UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

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

 

For the fiscal year ended December 31, 20162017

 

OR

 

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

 

For the transition period from ____________ to ____________.

 

Commission file number 000-53988

 

DSG GLOBAL INC.

(Exact Name of Registrant as Specified in Its charter)

 

Nevada 26-1134956

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

214 – 5455 152nd Street, Surrey, British Columbia V3S 5A5, Canada

(Address of Principal Executive Offices) (Zip Code)

 

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

 

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

 

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

 

Common Stock, $0.001 par value

(Title of Class)

 

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

 

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

 

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

 

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

 

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

 

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

 

Large accelerated filer [  ]Accelerated filer [  ]

Non-accelerated filer [  ]

(Do not check if smaller reporting company)

Smaller reporting company [X]

 

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

 

As of December 31, 2016,2017, the aggregate market value of the voting and non-voting common equity held by non-affiliates was $4,996,578$177,277 based on the closing price on that date. As of April 28, 2017,18, 2018, the registrant had 32,541,187966,394,233 shares of common stock issued and outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Portions of the registrant’s Proxy Statement for the registrant’s 2017 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report on Form 10-K. Such Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of December 31, 2016,2017, the last day of the fiscal year covered by this Annual Report on Form 10-K.

 

 

 

 
 

 

DSG GLOBAL INC.
FORM 10-K
TABLE OF CONTENTS

 

  Page
   
Special Note Regarding Forward-Looking Statements3
   
PART I
   
Item 1.Business4
Item 1A.Risk Factors2324
Item 1B.Unresolved Staff Comments2829
Item 2.Properties2829
Item 3.Legal Proceedings2829
Item 4.Mine Safety Disclosures2830
   
PART II
   
Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities2930
Item 6.Selected Financial Data2931
Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations3031
Item 7A.Quantitative and Qualitative Disclosures about Market Risk4342
Item 8.Financial Statements and Supplementary Data4542
Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure6970
Item 9A.Controls and Procedures6970
Item 9B.Other Information6971
   
PART III
   
Item 10.Directors, Executive Officers and Corporate Governance7071
Item 11.Executive Compensation7576
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters7677
Item 13.Certain Relationships and Related Transactions and Director Independence7977
Item 14.Principal Accountant Fees and Services8179
   
PART IV
   
Item 15.Exhibits and Financial Statement Schedules8280
Signatures S-1

 

 2 
 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

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

 

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

 

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

 

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

 

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

PART I

 

ITEM 1. BUSINESS

 

Our Corporate History and Background Prior to the Closing of the Share Exchange Agreement

 

Boreal Productions Inc. (the Company) was incorporated under the laws of the State of Nevada on September 24, 2007. Andrea Fehsenfeld was then appointed sole officer and director. The Company was formed to option feature films and TV projects and then package them to sell at a profit to various studios and production companies.

 

At that time the board of directors voted to seek capital and begin development of our business plan. We received our initial funding of $9,000 through the sale of common stock to Ms. Fehsenfeld who purchased 3,000,000 shares of common stock at $0.003 per share and $45,000 from the sale of 3,000,000 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 shares of common stock and our outstanding share capital increased from 6,000,000 shares of common stock to 30,000,000 shares of common stock.

 

We have not achieved revenues and have accrued a Net Loss of $153,964 since inception through May 6, 2015, the date of the reverse merger. We have been issued a going concern opinion by our auditors and rely upon the sale of our securities to fund operations. To date we have been unable to raise sufficient capital to finance the production of any film or television production and, consequently, our management has sought alternative strategies, such as business combinations or acquisitions, to create value for our shareholders.

 

On April 13, 2015, we entered into a share exchange agreement with DSG TAG and the shareholders of DSG TAG who become parties to the share exchange agreement. Pursuant to the terms of the share exchange agreement, we agreed to acquire not less than 75% and up to 100% of the issued and outstanding shares of DSG TAG’s common stock in exchange for the issuance by our company of up to 20,000,000 shares of our common stock to the shareholders of DSG TAG on the basis of one of our common shares for 5.4935 common shares of DSG TAG.

 

Previously, in anticipation of the share exchange agreement with DSG TAG, we undertook to change our name and effect a reverse stock split of our authorized and issued common stock. Accordingly, on January 19, 2015, our board of directors approved an agreement and plan of merger to merge with our wholly-owned subsidiary DSG Global Inc., a Nevada corporation, to effect a name change from Boreal Productions Inc. to DSG Global Inc. Our company remains the surviving company. DSG Global Inc. was formed solely for the change of name.

 

Also on January 19, 2015, our company’s board of directors approved a resolution to effect a reverse stock split of our authorized and issued and outstanding shares of common stock on a three (3) old for one (1) new basis. Upon effect of the reverse split, our authorized capital will decrease from 375,000,000 shares of common stock to 125,000,000 shares of common stock and correspondingly, our issued and outstanding shares of common stock will decrease from 30,000,000 to 10,000,000 shares of common stock, all with a par value of $0.001.

Articles of Merger to effect the merger and change of name and a Certificate of Change to effect the reverse stock split were filed with the Nevada Secretary of State on January 22, 2015, with an effective date of February 2, 2015. The name change and forward split were reviewed by the Financial Industry Regulatory Authority (FINRA) were approved for filing with an effective date of February 23, 2015.

 

The name change became effective with the Over-the-Counter Bulletin Board and OTC Markets quotation system at the opening of trading on February 23, 2015 under the symbol “BRPOD”. Effective March 19, 2015 our stock symbol changed to “DSGT”. Our new CUSIP number following the symbol change is 23340C104. The first trade of our common shares occurred on March 25, 2015.

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 Systems from shareholders who became parties to the share exchange agreement, and issued to these shareholders an aggregate of 18,422 shares of our common stock. Following completion of these additional purchases, DSG Global owns approximately 100% of the issued and outstanding shares of common stock of DSG TAG Systems. An aggregate of 4,229,384 shares of Series A Convertible Preferred Stock of DSG TAG Systems continues to be held by Westergaard Holdings Ltd., an affiliate of Keith Westergaard, a member of our board of directors.

 

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.

 

Our principal executive office is located at 214 - 5455 152nd Street, Surrey, BC, V3S 5A5 Canada. The telephone number at our principal executive office is 1 (877) 589 - 8806.

 

Business Subsequent to the Closing of the Share Exchange Agreement

 

Subsequent to the closing of the share exchange agreement with DSG Tag Systems, Inc. (“DSG TAG”), we have adopted the business and operations of DSG TAG.

 

DSG TAG was incorporated under the laws of the State of Nevada on April 17, 2008 and extra provincially registered in British Columbia, Canada in 2008. In March 2011, DSG TAG formed DSG Tag Systems International, Ltd. in the United Kingdom (“DSG UK”). DSG UK is a wholly owned subsidiary of DSG TAG.

 

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

 

DSG Global Inc. (“DSG”) is a technology development company based in Surrey, British Columbia, Canada, engaged in the design, manufacture, and marketing of fleet management solutions for the golf industry, as well as commercial, government and military applications. Its principal activities are the sale and rental of GPS tracking devices and interfaces for golf vehicles, and related support services. The company was founded by a group of individuals who have dedicated their careers to fleet management technologies and have been at the forefront of the industry’s most innovative developments. The company has developed the TAG suite of products that represents a major breakthrough as the first completely modular fleet management solution for the golf industry. The Executive Team has over 50 years’ combined experience in the design and manufacture of wireless, GPS, and fleet tracking solutions. The TAG suite of products is currently sold and installed around the world in golf facilities and commercial applications through a network of established distributors and partnerships with some of the most notable brands in fleet and equipment manufacture.

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

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

 

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

 

We have a direct sales force in North America, which comprises the most significant portion of the golf fleet market, and have developed key relationships with distributors and golf equipment manufacturers such as E-Z-GO, Yamaha and Ransomes Jacobsen to help drive sales for the North American and worldwide markets.

 

Emerging Growth Company

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

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

DSG Technologies and Products

 

Technology Overview

 

DSG produces a “modular” suite of products to provide fleet management solution for any vehicle required for a golf operation, and provides two golfer information display options to meet the operators budget requirements. DSG believes that it is currently the only company in the golf fleet management industry with these capabilities.

 

The DSG TAG System is designed from the ground up to be a golf/turf vehicle fleet management system. Its main function is addressing the golf course operator needs. While employing same core technology (cellular wireless and GPS) as traditional commercial vehicle fleet management systems, DSG has created patent pending solutions to adapt it to the very specific requirements of the golf environment. Compared to mainstream fleet tracking products, DSG collects 10 to 50 times more data points per MB (megabyte) of cellular data due to its proprietary data collection and compression algorithms. Also the relative positioning accuracy is improved by almost one order of magnitude by the use of application-specific geo-data validation and correction methods.

 

DSG’s proprietary methods make it possible to offer a solution suitable for use on golf courses at a price low enough to be affordable in the industry. Every system component incorporates state-of-the-art technology (server, mobile trackers, display). In developing its products DSG TAG 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 DSG 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 TOUCH is a perfect example of this development philosophy in action: the main component is a last-generation Android tablet PC wrapped in a custom designed outdoor enclosure containing the power supply and interface components required for the golf environment. The software application is taking advantage of all the advanced high resolution graphics, touch user interface and computing power of the Android OS delivering a vastly superior user experience compared to competitive systems. The time to market for this product was 30% of how long it took to develop and launch this type of products in the past.

 

The TAG Control Unit

 

The company’s flagship product is the TAG Control unit. The TAG can operate as a “stand alone” unit or with one of two displays; the TEXT alphanumeric display or the TOUCH high definition “touch activated” screen. The TAG 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
  
Geo fencing security features
  
Ability to enforce cart path rules which is key to protecting course on wet weather days
  
Modular system allows for hardware and feature options to fit any budget or operations

TEXT Display

 

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

 

DSG’s entry level alphanumeric golf informationsinformation’s display

 

Features and benefits

 

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

 

TOUCH Display

 

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

 

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

10

 

Features and Benefits

 

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

 

Advertising Platform

 

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

 

 1011 
 

 

 

Advertising displayed in multiple formats including animated GIF and video

11

 

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.

 

12

 

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 3rd 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’

12

 

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.

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

 

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

 

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

 

Markets

 

Sales and Marketing Plan

 

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

 

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

North America Sales

 

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

 

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

 

Western Canada
  
Eastern Canada
  
Northeast USA
  
Western USA
  
Southeastern USA
  
Midwest USA

 

International Sales

 

DSG focuses on select global golf markets that offer significant volume opportunities and that value the benefits that our products deliver.

We utilize strategic distributor partnerships in each targeted region/country to sell, install and service our products. Distributors are selected based on market strength, market share, technical and selling capability, and overall reputation. We believe that DSG solutions appeal to all distributors because they are universal and fit any make or model of vehicle. We maintain and leverage our strong relationship with Yamaha, E-Z-GO and Ransomes Jacobsen (sister company to E-Z-GO) in developing our distributor network around the world. Today, many of our distributor partners are the leading distributors for E-Z-GO and RJ and hold a dominant position in their respective markets. While they are Yamaha or E-Z-GO distributors, most sell DSG products to all courses regardless of their choice of golf car as a value add to their customers and to generate additional revenue. We complement this distributor base with independent distributors as needed to ensure we have sufficient coverage in critical markets.

 

Currently DSG is focused on Europe, Asia and South Africa. The company is looking to expand next into Australia and Latin America.

 

Management Companies

 

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

 

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

 

DSG has dedicated a team to create specific collateral for this market and has assigned a senior executive to have direct responsibility to manage these relationships.

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 newly-established company relative to our competitors, we face the same problems as other new companies starting up in an industry, such as limited access to capital. Our competitors may be substantially larger and better funded than us, and have significantly longer histories of research, operation and development than us. In addition, they may be able to provide more competitive products than we can and generally be able to respond more quickly to new or emerging technologies and changes in legislation and regulations relating to the industry. Additionally, our competitors may devote greater resources to the development, promotion and sale of their products or services than we do. Increased competition could also result in loss of key personnel, reduced margins or loss of market share, any of which could harm our business.

Our primary competitor in the field of golf course fleet management is GPS Industries, a company that was founded in 1996 by Mr. Bob Silzer, the founder of DSG TAG Systems. GPS Industries is currently the largest player in the marketplace with an installed base of approximately 750 golf courses worldwide. GPS Industries was consolidated by various mergers and acquisitions with a diversity of hardware platforms and application software. Since 2009, when GPS Industries has introduced their latest product offering called the Visage, in an exclusive partnership with Club Car, their strategy has been to target mostly their existing customers and motivate them into replacing their existing, older GPS system, with the Visage system.

 

GPS Industries is leveraging very heavily their partnership with Club Car, which is one of the three largest golf cars manufacturers in the world and at times is benefiting from golf operators’ preference for Club Car and their vehicles when they select their management system.

 

Market Mix

 

Since the introduction of the DSG product line, the golf course operators realized that they have now access to a budget-friendly fleet management tool that works not only on golf cars but also with all other vehicles used on the golf course such as turf maintenance, shuttles, and other utility vehicles.

 

Marketing studies have identified that half of the golf course operators only need a fleet management system and only 15% need a high-end GPS golf system. This illustrates the strong competitive advantage that DSG TAG Systems has versus GPS Industries since their product can only address the needs of a relatively small fraction of the marketplace.

Consequently, GPS Industries installed base has steadily declined since most of their new product installations have replaced older product for existing customers and some customers have opted for a lower budget system and switched over to DSG TAG Systems.

 

Marketing Activities

 

The company has a multi layered approach marketing the TAG suite of products. One of the foundations of this plan is attending industry trade shows which are well attended by golf operators. The two largest shows are the PGA Merchandise Show and the Golf Industry Show which are held in Florida at the end of January. The company also attends a number of regional shows around North America. International events are attended by our distributors and partners.

 

The second layer is memberships in key organizations such as the National Golf Course Owners Association, Golf Course Superintendents Association, and Club Managers Association of America. These are very influential in the industry and have marketing channels such as publications, email blasts, and web based marketing. The company also markets directly to course operators through email, surveys direct mail programs.

 

Lead Generation

 

One of the primary sources of lead generation is through the company’s strategic partnerships with EZ-GO, Yamaha, and Ransomes Jacobson. These relationships provide the company with a great deal of market intelligence. The sales forces of the partners work in tandem with the DSG sales team by passing on the leads, creating joint proposals, and distributing TAG sales material. The company has also created co-branded materials for specific value items of interest to operators such as Pace of Play solutions. DSG sale s and marketing staff attend partner sales events to conduct training and discuss marketing strategies.

 

The company is in the process of testing an internal telemarketing program in several key markets to gauge whether this particular channel warrants larger scale implementation.

Competitive Advantages

 

Pricing

 

One of the “heroes” of the TAG System is providing the course operator a range of modular fleet management options that are very competitively priced. Pricing options range from the TURF, TAG, Text, and Touch System, giving the customer a wide range of pricing options.

 

Functional advantages

 

DSG has the distinctive advantage of being able to offer a true fleet management system, encompassing all the vehicles on the golf course not just the golf carts. Due to the modular nature of the system, customers have now the option to configure their system’s configuration to match exactly their needs and their budget.

 

Product advantages

 

DSG products are the robust, reliable, and user friendly systems in the world. DSG is the only company currently providing systems that are waterproof with internal batteries to ensure our partners retain the full golf cart manufacturer’s warranty.

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 12 months’ warranty. The main hardware components offshore supplier offers a warranty plan of 15 months from the date the product is shipped. With an extended 90 days beyond the current warranty, such repair service would be paid by the supplier except for component replacement costs, which would be paid by DSG.

Another important activity related to the management of the product supply chain is working closely with the suppliers and ensuring that we have alternate sources for the main components and identify well in advance any components that may go “end-of-life” and find suitable replacements before product shortages may occur.

 

Inventory Control

 

The Company has implemented strict inventory management procedures that govern the inbound flow of products from suppliers, the outgoing flow to customers as well as the internal movement of inventory between warehouses (Canada, US and UK). There are also procedures in place to control the flow of equipment returning from customers for repairs and their replacements.

 

Installation

 

The Company is utilizing a small number of its own field engineers, geographically positioned to be in close proximity of areas with high concentrations of current and future customers. Occasionally, when new installations exceed the internal capacity, the company employs a number of external contractors, on a project by project basis. Each contractor has been trained extensively to perform product installations and the Company has created an extensive collection of Installation Manuals for all products and vehicle types.

 

The product was designed with ease of installation as one of its features. Additionally, the installation process includes a pre-shipping configuration process that prepares each device with all the settings and graphics content (if applicable) required for the specific location it will be deployed. This makes the installation process a lot simpler and less time consuming in the field which reduces costs (accommodations, food, travel) for internal staff as well as external contractor cost (less billable time).

Another benefit of the simplified installation procedure is increased scalability in anticipation of increased number of installs in the future by reducing the skill level and training time requirements for additional contractors.

 

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 will begin to offer the DSG Par 72 Service & Support Plan to guarantee service and support to client courses in the golf business, this program will be available April 2016. This new program for client courses will guarantee service and support program 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 March 31, 2015 DSG entered into an agreement with Adore Creative Agency Inc., a corporation owned by our director Rupert Wainwright pursuant to which Adore will provide marketing services to DSG. The terms included cash payment of $17,500 and a note in the amount of $310,000, with 5% interest per annum, convertible at the election of the holder into 248,000 common shares in the capital stock of DSG Global, Inc. at a price of $1.25 per share, maturing on March 30, 2016. As of December 31, 2016, approximately 90% of the marketing services related to the agreement have been expensed for a total amount of $280,000 and the remaining $30,000 is recorded as a prepaid deposit. Marketing services to date have not been completed.

On May 19, 2015 DSG entered into a commercial collaboration agreement for tablet products for the North America market with Remo Manufacturing (‘Remo’), a Chinese company in Shanghai, China. Remo is a first-tier developer and manufacturer of wireless tablets and devices. As per the agreement Remo and DSG have partnered together to develop new product lines.

On August 25,2015 DSG entered into a convertible note agreement with Jerry Katell for $250,000. The term of the note is for six months, interest of 10% per annum to be repaid in full by way of common shares @ USD $1.75 per share with piggyback registration rights on the first registration statement filed by DSG and one full warrant @ USD $2.25 per share.

On January 21, 2016, DSG signed a three-month Lease Agreement regarding DSG’s offices located at 5455-152nd Street, Surrey, British Columbia. The term will commence on February 1, 2016 and end on April 30, 2016. The Lease is subject to DSG TAG negotiating a Lease with the Landlord, Benchmark Group, for the current occupied space or another space in the building prior to March 31, 2016. If no agreement has been signed, the Landlord reserves the right to terminate the Lease on March 31, 2016. On April 7, 2016, DSG has signed an additional two-month extension on the current lease at 214-5455 152nd Avenue, Surrey, BC, V3S 5A5. The term will on May 1, 2016 and end on July 31, 2016.

 

On January 22, 2016, DSG TAG entered into a short-term loan agreement with Jeremy Yaseniuk for CAD$337,172 or USD$250,000, payable in either currency at the exchange rate of 1.35. The maturity date of the agreement is no more than six months of the agreement or July 22, 2016. The loan amount bears an interest rate of 10% per annum which shall be payable on the on the maturity date with minimum interest of $25,000.

 

On January 25, 2016, DSG TAG signed a Letter of Intent for exclusive work rights in golf courses and gated communities for Mullen Golf Cars of Mullen Technologies, Inc. DSG has the exclusive rights to offer models 100e 2 seater, 2 door 4 seater, the 100 e4 and any new Mullen golf worthy SLV to the gated communities known as The Villages, Florida, USA.

 

On March 5, 2016, by letter agreement dated December 31, 2015 with Westergaard Holdings Ltd., a corporation owned by our Director Keith Westergaard,a former director of the Company, we amended the Subscription and Debt Settlement Agreement dated September 26, 2014 between DSG Tag Systems, Inc. and Westergaard Holdings, as previously amended on October 4, 2015. Westergaard Holdings owns 4,229,384 shares Series A Convertible Preferred Stock of DSG TAG. Pursuant to the settlement agreement, the parties have agreed that DSG Global will complete financings for gross proceeds of at least $10 million and use a portion of the proceeds to redeem all of the Series A Convertible Preferred Shares. The letter agreement modifies the redemption provisions of the original agreement, which now obligate us to raise capital and redeem the Series A Convertible Preferred Shares at a price of $1.25 per share as follows: (i) on or before May 1, 2016, DSG Global must complete a financing for gross proceeds of at least $2.5 million and use at least $1.125 million to redeem a minimum of 900,000 Series A Shares; (ii) on or before June 1, 2016, DSG Global must complete an additional financing for gross proceeds of at least $2.5 million and use at least $1.125 million to redeem a minimum of 900,000 additional Series A Shares; and (iii) on or before July 1, 2016, DSG Global must complete an additional financing for gross proceeds of at least $5.0 million and use at least $3.04 million to redeem the remaining 2,429,384 Series A Shares.

 

On March 31, 2016, DSG TAG signed a promissory note for $54,000 CAD. The terms are payable on or before April 30th, 2016 to the order of E. Gary Risler, together with interest of 6% per annum simple interest. Interest will be accrued and payable at the time of promissory note repayment. Security for this note will $150,000 CAD of Tag, Touch, and Text inventory currently owed by DSG TAG.

 

On April 6, 2016, DSG TAG entered into a loan agreement with Westergaard Holdings Ltd. a corporation owned by oura former director Keith Westergaard,of the Company, pursuant to which we raised proceeds of $120,000 CAD. DSG TAG agrees to pay the loan plus fees no later than the final due date of July 6, 2016. The fees for service are as follows: (a) DSG TAG agrees to pay a fee for service equal to 5% of the amount of the loan or $6,000 CAD if the loan is paid in full, including fees on or before May 6, 2016; (b) DSG TAG agrees to pay a fee for service equal to 10% of the amount of the original loan, or $12,000 CAD if the loan is paid in full, including fees, between May 7, 2016 and June 5, 2016; and (c) DSG TAG agrees to pay a fee for service equal to 20% of the amount of the original loan, or $24,000 CAD if the loan is paid full, including fees, between June 6, 2016 and July 5, 2016. DSG TAG agrees to pay partial payments towards the principal amount of the loan and fees. DSG TAG agrees that fees will be charged on the initial amount of the loan.

On April 7, 2016, DSG TAG has signed an additional two-month extension on the current lease at 214-5455 152nd Avenue, Surrey, BC, V3S 5A5. The term will begin on May 1, 2016 and end on July 31, 2016.

On April 29, 2016 Westergaard Holdings Ltd., an affiliate of a member of our board of directors and a shareholder of the Company, amended the Subscription / Debt Settlement Agreement dated September 26, 2014 between DSG TAG and Westergaard Holdings, as previously amended. Westergaard Holdings owns 4,229,384 Series A Shares. Pursuant to the settlement agreement, DSG TAG has agreed that DSG Global Inc. will complete financings for gross proceeds of at least $10 million and use a portion of the proceeds to redeem all of the Series A Shares. The letter agreement modifies the redemption provisions, which now obligate the Company to raise capital and redeem the Series A Shares at a price of $1.25 per share as follows: (i) on or before August 1, 2016, the Company must complete a financing for gross proceeds of at least $2.5 million and use at least $1.125 million to redeem a minimum of 900,000 Series A Shares; (ii) on or before September 1, 2016, the Company must complete an additional financing for gross proceeds of at least $2.5 million and use at least $1.125 million to redeem a minimum of 900,000 additional Series A Shares; and (iii) on or before October 1, 2016, the Company must complete an additional financing for gross proceeds of at least $5.0 million and use at least $3.14 million to redeem the remaining 2,429,384 Series A Shares.

On July 26, 2016, DSG TAG has signed an additional six-month extension on the current lease. The term will begin on August 1, 2016 and end on January 31, 2017.

 

On August 5, 2016, DSG Global signed a convertible note agreement for $150,000 USD. The term of the note is 45 days from the date of contract with interest accrued at 2% per month. The principal and interest will be repaid in full by way of cash repayment or Class A common shares.

 

On November 7, 2016, we entered into a securities purchase agreement with Coastal Investment Partners. Pursuant to the agreement, Coastal Investment provided us with cash proceeds of $125,000 on November 10, 2016. In exchange, we issued a secured convertible promissory note in the principal amount of $138,888.89 (the “$138,888.89 Note”), inclusive of an 8% original issue discount, which bears interest at 8% per annum to the holder. The $138,888.89 Note matures six months from issuance and is convertible at the option of the holder into our common shares at a price per share that is the lower of $0. 12 or the closing price of our 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 of cash proceeds of $10,000 and another secured convertible note of $75,000 in consideration of cash proceeds of $10,000.

 

On December 6, 2016, a convertible loan was received from Brent Silzer in the amount of $29,791 (CAD $40,000). Interest is 8% annual rate for one month and 4% monthly rate thereafter if not paid by January 15, 2017. The note is convertible, in whole or in part, at $0.05 per share.

