Advantego Corp - Quarter Report: 2018 June (Form 10-Q)

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 June 30, 2018

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

For the transition period from _______________ to _______________

Commission File Number:    0-23726

COLORADO		84-1116515
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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

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

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

	Large accelerated filer	[  ]	Accelerated filer	[  ]
	Non-accelerated filer	[  ]	Smaller reporting company	[X]
			Emerging growth company	[  ]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advantego Corporation
Consolidated Balance Sheets
As of June 30, 2018 and December 31, 2017
Unaudited
		June 30,				December 31,
		2018				2017
ASSETS
CURRENT ASSETS
Cash & cash equivalents		$	83,093			$	37,041
Accounts receivable			25,000				-
Common stock subscription receivable			9,999				-
Inventory			2,914				1,000
Prepaid expenses			43,570				-
Total current assets			164,576				38,041
NON-CURRENT ASSETS
Deferred offering costs			64,236				-
Total Assets		$	228,812			$	38,041
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable - related parties		$	349,672			$	418,079
Accounts payable			31,372				27,300
Deferred revenue			106				4,215
Accrued interest, convertible notes payable			2,431				7,237
Acrued interest, convertible notes payable, related parties			-				24,706
Convertible notes payable (net of unamortized debt discounts of $26,081 and $47,483 and unamortized debt premiums of $287,573 and $0 respectively)			509,492				102,517
Convertible notes payable - related parties  (net of unamortized debt discounts of $0 and $19,936 respectively)			-				65,676
Total current liabilities			893,073				649,730
Total Liabilities		$	893,073			$	649,730
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, par value $.01 per share; 10,000,000 shares authorized, 240,000 issued and outstanding			2,400				2,400
Common stock, par value $.0001 per share; shares 2,000,000,000 shares authorized; 16,520,092 and 14,664,718 issued and outstanding respectively			1,652				1,466
Common stock subscribed			9,999				-
Additional paid-in capital			589,428				163,707
Accumulated (deficit) (net of Golden Eagle International, Inc.'s accumulated deficit of $65,247,222 that was eliminated through a quasi-reorganization on October 27, 2016)			(1,267,740	)			(779,262	)
Total stockholders' equity (deficit)			(664,261	)			(611,689	)
Total Liabilities and Stockholder's Equity (Deficit)		$	228,812			$	38,041

 

 

 

The accompanying footnotes are an integral part of these condensed unaudited financial statements.

 

Advantego Corporation
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)
		Three Months Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2018				2017				2018					2017
REVENUES
Sales			71,267				3,430				115,244				3,430
Cost of Sales		$	(43,685	)			-			$	(73,924	)			-
Gross Profit			27,582				3,430				41,320				3,430
OPERATING EXPENSES
General and administrative			203,145				157,857				385,585				317,389
Total operating expenses			203,145				157,857				385,585				317,389
OPERATING (LOSS)			(175,563	)			(154,427	)			(344,265	)			(313,959	)
OTHER INCOME (EXPENSE)
Interest expense			(69,079	)			(5,128	)			(144,213	)			(10,157	)
Total other (expense)			(69,079	)			(5,128	)			(144,213	)			(10,157	)
Loss before income taxes			(244,642	)			(159,555	)			(488,478	)			(324,116	)
Income taxes			-				-				-				-
NET LOSS ON CONTINUING OPERATIONS			(244,642	)			(159,555	)			(488,478	)			(324,116	)
NET LOSS			(244,642	)			(159,555	)			(488,478	)			(324,116	)
Basic and diluted (loss) per share on continuing operations		$	(0.02	)		$	(0.01	)		$	(0.03	)			(0.02	)
Weighted average shares outstanding - basic			16,010,976				14,664,718				15,766,973				14,544,099

 

 

 

 

 

The accompanying footnotes are an integral part of these condensed unaudited financial statements.

