Advantego Corp - Quarter Report: 2019 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, 2019

[  ] 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

ADVANTEGO CORPORATION

(Exact name of registrant as specified in its charter)

3801 East Florida Ave., Ste. 400

Denver, CO 80210

(Address of principal executive offices, including Zip Code)

(949) 627-8977

(Issuer’s telephone number, including area code)

(Former name or former address if changed since last report)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange

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

Act of 1934 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 every Interactive Data File required to be submitted 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 such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth 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.

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

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

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:114,099,763 shares of common stock as of November 11, 2019.

Table of Contents

Advantego Corporation

Consolidated Balance Sheets

As of September 30, 2019 and December 31, 2018

(Unaudited)

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

Advantego Corporation

Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2019 and 2018

(Unaudited)

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

Advantego Corporation

Consolidated Statement of Changes in Stockholders’ Equity (Deficit)

For the Three and Nine Months Ended September 30, 2019 and 2018

(Unaudited)

Three Months Ended September 30, 2019

Three Months Ended September 30, 2018

Nine Months Ended September 30, 2019

Nine Months Ended September 30, 2018

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

Advantego Corporation

Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2019 and 2018

(Unaudited)

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

ADVANTEGO CORPORATION

Notes to Consolidated Financial Statements

Nine Months Ended September 30, 2019 and 2018 (Unaudited)

Note A – Organization and Business

Organization and Nature of Business

Advantego Corporation (“Advantego,” formerly Golden Eagle International, Inc., or “GEII”) was incorporated in Colorado on July 21, 1988. Advantego Corporation, Inc. is a Colorado corporation formed on July 29, 2016. 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.

Effective February 1, 2018 and pursuant to Board authorization and majority shareholder approval, the Company changed the name of GEII to Advantego Corporation (amending GEII’s Articles of Incorporation accordingly), cancelled its Series A, C, and D preferred shares, and effected a 1-for-11 reverse stock split on its issued and outstanding shares of common stock that became effective on the OTCQB on February 21, 2018 under the symbol ADGO.

The Company leverages a proprietary Intelligent Solution Platform combining leading third-party technologies with existing data and systems to deliver a turnkey specialized Business Process as a Services (BPaaS) that is both scalable and cost effective.

The Company has been developing a proprietary software system that helps publicly traded company increase the efficiency of consolidating accounting and financial information for reporting to SEC. Certain modules are complete and are available to the public on a stand-alone basis. The system is targeted to be fully completed in first quarter 2020.

The Company has a number of Strategic Partners with proprietary technology that the Company uses and distributes as part of its product lines of services and solutions. The Company offers a variety of these as stand-alone products tailored specifically to targeted industries as well as combining these with multiple software applications for large enterprises, affiliate networks and franchise operators delivering comprehensive, all-inclusive, managed bundled solutions.

The Company began Product Design, Engineering and Manufacturing services beginning in first quarter of 2019 and are finalizing completion of working prototypes for specific products in the audiological market. The Company expects revenue to begin from this investment in first quarter 2020. The Company also licenses Intellectual Property from its vast library of Strategic Partners for current and future projects.

Basis of Presentation

The accompanying unaudited financial statements represent the consolidated operations of Advantego and Advantego Technologies, Inc., collectively “the Company,” “we,” “us,” as the consolidated entity, with all intercompany transactions eliminated.

These financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC, including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements and should be read in conjunction with our audited financial statements for the year ended December 31, 2018, included in our Annual Report on Form 10-K for the year ended December 31, 2018.

In the opinion of management, the accompanying financial statements contain all accruals and adjustments (each of which is of a normal recurring nature) necessary for a fair presentation of the Company’s financial position as of September 30, 2019 and the results of its operations for the nine months then ended. Results for the interim period presented are not necessarily indicative of the results that might be expected for the entire fiscal year.

Going Concern

The consolidated financial statements in this report have been prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that the Company’s assets will be realized, and liabilities settled in the ordinary course of business. Accordingly, the financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. The Company has not yet achieved profitable operations, has accumulated losses of $3,757,585 since its inception through September 30, 2019 and expects to incur further losses in the development of its business, all of which raises substantial doubt about the Company’s ability to continue as a going concern. Though the Company’s line of business involves proven technologies, the Company can offer no assurances that it will be able to obtain adequate financing to implement its business plan and remain a going concern

Note B – Summary of Significant Accounting Policies

Fair Value of Financial Instruments

The Company accounts for fair value measurements in accordance with accounting standard ASC 820-10-50, “Fair Value Measurements.” This guidance defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.

The Company’s financial instruments consist of cash, accounts payable, and convertible notes payable. The carrying amount of cash and accounts payable approximates fair value because of the short-term nature of these items. The carrying amount of convertible notes payable approximates fair value as the individual borrowings bear interest at market interest rates and are also short-term in nature.

Use of Estimates

Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates, and such differences may be material to the financial statements.

Concentration of Credit Risk

From time to time our cash balances, held at major financial institutions, exceed the federally insured limits of $250,000. Our management believes that the financial institutions are financially sound, and the risk of loss is low. Our cash balances did not exceed federally insured limits at September 30, 2019 or December 31, 2018.

All of the Company’s revenues during the three and nine months ended September 30, 2019 and 2018 and 100% of the accounts receivable at September 30, 2019 and December 31, 2018 were with one customer. This customer is a certifier of automobile collision repair shops, which distributes the Company’s products to the repair shops in its network.

Cash and Cash Equivalents

For the statement of cash flows, any liquid investments with a maturity of three months or less at the time of acquisition are considered to be cash equivalents. The Company has no cash equivalents at September 30, 2019 or December 31, 2018.