 

On December 21, 2016, we entered into a convertible note agreement for the principal amount of $74,500. The terms are payable at the date of maturity, December 21, 2017, together with interest of 12% per annum. Interest will be accrued and payable at the time of promissory note repayment. The Holder shall have the right to convert all or any part of the outstanding and unpaid principal amount into fully paid and non-assessable shares of Common Stock at a conversion price equal to the lessor of (i) the closing sale price of the Common Stock on the Principal Market on the Trading Day immediately preceding the Closing Date, and (ii) 50% of the lowest sale price for the Common Stock on the Principal Market during the twenty five (25) consecutive Trading Days immediately preceding the Conversion Date. As of December 31, 2016, this convertible note was still outstanding to be received. In January 2017, the funds from this note were received by the Company and the liability recorded.

 

On January 3, 2017, we entered into an investor relations agreement with Chesapeake Group Inc., to assist in all phases of our investor relations including broker/dealer relations. The contract will commence on January 3, 2017 and end on July 2, 2017. In consideration for the agreement, we are committed to providing 1,800,000 restricted common shares within 10 days of the agreement, plus an additional 450,000 restricted common shares representing a monthly fee of $3,750. These restricted common shares are to be issued in monthly installments of 75,000 restricted common shares on the 2nd of each month beginning on February 2, 2017 and ending on July 2, 2017.

 

On January 18, 2017, we issued a convertible promissory note in the principal amount of $75,000. The terms are payable at the date of maturity, October 18, 2017, together with interest of 12% per annum. Interest will be accrued and payable at the time of promissory note repayment. The Holder shall have the right to convert all or any part of the outstanding and unpaid principal amount into fully paid and non-assessable shares of Common Stock at a conversion price equal to the lessor of (i) 60% multiplied by the lowest Trading Price (representing a discount rate of 40%) during the previous twenty five (25) Trading Day period ending on the latest complete Trading Day prior to the date of this Note and (ii) the Variable Conversion Price which means 50% multiplied by the lowest Trading Price (representing a discount rate of 50%) during the previous twenty five (25) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.

On March 15, 2017, we entered into a Securities Purchase Agreement, pursuant to which the Company agreed to issue 500,000 common shares of the Company at a price of $0.10 per share for aggregate consideration of $50,000.

 

On April 3, 2017, we issued a convertible promissory note in the principal amount of $110,000. The terms are payable at the date of maturity, October 3, 2017, together with interest of 10% per annum. Interest will be accrued and payable at the time of promissory note repayment. In connection with the issuance of this convertible promissory note, the Borrower shall issue 550,000 shares of common stock as a commitment fee provided, however, these shares must be returned if the Note is fully repaid and satisfied prior to the date which is 180 days following the issuance. The Holder shall have the right to convert all or any part of the outstanding and unpaid principal amount into fully paid and non-assessable shares of Common Stock at a conversion price equal to the lessor of (i) 55% multiplied by the lowest Trading Price (representing a discount rate of 45%) during the previous twenty five (25) Trading Day period ending on the latest complete Trading Day prior to the date of this Note and (ii) the Alternate Conversion Price which means 55% multiplied by the lowest Trading Price (representing a discount rate of 50%45%) during the previous twenty five (25) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.

On June 5, 2017, we issued a convertible promissory note in the principal amount of $110,000. The terms are payable at the date of maturity, December 5, 2017, together with interest of 10% per annum. Interest will be accrued and payable at the time of promissory note repayment. The Holder shall have the right to convert all or any part of the outstanding and unpaid principal amount into fully paid and non-assessable shares of Common Stock at a conversion price equal to the lessor of (i) eight cents ($0.08) or (ii) the Alternate Conversion Price which means 55% multiplied by the lowest Trading Price (representing a discount rate of 45%) during the previous twenty five (25) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.

 On July 17, 2017, we issued a convertible promissory note in the principal amount of $135,000. The terms are payable at the date of maturity, July 17 2018, together with interest of 10% per annum. Interest will be accrued and payable at the time of promissory note repayment. The Holder shall have the right to convert all or any part of the outstanding and unpaid principal amount into fully paid and non-assessable shares of Common Stock at a conversion price equal to the lessor of (i) six cents ($0.06) or (ii) 55% of (representing a 45% discount) to the lowest Trading during the previous twenty (20) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.

On August 16, 2017, we issued a convertible promissory note in the principal amount of $110,250. The terms are payable at the date of maturity, August 16 2018, together with interest of 8% per annum. Interest will be accrued and payable at the time of promissory note repayment. The Holder shall have the right to convert all or any part of the outstanding and unpaid principal amount into fully paid and non-assessable shares of Common Stock at a conversion price equal to (i) 58% of the the lowest Trading during the previous ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.

On September 6, 2017, we issued a convertible promissory note in the principal amount of $107,000. The terms are payable at the date of maturity, March 6, 2018, together with interest of 10% per annum. Interest will be accrued and payable at the time of promissory note repayment. The Holder shall have the right to convert all or any part of the outstanding and unpaid principal amount into fully paid and non-assessable shares of Common Stock at a conversion price equal to the lessor of (i) three cents ($0.03) and (ii) lowest Trading Price during the previous twenty five (25) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.

On October 30, 2017, we issued a convertible promissory note in the principal amount of $107,000. The terms are payable at the date of maturity, April 30, 2018, together with interest of 10% per annum. Interest will be accrued and payable at the time of promissory note repayment. The Holder shall have the right to convert all or any part of the outstanding and unpaid principal amount into fully paid and non-assessable shares of Common Stock at a conversion price equal to the lessor of (i) $0.004 or (ii) lowest Trading Price during the previous twenty five (25) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.

On December 18, 2017, we issued a convertible promissory note in the principal amount of $82,000. The terms are payable at the date of maturity, June 18, 2018, together with interest of 10% per annum. Interest will be accrued and payable at the time of promissory note repayment. The Holder shall have the right to convert all or any part of the outstanding and unpaid principal amount into fully paid and non-assessable shares of Common Stock at a conversion price equal to the lessor of (i) $0.003 or (ii) lowest Trading Price during the previous twenty five (25) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.

 

On February 15, 2017, DSG TAG signed an additional six-month extension on the current lease. The term will begin on February 1, 2017 and end on July 31, 2017. Currently space is leased on a month to month basis.

 

Description of Property

 

On January 21, 2016, DSG entered into a three-month Lease Agreement regarding the lease DSG’s offices located at 5455-152nd Street, Surrey, British Columbia. Pursuant to the agreement DSG has leased the approximately 2,957 square foot space on a month to month basis at the rate of CAD$5,518.63 (approximately USD $4,087.87) per month. DSG may terminate the lease with 30 days’ notice. On April 7, 2016, DSG has signed an additional two-month extension on the current lease at 214-5455 152nd Avenue, Surrey, BC, V3S 5A5. The term will on May 1, 2016 and end on July 31, 2016.

 

During the year ended December 31, 2016, the lease was extended and will expire on January 31, 2017. On February 15, 2017, an additional six-month extension on the lease was signed with the term beginning on February 1, 2017 and ending on July 31, 2017. Currently space is leased on a month to month basis.

 

For the year ended December 31, 2016,2017, the aggregate rental expense was CAD$92,825 (approximately USD$70,025).92,913. Rent expense included other amounts paid in Canada and the United Kingdom for warehouse storage and offices under month to month or as needed basis.

 

Intellectual Property

 

General

 

Our success will depend in part on our ability to protect our products and product candidates by obtaining and maintaining a strong proprietary position both in the United States and in other countries. To develop and maintain our proprietary position, we will rely on patent protection, trade secrets, know-how, continuing technological innovations and licensing opportunities. In that regard, we retain and rely on the advice of legal counsel specialized in the field of intellectual property.

 

Patents

 

  DSG owns two U.S. patents
   
 US Patent No. 8,836,490 for a “Vehicle Management” was issued September 16, 2014 and expires June 29, 2031.
   
 US Patent No. 9,280,902 for a “Facilities Management” was issued March 8, 2016 and expires January 24, 2032.

Patent Litigation

On December 30, 2012, a corporation filed an action against DSG in the United States courts claiming patent infringement. On March 8, 2013, the parties agreed to a settlement, with the Company admitting no wrong doing, in the amount of $125,000. The settlement is to be paid over an 18-month period in equal installments of $7,500 with annual interest rate of 8%. DSG has accrued all liabilities related to this matter in the financial statements.

 

Domain Names

 

We have registered and own the domain name of our website www.dsgtag .com.

Copyright

 

We own the common law copyright in the contents of our website (www.dsgtag.com.) and our various promotional materials.

 

Trademarks

 

We own the common-law trademark rights in our corporate name, product names, and associated logos, including “DSG TAG”, “TAG Golf”, “ECO TAG”, “TAG Text”, “TAG Touch”, “TAG Turf”, “TAG Commercial” and “TAG Military”. We have not applied to register any trademarks with the U.S. Patent and Trademark Office.

 

Employees

 

As of April 28, 2017,18, 2018, we have 56 full-time employees in general and administrative, operations, engineering, research and development, business development, sales and marketing, and finance. We also engage independent contractors and consultants from time to time on an as-needed basis to supplement our core staff.

 

ITEM 1A. RISK FACTORS

 

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

 

Risks Related to Our Business

 

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

 

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

 

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

 

Our independent auditors have added an explanatory paragraph to their audit opinion issued in connection with the financial statements for the years ended December 31, 20162017 and 20152016 with respect to their doubt about our ability to continue as a going concern. As discussed in Note [3]2 to our financial statements for the years ended December 31, 20162017 and 2015,2016, we have generated operating losses since inception, and our cash resources are insufficient to meet our planned business objectives, which together raise doubt about our ability to continue as a going concern.

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

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

 

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

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

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

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

 

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

 

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

 

Risks Relating to Ownership of Our Securities

 

Trading on the OTCQB® Venture Marketplace may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.

 

Our common stock is quoted on the OTCQB Venture Marketplace operated by the OTC Markets Group. Trading in stock quoted on the OTCQB is often thin and characterized by wide fluctuations in trading prices due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTCQB is not a stock exchange, and trading of securities on the OTCQB is often more sporadic than the trading of securities listed on a stock exchange like the Nasdaq Stock Market or New York Stock Exchange. Accordingly, our shareholders may have difficulty reselling any of their shares.

Our stock is a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations and FINRA’s sales practice requirements, which may limit a stockholder’s ability to buy and sell our stock.

 

Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.

In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES

 

Our principal executive office is located at 214 - 5455 152nd Street, Surrey, BC, V3S 5A5 Canada, where we lease approximately 2,957 square feet of office space. On February 15, 2017, an additional six-month extension on the lease was signed with the term beginning on February 1, 2017 and ending on July 31, 2017. Currently space is leased on a month to month basis.

 

ITEM 3. LEGAL PROCEEDINGS

On June 4, 2015, a lawsuit was commenced against DSG TAG Systems Inc. in the Supreme Court of British Columbia, captioned Amanda McGuire v. DSG TAG Systems Inc., No. S-154634, Vancouver Registry. The plaintiff alleges that a promissory note in the principal amount of $100,000 CDN issued by DSG TAG Systems was not converted into common shares of DSG TAG Systems, as asserted by DSG TAG Systems, and the plaintiff seeks repayment of indebtedness in the amount of $100,000 CDN plus interest and costs. An agreement was reached on August 13, 2015 between DSG TAG Systems and the plaintiff, pursuant to which DSG TAG Systems agreed to pay the plaintiff $119,700 CDN in monthly installations of $17,100 CDN, the first payment commencing on October 1, 2015, and the plaintiff agreed to exchange 101,200 shares of common stock of DSG Tag Systems for 18,422 shares of common stock of DSG Global, which exchange occurred on October 22, 2015.

 

A Director of the Company, representing their company Adore Creative Agency Inc. (Adore), has filed a notice of default on March 31, 2016, in regard to the related party convertible note on the financial statements of DSG TAG.the Company. The note was issued in lieu of marketing services and has a maturity date of March 31, 2016. DSG TAGThe Company has countersued Adore for failure to provide services as obligated under the terms and agreement of the convertible note, and in addition for damages as a result.

On October 17, 2016, the Supreme Court of British Columbia made an order in relating to the above discussed lawsuit from a shareholder to recover a loan of CAD$100,000. The Company was ordered to repay the remaining loan plus costs in the amount of $77,589 to the shareholder in 14 monthly payments of $5,500 each plus $589 at the 15th month, starting February 15, 2017.

 

On September 7, 2016, Chetu Inc. has filed a Complaint for Damage in Florida to recover unpaid invoice amounts of $27,335 plus interest of $4,939. The invoice was not paid due to a dispute that DSG TAGthe Company did not think that vendor had delivered the service according to the agreement between the two parties.

 

On October 17, 2016,February 9, 2017, the Supreme CourtCompany received a notice of British Columbia made an order in relatingdefault from Auctus Fund LLC (“Auctus”), on a 12% convertible promissory notes issued to the above discussed lawsuit from a shareholder to recover a loan of CAD$100,000. DSG TAG was ordered to repay the remaining loan plus costsCompany in the principal amount of $77,589$75,000. Auctus commenced a lawsuit against the Company on February 2, 2018 in the United States District Court, District of Massachusetts. Auctus alleges that the Company failed to honor a conversion notice under the terms of the Auctus notes, and thus giving rise to an event of default. Auctus seeks damages in excess of $306,681, which consists of the principal amount of the Auctus note, liquidated damages, and default interest, as well as ordering the Company to pay reasonable legal fees incurred by Auctus with respects to the shareholderlawsuit. This action is still pending.

On May 24, 2017, the Company received a notice of default from Coastal Investment Partners LLC (“Coastal”), on three 8% convertible promissory notes issued to the Company in 14 monthly paymentsaggregate principal amount of $5,500 each plus $589 at$261,389. Coastal commenced a lawsuit against the 15th month, starting February 15, 2017.Company 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, as well as ordering the Company to pay reasonable legal fees incurred by Coastal with respects to the lawsuit. This action is still pending.

 

We may, from time to time, be party to litigation and subject to claims incident to the ordinary course of business. As our growth continues, we may become party to an increasing number of litigation matters and claims. The outcome of litigation and claims cannot be predicted with certainty, and the resolution of any future matters could materially affect our future financial position, results of operations or cash flows.

ITEM 4. MINE SAFETY DISCLOSURES

ITEM 4.MINE SAFETY DISCLOSURES

 

Not applicable.

PART II

 

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

 

Market Information for Common Stock

 

Our common stock is currently quoted on the OTC Market’s OTCQB Venture Marketplace (“OTCQB”) under the symbol “DSGT”. The following table sets forth for the periods indicated the high and low bid price per share of our common stock as reported on the OTCQB. The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions:

 

OTC Markets Group Inc. OTCQB(1)

 

Quarter Ended 

High

$

 

Low

$

  

High

$

  Low
$
 
          
December 31, 2017  0.04   0.00 
September 30, 2017  0.08   0.02 
June 30, 2017  0.63   0.07 
March 31, 2017  0.58   0.10 
December 31, 2016  0.30   0.05   0.30   0.05 
September 30, 2016  0.62   0.15   0.62   0.15 
June 30, 2016  1.78   0.38   1.78   0.38 
March 31, 2016  2.45   0.55   2.45   0.55 
December 31, 2015  2.58   1.06 
September 30, 2015  3.00   2.25 
June 30, 2015  2.90   1.75 
March 31, 2015  1.75   1.75 
December 31, 2014  (2)  (2)

 

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

 

Holders of Record

 

As of December 31, 2016,2017, we had 7572 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

 

None.

Recent Sale of Unregistered Securities

 

None.

 

ITEM 6.SELECTED FINANCIAL DATA

 

Not applicable.

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

 

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

Overview

 

DSG Global, Inc. is a technology development company based in Surrey, British Columbia, Canada, engaged in the design, manufacture, and marketing of fleet management solutions for the golf industry, as well as commercial, government and military applications. Our principal activities are the sale and rental of GPS tracking devices and interfaces for golf vehicles, and related support services. We were founded by a group of individuals who have dedicated their careers to fleet management technologies and have been at the forefront of the industry’s most innovative developments, and our executive team has over 50 years of experience in the design and manufacture of wireless, GPS, and fleet tracking solutions. We have developed the TAG suite of products that we believe is the first completely modular fleet management solution for the golf industry. The TAG suite of products is currently sold and installed around the world in golf facilities and as commercial applications through a network of established distributors and partnerships with some of the most notable brands in fleet and equipment manufacture.

 

DSG stands for “Digital Security Guard”, which is our primary value statement giving fleet operator’s new capabilities to track and control their vehicles. We have developed a proprietary combination of hardware and software that is marketed around the world as the TAG system. We have primarily focused on the golf industry where the TAG system is deployed to help golf course operators manage their fleet of golf carts, turf equipment, and utility vehicles. We are a leader in the category of fleet management in the golf industry and were awarded “Best Technology of the Year” in 2010 by Boardroom magazine, a publication of the National Golf Course Owners Association. To date the TAG system is installed on over 8,000 vehicles and has been used to monitor over 6,000,000 rounds of golf.

 

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

 

The primary market for our TAG system is the 40,000 golf operations worldwide. While the golf industry remains the primary focus of our sales and marketing efforts, we have completed several successful pilots of the TAG system in other markets such as agriculture and commercial fleet operations. With appropriate resources, we intend to expand our sales and marketing efforts into these new markets.

We have a direct sales force in North America, which comprises the most significant portion of the golf fleet market, and have developed key relationships with distributors and golf equipment manufacturers such as E-Z-GO, Yamaha and Ransomes Jacobsen to help drive sales for the North American and worldwide markets.

 

Reverse Acquisition

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

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

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

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 Systems from shareholders who became parties to the share exchange agreement, and issued to these shareholders an aggregate of 18,422 shares of our common stock. Following completion of these additional purchases, DSG Global owns approximately 100% of the issued and outstanding shares of common stock of DSG TAG Systems. An aggregate of 4,229,384 shares of Series A Convertible Preferred Stock of DSG TAG Systems continues to be held by Westergaard Holdings Ltd., an affiliate of Keith Westergaard, a member of our board of directors.

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.

Factors Affecting Our Performance

 

We believe that the growth of our business and our future success depend on various opportunities, challenges and other factors, including the following:

 

Inventory Sourcing

In order to successfully deliver products, increase sales, and maintain customer satisfaction, we need to have a reliable supplier of our hardware units and components at competitive prices. Presently, we source our TOUCH units from one supplier in China and our TAG units from one supplier in the United Kingdom. We have recently established a new relationship with a supplier for our TOUCH units in China to provide us with higher quality, newer technology at competitive pricing.

 

In addition, DSG is currently in negotiations with a telecommunications provider to provide new technology in hardware and wireless access.

 

Competition

We compete with a number of established producers and distributors of vehicle fleet management systems, as well as producers of non-golf specific utility vehicle fleet management systems. Many of our competitors have longer operating histories, better brand recognition and greater financial resources than we do. In order for us to successfully compete in our industry we must demonstrate our products’ competitive advantages, develop a comprehensive marketing system, and increase our financial resources.

 

We believe that we will be able to compete effectively in our industry because of the versatility, reliability, and relative affordability of our products when compared to those of our competitors. We will attempt to build awareness of our competitive advantages among existing and potential customers through trade shows, sales visits and demonstrations, online marketing, and positive word of mouth advertising. However, there can be no assurance that even if we do these things we will be able to compete effectively with the other companies in our industry.

Additional Capital

We require additional capital to continue to develop software and products, meet our contractual obligations, and execute our business plan. There can be no assurances that we will be able to raise additional capital on acceptable terms or at all, which would adversely affect our ability to achieve our business objectives.

 

Components of Our Results of Operations

 

Revenue

We derive revenue from four different sources, as follows:

 

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

 

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

 

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

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

 

We recognize revenue when 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 I, Item 1 of this Form 10-K.

 

Cost of Revenue

Our cost of revenue consists primarily of hardware purchases, wireless data fees, mapping, installation costs, freight expenses and inventory adjustments.

 

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

 

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

 

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

 

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

 

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

 

Operating Expenses & Other Income (Expenses)We classify our operating expenses and other income (expenses) into six categories: compensation, research and development, 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.

Research and development. Our research and development expenses consist primarily of personnel costs and professional services associated with the ongoing development and maintenance of our technology.

 

Research and development expenses include payroll, and other headcount-related expenses associated with product development. Research and development expenses also include third-party development and programming costs. 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.

General and administrative. Our general and administrative expenses consist primarily of sales and marketing, commissions, travel, trade shows, consultant fees, insurance, and compliance and other administrative functions, as well as accounting and legal professional services fees, allocated costs and other corporate expenses. Sales and marketing includes brand marketing, marketing materials, and media management.

 

We expect to continue to invest in corporate infrastructure and incur additional expenses associated with being a public company, including increased legal and accounting costs, investor relations costs, higher insurance premiums and compliance costs associated with Section 404 of the Sarbanes-Oxley Act of 2002. In addition, we expect sales and marketing expenses to increase in absolute dollars in future periods. In particular, we expect to incur additional marketing costs to support the expansion of our offerings in new markets like commercial fleet management and agriculture.

 

Warranty expense.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.

 

Foreign currency exchange.Our foreign currency exchange consist 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.

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, 2017  December 31, 2016 
Revenue  100.0%  100.0%
Cost of revenue  35.3%  43.9%
Gross profit  64.7%  56.15 
Operating Expenses        
Compensation expense  67.8%  83.1%
Research and development expense  0.0%  5.0%
General and administration expense  125.6%  86.7%
Warranty expense  8.2%  17.3%
Bad debt  6.9%  3.3%
Depreciation and amortization expense  2.7%  4.2%
Total operating expense  211.2%  200.2%
Loss from operations  (146.5)%  (144.1)%
Other Income (Expense)        
Foreign currency exchange  (9.7)%  (4.1)%
Other (expenses) income  (3.0)%  (1.5)%
Unrealized on derivative instruments  30.9%  0.0%
Finance costs  (157.4)%  (87.6)%
Total other expense  (183.6)%  (92.6)%
Loss from continuing operations before income taxes  330.0%  (236.7)%
Provision for income taxes  0.0%  0.0%
Net loss  330.0%  (236.7)%
Less attributed to non-controlling interest  61.2%  39.5%
Net loss attributable to controlling interest  268.8%  (197.1)%
Other Comprehensive Income        
Foreign currency translation  (70.1)%  (1.4)%
Comprehensive loss  (338.9)%  (238.0)%

 

  For the year ended 
  December 31, 2016  December 31, 2015 
Revenue  100.0%  100.0%
Cost of revenue  43.9%  59.6%
Gross profit  56.1%  40.4%
Operating Expenses        
Compensation expense  83.1%  44.6%
Research and development expense  5.0%  2.1%
General and administration expense  87.3%  70.5%
Warranty expense  17.3%  17.0%
Bad debt  3.3%  (0.4)%
Depreciation and amortization expense  4.2%  2.6%
Total operating expense  200.2%  136.5%
Loss from operations  (144.1)%  (96.2)%
Other Income (Expense)        
Foreign currency exchange  (4.1)%  (5.0)%
Oher (expenses) Income  (0.9)%  3.0%
Finance costs  (87.6)%  (32.4)%
Total Other Expense  (92.6)%  (34.4)%
         
Loss from continuing operations before income taxes  (236.7)%  (130.6)%
         
Provision for income taxes  %  -   
Net loss        
   (236.7)%  (130.6)%

Less attributed to non-controlling interest

  39.5%  21.2%
Net loss attributable to controlling interest        
   (197.1)%  (109.4)%
Other comprehensive income        
         
Foreign currency translation  (1.4)%  14.1 
         
Comprehensive loss  (198.0)%  (93.7)%
34

Comparison of the Years Ended December 31, 20162017 and 20152016

 

Revenue

  For the Years Ended
December 31,
    
  2016  2015  % Change 
             
Revenue $1,169,936  $1,911,935   -38.8%
  For the Years Ended
December 31,
    
  2017  2016  % Change 
            
Revenue $1,100,577  $1,169,936   (5.9)%

Revenue decreased by $741,999,$69,359, or 38.8%5.9%, for the years ended December 31, 20162017 as compared to the years ended December 31, 2015.2016. The decrease was primarily due to lower sales in 20162017 and continued design and redevelopment of our product line.

 

Due to the redevelopment of our product line, it has created lower sales overall than anticipated. We have been forced to move to a 3G/4G GPS cellular device, require redevelopment of our advertising, and also software development delays in integrating the tournament software onto the TOUCH screen, all of which that has caused delays in sales. Our company along with the new sales team is aggressively building its pipeline for the next year.

 

Cost of Revenue

  For the Years Ended
December 31,
    
  2016  2015  % Change 
             
Cost of revenue $513,638  $1,140,065   -54.9%
  For the Years Ended
December 31,
    
  2017  2016  % Change 
         
Cost of revenue $388,220  $513,638   (24.4)%

Cost of revenue decreased by $626,427,$125,418 or 54.9%24.4%, for the years ended December 31, 20162017 as compared to the years ended December 31, 2015.2016. The decrease was primarily due to the decrease in hardware leases and sales. Lower costsCosts of revenue as mentioned above was also due to a contract lease renewal that had no hardware costs associated. Lower salesSales also resulted in lower installation costs, freight charges, mapping, and direct labor costs in 20162017 in comparison to 2015.2016. Installation costs, such as direct labor decreased, by $17,938, cost of goods increased/decreased, by $508,905, mapping and freight costs decreased by $23,731.decreased. Wireless fees also decreased by $104,335 which was due to new lower negotiated wireless fee rates. An estimated value of $116,058 has been written off for the touch tablets.

