golf Potential:
● 38,000 courses globally.
● Million golf carts in the world market.
● DSG Tech on 300 courses now, with an additional 500 courses added in 2020 driving $15 million in sales.
● Key component of our “Pennies A Day, Pennies A Round” program.
Vantage e-Rickshaw Potential:
● Global three-wheelers market is projected to reach $39.9 billion by 2024.
● 11,000 new e-Rickshaws hit the streets every month, with annual sales expected to increase about 9 percent by 2021.
● Research on car-data-monetization trends and characteristics suggests that this value pool could be as large as $750 billion by 2030.
● DSG Global, Inc. has a strategic partnership in China to integrate Vantage TAG Systems with EVs, incorporating the Company’s advanced fleet management capabilities.
Our most recent product that is used to increase the Pace of Play on the course up to 90 minutes per round is the RAPTOR. Our 3-wheel single rider allows the course to revenue share with VTS as the RAPTOR is put on the course free of charge and then allows the course to revenue share with VTS along the way. Each seat is rented to the customers for minimum $25 per round.
Reverse Acquisition
DSG Global, Inc. (formerly Boreal Productions Inc.) was incorporated under the laws of the State of Nevada on September 24, 2007. We were formed to option feature films and TV projects to be packaged and sold to movie studios and production companies.
In January 2015, we changed our name to DSG Global, Inc. and effected a one-for-three reverse stock split of our issued and outstanding common stock in anticipation of entering in a share exchange agreement with DSG TAG Systems, Inc., a corporation incorporated under the laws of the State of Nevada on April 17, 2008 and extra provincially registered in British Columbia, Canada in 2008.
On April 13, 2015, we entered into a share exchange agreement with 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 December 31, 2020.
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.
Factors Affecting Our Performance
We believe that the growth of our business and our future success depend on various opportunities, challenges, and other factors, including the following:
Inventory Sourcing
In order to successfully deliver products, increase sales, and maintain customer satisfaction, we continue to source new, reliable suppliers of our hardware units and components at competitive prices. Presently, we out-source our INFINITY and TAG suppliers in China, which continues to provide us with higher quality, newer technology at competitive pricing.
In addition, DSG is currently in negotiations with a telecommunications provider to provide new technology in hardware and wireless access. However, there is no guarantee that we will conclude any agreement in this regard.
Competition
We compete with a number of established producers and distributors of vehicle fleet management systems, as well as producers of non-golf specific utility vehicle fleet management systems. Many of our competitors have longer operating histories, better brand recognition and greater financial resources than we do. In order for us to successfully compete in our industry we must demonstrate our products’ competitive advantages, develop a comprehensive marketing strategy, and increase our financial resources.
We believe that we will be able to compete effectively in our industry because of the versatility, reliability, and relative affordability of our products when compared to those of our competitors. We will attempt to build awareness of our competitive advantages among existing and potential customers through trade shows, sales visits and demonstrations, online marketing, and positive word of mouth advertising. However, there can be no assurance that even if we do these things, we will be able to compete effectively with the other companies in our industry.
Additional Capital
We require additional capital to continue to develop software and products, meet our contractual obligations, and execute our business plan. There can be no assurances that we will be able to raise additional capital on acceptable terms or at all, which would adversely affect our ability to achieve our business objectives.
Components of Our Results of Operations
Revenue
We derive revenue from four different sources, as follows:
Systems sales revenue, which consists of the sales price paid by those customers who purchase 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.
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 Consolidated Financial Statements included in Part I, Item 1 of this Form 10-K.
Cost of Revenue
Our cost of revenue consists primarily of hardware purchases, wireless data fees, mapping, installation costs, freight expenses and inventory adjustments.
Hardware purchases. Our equipment purchases consist primarily of TAG system control units, TEXT display, and 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.
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 tables set forth our consolidated results of operations as a percentage of revenue for the periods presented:
For the year ended
December 31, 2020
December 31, 2019
Revenue
100.0 %
100.0 %
Cost of revenue
45.5 %
67.8 %
Gross profit
54.5 %
32.2 %
Operating expenses
Compensation expense
240.4 %
137.3 %
General and administration expense
374.4 %
63.4 %
Warranty recovery
- %
- %
Bad debt
1.9 %
4.7 %
Depreciation and amortization expense
0.8 %
0.3 %
Total operating expense
617.5 %
205.6 %
Loss from operations
(563.0 )%
(173.4 )%
Other income (expense)
Foreign currency exchange
2.8 %
2.7 %
Change in fair value of derivative instruments
339.2 %
19.4 %
Loss on extinguishment of debt
(322.6 )%
47.2 %
Finance costs
(142.3 )%
(115.8 )%
Total other expense
(123.0 )%
(46.6 )%
Loss before income taxes
(686.0 )%
(220.0 )%
Provision for income taxes
- %
- %
Net loss
(686.0 )%
(220.0 )%
Other comprehensive income (expense)
Foreign currency translation adjustments
(13.4 )%
(6.6 )%
Comprehensive loss
(699.3 )%
(226.6 )%
Comparison of the Years Ended December 31, 2020 and 2019
Revenue
For the Years Ended
December 31,
% Change
Revenue $ 900,482 $ 1,399,420 (35.7 )%
Revenue decreased by $498,938 or 35.7%, for the year ended December 31, 2020 as compared to year ended December 31, 2019. Sales decreased for the year ended, year over year, as the result of challenges related to COVID-19 and normal customer attrition. This compares to the comparative period in which the Company experienced growth as a result of aggressive marketing and installation of the new Infinity suite of products.
Cost of Revenue
For the Years Ended
December 31,
% Change
Cost of revenue $ 409,793 $ 948,273 (56.8 )%
Cost of revenue increased by $538,480 or 56.8%, for the year ended December 31, 2020 as compared to the year ended December 31, 2019. The table below outlines the differences in detail:
For the Years Ended
December 31, 2020 December 31, 2019 Difference % Difference
Cost of goods $ 319,185 $ 857,507 $ (538,322 ) (62.8 )
Labour - 9,016 (9,016 ) (100.0 )
Mapping & freight costs 26,795 24,442 2,353 9.6
Wireless fees 63,813 60,086 3,727 6.2
Inventory adjustments & write offs - (2,778 ) 2,7781 (100.0 )
$ 409,793 $ 948,273 $ (538,480 ) (56.8 )
Cost of sales decreased for the years ended, year over year, primarily due to challenges related to COVID-19 and normal customer attrition. This decrease was consistent with the decrease in revenue for the same period.
Compensation Expense
For the Years Ended
December 31,
% Change
Compensation expense $ 2,164,776 $ 1,921,078 12.7 %
Compensation expense increased by $243,698 or 12.7%, for the year ended December 31, 2020 as compared to the year ended December 31, 2019 primarily as a result of non-cash warrants and shares issued for consulting services during the period as well as due to an increase in the CEO’s wage of $100,000 for the fiscal year 2020.
General and Administration Expense
For the Years Ended
December 31,
% Change
General & administration expense $ 3,371,325
$ 886,592 280.3 %
General & administration expense increased by $2,484,733 or 280.3% for the year ended December 31, 2020 as compared to the year ended December 31, 2019. The table below outlines the differences in detail:
For the Years Ended
December December Difference % Difference
Accounting & legal $ 413,268 $ 187,144 $ 226,124 120.8 %
Marketing & advertising 2,043,735
73,281 1,970,454
2,688.9
%
Subcontractor & commissions 401,913 181,571 220,342 121.4 %
Hardware 5,243 13,487 (8,244 ) (61.1 )%
Office expense, rent, software, design, bank & credit card charges, telephone & meals 507,166 431,109 76,057 17.6 %
$ 3,371,325
$ 886,592 $ 2,484,733
280.3
%
The overall increase general and admin expenses was primarily due to increases in marketing and advertising, general office expenses and accounting and legal expenses. Marketing and advertising increased as a result of non-cash shares issued for investor relations and marketing services. General office expenses increased as a result of greater trade show and operating lease expenses in the current period. Accounting and legal expenses increased as a result of lower expenses in the prior period from delays in preparing and issuing financial statements for the prior period as well as due to one-time charges which we incurred in relation to the Exchange Agreement.
Foreign Currency Exchange
For the Years Ended
December 31,
% Change
Foreign currency exchange (gain) loss $ (24,900 ) $ (37,224 ) (33.1 )%
For the year ended December 31, 2020, we recognized a $24,900 in foreign exchange gain as compared to $37,224 in foreign exchange loss for the year ended December 31, 2019. The change was primarily due to settlement of various foreign currency denominated debt instruments in the prior year as well as beneficial movements in foreign currency rates on payables, receivables and other foreign exchange transactions denominated in currencies other than the functional currencies of the legal entities in which the transactions are recorded. Foreign currency fluctuations are primarily from the Canadian dollar, Euro and British pound.
Change in fair value of derivative instruments
For the Years Ended
December 31,
% Change
Change in fair value of derivative instruments $ (3,054,034 ) $ (271,704 ) 1,024.0
%
Derivative gain increased by $2,782,330 or 1,024.0% to a gain of $3,054,034, for the year ended December 31, 2020 as compared to a gain of $271,704 for the year ended December 31, 2019. This was largely due to significant settlement of derivative instruments during the current period.
(Gain) loss on extinguishment of debt
For the Years Ended
December 31,
% Change
(Gain) loss on extinguishment of debt $ 2,904,832 $ (659,999 ) (540.1 )%
(Gain) loss on extinguishment of debt decreased by $3,564,831 or 540.1% to a loss of $2,904,832, for the year ended December 31, 2020 as compared to a gain of $659,999 for the year ended December 31, 2019. During the year ended December 31, 2020, the Company incurred greater losses on conversion of convertible debt and share settled debt due to the settlement of various accounts payable balances and debts which were converted into common stock at a value higher than the carrying value of the liabilities settled. These increases were primarily a result of more conversions of convertible debt and accrued interest in the current period and decreases in the strike price due to the Company’s stock price movement. During the year ended December 31, 2019 the Company settled various accounts payable balances, debt and preferred shares in exchange for shares of common stock to be issued and warrants at a value lower than the carrying value of the liabilities settled.
Finance Costs
For the Years Ended
December 31,
% Change
Finance costs $ 1,281,505 $ 1,620,504 (20.9 )%
Finance costs decreased by $338,999 or 20.9%, for the year ended December 31, 2020 as compared to the year ended December 31, 2019. Finance costs decreased due to the large number of conversions and settlement of notes in the current period.
Net Loss
For the Years Ended
December 31,
% Change
Net loss
$ (6,177,099 )
$ (3,078,120 )
100.7 %
As a result of the above factors, net loss increased by $3,098,979 or 100.7% for the year ended December 31, 2020 as compared to the year ended December 31, 2019.
Liquidity and Capital Resources
From our incorporation in April 17, 2008 through December 31, 2020, we have financed our operations, capital expenditures and working capital needs through the sale of common shares and the incurrence of indebtedness, including term loans, convertible loans, revolving lines of credit and purchase order financing. At December 31, 2020, we had $2,529,034 in outstanding current liabilities which has either already reached maturity or matures within the next twelve months.
We had cash of $1,372,016 at December 31, 2020, compared to $25,494 at December 31, 2019. We had a working capital deficit of $746,341 as of December 31, 2020 compared to working capital deficit of $8,376,433 as of December 31, 2019.
Liquidity and Financial Condition
At December 31,
At December 31,
Percentage
Increase/(Decrease)
Current assets
$ 1,782,693
$ 250,800
610.8 %
Current liabilities
$ 2,529,034
$ 8,627,233
(70.7 )%
Working capital
$ (746,341 )
$ (8,376,433 )
(91.1 )%
Cash Flow Analysis
Our cash flows from operating, investing, and financing activities are summarized as follows:
December
Net cash (used in) provided by operating activities
$ (1,400,086 )
$ (848,777 )
Net cash (used in) provided by investing activities
(23,161 )
(1,383 )
Net cash (used in) provided by financing activities
2,835,880
869,991
Effect of exchange rate changes on cash
(66,111 )
Net (decrease) increase in cash
1,346,522
20,435
Cash at beginning of period
25,494
5,059
Cash and equivalents at end of period
$ 1,372,016
$ 25,494
During the year ended December 31, 2020, cash used in operations totaled $1,400,086. This consists of the net loss of $6,177,099, adjusted by $4,777,013 for non-cash items and changes in non-cash working capital. Changes in non-cash working capital items consisted primarily of change in trade and other payables of $664,239, partially offset by changes in inventory and prepaid expenses of $139,219 and $114,369, respectively.
During the year ended December 31, 2019, cash used in operations totaled $848,777. This consists of the net loss of $3,078,120, adjusted by $2,229,343 for non-cash items and changes in non-cash working capital. Changes in non-cash working capital items consisted primarily of change in trade and other payables of $797,785, partially offset by change in deferred revenue of $111,456.
Net Cash Used in Investing Activities. During the year ended December 31, 2020, cash used in investing activities consisted of $23,161 for the acquisition of fixed assets.
During the year ended December 31, 2019, cash used in investing activities consisted of $1,383 for the acquisition of fixed assets.
Net Cash Provided by Financing Activities. Net cash provided by financing activities during the year ended December 31, 2020 totaled $2,835,880 which consisted primarily of $922,845 in proceeds from various note and loan facilities entered during the period and $1,532,023 in proceeds from shares and shares to be issued and $768,009 in proceeds from issuing warrants, partially offset by payments on outstanding notes payable of $386,996.
Net cash provided by financing activities during the year ended December 31, 2019 totaled $869,991 which consisted primarily of $846,538 proceeds from various note and loan facilities entered during the period and $23,453 proceeds from shares to be issued.
Outstanding Indebtedness
Our current indebtedness as of December 31, 2020 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 $193,889, bearing interest at 8% per annum.
● 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 loan payable with an outstanding principal amount of $31,396 (CDN$40,000). The loan is non-interest bearing and eligible for CDN$10,000 forgiveness if repaid by December 31, 2022. If not repaid by December 31, 2022, the loan bears interest at 5% per annum and is due on December 31, 2025;
● Unsecured loan payable with an outstanding principal amount of $31,395 (CDN$40,000). The loan is non-interest bearing and eligible for CDN$10,000 forgiveness if repaid by December 31, 2022. If not repaid by December 31, 2022, the loan bears interest at 5% per annum and is due on December 31, 2025;
● Unsecured loan payable with an outstanding principal amount of $30,065. 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;
Related Party Transactions
As at December 31, 2020, the Company owed $317,997 ($391,896 CDN) (2019 - $263,409 ($342,853 CDN)) to the President, CEO, and CFO of the Company for management fees and salaries, which is recorded in trade and other payables. The amounts owed and owing are unsecured, non-interest bearing, and due on demand. During the year ended December 31, 2020 the Company incurred $300,000 (2019 - $200,000) in salaries to the President, CEO, and CFO of the Company.
As at December 31, 2020, the Company owed $Nil (2019 - $7,260 ($9,450 CDN)) to a company controlled by the son of the President, CEO, and CFO of the Company for subcontractor services. The balance owing is recorded in trade and other payables. The amount owing is unsecured, non-interest bearing, and due on demand.
Prospective Capital Needs
We estimate our operating expenses and working capital requirements for the twelve-month period to be as follows:
Estimated Expenses for the Twelve-Month Period ending December 31, 2020
General and administrative $ 3,404,000
Research and development 1,043,600
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
During the year ended December 31, 2020, cash used in operations totaled $1,400,086. The relatively low level of cash used compared to our estimated working capital needs in the future was the result of an accumulation of vendor payables, some of which were settled with equity. We need to reduce the current level of payables in the future to maintain a good relationship with our vendors and expand our sales and service team to achieve our operational objectives. At present, our cash requirements for the next 12 months outweigh the funds available. Of the $20,237,500 that we require for the next 12 months, we had $1,372,016 in cash as of December 31, 2020, and a working capital deficit of $746,341. Our principal sources of liquidity are cash generated from product sales and debt financings. In order to achieve sustained profitability and positive cash flows from operations, we will need to increase revenue and/or reduce operating expenses. Our ability to maintain, or increase, current revenue levels to achieve and sustain profitability will depend, in part, on demand for our products.
