DSG Global Inc. - Quarter Report: 2020 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2020

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

For the transition period from _____________ to _____________.

Commission file number 000-53988

DSG GLOBAL, INC.

(Exact name of registrant as specified in its charter)

Nevada

26-1134956

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

312 – 2630 Croydon Drive

Surrey, British Columbia, V3Z 6T3, Canada

(Address of principal executive offices, zip code)

(604) 575-3848

(Registrant’s telephone number, including area code)

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

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 Exchange Act). Yes [ ] No [X]

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

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

As November 12, 2020, the issuer had 82,906,277 shares of common stock issued and outstanding.

DSG GLOBAL, INC.

TABLE OF CONTENTS

		Page No.
PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3

	Interim Condensed Consolidated Balance Sheets	4

	Interim Condensed Consolidated Statements of Operations	5

	Interim Condensed Statements of Comprehensive Loss	6

	Interim Condensed Consolidated Statements of Stockholders’ Deficit	7

	Interim Condensed Consolidated Statements of Cash Flows	8

	Notes to Interim Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 4.	Controls and Procedures	39

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	40

Item 1A.	Risk Factors	41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41

Item 3.	Defaults Upon Senior Securities	41

Item 4.	Mine Safety Disclosures	41

Item 5.	Other Information	41

Item 6.	Exhibits	42

Signatures		45

PART I: FINANCIAL INFORMATION

ITEM 1: Financial Statements (unaudited)

The accompanying unaudited interim condensed consolidated financial statements of DSG Global Inc. as at September 30, 2020, have been prepared by our management in conformity with accounting principles generally accepted in the United States of America and in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders’ equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.

Operating results for the three and nine month periods ended September 30, 2020 are not necessarily indicative of the results that can be expected for the year ending December 31, 2020.

DSG GLOBAL, INC.

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

AS AT SEPTEMBER 30, 2020 AND DECEMBER 31, 2019

(Expressed in U.S. dollars)

(UNAUDITED)

	September 30, 2020			December 31, 2019

ASSETS
CURRENT ASSETS
Cash	$	62,337		$	25,494
Trade receivables, net		134,687			74,793
Inventories, net of inventory allowance of $144,264 and $151,191, respectively		173,490			140,943
Prepaid expenses and deposits		11,906			9,570
TOTAL CURRENT ASSETS		382,420			250,800

Fixed assets, net		273,600			139,823
Equipment on lease, net		709			1,457
Intangible assets, net		13,140			14,061
TOTAL ASSETS	$	669,869		$	406,141

LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Trade and other payables	$	2,380,100		$	2,345,333
Deferred revenue		128,672			65,274
Operating lease liability		117,443			62,935
Loans payable		688,296			789,469
Derivative liability		5,849,664			2,856,569
Convertible notes payable, net of unamortized discount of $Nil and $550,876, respectively		844,798			2,507,653
TOTAL CURRENT LIABILITIES		10,008,973			8,627,233

Operating lease liability		174,316			74,225
Loans payable		230,232			-
TOTAL LIABILITIES		10,413,521			8,701,458

Going concern (Note 2)
Commitments (Note 16)
Contingencies (Note 17)
Subsequent events (Note 19)

MEZZANINE EQUITY
Redeemable preferred stock, $0.001 par value, 11,000,000 shares authorized (2019 – 11,000,000), to be issued (2019 - to be issued)		2,382,015			33,807

STOCKHOLDERS’ DEFICIT
Preferred stock, $0.001 par value, 3,010,000 shares authorized (2019 – 3,010,000), 200,512 issued and outstanding (2019 - 200,376)		767,240			200
Common stock, $0.001 par value, 150,000,000 shares authorized, (2019 - 150,000,000); 72,171,556 issued and outstanding (2019 - 1,146,302)		72,174			1,146
Additional paid in capital, common stock		40,026,328			28,097,710
Discounts on common stock		(69,838	)		(69,838	)
Common stock to be issued		77,829			7,402,254
Other accumulated comprehensive income		1,417,637			1,372,345
Accumulated deficit		(54,417,037	)		(45,132,941	)
TOTAL STOCKHOLDERS’ DEFICIT		(12,125,667	)		(8,329,124	)

TOTAL LIABILITIES MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT	$	669,869		$	406,141

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

DSG GLOBAL, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(Expressed in U.S. dollars)

(UNAUDITED)

	Three months ending						Nine months ending
	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019

Revenue	$	334,161		$	453,210		$	608,328		$	1,239,280
Cost of revenue		168,211			278,964			246,862			617,918
Gross profit		165,950			174,246			361,466			621,362

Operating expenses
Compensation expense		127,932			124,898			1,794,304			404,654
General and administration expense		427,171			277,311			1,143,880			727,076
Bad debt expense (recovery)		1,921			(28,172	)		17,141			(30,038	)
Depreciation and amortization expense		808			759			2,110			3,509
Total operating expense		557,832			374,796			2,957,435			1,105,201
Loss from operations		(391,882	)		(200,550	)		(2,595,969	)		(483,839	)

Other income (expense)
Foreign currency exchange		51,006			9,165			(15,141	)		40,328
Other income		99,171			-			99,171			-
Change in fair value of derivative instruments		(623,321	)		(4,944,421	)		(2,795,630	)		(4,223,797	)
Loss on extinguishment of debt		(1,954,383	)		(80,411	)		(2,772,276	)		(208,665	)
Finance costs		(339,833	)		(339,718	)		(1,204,251	)		(959,748	)
Total other income (expense)		(2,767,360	)		(5,355,385	)		(6,688,127	)		(5,351,882	)

Net income (loss)	$	(3,159,242	)	$	(5,555,935	)	$	(9,284,096	)	$	(5,835,721	)

Net income (loss) per share

Basic and diluted:
Basic	$	(0.08	)	$	(6.67	)	$	(0.47	)	$	(8.00	)
Diluted	$	(0.08	)	$	(6.67	)	$	(0.47	)	$	(8.00	)

Weighted average number of shares used in computing basic and diluted net income (loss) per share:
Basic		40,655,321			832,501			19,577,948			729,685
Diluted		40,655,321			832,501			19,577,948			729,685

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

DSG GLOBAL, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(Expressed in U.S. dollars)

(UNAUDITED)

	Three months ending						Nine months ending
	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019

Net income (loss)	$	(3,159,242	)	$	(5,555,935	)	$	(9,284,096	)	$	(5,835,721	)
Other comprehensive income (loss)

Foreign currency translation adjustments		(52,199	)		45,098			45,292			(31,013	)

Comprehensive income (loss)	$	(3,211,441	)	$	5,510,837		$	(9,238,804	)	$	(5,866,734	)

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

DSG GLOBAL, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Expressed in U.S. dollars)

(UNAUDITED)

	Common Stock												Preferred Stock
	Shares		Amount		Additional paid in capital		Discount on common stock			To be issued			Amount		Accumulated other comprehensive income			Accumulated deficit			Total stockholders’ deficit
Balance, December 31, 2018		634,471	$	634	$	22,415,121	$	(69,838	)	$	-		$	4,872,732	$	1,465,389		$	(42,054,821	)	$	(13,370,783	)

Shares issued on conversion of debt		55,932		56		119,921		-			-			-		-			-			119,977
Net loss for the period		-		-		-		-			-			-		(69,635	)		(7,172,973	)		(7,242,608	)
Balance, March 31, 2019		690,403		690		22,535,042		(69,838	)		-			4,872,732		1,395,754			(49,227,794	)		(20,493,414	)
Shares issued for services		17,500		18		19,582		-			-			-		-			-			19,600
Shares issued on conversion of debt		79,666		80		95,218		-			-			-		-			-			95,298
Net income for the period		-		-		-		-			-			-		(6,476	)		6,893,187			6,886,711
Balance, June 30, 2019		787,569		788		22,649,842		(69,838	)		-			4,872,732		1,389,278			(42,334,607	)		(13,491,805	)
Shares issued on conversion of debt		117,400		117		109,630		-			-			-		-			-			109,747
Net income for the period		-		-		-		-			-			-		45,098			(5,555,935	)		(5,510,837	)
Balance, September 30, 2019		904,969	$	905	$	22,759,472	$	(69,838	)	$	-		$	4,872,732	$	1,434,376		$	(47,890,542	)	$	(18,892,895	)

Balance, December 31, 2019		1,146,302	$	1,146	$	28,097,710	$	(69,838	)	$	7,402,254		$	200	$	1,372,345		$	(45,132,941	)	$	(8,329,124	)
Shares to be issued for cash		191,865		192		99,839		-			-			-		-			-			100,031
Shares and warrants issued for services		320,000		320		636,128		-			-			-		-			-			636,448
Shares issued on conversion of debt		1,178,518		1,180		565,375		-			-			-		-			-			566,555
Issuance of shares to be issued		1,766,451		1,766		1,384,487		-			(1,386,253	)		-		-			-			-
Net loss for the period		-		-		-		-			-			-		189,591			(2,957,959	)		(2,768,368	)
Balance, March 31, 2020		4,603,136		4,604		30,783,539		(69,838	)		6,016,001			200		1,561,936			(48,090,900	)		(9,794,458	)
Shares issued for services		1,183,000		1,183		108,768		-			-			-		-			-			109,951
Shares issued on conversion of debt		3,799,933		3,801		525,263		-			-			-		-			-			529,064
Shares issued and to be issued for share-settled debt		612,244		612		42,245		-			171,429			-		-			-			214,286
Preferred shares issued for services		-		-		-		-			-			767,040		-			-			767,040
Issuance of shares to be issued		7,663,695		7,664		6,008,337		-			(6,016,001	)		-		-			-			-
Net loss for the period		-		-		-		-			-			-		(92,100	)		(3,166,895	)		(3,258,995	)
Balance, June 30, 2020		17,862,008		17,864		37,468,152		(69,838	)		171,429			767,240		1,469,836			(51,257,795	)		(11,433,112	)
Shares issued for services		500,000		500		37,000		-			-			-		-			-			37,500
Shares issued on conversion of debt		47,959,548		47,960		2,433,426		-			-			-		-			-			2,481,386
Shares issued for share-settled debt		5,850,000		5,850		87,750		-			(93,600	)		-		-			-			-
Net loss for the period		-		-		-		-			-			-		(52,199	)		(3,159,242	)		(3,211,441	)
Balance, September 30, 2020		72,171,556	$	72,174	$	40,026,328	$	(69,838	)	$	77,829		$	767,240	$	1,417,637		$	(54,417,037	)	$	(12,125,667	)

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

DSG GLOBAL INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(Expressed in U.S. Dollars)

(UNAUDITED)

	September 30, 2020			September 30, 2019

Net loss	$	(9,284,096	)	$	(5,835,721	)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,110			3,509
Change in inventory allowance		27,478			(1,643	)
Non-cash financing costs		-			-
Accretion of discounts on debt		792,378			461,536
Change in fair value of derivative liabilities		2,795,630			4,223,797
Bad debt expense		17,141			(30,038	)
Shares and warrants issued for services		1,550,939			19,600
Loss on extinguishment of debt		2,772,276			208,665
Unrealized foreign exchange gain (loss)		27,740			(22,745	)

Changes in non-cash working capital:
Trade receivables, net		(79,200	)		(80,568	)
Inventories		(63,708	)		(46,393	)
Prepaid expense and deposits		(2,586	)		33,377
Trade payables and accruals		697,685			556,140
Deferred revenue		65,103			(143,925	)
Operating lease liabilities		12,014			2,383
Net cash used in operating activities		(669,096	)		(652,026	)

Cash flows from investing activities
Purchase of property, plant and equipment		(2,233	)		-
Net cash used in investing activities		(2,233	)		-

Cash flows from financing activities
Proceeds from issuing shares		100,031			-
Payments on notes payable		(305,526	)		-
Proceeds from notes payable		922,845			766,210
Net cash provided by financing activities		717,350			766,210

Effect of exchange rate changes on cash		(9,178	)		-
Net increase (decrease) in cash		36,843			114,184
Cash at beginning of period		25,494			5,059

Cash at the end of the period	$	62,337		$	119,243

Supplemental Cash Flow Information (Note 18)

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

DSG GLOBAL, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – ORGANIZATION

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

The Company is a technology development company engaged in the design, manufacture, and marketing of fleet management solutions in the golf industry. The Company’s principal activities are the sale and rental of GPS tracking devices and interfaces for golf vehicles and related support services.