Inventory

The Company’s inventory consists of finished good controller boxes that the Company configures with digital signage software upon customer order. Inventory is stated at lower of cost or net realizable value, with cost being determined on the first-in, first-out (“FIFO”) method. No reserve was considered necessary for slow moving or obsolete inventory at September 30, 2019 or December 31, 2018.

Revenue Recognition

The Company recognizes revenue from the sale of products and services in accordance with ASC 606,” Revenue from Contracts with Customers” following the five steps procedure:

Step 1: Identify the contract(s) with customers

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to performance obligations

Step 5: Recognize revenue when the entity satisfies a performance obligation

The Company generates revenue from online directory and digital signage components of its ongoing licensing services it provides to third parties. Revenue from online directory services are recognized over the life of the agreement ranging from one to twelve months. Revenue from digital signage control boxes is recognized at the time of sale and renewal fees are amortized over the term of the renewal, ranging from one to twelve months. The Company recognized $1,610 and $4,781 in online listing sales during the three months ended September 30, 2019 and 2018, respectively. The Company recognized $1,829 and $17,532 in online listing sales during the nine months ended September 30, 2019 and 2018, respectively. The Company recognized $53,504 and $41,200 in digital signage sales during the three months ended September 30, 2019 and 2018, respectively. The Company recognized $82,676 and $143,693 in digital signage sales during the nine months ended September 30, 2019 and 2018, respectively

As of September 30, 2019 and December 31, 2018, $46,958 and $0, respectively, of digital signage license renewals sales were deferred to future periods. As of September 30, 2019, and December 31, 2018, $7,889 and $0, respectively, of digital signage license renewals costs were deferred to future periods.

The Company recognized $544 and $2,164 in cost of sales for online listing sales during the three months ended September 30, 2019 and 2018, respectively. The Company recognized $6,521 and $8,115 in cost of sales on online listing sales during the nine months ended September 30, 2019 and 2018, respectively. The Company recognized $17,100 and $26,726 in cost of sales on digital signage sales during the three months ended September 30, 2019 and 2018, respectively. The Company recognized $37,233 and $94,699 in cost of sales on digital signage sales during the nine months ended September 30, 2019 and 2018, respectively.

Management determined no allowance for doubtful accounts was necessary at September 30, 2019 or December 31, 2018.

Stock Based Compensation

We measure stock-based compensation cost relative to the estimated fair value of the awards on the grant date. We recognize the cost as the awards vest.

Income (Loss) Per Share

The computation of basic earnings (loss) per common share is based on the net income (loss) divided by the weighted average number of shares outstanding during each period.

The computation of diluted earnings (loss) per common share is based on the weighted average number of shares outstanding during the period plus the common stock equivalents as detailed in the following chart. During the three and nine months ended September 30, 2019 and 2018, the inclusion of these common stock equivalents on the consolidated statement of operations would have resulted in a weighted average shares fully diluted number that was anti-dilutive, and as such they are excluded.

Fully diluted shares for the three and nine months ended September 30, 2019 and 2018 are as follows:

Income Taxes

Income taxes are accounted for under the liability method. Under the liability method, future tax liabilities and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in the financial statements and their respective tax bases. Future tax assets and liabilities are measured using enacted or substantially enacted income tax rates expected to apply when the asset is realized, or the liability settled.

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax law and rates on the date of enactment.

Effect of New Accounting Pronouncements

There are no recent accounting pronouncements that are expected to have a material impact on our financial position, results of operations or cash flows.

Note C – Prepaid Expenses

The Company has capitalized certain expenses as prepaid expenses. These include rent and vendor deposits, and prepaid insurance. Additionally, we have classified $137,384 as a prepaid expense for Returnable Shares issued as a commitment fee on a convertible note (See Note E(u)). Total prepaid expenses at September 30, 2019 and December 31, 2018, are as follows;

Note D – Pre-Production Costs

*We are capitalizing pre-production costs in accordance with ASC 340-10. Development costs will be amortized on a per unit basis over the life of the product once we begin selling the product.

**We have begun capitalizing software development costs during the nine months ended September 30, 2019 in accordance with ASC 985.

Software computer costs for computer software that is to be used as an integral part of a product or process is capitalized after the following conditions are met;

Capitalization of computer software costs shall cease when the product is available for general release to customers. The capitalized costs will then be amortized on a per unit basis.

Note E – Convertible Notes Payable

Convertible Notes Payable

We have uncollateralized convertible debt obligations with unaffiliated investors outstanding at September 30, 2019 and December 31, 2018 as follows:

Each individual note is described below and debt discount amortization, debt premium amortization and interest expense for the three-month period ended September 30, 2019 is disclosed. Debt discount amortization for the nine month period ended September 30, 2019 and 2018 was $260,368 and $64,236 respectively while debt premium amortization for these same nine month periods was $2,390,970 and $582,841 respectively and interest expense for the same nine month periods was $732,325 and $71,744 respectively.

(a) 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 November 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. On April 24, 2019, the maturity date on the note was extended until May 15, 2020 and the redemption date was extended to November 15, 2019 in exchange for a $38,188 cash payment. Debt discount and premium amortizations for the three months ended September 30, 2019 totaled $0 and $0, respectively, while interest expense was $2,250.

(b) 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, 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 of 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. On June 7, 2019, this note was paid in full.

(c) On August 2, 2018 the Company issued a convertible promissory note with a face value of $125,000, maturing on August 2, 2019, and a stated interest of 9% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on August 6, 2018, when the Company received proceeds of $106,250, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $18,750 to be amortized to interest expense over the life of the note. 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 $113,454 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.42 per share (60% of the lowest trading price during the 20 days preceding the note’s issuance), which computed to 502,008 shares of “if-converted” common stock with a redemption value of $238,454 due to $0.475 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 September 30, 2019, totaled $1,875 and $11,345, respectively, while interest expense was $1,912. On August 19, 2019 the investor converted $11,000 in principal and $1,025 in accrued interest into 447,154 and 41,677 shares of common stock respectively at a price of $.0246 per share. On September 10, 2019, the investor converted $5,000 in principal and $493 in accrued interest into 915,525 shares of common stock at a price of $.006 per share. On September 24, 2019 the investor converted $3,150 in principal and $321 in accrued interest into 964,322 shares of common stock at a price of $.0036 per share.

