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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2017 AND 2016
(EXPRESSED
IN U.S. DOLLARS)
Note
1 – ORGANIZATION
DSG
Global, Inc. (formerly Boreal Productions Inc.) (the “Company”) was incorporated under the laws of the State of Nevada
on September 24, 2007. The Company was formed to option feature films and TV projects to be packaged for sale to movie studios
and production companies.
On
January 19, 2015, the Board of Directors approved an agreement and plan of merger to merge with wholly-owned subsidiary DSG Global
Inc., a Nevada corporation, to affect a name change from Boreal Productions Inc. to DSG Global, Inc. On April 13, 2015, the Company
entered into a share exchange agreement with DSG Tag Systems Inc. (“DSG TAG”), 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, whereby the Company
acquired 75% of DSG TAG in exchange for the issuance of 15,185,875 common shares. In addition, concurrent with the share exchange
agreement, the Company issued 179,823 common shares for settlement of accrued interest. On July 6, 2015 and through to October
13, 2015, the Company acquired the remaining 27,035,175 common shares of DSG TAG in exchange for the issuance of 4,921,303 common
shares of the Company. As of July 6, 2015, the Company held a 100% interest in DSG TAG.
The
Company is a technology development company 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 specializes in the vehicle
fleet management industry, primarily focused on the golf industry to help golf course operators manage their fleet of golf carts,
turf equipment, and utility vehicles.
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 a former director of the Company.
In
March 2011, DSG TAG formed 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
3 – 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 (“US GAAP”) and are expressed in U.S. dollars. These consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries, DSG TAG and DSG 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. The Company regularly evaluates estimates and assumptions related to the collectability of accounts receivable,
valuation of inventory, useful lives and recoverability of long-lived assets, valuation of loans payable, fair value of convertible
debentures, derivative liabilities, warranty reserves, and stock-based compensation, and deferred income tax asset valuation allowances.
The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes
to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results
experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material
differences between the estimates and the actual results, future results of operations will be affected.
The
Company’s policy for equipment requires judgment in determining whether the present value of future expected economic benefits
exceeds capitalized costs. The policy requires management to make certain estimates and assumptions about future economic benefits
related to its operations. Estimates and assumptions may change if new information becomes available. If information becomes available
suggesting that the recovery of capitalized cost is unlikely, the capitalized cost is written off to the consolidated statement
of operations.
The
assessment of whether the going concern assumption is appropriate requires management to take into account all available information
about the future, which is at least, but is not limited to, 12 months from the end of the reporting period. The Company is aware
that material uncertainties related to events or conditions may cast significant doubt upon the Company’s ability to continue
as a going concern.
Cash
and Cash Equivalents
The
Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.
As at December 31, 2017 and 2016, there were no uninsured balances for accounts in Canada, United States, or 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 days from the date billed.
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. As at December 31, 2017 and 2016 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 non-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)
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk are cash and accounts receivable. The Company
places 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 the 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 maximum credit exposure.
Inventory
Inventory
is comprised of finished goods and is valued at the lower of cost or net realizable value. Cost is determined using the first-in-first-out
basis for finished goods. Net realizable value is determined on the basis of anticipated sales proceeds less the estimated selling
expenses. Inventory is reviewed at least annually for impairment due to slow moving or obsolescence.
Equipment
and Equipment on Lease
Equipment
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 are:
Furniture
and equipment
|
5
years straight-line
|
Computer
equipment
|
3
years straight-line
|
Equipment
on lease
|
5
years straight-line
|
Intangible
Assets
Intangible
assets are stated at cost less accumulated amortization and are comprised of patents. The patents are amortized straight-line
over the estimated useful life of 17 years and are reviewed annually for impairment.
Impairment
of Long-Lived Assets
The
Company reviews long-lived assets such as equipment, equipment on lease, and intangible assets with finite useful lives for impairment
whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. If the total of the expected
undiscounted future cash flows is less than the carrying value of the asset, a loss is recognized for the excess of the carrying
amount over the fair value of the asset.
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 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.
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.
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 international markets, and the amortization of purchased software code and services content. Such costs related to
software development are included in research and development expense until the point that technological feasibility is reached.