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

On March 26, 2019, the Company effected a reverse stock split of its shares of common stock on a four thousand (4,000) old for one (1) new basis. Upon effect of the reverse split, authorized capital decreased from 3,000,000,000 shares of common stock to 750,000 shares of common stock, with a par value of $0.001. On May 23, 2019, the Company approved to increase its authorized common stock to 150,000,000, with a par value of $0.001. Shares of preferred stock remain unchanged. These consolidated financial statements give retroactive effect to such reverse stock split named above and all share and per share amounts have been adjusted accordingly, unless otherwise noted.

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

Note 2 – GOING CONCERN

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

The recent outbreak of the coronavirus, also known as "COVID-19", has spread across the globe and is impacting worldwide economic activity. Conditions surrounding the coronavirus continue to rapidly evolve and government authorities have implemented emergency measures to mitigate the spread of the virus. The outbreak and the related mitigation measures may have an adverse impact on global economic conditions as well as on the Company’s business activities. The extent to which the coronavirus may impact the Company’s business activities will depend on future developments, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions, business disruptions, and the effectiveness of actions taken in Canada and other countries to contain and treat the disease. These events are highly uncertain and as such, the Company cannot determine their financial impact at this time. While certain restrictions are presently in the process of being relaxed, it is unclear when the world will return to the previous normal, if ever. This may adversely impact the expected implementation of the Company’s plans moving forward. The Company has seen a decline in its revenues for the nine months ending September 30, 2020 of approximately 41.8%, largely as a result of the challenges related to COVID-19.

As at September 30, 2020, the Company has a working capital deficit of $9,626,553 and has an accumulated deficit of $54,417,037 since inception. Furthermore, the Company incurred a net loss of $9,284,096 and used $669,096 of cash flows for operating activities during the nine months ended September 30, 2020. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These unaudited interim condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to U.S. GAAP rules and regulations for presentation of interim financial information. Therefore, the unaudited interim condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto, included in the Company’s Annual Report on the Form 10-K for the year ended December 31, 2019. Current and future financial statements may not be directly comparable to the Company’s historical financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

Principles of Consolidation

The interim condensed consolidated financial statements include the accounts of DSG Global Inc. and its wholly owned subsidiaries DSG, Vantage Tag Systems, Inc. DSG UK, and Imperium Motor Corp (collectively referred to as the “Company”). All intercompany accounts, transactions and profits were eliminated in the interim condensed consolidated financial statements.

Use of Estimates

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

Recently Adopted Accounting Pronouncements

In June 2016, FASB issued ASU 2016-13, Measurement of Credit Loss on financial Instruments. ASU 2016-13 replaces the current incurred loss impairment methodology with the expected credit loss impairment model, which requires consideration of a broader range of reasonable and supportable information to estimate expected credit losses over the life of the instrument instead of only when losses are incurred. This standard applies to financial assets measured at amortized cost basis and investments in leases recognized by the lessor. The Company adopted ASU 2016-13 on January 1, 2020 with no impact on the interim condensed consolidated financial statements.

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

Reclassification

Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations or cash flow.

Note 4 – TRADE RECEIVABLES, NET

As of September 30, 2020 and December 31, 2019, trade receivables consist of the following:

	September 30, 2020			December 31, 2019
Accounts receivables	$	150,124		$	82,927
Allowance for doubtful accounts		(15,437	)		(8,134	)
Total trade receivables, net	$	134,687		$	74,793

Note 5 – FIXED ASSETS AND EQUIPMENT ON LEASE

As of September 30, 2020 and December 31, 2019, fixed assets consisted of the following:

	September 30, 2020			December 31, 2019
Computer equipment	$	26,319		$	27,025
Furniture and equipment		2,233			-
Right-of-use lease asset		297,939			178,202
Accumulated depreciation		(52,891	)		(65,404	)
	$	273,600		$	139,823

As of September 30, 2020 and December 31, 2019, equipment on lease consisted of the following:

	September 30, 2020			December 31, 2019
Tags	$	123,502		$	126,817
Text		27,296			28,029
Touch		22,612			23,218
Accumulated depreciation		(172,701	)		(176,607	)
	$	709		$	1,457

For the three and nine months ended September 30, 2020, total depreciation expense for fixed assets was $501 and $1,189, respectively (2019 - $452 and $2,588, respectively) and is included in general and administration expense. For the three and nine months ended September 30, 2020, total depreciation for right-of-use assets was $19,052 and $42,397, respectively (2019 - $9,036 and $27,107, respectively) and is included in general and administration expense as operating lease expense.

Note 6 – INTANGIBLE ASSETS

As of September 30, 2020 and December 31, 2019, intangible assets consist of the following:

	September 30, 2020			December 31, 2019
Intangible asset – Patent	$	22,353		$	22,353
Accumulated depreciation		(9,213	)		(8,292	)
	$	13,140		$	14,061

The estimated useful life of the patent is 20 years. Patents are amortized on a straight-line basis. For the three and nine months ended September 30, 2020, total amortization expense was $307 and $921, respectively (2019 - $307 and $921, respectively).

Note 7 – TRADE AND OTHER PAYABLES

As of September 30, 2020 and December 31, 2019, trade and other payables consist of the following:

	September 30, 2020		December 31, 2019
Accounts payable and accrued expenses	$	1,450,709	$	1,334,685
Accrued interest		841,172		992,755
Other liabilities		88,219		17,893
Total payables	$	2,380,100	$	2,345,333

Note 8 – LOANS PAYABLE

As of September 30, 2020 and December 31, 2019, loans payable consisted of the following:

	September 30, 2020			December 31, 2019
Unsecured loan payable, due on demand, interest at 18% per annum	$	317,500		$	317,500
Unsecured loan payable, due on demand, interest 10% per annum, with a minimum interest amount of $25,000		250,000			250,000
Unsecured share-settled debt, due on May 7, 2019, non-interest bearing^(a)		-			214,286
Unsecured loan payable in the amount of CDN$10,000, due on demand, non-interest bearing		-			7,683
Unsecured loan payable in the amount of CDN$40,000, due on or before December 31, 2025^(b)		29,890			-
Unsecured loan payable in the amount of CDN$40,000, due on or before December 31, 2025 ^(c)		29,889			-
Unsecured loan payable, due on May 21, 2022, interest at 1% per annum^(d)		30,065			-
Secured loan payable, due on June 5, 2050, interest at 3.75% per annum^(e)		150,000			-
Unsecured, loan payable in the amount of CDN$43,244, due on demand, non-interest bearing^(f)		32,541			-
Unsecured, loan payable, due on March 20, 2021, non-interest bearing^(g)		78,643			-
		918,528			789,469
Current portion		(688,296	)		(789,469	)
Loans payable	$	230,232		$	-

(a)	On March 8, 2019, the Company entered into a convertible bridge loan agreement (the “Share-Settled Loan”). The Share-Settled Loan initially bore interest at 4.99% per month, was due in 60 days on May 7, 2019 and is convertible into restricted common shares of the Company at the lender’s option at the market price per share less a 30% discount to market. The Company has accounted the Share-Settled Loan as share-settled debt. It is initially recognized at its fair value and accreted to its share-settled redemption value of $214,286 over the term of the debt. The Share-Settled Loan was not repaid on May 7, 2019 and is in default. Effective September 1, 2019, interest was reduced to 2% per month and effective December 1, 2019, the loan became non-interest bearing. On April 23, 2020, the Company received notice to settle the debt for 3,061,224 shares of common stock at $0.049 per share, a 30% discount to market. On August 25, 2020, the terms of this settlement were amended to settle remaining principal of $120,000 for 10,714,285 common shares at an adjusted exercise price of $0.0112, a 30% discount to market. As at September 30, 2020, 6,462,244 shares have been issued and 4,864,285 remain to be issued.

(b)	On April 17, 2020, the Company received a loan in the principal amount of $29,890 (CDN$40,000) under the Canada Emergency Business Account program. The loan is non-interest bearing and eligible for CDN$10,000 forgiveness if repaid by December 31, 2022. If not repaid by December 31, 2022, the loan bears interest at 5% per annum and is due on December 31, 2025.

(c)	On April 21, 2020, the Company received a loan in the principal amount of $29,889 (CDN$40,000) under the Canada Emergency Business Account program. The loan is non-interest bearing and eligible for CDN$10,000 forgiveness if repaid by December 31, 2022. If not repaid by December 31, 2022, the loan bears interest at 5% per annum and is due on December 31, 2025.

(d)	On May 21, 2020, the Company received a loan in the principal amount of $30,065 under the Paycheck Protection Program. The loan bears interest at 1% per annum and is due on May 21, 2022 with payments deferred for the first six months of the term.

(e)	On June 5, 2020, the Company received a loan in the principal amount of $150,000. The loan bears interest at 3.75% per annum and is due on June 5, 2050. The loan is secured by all tangible and intangible assets of Company. Fixed payments of $731 are due monthly and begin 12 months from the date of the loan.

(f)	On May 15, 2020, the Company assigned an outstanding trade payable balance to another debtholder who issued a promissory note in its place in the principal amount of $32,541 (CDN$43,244). The loan is non-interest bearing and is due and payable on demand.

(g)	On September 8, 2020, the Company received a promissory note in the principal amount of $78,643 as part of an Assignment Agreement. The loan is non-interest bearing and is due on March 2, 2021. The loan was used to settle outstanding convertible debt, see Note 9(u).

Note 9 – CONVERTIBLE NOTES

On September 30, 2020, the Company entered into an Exchange Agreement (the “Exchange Agreement”) whereby the Company agreed to issue 2,347 shares of Series C Preferred Shares at a conversion price of $1,000 per preferred share to settle $2,348,208 in outstanding convertible debt and accrued interest as outlined below:

Note Reference	Original Note Issuance Date	Total Principal and Interest Settled		Series C Preferred Shares - to be issued
(y)	8/30/2017	$	18,131		18
(i)	1/22/2018		26,622		26
(j)	3/19/2018		476,661		477
(h)	5/28/2018		224,319		224
(r)	3/19/2018		342,641		343
(q)	8/31/2018		285,428		285
(s)	1/22/2019		166,401		166
(z)	5/2/2019		11,841		12
(k)	5/7/2019		286,302		286
(aa)	6/10/2019		51,999		52
(w)	8/31/2020		167,974		168
(x)	9/17/2020		289,889		290
		$	2,348,208		2,347

Subsequent to September 30, 2020, the Series C Preferred Shares were issued on October 14, 2020.

As of September 30, 2020, and December 31, 2019, convertible loans payable consisted of the following:

Convertible Notes Payable

(a)	On March 31, 2015, the Company issued a convertible promissory note in the principal amount of $310,000 to a company owned by a former director of the Company for marketing services. The note is unsecured, bears interest at 5% per annum, is convertible at $1.25 per common share, and is due on demand. As at September 30, 2020, the carrying value of the convertible promissory note was $310,000 (December 31, 2019 - $310,000).

(b)	On August 25, 2015, the Company issued a convertible promissory note in the principal amount of $250,000. The convertible promissory note is unsecured, bears interest at 10% per annum, is due on demand, and is convertible at $7,000 per share. As at September 30, 2020, the carrying value of the convertible promissory note was $250,000 (December 31, 2019 - $250,000).

(c)	On November 7, 2016, the Company entered into a securities purchase agreement with a non-related party. Pursuant to the agreement, the Company was provided with proceeds of $125,000 on November 10, 2016 in exchange for the issuance of a secured convertible promissory note in the principal amount of $138,889, which was inclusive of an 8% original issue discount and bears interest at 8% per annum to the holder. The convertible promissory note matures nine months from the date of issuance and is convertible at the option of the holder into our common shares at a price per share that is the lower of $480 or the closing price of the Company’s common stock on the conversion date. In addition, under the same terms, the Company also issued a secured convertible note of $50,000 in consideration for proceeds of $10,000 and another secured convertible note of $75,000 in consideration for proceeds of $10,000. Under the agreements, the Company has the right to redeem $62,500 and $40,000 of the notes for consideration of $1 each at any time prior to the maturity date in the event that the convertible promissory note is exchanged or converted into a revolving credit facility with the lender, whereupon the two $10,000 convertible note balances shall be rolled into such credit facility.

	On May 7, 2017, the Company triggered an event of default in the convertible note by failing to repay the full principal amount and all accrued interest on the due date. The entire convertible note payable became due on demand and would accrue interest at an increased rate of 1.5% per month (18% per annum) or the maximum rate permitted under applicable law until the convertible note payable was repaid in full.