In order to improve our liquidity, we also plan to pursue additional equity financing from private investors or possibly a registered public offering. We do not currently have any definitive arrangements in place for the completion of any further private placement financings and there is no assurance that we will be successful in completing any further private placement financings. To help finance our day to day working capital needs, the founder and CEO of the Company has made total payments of $113,475 since late 2015. If we are unable to achieve the necessary additional financing, then we plan to reduce the amounts that we spend on our business activities and administrative expenses in order to be within the amount of capital resources obligations and execute our business plan. There can be no assurances that we will be able to raise additional capital on acceptable terms or at all, which would adversely affect our ability to achieve our business objectives.
Off-Balance Sheet Transactions
We do not have any off-balance sheet arrangements.
Contractual Obligations and Known Future Cash Requirements
Indemnification Agreements
In the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which we agree to indemnify customers, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by us or from intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with directors and certain officers and employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon us to provide indemnification under such agreements and there are no claims that we are aware of that could have a material effect on our consolidated balance sheet, consolidated statements of operations, consolidated statements of comprehensive loss or consolidated statements of cash flows.
Operating Leases
We currently lease our corporate headquarters in Surrey, British Columbia and a showroom office in Vacaville, California, under operating lease agreements that expire on July 31, 2023 and August 31, 2022, respectively. The terms of both lease agreements provide for rental payments on a graduated basis.
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, derivative liabilities, foreign currency and foreign currency transactions and comprehensive loss have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. For further information on all of our significant accounting policies, see the notes to our consolidated financial statements.
Recently Issued and Adopted Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board, or FASB, established Topic 842, Leases, by issuing Accounting Standards Update (“ASU”) No. 2016-02, which requires lessors to classify leases as a sales-type, direct financing, or operating lease and requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements.
The Company adopted the new standard effective January 1, 2019 and elected to use the modified retrospective for transition. The Company elected the following practical expedients:
● Transition method practical expedient - permits the Company to use the effective date as the date of initial application. Upon adoption, the Company did not have a cumulative-effect adjustment to the opening balance of retained earnings. Financial information and disclosures for periods before January 1, 2019 were not updated.
● Package of practical expedients - permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. This allowed the Company to continue classifying its leases at transition in substantially the same manner.
● Single component practical expedient - permits the Company to not separate lease and non-lease components of leases. Upon transition, rental income, expense reimbursement, and other were aggregated into a single line within rental and other revenues on the condensed consolidated statement of operations.
● Short-term lease practical expedient - permits the Company not to recognize leases with a term equal to or less than 12 months.
Lessee Accounting
The new standard requires lessees to recognize a right-of-use asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating at inception, with classification affecting the pattern and recording of expenses in the statement of operations. Upon transition the Company recognized lease assets and lease liabilities principally for its office lease. When measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted average incremental borrowing rate applied was 11.98%. Refer to Notes 5 and 11.
Lessor Accounting
The new standard remained largely unchanged from that applied under previous GAAP. The majority of operating leases should remain classified as operating leases and should continue to recognize lease income on a generally straight-line basis over the lease term. The new standard made changes to lessor accounting guidance to align with lessee accounting guidance and Topic 606 Revenue Recognition.
In June 2016, FASB issued ASU 2016-13, Measurement of Credit Loss on financial Instruments. ASU 2016-13 replaces the current incurred loss impairment methodology with the expected credit loss impairment model, which requires consideration of a broader range of reasonable and supportable information to estimate expected credit losses over the life of the instrument instead of only when losses are incurred. This standard applies to financial assets measured at amortized cost basis and investments in leases recognized by the lessor. The Company adopted ASU 2016-13 on January 1, 2020 with no impact on the consolidated financial statements.
Other 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 consolidated financial statements.
Recently Issued Accounting Pronouncements
Applicable for fiscal years beginning after December 15, 2020:
In August 2020, FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 amends the guidance for convertible instruments and contract in an entity’s own equity by simplifying the accounting in order to reduce the unnecessarily complex and difficult nature of the guidance and its inconsistent application which has been the subject of a significant number of restatements. This standard applies to entities who issue convertible instruments and/or contracts in an entity’s own equity. The amendments are effective for fiscal years beginning after December 15, 2023. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020 and should be adopted as of the beginning of its annual fiscal year.
The Company is currently evaluating the impact of the above standard on its consolidated financial statements. Other 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 consolidated financial statements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
DSG GLOBAL INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholders’ Deficit
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of DSG Global, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of DSG Global Inc. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive loss, stockholders’ deficit, and cash flows for the years then ended and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are required to be independent with respect to the Company in accordance with the relevant ethical requirements relating to our audit.
We conducted our audits in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States) and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures including examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Emphasis of Matter
The accompanying financial statements have been prepared assuming that DSG Global Inc. will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has a working capital deficit, and has incurred significant operating losses and negative cash flows from operations since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 2 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ HARBOURSIDE CPA LLP
(formerly Buckley Dodds LLP)
Vancouver, Canada
March 4, 2021
We have served as the Company’s auditor since March 2019.
DSG GLOBAL, INC.
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, 2020 AND 2019
(Expressed in U.S. Dollars)
December 31, 2020
December 31, 2019
ASSETS
CURRENT ASSETS
Cash
$ 1,372,016
$ 25,494
Trade receivables, net
27,874
74,793
Lease receivable
4,297
-
Inventories, net of inventory allowance of $151,191 and $146,292, respectively
254,362
140,943
Prepaid expenses and deposits
124,144
9,570
TOTAL CURRENT ASSETS
1,782,693
250,800
Lease receivable
38,559
Fixed assets, net
268,981
139,823
Equipment on lease, net
1,457
Intangible assets, net
12,833
14,061
TOTAL ASSETS
$ 2,103,562
$ 406,141
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Trade and other payables
$ 1,786,313
$ 2,345,333
Deferred revenue
93,548
65,274
Operating lease liability
125,864
62,935
Loans payable
9,981
789,469
Derivative liability
-
2,856,569
Convertible notes payable
513,328
2,507,653
TOTAL CURRENT LIABILITIES
2,529,034
8,627,233
Operating lease liability
150,877
74,225
Loans payable
232,834
-
TOTAL LIABILITIES
2,912,745
8,701,458
Going concern (Note 2)
Commitments (Note 16)
Contingencies (Note 17)
Subsequent events (Note 20)
MEZZANINE EQUITY
Redeemable preferred stock, $0.001 par value, 24,010,000 shares authorized (2019 - 11,000,000), 1,024 issued and outstanding, 49,706 to be issued (2019 - 48,206 to be issued)
2,239,936
33,807
STOCKHOLDERS’ DEFICIT
Preferred stock, $0.001 par value, 3,010,000 shares authorized (2019 - 3,010,000), 200,508 issued and outstanding (2019 - to be issued)
2,084,680
Common stock, $0.001 par value, 350,000,000 shares authorized, (2019 - 150,000,000); 95,765,736 issued and outstanding (2019 - 1,146,302)
94,018
1,146
Additional paid in capital, common stock
43,299,937
28,097,710
Discounts on common stock
(69,838 )
(69,838 )
Common stock to be issued
1,436,044
7,402,254
Obligation to issue warrants
163,998
-
Other accumulated comprehensive income
1,252,082
1,372,345
Accumulated deficit
(51,310,040 )
(45,132,941 )
TOTAL STOCKHOLDERS’ DEFICIT
(3,049,119 )
(8,329,124 )
TOTAL LIABILITIES MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT
$ 2,103,562
$ 406,141
The accompanying notes are an integral part of the audited consolidated financial statements
DSG GLOBAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Expressed in U.S. Dollars)
Revenue
$ 900,482
$ 1,399,420
Cost of revenue
409,793
948,273
Gross profit
490,689
451,147
Operating expenses
Compensation expense
2,164,776
1,921,078
General and administration expense
3,371,325
886,592
Bad debt
17,525
65,802
Depreciation and amortization expense
6,759
4,218
Total operating expense
5,560,385
2,877,690
Loss from operations
(5,069,696 )
(2,426,543 )
Other income (expense)
Foreign currency exchange
24,900
37,224
Change in fair value of derivative instruments
3,054,034
271,704
Gain (loss) on extinguishment of debt
(2,904,832 )
659,999
Finance costs
(1,281,505 )
(1,620,504 )
Total other expense
(1,107,403 )
(651,577 )
Loss before income taxes
(6,177,099 )
(3,078,120 )
Provision for income taxes
-
-
Net loss
(6,177,099 )
(3,078,120 )
Net loss per share
Basic and diluted:
Basic
$ (0.17 )
$ (3.84 )
Diluted
$ (0.17 )
$ (3.84 )
Weighted average number of shares used in computing basic and diluted net loss per share:
Basic
35,744,303
801,993
Diluted
35,744,303
801,993
The accompanying notes are an integral part of the audited consolidated financial statements
DSG GLOBAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Expressed in U.S. Dollars)
Net loss
$ (6,177,099 )
$ (3,078,120 )
Other comprehensive income (loss)
Foreign currency translation adjustments
(120,263 )
(93,044 )
Comprehensive loss
$ (6,297,362 )
$ (3,171,164 )
The accompanying notes are an integral part of the audited consolidated financial statements
DSG GLOBAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
AS AT DECEMBER 31, 2020 AND 2019
(Expressed in U.S. Dollars)
Common Stock
Preferred Stock
Shares Amount Additional
paid in
capital Discount on common
stock To be issued Obligation to issue warrants Amount Accumulated other comprehensive income Accumulated deficit Total
stockholders’ deficit
Balance, December 31, 2018 634,471 $ 634 $ 22,415,121 $ (69,838
) $ - $ - $ 4,872,732 $ 1,465,389 $ (42,054,821 ) $ (13,370,783 )
Shares to be issued for cash - - - - 23,453 - - - - 23,453
Shares issued and to be issued for services 72,295 63,365 - 1,224,000 - - - - 1,287,437
Shares issued on conversion of debt 407,536 506,060 - - - - - - 506,468
Shares issued for debt settlement 32,000 37,728 - - - - - - 37,760
Shares to be issued and warrants issued for restructure of preferred shares and debt - - 5,075,436 - 6,154,801 - (4,872,732 ) - - 6,357,505
Preferred shares issued for services - - - - - - - -
Net loss for the period - - - - - - - (93,044 ) (3,078,120 ) (3,171,164 )
Balance, December 31, 2019 1,146,302 $ 1,146 $ 28,097,710 $ (69,838 ) $ 7,402,254 $ - $ 200 $ 1,372,345 $ (45,132,941 ) $ (8,329,124 )
Shares to be issued for cash 191,865 99,839 - - - - - - 100,031
Shares issued and to be issued for services 4,303,000 4,303 1,356,481 - - - - - - 1,360,784
Shares issued on conversion of debt 52,937,999 52,941 3,524,064 - - - - - - 3,577,005
Shares issued and to be issued for debt settlement 2,363,532 42,245 - 1,555,244 - - - - 1,598,101
Issuance of shares to be issued 16,880,146 16,880 7,504,574 - (7,521,454 ) - - - - -
Warrants issued for cash - - 768,008 - - - - - - 768,008
Warrants issued for settlement of debt - - 328,329 - - - - - - 328,329
Obligation to issue warrants - - - - - 163,998 - - - 163,998
Preferred shares issued for services - -
- - - 2,107,040 - - 2,107,040
Shares issued upon conversion of preferred shares 17,942,892 17,944 1,578,687 - - - (22,560 ) - - 1,574,071
Net loss for the period - - - - - - - (120,263 ) (6,177,099 ) (6,297,362 )
Balance, December 31, 2020 95,765,736 $ 94,018 $ 43,299,937 $ (69,838 ) $ 1,436,044 $ 163,998 $ 2,084,680 $ 1,252,082, $ (51,310,040 ) $ (3,049,119 )
The accompanying notes are an integral part of the audited consolidated financial statements
DSG GLOBAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Expressed in U.S. Dollars)
December 31, 2020
December 31, 2019
Net loss
$ (6,177,099 )
$ (3,078,120 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
6,759
4,218
Change in inventory allowance
28,820
2,096
Non-cash financing costs
-
235,177
Accretion of discounts on debt
792,378
751,691
Change in fair value of derivative liabilities
(3,054,034 )
(271,704 )
Bad debt expense
17,525
65,802
Shares issued and to be issued for services
3,467,824
1,287,637
Obligation to issue warrants
163,998
-
(Gain) loss on extinguishment of debt
2,904,832
(659,999
Unrealized foreign exchange gain
(12,578 )
40,173
Changes in non-cash working capital:
Trade receivables, net
30,091
42,456
Inventories
(139,219 )
4,919
Prepaid expense and deposits
(114,369 )
35,240
Lease receivable
(42,856 )
-
Trade payables and accruals
664,239
797,785
Deferred revenue
26,875
(111,456 )
Operating lease liabilities
36,728
5,308
Net cash used in operating activities
(1,400,086 )
(848,777 )
Cash flows from investing activities
Purchase of fixed assets
(23,161 )
(1,383 )
Net cash used in investing activities
(23,161 )
(1,383 )
Cash flows from financing activities
Proceeds from issuing shares and shares to be issued
1,532,023
23,453
Proceeds on warrants issued
768,008
-
Payments on notes payable
(386,996 )
-
Proceeds from notes payable
922,845
846,538
Net cash provided by financing activities
2,835,880
869,991
Effect of exchange rate changes on cash
(66,111 )
Net increase in cash
1,346,522
20,435
Cash at beginning of period
25,494
5,059
Cash at the end of the period
$ 1,372,016
$ 25,494
Supplemental Cash Flow Information (Note 19)
The accompanying notes are an integral part of the audited consolidated financial statements
DSG GLOBAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Note 1 -ORGANIZATION
DSG Global, Inc. (the “Company”) was incorporated under the laws of the State of Nevada on September 24, 2007.
The Company is a technology development company engaged in the design, manufacture, and marketing of fleet management solutions in the golf industry. The Company’s principal activities are the sale and rental of GPS tracking devices and interfaces for golf vehicles and related support services.
On April 13, 2015, the Company entered into a share exchange agreement with DSG Tag Systems Inc. (“DSG”), now a wholly-owned subsidiary of the Company, incorporated under the laws of the State of Nevada on April 17, 2008 and extra provincially registered in British Columbia, Canada in 2008. In March 2011, DSG formed DSG Tag Systems International, Ltd. in the United Kingdom (“DSG UK”). DSG UK is a wholly owned subsidiary of DSG.
On March 26, 2019, the Company effected a reverse stock split of its shares of common stock on a four thousand (4,000) old for one (1) new basis. Upon effect of the reverse split, authorized capital decreased from 3,000,000,000 shares of common stock to 750,000 shares of common stock, with a par value of $0.001. On May 23, 2019, the Company approved to increase its authorized common stock to 150,000,000, with a par value of $0.001. Shares of preferred stock remain unchanged. These consolidated financial statements give retroactive effect to such reverse stock split named above and all share and per share amounts have been adjusted accordingly, unless otherwise noted.
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.
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 recent 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. The Company has seen a decline in its revenues for the twelve months ending December 31, 2020 of approximately 35.7%, largely as a result of the challenges related to COVID-19.
As at December 31, 2020, the Company has a working capital deficit of $746,341 and has an accumulated deficit of $51,310,040 since inception. Furthermore, the Company incurred a net loss of $6,177,099 and used $1,400,086 of cash flows for operating activities during the twelve months ended December 31, 2020. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These audited consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and are expressed in U.S. dollars. These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Certain comparative information has been reclassified to conform with the financial statement presentation adopted in the current year.