Compensation Expense

 

  For the Years Ended
December 31,
    
  2016  2015  % Change 
             
Compensation expense $972,179  $853,507   13.9%
  For the Years Ended
December 31,
    
  2017  2016  % Change 
         
Compensation expense $746,739  $972,179   (23.2)%

Compensation expense increaseddecreased by $118,672,$225,440, or 13.9%23.2%, for the years ended December 31, 20162017 as compared to the years ended December 31, 2015.2016. The increasedecrease was primarily due to our continued efforts to reduce costs.

Research and Development

  For the Years Ended
December 31
    
  2016  2015  % Change 
             
Research and development expense $58,115  $41,070   41.5%
  For the Years Ended
December 31
    
  2017  2016  % Change 
         
Research and development expense $nil  $58,115   (100)%

35

 

Research and development expense increaseddecreased by $17,045,$58,115, or 41.5%100% for the years ended December 31, 20162017 as compared to the yearsyear ended December 31, 2015. As indicated,2016 as we did not incur any research and development costs during the year. We expect research and development expenses to increase as we enter new markets like commercial fleet management, agriculture, and advertising. This increase in costs will be required to develop the new 3G/4G GPS cellular device.

 

General and Administration Expense

  For the Years Ended
December 31,
    
  2016  2015  % Change 
             
General & administration expense $1,021,482  $1,347,547   -24.2%
  For the Years Ended
December 31,
    
  2017  2016  % Change 
         
General & administration expense $1,414,983  $1,014,861   39.4%

General & administration expense decreasedincreased by $326,065$367,006 or 24.2%36.2% for the years ended December 31, 20162017 as compared to the years ended December 31, 2015.2016. The table below outlines the differences in detail:

 

  December 2016  December 2015  Difference  % Difference 
Accounting & Legal, & Setup Costs for Public Company  186,791   281,055   (94,264)  -33.54%
Marketing & Advertising  221,868   354,936   (133,068)  -37.49%
Subcontractor & Commissions  79,484   228,478   (148,994)  -65.21%
Interest Expense  6,621   7,072   (451)  -6.38%
Meals & Entertainment  107,873   166,336   (58,463)  -35.15%
Shipping Expense  41,161   23,833   17,328   72.71%
Office Expense, Rent, Software, Bank & Credit Card Charges, & Telephone  377,684   285,837   91,847   32.13%
   1,021,482   1,347,547   (326,065)    
  December 2017  December 2016  Difference  % Difference 
Professional fees  160,515   186,791   (26,276)  (14.1)%
Marketing & Advertising  581,653   221,868   359,785   162.2%
Subcontractor & Commissions  166,623   79,484   87,139   109.6%
Shipping Expense  65,045   41,161   23,884   58.0%
Office Expense, Rent, Software, Bank & Credit Card Charges, Telephone & Meals  441,147   485,557   (44,410)  (9.1)%
   1,414,983   1,014,861   400,122     

 

Overall, there was a decrease of $94,264$26,276 in accounting & legal was overall due to the higher costs associated with the merger in May 2015,a change of auditors, as well the decrease was also due to efforts in decreasing legal costs for public filing requirements. There was a decreasean increase of $148,994$87,139 in subcontractor and commissions due to the hiring of more employees instead of contract workers and lower sales resulting in less commissions being paid. There was an increase of $7,293 in hardware design for the development of the new hardware prototype for tradeshows and an overall increase in shipping costs of 17,328$23,884 or 72.7%58.0% due to the increased use of rush shipping services in 2016 for urgent customer service calls. Office expense increasedand other expenses decreased overall by 91,857 mostly due to an increase of $116,517 in tradeshow costs from a large tradeshow which took place in January 2016. Overall, there was a decrease of $58,463 or 35.2% in travel and meals$44,410 reflecting our efforts of savingreducing costs.

Warranty Expense

  For the Years Ended
December 31,
    
  2016  2015  % Change 
             
Warranty expense $202,393  $325,820   -37.9%
  For the Years Ended
December 31,
    
  2017  2016  % Change 
         
Warranty expense $90,284  $202,393   (55.4)%

Warranty expense decreased by $123,427,$112,109, or 37.9%55.4% for the years ended December 31, 20162017 as compared to the years ended December 31, 2015.2016. The decrease in warranty expense from 20162017 to 20152016 was primarily due to the initial recording of the warranty reserve in 2015 for $117,315 (CAD $150,000) for future warranty costs, no reserve was used in prior periods,fewer breakdowns, and warranty costs were expensed as incurred.

Foreign Currency Exchange

  For the Years Ended
December 31,
    
  2016  2015  % Change 
             
Foreign currency exchange $47,497  $96,177   -50.6%
  For the Years Ended
December 31,
    
  2017  2016  % Change 
         
Foreign currency exchange $107,096  $(47,497)  325.5%

For the years ended December 31, 2016,2017, we recognized $107,096 in foreign currency transaction gains as compared to $47,497 in foreign currency transaction losses as compared to $96,177 in foreign currency transaction gainsloss for the yearsyear ended December 31, 2015.2016. The decreasedifference was primarily due to the gains or losses arising from exchange rate fluctuations on payables, receivables, and other foreign exchange transactions denominated in currencies other than the functional currencies of the legal entities in which the transactions are recorded. Foreign currency fluctuations are primarily from thetransactions incurred in Canadian Dollar, Euro, and British pound.

 

Finance Costs

  For the Years Ended
December 31,
    
  2016  2015  % Change 
             
Finance costs $1,024,723  $619,451   65.4%
  For the Years Ended
December 31,
    
  2017  2016  % Change 
         
Finance costs $1,731,921  $1,024,723   69.0%

 

Finance costs increased by $405,272$707,198 or 65.4%269.0% for the yearsyear ended December 31, 20162017 as compared to the years ended December 31, 2015.2016. The increase was primarily due to the derivative liability recordedan increase in the fourth quarter as well as accrued interest expensed from additional loansnumber and noteamount of convertible loans obtaineddebt conversions during the year ending December 31, 2017.

Change in fair value of derivative liabilities

  For the Years Ended
December 31,
    
  2017  2016  % Change 
         
Change in fair value of derivative liabilities $340,227  $Nil   100%

Change in fair value of derivative liabilities increased by $340,227 or 100% for the year ended December 31, 2017 as compared to the year ended December 31, 2016.

 

Net Loss

 

  For the Years Ended
December 31,
    
  2016  2015  % Change 
             
Net loss attributable to controlling interest $2,306,249  $2,092,184   10.2%
  For the Years Ended
December 31,
    
  2017  2016  % Change 
         
Net loss attributable to controlling interest $(3,396,407) $(2,306,249)  28.3%

 

As a result of the above factors, we have net loss after noncontrollingnon-controlling interest attributable to the Company’s common stockholders of approximately $3,396,407 for the year ended December 31, 2017 as compared to $2,306,249 for the year ended December 31, 2016, as compared to approximately $2,092,184 for the year ended December 31, 2015, representing an increase of approximately $214,065$1,090,158 or approximately 10.2%47.3%. This increase was primarily due to increased finance costs relating to the derivative expense recorded induring the fourth quarter. The increase was also due to the tradeshow which took place in January 2016 which was mostly offset due to company efforts to lower operating costs in general and administration expenses.year ended December 31, 2017.

Liquidity and Capital Resources

 

From our incorporation in April 17, 2008 through December 31, 2016,2017, 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, 2016,2017, we had $2,970,965$7,667,901 in outstanding indebtedness, which has either already reached maturity or matures within the next twelve months.

We had cash in the amount of $nil$5,489 as of December 31, 20162017 as compared to $nil as of December 31, 2015.2016. We had a working capital deficit of $8,002,300 as of December 31, 2017 compared to working capital deficit of $5,580,774 as of December 31, 2016 compared to working capital deficit of $2,999,744 as of December 31, 2015.2016.

 

Liquidity and Financial Condition

 At December 31, 2016  At December 31, 2015  Percentage
Increase/(Decrease)
  At December 31, 2017  At December 31, 2016  Percentage
Increase/(Decrease)
 
Current Assets $226,687  $657,835   (65.5)% $59,542  $226,687   (76.1)%
Current Liabilities $5,807,461  $3,657,579   58.8% $8,061,842  $5,807,461   32.7%
Working Capital $(5,580,774) $(2,999,744)  86.0% $(8,002,300) $(5,580,774)  (44.1)%

 

Cash Flow Analysis

Our cash flows from operating, investing, and financing activities are summarized as follows:

 

  December 31 
  2016  2015 
       
Net cash used in operating activities $(620,157) $(688,196)
Net cash provided by (used in) investing activities  18,654   161,700 
Net cash provided by (used in) financing activities  599,248   446,668 
Net (decrease) increase in cash  -   (91,840)
Cash at beginning of period  -   91,840 
Cash at end of period $-  $- 

  December 31 
  2017  2016 
       
Net cash used in operating activities $(568,972) $(620,157)
Net cash provided by investing activities  -   18,654 
Net cash provided by financing activities  984,684   599,248 
Net (decrease) increase in cash  415,712   (2,255)
Effects of exchange rate changes on cash  (410,224)  2,255 
Cash at beginning of period  -   - 
Cash and equivalents at end of period $5,488  $- 

 

Net Cash Used in Operating Activities. During the year ended December 31, 2017, cash used in operations totaled $568,972. This reflects the net loss of 3,632,072 less $3,063,100 provided by changes in operating assets and liabilities and adjustments for non-cash items. Non-cash items from the issuance of convertible debt, related finance fees, and the subsequent revaluation accounted for $1,290,850 of the loss. Cash provided by working capital items increased primarily due to an increase in accounts payable and accrued liabilities of $719,127. A further reduction in inventory of $71,644 from the company moving to a presale model and increases from a warranty reserve estimate of $53,808 accounted for the largest items provided by working capital items. 

During the year ended December 31, 2016, cash used in operations totaled $620,157. This reflects the net loss of $2,768,659 less $2,148,502 provided by changes in operating assets and liabilities and adjustments for non-cash items. Cash provided by working capital items was primarily impacted by decreased inventory purchases of $153,495,$269,553, a decrease in prepaid expense and deposits of $43,691, a decrease in related party receivable of $97,313 and an increase in trade payables and accruals of $1,250,632.

 

During the years ended December 31, 2015, cash used in operations totaled $688,196. This reflects the net loss of $2,497,146 less $1,808,949 provided by changes in operating assets and liabilities and adjustments for non-cash items. Cash provided by working capital items was primarily impacted by a non-cash item of $303,079 for notes issued for services, a decrease in prepaid expense and deposits of $219,072, a decrease in related party receivable of $16,660 and an increase in trade payables of $805,119.

Net Cash Provided by (Used in) Investing Activities. Investing activities provided $nil of cash in the year ended December 31, 2017. Investing activities provided $18,654 of cash in the yearsyear ended December 31, 2016, of which was primarily provided by a decrease in property, plant, and equipment. Investing activities provided $161,700 of cash in the years ended December 31, 2015, of which $89,001 was acquired as part of our reverse acquisition transaction.equipment on lease.

Net Cash (Used in) Provided by Financing Activities. Net cash usedprovided by financing activities during the year ended December 31, 2017 totaled $984,684 provided primarily by $946,750 in proceeds from notes payable and $50,000 in proceeds from issuance of shares, offset by bank overdraft repayments of $5,316 and share issuance costs of $6,750. Net cash provided by financing activities during the year ended December 31, 2016 totaled $599,248 provided primarily by proceeds for loansnotes payable of $650,099. Net cash used in financing activities during the year ended December 31, 2015 totaled $446,668 provided primarily by proceeds from loans payable and the issuance of common shares.

Outstanding Indebtedness

Our current indebtedness as of December 31, 20162017 is comprised of the following:

 

 

Unsecured loan payable in the amount of $186,192$199,283 bearing interest at 15% per annum and due on demand;

   
 Unsecured loan payable in the amount of $317,500 bearing interest at 18% per annum;
   
 

Unsecured note payable in the amount of $45,548,$48,751, bearing interest at 36% per annum and due on July 20, 2017;

   
 

Unsecured loan payable in the amount of $67,029,$71,742, fees for services payable on the original loan amount of 5% by May 6, 2016, 10% payable by June 5, 2016, or 20% payable by July 5, 20162016;

   
 

Unsecured loan payable in the amount of $250,000, bearing interest at 10% per annum, with a minimum interest amount of $25,000, and due on July 22, 2016.2016;

   
 

Secured convertible loan payable in the amount of $916,905,$981,370, bearing interest at 15.2% per annum and due on December 31, 2015;

   
 

Unsecured, convertible note payable to related party in the amount of $310,000, bearing interest at 5% per annum and due on March 30, 2016;

   
 Unsecured,

Senior secured, convertible note payable in the amount of $250,000, bearing$245,889 interest at 10% per annum and due on February 25, 2016;

Unsecured, convertible note payable in the amount of $150,000, bearing interest at 2% per month. Principal plus interest repayable in cash or common shares. Due 45 days from August 5, 2016 or upon filing of registration statement, convertible at $0.27 per share;
Senior secured discount convertible note payable in the amount of $261,389, bearing interest at 8% per annum. Repayable in cash or common shares at the lower of (i) twelve cents ($0.12) and (ii) the closing sales price of the Common Stock on the date of conversion and due on May 7, 2017;conversion;

   
 

Unsecured, convertible note payable in the amount of $29,791 (CAD $40,000), bearing$65,887 interest 12% per annum. Matures 1 year from execution date. Principal plus interest is repayable in cash or common shares at 8% annual rate for one month; if not paid by January 15, 2017, bearing interest at 4% per month thereafter;the lower of current market price and is convertible at $0.05 per share.50% of the lowest trading price of Common Stock during the 25 Trading Days immediately preceding conversion;

Unsecured, convertible note payable in the amount of $56,144 interest 12% per annum. Matures on October 18, 2017. Principal is repayable in cash or common shares at the lower of (i) three cents ($0.03) and (ii) 50% of the lowest trading price during the 25 Trading Days immediately preceding the date of conversion
Unsecured, convertible note payable in the amount of $69,952 interest 10% per annum. Matures on October 3, 2017. Principal is repayable in cash or common shares at the lower of (i) six cents ($0.06) (ii) 55% of the lowest trading price during the 25 Trading Days immediately preceding the date of conversion
Unsecured, convertible note payable in the amount of $110,000 interest 10% per annum. Matures on December 5, 2017. Principal is repayable in cash or common shares at the lower of (i) eight cents ($0.08) (ii) 55% of the lowest trading price during the 25 Trading Days immediately preceding the date of conversion
Unsecured, convertible note payable in the amount of $135,000 interest 10% per annum. Matures on July 17, 2018. Principal is repayable in cash or common shares at the lower of (i) six cents ($0.06) (ii) 55% of the lowest trading price during the 20 Trading Days immediately preceding the date of conversion
● Unsecured, convertible note payable in the amount of $110,250 interest 8% per annum. Matures on August 16, 2018. Principal is repayable in cash or common shares at a conversion price equal to 58% of the lowest Trading during the previous ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.
● Unsecured, convertible note payable in the amount of $107,000 interest 10% per annum. Matures on March 6, 2018. Principal is repayable in cash or common shares at the lower of (i) three cents ($0.03) and (ii) lowest Trading Price during the previous twenty five (25) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.
● Unsecured, convertible note payable in the amount of $107,000 interest 10% per annum. Matures on April 30, 2018. Principal is repayable in cash or common shares at the lower of (i) $0.004 or (ii) lowest Trading Price during the previous twenty-five (25) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.
Unsecured, convertible note payable in the amount of $82,000 interest 10% per annum. Matures on June 8, 2018. Principal is repayable in cash or common shares at the lower of (i) $0.003 or (ii) lowest Trading Price during the previous twenty-five (25) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.

Preferred Stock Redemption Obligations

Westergaard Holdings Ltd., an affiliatea company controlled by a former director of Keith Westergaard, a member of our board of directors,the Company, owns 4,229,384 shares (the “Series A Shares”) of Series A Convertible Preferred Stock of DSG TAG Systems. Pursuant to a Subscription / Debt Settlement Agreement dated September 26, 2014 between DSG TAG Systems and Westergaard Holdings, as amended on November 10, 2015, DSG TAG Systems has agreed that DSG Global, Inc. will complete financings for gross proceeds of at least $10 million and use a portion of the proceeds to redeem all of the Series A Shares at a price of $1.25 per share, as follows:

 

 On or before August 1, 2016, we must complete a financing for gross proceeds of at least $2.5 million and use at least $1.125 million to redeem a minimum of 900,000 Series A Shares;

 On or before September 1, 2016, we must complete an additional financing for gross proceeds of at least $2.5 million and use at least $1.125 million to redeem a minimum of 900,000 additional Series A Shares; and
   
 On or before October 1, 2016, we must complete an additional financing for gross proceeds of at least $5.0 million and use at least $3.14 million to redeem the remaining 2,509,384 Series A Shares.

 

If we fail to satisfy the above described financing and share redemption schedule, we will be in default of the Subscription and Debt Settlement Agreement which would entitle the holder of the Preferred Shares to convert the Series A Convertible Preferred Shares into common shares in the capital of DSG Global at the price of $1.25 per share. As of the date of this report, these commitments have not been satisfied and we are currently negotiating an extension on the terms of this agreement.

 

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, 2017
Management compensation $500,000 
Professional fees $150,000 
General and administrative $1,900,000 
Total $2,550,000 

At present, our cash requirements for the next 12 months outweigh the funds available to maintain our operations or development of any future properties. Of the $2,550,000 that we require for the next 12 months, we had $34,647 in cash as of April 28, 2017.

Our principal sources of liquidity are our existing cash and cash generated from product sales. Our working capital deficiency at December 31, 20162017 was $(5,580,774).8,002,300.

 

In order to improve our liquidity, we also plan to pursue additional equity financingachieve substantial profitability and positive cash flows 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 thatoperations we will be successful in completing any further private placement financings. To help finance our dayneed to day working capital needs, the founderincrease revenue and CEO of the company has made a total payment of $108,651 since late 2015. If we are unable/ or reduce operating expense. Our ability to maintain or increase, current revenue levels to achieve the necessary additional financing, then we plan to reduce the amounts that we spendand sustain profitability will depend, in part, on demand for our business activities and administrative expenses in order to be within the amount of capital resources obligations, and execute our business plan. We have already suspended payments of management compensation to our CEO since October 2015.products.

 

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. In addition, if our operating performance during the next twelve months is below our expectations, our liquidity and ability to operate our business could be adversely affected.

Off-Balance Sheet Transactions

 

We do not have any off-balance sheet arrangements.

 

Contractual Obligations and Known Future Cash Requirements

 

Indemnification Agreements

In the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which we agree to indemnify customers, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by us or from intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with directors and certain officers and employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon us to provide indemnification under such agreements and there are no claims that we are aware of that could have a material effect on our consolidated balance sheet, consolidated statements of operations, consolidated statements of comprehensive loss or consolidated statements of cash flows.

 

Operating Leases

We currently lease our corporate headquarters in Surrey, British Columbia, under operating lease agreements that expire through to July 31, 2017. The terms of the lease agreements provide for rental payments on a graduated basis. We recognize rent expense on a straight-line basis over the lease periods.

Critical Accounting Policies and Estimates

 

We prepare our consolidated financial statements in accordance with U.S. GAAP. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statements presentation, financial condition, results of operations, and cash flows will be affected.

 

We believe that the assumptions and estimates associated with revenue recognition, foreign currency and foreign currency transactions and comprehensive loss have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. For further information on all of our significant accounting policies, see the notes to our consolidated financial statements.

 

Recently Issued and Adopted Accounting Pronouncements

 

For fiscal years beginning after December 15, 2016:

In April 2016, the FASB issued ASC 2016-10 “Revenue from Controls with Customers (Topic 606) – Identifying Performance Obligations and Licensing”. These amendments are intended to clarify the identifying of performance obligations and the licensing of implementation guidance, while retaining the related principles for those areas. These amendments are effective for annual and interim reporting periods beginning after December 15, 2016. Early adoption is not permitted.

In March 2016, the FASB issued ASC 2016-09, “Compensation – Stock Compensation (Topic 718) – Improvements to Employee Share-Based Payment Accounting”. These amendments are intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Early adoption is permitted. Entities have the option to apply the amendments on either a prospective basis or a modified retrospective basis.

In November 2015, the FASB issued ASC 2015-17 “Income Taxes (Topic 740) – Balance Sheet Classification of Deferred Taxes” guidance simplifying the presentation of deferred tax liabilities and assets requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. Early adoption permitted.

In August 2014, the FASB issued ASC 2014-15 “Presentation of Financial Statements – Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” new guidance which provides details on when and how to disclose going concern uncertainties. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year and to provide certain footnote disclosures if conditions or events raise substantial doubt about an entity’s ability to continue as a going concern. Early adoption permitted.

In July 2015, the FASB issued ASC 2015-11 “Inventory (Topic 330) – Simplifying the Measurement of Inventory”. This standard requires entities that use inventory methods other than the last-in, first-out (LIFO) or retail inventory method to measure inventory at the lower of cost or net realizable value, which is defined as the estimated selling prices in the normal course of business, less reasonably predictable costs of completion, disposal, and transportation.

For fiscal years beginning after December 15, 2017:

 

In August 2016, the Financial Accounting Standards Board (“FASB”) issued ASC 2016-15 “Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments”. These amendments are intended to provide guidance for each of the eight issues included, to reduce the current and potential future diversity in practice. Early adoption is permitted including in an interim period.

In January 2016, the FASB issued ASC 2016-01 “Financial Instruments – Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Liabilities” a new standard related primarily to accounting for equity investments, financial liabilities where the fair value option has been elected, and the presentation and disclosure requirements for financial instruments. There will no longer be an available-for-sale classification and therefore, no changes in fair value will be reported in other comprehensive income for equity securities with readily determinable fair values. Early adoption is permitted.

For fiscal years beginning after December 15, 20182018::

In March 2017, the Financial Accounting Standards Board (“FASB”) issued ASC 2017-08 “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20) – Premium Amortization on Purchased Callable Debt Securities” an amendment to shorten the amortization period for certain callable debt securities held at a premium to the earliest call date. The amendments do not require an accounting change for securities held at a discount.

In July 2017, the Financial Accounting Standards Board (“FASB”) issued ASC 2017-11 “Earnings Per Share (Topic 260), Distinguishing Liability from Equity (Topic 480), and Derivatives and Hedging (Topic 815) – (i) Accounting for Certain Financial Instruments with Down Round Features (ii) Replace of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments.” The amendments in (i) change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features and to help clarify existing disclosure requirements. The amendments in (ii) characterize the indefinite deferral of certain provisions and do not have an accounting effect.

 

In February 2016, the FASB issued ASC 2016-02 “Leases (Topic 842)” a comprehensive standard related to lease accounting to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Most significantly, the new guidance requires lessees to recognize operating leases with a term of more than 12 months as lease assets and lease liabilities. The adoption will require a modified retrospective approach at the beginning of the earliest period presented. Early adoption permitted.

 

The Company is currently evaluating the impact of the above standards on their consolidated financial statements. Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

 

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

43

[INSERT AUDITOR REPORT HERE]

44

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

 

DSG GLOBAL INC., AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

 Page
  
ReportReports of Independent Registered Public Accounting Firm4643
  
Consolidated Financial Statements: 
Consolidated Balance Sheets4745
Consolidated Statements of Operations48
Consolidated Statements of and Comprehensive Loss4946
Consolidated Statements of Stockholders’ Deficit5047
Consolidated Statements of Cash Flows5148
Notes to the Consolidated Financial Statements5249

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of DSG Global, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of DSG Global, Inc. (the “Company”) as of December 31, 2017, and the related consolidated statements of operations and comprehensive loss, stockholders’ deficit, and cash flows for the year then ended and related notes (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2017, and the results of their operations and their cash flows for the year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph Regarding Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has a working capital deficit, and has incurred significant operating losses and negative cash flows from operations since inception. As at December 31, 2017, the Company has an accumulated deficit of $30,409,853. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 2 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to fraud or error. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. As part of our audit, we are required to obtain an understanding of the Company’s internal controls over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ SATURNA GROUP CHARTERED PROFESSIONAL ACCOUNTANTS LLP

Saturna Group Chartered Professional Accountants LLP

We have served as the Company’s auditor since 2017.

Vancouver, Canada

April 18, 2018

Lichter, Yu and Associates, Inc.

Certified Public Accountants

 

21031 Ventura Blvd., suite 316

Woodland Hills, CA 91364

Tel (818)789-0265 Fax (818) 789-3949

 

Report of Independent Registered Public Accounting Firm

 

Board of Directors and Stockholders of

DSG Global, Inc. and Subsidiary

 

We have audited the accompanying consolidated balance sheets of DSG Global, Inc. and Subsidiary (the “Company”) as of December 31, 2016, and 2015, and the related consolidated statements of operations, comprehensive loss, stockholders’ deficit, and cash flows for each of the years in the two year period ended December 31, 2016. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.audit.