	On May 8, 2017, the Company issued 25 common shares for the conversion of $5,000 of the $72,500 convertible note dated November 7, 2016. On May 24, 2017, the Company issued 53 common shares for the conversion of $10,500 of the $72,500 convertible note dated November 7, 2016. On May 25, 2017, the lender provided conversion notice for the remaining principal $57,000 of the $72,500 convertible note dated November 7, 2016. This conversion was not processed by the Company’s transfer agent due to direction from the Company not to honor any further conversion notices from the lender. In response, the Company received legal notification pursuant to the refusal to process further conversion notices. The Company has continually attempted to settle this litigation but has yet to reach an agreement. Refer to Note 17.

	During the year ended December 31, 2019, the Company issued 72,038 common shares with a fair value of $59,097 for the conversion of $32,000 of principal resulting in a loss on settlement of debt of $27,097.

	During the nine months ended September 30, 2020, the Company issued 53,764 common shares with a fair value of $53,226 for the conversion of $20,000 of principal resulting in a loss on settlement of debt of $33,226.

	As at September 30, 2020, the carrying value of the note was $193,889 (December 31, 2019 - $213,889) and the fair value of the derivative liability was $5,849,664 (December 31, 2019 - $360,718).

(d)	On June 5, 2017, the Company issued a convertible promissory note in the principal amount of $110,000. As at September 30, 2020, the carrying value of the note was $9,487 (December 31, 2019 - $9,487), relating to an outstanding penalty.

(e)	On July 17, 2017, the Company issued a convertible promissory note in the principal amount of $135,000. The note is unsecured, bears interest at 10% per annum, is due on July 17, 2018, and is convertible into common shares at a conversion price equal to the lessor of (i) 55% multiplied by the lowest trading price during the previous twenty trading day period ending on the latest complete trading day prior to the date of this note and (ii) $244. Interest will be accrued and payable at the time of promissory note repayment. Financing fees on the note were $16,500. Derivative liability applied as discount on the note was $118,500 and is accreted over the life of the note.

	As at September 30, 2020, the carrying value of the note was $81,470 (December 31, 2019 - $81,470). On November 10, 2020, the Company paid cash of $100,000, pursuant to a Settlement Agreement (the “Settlement Agreement”), in full and final satisfaction of $110,740 in outstanding principal and accrued interest on the above convertible note and corresponding pending litigation, see also Note 17. The Company wrote down the liability at September 30, 2020, to the subsequent settlement amount and recorded a gain on the settlement of $10,974. As at September 30, 2020, the fair value of the derivative liability of $752,842 (December 31, 2019 - $111,990) was extinguished in lieu of the Settlement Agreement.

(f)	In January 2018, the Company issued a convertible promissory note in the principal amount of $15,000 as a commitment fee. The note is unsecured, non-interest bearing until default, was due on August 16, 2018, and is convertible into common shares at a conversion price equal to 75% of the average closing trading price during the previous five trading days prior to conversion date, with a minimum of $0.20.

	During the year ended December 31, 2018, the Company issued 1,558 common shares with a fair value of $19,937 for the conversion of $10,000 of principal resulting in a loss on settlement of debt of $9,937. On April 22, 2020, the Company issued 258,000 common shares with a fair value of $25,800 to settle $7,166 in principal and interest.

	As at September 30, 2020, the carrying value of the note was $Nil (December 31, 2019 - $5,000) and the fair value of the derivative liability was $Nil (December 31, 2019 - $2,601).

(g)	On May 8, 2018, the Company issued a convertible note in the principal amount of $51,500. The note is unsecured, bears interest at 10% per annum, and is due on February 8, 2019. The note is convertible into common shares at a 32% discount to the lowest intra-day trading price of the Company’s common stock for the ten trading days immediately preceding the conversion date.

	During the nine months ended September 30, 2020, the Company issued 8,618,831,000 common shares with a fair value of $495,936 for the conversion of $107,352 principal and accrued interest resulting in a loss on settlement of debt of $388,586.

	As at September 30, 2020, the note and derivative liability were extinguished (December 31, 2019 - $51,500 and $48,918, respectively). During the nine months ended September 30, 2020, the Company accreted $Nil (2019 - $7,277) of the debt discount to finance costs.

(h)	On May 28, 2018, the Company issued a convertible note in the principal amount of $180,000. The note is unsecured, bears interest at 10% per annum, and was due on February 28, 2019. The note is convertible into common shares at a 32% discount to the lowest intra-day trading price of the Company’s common stock for the ten trading days immediately preceding the conversion date.

	On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $224,319 for 224 Series C Preferred Shares. As at September 30, 2020, the note and derivative liability were extinguished (December 31, 2019 - $180,000 and $169,234, respectively). During the nine months ended September 30, 2020, the Company accreted $Nil (2019 - $38,478) of the debt discount to finance costs.

(i)	On June 18, 2018, the Company reassigned convertible note balances from the original lender to another unrelated party in the principal amount of $168,721. The note is unsecured, bears interest at 10% per annum, which was due on August 2, 2018, and is convertible into common shares at a conversion price equal to the lesser of the lowest trading price during the previous twenty-five trading days prior to: (i) the date of the promissory note; or (ii) the latest complete trading day prior to the conversion date. Interest is accrued will be and payable at the time of promissory note repayment. The remaining derivative liability applied as a discount on the reassigned note was $25,824 and is accreted over the remaining life of the note.

	During the year ended December 31, 2019, the Company issued 234,350 common shares with a fair value of $268,614 for the conversion of $63,012 of principal and $9,671 of accrued interest resulting in a loss on settlement of debt of $195,931.

	During the nine months ended September 30, 2020, the Company issued 2,600,000 common shares with a fair value of $310,700 for the conversion of $15,444 of principal and accrued interest resulting in a loss on settlement of debt of $295,256. On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $26,622 for 26 Series C Preferred Shares. As at September 30, 2020, the note and derivative liability were extinguished (December 31, 2019 - $39,037 and $21,869, respectively).

(j)	On April 26, 2019, the Company entered into a note purchase and assignment agreement with two unrelated parties pursuant to a certain secured inventory convertible note issued on March 19, 2018 in the principal amount of $900,000. Pursuant to this agreement, the seller desired to sell the balance owing under the Second and Third tranche of the original note in four separate closings on April 26, May 22, June 24, and July 24, 2019, totaling $84,396, $85,838, $120,490 and $122,866, respectively (consisting of $375,804 principal and $37,786 of accrued interest). As at September 30, 2020, $413,590 in principal and accrued interest had been assigned to the purchaser.

	The note is unsecured, bears interest at 12% per annum, is due 184 days upon receipt, and is convertible into common shares after 180 days from issuance date at a conversion price equal to the lessor of: (i) the lowest trading price during the previous fifteen trading days prior to the date of the promissory note; or (ii) 55% of the lowest trading price during the previous fifteen days prior to the latest complete trading day prior to the conversion date. Interest will be accrued and payable at the time of promissory note repayment.

	On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $476,661 for 477 Series C Preferred Shares. As at September 30, 2020, the note and derivative liability were extinguished (December 31, 2019 - $413,590 and $181,870, respectively).

(k)	On May 7, 2019, the Company entered into a secured convertible promissory note agreement with an unrelated party. The note is secured by an unconditional first priority interest in and to, any and all property of the Company and its subsidiaries, of any kind or description, tangible or intangible, whether now existing or hereafter arising or acquired until the balance of all Notes has been reduced to $Nil. The note bears interest at 10% per annum, each tranche matures 12 months from the funding date and is convertible into common shares at the holder’s discretion at a conversion price equal to 62% of the lowest trading price of the Company’s common stock during the 10 trading days immediately preceding the conversion of the note.

	The note was funded in four tranches on May 7, 2019, June 28, 2019, July 8, 2019 and August 8, 2019, totaling $250,420. Proceeds from the note were paid directly to a former lender as an inducement for entering into a debt assignment arrangement. The $250,420 inducement is recorded to finance costs for the year ended December 31, 2019.

	On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $286,302 for 286 Series C Preferred Shares. As at September 30, 2020, the note and derivative liability were extinguished (December 31, 2019 - $124,695 and $323,514, respectively). During the nine months ended September 30, 2020, the Company accreted $125,725 (2019 - $9,605) of the debt discount to finance costs.

(l)	On July 30, 2019, the Company issued a convertible promissory note in the principal amount of $220,000. The note is unsecured, bears interest at 10% per annum, is due on July 30, 2020, and is convertible into common shares at a conversion price equal to the lesser of (i) 60% of the lowest trading price during the previous twenty trading days prior to the issuance date, or (ii) the lowest trading price for the Common Stock during the twenty day period ending one trading day prior to conversion of the note. Deferred financing fees and original issuance discount on the note were $23,500. The derivative liability applied as a discount on the note was $196,500 and is accreted over the life of the note.

	During the nine months ended September 30, 2020, the Company issued 6,907,267 common shares with a fair value of $860,248 for the conversion of all outstanding principal and accrued interest totaling $266,192 resulting in a loss on settlement of debt of $620,056.

	As at September 30, 2020, the note and derivative liability were extinguished (December 31, 2019 - $92,219 and $284,734, respectively). During the nine months ended September 30, 2020, the Company accreted $127,781 (2019 - $Nil) of the debt discount to finance costs.

(m)	On September 4, 2019, the Company issued a convertible promissory note in the principal amount of $137,500. The note is unsecured, bears interest at 10% per annum, is due on June 3, 2020, and is convertible during the first 180 calendar days from the issuance date at a price of $0.50 per share. For the subsequent period until repayment the conversion price shall equal the lesser of (i) 60% multiplied by the lowest traded price of the Common Stock during the previous twenty trading days before the issuance date of the note, or (ii) the lowest traded price for the Common Stock during the twenty day period ending on the last complete trading day before conversion. Deferred financing fees and original issuance discount on the note were $16,000. The derivative liability applied as a discount on the note was $121,500 and is accreted over the life of the note.

	In connection with the note, the Company granted 100,000 warrants to the lender. Each warrant can be exercised to purchase shares of common stock of the Company at a price of $0.75 per warrant for a period of five years. As the entire net proceeds of $121,500 were first allocated to the derivative liability which is measured at fair value on a recurring basis, the residual value of $Nil was allocated to the equity-classified warrants.

	During the nine months ended September 30, 2020, the Company issued 8,623,931 common shares with a fair value of $494,031 for the conversion of $107,500 of principal and accrued interest resulting in a loss on settlement of debt of $383,281. On September 18, 2020, the Company paid cash of $22,500 to settle all outstanding principal and interest on the note, resulting in a gain on the settlement of debt totaling $20,056.

	As at September 30, 2020, the note and derivative liability were extinguished (December 31, 2019 - $43,322 and $173,596, respectively). During the nine months ended September 30, 2020, the Company accreted $94,178 (2019 - $Nil), of the debt discount to finance costs.

(n)	On September 19, 2019, the Company issued a convertible promissory note in the principal amount of $55,000. The note is unsecured, bears interest at 10% per annum, is due on September 19, 2020, and is convertible during the first six months from the issuance date at a price of $0.50 per share. For the subsequent period until repayment the conversion price shall equal the lesser of (i) 60% multiplied by the lowest traded price of the Common Stock during the previous twenty trading days before the issuance date of the note, or (ii) the lowest traded price for the Common Stock during the twenty day period ending on the last complete trading day before conversion. Deferred financing fees and original issuance discount on the note were $7,000. The derivative liability applied as a discount on the note was $48,000 and is accreted over the life of the note.

	During the nine months ended September 30, 2020, the Company issued 5,758,117 common shares with a fair value of $332,480 for the conversion of total outstanding principal and interest totaling $57,750 resulting in a loss on settlement of debt of $272,230.

	As at September 30, 2020, the note and derivative liability were extinguished (December 31, 2019 - $15,370 and $70,052, respectively). During the nine months ended September 30, 2020, the Company accreted $39,630 (2019 - $Nil), of the debt discount to finance costs.