Principles of Consolidation
The consolidated financial statements include the accounts of DSG Global Inc. and its subsidiary VTS and its wholly owned subsidiaries DSG UK and Imperium, 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 consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to revenue recognition, the collectability of accounts receivable, valuation of inventory, useful lives and recoverability of long-lived assets, fair value derivative liabilities, the Company’s incremental borrowing rate, leases and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from those estimates. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined.
The Company’s policy for equipment requires judgment in determining whether the present value of future expected economic benefits exceeds capitalized costs. The policy requires management to make certain estimates and assumptions about future economic benefits related to its operations. Estimates and assumptions may change if new information becomes available. If information becomes available suggesting that the recovery of capitalized cost is unlikely, the capitalized cost is written off to the consolidated statement of operations.
The assessment of whether the going concern assumption is appropriate requires management to take into account all available information about the future, which is at least, but is not limited to, 12 months from the date the financial statements are issued. The Company is aware that material uncertainties related to events or conditions may cast substantial doubt upon the Company’s ability to continue as a going concern.
Foreign Currency Translation
The Company’s functional and reporting currency is the U.S. dollar. The functional currency of VTS is the Canadian dollar. The functional currency of DSG UK is the British pound. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets, liabilities, and items recorded in income arising from transactions denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.
The accounts of VTS and DSG UK are translated to U.S. dollars using the current rate method. Accordingly, assets and liabilities are translated into U.S. dollars at the period-end exchange rate while revenues and expenses are translated at the average exchange rates during the period. Related exchange gains and losses are included in a separate component of stockholders’ equity as accumulated other comprehensive income (loss).
Reportable Segment
The Company has one reportable segment. The Company’s activities are interrelated, and each activity is dependent upon and supportive of the other. Accordingly, all significant operating decisions are based on analysis of financial products provided as a single global business.
Revenue Recognition and Warranty Reserve
In May 2014, Financial Account Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). The Company adopted this standard on a modified retroactive basis on January 1, 2018. No financial statement impact occurred upon adoption.
Revenue from Contracts with Customers
Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), became effective for the Company on January 1, 2018. The Company’s revenue recognition disclosure reflects its updated accounting policies that are affected by this new standard. The Company applied the “modified retrospective” transition method for open contracts for the implementation of Topic 606. As sales are and have been primarily from product sales, delivery and installation, and customer support services and the Company has no significant post-delivery obligations, this new standard did not result in a material recognition of revenue on the Company’s accompanying consolidated financial statements for the cumulative impact of applying this new standard. The Company made no adjustments to its previously reported total revenues, as those periods continue to be presented in accordance with its historical accounting practices under Topic 605, Revenue Recognition.
The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer. Revenue is measured based on the consideration the Company expects to receive in exchange for those products. In instances where final acceptance of the product is specified by the customer, revenue is deferred until all acceptance criteria have been met. Revenues are recognized under Topic 606 in a manner that reasonably reflects the delivery of its products and services to customers in return for expected consideration and includes the following elements:
● executed contracts with the Company’s customers that it believes are legally enforceable;
● identification of performance obligations in the respective contract;
● determination of the transaction price for each performance obligation in the respective contract;
● allocation the transaction price to each performance obligation; and
● recognition of revenue only when the Company satisfies each performance obligation.
Performance Obligations and Signification Judgments
The Company’s revenue streams can be categorized into the following performance obligations and recognition patterns:
1. Sale, delivery and installation of Tag, Text and Infinity products, along with digital mapping and customer training. The Company recognizes revenue at a point in time when final sign-off on the installation is obtained from the General Manager and/or Director of Golf.
2. Provision of internet connectivity, regular software updates, software maintenance and basic customer support service. The Company recognizes revenue over time, evenly over the term of the service.
3. Sale and delivery of Fairway Rider products. The Company recognizes revenue at a point in time when control transfers to the customer.
Transaction prices for performance obligations are explicitly outlined in relevant agreements, therefore, the Company does not believe that significant judgments are required with respect to the determination of the transaction price, including any variable consideration identified.
Warranty Reserve
The Company accrues for warranty costs, sales returns, and other allowances based on its historical experience. During the years ended December 31, 2020 and 2019, the Company did not provide a warranty for any of its products sold during those periods. The warranty reserve was $Nil as at December 31, 2020 and 2019.
Research and Development
Research and development expenses include payroll, employee benefits, and other headcount-related expenses associated with product development. Research and development expenses also include third-party development and programming costs, localization costs incurred to translate software for international markets, and the amortization of purchased software code and services content. Such costs related to software development are included in research and development expense until the point that technological feasibility is reached. Research and development is expensed and is included in operating expenses.
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Income Taxes. The asset and liability method provides that deferred income tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred income tax assets to the amount that is believed more likely than not to be realized.
As of December 31, 2020 and 2019, the Company did not have any amounts recorded pertaining to uncertain tax positions. The Company recognizes interest and penalties related to uncertain tax positions in general and administrative expense. The Company did not incur any penalties or interest during the years ended December 31, 2020 and 2019. On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“the Tax Act”) which significantly changed U.S. tax law. The Tax Act lowered the Company’s statutory federal income tax rate from a maximum of 39% to a rate of 21% effective January 1, 2018. The Company has deferred tax losses and assets and they were adjusted as a result of the change in tax law reducing the federal income tax rate. The Company’s tax years 2015 and forward remain open.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk are cash, and trade receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company has a diversified customer base, most of which are in Canada, United States and the United Kingdom. The Company controls credit risk related to trade receivables through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.
Risks and Uncertainties
The Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange rates and the volatility of public markets.
Contingencies
Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.
If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
Cash and Cash Equivalents
Cash and equivalents include cash in hand and cash in demand deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. At December 31, 2020 and 2019, there were no uninsured balances for accounts in Canada, the United States and the United Kingdom. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts. At December 31, 2020 and 2019, the Company did not hold any cash equivalents.
Accounts Receivable
All accounts receivable under standard terms are due thirty (30) days from the date billed. If the funds are not received within thirty (30) days, the customer is contacted to arrange payment. The Company uses the allowance method to account for uncollectable accounts receivable.
Financing Receivables and Guarantees
The Company provides financing arrangements, including operating leases and financed service contracts for certain qualified customers. Lease receivables primarily represent sales-type and direct-financing leases. Leases typically have two- to three-year terms and are collateralized by a security interest in the underlying assets. The Company makes an allowance for uncollectible financing receivables based on a variety of factors, including the risk rating of the portfolio, macroeconomic conditions, historical experience, and other market factors. At December 31, 2020 and 2019 management determined that there was no allowance necessary. The Company also provides financing guarantees, which are generally for various third-party financing arrangements to channel partners and other customers. The Company could be called upon to make payment under these guarantees in the event of nonpayment to the third party. As at December 31, 2020 and 2019, no financing receivables are outstanding.
Advertising Costs
The Company expenses all advertising costs as incurred. Advertising and marketing costs were $2,043,735 and $73,281 for the years ended December 31, 2020 and 2019, respectively.
Inventory
Inventories are valued at the lower of cost or net realizable value. Cost is determined using the first-in-first-out basis for finished goods. Net realizable value is determined on the basis of anticipated sales proceeds less the estimated selling expenses. Management compares the cost of inventories with the net realizable value and an allowance is made to write down inventories to net realizable value, if lower.
Fixed Assets and Equipment on Lease
Fixed assets and equipment on lease are stated at cost less accumulated depreciation. Fixed assets and equipment on lease are depreciated using the straight-line method over the shorter of the estimated useful life of the asset or the lease term. The estimated useful lives of fixed assets are generally as follows:
Furniture and equipment 5-years straight-line
Vehicles 5-years straight-line
Computer equipment 3-years straight-line
Equipment on lease 5-years straight-line
Intangible Assets
Intangible assets are stated at cost less accumulated amortization and are comprised of patents. The patents are amortized straight-line over the estimated useful life of 20 years and are reviewed annually for impairment.
Impairment of Long-Lived Assets
The Company reviews long-lived assets such as equipment, equipment on lease, and intangible assets with finite useful lives for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. If the total of the expected undiscounted future cash flows is less than the carrying value of the asset, a loss is recognized for the excess of the carrying amount over the fair value of the asset.
Financial Instruments and Fair Value Measurements
The Company analyzes all financial instruments with features of both liabilities and equity under ASC Topic 480, “Distinguishing Liabilities from Equity,” and ASC Topic 815 “Derivatives and Hedging”.
ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
Level
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company’s financial instruments consist of cash, trade receivables, trade and other payables, operating lease liabilities, convertible note payable to related party, loans payable, derivative liabilities and convertible notes payable. Except for cash and derivative liabilities, the Company’s financial instruments’ carrying amounts, excluding any unamortized discounts, approximate their fair values due to their short term to maturity. The fair value of long-term operating lease liabilities approximates their carrying value due to minimal changes in interest rates and the Company’s credit risk since initial recognition. Cash and derivative liabilities are measured and recognized at fair value based on level 1 and level 2 inputs, respectively, for all periods presented.
Loss per Share
The Company computes net income (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the consolidated statement of operations. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As at December 31, 2020, the Company had 30,083,230 (2019 - 13,287,548) potentially dilutive shares outstanding.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC 718, “Compensation - Stock Compensation”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
The Company uses the Black-Scholes option pricing model to calculate the fair value of stock-based awards. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated statement of operations over the requisite service period. During the years ended December 31, 2020 and 2019 there was no stock-based compensation.
Leases
The Company accounts for leases in accordance with ASC 842 “Leases”.
Lessee Arrangements
The Company determines if an arrangement is a lease at inception. Operating and financing right-of-use assets and lease liabilities are included within fixed assets on the consolidated balance sheets. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate, based on the information available at the commencement date, in determining the present value of future lease payments. Right-of-use assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred. Operating lease expenses are recognized on a straight-line basis over the term of the lease, consisting of interest accrued on the lease liability and depreciation of the right-of-use asset. The lease terms may include options to extend or terminate the lease if it is reasonably certain the Company will exercise that option.
Lessor Arrangements
The Company determines if an arrangement is a lease at inception. The Company then determines whether to classify the lease as a sales-type or direct financing lease. At commencement date, a lessor shall derecognize the underlying asset and recognize the net investment in the lease, selling profit or loss arising from the lease, and initial direct directs as an expense if the fair value of the underlying asset is different from it carrying amount. The lease receivable (or net investment in the lease) is included on the consolidated balance sheets. The lease receivable amount is recognized based on the present value of lease payments over the lease term and the present value of the unguaranteed residual asset, except when the lease is a direct financing lease, whereby the net investment in the lease should be reduced by the amount of any selling profit. The unguaranteed residual asset is the amount the lessor expects to derive from the underlying asset following the end of the lease term. The Company uses the rate implicit in the lease agreement at the date of commencement, in determining the present value of the future lease payments and unguaranteed residual asset. Interest income is recognized over the term of the lease and lease payments are recognized against the lease receivable balance when received. Currently, the Company only has sales-type operating leases.
Reclassification
Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations or cash flow.
Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board, or FASB, established Topic 842, Leases, by issuing Accounting Standards Update (“ASU”) No. 2016-02, which requires lessors to classify leases as a sales-type, direct financing, or operating lease and requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements.
The Company adopted the new standard effective January 1, 2019 and elected to use the modified retrospective for transition. The Company elected the following practical expedients:
● Transition method practical expedient - permits the Company to use the effective date as the date of initial application. Upon adoption, the Company did not have a cumulative-effect adjustment to the opening balance of retained earnings. Financial information and disclosures for periods before January 1, 2019 were not updated.
● Package of practical expedients - permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. This allowed the Company to continue classifying its leases at transition in substantially the same manner.
● Single component practical expedient - permits the Company to not separate lease and non-lease components of leases. Upon transition, rental income, expense reimbursement, and other were aggregated into a single line within rental and other revenues on the condensed consolidated statement of operations.
● Short-term lease practical expedient - permits the Company not to recognize leases with a term equal to or less than 12 months.
Lessee Accounting
The new standard requires lessees to recognize a right-of-use asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating at inception, with classification affecting the pattern and recording of expenses in the statement of operations. Upon transition the Company recognized lease assets and lease liabilities principally for its office lease. When measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted average incremental borrowing rate applied was 11.98%. Refer to Notes 5 and 11.
Lessor Accounting
The new standard remained largely unchanged from that applied under previous GAAP. The majority of operating leases should remain classified as operating leases and should continue to recognize lease income on a generally straight-line basis over the lease term. The new standard made changes to lessor accounting guidance to align with lessee accounting guidance and Topic 606 Revenue Recognition.
In June 2016, FASB issued ASU 2016-13, Measurement of Credit Loss on financial Instruments. ASU 2016-13 replaces the current incurred loss impairment methodology with the expected credit loss impairment model, which requires consideration of a broader range of reasonable and supportable information to estimate expected credit losses over the life of the instrument instead of only when losses are incurred. This standard applies to financial assets measured at amortized cost basis and investments in leases recognized by the lessor. The Company adopted ASU 2016-13 on January 1, 2020 with no impact on the consolidated financial statements.
Other 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 consolidated financial statements.
Recently Issued Accounting Pronouncements
Applicable for fiscal years beginning after December 15, 2020:
In August 2020, FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 amends the guidance for convertible instruments and contract in an entity’s own equity by simplifying the accounting in order to reduce the unnecessarily complex and difficult nature of the guidance and its inconsistent application which has been the subject of a significant number of restatements. This standard applies to entities who issue convertible instruments and/or contracts in an entity’s own equity. The amendments are effective for fiscal years beginning after December 15, 2023. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020 and should be adopted as of the beginning of its annual fiscal year.
The Company is currently evaluating the impact of the above standard on its consolidated financial statements. Other 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 consolidated financial statements.
Note 4 - TRADE RECEIVABLES
As of December 31, 2020 and 2019, trade receivables consists of the following:
December 31, 2020 December 31, 2019
Accounts receivables $ 44,296 $ 82,927
Allowance for doubtful accounts (16,422 ) (8,134 )
Total trade receivables, net $ 27,874 $ 74,793
Note 5 - FIXED ASSETS AND EQUIPMENT ON LEASE
As of December 31, 2020 and 2019, fixed assets consisted of the following:
December 31, 2020 December 31, 2019
Furniture and equipment $ 2,342 $ -
Computer equipment 28,804 27,025
Vehicles 19,619 -
Right-of-use assets 302,477 178,202
Accumulated depreciation (84,261 ) (65,404 )
$ 268,981 $ 139,823
As of December 31, 2020 and 2019, equipment on lease consisted of the following:
December 31, 2020 December 31, 2019
Tags $ 129,533 $ 126,817
Text 28,629 28,029
Infinity/Touch 23,716 23,218
Accumulated depreciation (181,382 ) (176,607 )
$ 496 $ 1,457
For the year ended December 31, 2020, total depreciation expense for fixed assets and equipment on lease was $5,531 (2019 - $2,990) and is included in general and administration expense. For the year ended December 31, 2020, total depreciation for right-of-use assets was $68,218 (2019 - $39,671) and is included in general and administration expense as operating lease expense.
Note 6 - INTANGIBLE ASSETS
As of December 31, 2020 and 2019, intangible assets consisted of the following:
December 31, 2020 December 31, 2019
Intangible asset - Patents $ 22,353 $ 22,353
Accumulated amortization (9,520 ) (8,292 )
$ 12,833 $ 14,061
Patents are amortized on a straight-line basis over their estimated useful life of 20 years. For the year ended December 31, 2020, total amortization expense for intangible assets was $1,228 (2019 - $1,228).