 

We conducted our auditsaudit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of DSG Global, Inc. and Subsidiary as of December 31, 2016, and 2015, and the consolidated results of its operations and its cash flows for the two year period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 32 to the consolidated financial statements, the Company has an accumulated deficit of $27,013,446 and negative working capital of $5,580,774 which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 3.2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ Lichter, Yu and Associates, Inc. 
  
Woodland Hills, California 

April 28, 2017

 

DSG GLOBAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(EXPRESSED IN U.S. DOLLARS)

  December 31, 2016  December 31, 2015 
ASSETS        
CURRENT ASSETS        
Cash $-    $-   
Trade receivables, net  90,038   73,212 
Inventories  80,573   306,648 
Funds held in trust  -     3,414 
Prepaid expenses and deposits  56,076   155,932 
Other current assets  -     26,902 
Receivable from related party  -     91,727 
TOTAL CURRENT ASSETS  226,687   657,835 
         
NON-CURRENT ASSETS        
Intangible assets, net  16,580   16,984 
Fixed assets, net  4,741   6,971 
Equipment on lease, net  42,763   105,526 
TOTAL NON-CURRENT ASSETS  64,084   129,481 
         
TOTAL ASSETS $290,771  $787,316 
         
LIABILITIES AND STOCKHOLDERS' DEFICIT        
CURRENT LIABILITIES        
Bank overdraft $5,316  $25,269 
Trade and other payables  2,568,792   1,428,509 
Payable to related party  1,526   -   
Deferred revenue  149,147   99,739 
Warranty reserve  111,715   108,381 
Convertible note payable to related party  339,791   310,000 
Loans payable  866,269   546,137 
Derivative liability  365,944   -   
Convertible notes payable  1,398,961   1,139,543 
TOTAL CURRENT LIABILITIES  5,807,461   3,657,579 
         
Commitments and contingencies  -     -   
         
MEZZANINE EQUITY        
Redeemable Noncontrolling Interest - Preferred Shares $5,286,731  $5,286,731 
         
STOCKHOLDERS' DEFICIT        
Common stock, $0.001 par value, 125,000,000 sharesauthorized and 30,291,187 outstanding at December 31, 2016 and December 31, 2015.  30,291   30,291 
Additional paid in capital  15,982,222   15,873,724 
Other accumulated comprehensive income  1,296,652   1,306,959 
Accumulated deficit  (27,013,446)  (24,707,197)
Total shareholders' deficit attributable to DSG Global  (9,704,281)  (7,496,223)
Noncontrolling interest  (1,099,140)  (660,771)
TOTAL STOCKHOLDERS' DEFICIT  (10,803,421)  (8,156,994)
         
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $290,771  $787,316 

  December 31, 2017  December 31, 2016 
ASSETS        
CURRENT ASSETS        
Cash $5,488  $- 
Accounts receivable  23,736   90,038 
Inventory  8,929   80,573 
Prepaid expenses and deposits  20,355   56,076 
Due from related party  1,034   - 
TOTAL CURRENT ASSETS  59,542   226,687 
         
NON-CURRENT ASSETS        
Equipment  964   4,741 
Equipment on lease  14,814   42,763 
Intangible assets  15,395   16,580 
TOTAL NON-CURRENT ASSETS  31,173   64,084 
         
TOTAL ASSETS $90,715  $290,771 
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
CURRENT LIABILITIES        
Bank overdraft $-  $5,316 
Accounts payable and accrued liabilities  3,328,851   2,568,792 
Due to related parties  -   1,526 
Deferred revenue  159,665   149,147 
Warranty reserve  165,523   111,715 
Convertible note payable, related party, net of unamortized discount of $nil  310,000   339,791 
Loans payable  887,275   866,269 
Derivative liabilities  1,191,396   365,944 
Convertible notes payable, net of unamortized discount of $301,360 and $179,333, respectively  2,019,132   1,398,961 
TOTAL LIABILITIES  8,061,842   5,807,461 
         
MEZZANINE EQUITY        
Redeemable Non-controlling Interest - Preferred Shares  5,286,731   5,286,731 
         
STOCKHOLDERS’ DEFICIT        
Common stock, $0.001 par value, 2,000,000,000 shares authorized Issued and outstanding: 101,877,495 and 30,291,187 shares, respectively  101,877   30,291 
Additional paid-in capital  17,511,673   15,982,222 
Other accumulated comprehensive income  873,250   1,296,652 
Accumulated deficit  (30,409,853)  (27,013,446)
Total shareholders’ deficit attributable to DSG Global  (11,923,053)  (9,704,281)
Non-controlling interest  (1,334,805)  (1,099,140)
TOTAL STOCKHOLDERS’ DEFICIT  (13,257,858)  (10,803,421)
         
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT $90,715  $290,771 

Going concern (Note 2)

Contingencies (Note 18)

Subsequent events (Note 19)

(The accompanying notes are an integral part of these consolidated financial statements)

DSG GLOBAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(EXPRESSED IN U.S. DOLLARS)

  Year ended December 31, 2017  Year ended December 31, 2016 
Revenue $1,100,577  $1,169,936 
Cost of revenue  388,220   513,638 
Gross profit  712,357   656,298 
         
Operating Expenses        
Bad debts  75,540   38,202 
Compensation  746,739   972,179 
Depreciation and amortization  29,681   49,664 
General and administration  1,414,983   1,021,482 
Research and development  -   58,115 
Warranty  90,284   202,393 
Total operating expenses  2,357,227   2,342,035 
Loss from operations  (1,644,870)  (1,685,737)
         
Other Income (Expense)        
Change in fair value of derivative liabilities  (340,227)  (223,795)
Finance costs  (1,731,921)  (800,928)
Foreign currency exchange gain (loss)  107,096   (47,497)
Loss on extinguishment of debt  (22,150)  - 
Other expense  -   (10,702
Total Other Income (Expense)  (1,987,202)  (1,082,922)
         
Net loss  (3,632,072)  (2,768,659)
         
Less: net loss attributed to the non-controlling interest  235,665   462,410 
         
Net loss attributable to DSG Global, Inc.  (3,396,407)  (2,306,249)
         
Foreign currency translation adjustments  (423,402)  (10,307)
         
Comprehensive loss attributable to DSG Global, Inc. $(3,819,809) $(2,316,556)
         
         
Basic and diluted loss per share attributable to DSG Global, Inc. $(0.08) $(0.08)
         
Weighted average number of common shares outstanding used in the calculation of net loss attributable to DSG Global, Inc.  44,184,246   30,291,187 

(The accompanying notes are an integral part of these consolidated financial statements)

46

DSG GLOBAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(EXPRESSED IN U.S. DOLLARS)

  Common Shares  Additional
Paid-In
  Accumulated
Other
Comprehensive
  Accumulated  Non-controlling  Total
Stockholders’
 
  Number  Amount
$
  Capital
$
  

Income (Loss)
$

  Deficit
$
  Interest
$
  Deficit
$
 
                      
Balance, December 31, 2015  30,291,187   30,291   15,873,724   1,306,959   (24,707,197)  (660,771)  (8,156,994)
                             
Adjustment to paid-in capital for minority interest        (24,041)        24,041    
                             
Beneficial conversion feature of loans        132,539            132,539 
                             
Net loss           (10,307)  (2,306,249)  (462,410)  (2,778,966)
                             
Balance, December 31, 2016  30,291,187   30,291   15,982,222   1,296,652   (27,013,446)  (1,099,140)  (10,803,421)
                             
Issuance of common shares for cash  500,000   500   49,500            50,000 
                             
Issuance of common shares for services  2,250,000   2,250   560,250            562,500 
                             
Issuance of common shares for commitment fee  550,000   550   197,450            198,000 
                             
Issuance of common shares for convertible notes payable  68,286,308   68,286   729,001            797,287 
                             
Share issuance costs        (6,750)           (6,750)
                             
Net loss           (423,402)  (3,396,407)  (235,665)  (4,055,474)
                             
Balance, December 31, 2017  101,877,495   101,877   17,511,673   873,250   (30,409,853)  (1,334,805)  (13,257,858)

(The accompanying notes are an integral part of these consolidated financial statements)

DSG GLOBAL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(EXPRESSED IN U.S. DOLLARS)

  Year Ended 
  December 31, 2017  December 31, 2016 
Cash flows from operating activities      
Net loss attributable to DSG Global, Inc.  $(3,632,072)   $(2,768,659)
         
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  29,681   49,664 
Depreciation included in cost of goods sold  5,359   - 
Financing fees  216,900   - 
Interest on discount of convertible debt  733,723   143,912 
Loss on extinguishment of debt  22,150   - 
Change in fair value of derivative liabilities  340,227   223,795 
Bad debts  75,540   33,947 
Shares issued for services  760,500   - 
         
Changes in operating assets and liabilities:        
Accounts receivable  (9,238)   (48,710)
Inventory  71,644   269,553 
Funds held in trust  -   3,564 
Prepaid expense and deposits  35,721   43,691 
Due from/to related parties  (2,560)   97,313 
Other assets  -   34,202 
Accounts payable and accrued liabilities  719,127   1,250,632 
Deferred revenue  10,518   46,939 
Warranty reserve  53,808   - 
Net cash used in operating activities  (568,972)   (620,157)
         
Cash flows from investing activities        
Purchase of equipment  -   (1,992)
Return of equipment on lease  -   21,436 
Purchase of intangible assets  -   (790)
Net cash provided by investing activities  -   18,654 
         
Cash flows from financing activities        
Bank overdraft  (5,316)   (33,699)
Proceeds from issuance of common shares  50,000   - 
Share issuance costs  (6,750)   - 
Proceeds from notes payable  946,750   650,099 
Repayments of notes payable  -   (47,327)
Related party loan payable  -   30,175 
Net cash provided by financing activities  984,684   599,248 
         
Effect of exchange rate changes on cash  (410,224)   2,255 
         
Net increase (decrease) in cash  415,712   (2,255)
Change in cash  5,488   - 
Cash, beginning of the year  -   - 
Cash, end of the year $5,488  $- 
         
Supplemental Disclosures (Note 15)        

 

The accompanying notes are an integral part of the audited consolidated financial statements

DSG GLOBAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

48

 

  2016  2015 
       
Revenue $1,169,936  $1,911,935 
Cost of revenue  513,638   1,140,065 
Gross profit  656,298   771,870 
         
Operating Expenses        
Compensation expense  972,179   853,507 
Research and development expense  58,115   41,070 
General and administration expense  1,021,482   1,347,547 
Warranty expense  202,393   325,820 
Bad debt  38,202   (7,045)
Depreciation and amortization expense  49,664   49,463 
Total operating expense  2,342,035   2,610,362 
Loss from operations  (1,685,737)  (1,838,492)
         
Other Income (Expense)        
Foreign currency exchange  (47,497)  (96,177)
Other (expenses) income  (10,702)  56,974 
Finance costs  (1,024,723)  (619,451)
Total Other Expense  (1,082,922)  (658,654)
         
Loss from continuing operations before income taxes  (2,768,659)  (2,497,146)
         
Provision for income taxes  -   - 
         
Net loss  (2,768,659)  (2,497,146)
         
Less attributed to noncontrolling interest  462,410   404,962 
         
Net loss attributable to DSG Global $(2,306,249) $(2,092,184)
         
Net loss per share        
         
Basic and Diluted:        
Basic $(0.076) $(0.081)
Diluted $(0.076) $(0.081)
         
Weighted average number of shares used in computing basic and diluted net loss per share:        
Basic  30,291,187   25,965,534 
Diluted  30,291,187   25,965,534 

The accompanying notes are an integral part of the audited consolidated financial statements

DSG GLOBAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

  2016  2015 
       
Net loss $(2,768,659) $(2,497,146)
Other comprehensive income        
         
Change in foreign currency translation adjustments  (15,978)  269,991 
Comprehensive loss  (2,784,637)  (2,227,155)
Less: Comprehensive loss attributable to noncontrolling interest  468,081   435,800 
         
Total comprehensive loss attributable to DSG Global $(2,316,556) $(1,791,355)

The accompanying notes are an integral part of the audited consolidated financial statements

DSG GLOBAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

  Equity Attributable to Common Shareholders'       
  Common Stock  Additional
Paid in
  Accumulated  Accumulated
Comprehensive
  Total Deficit
Attributable to
Common
  Noncontrolling  Total
Stockholders'
 
  Shares  Amount  Capital  Deficit  Income  Shareholders'  Interest  Deficit 
                         
Balance December 31, 2015  30,291,187  $30,291  $15,873,724  $(24,707,197) $1,306,959  $(7,496,223) $(660,771) $(8,156,994)
                                 
Adjustment to paid in capital for minority interest  -   -   (24,041)  -   -   (24,041)  24,041   - 
Beneficial conversion feature of loans  -   -   132,539   -   -   132,539   -   132,539 
Net (loss) income for 2016  -   -   -   (2,306,249)  (10,307)  (2,316,556)  (462,410)  (2,778,966)
                                 
Balance December 31, 2016  30,291,187  $30,291  $15,982,222  $(27,013,446) $1,296,652  $(9,704,281) $(1,099,140) $(10,803,421)

The accompanying notes are an integral part of the audited consolidated financial statements

DSG GLOBAL INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

  Year Ended 
  December 31, 2016  December 31, 2015 
       
Net loss attributable to the Company  (2,768,659)  (2,497,146)
         
Adjustments to reconcile net loss to net cash used in        
operating activities:        
Depreciation and amortization  49,664   49,463 
Inventory write-off  116,058   - 
Interest on discount of convertible debt  143,912   - 
Non-cash fair value adjustment on derivative  223,795   - 
Reserve for bad debt  33,947   - 
Non-cash financing costs  -   188,580 
Notes issued for services  -   303,079 
         
(Increase) decrease in assets:        
Trade receivables, net  (48,710)  67,354 
Inventories  153,495   (83,785)
Funds held in trust  3,564   (3,695)
Prepaid expense and deposits  43,691   219,072 
Related party receivable  97,313   16,660 
Other assets  34,202   21,828 
Increase (decrease) in current liabilities:        
Trade payables and accruals  1,250,632   805,119 
Warranty reserve  -   117,315 
Deferred revenue  46,939   107,959 
Net cash used in operating activities  (620,157)  (688,196)
         
Cash flows from investing activities        
Purchase of property, plant and equipment  (1,992)  (9,479)
Return (purchase) of equipment on lease  21,436   87,208 
Purchase of intangible assets  (790)  (5,030)
Cash acquired from merger  -   89,001 
Net cash provided by (used in) investing activities  18,654   161,700 
         
Cash flows from financing activities        
Bank overdraft  (33,699)  27,601 
Proceeds from issuing shares  -   103,660 
Payments on notes payable  (47,327)  (146,233)
Proceeds from notes payable  650,099   340,964 
Related party loan payable, net  30,175   120,677 
Net cash provided by financing activities  599,248   446,668 
         
Net increase in cash and cash equivalents  (2,255)  (79,828)
         
Effect of exchange rate changes on cash and cash equivalents  2,255   (12,012)
         
Cash and cash equivalents at beginning of period  -   91,840 
Cash and cash equivalents at the end of the period $-  $- 
         
Supplemental disclosures        
Cash paid during the period for:        
Income tax payments $-  $- 
Interest payments $5,386  $5,803 
         
Supplemental schedule of non-cash financing activities:        
Issuance of stock for financing costs $-  $188,580 
Noncontrollinginterest change to mezzanine equity     $5,286,731 

The accompanying notes are an integral part of the audited consolidated financial statements

DSG GLOBAL, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

(EXPRESSED IN U.S. DOLLARS)

 

Note 1 –ORGANIZATION– ORGANIZATION

 

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

 

Previously, in anticipation of the share exchange agreement with DSG Tag Systems, Inc. (“DSG TAG”), we undertook to change our name and effect a reverse stock split of our authorized and issued common stock. Accordingly, onOn January 19, 2015, our boardthe Board of directorsDirectors approved an agreement and plan of merger to merge with our wholly-owned subsidiary DSG Global Inc., a Nevada corporation, to affect a name change from Boreal Productions Inc. to DSG Global, Inc. Our company remainsOn April 13, 2015, the surviving company. DSG Global, Inc. was formed solely for the change of our name.

Subsequent to the closing of theCompany entered into a share exchange agreement with DSG TAG, we have adopted the business and operations of Tag Systems Inc. (“DSG TAG.

DSG TAG wasTAG”), a company incorporated under the laws of the State of Nevada on April 17, 2008 and extra provincially registered in British Columbia, Canada in 2008. In March 2011, DSG TAG formed DSG Tag Systems International, Ltd. in2008, whereby the United Kingdom (“DSG UK”). DSG UK is a wholly owned subsidiary of DSG TAG.

Reverse Acquisition

On April 13, 2015, we entered into a share exchange agreement with DSG TAG and the shareholders of DSG TAG who become parties to the agreement. Pursuant to the terms of the share exchange agreement, we agreed to acquire not less thanCompany acquired 75% and up to 100% of the issued and outstanding common shares in the capital stock of DSG TAG in exchange for the issuance toof 15,185,875 common shares. In addition, concurrent with the selling shareholders of up to 20,000,000 shares of our common stock onshare exchange agreement, the basis of 1 common share for 5.4935Company issued 179,823 common shares for settlement of DSG TAG.

accrued interest. On MayJuly 6, 2015 we completedand through to October 13, 2015, the acquisition of approximately 75% (82,435,748 common shares) ofCompany acquired the issued and outstandingremaining 27,035,175 common shares of DSG TAG as contemplated byin exchange for the share exchange agreement by issuing 15,185,875issuance of 4,921,303 common shares of our common stock to shareholdersthe Company. As of DSG TAG who became parties toJuly 6, 2015, 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.Company held a 100% interest in partial settlement of accrued interest on outstanding indebtedness of DSG TAG.

 

FollowingThe Company is a technology development company engaged in the initial closingdesign, manufacture, and marketing of fleet management solutions for the share exchange agreementgolf industry, as well as commercial, government and through July 6, 2015, we acquired an additional 27,035,175 sharesmilitary applications. Its principal activities are the sale and rental of common stockGPS tracking devices and interfaces for golf vehicles, and related support services. The Company specializes in the vehicle fleet management industry, primarily focused on the golf industry to help golf course operators manage their fleet of DSG TAG from shareholders who became parties to the share exchange agreement,golf carts, turf equipment, and issued to these shareholders an aggregate of 4,921,303 shares of our common stock. Following completion of these additional purchases, DSG Global owns 100% (109,572,123 common shares) of the issued and outstanding shares of common stock of DSG TAG as of October 13, 2015.utility vehicles.

 

As of October 13, 2015, an aggregate of 101,200 of the issued and outstanding shares of common stock of DSG TAG (less than 0.1%) has been converted by the last remaining shareholder of DSG TAG. As of October 2015, we own 100% (109,572,123 common shares) of the issued and outstanding shares of common stock of DSG TAG. SeePart II, Item 1. “Legal Proceeding,” of this Form 10-K for a description of the settlement agreement and the additional changes to the original agreement, that has been amended in February 2016. Additionally, an aggregate of 4,229,384 shares of Series A Convertible Preferred Stock of DSG TAG continues to be held by Westergaard Holdings Ltd., an affiliate company of Keith Westergaard, a memberformer director of our board of directors.the Company.

The reverse acquisition was accounted for as a recapitalization effected by a share exchange, wherein

In March 2011, 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 upon the closing of the share exchange agreement.

When used in these notes, the terms “Company,” “we,” “our,” or “us” mean DSG Global, Inc. and its subsidiary DSG Tag Systems, Inc. and its wholly-owned subsidiaryformed DSG Tag Systems International, Ltd., a company incorporated in the United Kingdom (“DSG UK”). DSG UK is a wholly-owned subsidiary of DSG TAG.

Note 2 – GOING CONCERN

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders and note holders, the ability of the Company to obtain necessary equity financing to continue operations, and ultimately the attainment of profitable operations. As at December 31, 2017, the Company has a working capital deficit of $8,002,300 and has an accumulated deficit of $30,409,853 since inception. Furthermore, the Company incurred a net loss of $3,632,072 and used $568,972 of cash flows for operating activities during the year ended December 31, 2017. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Note 23 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation and Principles of Consolidation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Principles of Consolidation

Theare expressed in U.S. dollars. These consolidated financial statements include the accounts of DSG Global Inc.the Company and its subsidiarywholly-owned subsidiaries, DSG Tag Systems, Inc.TAG and its wholly owned subsidiary DSG Tag Systems International, Ltd., collectively referred to as the Company.UK. All material intercompany accounts, transactions and profits were eliminated in consolidation.

DSG GLOBAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

(EXPRESSED IN U.S. DOLLARS)

Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Use of Estimates

 

The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles 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. Actual results could differ from those estimates. EstimatesThe Company regularly evaluates estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the consolidated financial statements in the period they are determined.

Exchange (Loss) Gain

During the years ended December 31, 2016 and 2015, the transactions of the Company and its subsidiary were denominated in foreign currencies and were recorded in Canadian dollar (CAD), or British Pounds (GBP), at the rates of exchange in effect when the transactions occurred. Exchange gains and losses are recognized for the different foreign exchange rates applied when the foreign currency assets and liabilities are settled.

Foreign Currency Translation and Comprehensive (Loss) Income

The accounts of the Company and its subsidiary were maintained, and its financial statements were expressed, in CAD and GBP. Such financial statements were translated into United States dollars (USD) with the CAD or GBP as the functional currency. All assets and liabilities were translated at the exchange rate at the balance sheet date, stockholders’ deficit is translated at the historical rates and income statement items are translated at the average exchange rate for the period. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the consolidated statements of operations. The resulting translation adjustments are reported under other comprehensive income as a component of shareholders’ equity.

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

The Company recognizes 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. The Company accrues for warranty costs, sales returns, and other allowances based on its historical experience.

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 researchthe collectability of accounts receivable, valuation of inventory, useful lives and development expense until the point that technological feasibility is reached. Researchrecoverability of long-lived assets, valuation of loans payable, fair value of convertible debentures, derivative liabilities, warranty reserves, and development is expensedstock-based compensation, and is included in operating expenses.

Income Taxes

The Company utilizes the liability method of accounting for income tax. Under the liability method, deferred income tax assetsasset valuation allowances. The Company bases its estimates and liabilities are provided basedassumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the difference betweencircumstances, the financial statements and taxresults of which form the basis for making judgments about the carrying values of assets and liabilities measuredand the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the current enacted tax rates in effect forCompany may differ materially and adversely from the years in which theseCompany’s estimates. To the extent there are material differences are expected to reverse.between the estimates and the actual results, future results of operations will be affected.

 

The Company has adopted accounting standardsCompany’s policy for equipment requires judgment in determining whether the accounting for uncertain income taxes. These standards provide guidance for the accountingpresent value of future expected economic benefits exceeds capitalized costs. The policy requires management to make certain estimates and disclosureassumptions about uncertain tax positions taken. Management believes that all of the positions taken in its federal and states income tax returns are more likely than not to be sustained upon examination.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other 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 riskfuture economic benefits related to accounts receivable through credit approvals, credit limitsits operations. Estimates and monitoring procedures. The Company routinely assessesassumptions may change if new information becomes available. If information becomes available suggesting that the financial strengthrecovery of its customers and, based upon factors surroundingcapitalized cost is unlikely, 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 allowancecapitalized cost is limited.

Risks and Uncertaintieswritten off to the consolidated statement of operations.

 

The assessment of whether the going concern assumption is appropriate requires management to take into account all available information about the future, which is at least, but is not limited to, 12 months from the end of the reporting period. The Company is subjectaware that material uncertainties related 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

Certainevents or conditions may exist as of the date the 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,cast significant doubt upon the Company’s legal counsel evaluates the perceived merits of any legal proceedings or un-asserted claimsability to continue 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 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.going concern.

 

Cash and Cash Equivalents

 

Cash and equivalents include cash in hand and cash in demand deposits, certificates of deposit andThe Company considers all highly liquid debt instruments with original maturitiesmaturity of three months or less. Atless at the time of issuance to be cash equivalents. As at December 31, 20162017 and 2015,2016, there were no uninsured balances for accounts in Canada, the United States, and theor United Kingdom. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts.

 

Accounts Receivable

 

Accounts receivable is comprised of amounts due from customers and is recorded net of allowance for doubtful accounts. All accounts receivable are due thirty (30) days from the date billed. If the funds are not received within thirty (30) days the customer is contacted to arrange payment. The Company uses the allowance method to account for uncollectable accounts receivable. The allowance for doubtful accounts as of December 31, 2016 and 2015 was $47,289 and $14,368, respectively.

 

Financing Receivables and Guarantees

 

The Company provides financing arrangements, including operating leases and financed service contracts for certain qualified customers. Lease receivables primarily represent sales-type and direct-financing leases. Leases typically have two- to three-year terms and are collateralized by a security interest in the underlying assets. The Company makes an allowance for uncollectible financing receivables based on a variety of factors, including the risk rating of the portfolio, macroeconomic conditions, historical experience, and other market factors. AtAs at December 31, 20162017 and 20152016 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 nonpaymentnon-payment to the third party.