(d) On August 2, 2018 the Company issued a convertible promissory note with a face value of $63,000, maturing on August 2, 2019, and a stated interest of 8% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on August 6, 2018, when the company received proceeds of $54,700, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $8,300 to be amortized to interest expense over the life of the note. 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 $57,181 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.42 per share (60% of the lowest trading price during the 20 days preceding the note’s issuance), which computed to 253,012 shares of “if-converted” common stock with a redemption value of $120,181 due to $0.475 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. This note (including accrued interest) was paid in full on March 25, 2019.

(e) On August 2, 2018 the Company issued a convertible promissory note with a face value of $65,000, maturing on August 2, 2019, and a stated interest of 10% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on August 7, 2018, when the Company received proceeds of $56,350, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $8,650 to be amortized to interest expense over the life of the note. 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 $58,996 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.42 per share (60% of the lowest trading price during the 20 days preceding the note’s issuance), which computed to 261,044 shares of “if-converted” common stock with a redemption value of $123,996 due to $0.475 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. This note (including accrued interest) was paid in full on February 1, 2019.

(f) On August 2, 2018 the Company issued a convertible promissory note with a face value of $125,000, maturing on May 2, 2019, and a stated interest of 12% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on August 20, 2018, when the Company received proceeds of $101,850, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $23,150 to be amortized to interest expense over the life of the note. 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 $113,454 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.42 per share (60% of the lowest trading price during the 20 days preceding the note’s issuance), which computed to 502,008 shares of “if-converted” common stock with a redemption value of $238,454 due to $0.475 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. This note (including accrued interest) was paid in full on February 22, 2019.

(g) On August 9, 2018 the Company issued a convertible promissory note with a face value of $150,000, maturing on May 9, 2019, and a stated interest of 12% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 60% of the average of 2 lowest trading prices for the 20 days prior to conversion. The note was funded on August 16, 2018, when the Company received proceeds of $122,250, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $27,750 to be amortized to interest expense over the life of the note. 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 $139,017 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.43 per share (60% of the average of 2 lowest trading day prices during the 20 days preceding the note’s issuance), which computed to 578,034 shares of “if-converted” common stock with a redemption value of $289,017 due to $0.50 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. This note (including accrued interest) was paid in full on April 5, 2019. The remaining debt discount and debt premium was fully amortized at the time of the payoff in the amount of $4,728 and $23,684, respectively, while interest expense was $95,061 of which $94,529 was for pre-payment penalties.

(h) On September 17, 2018 the Company issued a convertible promissory note with a face value of $50,000, maturing on September 17, 2019, and a stated interest of 8% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 61% of the lowest trading price for the 20 days prior to conversion. The note was funded on September 20, 2018, when the Company received proceeds of $42,250, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $7,750 to be amortized to interest expense over the life of the note. 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 $49,016 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.50 per share (61% of the lowest trading price during the 20 days preceding the note’s issuance), which computed to 163,934 shares of “if-converted” common stock with a redemption value of $99,016 due to $0.604 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. This note (including accrued interest) was paid in full on May15, 2019. The remaining debt discount and debt premium was fully amortized at the time of the payoff in the amount of $3,660 and $23,146, respectively, while interest expense was $25,056 of which $25,000 was for pre-payment penalties.

(i) On November 14, 2018 the Company issued a convertible promissory note with a face value of $273,000, maturing on November 14, 2019, and a stated interest of 8% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 62% of the lowest trading price for the 20 days prior to conversion. The note was funded on November 14, 2018, when the Company received proceeds of $250,000, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $43,000 to be amortized to interest expense over the life of the note. 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 $167,323 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.40 per share (62% of the lowest trading price during the 20 days preceding the note’s issuance), which computed to 668,004 shares of “if-converted” common stock with a redemption value of $440,323 due to $0.64 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 September 30, 2019, totaled $10,875 and $41,831, respectively, while interest expense was $5,460. On May 8, 2019, exchange for $120,181 in cash, the investor extended the maturity date of the note to March 15, 2020. This payment consisted of $109,582 in extension fees that were classified as an interest expense.

(j) On January 3, 2019 the Company issued a convertible promissory note with a face value of $105,000, maturing on January 3, 2020, and a stated interest of 10% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on January 7, 2019, when the Company received proceeds of $91,500, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $13,500 to be amortized to interest expense over the life of the note. 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 $270,000 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.14 per share (60 % of the lowest trading price during the 20 days preceding the note’s issuance), which computed to 1,250,000 shares of ‘if-converted’ common stock with a redemption value of $375,000 due to $0.30 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. This note (including accrued interest) was paid in full on June 26, 2019.

(k) On January 17, 2019 the Company issued a convertible promissory note with a face value of $75,000, maturing on January 17, 2020, and a stated interest of 10% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 60% of the lowest trading price for the 25 days prior to conversion. The note was funded on January 25, 2019, when the Company received proceeds of $59,500, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $15,500 to be amortized to interest expense over the life of the note. 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 $148,214 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.14 per share (60% of the lowest trading price during the 25 days preceding the note’s issuance), which computed to 892,857 shares of ‘if-converted’ common stock with a redemption value of $223,214 due to $0.25 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 September 30, 2019, totaled $3,875 and $37,054, respectively, while interest expense was $4,875. On September 17, 2019, the investor converted $2,400 of principal and $750 in loan fees into 761,905 and 238,095 shares of common stock respectively at a price of $.00315 per share. On September 24, 2019, the investor converted $1,774 of principal and $750 of loan fees into 844,857 and 357,143 shares of common stock respectively at a price of $.0021 per share.