Note 7 - TRADE AND OTHER PAYABLES
As of December 31, 2020, and 2019, trade and other payables consist of the following:
December 31, 2020
December 31, 2019
Accounts payable and accrued expenses
$ 1,519,379
$ 1,334,685
Accrued interest
148,682
992,755
Other liabilities
118,252
17,893
Total trade and other payables
$ 1,786,313
$ 2,345,333
Note 8 - LOANS PAYABLE
As of December 31, 2020 and 2019, loans payable consisted of the following:
December 31, 2020
December 31, 2019
Unsecured loan payable, due on demand, interest at 18% per annum
$ -
$ 317,500
Unsecured loan payable, due on demand, interest 10% per annum, with a minimum interest amount of $25,000
-
250,000
Unsecured share-settled debt, due on May 7, 2019, non-interest bearing(a)
-
214,286
Unsecured loan payable in the amount of CDN$10,000, due on demand, non-interest bearing
-
7,683
Unsecured loan payable in the amount of CDN$40,000, due on or before December 31, 2025(b)
31,350
-
Unsecured loan payable in the amount of CDN$40,000, due on or before December 31, 2025 (c)
31,350
-
Unsecured loan payable, due on May 21, 2022, interest at 1% per annum(d)
30,115
-
Secured loan payable, due on June 5, 2050, interest at 3.75% per annum(e)
150,000
-
242,815
789,469
Current portion
(9,981 )
(789,469 )
Loans payable
$ 232,834
$ -
(a) On March 8, 2019, the Company entered into a convertible bridge loan agreement (the “Share-Settled Loan”). The Share-Settled Loan initially bore interest at 4.99% per month, was due in 60 days on May 7, 2019 and is convertible into restricted common shares of the Company at the lender’s option at the market price per share less a 30% discount to market. The Company has accounted the Share-Settled Loan as share-settled debt. It is initially recognized at its fair value and accreted to its share-settled redemption value of $214,286 over the term of the debt. The Share-Settled Loan was not repaid on May 7, 2019 and is in default. Effective September 1, 2019, interest was reduced to 2% per month and effective December 1, 2019, the loan became non-interest bearing. On April 23, 2020, the Company received notice to settle the debt for 3,061,224 shares of common stock at $0.049 per share, a 30% discount to market. On August 25, 2020, the terms of this settlement were amended to settle remaining principal of $120,000 for 10,714,285 common shares at an adjusted exercise price of $0.0112, a 30% discount to market. As at December 31, 2020, 8,062,244 shares have been issued and 3,264,285 remain to be issued. Subsequent to December 31, 2020, the remaining 3,264,285 common shares were issued.
(b) On April 17, 2020, the Company received a loan in the principal amount of $29,890 (CDN$40,000) under the Canada Emergency Business Account program. The loan is non-interest bearing and eligible for CDN$10,000 forgiveness if repaid by December 31, 2022. If not repaid by December 31, 2022, the loan bears interest at 5% per annum and is due on December 31, 2025.
(c) On April 21, 2020, the Company received a loan in the principal amount of $29,889 (CDN$40,000) under the Canada Emergency Business Account program. The loan is non-interest bearing and eligible for CDN$10,000 forgiveness if repaid by December 31, 2022. If not repaid by December 31, 2022, the loan bears interest at 5% per annum and is due on December 31, 2025.
(d) 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.
(e) 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.
Note 9 - CONVERTIBLE LOANS
As of December 31, 2020, and 2019, 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 director of the Company for marketing services. The note is unsecured, bears interest at 5% per annum, is convertible at $1.25 per common share, and is due on demand. As at December 31, 2020, the carrying value of the convertible promissory note was $310,000 (December 31, 2019 - $310,000).
(b) On August 25, 2015, the Company issued a convertible promissory note in the principal amount of $250,000. The convertible promissory note is unsecured, bears interest at 10% per annum, is due on demand, and is convertible at $7,000 per share. On December 30, 2020, the Company entered into a Debt Settlement agreement whereby the Company agreed to issue 300,000 shares of common stock, fair valued at $387,000 to settle principal debt and accrued interest outstanding totaling $378,000. The Company recorded a loss on settlement of debt totaling $9,000. As at December 31, 2020, the carrying value of the convertible promissory note was $Nil (December 31, 2019 - $250,000).
(c) On November 7, 2016, the Company entered into a securities purchase agreement with a non-related party. Pursuant to the agreement, the Company was provided with proceeds of $125,000 on November 10, 2016 in exchange for the issuance of a secured convertible promissory note in the principal amount of $138,889, which was inclusive of an 8% original issue discount and bears interest at 8% per annum to the holder. The convertible promissory note matures nine months from the date of issuance and is convertible at the option of the holder into our common shares at a price per share that is the lower of $480 or the closing price of the Company’s common stock on the conversion date. In addition, under the same terms, the Company also issued a secured convertible note of $50,000 in consideration for proceeds of $10,000 and another secured convertible note of $75,000 in consideration for proceeds of $10,000. Under the agreements, the Company has the right to redeem $62,500 and $40,000 of the notes for consideration of $1 each at any time prior to the maturity date in the event that the convertible promissory note is exchanged or converted into a revolving credit facility with the lender, whereupon the two $10,000 convertible note balances shall be rolled into such credit facility.
On May 7, 2017, the Company triggered an event of default in the convertible note by failing to repay the full principal amount and all accrued interest on the due date. The entire convertible note payable became due on demand and would accrue interest at an increased rate of 1.5% per month (18% per annum) or the maximum rate permitted under applicable law until the convertible note payable was repaid in full.
On May 8, 2017, the Company issued 25 common shares for the conversion of $5,000 of the $72,500 convertible note dated November 7, 2016. On May 24, 2017, the Company issued 53 common shares for the conversion of $10,500 of the $72,500 convertible note dated November 7, 2016. On May 25, 2017, the lender provided conversion notice for the remaining principal $57,000 of the $72,500 convertible note dated November 7, 2016. This conversion was not processed by the Company’s transfer agent due to direction from the Company not to honor any further conversion notices from the lender. In response, the Company received legal notification pursuant to the refusal to process further conversion notices. Refer to Note 17.
During the year ended December 31, 2019, the Company issued 72,038 common shares with a fair value of $59,097 for the conversion of $32,000 of principal resulting in a loss on settlement of debt of $27,097.
During the year ended December 31, 2020, the Company issued 53,764 common shares with a fair value of $53,226 for the conversion of $20,000 of principal resulting in a loss on settlement of debt of $33,226.
On December 31, 2020, the Company entered into a Debt Settlement agreement whereby the Company agreed to pay cash of $250,000 and issue 200,000 shares of common stock, fair valued at $268,000, in full and final satisfaction of all pending litigation, principal debt and accrued interest outstanding totaling $321,243. The Company recorded a loss on settlement of debt totaling $196,757 and wrote down the derivative liability to $Nil.
As at December 31, 2020, the carrying value of the note was $193,841 (December 31, 2019 - $213,889), the fair value of the derivative liability was $Nil (December 31, 2019 - $360,718), and included in shares to be issued is $268,000 to satisfy the terms of the Debt Settlement agreement. Subsequent to December 31, 2020, the Company satisfied the terms of the settlement.
(d) On June 5, 2017, the Company issued a convertible promissory note in the principal amount of $110,000. As at December 31, 2020, the carrying value of the note was $9,487 (December 31, 2019 - $9,487), relating to an outstanding penalty.
(e) On July 17, 2017, the Company issued a convertible promissory note in the principal amount of $135,000. The note is unsecured, bears interest at 10% per annum, is due on July 17, 2018, and is convertible into common shares at a conversion price equal to the lessor of (i) 55% multiplied by the lowest trading price during the previous twenty trading day period ending on the latest complete trading day prior to the date of this note and (ii) $244. Interest will be accrued and payable at the time of promissory note repayment. Financing fees on the note were $16,500. Derivative liability applied as discount on the note was $118,500 and is accreted over the life of the note.
On November 10, 2020, the Company paid cash of $100,000, pursuant to a Settlement Agreement (the “Settlement Agreement”), in full and final satisfaction of $110,740 in outstanding principal and accrued interest on the above convertible note and corresponding pending litigation, see also Note 17. The Company wrote down the liability at September 30, 2020, to the subsequent settlement amount and recorded a gain on the settlement of $10,974 and the fair value of the derivative liability of $752,842 was extinguished in lieu of the Settlement Agreement.
As at December 31, 2020, the carrying value of the note was $Nil (December 31, 2019 - $81,470) and the fair value of the derivative liability was $Nil (December 31, 2019 - $111,990).
(f) In January 2018, the Company issued a convertible promissory note in the principal amount of $15,000 as a commitment fee. The note is unsecured, non-interest bearing until default, was due on August 16, 2018, and is convertible into common shares at a conversion price equal to 75% of the average closing trading price during the previous five trading days prior to conversion date, with a minimum of $0.20.
On April 22, 2020, the Company issued 258,000 common shares with a fair value of $25,800 to settle $7,166 in principal and interest.
As at December 31, 2020, the carrying value of the note was $Nil (December 31, 2019 - $5,000) and the fair value of the derivative liability was $Nil (December 31, 2019 - $2,601).
(g) On May 8, 2018, the Company issued a convertible note in the principal amount of $51,500. The note is unsecured, bears interest at 10% per annum, and is due on February 8, 2019. The note is convertible into common shares at a 32% discount to the lowest intra-day trading price of the Company’s common stock for the ten trading days immediately preceding the conversion date.
During the year ended December 31, 2020, the Company issued 8,618,831 common shares with a fair value of $495,936 for the conversion of $107,350 principal and accrued interest resulting in a loss on settlement of debt of $388,586.
As at December 31, 2020, the note and derivative liability were extinguished (December 31, 2019 - $51,500 and $48,918, respectively). During the twelve months ended December 31, 2020, the Company accreted $Nil (2019 - $7,277) of the debt discount to finance costs.
(h) On May 28, 2018, the Company issued a convertible note in the principal amount of $180,000. The note is unsecured, bears interest at 10% per annum, and is due on February 28, 2019. The note is convertible into common shares at a 32% discount to the lowest intra-day trading price of the Company’s common stock for the ten trading days immediately preceding the conversion date.
On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $224,319 for 224 Series C Preferred Shares. As at December 31, 2020, the note and derivative liability were extinguished (December 31, 2019 - $180,000 and $169,234, respectively). During the twelve months ended December 31, 2020, the Company accreted $Nil (2019 - $38,478) of the debt discount to finance costs.
(i) On June 18, 2018, the Company reassigned convertible note balances from the original lender to another unrelated party in the principal amount of $168,721. The note is unsecured, bears interest at 10% per annum, which was due on August 2, 2018, and is convertible into common shares at a conversion price equal to the lesser of the lowest trading price during the previous twenty-five trading days prior to: (i) the date of the promissory note; or (ii) the latest complete trading day prior to the conversion date. Interest is accrued will be and payable at the time of promissory note repayment. The remaining derivative liability applied as a discount on the reassigned note was $25,824 and is accreted over the remaining life of the note.
During the year ended December 31, 2019, the Company issued 234,350 common shares with a fair value of $268,614 for the conversion of $63,012 of principal and $9,671 of accrued interest resulting in a loss on settlement of debt of $195,931.
During the year ended December 31, 2020, the Company issued 2,600,000 common shares with a fair value of $310,700 for the conversion of $15,444 of principal and accrued interest resulting in a loss on settlement of debt of $295,256.
On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $26,622 for 26 Series C Preferred Shares. As at December 31, 2020, the note and derivative liability were extinguished (December 31, 2019 - $39,037 and $21,869, respectively).
(j) On April 26, 2019, the Company entered into a note purchase and assignment agreement with two unrelated parties pursuant to a certain secured inventory convertible note issued on March 19, 2018 in the principal amount of $900,000. Pursuant to this agreement, the seller desired to sell the balance owing under the Second and Third tranche of the original note in four separate closings on April 26, May 22, June 24, and July 24, 2019, totaling $84,396, $85,838, $120,490 and $122,866, respectively (consisting of $375,804 principal and $37,786 of accrued interest). As at September 30, 2020, $413,590 in principal and accrued interest had been assigned to the purchaser.
The note is unsecured, bears interest at 12% per annum, is due 184 days upon receipt, and is convertible into common shares after 180 days from issuance date at a conversion price equal to the lessor of: (i) the lowest trading price during the previous fifteen trading days prior to the date of the promissory note; or (ii) 55% of the lowest trading price during the previous fifteen days prior to the latest complete trading day prior to the conversion date. Interest will be accrued and payable at the time of promissory note repayment.
On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $476,661 for 477 Series C Preferred Shares. As at December 31, 2020, the note and derivative liability were extinguished (December 31, 2019 - $413,590 and $181,870, respectively).
(k) On May 7, 2019, the Company entered into a secured convertible promissory note agreement with an unrelated party. The note is secured by an unconditional first priority interest in and to, any and all property of the Company and its subsidiaries, of any kind or description, tangible or intangible, whether now existing or hereafter arising or acquired until the balance of all Notes has been reduced to $Nil. The note bears interest at 10% per annum, each tranche matures 12 months from the funding date and is convertible into common shares at the holder’s discretion at a conversion price equal to 62% of the lowest trading price of the Company’s common stock during the 10 trading days immediately preceding the conversion of the note.
The note was funded in four tranches on May 7, 2019, June 28, 2019, July 8, 2019 and August 8, 2019, totaling $250,420. Proceeds from the note were paid directly to a former lender as an inducement for entering into a debt assignment arrangement. The $250,420 inducement is recorded to finance costs for the year ended December 31, 2019.
On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $286,302 for 286 Series C Preferred Shares. As at December 31, 2020, the note and derivative liability were extinguished (December 31, 2019 - $124,695 and $323,514, respectively). During the year ended December 31, 2020, the Company accreted $125,725 (2019 - $124,695) of the debt discount to finance costs.
(l) On July 30, 2019, the Company issued a convertible promissory note in the principal amount of $220,000. The note is unsecured, bears interest at 10% per annum, is due on July 30, 2020, and is convertible into common shares at a conversion price equal to the lesser of (i) 60% of the lowest trading price during the previous twenty trading days prior to the issuance date, or (ii) the lowest trading price for the Common Stock during the twenty-day period ending one trading day prior to conversion of the note. Deferred financing fees and original issuance discount on the note were $23,500. The derivative liability applied as a discount on the note was $196,500 and is accreted over the life of the note.
During the year ended December 31, 2020, the Company issued 6,907,267 common shares with a fair value of $860,248 for the conversion of all outstanding principal and accrued interest totaling $240,192 resulting in a loss on settlement of debt of $620,056.
As at December 31, 2020, the note and derivative liability were extinguished (December 31, 2019 - $92,219 and $284,734, respectively). During the year ended December 31, 2020, the Company accreted $127,781 (2019 - $92,219) of the debt discount to finance costs.
(m) On September 4, 2019, the Company issued a convertible promissory note in the principal amount of $137,500. The note is unsecured, bears interest at 10% per annum, is due on June 3, 2020, and is convertible during the first 180 calendar days from the issuance date at a price of $0.50 per share. For the subsequent period until repayment the conversion price shall equal the lesser of (i) 60% multiplied by the lowest traded price of the Common Stock during the previous twenty trading days before the issuance date of the note, or (ii) the lowest traded price for the Common Stock during the twenty-day period ending on the last complete trading day before conversion. Deferred financing fees and original issuance discount on the note were $16,000. The derivative liability applied as a discount on the note was $121,500 and is accreted over the life of the note.
In connection with the note, the Company granted 100,000 warrants to the lender. Each warrant can be exercised to purchase shares of common stock of the Company at a price of $0.75 per warrant for a period of five years. As the entire net proceeds of $121,500 were first allocated to the derivative liability which is measured at fair value on a recurring basis, the residual value of $Nil was allocated to the equity-classified warrants.