DSG GLOBAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

(EXPRESSED IN U.S. DOLLARS)

Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Advertising CostsConcentration of Credit Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk are cash and accounts receivable. The Company expenses all advertising costs as incurred. Advertising costs were $221,868places its cash in credit-worthy financial institutions. The Company’s accounts receivables are comprised of a diversified customer base, most of which are in Canada, United States and $354,936the United Kingdom. The Company controls credit risk related to accounts receivable 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. The carrying amount of cash and accounts receivables represents the years ended December 31, 2016 and 2015, respectively.maximum credit exposure.

 

Inventory

 

Inventories areInventory is comprised of finished goods and is valued at the lower of cost (determinedor net realizable value. Cost is determined using the first-in-first-out basis for finished goods. Net realizable value is determined on a weighted average basis)the basis of anticipated sales proceeds less the estimated selling expenses. Inventory is reviewed at least annually for impairment due to slow moving or market. Management compares the cost of inventories with the market value and allowance is made to write down inventories to market value, if lower. As of December 31, 2016 and 2015, inventory only consisted of finished goods.obsolescence.

 

Fixed AssetsEquipment and Equipment on Lease

 

Fixed assetsEquipment and equipment on lease are stated at cost and depreciated using the straight-line method over the shorter of the estimated useful life of the asset or the lease term. The estimated useful lives of our property and equipment are generally as follows:are:

 

Rental equipment:

Tag5-year useful life
Touch/Text5-year useful life
Office furnitureFurniture and equipment5-year useful life5 years straight-line
Computer equipment3-year useful life3 years straight-line
Equipment on lease5 years straight-line

 

As of December 31, 2016 and 2015, fixed assets consisted of the following:Intangible Assets

 

  December 31, 2016  December 31, 2015 
Furniture and equipment $20,838  $20,216 
Computer equipment  23,317   24,695 
Accumulated depreciation  (39,414)  (37,940)
  $4,741  $6,971 

AsIntangible assets are stated at cost less accumulated amortization and are comprised of December 31, 2016patents. The patents are amortized straight-line over the estimated useful life of 17 years and 2015, leased equipment consisted of the following:

  December 31, 2016  December 31, 2015 
Tags $122,935  $141,400 
Text  27,171   26,195 
Touch  22,507   20,386 
Accumulated Depreciation  (129,850)  (82,455)
  $42,763  $105,526 

As of December 31, 2016 and 2015, total depreciation expense was $49,664 and $49,463are reviewed annually for the fixed assets and leased equipment, respectively.impairment.

 

Fair ValueImpairment of Financial InstrumentsLong-Lived Assets

 

For certainThe 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 Company’s financial instruments, includingexpected undiscounted future cash and equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities and short-term debt,flows is less than the carrying amounts approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosurevalue of the asset, a loss is recognized for the excess of the carrying amount over the fair value of financial instruments heldthe asset.

Foreign Currency Translation

The Company’s functional and reporting currency is the U.S. dollar. The functional currency of DSG TAG is in Canadian dollars. The functional currency of DSG UK is in British Pounds. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets, liabilities, and items recorded in income arising from transactions denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.

The accounts of DSG TAG and DSG UK are translated to U.S. dollars using the current rate method. Accordingly, assets and liabilities are translated into U.S. dollars at the period-end exchange rate while revenues and expenses are translated at the average exchange rates during the period. Related exchange gains and losses are included in a separate component of stockholders’ equity as accumulated other comprehensive income (loss).

DSG GLOBAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

(EXPRESSED IN U.S. DOLLARS)

Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Recognition and Warranty Reserve

The Company recognizes 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 Company. ASC Topic 825, “Financial Instruments,” defines fair value,customer, revenue is deferred until all acceptance criteria have been met. The Company accrues for warranty costs, sales returns, and establishesother allowances based on its historical experience.

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 three-level valuation hierarchysingle global business.

Research and Development

Research and development expenses include payroll, employee benefits, and other 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 disclosuresinternational markets, and the amortization of fair value measurementpurchased software code and services content. Such costs related to software development are included in research and development expense until the point that enhances disclosure requirements for fair value measures. The carrying amounts reportedtechnological feasibility is reached. Research and development is expensed and included in the consolidated balance sheetsstatement of operations.

Income Taxes

The Company accounts for receivablesincome taxes using the asset and currentliability method in accordance with ASC 740, Income Taxes. The asset and liability method provides that deferred income tax assets and liabilities each qualify asare recognized for the expected future tax consequences of temporary differences between the financial instrumentsreporting and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards. 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 reasonable estimatevaluation allowance to reduce deferred income tax assets to the amount that is believed more likely than not to be realized.

The Company has not recorded any amounts pertaining to uncertain tax positions.

Loss per Share

The Company computes net income (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of their fair values becauseboth basic and diluted earnings per share (“EPS”) on the face of the shortconsolidated 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 time betweenshares assumed to be purchased from the originationexercise of such instrumentsstock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As at December 31, 2017, the Company had 585,040,862 (2016 – 12,259,635) potentially dilutive shares outstanding.

Risks and their expected realizationUncertainties

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 their current market ratethe volatility of interest. Thepublic markets.

DSG GLOBAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

(EXPRESSED IN U.S. DOLLARS)

Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial Instruments and Fair Value Measurements

ASC 820, “Fair Value Measurements and Disclosures” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels of valuation hierarchy are defined as follows:that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs toother than quoted prices that are observable for the valuation methodology areasset 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.markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

 

Level 23 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 inputs to the valuation methodology are unobservable and significant to the measurement of the fair value measurement.of the assets or liabilities.

 

The Company analyzes allCompany’s financial instruments with featuresconsist principally of bothcash, accounts receivable, amounts due from and to related parties, bank overdraft, account payable and accrued liabilities, convertible note – related party, loans payable, derivative liabilities, and equity under ASC Topic 480, “Distinguishing Liabilities from Equity,” and ASC Topic 815, “Derivatives and Hedging.”convertible notes payable.

 

As of December 31, 2016 and 2015, the Company did not identify anyThe following table represents assets and liabilities that are required to be presented on the balance sheetmeasured and recognized at fair value.value as of December 31, 2017, on a recurring basis:

 

Basic and Diluted Net Loss per Common Share

Basic and diluted net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Our potentially dilutive shares, which include outstanding convertible loans and notes, have not been included in the computation of diluted net loss per share attributable to common stockholders for all periods presented, as the results would be antidilutive. Such potentially dilutive shares are excluded when the effect would be to reduce net loss per share.

  Level 1
$
  Level 2
$
  Level 3
$
 
          
Cash  5,488       
Derivative liabilities     1,191,396    
             
Total  5,488   1,191,396    

 

The following table sets forth the computationrecorded values of basicall other financial instruments approximate their current fair values because of their nature and diluted earnings per share forrespective maturity dates or durations.

During the year ended December 31, 2016 and 2015:

  December 31, 2016  December 31, 2015 
       
Net loss attributable to DSG Global Inc. $(2,306,249) $(2,092,184)
         
Net loss per share        
Basic and Diluted:        
Basic $(0.076) $(0.081)
Diluted $(0.076) $(0.081)

2017, the Company recognized a loss on the change in fair value of derivative liabilities of $340,227 (2016 – $223,795).

 

Weighted average number of shares used in computing basic and diluted net loss per share:DSG GLOBAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

(EXPRESSED IN U.S. DOLLARS)

 

Basic  30,291,187   25,965,534 
Diluted  30,291,187   25,965,534 

Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Intangible AssetsContingencies

 

The Company records identifiable intangible assetsCertain conditions may exist as at fair value on the date of acquisitionthat 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 unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the useful lifeperceived merits of each asset. Finite-lived intangible assets primarily consistany legal proceedings or un-asserted claims as well as the perceived merits of software development capitalized. Finite-lived intangible assetsthe 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 amortized on a straight-line basis and are tested for recoverability if events or changesgenerally not disclosed unless they involve guarantees, in circumstances indicate that their carrying amounts may notwhich case the guarantee would be recoverable. These intangibles have useful lives ranging from 1 to 20 years.disclosed.

 

Stock-Based Compensation

 

We recognize all share-based payments to employees and to non-employee directors asThe Company records stock-based compensation for service on our board of directors as compensation expense in the consolidated financial statements based onaccordance with ASC 718, “Compensation – Stock Compensation”, using the fair valuesvalue method. All transactions in which goods or services are the consideration received for the issuance of such payments. Stock-based compensation expense recognized each period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Forfeituresequity instruments are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

For share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. We record compensation expenseaccounted for based on the fair value of the award at the reporting date. The awards to consultants and other third-parties are then revalued,consideration received or the total compensation is recalculated based on the then current fair value at each subsequent reporting date.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.

Reclassifications

Certain of the figures presented for comparative purposes have been reclassified to conform to the current presentation adopted in the current period.

 

Recently Issued Accounting Pronouncements

For fiscal years beginning after December 15, 2016:

In April 2016, the FASB issued ASC 2016-10 “Revenue from Controls with Customers (Topic 606) – Identifying Performance Obligations and Licensing”. These amendments are intended to clarify the identifying of performance obligations and the licensing of implementation guidance, while retaining the related principles for those areas. These amendments are effective for annual and interim reporting periods beginning after December 15, 2016. Early adoption is not permitted.

In March 2016, the FASB issued ASC 2016-09, “Compensation – Stock Compensation (Topic 718) – Improvements to Employee Share-Based Payment Accounting”. These amendments are intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Early adoption is permitted. Entities have the option to apply the amendments on either a prospective basis or a modified retrospective basis.

In November 2015, the FASB issued ASC 2015-17 “Income Taxes (Topic 740) – Balance Sheet Classification of Deferred Taxes” guidance simplifying the presentation of deferred tax liabilities and assets requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. Early adoption permitted.

In August 2014, the FASB issued ASC 2014-15 “Presentation of Financial Statements – Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” new guidance which provides details on when and how to disclose going concern uncertainties. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year and to provide certain footnote disclosures if conditions or events raise substantial doubt about an entity’s ability to continue as a going concern. Early adoption permitted.

In July 2015, the FASB issued ASC 2015-11 “Inventory (Topic 330) – Simplifying the Measurement of Inventory”. This standard requires entities that use inventory methods other than the last-in, first-out (LIFO) or retail inventory method to measure inventory at the lower of cost or net realizable value, which is defined as the estimated selling prices in the normal course of business, less reasonably predictable costs of completion, disposal, and transportation.

 

For fiscal years beginning after December 15, 2017:

 

In August 2016, the Financial Accounting Standards Board (“FASB”) issued ASC 2016-15 “Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments”. These amendments are intended to provide guidance for each of the eight issues included, to reduce the current and potential future diversity in practice. Early adoption is permitted including in an interim period.

 

In January 2016, the FASB issued ASC 2016-01 “Financial Instruments – Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Liabilities” a new standard related primarily to accounting for equity investments, financial liabilities where the fair value option has been elected, and the presentation and disclosure requirements for financial instruments. There will no longer be an available-for-sale classification and therefore, no changes in fair value will be reported in other comprehensive income for equity securities with readily determinable fair values. Early adoption is permitted.

 

54

DSG GLOBAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

(EXPRESSED IN U.S. DOLLARS)

Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recently Issued Accounting Pronouncements (continued)

For fiscal years beginning after December 15, 2018:

In March 2017, the FASB issued ASC 2017-08 “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20) – Premium Amortization on Purchased Callable Debt Securities” an amendment to shorten the amortization period for certain callable debt securities held at a premium to the earliest call date. The amendments do not require an accounting change for securities held at a discount.

In July 2017, the FASB issued ASC 2017-11 “Earnings Per Share (Topic 260), Distinguishing Liability from Equity (Topic 480), and Derivatives and Hedging (Topic 815) – (i) Accounting for Certain Financial Instruments with Down Round Features (ii) Replace of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments.” The amendments in (i) change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features and to help clarify existing disclosure requirements. The amendments in (ii) characterize the indefinite deferral of certain provisions and do not have an accounting effect.

 

In February 2016, the FASB issued ASC 2016-02 “Leases (Topic 842)” a comprehensive standard related to lease accounting to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Most significantly, the new guidance requires lessees to recognize operating leases with a term of more than 12 months as lease assets and lease liabilities. The adoption will require a modified retrospective approach at the beginning of the earliest period presented. Early adoption permitted.

 

The Company is currently evaluating the impact of the above standards on theirthe consolidated financial statements. Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

 

Note 3 – GOING CONCERN

As reflected in the accompanying financial statements, the Company had an accumulated deficit of $27,013,446 as of December 31, 2016 and had a net loss of $2,768,659 for the year ended December 31, 2016.

While the Company is attempting to grow revenues, improve margins and lower costs, the Company’s cash position may not be sufficient to support the Company’s daily operations. Management is seeking to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate revenues.

The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Note 4 – ACCOUNTS RECEIVABLE NET

 

As of December 31, 20162017 and 2015,2016, accounts receivable consistsconsisted of the following:

 

  December 31, 2016  December 31, 2015 
Accounts receivables $137,327  $87,580 
Allowance for bad debt  (47,289)  (14,368)
Total accounts receivables, net $90,038  $73,212 
  December 31, 2017  December 31, 2016 
Accounts receivable $52,373  $137,327 
Allowance for doubtful accounts  (28,637)  (47,289)
Total accounts receivables, net $23,736  $90,038 

 

Note 5 – OTHER ASSETSEQUIPMENT AND EQUIPMENT ON LEASE

 

Other assets consist of the following asAs of December 31, 2017 and 2016, and 2015:equipment consisted of the following:

 

  December 31, 2016  December 31, 2015 
GST/VAT Receivable $-  $26,902 
  $-  $26,902 
  December 31, 2017  December 31, 2016 
Furniture and equipment $17,914  $20,838 
Computer equipment  26,435   23,317 
Accumulated depreciation  (43,385)  (39,414)
  $964  $4,741 

55

DSG GLOBAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

(EXPRESSED IN U.S. DOLLARS)

Note 5 – EQUIPMENT AND EQUIPMENT ON LEASE(continued)

As of December 31, 2017 and 2016, equipment on lease consisted of the following:

  December 31, 2017  December 31, 2016 
Tags $124,314  $122,935 
Text  27,475   27,171 
Touch  22,759   22,507 
Accumulated depreciation  (159,734)  (129,850)
  $14,814  $42,763 

As of December 31, 2017, total depreciation expense was $33,855 (2016 - $49,664) for the equipment and equipment on lease.

 

Note 6 – INTANGIBLE ASSETS

 

Intangible assets consist of the following of December 31, 2016 and 2015:

  December 31, 2016  December 31, 2015 
Intangible Asset - Patents $21,253  $20,473 
Accumulated Amortization  (4,673)  (3,489)
  $16,580  $16,984 

The estimated useful life of the Patent is twenty years. Patents are amortized on a straight-line basis. As of December 31, 2017 and 2016, $4,673 has been amortized.intangible assets consisted of the following:

 

  December 31, 2017  December 31, 2016 
Patents $21,253  $21,253 
Accumulated depreciation  (5,858)  (4,673)
  $15,395  $16,580 

Note 7 – TRADEACCOUNTS PAYABLE AND OTHER PAYABLESACCRUED LIABILITIES

 

As of December 31, 2017 and 2016, accounts payable and 2015, trade and other payables consistaccrued liabilities consisted of the following:

 

 December 31, 2016 December 31, 2015  December 31, 2017 December 31, 2016 
Accounts payable $940,722  $742,256  $1,121,841  $940,722 
Accrued expenses  388,331   35,113   255,542   388,331 
Accrued interest  1,222,151   622,903 
Accrued interest payable  1,889,537   1,222,151 
Other liabilities  17,588   28,237   61,931   17,588 
Total payables $2,568,792  $1,428,509  $3,328,851  $2,568,792 

56

DSG GLOBAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

(EXPRESSED IN U.S. DOLLARS)

 

Note 8 – LOANS PAYABLE

 

As of December 31, 20162017 and 2015,2016, loans payable consisted of the following:

 

 December 31, 2016 December 31, 2015  December 31, 2017  December 31, 2016 
          
Unsecured, due on demand, interest 15% per annum $186,192  $180,635  $199,283  $186,192 
Unsecured, due on demand, interest 36% per annum  45,548   50,502   48,750   45,548 
Unsecured, loan payable, interest 18% per annum  317,500   315,000   317,500   317,500 
Unsecured, loan payable, fee for services payable on the original loan amount of 5% by May 6, 2016, 10% payable by June 5, 2016, or 20% payable by July 5, 2016  67,029   -   71,742   67,029 
Unsecured, loan payable, interest 10% per annum, with a minimum interest amount of $25,000, due July 22, 2016.  250,000   -   250,000   250,000 
Total $866,269  $546,137  $887,275  $866,269 
        
Current portion  866,269   546,137 
Long term portion  -   - 
Total $866,269  $546,137 

Note 9 – CONVERTIBLE NOTES PAYABLE

Related Party Notes

(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 convertible promissory note is unsecured, bears interest at 5% per annum, is convertible at $1.25 per share, was due on March 30, 2016, and is now due on demand. As at December 31, 2017, the carrying value of the debenture was $310,000 (2016 - $310,000). See Note 18(a).
(b)On December 16, 2016, the Company issued a convertible promissory note in the principal amount of Cdn$40,000 to a family member of the CEO and CFO of the Company. The convertible promissory note is unsecured, bears interest at 8% per annum, was due on January 15, 2017, and was convertible at $0.05 per share. After January 15, 2017, interest accrues at 4% per month. Interest will be accrued and payable at the time of promissory note repayment.
On April 3, 2017, the outstanding principal and all unpaid interest and penalties was settled in cash of Cdn$45,500 and the issuance of 525,049 common shares pursuant to a debt settlement and subscription agreement, as described in Note 12. As at December 31, 2017, the carrying value of the debenture was $nil (2016 - $29,791).

Third Party Notes

(c)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 $1.75 per share.

DSG GLOBAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

(EXPRESSED IN U.S. DOLLARS)

Note 9 – CONVERTIBLE NOTES PAYABLE (continued)

(d)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 six 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 $0.12 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 100,000 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 210,000 common shares for the conversion of $10,500 of the $72,500 convertible note dated November 7, 2016. Refer to Note 12.
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 18.
As at December 31, 2017, the carrying value of the note was $245,889 (2016 - $82,056) and the fair value of the derivative liability was $145,000 (2016 - $365,944). During the year ended December 31, 2017, the Company accreted $179,333 (2016 - $nil) of the debt discount to interest expense.
(e)On December 21, 2016, the Company entered into a convertible note agreement for the principal amount of $74,500 for consideration of proceeds of $72,250, which was received on January 10, 2017. The note is unsecured, bears interest at 12% per annum, was due on December 21, 2017, and is convertible into common shares at a conversion price equal to the lessor of: (i) the closing sale price of the common stock on the trading day immediately preceding the closing date, and (ii) 50% of the lowest sale price for the common stock during the twenty five consecutive trading days immediately preceding the conversion date. Interest will be accrued and payable at the time of repayment of the note. Financing fees on the note were $4,750. Derivative liability applied as discount on the note was $72,250 and is being accreted over the life of the note.
On July 24, 2017, the Company issued 800,000 common shares for the conversion of $26,850 of principal and a $750 finance fee. On October 10, 2017, the Company issued 1,000,000 common shares for the conversion of $705 of principal, $3,200 of penalty interest, and a $750 finance fee. On October 19, 2017, the Company issued 4,400,000 common shares for the conversion of $4,814 of principal and a $1,500 finance fee. On October 25, 2017, the Company issued 2,700,000 common shares for the conversion of $3,030 of principal and a $750 finance fee. On October 27, 2017, the Company issued 3,000,000 common shares for the conversion of $3,450 of principal and a $750 finance fee. On October 31, 2017, the Company issued 3,000,000 common shares for the conversion of $3,450 of principal and a $750 finance fee. On December 27, 2017, the Company issued 4,200,000 common shares for the conversion of $1,182 of principal and a $750 finance fee. On December 29, 2017, the Company issued 4,600,000 common shares for the conversion of $1,132 of principal and a $750 conversion fee. The Company also incurred a $36,000 default fee, which was added to the principal balance of the note, for failure to honour a conversion notice in a timely manner.

DSG GLOBAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

(EXPRESSED IN U.S. DOLLARS)

Note 9 – CONVERTIBLE NOTES PAYABLE (continued)

As at December 31, 2017, the carrying value of the note was $65,887 (2016 - $nil) and the fair value of the derivative liability was $31,431 (2016 - $nil). During the year ended December 31, 2017, the Company accreted $72,250 (2016 - $nil) of the debt discount and $4,750 (2016 - $nil) of the financing fees to interest expense.
(f)On January 18, 2017, the Company issued a convertible promissory note in the principal amount of $75,000. The note is unsecured, bears interest at 12% per annum, was due on October 18, 2017, and is convertible into common shares at a conversion price equal to the lessor of (i) 60% multiplied by the lowest trading price (representing a discount rate of 40%) during the previous twenty-five trading day period ending on the latest complete trading day prior to the date of the note; and (ii) the variable conversion price which means 50% multiplied by the lowest trading price (representing a discount rate of 50%) during the previous twenty five trading day period ending on the latest complete trading day prior to the conversion date. Interest will be accrued and payable at the time of promissory note repayment. Financing fees on the note were $2,750. Derivative liability applied as discount on the note was $75,000 and is being accreted over the life of the note.
On July 28, 2017, the Company issued 500,000 common shares for the conversion of $4,474 of principal and $4,586 of accrued interest. On September 7, 2017, the Company issued 750,000 common shares for the conversion of $12,549 of principal and $951 of accrued interest. On October 11, 2017, the Company issued 750,000 common shares for the conversion of $3,342 of principal and $648 of accrued interest. On October 20, 2017, the Company issued 2,229,400 common shares for the conversion of $3,369 of principal and $198 of accrued interest. On October 27, 2017, the Company issued 3,017,400 common shares for the conversion of $4,592 of principal and $236 of accrued interest. On November 7, 2017, the Company issued 3,667,000 common shares for the conversion of $5,530 of principal and $337 of accrued interest.
On November 7, 2017, the Company incurred a loan penalty of $15,000 for the conversion price being below the Company’s par value.
As at December 31, 2017, the carrying value of the note was $56,144 (2016 - $nil) and the fair value of the derivative liability was $70,818 (2016 - $nil). During the year ended December 31, 2017, the Company accreted $75,000 (2016 - $nil) of the debt discount and $2,750 (2016 - $nil) of the financing fees to interest expense.
(g)On April 3, 2017, the Company issued a convertible promissory note in the principal amount of $110,000. The note is unsecured, bears interest at 10% per annum, was due on October 3, 2017, and is convertible into common shares at a conversion price equal to the lessor of (i) 55% multiplied by the lowest trading price during the previous twenty-five trading day period ending on the latest complete trading day prior to the date of this note and (ii) the alternate conversion price which means 55% multiplied by the lowest trading price during the previous twenty five trading day period ending on the latest complete trading day prior to the conversion date. Interest will be accrued and payable at the time of promissory note repayment. In connection with the issuance, the Company issued 550,000 common shares as a commitment fee, however, these common shares must be returned if the note is fully repaid and satisfied prior to the maturity date. Financing fees on the note were $10,000. Derivative liability applied as discount on the note was $100,000 and is being accreted over the life of the note.

DSG GLOBAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

(EXPRESSED IN U.S. DOLLARS)

Note 9 – CONVERTIBLE NOTES PAYABLE (continued)

On October 11, 2017, the Company issued 1,415,205 common shares for the conversion of $2,590 of principal and $5,880 of accrued interest. On October 18, 2017, the Company issued 2,123,434 common shares for the conversion of $5,430 of principal and $494 of accrued interest. On October 19, 2017, the Company issued 2,229,450 common shares for the conversion of $3,879 of principal and $134 of accrued interest. On October 23, 2017, the Company issued 2,440,467 common shares for the conversion of $4,134 of principal and $258 of accrued interest. On October 26, 2017, the Company issued 1,791,445 common shares for the conversion of $3,107 of principal and $118 of accrued interest. On October 31, 2017, the Company issued 2,500,728 common shares for the conversion of $4,262 of principal and $239 of accrued interest. On November 2, 2017, the Company issued 1,499,272 common shares for the conversion of $2,528 of principal and $171 of accrued interest. On November 13, 2017, the Company issued 3,017,333 common shares for the conversion of $4,823 of principal and $608 of accrued interest. On November 22, 2017, the Company issued 4,000,565 common shares for the conversion of $4,292 of principal and $469 of accrued interest. On December 27, 2017, the Company issued 4,200,200 common shares for the conversion of $1,656 of principal and $1,725 of accrued interest. On December 29, 2017, the Company issued 4,619,360 common shares for the conversion of $3,347 of principal and $48 of accrued interest.
As at December 31, 2017, the carrying value of the note was $69,952 (2016 - $nil) and the derivative liability was $108,326 (2016 - $nil). During the year ended December 31, 2017, the Company accreted $100,000 (2016 - $nil) of the debt discount and $10,000 (2016 - $nil) of the financing fees to interest expense.
(h)On June 5, 2017, the Company issued a convertible promissory note in the principal amount of $110,000. The note is unsecured, bears interest at 10% per annum, was due on December 5, 2017, and is convertible into common shares at a conversion price equal to the lessor of (i) 55% multiplied by the lowest trading price during the previous twenty-five trading day period ending on the latest complete trading day prior to the date of this note and (ii) the alternate conversion price which means 55% multiplied by the lowest trading price during the previous twenty-five trading day period ending on the latest complete trading day prior to the conversion date. Interest will be accrued and payable at the time of promissory note repayment. Financing fees on the note were $7,000. Derivative liability applied as discount on the note was $103,000 and is being accreted over the life of the note.
As at December 31, 2017, the carrying value of the note was $110,000 (2016 - $nil) and the fair value of the derivative liability was $188,798 (2016 - $nil). During the year ended December 31, 2017, the Company accreted $103,000 (2016 - $nil) of the debt discount and $7,000 (2016 - $nil) of the financing fees to interest expense.
(i)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) $0.061. Interest will be accrued and payable at the time of promissory note repayment. Financing fees on the note were $16,500. Derivative liability applied as discount on the note was $118,500 and is being accreted over the life of the note.
As at December 31, 2017, the carrying value of the note was $70,718 (2016 - $nil) and the fair value of the derivative liability was $205,563 (2016 - $nil). During the year ended December 31, 2017, the Company accreted $54,218 (2016 - $nil) of the debt discount and $16,500 (2016 - $nil) of the financing fees to interest expense.
(j)On August 17, 2017, the Company issued a convertible promissory note in the principal amount of $110,250. The note is unsecured, bears interest at 8% per annum, is due on August 16, 2018, and is convertible at 58% of to the lowest trading price during the previous ten trading days to the date of a conversion notice. Interest will be accrued and payable at the time of promissory note repayment. Deferred financing fees on the note were $5,250. Derivative liability applied as discount on the note was $105,000 and is being accreted over the life of the note.