(l) On February 5, 2019 the Company issued a convertible promissory note with a face value of $78,000, maturing on February 5, 2020, and a stated interest of 12 % to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 58% of the average of 2 lowest trading prices for the 15 days prior to conversion. The note was funded on February 8, 2019, when the Company received proceeds of $74,500, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $3,500 to be amortized to interest expense over the life of the note. 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 $149,276 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.15 per share (58% of $0.25 - the average of 2 lowest trading day prices during the 15 days preceding the note’s issuance), which computed to 537,931 shares of ‘if-converted’ common stock with a redemption value of $227,276 due to $0.42 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 September 30, 2019, totaled $2,119 and $90,395, respectively, while interest expense was $37,662. On August 7, 2019, the principal amount of this amount of this note plus $37,662 in accrued interest and penalty interest was paid in cash.

(m) On February 6, 2019 the Company issued a convertible promissory note with a face value of $65,000, maturing on February 6, 2020, and a stated interest of 10% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on February 7, 2019, when the Company received proceeds of $56,350, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $8,650 to be amortized to interest expense over the life of the note. 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 $107,250 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.25 per share (60% of the lowest trading price during the 20 days preceding the note’s issuance), which computed to 433,333 shares of ‘if-converted’ common stock with a redemption value of $172,250 due to $0.398 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 September 30, 2019, totaled $5,214 and $64,648, respectively, while interest expense was $30,388. On August 2, 2019, the principal amount of this amount of this note plus $30,088 in accrued interest and penalty interest was paid in cash.

(n) On February 13, 2019 the Company issued a convertible promissory note with a face value of $50,000, maturing on February 13, 2022, and a stated interest of 0% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on February 21, 2019, when the Company received proceeds of $35,900, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $14,100 to be amortized to interest expense over the life of the note. 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 $74,800 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.25 per share (60% of the lowest trading price during the 20 days preceding the note’s issuance), which computed to 333,333 shares of ‘if-converted’ common stock with a redemption value of $124,800 due to $0.374 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 September 30, 2019, totaled $1,175 and $6,233, respectively, while interest expense was $0. On August 21, 2019, the investor converted $22,900 of principal into 609,756 shares of common stock at a price of $.0246 per share. On September 17, 2019, the investor converted $4,500 of principal into 1,000,000 shares of common stock at a price of $.0045 per share. On September 23, 2019, the investor converted $3,400 of principal into 1,333,333 shares of common stock at a price of $.003 per share.

(o) On February 14, 2019 the Company issued a convertible promissory note with a face value of $100,000, maturing on February 14, 2020, and a stated interest of 10% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on February 15, 2019, when the Company received proceeds of $99,500, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $500 to be amortized to interest expense over the life of the note. 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 $140,333 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.25 per share (60% of the lowest trading price during the 20 days preceding the note’s issuance), which computed to 666,666 shares of ‘if-converted’ common stock with a redemption value of $240,333 due to $0.361 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 September 30, 2019, totaled $125 and $$35,083, respectively, while interest expense was $2,500.

(p) On February 19, 2019 the Company issued a convertible promissory note with a face value of $50,000, maturing on February 19, 2020, and a stated interest of 10% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on February 22, 2019, when the Company received proceeds of $43,200, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $6,800 to be amortized to interest expense over the life of the note. 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 $75,000 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.30 per share (60% of the lowest trading price during the 20 days preceding the note’s issuance), which computed to 277,777 shares of ‘if-converted’ common stock with a redemption value of $125,000 due to $0.450 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 September 30, 2019, totaled $1,700 and $18,750, respectively, while interest expense was $1,250. On September 19, 2019, the investor converted $4,860 of principal into 900,000 shares of common stock at a price of $.0054 per share. On September 24, 2019, the investor converted $4,320 of principal into 1,200,000 shares of common stock at a price of $.006 per share.

(q) On February 25, 2019, the Company issued a convertible promissory note with a face value of $68,000, maturing on February 25, 2020, and a stated interest of 12% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 60% of the average of 2 lowest trading prices for the 15 days prior to conversion. The note was funded on February 27, 2019, when the Company received proceeds of $64,500, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $3,500 to be amortized to interest expense over the life of the note. 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 $58,974 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.33 per share (60% of the average of 2 lowest trading day prices during the 15 days preceding the note’s issuance), which computed to 343,174 shares of ‘if-converted’ common stock with a redemption value of $126,974 due to $0.370 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 September 30, 2019, totaled $875 and $14,744, respectively, while interest expense was $4,828. On August 27, 2019, the investor converted $10,000 of principal into 666,667 shares of common stock at a price of $.015 per share. On September 23, 2019, the investor converted $4,100 of principal into 953,488 shares of common stock at a price of $.0043 per share. On September 24, 2019, the investor converted $5,400 of principal into 1,255,814 shares of common stock at a price of $.0043 per share. On September 25, 2019, the investor converted $5,400 of principal into 1,255,814 shares of common stock at a price of $.0043 per share. On September 25, 2019, the investor converted $5,400 of principal into 1,255,814 shares of common stock at a price of $.0043 per share. On September 27, 2019, the investor converted $5,200 of principal into 1,238,095 shares of common stock at a price of $.0042 per share.