During the year ended December 31, 2020, the Company issued 8,623,931 common shares with a fair value of $494,031 for the conversion of $110,750 of principal and accrued interest resulting in a loss on settlement of debt of $383,281. On September 18, 2020, the Company paid cash of $22,500 to settle all outstanding principal and interest on the note, resulting in a gain on the settlement of debt totaling $20,056.
As at December 31, 2020, the note and derivative liability were extinguished (December 31, 2019 - $43,322 and $173,596, respectively). During the year ended December 31, 2020, the Company accreted $94,178 (2019 - $43,322), of the debt discount to finance costs.
(n) On September 19, 2019, the Company issued a convertible promissory note in the principal amount of $55,000. The note is unsecured, bears interest at 10% per annum, is due on September 19, 2020, and is convertible during the first six months from the issuance date at a price of $0.50 per share. For the subsequent period until repayment the conversion price shall equal the lesser of (i) 60% multiplied by the lowest traded price of the Common Stock during the previous twenty trading days before the issuance date of the note, or (ii) the lowest traded price for the Common Stock during the twenty-day period ending on the last complete trading day before conversion. Deferred financing fees and original issuance discount on the note were $7,000. The derivative liability applied as a discount on the note was $48,000 and is accreted over the life of the note.
During the year ended December 31, 2020, the Company issued 5,758,117 common shares with a fair value of $332,480 for the conversion of total outstanding principal and interest totaling $60,250 resulting in a loss on settlement of debt of $272,230.
As at December 31, 2020, the note and derivative liability were extinguished (December 31, 2019 - $15,370 and $70,052, respectively). During the year ended December 31, 2020, the Company accreted $39,630 (2019 - $Nil), of the debt discount to finance costs.
(o) On September 19, 2019, the Company issued a convertible promissory note in the principal amount of $141,900. The note is unsecured, bears interest at 10% per annum, is due on September 19, 2020, and is convertible during the first six months from the issuance date at a price of $0.50 per share. For the subsequent period until repayment the conversion price shall equal the lesser of (i) 60% multiplied by the lowest traded price of the Common Stock during the previous twenty trading days before the issuance date of the note, or (ii) the lowest traded price for the Common Stock during the twenty-day period ending on the last complete trading day before conversion. Deferred financing fees and original issuance discount on the note were $16,400. The derivative liability applied as a discount on the note was $125,500 and is accreted over the life of the note.
In connection with the note, the Company granted 113,250 warrants to the lender. Each warrant can be exercised to purchase shares of common stock of the Company at a price of $0.75 per warrant for a period of five years. As the entire net proceeds of $125,500 were first allocated to the derivative liability which is measured at fair value on a recurring basis, the residual value of $Nil was allocated to the equity-classified warrants.
During the year ended December 31, 2020, the Company issued 5,159,991 common shares with a fair value of $261,912 for the conversion of $74,620 of principal and accrued interest resulting in a loss on settlement of debt of $187,292. On September 18, 2020, the Company paid cash of $76,000 to settle all outstanding principal and interest on the note, resulting in a gain on the settlement of debt totaling $7,273.
As at December 31, 2020, the note and derivative liability were extinguished (December 31, 2019 - $40,043 and $190,246, respectively). During the year ended December 31, 2020, the Company accreted $101,857 (2019 - $40,043), of the debt discount to finance costs.
(p) On October 2, 2019, the Company issued a convertible promissory note in the principal amount of $82,500. The note is unsecured, bears interest at 10% per annum, is due on September 30, 2020, and is convertible during the first six months from the issuance date at a price of $0.50 per share. For the subsequent period until repayment the conversion price shall equal the lesser of (i) 60% multiplied by the lowest traded price of the Common Stock during the previous twenty trading days before the issuance date of the note, or (ii) the lowest traded price for the Common Stock during the twenty-day period ending on the last complete trading day before conversion. Deferred financing fees and original issuance discount on the note were $9,500. The derivative liability applied as a discount on the note was $73,000 and is accreted over the life of the note.
In connection with the note, the Company granted 83,333 warrants to the lender. Each warrant can be exercised to purchase shares of common stock of the Company at a price of $0.75 per warrant for a period of five years. As the entire net proceeds of $73,000 were first allocated to the derivative liability which is measured at fair value on a recurring basis, the residual value of $Nil was allocated to the equity-classified warrants.
During the year ended December 31, 2020, the Company issued 3,409,090 common shares with a fair value of $193,296 for the conversion of $22,500 of principal resulting in a loss on settlement of debt of $170,796. On September 18, 2020, the Company paid cash of $60,000 to settle all outstanding principal and interest on the note, resulting in a gain on the settlement of debt totaling $8,075.
As at December 31, 2020, the note and derivative liability were extinguished (December 31, 2019 - $20,795 and $105,790, respectively). During the year ended December 31, 2020, the Company accreted $61,705 (2019 - $20,795), of the debt discount to finance costs.
(q) During the year ended December 31, 2019, a convertible promissory note with an outstanding principal balance of $226,000 was assigned to another unrelated party with no changes to the terms of the note upon assignment. The note is unsecured, bears interest at 12% per annum, was due on August 31, 2019 and is convertible into common shares at a conversion price equal to 55% of the lowest trading price during the previous fifteen trading days prior to the conversion date, including the conversion date. Interest will be accrued and payable at the time of promissory note repayment.
On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $285,428 for 285 Series C Preferred Shares. As at December 31, 2020, the note and derivative liability were extinguished (December 31, 2019 - $226,000 and $289,462, respectively).
(r) During the year ended December 31, 2019, a convertible promissory note with an outstanding principal balance of $258,736 was assigned to another unrelated party with no changes to the terms of the note upon assignment. The note is unsecured, bears interest at 12% per annum, was due on September 19, 2018 and is convertible into common shares at a conversion price equal to the lessor of: (i) the lowest trading price during the previous fifteen trading days prior to the date of the promissory note; or (ii) 55% of the lowest trading price during the previous fifteen days prior to the latest complete trading day prior to the conversion date. Interest will be accrued and payable at the time of promissory note repayment.
On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $342,641 for 343 Series C Preferred Shares. As at December 31, 2020, the note and derivative liability were extinguished (December 31, 2019 - $258,736 and $351,774, respectively).
(s) During the year ended December 31, 2019, a convertible promissory note with an outstanding principal balance of $137,500 was assigned to another unrelated party with no changes to the terms of the note upon assignment. The note is unsecured, bears interest at 12% per annum, was due on January 22, 2020 and is convertible into common shares at a conversion price equal to 55% of the lowest trading price during the previous fifteen trading days prior to the conversion date, including the conversion date. Interest will be accrued and payable at the time of promissory note repayment.
On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $166,401 for 166 Series C Preferred Shares. As at December 31, 2020, the note and derivative liability were extinguished (December 31, 2019 - $137,500 and $170,201, respectively).
(t) On February 10, 2020, the Company issued a convertible promissory note in the principal amount of $119,600. The note is unsecured, bears interest at 8% per annum, is due on February 10, 2021, and is convertible into common shares of the Company, beginning 180 days from the date of the note up to maturity or repayment, at a price equal to 80% of the average of the lowest two trading prices for the common stock during the fifteen trading days before conversion. Deferred financing fees and original issuance discount on the note were $22,135. The derivative liability applied as a discount on the note was $97,465 and is accreted over the life of the note.
During the year ended December 31, 2020, the Company issued 11,549,008 common shares with a fair value of $549,376 for the conversion of $119,600 of principal resulting in a loss on settlement of debt of $429,776.
As at December 31, 2020, the note and derivative liability were extinguished. During the year ended December 31, 2020, the Company accreted $119,600, of the debt discount to finance costs.
(u) On March 2, 2020, the Company issued a convertible promissory note in the principal amount of $60,950. The note is unsecured, bears interest at 8% per annum, is due on March 2, 2021, and is convertible into common shares of the Company, beginning 180 days from the date of the note up to maturity or repayment, at a price equal to 80% of the average of the lowest two trading prices for the common stock during the fifteen trading days before conversion. Deferred financing fees and original issuance discount on the note were $10,950. The derivative liability applied as a discount on the note was $50,000 and is accreted over the life of the note.
On September 18, 2020, the Company paid cash, received pursuant to the promissory note outlined in Note 8(g), of $78,643 for outstanding principal and interest on the note including a prepayment penalty of $15,221 to settle the debt.
As at December 31, 2020, the note and derivative liability were extinguished. During the year ended December 31, 2020, the Company accreted $60,950, of the debt discount to finance costs.
(v) On April 15, 2020, the Company issued a convertible promissory note in the principal amount of $60,950. The note is unsecured, bears interest at 8% per annum, is due on April 15, 2021, and is convertible into common shares of the Company, beginning 180 days from the date of the note up to maturity or repayment, at a price equal to 80% of the average of the lowest two trading prices for the common stock during the fifteen trading days before conversion. Deferred financing fees and original issuance discount on the note were $10,950. The derivative liability applied as a discount on the note was $50,000 and is accreted over the life of the note.
On September 18, 2020, the Company paid cash of $66,000 to settle all outstanding principal and interest on the note, resulting in a loss on the settlement of debt totaling $2,966.
As at December 31, 2020, the note and derivative liability were extinguished. During the year ended December 31, 2020, the Company accreted $60,950, of the debt discount to finance costs.
(w) On August 31, 2020, the Company issued a convertible promissory note in the principal amount of $166,650 with a 10% original issuance discount totaling $16,650, for net proceeds of $150,000. The note is unsecured, bears interest at 10% per annum, is due and payable on demand, and is convertible into common shares of the Company, at a price equal to the lesser of (a) five cents ($0.05) per share or (b) seventy percent (70%) of the lowest traded price for the Company’s common stock during the fifteen (15) trading days preceding the relevant conversion.
On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $167,974 for 168 Series C Preferred Shares. As at December 31, 2020, the note was extinguished.
(x) On September 17, 2020, the Company issued a convertible promissory note in the principal amount of $288,860 with a 10% original issuance discount totaling $28,860, for net proceeds of $260,000. The note is unsecured, bears interest at 10% per annum, is due on June 17, 2021, and is convertible into common shares of the Company at a price equal to the lesser of (a) four cents ($0.04) per share or (b) seventy percent (70%) of the lowest traded price for the Company’s common stock during the fifteen (15) trading days preceding the relevant conversion.
On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $289,889 for 290 Series C Preferred Shares. As at December 31, 2020, the note was extinguished.
(y) On August 30, 2017, the Company issued a convertible promissory note in the principal amount of $15,000. The note is unsecured, bears interest at 10% per annum, is due on August 30, 2018, and is convertible into common shares of the Company at a price equal to a 20% discount of the average closing bid price for the Company’s common stock during the five (5) trading days immediately preceding a conversion date, with a floor price of $0.005. The note was issued as a Commitment fee and is included in Finance costs during the nine months ending September 30, 2020.
On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $18,131 for 18 Series C Preferred Shares. As at December 31, 2020, the note was extinguished.
(z) On May 2, 2019, the Company issued a convertible promissory note in the principal amount of $10,000. The note is unsecured, bears interest at 8% per annum, is due on May 2, 2020, and is convertible into common shares of the Company at a price equal to a 58% of the lowest traded price of the Company’s common stock during the five (5) trading days immediately preceding the conversion date. The note was issued for proceeds paid directly to legal counsel for legal fees, related to the 2019 S-1 Registration Statement, and is included in Accounting & Legal during the nine months ending September 30, 2020.
On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $11,841 for 12 Series C Preferred Shares. As at December 31, 2020, the note was extinguished.
(aa) On June 10, 2019, the Company issued a convertible promissory note in the principal amount of $15,000. The note is unsecured, bears interest at 10% per annum, is due on August 30, 2018, and is convertible into common shares of the Company at a price equal to a 20% discount of the average closing bid price for the Company’s common stock during the five (5) trading days immediately preceding a conversion date, with a floor price of $0.005. The note was issued for proceeds paid directly to a third party for audit fees, related to the 2019 S-1 Registration Statement, and is included in Accounting & Legal during the nine months ending September 30, 2020.
On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $51,999 for 52 Series C Preferred Shares. As at December 30, 2020, the note was extinguished.
Note 10 - DERIVATIVE LIABILITIES
The Company records the fair value of the of the conversion feature of the convertible loans payable disclosed in Note 9 in accordance with ASC 815, Derivatives and Hedging. The fair value of the derivative was calculated using a multi-nominal lattice model. The fair value of the derivative liabilities is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statement of operations.
The following range of inputs and assumptions were used to value the derivative liabilities outstanding during the years ended December 31, 2020 and 2019, assuming no dividend yield:
Expected volatility - 531 % - 374 %
Risk free interest rate 0.09 - 0.18 % 1.6 - 2.6 %
Expected life (years) 0.25 - 1.0 0.25 - 2.0
A summary of the activity of the derivative liabilities is shown below:
$
Balance, January 1, 2019
2,188,354
New issuances
939,919 )
Change in fair value
(271,704 )
Balance, December 31, 2019
2,856,569
Balance, January 1, 2020
2,856,569
New issuances
197,465
Extinguished
(10,440,286)
Change in fair value
7,386,252
Balance, December 31, 2020
-
Note 11 - LEASES
Lessor
During the year ended December 30, 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.
During the year ended December 31, 2020, the Company recognized lease receivables of $45,856, to reflect lease payments expected to be received over the term of the agreements and derecognized $30,000 in inventory related to the underlying asset.
Lease receivable December 31, 2020
Balance, January 1, 2020 $ -
Additions 45,856
Receipt of payments (3,000 )
Balance, December 31, 2020 42,856
Current portion of lease receivable (4,297 )
Long term potion of lease receivable $ 38,559
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 used 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.
In accordance with the terms of the agreement, the Company recorded $45,856 in rental revenues related to the lease at the date of commencement and $30,000 in cost of goods sold.
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 December 31, 2020, the Copier lease had a remaining term of 3.75 years.
On April 1, 2020, the Company terminated its showroom space lease, resulting in a gain of $8,428 (CDN$11,294) which is included in general and administrative expense. On May 31, 2020, the Company’s office leases expired.
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. As of December 31, 2020, Fairfield Lease had a remaining term of 1.67 years. The Fairfield Lease also included a refundable security deposit of $7,750 which is included in prepaid expenses and deposits at December 31, 2020.
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 and lease liabilities of $125,014. The difference between the recorded operating lease assets and lease liabilities is due to prepaid rent deposits to be applied to first months’ rent of $8,811 (CDN$11,948). The lease included a rent-free period with rent payments commencing on September 1, 2020. As of December 31, 2020, the lease had a remaining term of 2.58 years.
Right-of-use assets have been included within fixed assets, net and lease liabilities have been included in operating lease liability on the Company’s consolidated balance sheet.
Right-of-use assets December 31, 2020 December 31, 2019
Cost $ 302,477 $ 178,202
Accumulated depreciation (53,158 ) (39,671 )
Total right-of-use assets $ 249,319 $ 138,531
Lease liability December 31, 2020 December 31, 2019
Current portion $ 125,864 $ 62,935
Long-term portion 150,877 74,225
Total lease liability $ 276,741 $ 137,160
Operating lease liabilities are measured at the commencement date based on the present value of future lease payments. As the Company’s lease did not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The Company used a weighted average discount rate of 11.98% in determining its lease liabilities. The discount rate was derived from the Company’s assessment of borrowings.
Right-of-use assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The lease terms may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option.
Operating lease expense for the twelve months ended December 31, 2020 was $86,645 (2019 - $44,875) 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 December 31, 2020 for the next three years are as follows:
Operating lease commitments and lease liability December 31, 2020
$ 152,317
124,565
37,060
1,736
Total future minimum lease payments 315,678
Discount (38,937 )
Total 276,741
Current portion of operating lease liabilities (125,864 )
Long-term portion of operating lease liabilities $ 150,877
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.