(o)	On September 19, 2019, the Company issued a convertible promissory note in the principal amount of $141,900. The note is unsecured, bears interest at 10% per annum, is due on September 19, 2020, and is convertible during the first six months from the issuance date at a price of $0.50 per share. For the subsequent period until repayment the conversion price shall equal the lesser of (i) 60% multiplied by the lowest traded price of the Common Stock during the previous twenty trading days before the issuance date of the note, or (ii) the lowest traded price for the Common Stock during the twenty day period ending on the last complete trading day before conversion. Deferred financing fees and original issuance discount on the note were $16,400. The derivative liability applied as a discount on the note was $125,500 and is accreted over the life of the note.

	In connection with the note, the Company granted 113,250 warrants to the lender. Each warrant can be exercised to purchase shares of common stock of the Company at a price of $0.75 per warrant for a period of five years. As the entire net proceeds of $125,500 were first allocated to the derivative liability which is measured at fair value on a recurring basis, the residual value of $Nil was allocated to the equity-classified warrants.

	During the nine months ended September 30, 2020, the Company issued 5,159,991 common shares with a fair value of $261,912 for the conversion of $71,490 of principal and accrued interest resulting in a loss on settlement of debt of $187,292. On September 18, 2020, the Company paid cash of $76,000 to settle all outstanding principal and interest on the note, resulting in a gain on the settlement of debt totaling $7,273.

	As at September 30, 2020, the note and derivative liability were extinguished (December 31, 2019 - $40,043 and $190,246, respectively). During the nine months ended September 30, 2020, the Company accreted $101,857 (2019 - $Nil), of the debt discount to finance costs.

(p)	On October 2, 2019, the Company issued a convertible promissory note in the principal amount of $82,500. The note is unsecured, bears interest at 10% per annum, is due on September 30, 2020, and is convertible during the first six months from the issuance date at a price of $0.50 per share. For the subsequent period until repayment the conversion price shall equal the lesser of (i) 60% multiplied by the lowest traded price of the Common Stock during the previous twenty trading days before the issuance date of the note, or (ii) the lowest traded price for the Common Stock during the twenty day period ending on the last complete trading day before conversion. Deferred financing fees and original issuance discount on the note were $9,500. The derivative liability applied as a discount on the note was $73,000 and is accreted over the life of the note.

	In connection with the note, the Company granted 83,333 warrants to the lender. Each warrant can be exercised to purchase shares of common stock of the Company at a price of $0.75 per warrant for a period of five years. As the entire net proceeds of $73,000 were first allocated to the derivative liability which is measured at fair value on a recurring basis, the residual value of $Nil was allocated to the equity-classified warrants.

	During the nine months ended September 30, 2020, the Company issued 3,409,090 common shares with a fair value of $193,296 for the conversion of $22,500 of principal resulting in a loss on settlement of debt of $170,796. On September 18, 2020, the Company paid cash of $60,000 to settle all outstanding principal and interest on the note, resulting in a gain on the settlement of debt totaling $8,075. As at September 30, 2020, the note and derivative liability were extinguished (December 31, 2019 - $20,795 and $105,790, respectively). During the nine months ended September 30, 2020, the Company accreted $61,705 (2019 - $Nil), of the debt discount to finance costs.

(q)	During the year ended December 31, 2019, a convertible promissory note with an outstanding principal balance of $226,000 was assigned to another unrelated party with no changes to the terms of the note upon assignment. The note is unsecured, bears interest at 12% per annum, was due on August 31, 2019 and is convertible into common shares at a conversion price equal to 55% of the lowest trading price during the previous fifteen trading days prior to the conversion date, including the conversion date. Interest will be accrued and payable at the time of promissory note repayment. On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $285,428 for 285 Series C Preferred Shares. As at September 30, 2020, the note and derivative liability were extinguished (December 31, 2019 - $226,000 and $289,462, respectively).

(r)	During the year ended December 31, 2019, a convertible promissory note with an outstanding principal balance of $258,736 was assigned to another unrelated party with no changes to the terms of the note upon assignment. The note is unsecured, bears interest at 12% per annum, was due on September 19, 2018 and is convertible into common shares at a conversion price equal to the lessor of: (i) the lowest trading price during the previous fifteen trading days prior to the date of the promissory note; or (ii) 55% of the lowest trading price during the previous fifteen days prior to the latest complete trading day prior to the conversion date. Interest will be accrued and payable at the time of promissory note repayment.

	On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $342,641 for 343 Series C Preferred Shares. As at September 30, 2020, the note and derivative liability were extinguished (December 31, 2019 - $258,736 and $351,774, respectively).

(s)	During the year ended December 31, 2019, a convertible promissory note with an outstanding principal balance of $137,500 was assigned to another unrelated party with no changes to the terms of the note upon assignment. The note is unsecured, bears interest at 12% per annum, was due on January 22, 2020 and is convertible into common shares at a conversion price equal to 55% of the lowest trading price during the previous fifteen trading days prior to the conversion date, including the conversion date. Interest will be accrued and payable at the time of promissory note repayment.
	On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $166,401 for 166 Series C Preferred Shares. As at September 30, 2020, the note and derivative liability were extinguished (December 31, 2019 - $137,500 and $170,201, respectively).

(t)	On February 10, 2020, the Company issued a convertible promissory note in the principal amount of $119,600. The note is unsecured, bears interest at 8% per annum, is due on February 10, 2021, and is convertible into common shares of the Company, beginning 180 days from the date of the note up to maturity or repayment, at a price equal to 80% of the average of the lowest two trading prices for the common stock during the fifteen trading days before conversion. Deferred financing fees and original issuance discount on the note were $22,135. The derivative liability applied as a discount on the note was $97,465 and is accreted over the life of the note.

	During the nine months ended September 30, 2020, the Company issued 11,549,008 common shares with a fair value of $549,376 for the conversion of $119,600 of principal resulting in a loss on settlement of debt of $429,776.

	As at September 30, 2020, the note and derivative liability were extinguished. During the nine months ended September 30, 2020, the Company accreted $119,600, of the debt discount to finance costs.

(u)	On March 2, 2020, the Company issued a convertible promissory note in the principal amount of $60,950. The note is unsecured, bears interest at 8% per annum, is due on March 2, 2021, and is convertible into common shares of the Company, beginning 180 days from the date of the note up to maturity or repayment, at a price equal to 80% of the average of the lowest two trading prices for the common stock during the fifteen trading days before conversion. Deferred financing fees and original issuance discount on the note were $10,950. The derivative liability applied as a discount on the note was $50,000 and is accreted over the life of the note.

	On September 18, 2020, the Company paid cash, received pursuant to the promissory note outlined in Note 8(g), of $78,643 for outstanding principal and interest on the note including a prepayment penalty of $15,221 to settle the debt.

	As at September 30, 2020, the note and derivative liability were extinguished. During the nine months ended September 30, 2020, the Company accreted $60,950, of the debt discount to finance costs.

(v)	On April 15, 2020, the Company issued a convertible promissory note in the principal amount of $60,950. The note is unsecured, bears interest at 8% per annum, is due on April 15, 2021, and is convertible into common shares of the Company, beginning 180 days from the date of the note up to maturity or repayment, at a price equal to 80% of the average of the lowest two trading prices for the common stock during the fifteen trading days before conversion. Deferred financing fees and original issuance discount on the note were $10,950. The derivative liability applied as a discount on the note was $50,000 and is accreted over the life of the note.

	On September 18, 2020, the Company paid cash of $66,000 to settle all outstanding principal and interest on the note, resulting in a loss on the settlement of debt totaling $2,966. As at September 30, 2020, the note and derivative liability were extinguished. During the nine months ended September 30, 2020, the Company accreted $60,950, of the debt discount to finance costs.

(w)	On August 31, 2020, the Company issued a convertible promissory note in the principal amount of $166,650 with a 10% original issuance discount totaling $16,650, for net proceeds of $150,000. The note is unsecured, bears interest at 10% per annum, is due and payable on demand, and is convertible into common shares of the Company, at a price equal to the lesser of (a) five cents ($0.05) per share or (b) seventy percent (70%) of the lowest traded price for the Company’s common stock during the fifteen (15) trading days preceding the relevant conversion.
	On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $167,974 for 168 Series C Preferred Shares. As at September 30, 2020, the note was extinguished.

(x)	On September 17, 2020, the Company issued a convertible promissory note in the principal amount of $288,860 with a 10% original issuance discount totaling $28,860, for net proceeds of $260,000. The note is unsecured, bears interest at 10% per annum, is due on June 17, 2021, and is convertible into common shares of the Company at a price equal to the lesser of (a) four cents ($0.04) per share or (b) seventy percent (70%) of the lowest traded price for the Company’s common stock during the fifteen (15) trading days preceding the relevant conversion.

	On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $289,889 for 290 Series C Preferred Shares. As at September 30, 2020, the note was extinguished.

(y)	On August 30, 2017, the Company issued a convertible promissory note in the principal amount of $15,000. The note is unsecured, bears interest at 10% per annum, is due on August 30, 2018, and is convertible into common shares of the Company at a price equal to a 20% discount of the average closing bid price for the Company’s common stock during the five (5) trading days immediately preceding a conversion date, with a floor price of $0.005. The note was issued as a Commitment fee and is included in Finance costs during the nine months ending September 30, 2020.

	On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $18,131 for 18 Series C Preferred Shares. As at September 30, 2020, the note was extinguished.

(z)	On May 2, 2019, the Company issued a convertible promissory note in the principal amount of $10,000. The note is unsecured, bears interest at 8% per annum, is due on May 2, 2020, and is convertible into common shares of the Company at a price equal to a 58% of the lowest traded price of the Company’s common stock during the five (5) trading days immediately preceding the conversion date. The note was issued for proceeds paid directly to legal counsel for legal fees, related to the 2019 S-1 Registration Statement, and is included in Accounting & Legal during the nine months ending September 30, 2020.

	On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $11,841 for 12 Series C Preferred Shares. As at September 30, 2020, the note was extinguished.

(aa)	On June 10, 2019, the Company issued a convertible promissory note in the principal amount of $15,000. The note is unsecured, bears interest at 10% per annum, is due on August 30, 2018, and is convertible into common shares of the Company at a price equal to a 20% discount of the average closing bid price for the Company’s common stock during the five (5) trading days immediately preceding a conversion date, with a floor price of $0.005. The note was issued for proceeds paid directly to a third party for audit fees, related to the 2019 S-1 Registration Statement, and is included in Accounting & Legal during the nine months ending September 30, 2020.

	On September 30, 2020, pursuant to the Exchange Agreement described above, the Company settled outstanding principal and interest of $51,999 for 52 Series C Preferred Shares. As at September 30, 2020, the note was extinguished.

Note 10 – DERIVATIVE LIABILITIES

The following range of inputs and assumptions were used to value the derivative liabilities outstanding during the nine months ended September 30, 2020 and year ended December 31, 2019, assuming no dividend yield:

	September 30, 2020		December 31, 2019
Expected volatility	243 - 531	%	176 - 374	%
Risk free interest rate	0.1 - 0.2	%	1.6 - 2.6	%
Expected life (years)	0.25 - 0.92		0.25 - 2.0

A summary of the activity of the derivative liabilities is shown below:

Balance, December 31, 2018	$	2,188,354
New issuances		939,919
Change in fair value		(271,704	)
Balance, December 31, 2019		2,856,569
New issuances		197,465
Extinguished		(4,590,622	)
Change in fair value		7,386,252
Balance, September 30, 2020	$	5,849,664

Note 11 - LEASES

The Company leases certain assets under lease agreements. On April 1, 2020, the Company terminated its showroom space lease, resulting in a gain of $11,294 which is included in general and administrative expense. On May 31, 2020, the Company’s office leases expired.

On July 10, 2020, the Company entered into a lease agreement for retail, showroom and warehouse space in Fairfield, CA (the “Fairfield Lease”). Upon initial recognition of the lease, the Company recognized right-of-use assets of $164,114 and lease liabilities of $156,364. The difference between the recorded operating lease assets and lease liabilities is due to prepaid rent deposits to be applied to first months’ rent of $7,750. The lease included a rent-free period with rent payments commencing on October 1, 2020. As of September 30, 2020, Fairfield Lease had a remaining term of 1.92 years. The Fairfield Lease also included a refundable security deposit of $7,750 which is included in prepaid expenses and deposits at September 30, 2020.

On July 14, 2020, the Company entered into a lease agreement for office space in Surrey, BC (the “Croydon Lease”). Upon initial recognition of the lease, the Company recognized right-of-use assets of $133,825 and lease liabilities of $125,014. The difference between the recorded operating lease assets and lease liabilities is due to prepaid rent deposits to be applied to first months’ rent of $8,811 (CDN$11,948). The lease included a rent-free period with rent payments commencing on September 1, 2020. As of September 30, 2020, the lease had a remaining term of 2.83 years.