DSG GLOBAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

(EXPRESSED IN U.S. DOLLARS)

Note 9 – CONVERTIBLE NOTES PAYABLE (continued)

As at December 31, 2017, the carrying value of the note was $44,661 (December 31, 2016 - $nil) and the fair value of the derivative liability was $166,460 (2016 - $nil). During the year ended December 31, 2017, the Company accreted $39,411 (2016 - $nil) of the debt discount and $5,250 (2016 - $nil) of the financing fees to interest expense.
(k)On September 6, 2017, the Company issued a convertible promissory note in the principal amount of $107,000. The note is unsecured, bears interest at 10% per annum, is due on March 6, 2018, and is convertible into common shares at a conversion price equal to the lessor of the lowest trading price during the previous twenty-five trading days prior to: (i) the date of the promissory note; or (ii) the latest complete trading day prior to the conversion date. Interest will be accrued and payable at the time of promissory note repayment. Deferred financing fees on the note were $7,000. Derivative liability applied as discount on the note was $100,000 and is being accreted over the life of the note.
As at December 31, 2017, the carrying value of the note was $71,088 (2016 - $nil) and the fair value of the derivative liability was $100,000 (2016 - $nil). During the year ended December 31, 2017, the Company accreted $64,088 (2016 - $nil) of the debt discount and $7,000 (2016 - $nil) of the financing fees to interest expense.
(l)On October 30, 2017, the Company issued a convertible promissory note in the principal amount of $107,000. The note is unsecured, bears interest at 10% per annum, is due on April 30, 2018, and is convertible into common shares at a conversion price equal to the lessor of the lowest trading price during the previous twenty-five trading days prior to: (i) the date of the promissory note; or (ii) the latest complete trading day prior to the conversion date. Interest will be accrued and payable at the time of promissory note repayment. Deferred financing fees on the note were $7,000. Derivative liability applied as discount on the note was $100,000 and is being accreted over the life of the note.
As at December 31, 2017, the carrying value of the note was $41,066 (2016 - $nil) and the fair value of the derivative liability was $100,000 (2016 - $nil). During the year ended December 31, 2017, the Company accreted $34,066 (2016 - $nil) of the debt discount and $7,000 (2016 - $nil) of the financing fees to interest expense.
(m)On December 18, 2017, the Company issued a convertible promissory note in the principal amount of $82,000. The note is unsecured, bears interest at 10% per annum, is due on June 18, 2018, and is convertible into common shares at a conversion price equal to the lessor of the lowest trading price during the previous twenty-five trading days prior to: (i) the date of the promissory note; or (ii) the latest complete trading day prior to the conversion date. Interest will be accrued and payable at the time of promissory note repayment. Deferred financing fees on the note were $7,000. Derivative liability applied as discount on the note was $75,000 and is being accreted over the life of the note.
As at December 31, 2017, the carrying value of the note was $12,357 (2016 - $nil) and the fair value of the derivative liability was $75,000 (2016 - $nil). During the year ended December 31, 2017, the Company accreted $5,357 (2016 - $nil) of the debt discount and $7,000 (2016 - $nil) of the financing fees to interest expense.
(n)As at December 31, 2017, the Company owed a convertible promissory note of $nil (December 31, 2016 - $150,000). The convertible promissory note is unsecured, bears interest at 24% per annum, was due on September 19, 2016 or upon filing of registration statement, and was convertible at $0.05 per share.
On May 17, 2017, the Company issued 3,000,000 common shares for the conversion of $150,000 of the principal pursuant to a debt settlement.
(o)As at December 31, 2017, the Company owed a convertible promissory note in the principal amount of $981,370 (Cdn$1,231,128) (2016 - $916,905 (Cdn$1,231,128)). The convertible promissory note is unsecured, bears interest at 15.2% per annum, is due on demand, and is convertible into Tags units at the average closing price of the 120 days period prior to conversion date. As at December 31, 2017, accrued interest of $549,886 (Cdn$689,832) (2016 – Cdn$477,576) was recorded in accounts payable and accrued liabilities.

 

 6061 
 

 

Note 9 – CONVERTIBLE LOANSDSG GLOBAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

(EXPRESSED IN U.S. DOLLARS)

 

As of December 31, 2016 and 2015, convertible loans payable consisted of the following:

Convertible Loans

  December 31, 2016  December 31, 2015 
 Unsecured, interest 15.2% per annum, from equity investment, mature from February 28, 2015 to December 31, 2015. Principal is repayable in cash or Tags units. Convertible at the average closing price of the 120 days period prior to conversion date $916,905  $889,543 
Unsecured, interest 10% per annum. Principal plus interest repayable in cash or common shares due on demand. Convertible at $1.75 per share  250,000   250,000 
Unsecured, interest 2% per month. Principal plus interest repayable in cash or common shares. Due 45 days from August 5, 2016 or upon filing of registration statement, convertible at $0.27 per share  150,000   -   
Senior secured, interest 8% per annum. Repayable in cash or common shares at the lower of (i) twelve cents ($0.12) and (ii) the closing sales price of the Common Stock on the date of conversion.(1)  261,389   -   
Less: debt discount(1)  (179,333)  -   
Total $1,398,961  $1,139,543 
         
Current portion  1,398,961   1,139,543 
Long term portion $-    $-   

Convertible Loans to Related Party

  December 31, 2016  December 31, 2015 
Unsecured, interest 5% per annum, matures March 30, 2016, and is convertible at $1.25/per share $310,000  $310,000 
Unsecured, 8% annual rate for one month; if not paid by July 16, 2016, 4% per month thereafter; convertible at $0.08 per share.  29,791   - 
Total current portion $339,791  $310,000 

Securities Purchase Agreement – Coastal Investment

(1)On November 7, 2016, we entered into a securities purchase agreement with Coastal Investment Partners. Pursuant to the agreement, Coastal Investment provided us with cash proceeds of $125,000 on November 10, 2016. In exchange, we issued a secured convertible promissory note in the principal amount of $138,888.89 (the “$138,888.89 Note”), inclusive of an 8% original issue discount, which bears interest at 8% per annum to the holder. The $138,888.89 Note matures six months from issuance and is convertible at the option of the holder into our common shares at a price per share that is the lower of $0.12 or the closing price of our 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 of cash proceeds of $10,000 and another secured convertible note of $72,500 in consideration of cash proceeds of $10,000. Discount on the notes was $116,389 and is being amortized over life of the notes.

The fair market value of the potential derivative liability was $365,944, recorded as of December 31, 2016, and was calculated using the binomial method with a volatility rate of 171% and discount interest rate of 0.62%. Derivative liability applied as discount on the notes was $145,000 and is being amortized over the life of the notes.

Under the agreements, the Company has the right to redeem $62,500 and $40,000 of the notes in consideration of $1 each at any time prior to the maturity date in the event that the $138,888.89 Note is exchanged or converted into a revolving credit facility with Coastal Investment, whereupon the two $10,000 convertible note balances shall be rolled into such credit facility.

Note 10 – PAYABLE TO SHAREHOLDERDERIVATIVE LIABILITIES

 

On October 1, 2015,The Company records the fair value of the of the conversion price of the convertible debentures 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. During the year ended December 31, 2017, the Company convertedrecorded a loss on the debtchange in fair value of $149,766 payablederivative liability of $340,227 (2016 – $223,795). As at December 31, 2017, the Company recorded a derivative liability of $1,191,396 (2016 - $365,944).

The following inputs and assumptions were used to a shareholdervalue the derivative liabilities outstanding during the years ended December 31, 2017 and former director2016, assuming no dividend yield:

  2017  2016 
Expected volatility  96 - 533%  171%
Risk free interest rate  0.11 - 1.76%  0.62%
Expected life (in years)  0.1 – 1.0   0.5 

A summary of the Company that is unsecured and carries no interest. The debt was converted into sharesactivity of the Company’s common stock at a conversion price equal to the price at which the Company sells shares of common stock in its next equity financing.derivative liabilities is shown below:

$
Balance, December 31, 2015—  
Derivative loss due to new issuances142,149
Mark to market adjustment223,795
Balance, December 31, 2016365,944
Derivative loss due to new issuances920,999
Extinguishment upon conversion(435,774)
Mark to market adjustment340,227
Balance, December 31, 20171,191,396

 

Note 11 – MEZZANINE EQUITY

 

DSG TAG has 150,000,000 shares of undesignated preferred stock authorized, each having a par value of $0.001 as of December 31, 20162017 and 2015.2016. DSG TAG designated 5,000,000 shares as Series A Convertible Preferred Stock (“Series A Shares”) and issued 4,309,384 Series A Shares to a company controlled by a director of DSG TAG for conversion of its debt of $5,386,731 on October 24, 2014. The Series A Shares have no general voting rights and carry a 5% per annum interest rate. Series A Shares that are converted to common shares are entitled to the same voting rights as other common shareholders. At any time on or after the issuance date any holder ofThe Series A Shares may convertare subject to common stock based on predetermined conversion price ofa redemption obligation at $1.25 per share. share pursuant to the following terms:

On or before August 1, 2016, we must complete a financing for gross proceeds of at least $2.5 million and use at least $1.125 million to redeem a minimum of 900,000 Series A Shares;
On or before September 1, 2016, we must complete an additional financing for gross proceeds of at least $2.5 million and use at least $1.125 million to redeem a minimum of 900,000 additional Series A Shares; and
On or before October 1, 2016, we must complete an additional financing for gross proceeds of at least $5.0 million and use at least $3.14 million to redeem the remaining 2,509,384 Series A Shares.

The preferred shares are recorded in the consolidated financial statements as non-controlling interest.Mezzanine Equity.

62

DSG GLOBAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

(EXPRESSED IN U.S. DOLLARS)

Note 11 – MEZZANINE EQUITY (continued)

During the year ended December 31, 2015, 80,000 Series A Shares with a value of $100,000 have been purchased by an unrelated third-party and exchanged for 80,000 shares of common stock of the Company. The Series A Shares were not exchanged for securities of DSG Global, Inc. as part of the Share Exchange Agreement. The Series A Shares are subject to a redemption obligation pursuant to which the Company must redeem at a price of $1.25 per share, 900,000 Series A Shares ($1,250,000) by May 1, 2016, an additional 900,000 Series A Shares ($1,250,000) by June 1, 2016, and the remaining 2,509,384 Series A Shares ($3,136,730) by July 1, 2016.

As of December 31, 2017, the non-controlling interest was $1,334,805 (December 31, 2016 80,000 preferred shares were purchased by an unrelated third-party and exchanged for 80,000 shares of common stock of DSG Global, Inc.- $1,099,140).

Note 12 – STOCKHOLDERS’ DEFICITCOMMON STOCK

 

Common Stock

On December 23, 2016, the Company entered into an investor relations agreement with Chesapeake Group Inc., to assist the Company in all phases of investor relations including broker/dealer relations. The contract commenced on January 3, 2017 ended on July 2, 2017. In consideration for the agreement, the Company has 125,000,000is committed to issuing 1,800,000 shares of common stock authorized, each having a par value of $0.001, as of December 31, 2016 and 2015. According to the Share Exchange Agreement dated April 13, 2015, we agreed to acquire not less than 75% and up to 100%within ten days of the issued and outstanding commonagreement, plus an additional 450,000 shares of DSG TAG in exchange for the issuance to the subscribing shareholderscommon stock representing a monthly fee of up to 20,000,000$3,750. These shares of ourcommon stock are to be issued in monthly installments of 75,000 shares of common stock on the basis2nd of 1 common share of DSG Global, Inc. for 5.4935 common shares of DSG TAG. Theeach month beginning on February 2, 2017 and ending on July 2, 2017. On February 15, 2017, the Company also issued an additional 179,823 common shares to a director of DSG TAG to meet debt agreement obligations. There were 30,291,187 and 30,291,1872,250,000 shares of common stock at a purchase price of $0.051 per common stock satisfying the full terms of the agreement.

On April 3, 2017, the Company issued and outstanding as481,836 common shares with a fair value of December 31, 2016 and 2015, respectively. Each share$24,092 based on the closing price of the Company’s common stock pursuant to the conversion of a Cdn$24,092 convertible note balance at a conversion price of $0.05 per common share. The Company also agreed to issue 43,213 common shares with a fair value of $2,160 pursuant to the conversion of interest outstanding totaling Cdn$2,160 at a conversion price of $0.05 per common share.

On April 6, 2017, the Company issued 550,000 common shares with a fair value of $198,000 based on the closing price of the Company’s common stock as a commitment fee, pursuant to the terms of the convertible promissory note issued on April 3, 2017. These common shares are contingently redeemable, pursuant to the agreement that the shares must be returned if the note is entitledfully repaid and satisfied prior to one (1) vote.the maturity date. On October 6, 2017, the note matured unpaid, and the common shares were no longer returnable.

On April 7, 2017, the Company issued 500,000 common shares at $0.10 per common share for proceeds of $50,000.

On May 4, 2017, the Company issued 3,000,000 common shares with a fair value of $150,000 based on the closing price of the Company’s common stock at $0.05 per share for the conversion of a convertible note of $150,000.

On May 8, 2017, the Company issued 100,000 common shares with a fair value of $42,000 based on the closing price of the Company’s common stock for the conversion of convertible notes payable of $5,000 and derivative liabilities of $30,000. The Company recorded a loss on settlement of debt of $7,000 in connection with this debt settlement.

On May 25, 2017, the Company issued 210,000 common shares with a fair value of $71,400 based on the closing price of the Company’s common stock for the conversion of $10,500 of convertible notes payable and derivative liabilities of $63,000. The Company recorded a gain on settlement of debt of $2,100 in connection with this debt settlement.

On July 24, 2017, the Company issued 800,000 common shares with a fair value of $40,000 based on the closing price of the Company’s common stock for the conversion of $26,850 of convertible notes payable, a $750 financing fee, and derivative liabilities of $35,407. The Company recorded a gain on settlement of debt of $23,007 in connection with this debt settlement.

On July 28, 2017, the Company issued 500,000 common shares with a fair value of $21,500 based on the closing price of the Company’s common stock for the conversion of $4,474 of convertible notes payable, accrued interest of $4,586, and derivative liabilities of $6,296. The Company recorded a loss on settlement of debt of $6,144 in connection with this debt settlement.

63

DSG GLOBAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

(EXPRESSED IN U.S. DOLLARS)

 

Non-controlling InterestNote 12 – COMMON STOCK (continued)

 

DSG TAG has 150,000,000On September 7, 2017 the Company issued 750,000 common shares of undesignated preferred stock authorized, each havingwith a parfair value of $0.001 as$22,575 based on the closing price of December 31, 2015 and 2014. DSG TAG designated 5,000,000 shares as Series A Convertible Preferred Stock (“Series A Shares”) and issued 4,309,384 Series A Shares to a company controlled by a director of DSG TAGthe Company’s common stock for the conversion of its$12,549 of convertible notes payable, accrued interest of $951, and derivative liabilities of $8,436. The Company recorded a loss on settlement of debt of $5,386,731$639 in connection with this debt settlement.

On October 10, 2017, the Company issued 1,000,000 common shares with a fair value of $34,000 based on October 24, 2014. The Series A Shares were not exchanged for securities of DSG Global, Inc. as partthe closing price of the Share Exchange Agreement. NoncontrollingCompany’s common stock for the conversion of $705 of convertible notes payable, a $750 financing fee, penalty interest as of $3,200, and derivative liabilities of $2,166. The Company recorded a loss on settlement of debt of $27,179 in connection with this debt settlement.

On October 11, 2017, the Company issued 1,415,205 common shares with a fair value of $42,456 based on the closing price of the Company’s common stock for the conversion of $2,590 of convertible notes payable, accrued interest of $5,880, and derivative liabilities of $13,803. The Company recorded a loss on settlement of debt of $20,183 in connection with this debt settlement.

On October 11, 2017, the Company issued 750,000 common shares with a fair value of $25,500 based on the closing price of the Company’s common stock for the conversion of $3,342 of convertible notes payable, accrued interest of $648, and derivative liabilities of $18,029. The Company recorded a loss on settlement of debt of $3,481 in connection with this debt settlement.

On October 18, 2017, the Company issued 2,123,434 common shares with a fair value of $8,494 based on the closing price of the Company’s common stock for the conversion of $5,430 of convertible notes payable, accrued interest of $494, and derivative liabilities of $584. The Company recorded a loss on settlement of debt of $1,986 in connection with this debt settlement.

On October 19, 2017, the Company issued 4,400,000 common shares with a fair value of $43,200 based on the closing price of the Company’s common stock for the conversion of $4,814 of convertible notes payable, a $1,500 financing fee, and derivative liabilities of $35,560. The Company recorded a loss on settlement of debt of $1,326 in connection with this debt settlement.

On October 19, 2017, the Company issued 2,229,450 common shares with a fair value of $26,753 based on the closing price of the Company’s common stock for the conversion of $3,879 of convertible notes payable, accrued interest of $134, and derivative liabilities of $24,782. The Company recorded a gain on settlement of debt of $2,042 in connection with this debt settlement.

On October 20, 2017, the Company issued 2,229,400 common shares with a fair value of $11,147 based on the closing price of the Company’s common stock for the conversion of $3,369 of convertible notes payable, accrued interest of $198, and derivative liabilities of $7,791. The Company recorded a gain on settlement of debt of $211 in connection with this debt settlement.

On October 23, 2017, the Company issued 2,440,467 common shares with a fair value of $19,524 based on the closing price of the Company’s common stock for the conversion of $4,134 of convertible notes payable, accrued interest of $258, and derivative liabilities of $17,457. The Company recorded a gain on settlement of debt of $2,325 in connection with this debt settlement.

On October 25, 2017, the Company issued 2,700,000 common shares with a fair value of $16,200 based on the closing price of the Company’s common stock for the conversion of $3,030 of convertible notes payable, a $750 financing fee, and derivative liabilities of $11,471. The Company recorded a loss on settlement of debt of $949 in connection with this debt settlement.

On October 26, 2017, the Company issued 1,791,445 common shares with a fair value of $12,540 based on the closing price of the Company’s common stock for the conversion of $3,107 of convertible notes payable, accrued interest of $118, and derivative liabilities of $11,564. The Company recorded a gain on settlement of debt of $2,249 in connection with this debt settlement.

DSG GLOBAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

(EXPRESSED IN U.S. DOLLARS)

Note 12 – COMMON STOCK (continued)

On October 27, 2017, the Company issued 3,000,000 common shares with a fair value of $21,000 based on the closing price of the Company’s common stock for the conversion of $3,450 of convertible notes payable, a $750 financing fee, and derivative liabilities of $15,279. The Company recorded a loss on settlement of debt of $1,521 in connection with this debt settlement.

On October 27, 2017, the Company issued 3,017,400 common shares with a fair value of $21,122 based on the closing price of the Company’s common stock for the conversion of $4,592 of convertible notes payable, accrued interest of $236, and derivative liabilities of $19,228. The Company recorded a gain on settlement of debt of $2,934 in connection with this debt settlement.

On October 31, 2017, the Company issued 2,500,728 common shares with a fair value of $17,505 based on the closing price of the Company’s common stock for the conversion of $4,262 of convertible notes payable, accrued interest of $239, and derivative liabilities of $13,497. The Company recorded a gain on settlement of debt of $493 in connection with this debt settlement.

On October 31, 2017, the Company issued 3,000,000 common shares with a fair value of $21,000 based on the closing price of the Company’s common stock for the conversion of $3,450 of convertible notes payable, a $750 financing fee, and derivative liabilities of $15,279. The Company recorded a loss on settlement of debt of $1,521 in connection with this debt settlement.

On November 2, 2017, the Company issued 1,499,272 common shares with a fair value of $8,996 based on the closing price of the Company’s common stock for the conversion of $2,528 of convertible notes payable, accrued interest of $171, and derivative liabilities of $8,005. The Company recorded a gain on settlement of debt of $1,708 in connection with this debt settlement.

On November 7, 2017, the Company issued 3,667,000 common shares with a fair value of $18,335 based on the closing price of the Company’s common stock for the conversion of $5,530 of convertible notes payable, accrued interest of $337, and derivative liabilities of $26,611. The Company recorded a gain on settlement of debt of $14,143 in connection with this debt settlement.

On November 13, 2017, the Company issued 3,017,333 common shares with a fair value of $18,104 based on the closing price of the Company’s common stock for the conversion of $4,823 of convertible notes payable, accrued interest of $608, and derivative liabilities of $15,273. The Company recorded a gain on settlement of debt of $2,600 in connection with this debt settlement.

On November 22, 2017, the Company issued 4,000,565 common shares with a fair value of $12,002 based on the closing price of the Company’s common stock for the conversion of $4,292 of convertible notes payable, accrued interest of $469, and derivative liabilities of $16,950. The Company recorded a gain on settlement of debt of $9,709 in connection with this debt settlement.

On December 27, 2017, the Company issued 4,200,200 common shares with a fair value of $12,600 based on the closing price of the Company’s common stock for the conversion of $1,656 of convertible notes payable, accrued interest of $1,725, and derivative liabilities of $5,761. The Company recorded a loss on settlement of debt of $3,458 in connection with this debt settlement.

On December 27, 2017, the Company issued 4,200,000 common shares with a fair value of $13,420 based on the closing price of the Company’s common stock for the conversion of $1,182 of convertible notes payable, a $750 financing fee, and derivative liabilities of $3,310. The Company recorded a loss on settlement of debt of $7,358 in connection with this debt settlement.

On December 29, 2017, the Company issued 4,600,000 common shares with a fair value of $9,200 based on the closing price of the Company’s common stock for the conversion of $1,132 of convertible notes payable, a $750 financing fee, and derivative liabilities of $2,038. The Company recorded a loss on settlement of debt of $5,280 in connection with this debt settlement.

DSG GLOBAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

(EXPRESSED IN U.S. DOLLARS)

Note 12 – COMMON STOCK (continued)

On December 29, 2017, the Company issued 4,619,360 common shares with a fair value of $10,462 based on the closing price of the Company’s common stock for the conversion of $3,347 of convertible notes payable, accrued interest of $48, and 2015 was $1,099,140 or 16.18% and $660,771 or 16.18%, respectively.derivative liabilities of $8,197. The Company recorded a gain on settlement of debt of $2,354 in connection with this debt settlement.

 

Note 13 – STOCK OPTIONS ANDSHARE PURCHASE WARRANTS

 

Stock Compensation to employees and officersThe following table summarizes the continuity schedule of the Company’s share purchase warrants:

 

On March 1, 2013, the Company extended warrants issued in 2008 to five employees and officers that were to expire on March 31, 2013 to December 31, 2016. The Company issued warrants to these individuals to purchase an aggregate of 7,006,098 shares of common stock. The warrants had an exercise price of $0.23 per share. The fair value of the warrants at the time they were extended was estimated at $769,760 using a Black-Scholes model with the following assumptions: expected volatility of 17%, risk free interest of 0.38%, expected life of 3 years and no dividends. The fair value of the warrants were recorded as equity and compensation expense. On January 18, 2015, DSG TAG cancelled 5,913,898 of the warrants. The remaining 1,092,200 warrants expired as of December 31, 2016.

Stock Warrant for Convertible Loan

In connection with the extension of a convertible loan for $2,614,268, DSG TAG issued warrants to the convertible loan holder to purchase an aggregate of 546,100 shares of common stock of DSG TAG. The warrants had an exercise price of $0.23 per share and an expiration date of December 31, 2016. The fair value of the warrants was estimated at $112,596 using a Black-Scholes model with the following assumptions: expected volatility of 15%, risk free interest of 0.68%, expected life of 3 years and no dividends. The fair value of the warrants was recorded as equity and a debt discount and was amortized to interest expense over the term of the loan. The final debt discount balance as of December 31, 2013 was $96,724. The convertible loan was converted into equity in September 2014 at which time the remaining unamortized debt discount of $69,233 was expensed. On January 18, 2015, the warrants were cancelled.