Mezzanine Preferred Equity Transactions
During the year ended December 31, 2020:
● On September 30, 2020, the Company entered into an Exchange Agreement, as outlined in Note 9, to settle outstanding convertible debt and accrued interest in exchange for 2,347 shares of Series C preferred shares with an aggregate carrying amount of $2,348,208. The shares were issued October 14, 2020.
● On September 30, 2020, the Company entered into a Securities Purchase Agreement (the “Series C SPA”) whereby the Company agrees to sell and the Purchaser agrees to purchase, in a series of closings (the “Closings”), up to 200 shares of Series C preferred shares at a price of $1,000 per share. At the First Closing, the Company agrees to issue 250 shares of Series C preferred shares, representing 200 Purchased Shares and 50 Commitment Shares. On October 14, 2020, the Company issued 250 Series C shares for gross proceeds of $200,000 in full satisfaction of the First Closing.
● On November 6, 2020, the Company received gross proceeds of $300,000 for 300 Series C Preferred Shares in lieu of the Second Closing for the Series C SPA. The shares are included in preferred shares to be issued at December 31, 2020.
● 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 at December 31, 2020.
● On December 23, 2020, the Company entered into a Securities Purchase Agreement (the “Series F SPA”) whereby the Company agrees 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 shares are included in preferred shares to be issued at December 31, 2020 with a fair value of $731,992 and were issued subsequently on February 4, 2021.
● During the year ended December 31, 2020, 1,573 Series C Preferred Shares were converted into common shares, see note 14.
● On December 22, 2020, the Company received conversion notices to convert 18 Series C shares into 96,861 common shares. 18 Series C were converted subsequently on January 19, 2021.
● On December 23, 2020, the Company received conversion notices to convert 286 Series C shares into 1,539,014 common shares. 286 Series C were converted subsequently on January 15, 2021.
During the year ended December 31, 2019:
● The Company settled various accounts payable balances, debt and preferred shares in exchange for shares of common stock to be issued and warrants. Included in these settlements were 100,500 and 4,649,908 shares of Series D and Series E preferred shares, respectively, with an aggregate carrying value of $6,668,643.
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.
On March 26, 2019, the Company effected a reverse stock split of its shares of common stock on a four thousand (4,000) old for one (1) new basis. Preferred share amounts remained unchanged.
On October 29, 2019, the Company re-designated its Series A Preferred Stock. The Series A Preferred Stock shall be entitled to vote with the holders of the Company’s Common Stock as a class at the rate of 665 common share votes per share of Series A Preferred Stock. The Series A Preferred Stock shall be deemed cancelled five years following issuance, provided that the Board of Directors may, in its discretion, retire the Series A Preferred Stock at any time after two years following issuance, or defer the retirement of the Series A Preferred Stock for up to 10 years following issuance.
Preferred Stock Transactions
During the year ended December 31, 2020:
● On May 21, 2020, the Company issued an aggregate of 136 shares of Series B preferred shares to various parties for past services to the Company, which included 122 issued to related parties and 2 issued to a former director of the Company. These preferred shares were valued at $767,040, based on the fair value of the underlying common stock, discounted for the six months hold period before the preferred shares can be converted. The issuance is recorded under compensation expense.
● On October 26, 2020, the Company agreed to issue 100 shares of Series B preferred shares to for investor relations services to the Company, these preferred shares were valued at $1,340,000, based on the fair value of the underlying common stock.
● On December 11, 2020, 4 Series B preferred shares were converted into common shares, see note 14.
During the year ended December 31, 2019:
● The Company settled various accounts payable balances, debt and preferred shares in exchange for shares of common stock to be issued and warrants. Included in these settlements were 132 shares of Series B Preferred Stock with a carrying value of $4,872,732.
● On October 29, 2019, the Company issued an aggregate of 200,376 shares of Series A preferred shares at value of $200 to three directors of the Company.
Note 14 - COMMON STOCK AND ADDITIONAL PAID IN CAPITAL
Authorized
On March 26, 2019, the Company effected a reverse stock split of its shares of common stock on a four thousand (4,000) old for one (1) new basis. Upon effect of the reverse split, authorized capital decreased from 3,000,000,000 shares of common stock to 750,000 shares of common stock. Subsequently, on May 23, 2019, an increase in common shares to 150,000,000 was authorized, with a par value of $0.001. These consolidated financial statements give retroactive effect to such reverse stock split named above and all share and per share amounts have been adjusted accordingly, unless otherwise noted. Each share of common stock is entitled to one (1) vote.
Common Stock Transactions
During the year ended December 31, 2020:
● The Company issued an aggregate of 191,865 shares of common stock for cash proceeds of $100,031.
● The Company issued an aggregate of 4,303,000 shares of common stock with a fair value of $1,360,784 in exchange for services.
● The Company issued an aggregate of 16,880,146 shares of common stock with a fair value of $7,521,454 to satisfy shares to be issued.
● The Company issued 2,363,532 shares of common stock with a fair value of $214,286 for share-settled debt.
● The Company issued an aggregate of 52,937,999 shares of common stock with a fair value of $3,577,005 upon the conversion of $777,872 of convertible debentures and accrued interest, as outlined in Note 9, per the table below:
Date issued Common shares
issued (#)
Fair value(1) Converted balance(2) Loss on conversion
January 7, 2020 53,764 $ 53,226 $ 20,000 $ (33,226 )
February 4, 2020 135,802 127,654 20,000 (107,654 )
February 7, 2020 151,234 142,160 24,500 (117,660 )
February 26, 2020 151,515 45,455 20,000 (25,455 )
February 26, 2020 140,151 39,242 18,500 (20,742 )
March 9, 2020 170,000 27,200 13,090 (14,110 )
March 9, 2020 195,547 68,441 13,000 (55,441 )
March 11, 2020 180,505 63,177 12,000 (51,177 )
April 1, 2020 140,000 9,800 3,889 (5,911 )
April 1, 2020 220,000 15,400 6,666 (8,734 )
April 2, 2020 218,678 16,379 7,000 (9,379 )
April 21, 2020 264,026 24,649 8,000 (16,649 )
May 15, 2020 258,000 25,800 7,166 (18,634 )
May 19, 2020 426,000 80,940 17,338 (63,602 )
May 19, 2020 675,675 100,000 30,000 (70,000 )
May 19, 2020 350,000 33,250 12,705 (20,545 )
May 19, 2020 337,837 50,000 15,000 (35,000 )
May 21, 2020 298,606 56,735 13,258 (43,477 )
May 21, 2020 611,111 116,111 27,750 (88,361 )
July 8, 2020 500,000 45,000 10,500 (34,500 )
July 8, 2020 857,142 72,857 18,000 (54,857 )
July 8, 2020 600,000 22,800 11,549 (11,251 )
July 8, 2020 639,846 51,188 13,437 (37,751 )
July 8, 2020 880,952 70,476 18,500 (51,976 )
July 10, 2020 809,523 29,952 17,000 (12,952 )
July 17, 2020 1,121,212 55,948 18,500 (37,448 )
July 17, 2020 1,151,515 46,291 19,500 (26,791 )
July 20, 2020 1,130,000 45,426 17,091 (28,335 )
July 23, 2020 879,157 43,870 14,506 (29,364 )
August 3, 2020 1,309,824 35,234 14,146 (21,088 )
August 3, 2020 1,638,117 33,991 17,692 (16,299 )
August 10, 2020 1,412,525 30,553 15,255 (15,298 )
August 13, 2020 1,000,000 20,100 15,000 (5,100 )
August 13, 2020 1,130,000 25,877 11,311 (14,566 )
August 13, 2020 1,465,201 29,451 16,000 (13,451 )
August 19, 2020 1,484,615 22,269 19,300 (2,969 )
August 25, 2020 1,750,000 125,125 11,340 (113,785 )
August 25, 2020 1,483,146 106,045 13,200 (92,845 )
August 25, 2020 620,033 44,332 4,018 (40,314 )
August 25, 2020 1,490,000 106,535 8,851 (97,684 )
August 25, 2020 1,893,939 135,417 12,500 (122,917 )
August 26, 2020 1,818,182 130,000 12,000 (118,000 )
August 27, 2020 1,808,989 156,839 16,100 (140,739 )
August 31, 2020 1,808,989 84,842 16,100 (68,742 )
September 1, 2020 1,560,000 79,560 9,266 (70,294 )
September 2, 2020 1,808,989 80,283 16,100 (64,183 )
September 9, 2020 1,808,989 66,119 16,100 (50,019 )
September 10, 2020 2,727,273 92,045 18,000 (74,045 )
September 14, 2020 1,560,000 46,566 9,266 (37,300 )
September 17, 2020 345,291 12,879 7,700 (5,179 )
September 18, 2020 2,938,117 113,705 19,039 (94,666 )
September 22, 2020 1,515,151 57,879 10,000 (47,879 )
September 24, 2020 412,831 51,232 5,699 (45,533 )
September 29, 2020 2,600,000 310,700 15,444 (295,256 )
Total 52,937,999 $ 3,577,005 $ 777,872 $ (2,799,133 )
(1) Fair values are derived based on the closing price of the Company’s common stock on the date of the conversion notice.
(2) Converted balance includes portions of principal, accrued interest, financing fees, interest penalties and other fees converted upon the issuance of shares of common stock.
During the year ended December 31, 2019:
● The Company issued an aggregate of 72,295 shares of common stock with a fair value of $63,437 in exchange for services.
● The Company issued an aggregate of 32,000 shares of common stock with a fair value of $37,760 as partial settlement for accounts payable, as outlined in Note 8.
● The Company issued an aggregate of 407,536 shares of common stock with a fair value of $506,468 upon the conversion of $180,642 of convertible debentures, accrued interest and accounts payable, as outlined in Note 9, per the table below:
Date issued Common
shares issued (#) Fair value(1) Converted balance(2) Loss on conversion
January 22, 2019 10,189 $ 28,527 $ 15,690 $ (12,837 )
March 11, 2019 18,606 37,211 12,280 (24,931 )
March 15, 2019 27,137 54,238 17,899 (36,339 )
June 17, 2019 45,216 58,781 31,651 (27,130 )
June 20, 2019 34,450 36,517 19,895 (16,622 )
July 17, 2019 37,900 33,352 5,628 (27,724 )
August 26, 2019 40,000 27,020 6,620 (20,400 )
September 18, 2019 39,500 49,376 8,255 (41,121 )
October 11, 2019 35,000 44,450 13,475 (30,975 )
November 13, 2019 47,500 77,899 18,810 (59,089 )
November 7, 2019 23,149 18,519 10,000 (8,519 )
December 19, 2019 48,889 40,578 22,000 (18,578 )
Total 407,536 $ 506,468 $ 182,203 $ (324,265 )
(1) Fair values are derived based on the closing price of the Company’s common stock on the date of the conversion notice.
(2) Converted balance includes portions of principal, accrued interest, accounts payable, financing fees and interest penalties converted upon the issuance of shares of common stock.
Common Stock to be Issued
Common stock to be issued as at December 31, 2020 consists of:
● 3,264,285 shares valued at $52,229 to be issued pursuant to settlement of share-settled debt.
● 4,874,690 shares valued at $1,383,815 to be issued pursuant to settlement of various accounts payable balances and outstanding debt in exchange for shares of common stock to be issued.
As at December 31, 2020, 8,138,975 shares of common stock remain to be issued with a value of $1,436,044, all of which were issued subsequent to year end.
Warrants
On December 23, 2020, the Company granted 3,000,000 warrants concurrently with the execution of the Series F SPA. The warrants are exercisable into one share of common stock at an exercise price of $0.50 per share. Warrants were valued at $768,008, under the relative fair value allocation approach. The warrants expire on the five-year anniversary of the Initial Exercise Date.
On March 2, 2020, the Company granted 2,829,859 warrants with a contractual life of five years and exercise price of $0.25 per share in exchange for strategic advisory services. Warrants were valued at $465,248 using the Black Scholes Option Pricing Model with the assumptions outlined below. Expected life was determined based on historical exercise data of the Company.
On October 26, 2020, the Company promised to grant 1,000,000 warrants with a contractual life of three years and exercise price of $0.25 per share in exchange for investor relations services. Warrants were valued at $163,998 using the Black Scholes Option Pricing Model with the assumptions outlined below and were issued subsequently on February 10, 2021. As at December 31, 2020, the value of the warrants was included in obligation to issue warrants.
On December 31, 2020, the Company granted 250,000 warrants with a contractual life of two years and exercise price of $1.00 per share as part of a Debt Conversion and Settlement agreement. Warrants were valued at $328,329 using the Black Scholes Option Pricing Model with the assumptions outlined below.
December 31, 2020 December 31, 2019
Risk-free interest rate 0.13% - 0.88 % 1.62 %
Expected life 2.0 - 5.0 years 3.0 years
Expected dividend rate 0 % 0 %
Expected volatility - 321 % 280 %
Continuity of the Company’s common stock purchase warrants issued and outstanding is as follows:
Warrants Weighted average exercise price
Outstanding at year end December 31, 2018 - $ -
Granted 6,859,954 0.77
Exercised - -
Expired - -
Outstanding at year December 31, 2019 6,859,954 $ 0.77
Granted 6,079,859 0.40
Exercised - -
Expired - -
Outstanding as at December 31, 12,939,813 $ 0.60
As at December 31, 2020, the weighted average remaining contractual life of warrants outstanding was 3.20 years (2019 - 3.08 years) with an intrinsic value of $9,605,067 (2019 - $108,246).
Note 15 - RELATED PARTY TRANSACTIONS
As at December 31, 2020, the Company owed $317,997 (December 31, 2019 - $263,409) to the President, CEO, and CFO of the Company for management fees and salaries, which has been recorded in trade and other payables. The amounts owed and owing are unsecured, non-interest bearing, and due on demand. During the year ended December 31, 2020 the Company incurred $300,000 (2019 - $100,000) in salaries to the President, CEO, and CFO of the Company and made payments of $170,381.
As at December 31, 2020, the Company owed $Nil (December 31, 2019 - $7,260 (CDN$9,450)) to a company controlled by the son of the President, CEO, and CFO of the Company for subcontractor services. The balance owing has been recorded in trade and other payables. The amount owing is unsecured, non-interest bearing, and due on demand.
On May 21, 2020, the Company issued an aggregate of 136 shares of Series B convertible preferred shares to various parties for past services to the Company, which included 122 issued to related parties and 2 issued to a former director of the Company. These preferred shares were valued at $767,040, based on the fair value of the underlying common stock, discounted for the six months hold period before the preferred shares can be converted. The issuance is recorded under compensation expense.
Note 16 - COMMITMENTS
Product Warranties
The Company’s warranty policy generally covers a period of two years which is also covered by the manufacturer warranty. Thus, any warranty costs incurred by the Company are immaterial.
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 17 - CONTINGENCIES
On September 7, 2016, Chetu Inc. filed a Complaint for Damage in Florida to recover an unpaid invoice amount of $27,335 plus interest of $4,939. The invoice was not paid due to a service dispute. As at December 31, 2020, included in trade and other payables is $47,023 (December 31, 2019 - $40,227) related to this unpaid invoice, interest and legal fees.
On May 24, 2017, the Company received a notice of default from Coastal Investment Partners LLC (“Coastal”), on three 8% convertible promissory notes issued by the Company in aggregate principal amount of $261,389 and commenced a lawsuit on June 12, 2017 in the United States District Court, Southern District of New York. Coastal alleges that the Company failed to deliver shares of common stock underlying the Coastal notes, and thus giving rise to an event of default. Coastal seeks damages in excess of $250,000 for breach of contact damages, and legal fees incurred by Coastal with respect to the lawsuit. On June 13, 2017, Coastal filed a complaint and motion for a preliminary injunction seeking conversion of the principal amount of a note issued by it to the Company into common stock of the Company. The Court issued an Order to Show Cause as to why a preliminary injunction should not be issued on June 27, 2017, and the Company opposed Coastal’s motion. A hearing on the motion for preliminary injunction was held on July 26, 2017. For the following reasons, the Court denied Coastal’s motion for a preliminary injunction. The Company also filed a cross motion to dismiss on the grounds that the $72,500 Note violates New York’s criminal usury law. The Court did not address this motion at that time and has set a separate briefing schedule for it. On December 31, 2020, the Company entered into a Settlement Agreement with Coastal for full and final satisfaction of its claims and all outstanding principal debt and accrued interest for $250,000 paid in cash and 200,000 shares of common stock fair valued at $268,000. As at December 31, 2020, $250,000 is included in loans and accrued interested and $268,000 is included in shares to be issued in relation to the settlement. The Company paid cash of $250,000 on February 11, 2021, in satisfaction of the agreement.
