The accompanying footnotes are an integral part
of these condensed unaudited financial statements.
The accompanying footnotes are an integral part
of these condensed unaudited financial statements.
The accompanying footnotes are an integral part
of these condensed unaudited financial statements.
Notes to Consolidated Financial Statements
Nine Months Ended September 30, 2018 and 2017 (Unaudited)
[GRAPHIC OMITTED]
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. Since 2008, GEII had
engaged in contract gold milling operations in the state of Nevada in the United
States. On October 27, 2016, GEII completed a reverse merger with Advantego
Technologies, Inc., which resulted in a change of control and the perpetuation
of Advantego Technologies, Inc.'s management and business operations. Concurrent
with the merger, the combined entity executed a quasi-reorganization, thereby
eliminating GEII's losses accumulated since its inception through the date of
the merger.
Advantego Technologies, Inc. was incorporated in California on July 29, 2016.
Advantego Technologies, Inc. develops software products and related services
which are designed to enable an organization to rapidly and cost-effectively
create a comprehensive promotional and marketing campaign using social media
marketing, customer relationship management, and lead generation.
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 OTC Markets trading platform on February 22, 2018. Unless otherwise
noted, impacted amounts and share information included in the financial
statements and notes thereto have been adjusted to reflect the stock split as if
it had occurred on the first day of the earliest period presented.
Basis of Presentation
The accompanying 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.
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 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 accumulated losses of $1,565,717 since its
inception through September 30, 2018 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 our line of business
involves proven technologies, we can offer no assurances that we will be able to
obtain adequate financing to implement our business plan and remain a going
concern
7
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, 2018
or December 31, 2017.
Approximately 90% of the Company's revenues during the nine months ended
September 30, 2018 and 100% of the accounts receivable at September 30, 2018 are
with one customer. This customer is a certifier of automobile collision repair
shops, which distribute the Company's product 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.
Inventory
The Company's inventory consists of controller boxes that the Company configures
with digital signage software upon customer order. Each box is identical and is
carried at cost.
8
Property and Equipment
Property and equipment are recorded at cost. Maintenance and repair costs are
charged to expense as incurred, and renewals and improvements that extend the
useful life of assets are capitalized. Depreciation on property and equipment is
computed using the straight-line method over the assets' estimated useful lives
as follows:
Vehicles 5 years
Office equipment 4-10 years
Long-Lived Assets
We periodically review our long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Impairment losses are recognized when the estimated future cash
flows are less than the carrying amount of the asset calculated on discounted
cash flow basis. For the nine months ended September 30, 2018 and 2017, we did
not recognize any impairment charges.
Revenue Recognition
In May 2017, the Company launched the online directory and digital signage
components of the licensing services it provides to third parties. The Company
has entered into various licensing arrangements to be recognized as revenue over
the life of the licensing agreements ranging from one to twelve months. During
the nine months ended September 30, 2018, the Company recognized $161,225 in net
revenues, which were comprised of $143,694 in digital signage and $17,531 in
online directory listing sales. As of September 30, 2018, and December 31, 2017,
$0 and $4,215, respectively, of online directory listing sales were deferred to
future periods. The September 30, 2018 accounts receivable balance of $10,800
consists of amounts owed for digital signage hardware and software, payment for
which is billed to customers upon shipment (the point at which revenue is deemed
earned). Since customers pre-pay via the Company's website for online directory
services to be rendered during a subsequent period, management determined no
allowance for doubtful accounts was necessary at September 30, 2018.
Stock Based Compensation
We measure stock-based compensation cost relative to the estimated fair value of
the awards on the grant date using a Black-Scholes options pricing model. 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, 2018 and 2017, 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.