(r) On March 14, 2019 the Company issued a convertible promissory note with a face value of $610,000, maturing on March 14, 2020, and a stated interest of 9% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of shares the Company’s common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on March 14, 2019, when the Company received proceeds of $557,500, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $52,500 to be amortized to interest expense over the life of the note. 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 $1,300,101 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.20 per share (60% of $0.33 - the lowest trading price during the 20 days preceding the note’s issuance), which computed to 3,080,808 shares of ‘if-converted’ common stock with a redemption value of $1,910,101 due to $0.620 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 September 30, 2019, totaled $13,125 and $325,025, respectively, while interest expense was $13,725.

(s) On April 24, 2019 the Company issued a convertible promissory note (the “Note”) with a face value of $88,000, maturing on April 24, 2020, and a stated interest of 10.00 % to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 60.00 % of the lowest trading price for the 20 days prior to conversion. The note was funded on April 25, 2019, when the Company received proceeds of $77,000, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $11,000 to be amortized to interest expense over the life of the note. 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 $58,666 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.24 per share (60 % of $0.40 - the lowest trading price during the 20 days preceding the note’s issuance), which computed to 366,666 shares of ‘if-converted’ common stock with a redemption value of $146,666 due to $0.400 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-month period ended September 30, 2019, totaled $2,750 and $14,667, respectively, while interest expense was $2,200.

(t) On April 26, 2019 the Company issued a convertible promissory note (the “Note”) with a face value of $63,000, maturing on April 26, 2020, and a stated interest of 12.00 % to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 60.00 % of the average of 2 lowest trading prices for the 15 days prior to conversion. The note was funded on April 29, 2019, when the Company received proceeds of $59,500, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $3,500 to be amortized to interest expense over the life of the note. 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 $58,227 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.23 per share (60 % of $0.39 - the average of 2 lowest trading day prices during the 15 days preceding the note’s issuance), which computed to 272,727 shares of ‘if-converted’ common stock with a redemption value of $121,227 due to $0.445 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-month period ended September 30, 2019, totaled $875 and $14,557, respectively, while interest expense was $1,890.

(u) On May 1, 2019 the Company issued a convertible promissory note (the “Note”) with a face value of $282,000, maturing on November 01, 2019, and a stated interest of 9.00 % to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 60.00 % of the average of 2 lowest trading prices for the 20 days prior to conversion. The note was funded on May 1, 2019, when the Company received proceeds of $234,500, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $47,500 to be amortized to interest expense over the life of the note. 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 $214,748 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.22 per share (60 % of $0.37 - the average of 2 lowest trading day prices during the 20 days preceding the note’s issuance), which computed to 1,273,712 shares of ‘if-converted’ common stock with a redemption value of $496,748 due to $0.39 per share fair market value of the Company’s stock on the note’s date of issuance. Additionally, the Company issued 361,538 shares of common stock (“Returnable Shares) to the lender as a commitment fee. The Returnable Shares must be returned to the Company if the note is fully repaid and satisfied prior to 180 days from the issue date. As such, the Returnable Shares were valued at $0.38 fair market value on their date of issuance, and their total value of $137,384 has been recorded as a prepaid expense (see Note F). 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-month period ended September 30, 2019, totaled $23,750 and $107,374, respectively, while interest expense was $6,345.

(v) On May 7, 2019 the Company issued a convertible promissory note (the “Note”) with a face value of $40,000, maturing on May 07, 2020, and a stated interest of 10% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 60.00 % of the lowest trading price for the 25 days prior to conversion. The note was funded on May 9, 2019, when the Company received proceeds of $31,800, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $8,200 to be amortized to interest expense over the life of the note. 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 $27,029 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.22 per share (60 % of $0.37 - the lowest trading price during the 25 days preceding the note’s issuance), which computed to 181,159 shares of ‘if-converted’ common stock with a redemption value of $67,029 due to $0.370 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-month period ended September 30, 2019, totaled $2,050 and $6,757 respectively, while interest expense was $1,000.

(w) On May 16, 2019 the Company issued a convertible promissory note (the “Note”) with a face value of $69,300, maturing on May 16, 2020, and a stated interest of 9% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on May 17, 2019, when the Company received proceeds of $56,500, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $12,800 to be amortized to interest expense over the life of the note. 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 $49,500 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.21 per share (60 % of $0.35 - the lowest trading price during the 20 days preceding the note’s issuance), which computed to 330,000 shares of ‘if-converted’ common stock with a redemption value of $118,800 due to $0.360 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-month period ended September 30, 2019, totaled $2,743 and $10,607, respectively, while interest expense was $1,559.

(x) On May 23, 2019 the Company issued a convertible promissory note (the “Note”) with a face value of $170,000, maturing on May 23, 2020, and a stated interest of 10% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 60.00 % of the lowest trading price for the 20 days prior to conversion. The note was funded on May 24, 2019, when the Company received proceeds of $153,000, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $17,000 to be amortized to interest expense over the life of the note. 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 $113,333 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.19 per share (60 % of $0.32 - the lowest trading price during the 20 days preceding the note’s issuance), which computed to 885,416 shares of ‘if-converted’ common stock with a redemption value of $283,333 due to $0.320 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-month period ended September 30, 2019, totaled $4,250 and $28,333, respectively, while interest expense was $4,250.

(y) On June 25, 2019 the Company issued a convertible promissory note (the “Note”) with a face value of $200,000, maturing on June 25, 2020, and a stated interest of 10.00 % to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the Company’s common stock, based on a conversion rate of 60.00 % of the lowest trading price for the 20 days prior to conversion. The note was funded on June 25, 2019, when the Company received proceeds of $184,500, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $15,500 to be amortized to interest expense over the life of the note. 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 $204,762 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.08 per share (60 % of $0.14 - the lowest trading price during the 20 days preceding the note’s issuance), which computed to 2,380,952 shares of ‘if-converted’ common stock with a redemption value of $404,762 due to $0.170 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-month period ended September 30, 2019, totaled $3,875 and $51,190, respectively, while interest expense was $5,000.