On October 10, 2017, a vendor filed a complaint for Breach of Contract with Superior Court of the State of California. The Complainant is alleging that it is contractually owed 1,848,130 shares of the Company’s common stock and is seeking damages of $270,000. In addition, a related vendor filed in the same filing a complaint for $72,000 as part of a consulting agreement the Company executed. Subsequent to year end, the Company reached a settlement of which the terms have not, as yet, occurred. As at December 31, 2020, included in accrued liabilities is a contingent liability of $115,000 for the expected financial impact of the settlement. Subsequent to December 31, 2020, the Company issued 115,000 shares of restricted common stock pursuant to the settlement.
On April 9, 2018, the Company received a share-reserve increase letter from JSJ Investments Inc. (“JSJ”) pursuant to the terms of a 10% convertible promissory note issued to the Company in the principal amount of $135,000. On April 24, 2018, the Company received a notice of default from JSJ for failure to comply with the share-reserve increase and on April 30, 2018 demanded payment in full of the default amount totaling $172,845. On May 7, 2018, JSJ commenced a lawsuit in the United States District Court, District of Dallas County, Texas. JSJ alleges that the Company failed to comply with the share-reserve increase letter, thus giving rise to an event of default, and failed to pay the outstanding default amount due under the terms of the note. JSJ seeks damages in excess of $200,000 but not more than $1,000,000, which consists of the principal amount of the note, default interest, and legal fees incurred by JSJ with respect to the lawsuit. This action is still pending but as at September 30, 2020, JSJ has negotiated a reduced amount with a private investor. As at September 30, 2020, the principal balance and accrued interest on this convertible note is included on the consolidated balance sheet under convertible notes payable. In November 2020, the Company entered into a Settlement Agreement with JSJ for full and final satisfaction if its claims for $100,000 (the “Settlement Payment”) paid in cash on or before November 10, 2020. Upon receipt of the Settlement Payment, JSJ agreed to provide (a) a settlement agreement and release of all its claims against the Company; and (b) a consent dismissal order in B.C. Supreme Court Action No. 1911876 on a “without costs” basis. The Company paid cash of $100,000 on November 10, 2020 in satisfaction of the agreement. See Note 9(e).
Note 18 - INCOME TAX
For the years ended December 31, 2020 and 2019, there is $Nil and $Nil current and deferred income tax expense, respectively, reflected in the Statement of Operations.
The following are the components of income before income tax reflected in the Statement of Operations for the years ended December 31, 2020 and 2019:
Component of Loss Before Income Tax
December 31, 2020 December 31, 2019
Loss before income tax $ (6,177,099 ) $ (3,078,120 )
Income tax $ - $ -
Effective tax rate 21.0 % 21.0 %
Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating the ability to recover the deferred tax assets within the jurisdiction from which they arise, the Company considered all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In projecting future taxable income, the Company began with historical results adjusted for changes in accounting policies and incorporates assumptions including the amount of future pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimate the Company are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, the Company consider three years of cumulative operating income (loss).
As of December 31, 2020, the Company had aggregate net operating losses of $51,310,040 (2019 - $45,132,941) to offset future taxable income in the United States and the United Kingdom. The deferred tax assets at December 31, 2020 were fully reserved. Management believes it is more likely than not that these assets will not be realized in the near future.
Note 19 - SUPPLEMENTAL CASH FLOW INFORMATION
Year Ended
December 31, 2020 December 31, 2019
Cash paid during the period for:
Income tax payments $ - $ -
Interest payments $ 21,206 $ 46,500
Non-cash investing and financing transactions:
Shares issued for convertible notes payable and accrued interest $ 5,501,965 $ 506,468
Shares issued and to be issued for share-settled debt $ 2,246,334
$ 634,498
Convertible debenture issued for financing fees $ - $ 250,419
Preferred shares exchanged for shares to be issued $ - $ 11,541,375
Initial recognition of lease assets $ 306,622 $ 178,202
Initial recognition of lease liabilities $ 290,061 $ 171,648
Note 20 - SUBSEQUENT EVENTS
Management has evaluated events subsequent to the year ended for transactions and other events that may require adjustment of and/or disclosure in such consolidated financial statements.
Subsequent to December 31, 2020, the Company issued:
● 1,539,014 shares of common stock for conversion of 286 Series C Preferred Shares with an aggregate carrying value of $286,302.
● 1,751,288 shares of common stock were cancelled and returned to treasury due to a duplicated issuance for share settled debt.
● 3,264,285 shares of common stock with a fair value of $52,229 to satisfy shares to be issued at December 31, 2020.
● The Company issued 100 Series B Preferred Shares with a fair value of $1,340,000 and 1,000,000 warrants with a fair value of $163,998 pursuant to an investor relations agreement dated October 26, 2020.
● 300,000 shares of common stock with a fair value of $387,000 to satisfy shares to be issued at December 31, 2020.
● 35,148 shares of common stock with a fair value of $45,341 to satisfy shares to be issued at December 31, 2020.
● 96,861 shares of common stock for conversion of 18 Series C Preferred Shares with an aggregate carrying value of $18,131.
● 1,700,000 shares of common stock for conversion of 17 Series B Preferred Shares with an aggregate carrying value of $95,880.
● 375,000 shares of common stock with a fair value of $502,500 to satisfy shares to be issued at December 31, 2020.
● 200,000 shares of common stock with a fair value of $268,000 to satisfy shares to be issued at December 31, 2020.
● 3,964,542 shares of common stock with a fair value of $180,974 to satisfy shares to be issued at December 31, 2020.
● 3,000 shares of Series F preferred shares with a fair value of $731,992 to satisfy preferred shares to be issued at December 31, 2020, pursuant to the Series F SPA, see note 12.
● 150,000 shares of common stock with a fair value of $138,750 pursuant to a consulting services agreement dated January 26, 2021.
● 115,000 shares of common stock with a fair value of $60,835 pursuant to a legal settlement, see Note 17.
● 695,173 shares of common stock for conversion of 168 Series C Preferred Shares with an aggregate carrying value of $51,999.
● 16 shares of Series B Preferred Shares, convertible into 100,000 shares of common stock per Series B preferred shares, to members of the Board of Directors for compensation with an aggregate fair value of $849,600 based on the underlying security.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The phrase “disclosure controls and procedures” refers to controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended, or the Exchange Act, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission, or SEC. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our chief executive officer, or CEO, and chief financial officer, or CFO, as appropriate to allow timely decision regarding required disclosure.
Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Exchange Act), as of December 31, 2020, the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our CEO and CFO have concluded that as of December 31, 2020, our disclosure controls and procedures were designed at a reasonable assurance level and were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles.
Our management, with the participation of our CEO and CFO, has assessed the effectiveness of the internal control over financial reporting as of December 31, 2020. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013 Framework). Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2020.
This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm on our internal control over financial reporting due to an exemption established by the JOBS Act for “emerging growth companies.”
Changes in Internal Controls over Financial Reporting
There was no change in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended December 31, 2020 that materially affected, or is reasonable likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
Re-designation of Series A Preferred Stock
On October 29, 2019, the Company re-designated its Series A Preferred Stock. The Series A Preferred Stock shall be entitled to vote with the holders of the Company’s Common Stock as a class at the rate of six hundred and 665 common share votes per share of Series A Preferred Stock. The Series A Preferred Stock shall be deemed cancelled five years following issuance, provided that the Board of Directors may, in its discretion, retire the Series A Preferred Stock at any time after two years following issuance, or defer the retirement of the Series A Preferred Stock for up to 10 years following issuance.
Amendment of Series C Preferred Stock
On September 30, 2020, the Company amended its Series C Preferred Stock. The Series C Preferred Stock shall be entitled to vote with the holders of the Company’s Common Stock on an as-converted basis.
Designation of Series F Preferred Stock
On December 22, 2020, the Company designated its Series F Preferred Stock. The Series F Preferred Stock shall be entitled to vote with the holders of the Company’s Common Stock on an as-converted basis.
Debt Settlement Transactions
On April 23, 2020, the Company agreed to settle principal debt of $150,000 for 3,061,224 shares of common stock at $0.049 per share, a 30% discount to market. On August 25, 2020, the terms of this settlement were amended to settle remaining principal of $120,000 for 10,714,285 common shares at an adjusted exercise price of $0.0112, a 30% discount to market. At December 31, 2020, 8,062,244 shares have been issued and 3,264,285 shares were left to be issued. These shares were issued subsequently on January 5, 2021.
On September 18, 2020, the Company paid cash of $60,000 to settle outstanding debt and accrued interest.
On September 18, 2020, the Company paid cash of $22,500 to settle outstanding debt and accrued interest.
On September 18, 2020, the Company paid cash of $66,000 to settle outstanding debt and accrued interest.
On September 18, 2020, the Company paid cash of $76,000 to settle outstanding debt and accrued interest.
On September 30,2020, the Company settled outstanding debt in the aggregate amount of $2,348,208 for 2,347 shares of Series C preferred stock at a price of $1,000 per share.
On November 10, 2020, the Company paid cash of $100,000 to settle outstanding debt and accrued interest.
On December 31, 2020, the Company agreed to settle outstanding loans payable of $111,184 in exchange for 3,964,542 shares of common stock which are included in shares to be issued.
On December 31, 2020, the Company agreed to settle accounts payable of $31,106 in exchange for 35,148 shares of common stock which are included in shares to be issued.
On December 31, 2020, the Company agreed to settle accounts payable of $378,000 in exchange for 300,000 shares of common stock which are included in shares to be issued.
On December 31, 2020, the Company agreed to settle outstanding convertible notes of $193,889 and accrued interest totaling $127,354 for $250,000 paid in cash and the issuance of 200,000 shares of common stock which are included in shares to be issued.
On December 31, 2020, the Company agreed to settle outstanding loans payable of $567,500 and accrued interest totaling $529,990 in exchange for 375,000 shares of common stock which are included in shares to be issued and 250,000 two-year warrants convertible to common shares at $1.00 which were granted on December 31, 2020.
During the year ended December 31, 2020, the Company issued an aggregate of 52,937,999 shares of common stock with a fair value of $3,577,005 upon the conversion of $777,872 of convertible debentures and accrued interest
Preferred Stock Transactions
On May 21, 2020, the Company issued an aggregate of 136 shares of Series B convertible preferred shares with a fair value of $767,040 to various parties for past services to the Company, which included 122 issued to related parties and 2 issued to a former director of the Company.
On October 14, 2020, the Company issued an aggregate of 2,347 shares of Series C preferred shares at a value of $1,000 per share to a third party to settle outstanding debt of $2,348,208.
On October 14, 2020, the Company issued 250 shares of Series C preferred shares for proceeds of $200,000.
On October 26, 2020, the Company agreed to issue 100 shares of Series B convertible preferred shares with a fair value of $1,340,000 for investor relations services. Shares were issued subsequent to December 31, 2020.
On November 6, 2020, the Company agreed to issue 300 shares of Series C preferred shares for proceeds of $300,000. Shares were issued subsequent to December 31, 2020.
On December 7, 2020, the Company agreed to issue 200 shares of Series C preferred shares for proceeds of $200,000. Shares were issued subsequent to December 31, 2020.
On December 23, 2020, the Company agreed to issue 1,500 shares of Series F preferred shares for proceeds of $1,500,000. Shares were issued subsequent to December 31, 2020.
Legal Proceedings
On September 7, 2016, Chetu Inc. filed a Complaint for Damage in Florida to recover an unpaid invoice amount of $27,335 plus interest of $4,939. The invoice was not paid due to a service dispute. As at December 31, 2020, included in trade and other payables is $47,023 (December 31, 2019 - $40,227) related to this unpaid invoice, interest and legal fees.
On May 24, 2017, we received a notice of default from Coastal Investment Partners LLC (“Coastal”), on three 8% convertible promissory notes issued by the Company in aggregate principal amount of $261,389 and commenced a lawsuit on June 12, 2017 in the United States District Court, Southern District of New York. Coastal alleges that the Company failed to deliver shares of common stock underlying the Coastal notes, and thus giving rise to an event of default. Coastal seeks damages in excess of $250,000 for breach of contact damages, and legal fees incurred by Coastal with respect to the lawsuit. On June 13, 2017, Coastal filed a complaint and motion for a preliminary injunction seeking conversion of the principal amount of a note issued by it to the Company into common stock of the Company. The Court issued an Order to Show Cause as to why a preliminary injunction should not be issued on June 27, 2017, and the Company opposed Coastal’s motion. A hearing on the motion for preliminary injunction was held on July 26, 2017. For the following reasons, the Court denied Coastal’s motion for a preliminary injunction. The Company also filed a cross motion to dismiss on the grounds that the $72,500 Note violates New York’s criminal usury law. The Court did not address this motion at that time and has set a separate briefing schedule for it. On December 31, 2020, the Company entered into a Settlement Agreement with Coastal for full and final sastisfaction of its claims and all outstanding principal debt and accrued interest for $250,000 paid in cash and 200,000 shares of common stock fair valued at $268,000. As at December 31, 2020, $250,000 is included in loans and accrued interested and $268,000 is included in shares to be issued in relation to the settlement. The Company paid cash of $250,000 on February 11, 2021, in satisfaction of the agreement.
On October 10, 2017, a vendor filed a complaint for Breach of Contract with Superior Court of the State of California. The Complainant is alleging that it is contractually owed 1,848,130 shares of the Company’s common stock and is seeking damages of $270,000. In addition, a related vendor filed in the same filing a complaint for $72,000 as part of a consulting agreement the Company executed. Subsequent to year end, the Company reached a settlement of which the terms have not, as yet, occurred. As at December 31, 2020, included in accrued liabilities is a contingent liability of $115,000 for the expected financial impact of the settlement. Subsequent to December 31, 2020, the Company issued 115,000 shares of restricted common stock pursuant to the settlement.
On April 9, 2018, we received a share-reserve increase letter from JSJ Investments Inc. (“JSJ”) pursuant to the terms of a 10% convertible promissory note issued to the Company in the principal amount of $135,000. On April 24, 2018, the Company received a notice of default from JSJ for failure to comply with the share-reserve increase and on April 30, 2018 demanded payment in full of the default amount totaling $172,845. On May 7, 2018, JSJ commenced a lawsuit in the United States District Court, District of Dallas County, Texas. JSJ alleges that the Company failed to comply with the share-reserve increase letter, thus giving rise to an event of default, and failed to pay the outstanding default amount due under the terms of the note. JSJ seeks damages in excess of $200,000 but not more than $1,000,000, which consists of the principal amount of the note, default interest, and legal fees incurred by JSJ with respect to the lawsuit. This action is still pending but as at September 30, 2020, JSJ has negotiated a reduced amount with a private investor. As at September 30, 2020, the principal balance and accrued interest on this convertible note is included on the consolidated balance sheet under convertible notes payable. In November 2020, the Company entered into a Settlement Agreement with JSJ for full and final satisfaction if its claims for $100,000 (the “Settlement Payment”) paid in cash on or before November 10, 2020. Upon receipt of the Settlement Payment, JSJ agreed to provide (a) a settlement agreement and release of all its claims against the Company; and (b) a consent dismissal order in B.C. Supreme Court Action No. 1911876 on a “without costs” basis. The Company paid cash of $100,000 on November 10, 2020 in satisfaction of the agreement. See Note 9(e).