 

Advantego Corporation
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2018 and 2017
(Unaudited)
		June 30,				June 30,
		2018					2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$	(488,478	)		$	(324,116	)
Amortization of debt discount			137,163				5,753
Amortization of consulting services prepaid with common stock			5,758
Changes in operating assets and liabilities
(Increase) in accounts receivable			(25,000	)			(2,400	)
(Increase) in prepaid expenses			(35,510	)			-
(Increase) in inventory			(1,914	)			-
Increase in accounts payable			4,072				-
Increase (decrease) in deferred revenue			(4,109	)			6,822
Increase (decrease) in accounts payable - related parties			(29,907	)			216,322
Increase in accrued interest, convertible notes payable -related parties			2,781				1,503
Increase in accrued interest, convertible notes payable			2,007				2,901
Net cash flows (used by) operating activities			(433,137	)			(93,215	)
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash flows provided by investing activities			-				-
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock and exercise of warrants			82,625				-
Proceeds from convertible notes payable			419,050				62,500
Principal payments on convertible notes payable			(22,486	)			-
Net cash flows (used in) provided by financing activities			479,189				62,500
NET CHANGE IN CASH			46,052				(30,715	)
CASH - BEGINNING OF PERIOD			37,041				46,111
CASH - END OF PERIOD		$	83,093			$	15,396
SUPPLEMENTAL CASH FLOW INFORMATION
Schdule of Non-cash Investing and Financing Activities:
Conversion of convertible notes payable into common stock		$	434,797			$	-
Conversion of convertible notes payable - related parties into common stock		$	79,590			$	-
Conversion of accrued interest, convertible notes payable into common stock		$	6,813			$	-
Conversion of accrued interst, convertible notes payable-related parties into common stock		$	27,487			$	-
Conversion of officer wages payable intocommon stock		$	38,500			$	-
Issuance of common stock for prepaid consulting fees		$	13,818			$	-
Issuance of common stock for finders fee		$	15,000			$	-
Issuance of convertible note payable to secure line of credit		$	50,000			$	-
Capitalization of stock offering costs (including $14,236 beneficial conversion feature)		$	64,236			$	-
Forgiveness of related party debt		$	6,022			$	-
Common stock subscribed		$	9,999			$	-
Recording of premium on convertible debt at stock redemption value		$	611,096			$	-
Amortization to additional paid-in capital of premium on convertible notes payable		$	318,115			$	-
Cash paid for
Interest		$	2,264			$	-
Income taxes			-				-

 

The accompanying footnotes are an integral part of these condensed unaudited financial statements.

	Vehicles	5 years
	Office equipment	4-10 years

	Three Months Ended									Six Months Ended
	June 30, 2018				June 30, 2017					June 30, 2018				June 30, 2017
Basic weighted average shares outstanding			16,010,976				14,534,848				15,766,973				14,534,848
Convertible debt			172,734				420,408				85,890				415,486
Series B preferred stock			10,909				10,909				10,909				10,909
Warrants			181,818				545,454				181,818				545,454
Fully diluted weighted average shares outstanding			16,376,437				15,511,619				16,045,590				15,506,697

		June 30, 2018																December 31, 2017
Note		Principal				Less Debt Discount				Net Note Balance				Accrued Interest				Principal				Less Debt Discount				Net Note Balance				Accrued Interest
(a)		$	-			$	-			$	-			$	-			$	30,112			$	(4,516	)		$	25,596			$	20,716
(b)			-				-				-				-				30,500				-				30,500				3,439
(c)			-				-				-				-				12,500				(6,216	)			6,284				366
(d)			-				-				-				-				12,500				(9,204	)			3,296				185
Totals		$	-			$	-			$	-			$	-			$	85,612			$	(19,936	)		$	65,676			$	24,706

 

(a)	Gulf Coast Capital, LLC is a company owned by Mark Bogani, our former CEO.  The note was dated September 30, 2016 and represented the consolidation of various smaller notes payable previously outstanding totaling $145,112 plus $15,471 in accrued interest.  Interest continued to accrue at the rate of 5%, with principal and interest being due on demand and convertible into our common stock at the option of the lender at a fixed rate of $.275 per share.  Upon the note's inception, there was a beneficial conversion feature totaling $29,022 that was being amortized and netted against the principal balance as a debt discount.  On December 30, 2016, Gulf Coast Capital converted $115,000 of the note into 418,182 shares of the Company's common stock.  On January 8, 2018, Gulf Coast Capital converted $24,090 principal plus $21,376 in accrued interest into 165,331 shares of our common stock (Note D), at which point the remaining unamortized debt discount of $4,516 was amortized to interest expense.  On June 30, 2018, the remaining $6,022 principal balance was forgiven and written-off to additional paid-in capital.
(b)	Avcon Services, Inc. is a company owned by Tracy Madsen, our CFO.  The note represented amounts totaling $30,500 for CFO services during the period of June 2014 through September 2015, was dated December 31, 2015, carried an interest rate of 5%, and was due on demand. The note and accrued interest, or any portion thereof, were convertible at the option of Avcon, into the Company's common stock at a fixed rate of $.275 per share through December 31, 2020.  On May 10, 2018, this note was sold to Khalid Mirza. On May 30, 2018, Mr. Mirza converted the note principal plus accrued interest of $5,548 into 131,083 shares of our common stock.