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

Right-of-use assets	September 30, 2020			December 31, 2019
Cost	$	297,939		$	178,202
Accumulated depreciation		(27,337	)		(39,671	)
	$	270,602		$	138,531

Lease liability	September 30, 2020
Current portion	$	117,443
Long-term portion		174,316
Total lease liability	$	291,759

	December 31, 2019
Current portion		62,935
Long-term portion		74,225
Total lease liability	$	137,160

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

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

Operating lease expense for the three and nine months ended September 30, 2020 was $24,034 and $54,803, respectively (2019 - $18,418 and $55,231, respectively) and is recorded in general and administration expense.

Future minimum lease payments to be paid by the Company as a lessee for operating leases as of September 30, 2020 for the next three years are as follows:

Remainder of 2020	$	36,375
2021		147,393
2022		119,536
2023		33,125

Total future minimum lease payments	$	336,429
Discount		(44,670	)

Total	$	291,759

Note 12 – MEZZANINE EQUITY

Authorized

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

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

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

Mezzanine Preferred Equity Transactions

During the nine months ended September 30, 2020:

●

On September 30, 2020, the Company entered into an Exchange Agreement, as outlined in Note 9, to settle outstanding convertible debt and accrued interest in exchange for 2,347 shares of Series C preferred shares with an aggregate carrying amount of $2,348,208. The shares were all issued subsequently on October 14, 2020.

●

On September 30, 2020, the Company into a Securities Purchase Agreement (the “SPA”) whereby the Company agrees to sell and the Purchaser agrees to purchase, in a series of closings (the “Closings”), up to 200 shares of Series C preferred shares at a price of $1,000 per share. At the First Closing, the Company agrees to issue 250 shares of Series C preferred shares, representing 200 Purchased Shares and 50 Commitment Shares.

During the year ended December 31, 2019:

●

The Company settled various accounts payable balances, debt and preferred shares in exchange for shares of common stock to be issued and warrants. Included in these settlements were 100,500 and 4,649,908 shares of Series D and Series E preferred shares, respectively, with an aggregate carrying value of $6,668,643.

Note 13 – PREFERRED STOCK

Authorized

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

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

Preferred Stock Transactions

During the nine months ended September 30, 2020:

●

On May 21, 2020, the Company issued an aggregate of 136 shares of Series B convertible preferred shares to various parties for past services to the Company, which included 122 issued to related parties and 2 issued to a former director of the Company. These preferred shares were valued at $767,040, based on the fair value of the underlying common stock, discounted for the six month hold period before the preferred shares can be converted. The issuance is recorded under compensation expense.

During the year ended December 31, 2019:

	●	The Company settled various accounts payable balances, debt and preferred shares in exchange for shares of common stock to be issued and warrants. Included in these settlements were 132 shares of Series B Preferred Stock with a carrying value of $4,872,732.

	●	On October 29, 2019, the Company issued an aggregate of 200,376 shares of Series A preferred shares at value of $200 to three directors of the Company.

Note 14 – COMMON STOCK AND ADDITIONAL PAID IN CAPITAL

Authorized

On March 26, 2019, the Company effected a reverse stock split of its shares of common stock on a four thousand (4,000) old for one (1) new basis. Upon effect of the reverse split, authorized capital decreased from 3,000,000,000 shares of common stock to 750,000 shares of common stock. Subsequently, on May 23, 2019, an increase in common shares to 150,000,000 was authorized, with a par value of $0.001. These consolidated financial statements give retroactive effect to such reverse stock split named above and all share and per share amounts have been adjusted accordingly, unless otherwise noted. Each share of common stock is entitled to one vote.

Common Stock Transactions

During the nine months ended September 30, 2020:

	●	The Company issued an aggregate of 191,865 shares of common stock for cash proceeds of $100,031.

	●	The Company issued an aggregate of 2,003,000 shares of common stock with a fair value of $783,899 in exchange for services.

	●	The Company issued an aggregate of 9,430,146 shares of common stock with a fair value of $7,402,254 to satisfy shares to be issued.

	●	The Company issued 6,462,244 shares of common stock with a fair value of $136,457 for share-settled debt.

	●	The Company issued an aggregate of 52,937,999 shares of common stock with a fair value of $3,577,005 upon the conversion of $777,872 of convertible debentures and accrued interest, as outlined in Note 9, per the table below:

Date issued	Common shares issued (#)		Fair value⁽¹⁾		Converted balance⁽²⁾		Loss on conversion
January 7, 2020		53,764	$	53,226	$	20,000	$	(33,226	)
February 4, 2020		135,802		127,654		19,500		(108,154	)
February 7, 2020		151,234		142,160		24,000		(118,160	)
February 26, 2020		151,515		45,455		19,500		(25,955	)
February 26, 2020		140,151		39,242		18,000		(21,242	)
March 9, 2020		170,000		27,200		13,090		(14,110	)
March 9, 2020		195,547		68,441		12,500		(55,941	)
March 11, 2020		180,505		63,177		11,500		(51,677	)
April 1, 2020		140,000		9,800		3,889		(5,911	)
April 1, 2020		220,000		15,400		6,166		(9,234	)
April 2, 2020		218,678		16,379		6,500		(9,879	)
April 21, 2020		264,026		24,649		7,500		(17,149	)
May 15, 2020		258,000		25,800		7,166		(18,634	)
May 19, 2020		426,000		80,940		17,338		(63,602	)
May 19, 2020		675,675		100,000		29,500		(70,500	)
May 19, 2020		350,000		33,250		12,205		(21,045	)
May 19, 2020		337,837		50,000		14,500		(35,500	)
May 21, 2020		298,606		56,735		12,653		(44,082	)
May 21, 2020		611,111		116,111		27,000		(89,111	)
July 8, 2020		500,000		45,000		10,500		(34,500	)
July 8, 2020		857,142		72,857		18,000		(54,857	)
July 8, 2020		600,000		22,800		11,549		(11,251	)
July 8, 2020		639,846		51,188		13,437		(37,751	)
July 8, 2020		880,952		70,476		18,500		(51,976	)
July 10, 2020		809,523		29,952		17,000		(12,952	)
July 17, 2020		1,121,212		55,948		18,500		(37,448	)
July 17, 2020		1,151,515		46,291		19,500		(26,791	)
July 20, 2020		1,130,000		45,426		17,091		(28,335	)
July 23, 2020		879,157		43,870		14,506		(29,364	)
August 3, 2020		1,309,824		35,234		14,146		(21,088	)
August 3, 2020		1,638,117		33,991		17,692		(16,299	)
August 10, 2020		1,412,525		30,553		15,255		(15,298	)
August 13, 2020		1,000,000		20,100		15,000		(5,100	)
August 13, 2020		1,130,000		25,877		11,311		(14,566	)
August 13, 2020		1,465,201		29,451		16,000		(13,451	)
August 19, 2020		1,484,615		22,269		19,300		(2,969	)
August 25, 2020		1,750,000		125,125		11,340		(113,785	)
August 25, 2020		1,483,146		106,045		13,200		(92,845	)
August 25, 2020		620,033		44,332		4,018		(40,314	)
August 25, 2020		1,490,000		106,535		8,851		(97,684	)
August 25, 2020		1,893,939		135,417		12,500		(122,917	)
August 26, 2020		1,818,182		130,000		12,000		(118,000	)
August 27, 2020		1,808,989		156,839		16,100		(140,739	)
August 31, 2020		1,808,989		84,842		16,100		(68,742	)
September 1, 2020		1,560,000		79,560		9,266		(70,294	)
September 2, 2020		1,808,989		80,283		16,100		(64,183	)
September 9, 2020		1,808,989		66,119		16,100		(50,019	)
September 10, 2020		2,727,273		92,045		18,000		(74,045	)
September 14, 2020		1,560,000		46,566		9,266		(37,300	)
September 17, 2020		345,291		12,879		7,700		(5,179	)
September 18, 2020		2,938,117		113,705		19,039		(94,666	)
September 22, 2020		1,515,151		57,879		10,000		(47,879	)
September 24, 2020		412,831		51,232		5,699		(45,533	)
September 29, 2020		2,600,000		310,700		15,444		(295,256	)
Total		52,937,999	$	3,577,005	$	777,872	$	(2,799,133	)

	⁽¹⁾	Fair values are derived based on the closing price of the Company’s common stock on the date of the conversion notice.

	⁽²⁾	Converted balance includes portions of principal, accrued interest, financing fees, interest penalties and other fees converted upon the issuance of shares of common stock.

During the year ended December 31, 2019:

	●	The Company issued an aggregate of 72,295 shares of common stock with a fair value of $63,437 in exchange for services.

	●	The Company issued an aggregate of 32,000 shares of common stock with a fair value of $37,760 as partial settlement for accounts payable.

	●	The Company issued an aggregate of 407,536 shares of common stock with a fair value of $506,468 upon the conversion of $180,642 of convertible debentures, accrued interest and accounts payable per the table below:

Date issued	Common shares issued (#)		Fair value⁽¹⁾		Converted balance⁽²⁾		Loss on conversion
January 22, 2019		10,189	$	28,527	$	15,690	$	(12,837	)
March 11, 2019		18,606		37,211		12,280		(24,931	)
March 15, 2019		27,137		54,238		17,899		(36,339	)
June 17, 2019		45,216		58,781		31,651		(27,130	)
June 20, 2019		34,450		36,517		19,895		(16,622	)
July 17, 2019		37,900		33,352		5,628		(27,724	)
August 26, 2019		40,000		27,020		6,620		(20,400	)
September 18, 2019		39,500		49,376		8,255		(41,121	)
October 11, 2019		35,000		44,450		13,475		(30,975	)
November 13, 2019		47,500		77,899		18,810		(59,089	)
November 7, 2019		23,149		18,519		10,000		(8,519	)
December 19, 2019		48,889		40,578		22,000		(18,578	)
Total		407,536	$	506,468	$	182,203	$	(324,265	)

	⁽¹⁾	Fair values are derived based on the closing price of the Company’s common stock on the date of the conversion notice.

	⁽²⁾	Converted balance includes portions of principal, accrued interest, accounts payable, financing fees and interest penalties converted upon the issuance of shares of common stock.

Common stock to be issued

Common stock to be issued as at September 30, 2020 consists of:

●

4,864,285 shares valued at $77,829 to be issued pursuant to settlement of share-settled debt.

Warrants

During the nine months ended September 30, 2020, the Company granted 2,829,859 warrants with a contractual life of five years and exercise price of $0.25 per share in exchange for strategic advisory services. Warrants were valued at $465,248 using the Black Scholes Option Pricing Model with the assumptions outlined below. Expected life was determined based on historical exercise data of the Company.

	September 30, 2020
Risk-free interest rate		0.88	%
Expected life		5.0 years
Expected dividend rate		0	%
Expected volatility		266	%

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

	Warrants		Weighted average exercise price
Outstanding at year December 31, 2019		6,859,954	$	0.77
Granted		2,829,859		0.25
Exercised		-		-
Expired		-		-
Outstanding as at September 30, 2020		9,689,813	$	0.62

As at September 30, 2020, the weighted average remaining contractual life of warrants outstanding was 2.94 years with an intrinsic value of $Nil.

Note 15 – RELATED PARTY TRANSACTIONS

As at September 30, 2020, the Company owed $274,778 (December 31, 2019 - $263,409) to the President, CEO, and CFO of the Company for management fees and salaries, which has been recorded in trade and other payables. The amounts owed and owing are unsecured, non-interest bearing, and due on demand. During the nine months ended September 30, 2020 the Company incurred $150,000 (2019 - $100,000) in salaries to the President, CEO, and CFO of the Company and made payments of $60,000.

As at September 30, 2020, the Company owed $6,950 (CDN$9,450) (December 31, 2019 - $7,260 (CDN$9,450)) to a company controlled by the son of the President, CEO, and CFO of the Company for subcontractor services. The balance owing has been recorded in trade and other payables. The amount owing is unsecured, non-interest bearing, and due on demand.

Note 16 – COMMITMENTS

Product Warranties

The Company’s warranty policy generally covers a period of two years which is also covered by the manufacturer warranty. Thus, any warranty costs incurred by the Company are immaterial.