Research and development is expensed and included in the consolidated statement of operations.
Income
Taxes
The
Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Income Taxes. The asset and
liability method provides that deferred income tax assets and liabilities are recognized for the expected future tax consequences
of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax
credit 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 valuation 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
both basic and diluted earnings per share (“EPS”) on the face of the consolidated statement of operations. Basic EPS
is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares
outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during
the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted
EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise
of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As at December
31, 2017, the Company had 585,040,862 (2016 – 12,259,635) potentially dilutive shares outstanding.
Risks
and Uncertainties
The
Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated
with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange
rates and the volatility of public markets.
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 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 other than quoted prices that are observable for the asset or liability
such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in
markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant
inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level
3
Level
3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to
the measurement of the fair value of the assets or liabilities.
The
Company’s financial instruments consist principally of cash, 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 convertible notes payable.
The
following table represents assets and liabilities that are measured and recognized at fair value as of December 31, 2017, on a
recurring basis:
|
|
Level
1
$
|
|
|
Level
2
$
|
|
|
Level
3
$
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
5,488
|
|
|
|
–
|
|
|
|
–
|
|
Derivative
liabilities
|
|
|
–
|
|
|
|
1,191,396
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5,488
|
|
|
|
1,191,396
|
|
|
|
–
|
|
The
recorded values of all other financial instruments approximate their current fair values because of their nature and respective
maturity dates or durations.
During
the year ended December 31, 2017, the Company recognized a loss on the change in fair value of derivative liabilities of $340,227
(2016 – $223,795).
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)
Contingencies
Certain
conditions may exist as at the date that 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 perceived merits of any legal proceedings or un-asserted claims as well as the perceived
merits of the amount of relief sought or expected to be sought.
If
the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability
can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the
assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable
and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they
involve guarantees, in which case the guarantee would be disclosed.
Stock-Based
Compensation
The
Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation”, using
the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments
are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever
is more reliably measurable.
The
Company uses the Black-Scholes option pricing model to calculate the fair value of stock-based awards. This model is affected
by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables
include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and
projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest
is recognized as an expense in the consolidated statement of operations over the requisite service period.
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, 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.
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 the 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 are not believed by management to have a material impact on
the Company’s present or future consolidated financial statements.
Note
4 – ACCOUNTS RECEIVABLE
As
of December 31, 2017 and 2016, accounts receivable consisted of the following:
|
|
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 – EQUIPMENT AND EQUIPMENT ON LEASE
As
of December 31, 2017 and 2016, equipment consisted of the following:
|
|
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
|
|
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
As
of December 31, 2017 and 2016, 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 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As
of December 31, 2017 and 2016, accounts payable and accrued liabilities consisted of the following:
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
Accounts
payable
|
|
$
|
1,121,841
|
|
|
$
|
940,722
|
|
Accrued
expenses
|
|
|
255,542
|
|
|
|
388,331
|
|
Accrued
interest payable
|
|
|
1,889,537
|
|
|
|
1,222,151
|
|
Other
liabilities
|
|
|
61,931
|
|
|
|
17,588
|
|
Total
payables
|
|
$
|
3,328,851
|
|
|
$
|
2,568,792
|
|
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, 2017 and 2016, loans payable consisted of the following:
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
Unsecured, due on demand,
interest 15% per annum
|
|
$
|
199,283
|
|
|
$
|
186,192
|
|
Unsecured, due on demand, interest
36% per annum
|
|
|
48,750
|
|
|
|
45,548
|
|
Unsecured, loan payable, interest
18% per annum
|
|
|
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
|
|
|
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
|
|
Total
|
|
$
|
887,275
|
|
|
$
|
866,269
|
|
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.