  Number of warrants  Weighted average exercise price 
       
Balance, December 31, 2015  1,092,200  $0.23 
Expired  (1,092,200)  0.23 
Balance, December 31, 2016 and 2017  -    $-   

Note 14 – RELATED PARTY TRANSACTIONS

 

On MarchAs at December 31, 2015,2017, the Company entered into an agreement with a marketing firm that is owned by oneowed $1,034 (Cdn$1,297) (2016 - $nil) from the President, CEO, and CFO of the directorsCompany. As at December 31, 2017, the Company owes $205,963 (Cdn$258,381) (2016 - $254,010 (Cdn$341,034)) to the President, CEO, and CFO of the Company for management fees, which has been recorded in accounts payable and accrued liabilities. The amounts owed and owing are unsecured, non-interest bearing, and due on demand.

As at December 31, 2017, the Company owes $nil (2016 - $1,526) to a director of the Company. The terms included cash payment of $17,500amount owing is unsecured, non-interest bearing and a note in the amount of $310,000, with 5% interest per annum, convertibledue on demand.

As at the election of the holder into 248,000 shares of Common Stock of DSG Global, Inc. at a price of $1.25 per share, maturing on March 30, 2016. As of December 31, 2016, it was estimated that approximately 90% of2017, the marketing services relatedCompany owes $52,838 (2016 - $nil) to the agreement have been provided and we have therefore expensed $280,000 and the remaining $30,000 is recorded as a prepaid deposit. AsSenior Vice President of March 31, 2016, the DirectorGlobal Sales of the Company, which has filedbeen recorded in accounts payable and accrued liabilities. The amount owing is unsecured, non-interest bearing, and due on demand.

As at December 31, 2017, the Company owes $4,273 (Cdn$27,950) (2016 - $nil) to a lawsuit for paymentCompany controlled by the son of the convertible notePresident, CEO, and the Company has countersued for failure to provide services as obligated as per the agreement. (See Note 17).

A shareholder and former directorCFO of the Company, is owed $149,766. On May 6, 2015 upon the closing of the Share Exchange Agreement, the director resigned. On October 1, 2015, the parties agreed to convert this debt into shares of the Company’s common stock at a conversion price equal to the price at which the Company sells shares of common stockhas been recorded in its next equity financing.accounts payable and accrued liabilities. The $149,766 was converted to 85,580 shares at $1.75 USD per share on October 1, 2015.

On June 16, 2016, a convertible loan was received from a related party in the amount of $29,791. Interestowing is 8% annual rate for one month and 4% monthly rate thereafter if not paid by July 16, 2016. The note is convertible at $0.08 per share. (See Note 9).

Amount due to and from related party at December 31, 2016 and 2015 was $(1,526) and $91,727, respectively. The amounts consist of advances to a director and officer of the Company. These amounts are unsecured, non-interest bearing, and due on demand.

 

Note 15 – INCOME TAXSUPPLEMENTAL INFORMATION

  2017  2016 
Cash paid during the period for:        
Income tax payments $-  $- 
Interest payments $29,952  $5,386 
         
Supplemental schedule of non-cash financing activities:        
Shares issued for convertible notes payable  771,035   - 
Shares issued for convertible notes payable, related party  26,252   - 
Shares issued for commitment fee  198,000   - 

66

DSG GLOBAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

(EXPRESSED IN U.S. DOLLARS)

 

For the years ended December 31, 2016 and 2015, there is $nil and $nil current and deferred income tax expense, respectively, reflected in the Statement of Operations.Note 16 – INCOME TAX

 

The following are the components of income before income tax reflected in the Statementconsolidated statement of Operationsoperations for the years ended December 31, 20162017 and 2015:2016:

 

Component of Loss Before Income Taxloss before income tax and Noncontrolling Interestnon-controlling interest:

 

  December 31, 2016  December 31, 2015 
Loss before income tax and noncontrolling interest $(2,768,659) $(2,497,146)
Income Tax $-  $- 
Effective tax rate  0%  0%
  December 31, 2017  December 31, 2016 
Loss before income tax and non-controlling interest $(3,632,072) $(2,768,659)
Income tax $-  $- 
Effective tax rate  0%  0%


Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating the ability to recover the deferred tax assets within the jurisdiction from which they arise, the Company considered all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In projecting future taxable income, the Company began with historical results adjusted for changes in accounting policies and incorporates assumptions including the amount of future pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimate the Company are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, the Company consider three years of cumulative operating income (loss).

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the “Act”), which reduced the corporate tax rate for businesses from a maximum of 35% to a flat 21% rate. The rate reduction is effective on January 1, 2018. As a result of the rate reduction, the Company has reduced the deferred tax asset balance as of December 31, 2017 by $4,257,379. Due to the Company’s full valuation allowance position, there was no net impact on the Company’s income tax provision at December 31, 2017 as the reduction in the deferred tax asset balance was fully offset by a corresponding decrease in the valuation allowance.

As of December 31, 2016,2017, the Company had net operating losses or NOLs, of approximately $27 million$30,409,853 (2016 - $26,777,781) to offset future taxable income in Canada and the United Kingdom. The deferred tax assets at December 31, 20162017 were fully reserved. Management believes it is more likely than not that these assets will not be realized in the near future.

 

Note 1617 – GEOGRAPHIC SEGMENT INFORMATION

 

As a resultFor the year ended December 31, 2017, the Company only operated in Canada and all of the reverse merger on May 6, 2015,Company’s operations and non-current assets are based in Canada. For the year ended December 31, 2016, the Company operatesoperated in three regions: Canada, United Kingdom, and the United States of America. Geographic segment information for the year ended December 31, 2016 is as follows:

For the Year Ended December 31, 2016 Canada  United  Kingdom  United States  Elimination  Consolidated 
Revenue $922,654  $258,054   -  $(10,772) $1,169,936 
Cost of Revenue  397,095   127,315   -   (10,772)  513,638 
Total Expenses  2,004,848   322,356   14,831   -   2,342,035 
Other Expenses  (989,743)  (33,843)  (1,137)  -   (1,024,723)
Non-controlling Interest  462,410   -   -   -   462,410 
Net Loss  (2,064,821)  (225,461)  (15,967)  -   (2,306,249)
Assets  222,634   16,444   51,693   -  290,771 
Liabilities  5,456,349   339,374   11,738   -  5,807,461 

All inter-company transactions are eliminated in consolidation. Prior to the merger, the Company operated in two regions.

 

For the years ended December 31, 2016 and 2015, geographic segment information is as follows:

For the Year Ended December 31, 2016 Canada  United
Kingdom
  United States  Elimination  Consolidated 
                
Revenue $922,654  $258,054   -    $(10,772) $1,169,936 
Cost of Revenue  397,095   127,315   -     (10,772)  513,638 
Total Expenses  2,004,848   322,356   14,830       2,342,035 
Other Income (Expenses)  (989,743)  (33,843)  (1,137)      (1,024,723)
Noncontrolling Interest  462,410   -     -         462,410 
Net (Loss) Income  (2,064,821)  (225,461)  (15,967)      (2,306,249)
Assets  222,634   16,444   51,693   (200,139)  290,771 
Liabilities  5,456,349   339,374   11,738   (200,139)  5,807,461 

For the Year Ended December 31, 2015 Canada  United Kingdom  United States  Elimination  Consolidated 
                
Revenue $1,686,990  $481,555   -  $(256,610) $1,911,935 
Cost of Revenue  1,085,877   310,798   -   (256,610)  1,140,065 
Total Expenses  2,332,014   282,339   (3,991)     2,610,362 
Other Income (Expenses)  (653,613)  (7,170)  2,129      (658,654)
Noncontrolling Interest  404,962            404,962 
Net (Loss) Income  (1,979,552)  (118,752)  6,120      (2,092,184)
Assets  797,904   81,641   70,776   (163,005)  787,316 
Liabilities  3,578,182   227,547   14,855   (163,005)  3,657,579 

67

 

Note 17 – COMMITMENTSDSG GLOBAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND CONTINGENCIES2016

(EXPRESSED IN U.S. DOLLARS)

 

Lease Obligations

The Company leases offices in Canada under a renewable operating lease which originally expired on April 30, 2016, following which the term of the lease is month to month, with 30 days’ notice to terminate. If no agreement is signed, the Landlord reserves the right to terminate the Lease on March 31, 2016.

On April 7, 2016, the Company signed an additional two-month extension on the current lease with a term of May 1, 2016 to July 31, 2016. During the year ended December 31, 2016, the lease was extended and will expire on January 31, 2017.

On February 15, 2017, an additional six-month extension on the lease was signed with the term beginning on February 1, 2017 and ending on July 31, 2017.

The annual rent for the premises in Canada is approximately $66,000. For the years ended December 31, 2016 and 2015, the aggregate rental expense was CAD $92,825 and CAD $82,531, respectively. Rent expense included other amounts paid in Canada and the United Kingdom for warehouse storage and offices on a month-to-month or as-needed basis.

The Company signed an operating lease agreement through National Leasing for a photocopier. The lease terms are for 60 months commencing on May 22, 2015 and ending April 22, 2020 with a monthly lease payment of approximately $183.

The following table summarizes our future minimum payments under these arrangements as of December 31, 2016:

December 31:   
2017  2,200 
2018  2,200 
2019  2,200 
2020  917 
  $7,517 

Product Warranties

The Company’s product warranty costs are part of its cost of sales based on associated material product costs, labor costs for technical support staff, and associated overhead. The products sold are generally covered by a warranty for a period of one year. As of December 31, 2016, the Company has set up a reserve for future warranty costs of $111,715. The Company’s past experience with warranty related costs was used as a basis for the reserve. Prior to December 31, 2015 the Company expensed warranty costs as incurred. The warranty expense incurred was $202,393 and $325,820 (including set up of $111,715 reserve) for the years ended December 31, 2016 and 2015, respectively.

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 18 – LEGAL MATTERSCONTINGENCIES

 

(a)Product Warranties
The Company’s product warranty costs are part of its cost of sales based on associated material product costs, labor costs for technical support staff, and associated overhead. The products sold are generally covered by a warranty for a period of one year. As of December 31, 2017, the Company has set up a reserve for future warranty costs of $165,523 (2016 - $111,715). The Company’s past experience with warranty related costs was used as a basis for the reserve. During the year ended December 31, 2017, the Company recorded warranty expense of $90,284 (2016 - $202,393).
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.
(b)A director of the Company, representing his company, Adore Creative Agency Inc. (“Adore”), has filed a notice of default on March 31, 2016, in regard to the related party convertible note on the Company’s. The note was issued in lieu of marketing services and has a maturity date of March 31, 2016. The Company has countersued Adore for failure to provide services as obligated under the terms and agreement of the convertible note, and in addition for damages as a result.
(c)On September 7, 2016, Chetu Inc. has 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 dispute that DSG TAG did not think that vendor had delivered the service according to the agreement between the two parties.
(d)On May 24, 2017, the Company received a notice of default from Coastal Investment Partners LLC (“Coastal”), on three 8% convertible promissory notes issued to the Company in aggregate principal amount of $261,389. Coastal commenced a lawsuit against the Company 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, as well as ordering the Company to pay reasonable legal fees incurred by Coastal with respects to the lawsuit. This action is still pending.
(e)On February 9, 2017, the Company received a notice of default from Auctus Fund LLC (“Auctus”), on a 12% convertible promissory notes issued to the Company in the principal amount of $75,000. Auctus commenced a lawsuit against the Company on February 2, 2018 in the United States District Court, District of Massachusetts. Auctus alleges that the Company failed to honor a conversion notice under the terms of the Auctus notes, and thus giving rise to an event of default. Auctus seeks damages in excess of $306,681, which consists of the principal amount of the Auctus note, liquidated damages, and default interest, as well as ordering the Company to pay reasonable legal fees incurred by Auctus with respects to the lawsuit. This action is still pending.

On December 30, 2012, a corporation filed an action against the Company in the United States courts claiming patent infringement. On March 8, 2013, the parties agreed to a settlement, with the Company admitting no wrongdoing, in the amount of $125,000. The settlement is to be paid over an 18-month period in equal installments of $7,500 with annual interest at a rate of 8%. The Company has accrued all liabilities related to this matter in the financial statements.

68

 

On June 4, 2015, a shareholder of the Company’s subsidiary filed a lawsuit to recover a loan of CAD$100,000 which was made on October 16, 2012 and was due on July 16, 2013 with accrued interest. A response to the claim was submitted on June 29, 2015. On August 13, 2015, a settlement was reached between both parties to pay the loan amount remaining plus interest, for a total of $119,700. In addition, the shareholder’s outstanding shares of

DSG TAG were converted into 18,422 shares of common stock of DSG Global, Inc. on October 22, 2015. On February 16,GLOBAL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016 a new agreement was reached after a breach of the settlement agreement dated August 13, 2015. DSG TAG defaulted on the settlement agreement and both parties agreed to new terms. The balance owing on February 16, 2106 was CAD$86,780 payable ratably over 16 months. The shareholder’s loan and accrued interest is appropriately recorded in these financial statements.

(EXPRESSED IN U.S. DOLLARS)

A Director of the Company, representing their company Adore Creative Agency Inc. (Adore), has filed a notice of default on March 31, 2016, in regard to the related party convertible note on the financial statements of DSG TAG. The note was issued in lieu of marketing services and has a maturity date of March 31, 2016. DSG TAG has countersued Adore for failure to provide services as obligated under the terms and agreement of the convertible note, and in addition for damages as a result.

On September 7, 2016, Chetu Inc. has filed a Complaint for Damage in Florida to recover unpaid invoice amount of $27,335 plus interest of $4,939. The invoice was not paid due to a dispute that DSG TAG did not think that vendor had delivered the service according to the agreement between the two parties.

On October 17, 2016, the Supreme Court of British Columbia made an order in relating to the above discussed lawsuit from a shareholder to recover a loan of CAD$100,000. DSG TAG was ordered to repay the remaining loan plus costs in the amount of $77,589 to the shareholder in 14 monthly payments of $5,500 each plus $589 at the 15th month, starting February 15, 2017.

 

Note 19 – SUBSEQUENT EVENTS

 

Management has evaluated events subsequentOn January 18, 2018, the Company amended its Articles of Incorporation and increased its authorized share capital to the year ended December 31, 2016 through April 28, 2017 for transactions and other events that may require adjustment2,000,000,000 shares of and/or disclosure in such financial statements.common stock having a par value of $0.001 per share.

 

On December 21, 2016,January 18, 2018, the Company enteredissued to Labry’s Fund LP, a senior secured convertible promissory note of $55,000, which is unsecured, bears interest at 10% per annum, is due on July 18, 2018, and is convertible into common shares at a convertible note agreement forconversion price equal to the principal amountlessor of $74,500. The terms are payable atthe lowest trading price during the previous twenty-five trading days prior to: (i) the date of maturity, December 21,the promissory note; or (ii) the latest complete trading day prior to the conversion date.

On January 19, 2018, the Company issued to Eagle Equities, LLC, a partial replacement convertible redeemable note of $50,000 for a note originally issued on June 5, 2016 of $110,000.00. The convertible debenture is unsecured, bears interest at 10% per annum, is due on January 19, 2019, and is convertible into common shares at a conversion price equal to 55% of the lowest trading price during the previous fifteen trading days prior to the conversion date, including the conversion date.

On January 19, 2018, the Company issued to Eagle Equities, LLC, convertible redeemable note of $55,000, which is unsecured, bears interest at 10% per annum, is due on January 19, 2019, and is convertible into common shares at a conversion price equal to 55% of the lowest trading price during the previous fifteen trading days prior to the conversion date, including the conversion date.

On February 2, 2018 the Company issued to Labry’s Fund, LP a senior secured convertible promissory note of $107,500, which is unsecured, bears interest at 10% per annum, is due on August 2, 2018, and is convertible into common shares at a conversion price equal to the lessor of the lowest trading price during the previous twenty-five trading days prior to: (i) the date of the promissory note; or (ii) the latest complete trading day prior to the conversion date.

On February 5, 2018, the Company issued 20,742,000 common shares to GHS Investments LLC for proceeds of $34,847.

On March 2, 2018, the Company issued to Eagle Equities, LLC, convertible redeemable note of $128,000, which is unsecured, bears interest at 10% per annum, is due on March 2, 2019, and is convertible into common shares at a conversion price equal to 55% of the lowest trading price during the previous fifteen trading days prior to the conversion date, including the conversion date.

On March 2, 2018, the Company issued to Eagle Equities, LLC, a partial replacement convertible redeemable note of $25,000 for a note originally issued on June 5, 2017 together within the amount of $110,000.00. The convertible debenture is unsecured, bears interest at 10% per annum, is due on March 2, 2019, and is convertible into common shares at a conversion price equal to 55% of the lowest trading price during the previous fifteen trading days prior to the conversion date, including the conversion date.

On March 15, 2018, the Company issued 29,258,000 common shares to GHS Investments LLC for proceeds of $46,813.

On March 19, 2018, the Company issued to Labry’s Fund, LP a senior secured convertible inventory promissory note of up to $900,000. The convertible debenture is unsecured, bears interest at 12% per annum. Interest will be accruedannum, is due on August 2, 2018, and payable at the time of promissory note repayment. The Holder shall have the right to convert all or any part of the outstanding and unpaid principal amountis convertible after 180 days from issuance date into fully paid and non-assessablecommon shares of Common Stock at a conversion price equal to the lessor of (i) the closing salelowest trading price of the Common Stock on the Principal Market on the Trading Day immediately preceding the Closing Date, and (ii) 50% of the lowest sale price for the Common Stock on the Principal Market during the twenty five (25) consecutive Trading Days immediately preceding the Conversion Date. As of December 31, 2016, this convertible note was still outstanding to be received. In January 2017, the funds from this note were received by the Company and the liability recorded.

On January 3, 2017, the Company entered into an investor relations agreement with Chesapeake Group Inc., to assist the Company in all phases of investor relations including broker/dealer relations. The contract will commence on January 3, 2017 and end on July 2, 2017. In consideration for the agreement, the Company is committed to providing 1,800,000 restricted common shares within 10 days of the agreement, plus an additional 450,000 restricted common shares representing a monthly fee of $3,750. These restricted common shares are to be issued in monthly installments of 75,000 restricted common shares on the 2nd of each month beginning on February 2, 2017 and ending on July 2, 2017.

On January 18, 2017, the Company issued a convertible promissory note in the principal amount of $75,000. The terms are payable at the date of maturity, October 18, 2017, together with interest of 12% per annum. Interest will be accrued and payable at the time of promissory note repayment. The Holder shall have the right to convert all or any part of the outstanding and unpaid principal amount into fully paid and non-assessable shares of Common Stock at a conversion price equal to the lessor of (i) 60% multiplied by the lowest Trading Price (representing a discount rate of 40%) during the previous twenty five (25) Trading Day period ending on the latest complete Trading Dayfifteen trading days prior to the date of this Note andthe promissory note; or (ii) the Variable Conversion Price which means 50% multiplied by55% of the lowest Trading Price (representing a discount rate of 50%)trading price during the previous twenty five (25) Trading Day period ending onfifteen days prior to the latest complete Trading Daytrading day prior to the Conversion Date.conversion date. The Company received $270,000 pursuant to the first tranche of the agreement.

 

On March 15, 2017,Subsequent to the Company entered into a Securities Purchase Agreement, pursuant to which the Company agreed to issue 500,000 common shares of the Company at a price of $0.10 per share for aggregate consideration of $50,000.

On April 3,year ended December 31, 2017, the Company issued a814,516,738 common shares for the conversion of $441,652 of convertible promissory note in the principal amount of $110,000. The terms arenotes payable, at the date of maturity, October 3, 2017, together withaccrued interest, of 10% per annum. Interest will be accrued and payable at the time of promissory note repayment. In connection with the issuance of this convertible promissory note, the Borrower shall issue 550,000 shares of common stock as a commitment fee provided, however, these shares must be returned if the Note is fully repaid and satisfied prior to the date which is 180 days following the issuance. The Holder shall have the right to convert all or any part of the outstanding and unpaid principal amount into fully paid and non-assessable shares of Common Stock at a conversion price equal to the lessor of (i) 55% multiplied by the lowest Trading Price (representing a discount rate of 45%) during the previous twenty five (25) Trading Day period ending on the latest complete Trading Day prior to the date of this Note and (ii) the Alternate Conversion Price which means 55% multiplied by the lowest Trading Price (representing a discount rate of 50%) during the previous twenty five (25) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.penalties.

On February 15, 2017, DSG TAG has signed an additional six-month extension on the current lease at 214-5455 152nd Avenue, Surrey, BC V3S 5A5. The term will begin on February 1, 2017 and end on July 31, 2017.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A.CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

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

 

Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Exchange Act), as of December 31, 2015, the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our CEO and CFO have concluded that as of December 31, 2015, 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(as defined in RulesRule 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,Act). Management has assessed the effectiveness of theour internal control over financial reporting as of December 31, 2015. In making this assessment, our management used the2017 based on criteria set forthestablished in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) inInternal Control — Integrated Framework (2013 Framework). Based onTredway Commission. As a result of this evaluation, ourassessment, management has concluded that, as of December 31, 2017, our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective asrisk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending December 31, 2016.2018: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; (ii) adopt sufficient written policies and procedures for accounting and financial reporting; and (iii) appoint additional independent directors that can serve as members of an audit committee. The remediation efforts will be largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

 

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, 20162017 that materially affected, or is reasonable likely to materially affect, our internal control over financial reporting.

 

Limitations on Effectiveness of Controls and Procedures

 

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

ITEM 9B.OTHER INFORMATION

 

None.

 

69

PART III

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 7071 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 6566 Director June 16, 2015
       
James Singerling 72DirectorJune 16, 2015
Kenneth (Kim) Marsh6373 Director June 16, 2015
       
Jason Sugarman 4546 Director June 16, 2015
       
Rupert Wainwright 5556 Director June 16, 2015

 

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 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 also served as vice president and general manager of the Coral Ridge Country Club in Ft. Lauderdale, FL.

Mr. Singerling has been recognized as Industry Leader of the Year by the University of Nevada, Las Vegas, and Michigan State University, in addition to receiving awards from Florida State University, Pennsylvania State University, Oklahoma State University and Sun Yat Sen University – China. He also was elected to the Association Committee of 100 by the U.S. Chamber of Commerce, widely recognized as the most prestigious organization of chief executives in the United States.

Kenneth (Kim) Marsh,Director

Kenneth (Kim) Marsh, CAMS, CFE, has a distinguished record of achievement in the areas of international financial crime and anti-money laundering. As Executive Vice President, International Operations, Kim brings 40 years of investigative experience to IPSA’s corporate, legal, financial, and government clients throughout Europe, the Middle East, Africa, South America and Asia.

Based in IPSA’s Vancouver office, Kim specializes in multi-jurisdictional financial and due diligence investigations, as well as anti-money laundering assignments targeting offshore and onshore tax havens. Prior to joining IPSA, Kim completed 25 years with the Royal Canadian Mounted Police, retiring as Commander of the International Organized Crime Investigation Unit, where he was responsible for large-scale, covert operations in Europe, Asia and North America. While with the RCMP, Kim was posted to the Canadian High Commission, London, UK between 1992-97, which had geographical coverage including the United Kingdom, Ireland, Nordic countries and the Former Soviet Union. During these years he worked closely with Canadian Immigration and Citizenship vetting applicants wishing to enter Canada.

Kim has been with IPSA International since 2002 and is the lead person for the due diligence services. During his tenure with the company he has built the due diligence team in Vancouver and recently completed a secondment to the UK where he orchestrated the opening of offices in London, Dubai and Hong Kong.

Kim has lectured internationally to public and private entities on covert investigative practices and global due diligence. He is a certified member of the Association of Certified Fraud Examiner (CFE), and a former Board of Directors of the UK and Vancouver Chapters of the Association of Certified Fraud Examiners (ACFE). He is also a member of the Association of Certified Anti Money Laundering Specialists (ACAMS) and currently holds a board position on the Vancouver Chapter.

 

Jason Sugarman,Director

 

With over 20 years’ experience, Jason Sugarman has over 20 yearsis a leader in the finance business with focus on asset backindustry in the areas of asset-based lending, and private equity, and debt investments. As the founderHe has been a principal investor and financier of twoall asset management firmsclasses and the lead outside investor in numerous financial service companies andhas led real estate, projects, he has funded over $1 billion in direct loanfinancial services, and equity placementsinfrastructure investments both domestically and is the Sr. VP of Valor Group LTD.

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

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

 

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

Mr. Sugarman is on the boardboards of a number of charities with a focus on elementary education, health care researchprivate and Jewish causes. He is a Graduate of Stanford University where he was a Scholar Athletepublic companies and member of the baseball team.has invested in several professional sports teams including Los Angeles Football Club and Oklahoma City Dodgers. He is married to Elizabeth Guber Sugarman’with three boys and has three children. He is an active golf and tennis player and is a partnerlives in Marucci Sports, the Oklahoma City Dodgers (AAA affiliate of the Los Angeles, Dodgers), and the LA Football Club (MLS franchise).California.