Indemnifications

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

Note 17 – CONTINGENCIES

On September 7, 2016, Chetu Inc. filed a Complaint for Damage in Florida to recover an unpaid invoice amount of $27,335 plus interest of $4,939. The invoice was not paid due to a service dispute. As at September 30, 2020, included in trade and other payables is $47,023 (December 31, 2019 - $40,227) related to this unpaid invoice, interest and legal fees.

On May 24, 2017, the Company received a notice of default from Coastal Investment Partners LLC (“Coastal”), on three 8% convertible promissory notes issued by the Company in aggregate principal amount of $261,389 and commenced a lawsuit on June 12, 2017 in the United States District Court, Southern District of New York. Coastal alleges that the Company failed to deliver shares of common stock underlying the Coastal notes, and thus giving rise to an event of default. Coastal seeks damages in excess of $250,000 for breach of contact damages, and legal fees incurred by Coastal with respect to the lawsuit.

On June 13, 2017, Coastal filed a Complaint and Motion for a Preliminary Injunction seeking conversion of the principal amount of a note issued by it to the Company into common stock of the Company. The Court issued an Order to Show Cause as to why a preliminary injunction should not be issued on June 27, 2017, and the Company opposed Coastal’s Motion. A hearing on the Motion for Preliminary Injunction was held on July 26, 2017. For the following reasons, the Court denied Coastal’s Motion for a Preliminary Injunction. A) The Company also filed a Cross Motion to Dismiss on the grounds that the $72,500 Note violates New York’s criminal usury law. The Court did not address this Motion at that time and has set a separate briefing schedule for it. This action is still pending. As at September 30, 2020 the principal balance and accrued interest on this convertible note is included on the consolidated balance sheet under convertible notes payable.

On October 10, 2017, a vendor filed a complaint for Breach of Contract with Superior Court of the State of California. The Complainant is alleging that it is contractually owed 1,848,130 shares of the Company’s common stock and is seeking damages of $270,000. In addition, a related vendor filed in the same filing a complaint for $72,000 as part of a consulting agreement the Company executed. The Company is currently in the process of negotiating a settlement and no accrual has been recorded to date due to the uncertainty of the settlement amount.

On April 9, 2018, the Company received a share-reserve increase letter from JSJ Investments Inc. (“JSJ”) pursuant to the terms of a 10% convertible promissory note issued to the Company in the principal amount of $135,000. On April 24, 2018, the Company received a notice of default from JSJ for failure to comply with the share-reserve increase and on April 30, 2018 demanded payment in full of the default amount totaling $172,845. On May 7, 2018, JSJ commenced a lawsuit in the United States District Court, District of Dallas County, Texas. JSJ alleges that the Company failed to comply with the share-reserve increase letter, thus giving rise to an event of default, and failed to pay the outstanding default amount due under the terms of the note. JSJ seeks damages in excess of $200,000 but not more than $1,000,000, which consists of the principal amount of the note, default interest, and legal fees incurred by JSJ with respect to the lawsuit. This action is still pending but as at September 30, 2020, JSJ has negotiated a reduced amount with a private investor. As at September 30, 2020, the principal balance and accrued interest on this convertible note is included on the consolidated balance sheet under convertible notes payable. Subsequent to September 30, 2020, the Company entered into a Settlement Agreement with JSJ for full and final satisfaction if its claims for $100,000 (the “Settlement Payment”) paid in cash on or before November 10, 2020. Upon receipt of the Settlement Payment, JSJ agreed to provide (a) a settlement agreement and release of all its claims against the Company; and (b) a consent dismissal order in B.C. Supreme Court Action No. 1911876 on a “without costs” basis. The Company paid cash of $100,000 on November 10, 2020 in satisfaction of the agreement. See Note 9(e).

Note 18 – SUPPLEMENTAL CASH FLOW INFORMATION

	Nine-months ended
	September 30, 2020		September 30, 2019

Cash paid during the period for:
Income tax payments	$	—	$	—
Interest payments	$	2,676	$	2,513

Non-cash investing and financing transactions:
Shares issued for convertible notes payable and accrued interest	$	3,577,005	$	215,275
Shares issued and to be issued for share-settled debt	$	214,286		$
Initial recognition of lease assets	$	—	$	51,203
Initial recognition of lease liabilities	$	—	$	47,118

Note 19 – SUBSEQUENT EVENTS

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

The recent outbreak of the coronavirus, also known as “COVID-19”, has spread across the globe and is impacting worldwide economic activity. Conditions surrounding the coronavirus continue to rapidly evolve and government authorities have implemented emergency measures to mitigate the spread of the virus. The outbreak and the related mitigation measures may have an adverse impact on global economic conditions as well as on the Company’s business activities. The extent to which the coronavirus may impact the Company’s business activities will depend on future developments, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions, business disruptions, and the effectiveness of actions taken in Canada and other countries to contain and treat the disease. These events are highly uncertain and as such, the Company cannot determine their financial impact at this time.

Subsequent to September 30, 2020, the Company issued:

	●	8,734,721 shares of common stock for conversion of 521 Series C Preferred Shares with an aggregate carrying value of $521,000.

	●	2,000,000 shares of common stock to a third party for advisory services valued at $100,000 and data deliverables valued at $300,000 pursuant to a Services Agreement and a Data Delivery Agreement, dated October 21, 2020, with a third party.

	●	The Company issued 250 Series C Preferred Shares in exchange for proceeds of $200,000 pursuant to the SPA on October 14, 2020, representing the First Closing of 200 Purchase Shares and 50 Commitment Shares.

	●	The Company agreed to issue 300 Series C Preferred Shares in exchange for proceeds of $300,000 pursuant to the SPA on November 6, 2020, representing the Second Closing of 300 Purchase Shares.

On November 1, 2020, the Company entered into an Advisory Services and Consulting Agreement with a third party for a term of twelve (12) months, and which may be terminated by either party after six (6) months, whereby the Company agrees to pay a non-refundable cash consulting fee of $3,500 per month as well as consideration of an amount of restricted shares of the Company’s common stock to be determined as mutually agreed upon by the parties upon the Company’s listing on a U.S. national exchange.

On November 10, 2020, the Company paid $100,000 in cash pursuant to the Settlement Agreement for full and final satisfaction of the outstanding pending litigation and all related principal and accrued interest outstanding for $100,000. See Note 9(e) and Note 17.

On November 11, 2020, the Company received a conversion notice to issue 1,622,840 shares of common stock for the conversion of 180 Series C Preferred Shares with a carrying value of $180,000. The shares have yet to be issued as of the date of this report.

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

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

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

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements. 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-Q and are subject to uncertainties, assumptions and business and economic risks. As such, our actual results could differ materially from those set forth in the forward-looking statements as a result of the factors set forth below in Part II, Item 1A, “Risk Factors,” and in our other reports filed with the Securities and Exchange Commission. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Form 10-Q may not occur, and actual results could differ materially and adversely from those anticipated or implied in our forward-looking statements.

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

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

Corporate History

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

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

On April 13, 2015, we entered into a share exchange agreement with DSG Tag Systems Inc. (“DSG”) and the shareholders of DSG 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 in exchange for the issuance to the selling shareholders of up to 20,000,000 pre-reverse split shares of our common stock on the basis of 1 common share for 5.4935 common shares of DSG.

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 as contemplated by the share exchange agreement by issuing 15,185,875 pre-reverse split shares of our common stock to shareholders of DSG who became parties to the agreement. In addition, concurrent with the closing of the share exchange agreement, we issued an additional 179,823 pre-reverse split shares of our common stock to Westergaard Holdings Ltd. in partial settlement of accrued interest on outstanding indebtedness of DSG.

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 from shareholders who became parties to the share exchange agreement and issued to these shareholders an aggregate of 18,422 pre-reverse split shares of our common stock. Following completion of these additional purchases, DSG Global Inc. owns approximately 100% of the issued and outstanding shares of common stock of DSG. An aggregate of 4,229,384 shares of Series A Convertible Preferred Stock of DSG were exchanged for 51 Series B and 3,000,000 Series E preferred shares during the year ended December 31, 2018 by Westergaard Holdings Ltd., an affiliate of Keith Westergaard, a previous member of our board of directors which have not been issued as of September 30, 2020.

The reverse acquisition was accounted for as a recapitalization effected by a share exchange, wherein DSG 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 upon the closing of the share exchange agreement.

Overview of Our Business

DSG Global, Inc., under the brand name Vantage Tag Systems Inc. (“VTS”) provides patented electronic tracking systems and fleet management solutions to golf courses and other avenues that allow for remote management of the course’s fleet of golf carts, turf equipment and utility vehicles. Their clients use VTS’s unique technology to significantly reduce operational costs, improve the efficiency plus profitability of their fleet operations, increase safety, and enhance customer satisfaction. VTS has grown to become a leader in the category of Fleet Management in the golf industry, with its technology installed in vehicles worldwide. VTS is now aggressively branching into several new streams of revenue, through programmatic advertising, licensing and distribution, as well as expanding into Commercial Fleet Management, PACER a single rider golf cart and Agricultural applications. Additional information is available at http://vantage-tag.com/

Ready Golf Ready: Our roots as a company are in golf, and our technology is changing the way golf is being played and driving new revenue for courses.

●	Vantage TAG equipped golf carts enhance fleet management.

●	Single rider carts speed up pace of play and drive rental revenue.

●	Onboard touchscreens drive revenue and offer an enhanced course experience.

●	Combination of technology and single rider carts has the ability to decrease average play time to 2:20 and drive numerous extra plays per hour.

●	Our “Pennies A Day, Pennies A Round” model provides easy entry to leasing single-rider vehicles.

In Development: DSG’s Infinity On-Board Screen Offers Gaming Revenue Potential

●	In the next 2 years, sports betting will generate $10B / licensed in 20+ States.

●	In negotiations with leading mobile gaming developers.

●	DSG’s existing infinity screens work with current gaming technology.

Business Unit Overview: On Board Media

●	38,000 courses globally.

●	26,000 courses capable of installing the DSG TAG SYSTEM with the TAG and INFINITIY.

●	Courses with INFINITY screens in carts can generate $90,000 - $110,000 in additional revenue.

●	Screens for free and own revenue generated by 250 golf courses.

●	DSG single-rider golf cars are available in any quantity for most courses on a revenue share basis with no upfront cost to the golf course.

●	Programmatic Advertising has the ability to increase revenue 4x more than standard advertising, an average increase of $200,000 - $300,000 per course.

Business Unit Overview: TAG / Fleet Management Vantage Golf Potential:

●	38,000 courses globally.

●	4 Million golf carts in the world market.

●	DSG Tech on 300 courses now, with an additional 500 courses added in 2020 driving $15 million in sales.

●	Key component of our “Pennies A Day, Pennies A Round” program.

Vantage e-Rickshaw Potential:

●	Global three-wheelers market is projected to reach $39.9 billion by 2024.

●	11,000 new e-Rickshaws hit the streets every month, with annual sales expected to increase about 9 percent by 2021.

●	Research on car-data-monetization trends and characteristics suggests that this value pool could be as large as $750 billion by 2030.

●	DSG Global, Inc. has a strategic partnership in China to integrate Vantage TAG Systems with EVs, incorporating the Company’s advanced fleet management capabilities.

Our most recent product that is used to increase the Pace of Play on the course up to 90 minutes per round is the RAPTOR. Our 3-wheel single rider allows the course to revenue share with VTS as the RAPTOR is put on the course free of charge and then allows the course to revenue share with VTS along the way. Each seat is rented to the customers for minimum $25 per round.

Components of Our Results of Operations

Revenue

We derive revenue from four different sources, as follows:

Systems sales revenue, which consists of the sales price paid by those customers who purchase or lease our TAG system hardware.

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

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

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

We recognize revenue when it satisfies a performance obligation by transferring control over a product to a customer. Revenue is measured based on the consideration the Company expects to receive in exchange for those products. In instances where final acceptance of the product is specified by the customer, revenue is deferred until all acceptance criteria have been met. We accrue for warranty costs, sales returns, and other allowances based on its historical experience.

Our revenue recognition policies are discussed in more detail under “Note 3 – Summary of Significant Accounting Policies” in the notes to our Consolidated Financial Statements included in Part I, Item 1 of this Form 10-K.