|
DSG
GLOBAL, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2017 AND 2016
(EXPRESSED
IN U.S. DOLLARS)
Note
10 – DERIVATIVE LIABILITIES
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 recorded a loss on the change in
fair value of derivative 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 value the derivative liabilities outstanding during the years ended December 31,
2017 and 2016, 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 activity of the derivative liabilities is shown below:
|
|
$
|
|
Balance, December 31, 2015
|
|
|
—
|
|
Derivative loss due to new
issuances
|
|
|
142,149
|
|
Mark to market
adjustment
|
|
|
223,795
|
|
|
|
|
|
|
Balance, December 31, 2016
|
|
|
365,944
|
|
Derivative loss due to new issuances
|
|
|
920,999
|
|
Extinguishment upon conversion
|
|
|
(435,774
|
)
|
Mark to market
adjustment
|
|
|
340,227
|
|
|
|
|
|
|
Balance, December 31, 2017
|
|
|
1,191,396
|
|
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, 2017
and 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. The Series A Shares are subject to a redemption
obligation at $1.25 per 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 Mezzanine Equity.
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. As of December 31, 2017, the non-controlling interest was $1,334,805 (December 31,
2016 - $1,099,140).
Note
12 – 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 is committed to issuing 1,800,000 shares of common stock within ten days
of the agreement, plus an additional 450,000 shares of common stock representing a monthly fee of $3,750. These shares of common
stock are to be issued in monthly installments of 75,000 shares of common stock on the 2nd of each month beginning on February
2, 2017 and ending on July 2, 2017. On February 15, 2017, the Company issued 2,250,000 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 481,836 common shares with a fair value of $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 fully repaid and
satisfied prior to 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.
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
September 7, 2017 the Company issued 750,000 common shares with a fair value of $22,575 based on the closing price of the Company’s
common stock for the conversion of $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 $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 the closing price of
the Company’s common stock for the conversion of $705 of convertible notes payable, a $750 financing fee, penalty interest
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 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 – SHARE PURCHASE WARRANTS
The
following table summarizes the continuity schedule of the Company’s share purchase warrants:
|
|
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
As
at December 31, 2017, the Company is owed $1,034 (Cdn$1,297) (2016 - $nil) from the President, CEO, and CFO of the Company. 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 amount owing is unsecured, non-interest
bearing and due on demand.
As
at December 31, 2017, the Company owes $52,838 (2016 - $nil) to the Senior Vice President of Global Sales of the Company, which
has been 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 Company controlled by the son of the President,
CEO, and CFO of the Company, which has been recorded in accounts payable and accrued liabilities. The amount owing is unsecured,
non-interest bearing, and due on demand.
Note
15 – SUPPLEMENTAL 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
|
|
|
|
-
|
|
DSG
GLOBAL, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2017 AND 2016
(EXPRESSED
IN U.S. DOLLARS)
Note
16 – INCOME TAX
The
following are the components of income before income tax reflected in the consolidated statement of operations for the years ended
December 31, 2017 and 2016:
Component
of loss before income tax and non-controlling interest:
|
|
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, 2017, the Company had net operating losses of $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, 2017 were fully reserved. Management believes it is
more likely than not that these assets will not be realized in the near future.
Note
17 – GEOGRAPHIC SEGMENT INFORMATION
For
the year ended December 31, 2017, the Company only operated in Canada and all of the Company’s operations and non-current
assets are based in Canada. For the year ended December 31, 2016, the Company operated 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.
DSG
GLOBAL, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2017 AND 2016
(EXPRESSED
IN U.S. DOLLARS)
Note
18 – CONTINGENCIES
(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.
|
DSG
GLOBAL, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2017 AND 2016
(EXPRESSED
IN U.S. DOLLARS)
Note
19 – SUBSEQUENT EVENTS
On
January 18, 2018, the Company amended its Articles of Incorporation and increased its authorized share capital to 2,000,000,000
shares of common stock having a par value of $0.001 per share.
On
January 18, 2018, the Company issued 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 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
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 in 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, is due on August 2, 2018, and is convertible after 180
days from issuance date into common shares at a conversion price equal to the lessor of (i) the lowest trading price during the
previous fifteen trading days prior to the date of the promissory note; or (ii) 55% of the lowest trading price during the previous
fifteen days prior to the latest complete trading day prior to the conversion date. The Company received $270,000 pursuant to
the first tranche of the agreement.
Subsequent
to the year ended December 31, 2017, the Company issued 814,516,738 common shares for the conversion of $441,652 of convertible
notes payable, accrued interest, and penalties.