(z) On July 10, 2019 the Company issued a convertible promissory note with a face value of $63,000, maturing on July 10, 2020, and a stated interest of 8% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the company’s common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on July 16, 2019, when the company received proceeds of $56,500, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $6,500 to be amortized to interest expense over the life of the note. 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 $42,000 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.08 per share (60% of $0.13 - the lowest trading price during the 20 days preceding the note’s issuance), which computed to 801,526 shares of ‘if converted’ common stock with a redemption value of $105,000 due to $0.131 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-month period ended September 30, 2019, totaled $1,336 and $8,633, respectively, while interest expense was $1,036.

(aa) On July 15, 2019 the Company issued a convertible promissory note with a face value of $75,000, maturing on July 15, 2020, and a stated interest of 12% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the company’s common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on July 23, 2019, when the company received proceeds of $62,500, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $12,500 to be amortized to interest expense over the life of the note. 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 $60,496 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.08 per share (60% of $0.13 - the lowest trading price during the 20 days preceding the note’s issuance), which computed to 954,198 shares of ‘if converted’ common stock with a redemption value of $135,496 due to $0.142 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-month period ended September 30, 2019, totaled $2,326 and $11,259, respectively, while interest expense was $1,675.

(bb) On July 19, 2019 the Company issued a convertible promissory note with a face value of $69,300, maturing on July 19, 2020, and a stated interest of 9% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the company’s common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on July 25, 2019, when the company received proceeds of $55,500, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $13,800 to be amortized to interest expense over the life of the note. 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 $46,200 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.07 per share (60% of $0.12 - the lowest trading price during the 20 days preceding the note’s issuance), which computed to 962,500 shares of ‘if converted’ common stock with a redemption value of $115,500 due to $0.120 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-month period ended September 30, 2019, totaled $2,492 and $8,342, respectively, while interest expense was $1,126.

(cc) On July 31, 2019 the Company issued a convertible promissory note with a face value of $100,000, maturing on August 20, 2020, and a stated interest of 10% to a third-party investor. The note is convertible at any time after 6 months of the funding of the note into a variable number of the company’s common stock, based on a conversion rate of 60% of the lowest trading price for the 20 days prior to conversion. The note was funded on August 2, 2019, when the company received proceeds of $91,000, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $9,000 to be amortized to interest expense over the life of the note. 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 $66,667 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.04 per share (60% of $0.06 - the lowest trading price during the 20 days preceding the note’s issuance), which computed to 2,688,172 shares of ‘if-converted’ common stock with a redemption value of $166,667 due to $0.062 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-month period ended September 30, 2019, totaled $1,450 and $10,741, respectively, while interest expense was $1,611.

(dd) On August 7, 2019 the Company issued a convertible promissory note with a face value of $88,000, maturing on August 7, 2020, and a stated interest of 12.00 % to a third-party investor. The note is convertible at any time after 0 months of the funding of the note into a variable number of the company’s common stock, based on a conversion rate of 60% of the average of 2 lowest trading prices for the 15 days prior to conversion. The note was funded on August 8, 2019, when the company received proceeds of $84,500, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $3,500 to be amortized to interest expense over the life of the note. 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 $101,011 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.06 per share (60% of $0.06 - the average of 2 lowest trading day prices during the 15 days preceding the note’s issuance), which computed to 2,365,591 shares of ‘if-converted’ common stock with a redemption value of $189,011 due to $0.080 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-month period ended September 30, 2019, totaled $506 and $14,590, respectively, while interest expense was $1,525.

Note F – Stockholders’ Equity

Common Stock

We are authorized to issue 2,000,000,000 shares of our $.0001 par value common stock, of which 33,384,036 and 16,712,819 shares were issued and outstanding at September 30, 2019 and December 31, 2018 respectively.

Nine Months Ended September 30, 2019:

The Company issued 16,309,679 shares of common stock for conversion of $130,904 in convertible debt and $6,025 in related accrued interest at conversion rates between $.002 and $.025 pursuant to underlying promissory note (Note E).

The Company issued 361,538 shares of common stock at their $.38 per share fair market value for total value of $137,384. These shares represent a commitment fee to a noteholder and are returnable to the Company if certain conditions are met. These returnable shares reported as a prepaid expense at September 30, 2019 (Note C).

Nine Months Ended September 30, 2018:

The Company issued 110,955 shares of common stock at $.55 per share fair market value for cash to independent investors.

The Company issued 1,166,469 shares of common stock for conversion of $427,775 in convertible debt at various conversion rates pursuant to underlying promissory notes (Note E). The Company also issued 35,781 shares of common stock for conversion of $13,835 in related accrued interest.

The Company issued 389,370 shares of common stock at $.275 per share for settlement of related party debt and related accrued interest totaling $107,077.

The Company issued 95,890 shares of common stock for payment of accrued officer wages totaling $38,500, along with 17,273 shares of common stock for payment of accrued expenses totaling $13,818.

The Company issued 20,000 shares of common stock valued at $15,000 to secure a line of credit.

Warrants

During August and September 2016, we sold 33,058 shares of our common stock, with warrants to purchase an additional 545,454 shares of our common stock, to a group of private investors for $100,000. The warrants were issued prior to the reverse merger (Note A) and were subsequently still deemed issued and outstanding. The Series A and B warrants have expired, while the Series C warrants expired on June 30, 2019. The warrants were originally exercisable at prices between $0.55 and $2.20 share at any time between June 30, 2017 and June 30, 2019. Each series of warrants was valued using the Black-Scholes Options Pricing Model resulting in total warrant value of $85,833. The remaining proceeds of $14,167 were allocated to the common stock. Black-Scholes data inputs used to value the warrants are as follows:

During May and June 2018, various Series B warrant holders elected to exercise their warrants prior to their June 30, 2018 expiration. As such, the Company issued 19,636 shares of common stock at $1.10 per share for $21,600. The Series C warrants expired on June 30, 2019. There are currently no outstanding warrants.