 

 

(c)	On June 29, 2017, the Company entered into an uncollateralized note payable with its then-CFO, Philip Grey, in the amount of $12,500.  The note carried an interest rate of 6% and matured on June 29, 2018.  The note and accrued interest, or any portion thereof, were convertible at the option of the lender, into the Company's common stock at a fixed rate of $.275 per share. Upon the note's inception, there was a beneficial conversion feature totaling $12,500 that was being amortized and netted against the note balance as a debt discount. On January 8, 2018, Mr. Grey converted the $12,500 principal plus accrued interest of $375 into 46,818 shares of common stock (Note D), and the remaining debt discount of $6,216 was amortized to interest expense.
(d)	On September 25, 2017, the Company entered into an uncollateralized note payable with its former CEO, Mark Bogani, in the amount of $12,500.  The note carried an interest rate of 6% and matured on September 25, 2018.  The note and accrued interest, or any portion thereof, were convertible at the option of the lender, into the Company's common stock at a fixed rate of $.275 per share. Upon the note's inception, there was a beneficial conversion feature totaling $12,500 that was being amortized and netted against the principal balance as a debt discount. On January 8, 2018, Mr. Bogani converted the $12,500 principal plus accrued interest of $188 into 46,138 shares of common stock (Note D), and the remaining debt discount of $9,204 was amortized to interest expense.

		June 30, 2018																				December 31, 2017
Note		Principal				Less Debt Discount				Plus Premium				Net Note Balance				Accrued Interest				Principal				Less Debt Discount				Net Note Balance				Accrued Interest
(a)		$	-			$	-			$	-			$	-			$	-			$	100,000			$	(6,158	)		$	93,842			$	6,748
(b)			-				-				-				-				-				25,000				(18,408	)			6,592				362
(c)			-				-				-				-				-				25,000				(22,917	)			2,083				127
(d)			-				-				-				-				-				-				-				-				-
(e)			45,000				(6,000	)			95,789				134,789				911
(f)			75,000				(9,844	)			131,250				196,406				1,133
(g)			78,000				(10,237	)			60,534				128,297				234
(h)			50,000				-				-				-				153
Totals		$	248,000			$	(26,081	)		$	287,573			$	509,492			$	2,431			$	150,000			$	(47,483	)		$	102,517			$	7,237

 

(a)	On September 22, 2016 ($50,000), January 12, 2017 ($25,000), and March 27, 2017 ($25,000), the Company entered into notes payable with a single investor totaling $100,000.  The notes carried an interest rate of 6% and each matured one year following its issuance date.  The notes and accrued interest were convertible into the Company's common stock at a fixed rate of $.275 per share.  Upon the notes' inceptions, there was an aggregate beneficial conversion feature totaling $40,000, which was being amortized and netted against the aggregate principal balance as a debt discount.  On January 8, 2018, the noteholder converted the $100,000 principal plus accrued interest of $6,313 into 386,593 shares of common stock (Note D), and the remaining unamortized debt discount of $6,158 was amortized to interest expense.
(b)	On September 25, 2017, the Company entered into a note payable in the amount of $25,000.  The note carried an interest rate of 6% and matured on September 25, 2018. The note and accrued interest were convertible at the option of the lender into the Company's common stock at a fixed rate of $.275 per share. Upon the note's inception, there was a beneficial conversion feature of $25,000, which was being amortized and netted against the principal balance as a debt discount.  On January 8, 2018, the noteholder converted the $25,000 principal plus accrued interest of $375 into 92,273 shares (Note D), and the remaining unamortized debt discount of $18,408 was amortized to interest expense.