Cost of Revenue

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

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

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

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

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

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

Operating expenses & other income (expenses) We classify our operating expenses and other income (expenses) into six categories: compensation, general and administrative, warranty, foreign currency exchange, and finance costs. Our operating expenses consist primarily of sales and marketing, salaries and wages, consulting fees, professional fees, trade shows, software development, and allocated costs. Allocated costs include charges for facilities, office expenses, telephones and other miscellaneous expenses. Our other income (expenses) primarily consists of financing costs and foreign exchange gains or losses.

Compensation expense. Our compensation expenses consist primarily of personnel costs, such as employee salaries, payroll expenses, employee benefits and share-based payments to employees. This includes salaries for management, administration, engineering, sales and marketing, and service support technicians. Salaries and wages directly related to projects or research and development are expensed as incurred to their operating expense category.

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

Warranty expense (recovery). Our warranty expenses consist primarily of associated material product costs, labor costs for technical support staff, and other associated overhead. Warranty costs are expensed as they are incurred.

Bad debt. Our bad debt expense consists primarily of amounts written down for doubtful accounts recorded on trade receivables.

Depreciation and amortization. Our depreciation and amortization costs consist primarily of depreciation and amortization on fixed assets, equipment on lease and intangible assets.

Foreign currency exchange. Our foreign currency exchange consists primarily of foreign exchange fluctuations recorded in Canadian dollar (CAD), British Pounds (GBP), or Euro (EUR) at the rates of exchange in effect when the transaction occurred.

Finance costs. Our finance costs consist primarily of investor interest expense, investor commission fees, and other financing charges for obtaining debt financing.

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

Results of Operations

The following table summarizes key items of comparison and their related increase (decrease) for the three and nine months ended September 30, 2020 and 2019:

	Three months ended						Increase (Decrease)			Nine months ended						Increase (Decrease)
	30-Sept-20			30-Sept-19			2020 – 2019			30-Sept-20			30-Sept-19			2020 – 2019
		($)			($)			(%)			($)			($)			(%)
Revenues	$	334,161			453,210			-26,.3	%	$	608,328		$	1,239,280			-50.9	%
Cost of revenue		168,211			278,966			-39.7	%		246,862			617,918			-60.0	%
Gross profit		165,950			174,246			-4.8	%		361,466			621,362			-41.8	%

Operating expenses:
Compensation expense		127,836			124,898			2.4	%		1,794,304			404,654			343.4	%
General and administrative expense		472,171			277,311			54.0	%		1,143,880			727,076			57.3	%
Bad debt expense		1,921			(28,172	)		-106.8	%		17,141			(30,038	)		-157.1	%
Depreciation and amortization expense		808			759			6.5	%		2,110			3,509			-39.9	%
Total operating expenses		557,832			374,796			48.8	%		2,957,435			1,105,201			167.6	%
Loss from operations		(391,882	)		(200,550	)		95.4	%		(2,595,969	)		(483,839	)		436.5	%

Other income (expense)
Foreign currency exchange		51,006			9,165			456.5	%		(15,141	)		40,328			-137.5	%
Other income		99,171			-			100.0	%		99,171			-			100.0	%
Change in fair value of derivative instruments		(623,321	)		(4,944,521	)		-87.4	%		(2,795,630	)		(4,223,797	)		-33.8	%
Loss on extinguishment of debt		(1,954,383	)		(80,411	)		2,330.5	%		(2,772,276	)		(208,665	)		1,228.6	%
Finance costs		(339,833	)		(339,718	)		0.0	%		(1,204,251	)		(959,748	)		25.5	%
Total other expense		(2,767,360	)		(5,355,385	)		-48.3	%		(6,688,127	)		(5,351,882	)		25.0	%

Net loss		(3,159,242	)		(5,555,935	)		-43.1	%		(9,238,804	)		(5,835,721	)		59.1	%

Comparison of the three and nine months ended September 30, 2020 and 2019:

Revenue

	For the Three Months Ended September 30,							For the Nine Months Ended September 30,
	2020		2019		% Change			2020		2019		% Change

Revenue	$	334,161	$	453,210		(26.3	)	$	608,328		1,239,280		(50.9	)

Revenue decreased by $119,049 or 26.3%, for the three months ended September 30, 2020 as compared to the three months ended September 30, 2019. Revenue decreased by $630,952 or 50.9%, for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019.

Sales decreased for the three and nine months ended, year over year, as the result of challenges related to COVID-19 and normal customer attrition. This compares to the comparative period in which the Company experienced growth as a result of aggressive marketing and installation of the new Infinity suite of products.

Cost of Revenue

	For the Three Months Ended September 30,							For the Nine Months Ended September 30,
	2020		2019		% Change			2020		2019		% Change

Cost of revenue	$	168,211	$	278,964		(39.7	)	$	246,862	$	617,918		(60.0	)

Cost of revenue decreased by $110,753, or 39.7%, for the three months ended September 30, 2020 as compared to the three months September 30, 2019. The table below outlines the differences in detail:

	For the Three Months Ended
	September 30, 2020		September 30, 2019			Difference			% Difference
Cost of goods	$	142,517	$	258,261		$	(115,744	)		(44.8	)
Labour		-		30			(30	)		(100.0	)
Mapping & freight costs		7,929		10,342			(2,413	)		(23.3	)
Wireless fees		17,765		10,340			7,425			71.8
Inventory adjustments & write offs		-		(9	)		9			(100.0	)
	$	168,211	$	278,964		$	(110,753	)		(39.7	)

Cost of sales decreased for the three months ended, year over year, primarily due challenges related to COVID-19 and normal customer attrition. This decrease was consistent with the decrease in revenue for the same period.

Cost of revenue decreased by $371,056, or 60.0%, for the nine months ended September 30, 2020 as compared to the three months September 30, 2019. The table below outlines the differences in detail:

	For the Nine Months Ended
	September 30, 2020		September 30, 2019			Difference			% Difference
Cost of goods	$	176,265	$	554,531		$	(378,266	)		(68.2	)
Labour		-		8,997			(8,997	)		(100.0	)
Mapping & freight costs		25,304		22,454			2,850			12.7
Wireless fees		45,293		34,708			10,585			30.5
Inventory adjustments & write offs		-		(2,772	)		2,772			(100.0	)
	$	246,862	$	617,918		$	(371,056	)		(60.0	)

Cost of sales decreased for the nine months ended, year over year, primarily due to challenges related to COVID-19 and normal customer attrition. This decrease was consistent with the decrease in revenue for the same period.

Compensation Expense

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2020		2019		% Change		2020		2019		% Change

Compensation expense	$	127,932	$	124,898		2.4	$	1,794,304	$	404,654		343.4

Compensation expense increased by $3,034, or 2.4%, for the three months ended September 30, 2020 as compared to the three months ended September 30, 2019. Compensation expense increased by $1,389,650, or 343.4%, for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019 primarily as a result of non-cash warrants and shares issued for consulting services during the period.

General and Administration Expense

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2020		2019		% Change		2020		2019		% Change

General & administration expense	$	427,171	$	277,311		54.0	$	1,143,880	$	727,076		57.3

General & administration expense decreased by $149,860 or 54.0% for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. The table below outlines the differences in detail:

	For the Three Months Ended

	September 30, 2020		September 30, 2019			Difference			% Difference
Accounting & legal	$	90,042	$	13,918		$	76,124			546.9
Marketing & advertising		40,068		(1,378	)		41,446			(3007.7	)
Subcontractor & commissions		102,178		55,750			46,428			83.3
Hardware		59,277		14			59,263			423,307.1
Office expense, rent, software, bank & credit card charges, telephone & meals		135,606		209,007			(73,401	)		(35.1	)
	$	427,171	$	277,311		$	149,860			54.0

The overall decrease general and admin expenses was primarily due to decreases in accounting and legal expenses and marketing and advertising expenses, partially offset by an increase in subcontractor expenses.

General & administration expense increased by $416,804 or 57.3% for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The table below outlines the differences in detail:

	For the Nine Months Ended

	September 30, 2020		September 30, 2019		Difference			% Difference
Accounting & legal	$	222,131	$	98,773	$	123,358			124.9
Marketing & advertising		215,087		44,415		170,672			384.3
Subcontractor & commissions		272,267		183,061		89,206			48.7
Hardware		60,126		3,828		56,298			1,470.7
Office expense, rent, software, bank & credit card charges, telephone & meals		374,269		396,999		(22,730	)		(5.7	)
	$	1,143,880	$	727,076	$	416,804			57.3

The overall increase general and admin expenses was primarily due to increases in marketing and advertising, general office expenses and accounting and legal expenses. Marketing and advertising increased as a result of non-cash shares issued for investor relations services. General office expenses increased as a result of greater trade show and operating lease expenses in the current period. Accounting and legal expenses increased as a result of lower expenses in the prior period from delays in preparing and issuing financial statements for the prior period as well as due to one time charges which we incurred in relation to the Exchange Agreement.

Foreign Currency Exchange

	For the Three Months Ended September 30,								For the Nine Months Ended September 30,
	2020			2019			% Change		2020		2019			% Change

Foreign currency exchange (gain) loss	$	(51,006	)	$	(9,165	)		456.5	$	15,141	$	(40,328	)		(137.5	)

For the three months ended September 30, 2020, we recognized a $51,006 foreign exchange gain as compared to a $9,165 foreign exchange gain for the three months ended September 30, 2019. For the nine months ended September 30, 2020, we recognized a $15,141 foreign exchange loss as compared to a $40,328 foreign exchange gain for the nine months ended September 30, 2019. The changes were primarily due to unfavorable changes in foreign currency rates on payables, receivables, loans and other foreign balances denominated in currencies other than the functional currencies of the legal entities in which the transactions are recorded. Foreign currency fluctuations are primarily from the United States dollar, Canadian dollar, Euro and British pound.

Other (Expenses) Income

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2020		2019		% Change		2020		2019		% Change

Other (expense) income	$	99,171		$ Nil		100.0	$	99,171		$ Nil		100.0

For the three and nine months ended September 30, 2020, we recognized $99,171 and $99,171, respectively in other income pursuant to funds received under the Canada Emergency Wage Subsidy (CEWS) pursuant to COVID-19 for employee wage relief.

Change in Fair Value of Derivative Instruments

	For the Three Months Ended September 30,							For the Nine Months Ended September 30,
	2020		2019		% Change			2020		2019		% Change

Change in fair value of derivative instruments	$	623,321	$	4,944,421		(87.4	)	$	2,795,630	$	4,223,797		(33.8	)

Derivative loss decreased by $4,944,421 or 87.4%, for the three months ended September 30, 2020 as compared to the three months ended September 30, 2019. The Company had a loss on derivatives of $623,321 in the current period due to the Company’s stock price movement near period end and increases in the volatility of the Company’s stock price, partially offset by a significant settlement of derivative instruments. The Company had a loss on derivatives of $4,944,421 in the prior period due to significant increases in the volatility of the Company’s common stock price during the period.

Derivative loss decreased by $1,428,167 or 33.8%, for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019. The Company had a loss on derivatives of $2,795,630 in the current period due to the Company’s stock price movement near period end and increases in the volatility of the Company’s stock price, partially offset by a significant settlement of derivative instruments. The Company had a loss on derivatives of $4,223,797 in the prior period due to increase in the volatility of the Company’s common stock price during the period.

Loss on Extinguishment of Debt

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2020		2019		% Change		2020		2019		% Change

Loss on extinguishment of debt	$	1,954,383	$	80,411		2,330.5	$	2,772,276	$	208,665		1,228.6

Loss on extinguishment of debt increased by $1,873,972 or 2,330.5% to a loss of $1,954,383, for the three months ended September 30, 2020 as compared to a loss of $80,411 for the three months ended September 30, 2019. Loss on extinguishment of debt increased by $2,563,611 or 1,228.6% to a loss of $2,772,276, for the nine months ended September 30, 2020 as compared to a loss of $208,665 for the nine months ended September 30, 2019. These increases were primarily a result of more conversions of convertible debt and accrued interest in the current period and decreases in the strike price due to the Company’s stock price movement.

Finance Costs

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2020		2019		% Change		2020		2019		% Change

Finance costs	$	339,833	$	339,718		0.00	$	1,204,251	$	959,748		25.5

Finance costs increased by $115 or 0.0%, for the three months ended September 30, 2020 as compared to the three months ended September 30, 2019. Finance costs increased by $244,503 or 25.5%, for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019. Finance costs increased due to greater debt outstanding during the current period in addition to elevated penalty interest rates on debt in default.