The following table represents the warrant activity for the periods presented;

Preferred Stock

Our Articles of Incorporation provide that we may issue up to 10,000,000 shares of various series of preferred stock. Subject to the requirements of the Colorado Business Corporation Act, the Board of Directors may issue the preferred stock in series with rights and preferences as the Board of Directors may determine appropriate, without shareholder approval. As of September 30, 2019 and December 31, 2018, 4,500,000 Series B Preferred shares had been authorized for issuance, and 240,000 Series B preferred shares were issued and outstanding. These 240,000 Series B shares are convertible into 10,909 common shares.

Other

During the nine months ended September 30, 2019 and 2018, the Company recorded in additional paid-in capital a premium on convertible debt of $3,366,586 and $1,142,215, respectively, as well as accretion of the premium of $2,390,971 and $582,841, respectively (Note E).

During the nine months ended September 30, 2018, the Company recorded in additional paid-in capital $14,236 of deferred offering costs, as well as $6,022 of related party debt forgiveness.

Note G– Material Agreements

1. On May 26, 2019 the Company entered into an agreement with Aska Electronics Co., Ltd of China. Aska is a manufacturer of Bluetooth headphones, sport earbuds and associated listening devices and provides its products as an OEM and as an ODM for projects worldwide.

Under the Agreement:

The Company, upon no less than thirty days written notice, may redeem the Preferred Shares at a price of $2.00 per share. The Preferred shares will automatically convert into shares of the Company’s common stock if the Company’s common stock closes at a price of $2.20 or more during any 30 consecutive trading days and if the average trading volume of the Company’s common stock during such 30 consecutive trading days is at least 10,000 shares per day.

A “leak out provision” was established such that Aska may not sell more than 100,000 shares per month.

As of the date of this report the Company has not generated any revenue related to this transaction and no shares have been issued.

However, because of the financial structure of the purchase of a percentage of certain profits that were part of the overall distribution rights, the Company was unable to obtain a financial institution that would facilitate the transaction as documented and ASKA, being a Chinese based entity, is prohibited from certain financial structures. Accordingly, the agreement has yet to be consummated and may not be consummated under the original terms and the Preferred Shares were never issued. Consequently, both Companies remain set on utilizing each’s resources for future business, the anticipated revenues that could have possibly been realized are not available at this particular time.

Note H – Subsequent Events

During October and November 2019, the Company issued 80,715,727 shares of common stock for conversion of $65,143 and $4,283 in principal and accrued interest, respectively, of several of its outstanding convertible debt (Note E) at various conversion rates ranging from $.0005 to $.0033 pursuant to the underlying promissory notes.

The Company has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. The Company has determined that there are no such events that warrant disclosure or recognition in the financial statements, other than those disclosed above.

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

Throughout this Annual Report on Form 10-K Advantego Corporation is referred to as “we,” “our,” “us,” the “Company,” or “Advantego.”

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. Advantego Technologies, Inc. is a California corporation formed on July 29, 2016. On October 27, 2016, the Company acquired 100% stock ownership of Advantego Technologies, Inc. in exchange for 11,628,636 (post-split) shares of the Company’s common stock. The stock exchange was deemed a reverse merger, as the management and operations of Advantego have continued, and Advantego’s management received in the aggregate a majority ownership in GEII as a result of the stock exchange.

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.

The Company empowers business innovation as a solutions provider developing stand-alone digital and enterprise software products to capitalize on niche opportunities within a specific market. The Company leverages a proprietary Intelligent Solution Platform combining leading third-party technologies with existing data and systems to deliver a turnkey specialized Business Process as a Service (BPaaS).

The Company’s products are tailored specifically to targeted industries that can be integrated with multiple software applications for large enterprises, affiliate networks and franchise operators as comprehensive, managed, bundled solutions. The Company’s services include product design, engineering and OEM manufacturing of hardware products and licensing and distribution of third-party proprietary software and hardware from a host of Strategic Partners. This business model provides a “one-stop-shop” for our customers.

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 this approach is more cost-effective, provides greater flexibility, and 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 March of 2018 throughout the United States. 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 September 30, 2019, we had delivered approximately 1,250 digital signage controllers to individual auto care collision centers in the Assured Performance Network nationwide.

We expanded the functionality of our digital signage product to include SMS Messaging and have field tested it at live events, weddings and in audiological clinic lobbies as a digital delivery system in the same way the auto care collisions have used it. These additional features should help to attract potential advertisers as networks are built out.

We also provide subscription-based online directory listing services and we are a reseller of software that allows potential customers to better locate any business, on the internet.

We have developed an enterprise software product (“Convertible Note Disclosure Report”) that provides initial calculations for investments made in public companies using convertible debt. The product is currently being offered to the public as a stand-alone service this product will become one of a number of modules that will eventually be expanded to include the tracking and issuance of all equity (common stock, preferred stock, warrants & options), debt rolled up, equity rolled up, basic and weighted averages of shares outstanding and other types of tables and information that that are necessary for financial disclosures. When complete, this system will provide for the equity management and reporting of the financial information necessary to complete a Consolidated Financial Statement when combined with existing everyday accounting software for public and private companies, third parties and auditors. We are unaware of any system that is as comprehensive in nature of what is being developed in the marketplace today. Since the original anticipated system has been expanded to other facets of reporting, the Company is projecting release of the complete system in early 1^st quarter 2020.

In early 2019, we began designing and engineering certain hardware products focused on the audiological market that are combined with proprietary software to address the needs of the hearing impaired. To date, the initial protypes have been completed and are being tested. The Company anticipates revenue from this investment to materialize in 1^st quarter 2020.