Rupert Wainwright,Director

 

Since 2005 Rupert Wainwright has served as president and chief creative of Adore Creative, an integrated advertising and creative services agency with offices in London, Paris, Moscow, Sao Paolo, and Los Angeles. There he leads a talented staff and top tier production professionals to create has countless commercial TV awards working with global clients. Adore Creative has built a unparalleled record of winning campaigns for the Olympics, the FIFA World Cup, Reebok, AT&T, Fox Sports One TV, and many, many other clients. They are dedicated to producing innovative and successful creative work winning awards in the U.S. and all over the world including two Grand Effies, a Grammy, MTV Awards and several Cannes Dolphins. They are currently working on the Winter Olympics 2022 campaign.

 

As a director, Mr. Wainwright has shot all over the world and won awards for such US and International Fortune 500 clients as ATT, Sprint, Honda, Sprite, Walmart, Reebok, Footlocker, Gatorade, McDonalds, Converse, GHI, Hong Kong and Shanghai Bank, Deutsche Telekom, Barilla, BP Disney, Fritos, and his campaign for Reebok won Ad week’s highest Award, the Grand Effie, for the most effective advertising campaign of 1992. Mr. Wainwright is also the director of the feature films “The Fog” (2005), which was #1 at the US Box Office opening weekend, and “Stigmata” (1999) produced by MGM, among others. From 1990 to 1998 he was the founder and CEO of the independent production company, Fragile Films.

 

Mr. Wainwrights holds an MA in English Literature from the University of Oxford and an MFA in Film Directing from the University of California, Los Angeles where he was a Fullbright Scholar.

 

Keith Westergaard,former Director

Keith Westergaard has over 40 years’ experience in real estate finance and development. He is the founder and president of Westergaard Holdings Ltd., a diversified mortgage brokerage, real estate investment, and development company with offices in Alberta and British Columbia, Canada. Westergaard Holdings Ltd. has operated continuously since 1980. Its significant projects have included the Gleniffer Lake Resort & Country Club in Central Alberta, a 217-acre bare land condominium recreational & residential land development which included 750 lots, golf course, leisure facilities and marina.

Mr. Keith Westergaard resigned as a Director as of September 30, 2016. His resignation letter was included in the 10Q filing with the SEC filed on December 16, 2016.

Significant Employees

 

Other than Bob Silzer, we have no full-time employees whose services are materially significant to our business and operations who are employed at will by DSG Global, Inc.

 

Family Relationships

 

There are no family relationships among any of our directors or officers.

73

 

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, 2016,2017, all filing requirements applicable to our officers, directors and greater than 10% percent beneficial owners were complied with.

 

Corporate Governance Guidelines, Code of Ethics, and Business Conduct

 

The Board has adopted Corporate Governance Guidelines (the “Guidelines”) to assist it in the exercise of its responsibilities. These Guidelines reflect the Board’s commitment to monitor the effectiveness of policy and decision making both at the Board and at the management level, with a view to enhancing stockholder value over the long term.

 

We have adopted a written code of ethics and business conduct to provide guidance to all Company’s directors, officers and employees, for each employee, including our including the Company’s principal executive officer, principal accounting officer or controller or persons performing similar functions. The code of ethics is posted on our website at www.dsgtag.com. If we make certain amendments to or waivers of our code of ethics, we intend to satisfy the SEC disclosure requirements by promptly posting the amendment or waiver on our website.

74

 

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 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 director does not believe that it is necessary to have such committees because believes the functions of such committees can be adequately performed by the sole member of our board of directors.

ITEM 11. EXECUTIVE COMPENSATION

ITEM 11.EXECUTIVE COMPENSATION

 

Summary Compensation Table — Fiscal Years of DSG Global Inc. Years Ended December 31, 20162017 & 20152016

 

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, 20162017 and 2015;2016; 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, 20162017 and 2015,2016,

 

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

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,,Director, President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer 2017
2016
2015
 200,000
136,404
 Nil200,000
Nil200,000
 Nil
Nil
 Nil
Nil
 Nil
Nil
 Nil
Nil
 Nil
11,788Nil
 200,000Nil
148,192
Andrea Fehsenfeld,
Former sole officer and DirectorNil
 2016200,000
2015200,000
 Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil

 

As of December 31, 2016,2017, we had no employment agreements with any of our executive officers or employees.

 

Summary of Employment Agreements and Material Terms

 

We have not entered into any employment or consulting agreements with any of our current officers, directors, or employees.

 

Outstanding Equity Awards at Fiscal Year Ended December 31, 20162017 and 20152016 of DSG Global, Inc.

 

For the years ended December 31, 20162017 and 2015,2016, no director or executive officer of DSG Global, Inc. has received compensation from us pursuant to any compensatory or benefit plan. There is no plan or understanding, express or implied, to pay any compensation to any director or executive officer pursuant to any compensatory or benefit plan, although we anticipate that we will compensate our officers and directors for services to us with stock or options to purchase stock, in lieu of cash.

 

 76 
 

 

Compensation of Directors

 

The particulars of the compensation paid to each of our director during our fiscal years ended December 31, 20162017 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

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,Director2017
2016
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
James Singerling,Director2017
2016
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Kim Marsh,Former Director(1) 2017
2016
2015
 Nil
Nil
 Nil
Nil
 Nil
Nil
 Nil
Nil
 Nil
Nil
 Nil
Nil
 Nil
Nil
 Nil
Nil
James Singerling,Jason Sugarman,Director2017
2016
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Rupert Wainwright,Director2017
2016
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Keith Westergaard,Director(1) 2016
2015
Nil2017
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Kim Marsh,Director(1)2016 2016
2015
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Jason Sugarman,Director(1) 2016Nil
2015
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Rupert Wainwright,Director(1) 2016Nil
2015
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil

Nil

297,500(2)

Nil
297,500
Keith Westergaard,Director(3) 2016Nil
2015Nil
 Nil
Nil
 Nil
Nil
 Nil
Nil
 Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil

 

 (1)Appointed as a Director on June 16, 2015
(2)Consists of $17,500 in cash paid and $280,000 of the convertible note payable that was expensed on the financial statements for marketing and advertising services provided by Adore Creative, a company owned by Mr. Wainwright.
(3)Resigned as of September 30, 2016

 

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, 20162017 (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  8,070,285   26.64%
Keith Westergaard
214 - 5455 152nd Street
Surrey, British Columbia, Canada
V3S 5A5
 Former Director Common Stock  3,248,662(3)  10.72%
Jason Sugarman
214 - 5455 152nd Street
Surrey, British Columbia, Canada
V3S 5A5
 Director Common Stock  (4)  (4)
Rupert Wainwright
214 - 5455 152nd Street
Surrey, British Columbia, Canada
V3S 5A5
 Director Common Stock  (4)  (4)
Stephen Johnston
214 - 5455 152nd Street
Surrey, British Columbia, Canada
V3S 5A5
 Director Common Stock  (4)  (4)
James Singerling
214 - 5455 152nd Street Surrey, British Columbia, Canada
V3S 5A5
 Director Common Stock  (4)  (4)
Kim March
214 - 5455 152nd Street Surrey, British Columbia, Canada
V3S 5A5
 Director Common Stock  (4)  (4)
All officers and directors as a group   Common stock, $0.001 par value  11,318,947   37.38%
5%+ Security Holders
n/a n/a Common Stock  n/a   n/a 
All 5%+ Security Holders   Common stock, $0.001 par value  n/a   n/a 

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  8,070,285   7.92%
Keith Westergaard
214 - 5455 152nd Street
Surrey, British Columbia, Canada
V3S 5A5
 Former Director Common Stock    3,248,662(3)  3.19%
Jason Sugarman
214 - 5455 152nd Street
Surrey, British Columbia, Canada
V3S 5A5
 Director Common Stock  (4)  (4)
Rupert Wainwright
214 - 5455 152nd Street
Surrey, British Columbia, Canada
V3S 5A5
 Director Common Stock  (4)  (4)
Stephen Johnston
214 - 5455 152nd Street
Surrey, British Columbia, Canada
V3S 5A5
 Director Common Stock  (4)  (4)
James Singerling
214 - 5455 152nd Street
Surrey, British Columbia, Canada
V3S 5A5
 Director Common Stock  (4)  (4)
Kim March
214 - 5455 152nd Street
Surrey, British Columbia, Canada
V3S 5A5
 

Former

Director
 Common Stock  (4)  (4)
All officers and directors as a group   Common stock, $0.001 par value  11,318,947   11.11
5%+ Security Holders 
Labrys Fund LP n/a Common Stock  30,387,459   29.83%
EMA Financial n/a Common Stock  23,700,000   23.26%
Auctus Private Equity n/a Common Stock  10,913,800   10.71%
All 5%+ Security Holders   Common stock, $0.001 par value  65,001,259   63.80%

 

(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 30,291,187101,877,495 shares of our company’s common stock issued and outstanding as of the date of this report there were.were 966,394,233 common stock issued and outstanding.
  
(3)The 3,248,632 common shares are held by Westergaard Holdings Ltd. Keith Westergaard has voting and dispositive control over securities held by Westergaard Holdings Ltd.
  
(4)Less than 1%.

 

78

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

 

Transactions with Related Persons of DSG Global Inc.

 

Except as disclosed herein, no director, executive officer, shareholder holding at least 5% of shares of our common stock, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction since the year ended December 31, 2016,2017, 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, 2016,2017, we had advanced an aggregate amount of $(1,526)$1,034 to our Director and sole officer, Robert Silzer. The amounts are repayable on demand.

 

On September 26, 2014 DSG TAG entered into a Subscription and Debt Settlement Agreement (as amended on October 7, 2014) whereby Westergaard Holdings Ltd., a corporation owned and controlled by our currenta former director, Keith Westergaard, purchased: (i) 4,229,384 Series A Preferred Shares of DSG TAG at a deemed price of $1.25 per share in consideration for the settlement of $5,386,730.50 in debt payable to Westergaard Holdings; and (ii) 2,001,735 common shares of DSG TAG at a deemed price of 0.25 per share in consideration of $2,502,168.23 in interest and expenses accrued in respect of the debt. Until such time as all Series A Shares have been redeemed by DSG TAG Westergaard Holdings may convert any or all of its remaining Series A Shares and accrued interest into common shares of DSG Global at $1.25 per share.

 

Pursuant to the Agreement, DSG Tag agreed to complete a going public transaction by share exchange within 60 days of the Agreement, and a private placement financing of not less than $5,000,000 in gross proceeds within 60 days of going public., the Company and/or Pubco shall have completed a financing for gross proceeds of at least $5,000.000. DSG Tag agreed to pay $2,500,000 of the financing proceeds to Westergaard Holdings to redeem 2,000,000 of the Series A Preferred Shares at the deemed redemption price of $1.25 per share. DSG TAG further agreed to raise additional gross proceeds of $5,000,000 and to redeem an additional 2,000,000 Series A Preferred Shares from Westergaard Holdings (at a redemption price of $1.25 per share or $2,500,000 in the aggregate). within 150 days following the going public transaction. Subsequent to the Agreement, DSG TAG completed its going public transaction on May 6, 2015 but did not raise sufficient capital to redeem the Series A Preferred Shares. The Subscription and Debt Settlement Agreement was subsequently amended by letter of agreement dated December 31, 2015, as described below.

 

On March 5, 2016, by letter agreement dated December 31, 2015 with Westergaard Holdings Ltd., a corporation owned by our Director Keith Westergaard,a former director, we amended the Subscription and Debt Settlement Agreement dated September 26, 2014 between DSG Tag Systems, Inc. and Westergaard Holdings, as previously amended on October 4, 2015. Westergaard Holdings owns 4,229,384 shares Series A Convertible Preferred Stock of DSG TAG. Pursuant to the settlement agreement, the parties have agreed that DSG Global will complete financings for gross proceeds of at least $10 million and use a portion of the proceeds to redeem all of the Series A Convertible Preferred Shares. The letter agreement modifies the redemption provisions of the original agreement, which now obligate us to raise capital and redeem the Series A Convertible Preferred Shares at a price of $1.25 per share as follows: (i) on or before May 1, 2016, DSG Global must complete a financing for gross proceeds of at least $2.5 million and use at least $1.125 million to redeem a minimum of 900,000 Series A Shares; (ii) on or before June 1, 2016, t DSG Global must complete an additional financing for gross proceeds of at least $2.5 million and use at least $1.125 million to redeem a minimum of 900,000 additional Series A Shares; and (iii) on or before July 1, 2016, DSG Global must complete an additional financing for gross proceeds of at least $5.0 million and use at least $3.04 million to redeem the remaining 2,429,384 Series A Shares.

On March 31, 2015, DSG entered into an agreement with Adore Creative Agency Inc., a corporation owned by our director Rupert Wainwright, pursuant to which Adore will provide marketing services to DSG. The terms included cash payment of $17,500 and a note in the amount of $310,000, with 5% interest per annum, convertible at the election of the holder into 248,000 common shares in the capital stock of DSG Global, Inc. at a price of $1.25 per share, maturing on March 30, 2016. As of December 31, 2015, approximately 90% of the marketing services have been expensed in the amount of $280,000 and the remaining $30,000 is recorded as a prepaid deposit. Marketing services to date have not been completed.

 

On April 6, 2016, DSG TAG entered into a loan agreement with Westergaard Holdings Ltd. a corporation owned by oura former director, Keith Westergaard, pursuant to which we raised proceeds of $120,000 CAD. DSG TAG agrees to pay the loan plus fees no later than the final due date of July 6, 2016. The fees for service are as follows: (a) DSG TAG agrees to pay a fee for service equal to 5% of the amount of the loan or $6,000 CAD if the loan is paid in full, including fees on or before May 6, 2016; (b) DSG TAG agrees to pay a fee for service equal to 10% of the amount of the original loan, or $12,000 CAD if the loan is paid in full, including fees, between May 7, 2016 and June 5, 2016; and (c) DSG TAG agrees to pay a fee for service equal to 20% of the amount of the original loan, or $24,000 CAD if the loan is paid full, including fees, between June 6, 2016 and July 5, 2016. DSG TAG agrees to pay partial payments towards the principal amount of the loan and fees. DSG TAG agrees that fees will be charged on the initial amount of the loan.

On December 16, 2016, a convertible loan was received Brent Silzer, in the amount of $29,791 (CAD $40,000). Interest is 8% annual rate for one month and 4% monthly rate thereafter if not paid by January 15, 2017. The note is convertible at $0.05 per share. On April 3, 2017, this convertible loan and all unpaid interest and penalties was settled in cash of CDN$45,500 and the issuance of 525,049 common shares pursuant to a debt settlement and subscription agreement as described in Note 9.

 

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 six (6)five (5) directors consisting of Robert Silzer, Jason Sugarman, Rupert Wainwright, Stephen Johnston, and James Singerling and Kim March.Singerling. We have not made any determination as to whether any of our directors are independent directors, as that term is used in Rule 4200(a) (15) of the Rules of National Association of Securities Dealers.

80

 

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 (Lichter, Yu and Associates) for each of the years ended December 31, 20162017 and 2015.2016.

 

  Lichter, Yu and Associates 
  2016  2015 
Audit Fees $76,762  $54,000 
Audit Related Fees(1)  Nil   Nil 
Tax Fees(2)  2,500   9,152 
All Other Fees(3)  1,000   3,813 
Total $80,262  $66,965 

(1)Travel expenses due for audit work
(2)United States tax return and filing fees from Sept 2007 to Sept 2014 for DSG Global Inc, formerly own as Boreal Ltd and for 2015 year end.
(3)Filing application fee for the Canadian Public Accountability Board (CPAB), & time spent on filing 8-K related to reverse merger of DSG Global Inc. & DSG Tag Systems Inc.
  2017  2016 
Audit Fees $52,800  $76,762 
Audit Related Fees  Nil   Nil 
Tax Fees  Nil   2,500 
All Other Fees  Nil   1,000 
Total $52,800  $80,262 

 

Lichter, Yu and Associates has served as our independent registered public accounting firm sincefrom September 2014.2014 to October 2017.

 

The following represents fees for professional services rendered by a previousSaturna Group Chartered Professional Accountants LLP is our independent registered public accounting firm Harris & Gillespie CPA’s PLLC, for the years ended 2016 and 2014. These represent audit fees paid for DSG Global Inc., formerly own as Boreal Ltd prior to the merger in May 6, 2015. Changes in registrant’s certifying accountant was filed as an 8-K on August 3, 2015.

  Harris & Gillespie CPA’s PLLC 
  2016  2015 
Audit Fees $Nil  $5,900 
Total $Nil  $5,900 

Tax Feessince October 2017.

 

The following represents fees for the professional services rendered by our independent Canadian tax accounting firm (J.K.C. Fraser, CPA, CA) for each of the years ended December 31, 2016 and 2015.

  J.K.C. Fraser, CPA, CA 
  2016  2015 
Tax Fees(1) $396  $1,564 
Total $396  $1,564 

(1)This represents tax return and filings for 2014 for DSG Tag Systems Inc., Canadian tax filing requirements. The fees are $2,000 CAD, the above amount has been converted to USD.

The following represents fees for the professional services rendered by our independent United Kingdom tax accounting firm (Ascot Sinclair Associates Ltd.) for the years ended December 31, 2016 and 2015.

  Ascot Sinclair Associates Ltd. 
  2016  2015 
Tax Fees(1) $Nil  $5,216 
Total $Nil  $5,216 

(1)This represents tax return and filings for 2013 & 2014 for DSG Tag Systems International Ltd., United Kingdom tax filing requirements. The fees are £3,413 BPS, the above amount has been converted to USD.

 8179 
 

 

PART IV

 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

ITEM15.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.

80

SIGNATURES

 

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

 

Dated: April 28, 201718, 2018DSG Global Inc.
  
 By:/s/Robert Silzer
  

Robert Silzer

Chief Executive Officer and Chief Financial Officer

(Principal Executive Officer and

Principal Financial and Accounting Officer)

 

POWER OF ATTORNEY

 

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

 

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

 

Signature Title Date
     
/s/ Robert Silzer Chief Executive Officer, Chief Financial Officer and Chairman of the April 28, 201718, 2018
Robert Silzer 

Board of Directors(Principal Executive Officer and Principal Financial and Accounting Officer)

  
     
/s/ Stephen Johnston Director April 28, 201718, 2018
Stephen Johnston
/s/ Kenneth MarshDirectorApril 28, 2017
Kenneth Marsh    
     
/s/ James Singerling Director April 28, 201718, 2018
James Singerling    
     
/s/ Jason Sugarman Director April 28, 201718, 2018
Jason Sugarman    
     
/s/ Rupert Wainwright Director April 28, 201718, 2018
Rupert Wainwright    

S-1 

EXHIBIT INDEX

 

Exhibit   Filed      
Number Exhibit Description Form Exhibit Filing Date Herewith
3.1.1 Articles of Incorporation of the Registrant SB-2 3.1 10-22-07  
           
3.1.2 Certificate of Change of the Registrant 8-K 3.1 06-24-08  
           
3.1.3 Articles of Merger of the Registrant 8-K 3.1 02-23-15  
           
3.1.4 Certificate of Change of the Registrant 8-K 3.2 02-23-15  
           
3.1.5 Certificate of Correction of the Registrant 8-K 3.3 02-23-15  
           
3.2.1 Bylaws of the Registrant SB-2 3.2 10-22-07  
           
3.2.2 Amendment No. 1 to Bylaws of the Registrant 8-K 3.2 06-19-15  
           
4.1 Form of the Registrant’s common stock certificate       X
           
4.1.2 DSG Global, Inc. 2015 Omnibus Incentive Plan 10-Q 10.3 11-13-15  
           
10.1.1 Subscription Agreement / Debt Settlement, dated September 26, 2014, between DSG TAG Systems Inc. and Westergaard Holdings Ltd. 8-K 10.1 08-17-15  
           
10.1.2 Addendum to Subscription Agreement / Debt Settlement, dated October 7, 2014, between DSG TAG Systems Inc. and Westergaard Holdings Ltd. 8-K 10.2 08-17-15  
           
10.1.3 Second Addendum to Subscription Agreement / Debt Settlement, dated April 29, 2015, between DSG TAG Systems Inc. and Westergaard Holdings Ltd. 8-K 10.3 08-17-15  
           
10.1.4 Third Addendum to Subscription Agreement / Debt Settlement, dated August 11, 2015, between DSG TAG Systems Inc. and Westergaard Holdings Ltd. 8-K 10.4 08-17-15  
           
10.1.5 

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

 

 8-K 10.1 09-08-15  
Exhibit   Filed      
Number Exhibit Description Form Exhibit Filing Date Herewith
3.1.1 Articles of Incorporation of the Registrant SB-2 3.1 10-22-07  
           
3.1.2 Certificate of Change of the Registrant 8-K 3.1 06-24-08  
           
3.1.3 Articles of Merger of the Registrant 8-K 3.1 02-23-15  
           
3.1.4 Certificate of Change of the Registrant 8-K 3.2 02-23-15  
           
3.1.5 Certificate of Correction of the Registrant 8-K 3.3 02-23-15  
           
3.2.1 Bylaws of the Registrant SB-2 3.2 10-22-07  
           
3.2.2 Amendment No. 1 to Bylaws of the Registrant 8-K 3.2 06-19-15  
           
4.1.2 DSG Global, Inc. 2015 Omnibus Incentive Plan 10-Q 10.3 11-13-15  
           
10.1.1 Subscription Agreement / Debt Settlement, dated September 26, 2014, between DSG TAG Systems Inc. and Westergaard Holdings Ltd. 8-K 10.1 08-17-15  
           
10.1.2 Addendum to Subscription Agreement / Debt Settlement, dated October 7, 2014, between DSG TAG Systems Inc. and Westergaard Holdings Ltd. 8-K 10.2 08-17-15  
           
10.1.3 Second Addendum to Subscription Agreement / Debt Settlement, dated April 29, 2015, between DSG TAG Systems Inc. and Westergaard Holdings Ltd. 8-K 10.3 08-17-15  
           
10.1.4 Third Addendum to Subscription Agreement / Debt Settlement, dated August 11, 2015, between DSG TAG Systems Inc. and Westergaard Holdings Ltd. 8-K 10.4 08-17-15  
           
10.1.5 

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

 8-K 10.1 09-08-15  

 

EX-1

 

Exhibit   Filed      
Number Exhibit Description Form Exhibit Filing Date Herewith
10.1.6 Letter from Westergaard Holdings Ltd., dated November 10, 2015, extending dates of redemption obligations 10-Q 10.1 11-13-15  
           
10.1.7 Letter fromWestergaard Holdings Ltd., dated December 31, 2015, extending dates of redemption obligations 8-K 10.1 03-09-16  
           
10.2 Convertible Note of DSG TAG Systems Inc., dated March 31, 2015, payable to Adore Creative Agency, Inc. 8-K 10.5 08-14-15  
           
10.3 Convertible Note Agreement, dated August 25, 2015, between the Registrant and Jerry Katell, Katell Productions, LLC and Katell Properties, LLC 10-Q 10.2 11-13-15  
           
10.4 Agreement (TAG Touch) dated February 15, 2014 between DSG TAG Systems Inc. and DSG Canadian Manufacturing Corp. 8-K 10.1 05-06-15  
           
21 List of Subsidiary:        
           
21.1 DSG Tag Systems Inc. (Nevada) (100%)        
           
21.2 DSG Tag Systems International Ltd. (United Kingdom) (100%)        

EX-2

 

Exhibit   Filed      
Number Exhibit Description Form Exhibit Filing Date Herewith
10.1.6 Letter from Westergaard Holdings Ltd., dated November 10, 2015, extending dates of redemption obligations 10-Q 10.1 11-13-15  
           
10.1.7 Letter fromWestergaard Holdings Ltd., dated December 31, 2015, extending dates of redemption obligations 8-K 10.1 03-09-16  
           
10.2 Convertible Note of DSG TAG Systems Inc., dated March 31, 2015, payable to Adore Creative Agency, Inc. 8-K 10.5 08-14-15  
           
10.3 Convertible Note Agreement, dated August 25, 2015, between the Registrant and Jerry Katell, Katell Productions, LLC and Katell Properties, LLC 10-Q 10.2 11-13-15  
           
10.4 Agreement (TAG Touch) dated February 15, 2014 between DSG TAG Systems Inc. and DSG Canadian Manufacturing Corp. 8-K 10.1 05-06-15  
           
10.5 Loan agreement, dated October 24, 2014 between DSG TAG Systems Inc. and A.Bosa & Co (Kootenay) Ltd.       X
           
10.6 Lease agreement (Modified), dated January 21, 2016 and February 1, 2016 between DSG TAG Systems Inc. and Benchmark Group       X
           
10.7 Loan agreement, dated February 11, 2016 between DSG TAG Systems Inc. and Jeremy Yaseniuk       X
           
10.8 Loan agreement, dated March 31, 2016 between DSG TAG Systems Inc. and E. Gary Risler       X
           
21 

List of Subsidiary:

        
           
21.1 DSG Tag Systems Inc. (Nevada) (100%)        
           
21.2 DSG Tag Systems International Ltd. (United Kingdom) (100%)        

EX-2

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

 

*

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

 

EX-3