Net Loss

	For the Three Months Ended September 30,									For the Nine Months Ended September 30,
	2020			2019			% Change			2020			2019			% Change

Net income (loss)	$	(3,159,242	)	$	(5,555,935	)		(43.1	)	$	(9,284,096	)	$	(5,835,721	)		59.1

As a result of the above factors, net loss decreased by $2,396,693 or 43.1% for the three months ended September 30, 2020 as compared to the three months ended September 30, 2019 and increased by $3,448,375 or 59.1% for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019.

Liquidity and Capital Resources

From our incorporation on April 17, 2008 through September 30, 2020, we have financed our operations, capital expenditures and working capital needs through the sale of common shares and the incurrence of indebtedness, including term loans, convertible loans, revolving lines of credit and purchase order financing. At September 30, 2020, we had $10,413,521 in total liabilities, the majority of which matures within the next twelve months.

We had cash of $62,337 at September 30, 2020, compared to $25,494 at December 31, 2019. We had a working capital deficit of $9,626,553 as of September 30, 2020 compared to working capital deficit of $8,376,433 as of December 31, 2019.

Liquidity and Financial Condition

Our financial position as of September 30, 2020 and December 31, 2019, and the changes for the periods then ended are as follows:

Working Capital

	At September 30, 2020			At December 31, 2019
Current assets	$	382,420		$	250,800
Current liabilities	$	10,008,973		$	8,627,233
Working capital	$	(9,626,553	)	$	(8,376,433	)

Cash Flow Analysis

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

	September 30,
	2020			2019

Net cash used in by operating activities	$	(669,096	)	$	(652,026	)
Net cash used in investing activities		(2,233	)		-
Net cash provided by financing activities		717,350			766,210
Effect of exchange rate changes on cash and cash equivalents		(9,178	)		-
Net increase in cash		36,843			114,184
Cash at beginning of period		25,494			5,059
Cash at end of period	$	62,337		$	119,243

Net Cash Used in Operating Activities. During the nine months ended September 30, 2020, cash used in operations totaled $669,096. This reflects the net loss of $9,284,097 adjusted for $8,615,001 changes in non-cash working capital items and adjustments for non-cash items. Non-cash and working capital adjustments consisted primarily of non-cash change in fair value of derivative liabilities of $2,795,630, non-cash shares and warrants issued for services of $1,550,939, loss on extinguishment of debt of $2,772,276, non-cash accretion of discounts on debt of $792,378 and increases in trade payables and accruals of $697,686 and deferred revenues of $65,103.

Net Cash (Used in) Provided by Investing Activities. During the nine months ended September 30, 2020, cash used in investing activities totaled $2,233. This was due to a one-time purchase of property, plant and equipment during the current period. The Company had no investing activities in the nine months ended September 30, 2019.

Net Cash Provided by Financing Activities. Net cash from financing activities during the nine months ended September 30, 2020 totaled $717,350, from various note and loan facilities entered into during the period and the issuance of common shares, partially offset by repayments of notes payable. Net cash provided by financing activities during the nine months ended September 30, 2019 was $766,210 from various note and loan facilities entered during the period.

Outstanding Indebtedness

Our current indebtedness as of September 30, 2020 is comprised of the following:

	●	Unsecured loan payable with an outstanding principal amount of $317,500, bearing interest at 18% per annum;

	●	Unsecured loan payable with an outstanding principal amount of $250,000, bearing interest at 10% per annum, with a minimum interest amount of $25,000, mature and in default;

	●	Unsecured loan payable with an outstanding principal amount of $250,000, bearing interest at 10% per annum, is due on demand, and convertible into common shares at $1.75 per share;

	●	Unsecured, convertible note payable to a former related party with an outstanding principal amount of $310,000, bearing interest at 5% per annum, mature and in default;

	●	Senior secured, convertible note payable with an outstanding principal amount of $193,889, bearing interest at 8% per annum. 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;

	●	Unsecured, convertible note payable with an outstanding principal amount of $81,470, bearing interest at 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 loan payable with an outstanding principal amount of CDN$40,000. The loan is non-interest bearing and eligible for CDN$10,000 forgiveness if repaid paid by December 31, 2022. If not repaid by December 31, 2022, the loan bears interest at 5% per annum and is due on December 31, 2025;

	●	Unsecured loan payable with an outstanding principal amount of CDN$40,000. The loan is non-interest bearing and eligible for CDN$10,000 forgiveness if repaid paid by December 31, 2022. If not repaid by December 31, 2022, the loan bears interest at 5% per annum and is due on December 31, 2025;

	●	Unsecured loan payable with an outstanding principal amount of $30,065. The loan bears interest at 1% per annum and is due on May 21, 2022 with payments deferred for the first six months of the term; and

	●	Secured loan payable with an outstanding principal amount of $150,000. The loan bears interest at 3.75% per annum and is due on June 5, 2050. The loan is secured by all tangible and intangible assets of Company. Fixed payments of $731 are due monthly and begin 12 months from the date of the loan.
	●	Unsecured loan payable with an outstanding principal amount of $78,643. The loan is non-interest bearing and due on March 2, 2021.

	●	Unsecured loan payable with an outstanding principal amount of $32,541 (CDN$43,243). The loan is non-interest bearing and due and payable on demand;

Prospective Capital Needs

We estimate our operating expenses and working capital requirements for the twelve-month period to be as follows:

Estimated Expenses for the Twelve-Month Period ending September 30, 2021
Management compensation	$	500,000
Professional fees	$	150,000
General and administrative	$	1,900,000
Total	$	2,550,000

As noted earlier, during the nine months ended September 30, 2020, cash used in operations totaled $670,836. The relatively low level of cash used compared to our estimated working capital needs in the future was the result of an accumulation of vendor payables, deferred revenues and additional loans. We need to reduce the current level of payables in the near future to keep a good relationship with our vendors and expand our sales and service team to achieve our operational objectives. At present, our cash requirements for the next 12 months outweigh the funds available. Of the $2,550,000 that we require for the next 12 months, we had $62,337 in cash as of September 30, 2020 and a working capital deficit of $9,626,553. Our principal sources of liquidity are cash generated from product sales. In order to achieve sustained profitability and positive cash flows from operations, we will need to increase revenue and/or reduce operating expenses. Our ability to maintain, or increase, current revenue levels to achieve and sustain profitability will depend, in part, on demand for our products.

In order to improve our liquidity, we also plan to pursue additional equity financing from private investors or possibly a registered public offering. We do not currently have any definitive arrangements in place for the completion of any further private placement financings and there is no assurance that we will be successful in completing any further private placement financings. To help finance our day to day working capital needs, the founder and CEO of the company has made total payments of $113,475 since late 2015. If we are unable to achieve the necessary additional financing, then we plan to reduce the amounts that we spend on our business activities and administrative expenses in order to be within the amount of capital resources obligations and execute our business plan. There can be no assurances that we will be able to raise additional capital on acceptable terms or at all, which would adversely affect our ability to achieve our business objectives.

Off-Balance Sheet Transactions

We do not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

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

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not Applicable

Item 4. 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 Quarterly Report on Form 10-Q, 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 interim chief executive officer, or Interim 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 September 30, 2020, the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our CEO and CFO have concluded that as of September 30, 2016, 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.

Changes in Internal Control

There were no changes 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 first quarter of 2019 that materially affected, or are reasonably 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.

PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On April 9, 2018, we received a share-reserve increase letter from JSJ Investments Inc. (“JSJ”) pursuant to the terms of a 10% convertible promissory note issued to the Company in the principal amount of $135,000. On April 24, 2018, the Company received a notice of default from JSJ for failure to comply with the share-reserve increase and on April 30, 2018 demanded payment in full of the default amount totaling $172,845. On May 7, 2018, JSJ commenced a lawsuit in the United States District Court, District of Dallas County, Texas. JSJ alleged that the Company failed to comply with the share-reserve increase letter, thus giving rise to an event of default, and failed to pay the outstanding default amount due under the terms of the note. JSJ sought damages in excess of $200,000 but not more than $1,000,000, consisting of the principal amount of the note, default interest, and legal fees incurred by JSJ with respect to the lawsuit. On August 31, 2018 final judgement was entered against DSG Global in the amount of $187,908, which includes $172,846 in damages, $2,450 in legal fees, $1,982 in pre-judgement interest and $10,631 in post-judgment interest. The appeal period expired on September 30, 2018. As at the date of this Annual Report, the plaintiff is seeking to enforce the Texas judgement against DSG Global in British Columbia, Canada. As at September 30, 2020, the principal balance and accrued interest on this convertible note is included on the consolidated balance sheet under convertible notes payable. Subsequent to September 30, 2020, the Company entered into a Settlement Agreement with JSJ for full and final satisfaction if its claims for $100,000 paid in cash on or before November 10, 2020. Upon receipt of the Settlement Payment, JSJ agreed to provide (a) a settlement agreement and release of all its claims against the Company; and (b) a consent dismissal order in B.C. Supreme Court Action No. 1911876 on a “without costs” basis, The Company paid cash of $100,000 on November 10, 2020 in satisfaction of the agreement.

ITEM 1A. RISK FACTORS

As a smaller reporting company, we are not required to provide the information required by this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

Not Applicable.

Item 6. Exhibits

Exhibit Number	Exhibit Description	Filed 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

3.1.6	Certificate of Change of the Registrant	8-K	3.1	03-26-19

3.1.7	Certificate of Correction of the Registrant	8-K	3.2	03-26-19

3.1.8	Certificates of Amendment and Designation dated November 22, 2019	10-K	3.1.8	05-15-20

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	Subscription Agreement / Debt Settlement, dated September 26, 2014, between DSG TAG Systems Inc. and Westergaard Holdings Ltd.	8-K	10.1	08-17-15

10.2	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

10.3	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

10.4	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

10.5	Letter from Westergaard Holdings Ltd., dated September 1, 2015, extending dates of redemption obligations.	8-K	10.1	09-08-15

Exhibit Number	Exhibit Description	Filed Form	Exhibit	Filing Date	Herewith

10.6	Letter from Westergaard Holdings Ltd., dated November 10, 2015, extending dates of redemption obligations	10-Q	10.1	11-13-15

10.7	Letter fromWestergaard Holdings Ltd., dated December 31, 2015, extending dates of redemption obligations	8-K	10.1	03-09-16

10.8	Convertible Note of DSG TAG Systems Inc., dated March 31, 2015, payable to Adore Creative Agency, Inc.	8-K	10.5	08-14-15

10.9	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

10.10	Agreement (TAG Touch) dated February 15, 2014 between DSG TAG Systems Inc. and DSG Canadian Manufacturing Corp.	8-K	10.10	05-06-15

10.11	Loan agreement, dated October 24, 2014 between DSG TAG Systems Inc. and A.Bosa & Co (Kootenay) Ltd.	10-K	10.11	05-02-16

10.12	Lease agreement (Modified), dated January 21, 2016 and February 1, 2016 between DSG TAG Systems Inc. and Benchmark Group	10-K	10.12	05-02-16

10.13	Loan agreement, dated February 11, 2016 between DSG TAG Systems Inc. and Jeremy Yaseniuk	10-K	10.13	05-02-16

10.14	Loan agreement, dated March 31, 2016 between DSG TAG Systems Inc. and E. Gary Risler	10-K	10.14	05-02-16

10.15	Letter from Westergaard Holdings Ltd., dated April 29, 2016	10-K	10.15	05-20-16

10.16	Security purchase agreement between DSG Global Inc. and Coastal Investment Partners, dated November 7 2016	8-K	10.16	11-15-16

10.17	Letter of Resignation by Board Member Keith Westergaard	10-Q	10.17	12-16-16

10.8	Equity Financing Agreement with GHS dated September 18, 2019	8-k	10.1	10-11-19

10.9	Registration Rights Agreement with GHS dated September 18, 2019	8-k	10.2	10-11-19

10.10	Advisory Services Agreement dated as of March 2, 2020 Graj + Gustavsen, Inc. .	8-k	10.1	03-06-19

21	List of Subsidiary	10-K	21.1	05-02-16

Exhibit Number	Exhibit Description	Filed Form	Exhibit	Filing Date	Herewith
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.

SIGNATURES

Pursuant to the requirements 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.

Date: November 12, 2020	DSG Global Inc.
	(Registrant)

	By:	/s/ Robert Silzer
		Robert Silzer
		Chief Executive Officer and Chief Financial Officer
		(Principal Executive Officer and
		Principal Financial and Accounting Officer)