 

 

(c)	On November 30, 2017, the Company entered into a note payable in the amount of $25,000 with an unaffiliated lender.  The note carried an interest rate of 6% and matured on November 30, 2018. The note and accrued interest were convertible at the option of the lender into the Company's common stock at a fixed rate of $.275 per share. Upon the note's inception, there was a beneficial conversion feature of $25,000, which was being amortized and netted against the principal balance as a debt discount.  On January 8, 2018, the noteholder converted the $25,000 principal plus accrued interest of $125 into 91,364 shares (Note D), and the remaining debt discount of $22,917 was amortized to interest expense.
(d)	On March 2, 2018, the Company entered into an uncollateralized note payable with an unaffiliated investor in the amount of $301,875.  The note carried an interest rate of 12% and matured on March 2, 2019. The note and accrued interest, or any portion thereof, were convertible at the option of the lender, into the Company's common stock at a rate of 58% of the lowest market trading price per share during the 25 days preceding conversion.  At the note's inception, there was an original issue discount of $39,375, a transaction fee of $12,500, and a finder's fee of common stock valued at $15,000 (Note D), which in the aggregate resulted in a total discount of $66,875 to be amortized to interest expense over the life of the note, and net proceeds received by the Company of $250,000.   Additionally, the note's variable conversion rate component requires that the note be valued at its stock redemption value (i.e., "if-converted" value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the note's undiscounted face value being deemed a premium to be added to the principal balance and amortized to additional paid-in capital over the life of the note.  As such, the Company recorded a premium on the note of $284,063 as a reduction to additional paid-in capital based on a discounted "if-converted" rate of $.32 per share (58% of the $.55 lowest trading price during the 25 days preceding the note's issuance), which computed to 781,250 shares of "if-converted" common stock with a redemption value of $585,938 due to $.75 per share fair market value of the Company's stock on the note's date of issuance.  Debt discount amortization is recorded as interest expense, while debt premium amortization is recorded as an increase to additional paid-in capital.  Debt discount and premium amortizations for the three months ended March 31, 2018 totaled $4,753 and $23,348, respectively, while interest expense was $2,264.    During the period May 15 through May 30, 2018 the note's principal and interest balance totaling $284,797 was converted into 632,020 shares of our common stock in accordance with terms of the convertible promissory note (Note D), while the remaining unamortized discount of $62,122 was amortized to interest and the remaining premium of $255,307 was amortized to additional paid-in capital.
(e)	On May 11, 2018, the Company entered into an uncollateralized note payable with an unaffiliated investor in the amount of $45,000.  The note carries an interest rate of 12% and matures on May 11, 2019. The note and accrued interest, or any portion thereof, are convertible at the option of the lender, into the Company's common stock at a rate of 58% of the lowest market trading price per share during the 20 days preceding conversion.  At the note's inception, there was a transaction fee of $3,000 and a finder's fee of $4,200, which in the aggregate resulted in a total discount of $7,200 to be amortized to interest expense over the life of the note, and net proceeds received by the Company of $37,800.  As of June 30, 2018, the unamortized debt discount was $6,000   Additionally, the note's variable conversion rate component requires that the note be valued at its stock redemption value (i.e., "if-converted" value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the note's undiscounted face value being deemed a premium to be added to the principal balance and amortized to additional paid-in capital over the life of the note.  As such, the Company recorded a premium on the note of $114,947 as a reduction to additional paid-in capital based on a discounted "if-converted" rate of $.67 per share (58% of the average of the two lowest trading day prices during the 15 days preceding the note's issuance), which computed to 76,680 shares of "if-converted" common stock with a redemption value of $92,016 due to $1.20 per share fair market value of the Company's stock on the note's date of issuance.  Debt discount amortization is recorded as interest expense, while debt premium amortization is recorded as an increase to additional paid-in capital. Debt discount and premium amortizations for the six months ended June 30, 2018 totaled $1,200 and $19,158, respectively, while interest expense was $911.   This note was repaid in full during August 2018 as a result of funding received as detailed in Note G - Subsequent Events.