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
The following sets forth information about our director and executive officer as of the date of this report:
NAME
AGE
POSITION
DATE FIRST ELECTED OR APPOINTED
Robert Silzer
Director, President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer
May 6, 2015 (as President, Chief Executive Officer, Chief Financial Officer, Secretary, and Treasurer) June 16, 2015 (as Director)
Stephen Johnston
Director
June 16, 2015
James Singerling
Director
June 16, 2015
Michael Leemhuis
Director
April 8, 2020
Carol Cookerly
Director
April 8, 2020
Jason Sugarman(1)
Former Director
June 16, 2015
(1) Jason Sugarman resigned from his position as director on July 11, 2019.
Our directors will serve in that capacity until our next annual shareholder meeting or until his successor is elected and qualified. Officers hold their positions at the will of our Board of Directors. There are no arrangements, agreements or understandings between non-management security holders and management under which non-management security holders may directly or indirectly participate in or influence the management of our affairs.
Executive Management
Our executive management team represents a significant depth of experience in biometrics and facial recognition technologies, intelligent security and surveillance, high-growth and technology marketing, and domestic and international sales and business development. The team represents a cross-disciplinary approach to management and business development.
Robert Silzer, Director, President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer.
Robert Silzer has over 20 years’ experience in the GPS tracking and fleet solutions industries. He is the founder of DSG TAG Systems Inc. and has served as Chief Executive Officer of DSG TAG since its inception in April 2008. Mr. Silzer is a product designer who has developed multiple new product concepts and successfully introduced these products to market including the world’s first handheld bingo gaming unit, the first handheld and color handheld GPS golf units and the first Wi-Fi enabled GPS golf business solution. Prior to establishing DSG TAG, Mr. Silzer’s designed and a total golf solution that addressed the growing needs in Golf Course management. Through a series of mergers and acquisitions different companies with diversified hardware and software platforms, he founded GPS Industries (“GPSI”) in 1996, serving as its president, CEO, Chairman and director until 2007. Under his leadership, it became the largest operator of golf GPS systems in the world and with a remarkable 750 golf courses worldwide using the installed system. Prior to founding GPSI, Mr. Silzer founded XGA, an online golf store and website company in 1993. He also founded Advanced Gaming Technology, Inc. in 1992, an electronic gaming company, where he served as Chief Executive Officer until 1998. From 1986 to 1992, Mr. Silzer founded and operated the private company Supercart International. With over 30 years as an entrepreneur in the technology and other markets, Mr. Silzer has developed expertise in taking companies to market, growing start-up business, initial public offerings, raising funds, operations, marketing and international licensing.
Stephen Johnston, Director
Stephen Johnston is the founding Partner of Global Golf Advisors and one of the leading authorities on operational analysis and financial solutions for golf businesses. Steve began his career at the accounting firm of Thorne Gunn/Thorne Riddell in Toronto in 1973. He earned his Chartered Accountant designation while with Thorne Riddell in 1976 and in 1984 was promoted to Partner and given responsibility for major client accounts. His audit experience with major accounts subsequently expanded into real estate, communications and insurance.
When the firm became known as KPMG, Steve continued as an Audit Partner and in 1992 created the KPMG Golf Industry Practice and assumed responsibility as National Director. In 2006 Steve purchased the KPMG Golf Industry Practice and created Global Golf Advisors Inc., bringing with him the entire staff complement and client files to the new firm.
Steve is a graduate of the University of Toronto with a Bachelor of Science degree and business courses complement relevant to his Chartered Accountant designation. Steve’s main focus is developing financial and business solutions for private clubs, public golf courses and resorts, golf communities, investors and lenders. He provides a keen insight for banking and finance solutions arising from his years of advising numerous international financial institutions.
He has completed due diligence and valuation assignments for some of the largest golf-related transactions in North America and has completed multiple market studies to reposition various golf assets. In addition, Steve has been actively involved with workouts/receiverships, providing operational and financial guidance. These assignments typically lead to member buyouts/transitions from developers or to an outright disposition of property. Steve has been recognized as one of the Top Powerbrokers in Canadian Golf by The National Post over the past 15 years.
James Singerling, Director
From 1990 until his retirement in 2015, James Singerling, CCM, served as the CEO of Club Managers Association of America (CMAA), the foremost professional association for managers of membership clubs in the US. In this role Mr. Singerling was credited for elevating the professional role of club managers by creating industry-standard development and certification programs. For over two decades, he spearheaded efforts to adopt the general manager/chief operating officer model at clubs nationwide, raising the qualifications and quality of club managers. Mr. Singerling is also recognized for building new relationships for the industry with federal and state governments and within the association community.
In addition to his work within the U.S., Mr. Singerling was instrumental in the development of professional club management associations internationally, helping other nations elevate the role of club managers by adopting professional standards and certifications. Regions where his leadership is recognized include South America, Australia, China, South Africa and the Asian-Pacific corridor, among others.
Prior to becoming chief executive at CMAA, Mr. Singerling was a leader in the golf course design and management companies of Robert Trent Jones, Sr., and served as vice president and general manager of the Coral Ridge Country Club in Ft. Lauderdale, FL.
Mr. Singerling has been recognized as Industry Leader of the Year by the University of Nevada, Las Vegas, and Michigan State University, in addition to receiving awards from Florida State University, Pennsylvania State University, Oklahoma State University and Sun Yat Sen University - China. He also was elected to the Association Committee of 100 by the U.S. Chamber of Commerce, widely recognized as the most prestigious organization of chief executives in the United States.
Michael Leemhuis, Director
Michael Leemhuis, M.A. Ed., CCM, CCE, PGA Master Professional is known for his extensive leadership and sports experience. Michael’s experience has been gained in his roles as the President of the Ocean Reef Club; CEO of Congressional Country Club; President of the Club Managers Association of America in 2009; GM/Director of Golf at the PGA TOUR; General Manager, Sport and Recreation at Sun City Resort; Tournament Director of the Nedbank Million Dollar Golf Challenge and MD of Sports International. One of Mike’s career highlights was guiding Congressional Country Club to the #1 spot in the Platinum Clubs of America and into the top 100 of Platinum Clubs in the World.
Education combined with certification are what Mike believes are the cornerstones of success in business and in life and to that end Mike is a Certified Club Manager (CCM) and Certified Chief Executive (CCE) through CMAA, as well as a certified PGA member through the PGA of America and the PGA of South Africa (Master Professional).
Carol Cookerly, Director
Carol Cookerly is a graduate of Duke University and former broadcast journalist, Carol worked in public relations in New York City before founding the agency in Atlanta. Founder and CEO of Cookerly Public Relations has grown the Company into one of the Southeast’s leading public relations agencies representing a client roster more typical of national firms. In addition to creating higher visibility for a variety of clients, the agency has built a stellar reputation for its ability to: manage high-profile issues and direct crisis communications strategies; use data driven marketing to create behavioral change; and, drive engagement and brand success in social media.
Recent visibility campaign successes include the award-winning introduction of the A-Class line of vehicles for Mercedes-Benz USA and the launch of Novelis Inc.’s advanced-design lightweight aluminum battery enclosure for electric vehicles. Active in the community, Carol is a councilwoman serving the city of Milton, Ga. She is a board member of the nation’s most innovative law enforcement support organization, the Atlanta Police Foundation, for which she serves on two committees. In addition, she was recently appointed to the board of Oglethorpe University’s Hammock School of Business.
Significant Employees
Other than Bob Silzer, we have no full-time employees whose services are materially significant to our business and operations who are employed the Company.
Family Relationships
There are no family relationships among any of our directors or officers.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
1. been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
2. had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
3. been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
4. been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
5. been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
6. been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors and persons who own more than 10% of our common stock to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports that they file.
Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended December 31, 2020, all filing requirements applicable to our officers, directors and greater than 10% percent beneficial owners were complied with.
Corporate Governance Guidelines, Code of Ethics, and Business Conduct
The Board has adopted Corporate Governance Guidelines (the “Guidelines”) to assist it in the exercise of its responsibilities. These Guidelines reflect the Board’s commitment to monitor the effectiveness of policy and decision making both at the Board and at the management level, with a view to enhancing stockholder value over the long term.
We have adopted a written code of ethics and business conduct to provide guidance to all Company’s directors, officers and employees, for each employee, including our including the Company’s principal executive officer, principal accounting officer or controller or persons performing similar functions. The code of ethics is posted on our corporate website at www.dsgtglobal.com. If we make certain amendments to or waivers of our code of ethics, we intend to satisfy the SEC disclosure requirements by promptly posting the amendment or waiver on our website.
Audit Committee and Audit Committee Financial Expert
Our board of directors has determined that it does not have a member of its audit committee that qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K, and is “independent” as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.
We believe that our board of directors is capable of analyzing and evaluating our consolidated financial statements and understanding internal controls and procedures for financial reporting. We believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated any material revenues to date. In addition, we currently do not have nominating, compensation or audit committees or committees performing similar functions nor do we have a written nominating, compensation or audit committee charter. Our sole officer does not believe that it is necessary to have such committees because believes the functions of such committees can be adequately performed by the members of our Board of Directors.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The particulars of the compensation paid to the following persons:
(a) our principal executive officer;
(b) our principal financial officer;
(c) each of our three most highly compensated executive officers who were serving as executive officers at the end of the years ended December 31, 2020 and 2019; and
(d) up to two additional individuals for whom disclosure would have been provided under (c) but for the fact that the individual was not serving as our executive officer at the end of the years ended December 31, 2020 and 2019;
who we will collectively refer to as the named executive officers of our Company, are set out in the following summary compensation table, except that no disclosure is provided for any named executive officer, other than our principal executive officers, whose total compensation did not exceed $100,000 for the respective fiscal year:
EXECUTIVE SUMMARY COMPENSATION TABLE
Name and
principal
position
Year Salary
($)
Bonus
($)
Stock
Awards
($)
Option
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
Nonqualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)
Total
($)
Robert Silzer, 300,000 Nil 338,400 Nil Nil Nil Nil 668,400
Director, President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer 200,000 Nil Nil Nil Nil Nil Nil 200,000
As of December 31, 2020, we had no employment agreements with any of our executive officers or employees.
Summary of Employment Agreements and Material Terms
We have not entered into any employment or consulting agreements with any of our current officers, directors, or employees.
Outstanding Equity Awards.
For the years ended December 31, 2020 and 2019, no director or executive officer has received compensation from us pursuant to any compensatory or benefit plan. There is no plan or understanding, express or implied, to pay any compensation to any director or executive officer pursuant to any compensatory or benefit plan, although we anticipate that we will compensate our officers and directors for services to us with stock or options to purchase stock, in lieu of cash.
Compensation of Directors
The particulars of the compensation paid to each of our director during our fiscal years ended December 31, 2020 and 2019 are set out in the following summary compensation table, except that no disclosure is provided for any director who’s also a named executive officer and whose compensation is fully reflected in the above Executive Summary Compensation Table:
DIRECTOR COMPENSATION TABLE
Name and
principal
position
Year Salary
($)
Bonus
($)
Stock
Awards
($)
Option
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
Nonqualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)
Total
($)
Stephen Johnston, Nil Nil 33,840 Nil Nil Nil Nil Nil
Director Nil Nil Nil Nil Nil Nil Nil Nil
James Singerling, Nil Nil 33,840 Nil Nil Nil Nil Nil
Director Nil Nil Nil Nil Nil Nil Nil Nil
Michael Leemhuis, Nil Nil Nil Nil Nil Nil Nil Nil
Director Nil Nil Nil Nil Nil Nil Nil Nil
Carol Cookerly, Nil Nil Nil Nil Nil Nil Nil Nil
Director Nil Nil Nil Nil Nil Nil Nil Nil
Jason Sugarman, Nil Nil 11,280 Nil Nil Nil Nil Nil
Former Director Nil Nil Nil Nil Nil Nil Nil Nil

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding beneficial ownership of our common stock as of December 31, 2019 (i) by each person who is known by us to beneficially own more than 5% of our common stock; (ii) by each of our officers and directors; and (iii) by all of our officers and directors as a group.
Name and Address of Beneficial Owner Office, if Any Title of Class Amount and
Nature of
Beneficial
Ownership (1) Percent of Class (2)
Officers and Directors
Robert Silzer
214 - 5455 152nd Street
Surrey, British Columbia, Canada
V3S 5A5 Director, president, chief executive officer, chief financial officer, secretary, and treasurer Common Stock 2,019 0.00 %
Stephen Johnston
214 - 5455 152nd Street
Surrey, British Columbia, Canada
V3S 5A5 Director Common Stock - -
James Singerling
214 - 5455 152nd Street Surrey, British Columbia, Canada
V3S 5A5 Director Common Stock - -
Michael Leemhuis
214 - 5455 152nd Street Surrey, British Columbia, Canada
V3S 5A5 Director Common Stock - -
Carol Cookerly
214 - 5455 152nd Street Surrey, British Columbia, Canada
V3S 5A5 Director Common Stock - -
All officers and directors as a group
Common stock, $0.001 par value 2,019 0.00 %
5%+ Security Holders
None
- -
All 5%+ Security Holders
Common stock, $0.001 par value - -
(1)
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.
(2) Percentages are based on 95,765,736 shares of our Company’s common stock issued and outstanding at December 31, 2020. As of February 26, 2021, 101,943,690 shares of common stock were issued and outstanding.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions with Related Persons
Except as disclosed herein, no director, executive officer, shareholder holding at least 5% of shares of our common stock, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction since the year ended December 31, 2020, in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at the year-end for the last three completed fiscal years.
As at December 31, 2020, we owed $317,997 ($405,225 CDN) (2019 - $263,409 ($342,853 CDN)) to our Director and sole Officer, Robert Silzer, for management fees and salaries and $Nil (2019 - $7,260 ($9,450 CDN)) to a company controlled by Robert Silzer, Jr., the son of Robert Silzer, our Director and sole Officer for subcontractor services. The amounts owed and owing are unsecured, non-interest bearing, and due on demand.
Promoters and Certain Control Persons
We did not have any promoters at any time during the past five fiscal years.
Director Independence
We currently act with five (5) directors consisting of Robert Silzer, Stephen Johnston, James Singerling, Michael Leemhuis and Carol Cookerly. We have not made any determination as to whether any of our directors are independent directors, as that term is used in Rule 4200(a) (15) of the Rules of National Association of Securities Dealers.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees, Audit Related Fees, and All Other Fees
The following represents fees for professional services rendered by our independent registered public accounting firm for each of the years ended December 31, 2020 and 2019.
Audit fees $ 75,897 $ 76,130
Audit related fees Nil Nil
Tax fees Nil Nil
All other fees Nil Nil
Total $ 75,897 $ 76,130
Audit fees represent amounts billed for professional services rendered for the audit of our annual consolidated financial statements, reviews of our quarterly reports on Form 10-Q and certain additional services associated with accessing capital markets, including reviewing registration statements and the issuance and preparation of comfort letters and consents.
Saturna Group Chartered Professional Accountants, LLP has served as our independent registered public accounting firm from October 2017 to January 2019.
Buckley Dodds, LLP served as our independent registered public accounting firm since March 2019.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
We have filed the following documents as part of this Annual Report on Form 10-K:
1. Consolidated Financial Statements
Our consolidated financial statements are listed in the “Index to Consolidated Financial Statements” under Part II, Item 8 of this Annual Report on Form 10-K.
2. Financial Statement Schedules
All schedules have been omitted because they are not required, not applicable, not present in amounts sufficient to require submission of the schedule, or the required information is otherwise included in our consolidated financial statements and related notes.
3. Exhibits
See the Exhibit Index immediately following the signature pages of this Annual Report on Form 10-K.