ADGO Advantego Corporation (CE)

Note A – Organization and Business

Organization and Nature of Business

Advantego Corporation (“Advantego,” “we,” or the “Company”) was originally incorporated in Colorado on July 21, 1988, as Beneficial Capital Financial Services Corp. On February 2, 1995, the Company changed its name to Golden Eagle International, Inc. (“GEII”). From late 2008 through June 2009, GEII engaged in contract gold milling operations in the state of Nevada in the United States. GEII had not had any business operations since it disposed of its wholly owned subsidiary, Golden Eagle International, Inc. (Bolivia), in the first quarter of fiscal 2010. Prior to that time, GEII had been involved in the business of minerals exploration and (prior to 2005) mining and milling operations in Bolivia through that subsidiary. More recently, GEII had been a non-operating corporation seeking to sell its remaining milling plant and equipment and/or merge with an operating company. Advantego Technologies, Inc. (“ATI”) is a Colorado corporation formed on July 29, 2016. On October 27, 2016, GEII completed a reverse merger with ATI, which resulted in a change of control and the perpetuation of ATI’s management and business operations.

Effective February 1, 2018 and pursuant to Board authorization and majority shareholder approval, the Company changed its name 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 empowers business innovation as a technical 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 Services (BPaaS) that is both scalable and cost effective.

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

Basis of Presentation

The accompanying consolidated financial statements represent the operations of Advantego Corporation and its wholly owned subsidiary, Advantego Technologies, Inc., with all intercompany transactions eliminated.

Going Concern

The consolidated financial statements for the three and six months ended June 30, 2020 and 2019 have been prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that our 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 we be unable to continue as a going concern. The Company has not yet achieved profitable operations, has negative working capital, has accumulated losses of $4,858,859, since its inception through June 30, 2020, and may incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. We can offer no assurances that we will be able to obtain adequate financing to implement our business plan and remain a going concern.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic. While the disruption is currently expected to be temporary, there is uncertainty around its duration. As a result of COVID-19 mobility restrictions globally, there have been changes in consumer behavior. We expect these changes in behavior to continue to evolve. The impacts seen to date may continue to create a wider range of outcomes as consumer behaviors and mobility restrictions continue to evolve. The Covid 19 pandemic has impacted our business resulting in the cancellation of certain business contracts and hindered our ability to raise additional capital.

Note B – Summary of Significant Accounting Policies

Note C – Convertible Notes Payable

Convertible Notes Payable

From January 17, 2019, through August 7, 2019, the Company issued nineteen (19) Convertible Promissory Notes to third parties ranging in face values from a low of $40,000 to a high of $610,000 all with maturity dates ranging of nine (9) months to one (1) year. Annual interest rates ranged from a low of 0% to a high of 12%. All notes are 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 from 58% to 62% of the of the lowest trading price from a range of 15 to 25 of the previous days to conversion. When the Company received proceeds, proceeds ranged from $31,800 to $557,500, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount ranging from $500 to $52,500 that are amortized to interest expense over the life of each 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 premiums on the note(s) ranging from $42,200 to $1,300,101 as a reduction to additional paid-in capital based on a discounted “if-converted” rates from $ .04 to $ .33 per share based on the trading prices ranging from 15 to 25 days preceding the note’s issuance), which computed to a range of 181,159 to 3,080,808 shares ‘if converted’ common stock with redemption values between $67,029 and $191,101 due to the range from $.06 to $.45 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.

During the six months ended June 30, 2020 and 2019, the Company received $0 and $1,981,550, respectively, in proceeds from issuance of convertible notes, and made repayments of $0 and $608,000, respectively. During the six months ended June 30, 2020, and 2019, the Company converted $5,819 and $40,000, respectively, in principal and $8,021 and $2,685, respectively, in accrued interest on convertible notes to common stock. Debt discount and premium amortizations for the six months ended June 30, 2020, totaled $65,712 and $706,079, respectively, while interest expense was $333,235. Debt discount and premium amortizations for the six months ended June 30, 2019, totaled $162,425 and $1,448,214, respectively, while interest expense was $696,536.

Note D – Stockholders’ Equity

Common Stock

On March 11, 2020, the board of directors amended the Articles of Incorporation to increase the number of authorized common shares to 300,000,000,000 with a par value of $.0001 per share. On June 30, 2020 and December 31, 2019 there were 783,029,648 and 487,359,288 shares issued and outstanding respectively.

During the six months ended June 30, 2020 and 2019, unaffiliated holders of our convertible notes payable elected to convert $5,819 and $40,000 of principal into 96,984,801 and 297,618 shares of our common stock, respectively, and $8,021 and $2,685 in accrued interest into 198,685,559 and 21,399 shares of common stock, respectively, at prices per share discounted from the stock’s fair market value on each conversion date based on discount rates specified in each respective note.

In May 2019, the Company issued 361,538 shares of common stock (“Returnable Shares) to a lender as a commitment fee. The Returnable Shares were to be returned to the Company if the note was 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 (the grant date), and their total value of $137,384 was initially recorded as a prepaid expense. The underlying note was not repaid prior to 180 days from the issue date, and the value was expensed in full in November 2019.

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.

The Company has designated 4,500,000 Series B Convertible Preferred shares, of which 240,000 shares were issued and outstanding at June 30, 2020 and December 31, 2019. These 240,000 Series B shares are convertible into 10,909 common shares. There were no issuances of Series B convertible preferred stock during the six months ended June 30, 2020 or 2019.