(f)	On May 15, 2018, the Company entered into an uncollateralized note payable with an unaffiliated investor in the amount of $75,000.  The note carries an interest rate of 12% and matures on May 15, 2019. The note and accrued interest, or any portion thereof, are convertible at the option of the lender, into the Company's common stock at a rate of 60% of the lowest market trading price per share during the 20 days preceding conversion.  At the note's inception, there was an original issue discount of $3,750 a transaction fee of $2,000, and a finder's fee of $5,500, which in the aggregate resulted in a total discount of $11,250 to be amortized to interest expense over the life of the note, and net proceeds received by the Company of $63,750.   Additionally, the note's variable conversion rate component requires that the note be valued at its stock redemption value (i.e., "if-converted" value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the note's undiscounted face value being deemed a premium to be added to the principal balance and amortized to additional paid-in capital over the life of the note.  As such, the Company recorded a premium on the note of $150,000 as a reduction to additional paid-in capital based on a discounted "if-converted" rate of $.51 per share (60% of the $.85 lowest trading price during the 20 days preceding the note's issuance), which computed to 126,000 shares of "if-converted" common stock with a redemption value of $192,780 due to $1.53 per share fair market value of the Company's stock on the note's date of issuance.  Debt discount amortization is recorded as interest expense, while debt premium amortization is recorded as an increase to additional paid-in capital.  Debt discount and premium amortizations for the six months ended June 30, 2018 totaled $1,406 and $18,750, respectively, while interest expense was $1,133.
(g)	On June 21, 2018, the Company entered into an uncollateralized note payable with an unaffiliated investor in the amount of $78,000.  The note carries an interest rate of 12% and matures on June 21, 2019. The note and accrued interest, or any portion thereof, are convertible at the option of the lender, into the Company's common stock at a rate of 58% of the average of the two lowest market trading price per share during the 15 days preceding conversion.  At the note's inception, there was a transaction fee of $3,000 and a finder's fee of $7,500, which in the aggregate resulted in a total discount of $10,500 to be amortized to interest expense over the life of the note, and net proceeds received by the Company of $67,500.   Additionally, the note's variable conversion rate component requires that the note be valued at its stock redemption value (i.e., "if-converted" value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the note's undiscounted face value being deemed a premium to be added to the principal balance and amortized to additional paid-in capital over the life of the note.  As such, the Company recorded a premium on the note of $62,086 as a reduction to additional paid-in capital based on a discounted "if-converted" rate of $.84 per share (58% of the $.1.44 lowest trading price during the 15 days preceding the note's issuance), which computed to 132,912 shares of "if-converted" common stock with a redemption value of $201,168 due to $1.50 per share fair market value of the Company's stock on the note's date of issuance.  Debt discount amortization is recorded as interest expense, while debt premium amortization is recorded as an increase to additional paid-in capital.  Debt discount and premium amortizations for the six months ended June 30, 2018 totaled $263 and $1,552, respectively, while interest expense was $234.   This note was repaid in full during August 2018 as a result of funding received as detailed in Note G - Subsequent Events.
(h)	On June 11, 2018, we issued a fixed price convertible note payable in the amount of $50,000 as a commitment fee to Tangiers in order to provide a long-term funding facility for our operations. The note bears interest at 10% per year and is due and payable on January 11, 2019 and is convertible into shares of our common stock at a fixed rate of $1.44 per share. Under the investment agreement Tangiers has agreed to provide us with up to $5,000,000 of funding during a three-year period. This investment agreement is pending approval our S-1 filing.  This commitment fee is deemed an offering cost, along with an associated beneficial conversion feature of $14,236, for total offering costs of $64,236 being reported as a non-current asset to be amortized to additional paid-in capital pro-rata in conjunction with each future long-term funding tranche received from Tangiers.

Warrants		Stock Price				Exercise Price				Expected Life (Yrs)				Risk-Free Rate				Warrant Value				Number of Warrants				Extended Value
Series A (expired)		$	.275			$	.55				.75				.54	%		$	.1168				181,818			$	21,249
Series B (expired)		$	.275			$	.1.10				1.75				.69	%		$	.1639				181,818			$	29,817
Series C		$	.275			$	2.20				1.75				.85	%		$	.1912				181,818			$	34,767
Total																										$	85,833