In order to market to these niche markets, the Company is currently undergoing a rebranding all its products; and anticipates completion and marketing of these products under the “ADGO” brand in third quarter of 2019.

Contractual Obligations

ASKA Electronics, Ltd. Contract:

On June 3, 2019, the Company announced the acquisitions of the North American Distribution Rights of ASKA Electronics. of China.

Aska is a manufacturer of Bluetooth headphones, sport earbuds and associated listening devices and provides its products as an OEM and as an ODM for projects worldwide.

Under the Agreement:

Each Preferred Share is convertible into one share of the Company’s common stock.

The Company, upon no less than thirty days written notice, may redeem the Preferred Shares at a price of $2.00 per share.

The Preferred shares will automatically convert into shares of the Company’s common stock if the Company’s common stock closes at a price of $2.20 or more during any 30 consecutive trading days and if the average trading volume of the Company’s common stock during such 30 consecutive trading days is at least 10,000 shares per day.

A “leak out provision” was established such that Aska may not sell more than 100,000 shares per month. The May 26, 2019 agreement replaces the January 14, 2019 agreement between the Company and Aska.

However, because of the financial structure of the purchase of a percentage of certain profits that were part of the overall distribution rights, the Company was unable to obtain a financial institution that would facilitate the transaction as documented and ASKA, being a Chinese based entity, is prohibited from certain financial structures. Accordingly, the agreement has yet to be consummated and may not be consummated under the original terms and the Preferred Shares were never issued. Consequently, both Companies remain set on utilizing each’s resources for future business, the anticipated revenues that could have possibly been realized are not available at this particular time.

Shenzhen Ferex Electrical Co. Ltd

We signed a Strategic Partnership Agreement with manufacturer and exporter Shenzhen Ferex Electrical Co., Ltd of China to manufacture and supply electrical components and systems at the end of last year. We began offering design, engineering and manufacturing services to our customers in the beginning of 2019. Currently, we have a manufacturing contract to provide these services with AfterMaster Audio Labs regarding two new products. This agreement is subject to certain financing requirements. As of the date of this filing we have not generated any revenue related to this transaction.

There were no other material changes to our contracts not previously reported.

Results of Operations

During the three months ended September 30, 2019 and 2018, we had revenues of $55,114 and $45,981, respectively. The related cost of sales for the three months ended September 30, 2019 and 2018 was $17,644 and $28,890, respectively. The increase in revenue was the result of recognition of digital signage license renewals. We also deferred $46,958 and $0 of our digital signage renewal revenue to future periods as of September 30, 2019 and December 31, 2018, respectively. Similarly, our cost of sales decreased as the renewal costs were lower than the initial cost. As a result, gross margin for the three months ended September 30, 2019 increased to $37,470 from $17,091 during the same period during 2018. Our general and administrative expenses totaled $181,679 and $243,324 for the three months ended September 30, 2019 and 2018, respectively, and consisted primarily of officer wages, outsourced services, and professional fees. The decrease in general and administrative expenses was primarily the result of decreased marketing and investor relations expenses and the capitalization of some development costs. Interest expense was $235,367 and $71,744 during the three months ended September 30, 2019 and 2018, respectively. The increase during 2019 was due to an increased number of convertible notes payable, the amortization of debt discounts, pre-payment penalties and extension fees that we classified as interest expense.

During the nine months ended September 30, 2019 and 2018, we had revenues of $84,505 and $161,225, respectively. The related cost of sales for the nine months ended September 30, 2019 and 2018 was $43,754 and $102,814, respectively. The decrease in revenue was the result of renewal fees for our digital signage service which were lower than the initial cost of the control boxes and service for our digital signage product to a network of certified auto care collision centers in the United States during 2018. We also deferred $46,958 and $0 of our digital signage renewal revenue to future periods as of September 30, 2019 and December 31, 2018, respectively. Similarly, our cost of sales decreased as the renewal costs were lower than the initial cost and we deferred $7,889 of costs of sales to future periods as of September 30, 2019. As a result, gross margin for the nine months ended September 30, 2019 decreased to $40,751 from $58,411 during the same period 2018. Our general and administrative expenses totaled $833,832 and $628,909 for the nine months ended September 30, 2019 and 2018, respectively, and consisted primarily of officer wages, outsourced services, and professional fees. The increase in general and administrative expenses was primarily the result of increased marketing and investor relations expenses. Interest expense was $931,902 and $215,957 during the nine months ended September 30, 2019 and 2018, respectively. The increase during 2019 was due to an increased number of convertible notes payable, the amortization of debt discounts, pre-payment penalties and extension fees that we classified as interest expense. The Company chose to repay certain convertible notes with cash and incur significant prepayment penalties rather than converting the convertible debt into stock at a discounted rate thus reducing the dilution of the outstanding shares of stock.

Liquidity and Capital Resources

Our primary sources and (uses) of cash for the nine months ended September 30, 2019 and 2018 were:

See Note B to the September 30, 2019 financial statements included as part of this report for a description of our significant accounting policies.

See Note E to the September 30, 2019 financial statements which are a part of this report for a discussion of our convertible notes payable.

Off-Balance Sheet Arrangements

None.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable. The Company is a “smaller reporting company.”

Item 4. Controls and Procedures.

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 periods 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 September 30, 2109, our disclosure controls and procedures were not effective for the following reasons:

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 September 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II.

Item 1. Legal Proceedings.

The Company is not a party to any material pending legal proceedings and, to the best of its knowledge; its properties are not the subject of any such proceedings.

Item 1A. Risk Factors.

See the Going Concern statement listed in Note A to the accompanying financial statements.

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

Common stock issued for convertible debt during the three months ended September 30, 2019 and subsequent to September 30, 2019 through November 11, 2019.