Name				Principal				Interest				Total Converted				Conversion Rate Per Share				Post-Split Shares Issued Upon Conversion
Gulf Coast Capital		January 8, 2018		$	24,090			$	21,376			$	45,466			$	.275				165,331
Mark Bogani		January 8, 2018			12,500				188				12,688				.275				46,138
Stephen Calandrella		January 8, 2018			25,000				375				25,375				.275				92,273
Clifford Thygesen		January 8, 2018			100,000				6,313				106,313				.275				386,593
Kevin Curtis		January 8, 2018			25,000				125				25,125				.275				91,364
Phillip Grey		January 8, 2018			12,500				375				12,875				.275				46,818
Phillip Grey*		January 8, 2018			38,500				-				38,500				.402				95,890
Carebourn Capital		May 15, 2018			150,000				-				150,000				.377				397,878
Carebourn Capital		May 22, 2018			50,000				-				50,000				.493				101,419
Carebourn Capital		May 30, 2018			77,775				7,022				84,797				.638				132,723
Avcon Services		May 30, 2018			30,500				5,548				36,048				.275				131,083
Total				$	545,865			$	41,332			$	587,187				-				1,687,510

 

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

 

Advantego Corporation ("Advantego," formerly Golden Eagle International, Inc., or "GEII") was incorporated in Colorado on July 21, 1988. GEII had previously engaged in contract gold milling operations primarily in the state of Nevada in the United States. On October 27, 2016, GEII completed a reverse merger with Advantego Technologies, Inc., which resulted in a change of control and the perpetuation of Advantego Technologies, Inc.'s management and business operations.  Concurrent with the merger, the combined entity executed a quasi-reorganization, thereby eliminating GEII's losses accumulated since its inception through the date of the merger.  On February 1, 2018, we changed our name from GEII to Advantego Corporation and our trading symbol from MYNG to ADGO.  On January 31, 2018, our shareholders approved a 1-for-11 reverse stock split, which was effective February 22, 2018.  Unless otherwise indicated, all per-share information in this report has been adjusted to reflect this reverse stock split.  All references to "the Company," "we," "us," or "our," include the operations of Advantego Technologies, Inc. consolidated with Advantego.

Advantego Technologies, Inc. is a California corporation formed on July 29, 2016 that designs, develops and implements subscription-based digital communication and enterprise software services that are designed to enable an organization to rapidly create comprehensive promotional and marketing campaigns. We offer a variety of products and services that utilize its proprietary software platform to integrate Third Party "best in class" technologies with our customers' internal data and applications to provide all-inclusive, multi-functional systems that are easily managed once deployed. These integrated services can be delivered to multiple locations and are used by large enterprises or networks in specific industries. All participating parties can then benefit from the economies of scale to enhance internal operations, reduce costs, and increase marketing efficiency.

 We maintain a small core group of employees and outsource most of our Product Development, Product Maintenance, Sales & Marketing, Accounting, Investor Relations, Legal, and Project Management services.  We feel that this approach is more cost-effective, provides greater flexibility, and the necessary resources can be applied quickly to specific projects and tasks as needed.

We launched our field testing of various products and services in May 2017, and commenced fulfillment of a revenue generating contract of our digital signage product to a network of certified auto care collision centers in the United States during the six months ended June 30, 2018.  The digital signage allows the auto care collision centers to display, on a large television screen or counter displays, information concerning the center, their certifications and other informational and promotional content associated with the automotive industry.  As of August 10, 2018, we had 700 auto care collision centers using our digital signage product.

We also provide subscription-based online directory listing services and we are a reseller of software that allows potential customers to better locate an auto collision center on the internet.  As of August 10, 2018, 25auto care collision centers were using this software.

During the three months ended June 30, 2018 we had revenues of $71,267, which were comprised of $63,150 in digital signage and $8,117 in online directory listing sales.  The related cost of sales consisted of $43,685 in inventory, programming, software, and shipping.  During the three months ended June 30, 2017, we had minimal online directory sales revenues of $3,430 and $0 digital signage revenues.  The increase in revenue was the result of the launch of our digital signage product to a network of certified auto care collision centers in the United States during the three months ended June 30, 2018.  Our general and administrative expenses totaled $203,145 and $157,857 for the three months ended June 30, 2018 and 2017, respectively, and consisted primarily of officer wages, outsourced services, and professional fees.  The increase in general and administrative expenses was the result of the digital signage launch and increased sales volume.  Interest expense was $69,079 and $5,128 during the three months ended June 30, 2018 and 2017, respectively.  The large increase during 2018 was due to the conversion of a note payable, as its unamortized debt discount of $62,122 was recognized as interest expense upon conversion.

 

During the six months ended June 30, 2018 we had revenues of $115,244 which were comprised of $102,492 in digital signage and $12,750 in online directory listing sales.  The related cost of sales consisted of $73,924 in inventory, programming, software, and shipping.  During the six months ended June 30, 2017, we had minimal online directory sales revenues of $3,430 and $0 digital signage revenues.  The increase in revenue was the result of the launch of our digital signage product to a network of certified auto care collision centers in the United States during the six months ended June 30, 2018.  Our general and administrative expenses totaled $382,130 and $317,389 for the six months ended June 30, 2018 and 2017, respectively, and consisted primarily of officer wages, outsourced services, and professional fees.  The increase in general and administrative expenses was the result of the digital signage launch and increased sales volume.  Interest expense was $144,213 and $10,157 during the six months ended June 30, 2018 and 2017, respectively.  The large increase during 2018 was due to the conversion of various notes payable, as their unamortized debt discounts of $129,541 were recognized as interest expense upon conversion.

 

Our primary sources and (uses) of cash for the six months ended June 30, 2018 and 2017 were:

 

		2018				2017
Cash (used in) operations		$	(433,137	)		$	(93,215	)
Sale of common stock		$	82,625			$	--
Net proceeds from issuance of convertible notes		$	419,050			$	62,500
Payments on convertible notes		$	(22,486	)		$	--

 

On January 8, 2018, holders of notes, in the principal amount of $199,090, converted their notes, plus accrued interest of $28,752, into 828,517 shares of our common stock at $.275 per share pursuant to their terms underlying convertible promissory notes.  Our former Chief Financial Officer, Philip Grey, also converted $38,500 in accrued wages to 95,890 shares of our common stock at $0.40 per share.

 

On May 15 through May 30, 2018, the holder of note, in the principal amount of $277,775, converted its note, plus accrued interest of $7,022, into 632,020 shares of our common stock at prices ranging from $.377 per share to $.638 per share pursuant to terms underlying its convertible promissory note. 

 

See Note C to the June 30, 2018 financial statements, which are a part of this report, for a discussion of our convertible notes payable.

 

Other than funding our operating expenses and paying our notes payable, we did not, as of June 30, 2018, have any significant capital requirements. However, now that the Company has completed its reverse stock split, name change, and symbol change, the Company will actively pursue additional capital to expand the sales and marketing of its products and services and the long- term branding of the Company.

 

See Note B to the June 30, 2018 financial statements included as part of this report, for a description of our significant accounting policies.

 

 

Not Applicable.  The Company is a "smaller reporting company."

 

 

An evaluation was carried out under the supervision and with the participation of our management, including our Principal Executive and Financial Officers of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report on Form 10-Q. Disclosure controls and procedures are procedures designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this Form 10-Q, is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and is communicated to our management, including our Principal Executive and Financial Officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our management concluded that, as of June 30, 2018, our disclosure controls and procedures were not effective for the following reasons:

 

●

the lack of formal written documentation relating to the design of our controls.

·

●

we did not maintain adequate segregation of duties related to job responsibilities for initiating, authorizing, and recording of certain transactions due to the small size of our company.

Notwithstanding the above, a controls system cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the quarter ended June 30, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II.

 

On May 15 through May 30, 2018, the holder of note, in the principal amount of $277,775, converted its note, plus accrued interest of $7,022, into 632,020 shares of our common stock at prices ranging from $.377 per share to $.638 per share pursuant to terms underlying its convertible promissory note. 

 

On May 30, 2018, we issued 131,083 shares of our common stock to Avcon Services (a company owned by our CFO Tracy Madsen) upon Avcon's conversion of its note payable of $30,500 plus accrued interest of $5,548 at the conversion rate of $.275 as stated in the underlying note.

 

 

Item 6.     Exhibits.

 

Exhibits		Description
31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification pursuant to Section 906 of the Sarbanes-Oxley Act.

 

 

 

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.

 

 

	ADVANTEGO CORPORATION
August 14, 2018	By:	/s/ Robert Ferguson
		Robert Ferguson, Principal Executive Officer
August 14, 2018	By:	/s/ Tracy A. Madsen
		Tracy A. Madsen, Principal Financial Officer

 

 

 

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