9
Fully diluted shares for the three and nine months ended September 30, 2018 and
2017 are as follows:
Three Months Ended Nine Months Ended
Sept 30, Sept. 30, Sept. 30, Sept. 30,
2018 2017 2018 2017
-------------------- ---------------------
Basic weighted average shares
outstanding 16,520,092 14,534,848 16,020,771 14,534,848
Convertible debt 1,717,856 465,862 635,857 432,463
Series B preferred stock 10,909 10,909 10,909 10,909
Warrants 181,818 545,454 181,818 545,454
---------- ---------- ---------- ----------
Fully diluted weighted average
shares outstanding 18,430,675 15,557,073 16,849,355 15,523,674
|
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 - Convertible Notes Payable
Convertible Notes Payable - Related Parties
We have uncollateralized related party convertible debt obligations outstanding
at September 30, 2018 and December 31, 2017 as follows:
September 30, 2018 December 31, 2017
------------------------------------ ---------------------------------------
Less Net Less Net
Debt Note Accrued Debt Note Accrued
Note Principal Discount Balance Interest Principal Discount Balance Interest
-----------------------------------------------------------------------------------------------
(a) $ - $ - $ - $ - $30,112 $(4,516) $25,596 $ 20,716
(b) - - - - 30,500 - 30,500 3,439
|
10
(c) - - - - 12,500 (6,216) 6,284 366
(d) - - - - 12,500 (9,204) 3,296 185
------ ------ ------ ----- ------- -------- ------- ------
Totals $ - $ - $ - $ - $85,612 $(19,936) $65,676 24,706
====== ====== ====== ===== ======= ======== ======= ======
|
(a) Gulf Coast Capital, LLC is a company owned by Mark Bogani, our former CEO.
The note was dated September 30, 2016 and represented the consolidation of
various smaller notes payable previously outstanding totaling $145,112 plus
$15,471 in accrued interest. Interest continued to accrue at the rate of
5%, with principal and interest being due on demand and convertible into
our common stock at the option of the lender at a fixed rate of $.275 per
share. Upon the note's inception, there was a beneficial conversion feature
totaling $29,022 that was being amortized and netted against the principal
balance as a debt discount. On December 30, 2016, Gulf Coast Capital
converted $115,000 of the note into 418,182 shares of the Company's common
stock. On January 8, 2018, Gulf Coast Capital converted $24,090 principal
plus $21,376 in accrued interest into 165,331 shares of our common stock
(Note D), at which point the remaining unamortized debt discount of $4,516
was amortized to interest expense. On June 30, 2018, the remaining $6,022
principal balance was forgiven and written-off to additional paid-in
capital.
(b) Avcon Services, Inc. is a company owned by Tracy Madsen, our CFO. The note
represented amounts totaling $30,500 for CFO services during the period of
June 2014 through September 2015, was dated December 31, 2015, carried an
interest rate of 5%, and was due on demand. The note and accrued interest,
or any portion thereof, were convertible at the option of Avcon, into the
Company's common stock at a fixed rate of $.275 per share through December
31, 2020. On May 10, 2018, this note was sold to Khalid Mirza. On May 30,
2018, Mr. Mirza converted the note principal plus accrued interest of
$5,548 into 131,083 shares of our common stock.
(c) On June 29, 2017, the Company entered into an uncollateralized note payable
with its then-CFO, Philip Grey, in the amount of $12,500. The note carried
an interest rate of 6% and matured on June 29, 2018. The note and accrued
interest, or any portion thereof, were convertible at the option of the
lender, into the Company's common stock at a fixed rate of $.275 per share.
Upon the note's inception, there was a beneficial conversion feature
totaling $12,500 that was being amortized and netted against the note
balance as a debt discount. On January 8, 2018, Mr. Grey converted the
$12,500 principal plus accrued interest of $375 into 46,818 shares of
common stock (Note D), and the remaining debt discount of $6,216 was
amortized to interest expense.
(d) On September 25, 2017, the Company entered into an uncollateralized note
payable with its former CEO, Mark Bogani, in the amount of $12,500. The
note carried an interest rate of 6% and matured on September 25, 2018. The
note and accrued interest, or any portion thereof, were convertible at the
option of the lender, into the Company's common stock at a fixed rate of
$.275 per share. Upon the note's inception, there was a beneficial
conversion feature totaling $12,500 that was being amortized and netted
against the principal balance as a debt discount. On January 8, 2018, Mr.
Bogani converted the $12,500 principal plus accrued interest of $188 into
46,138 shares of common stock (Note D), and the remaining debt discount of
$9,204 was amortized to interest expense.
Convertible Notes Payable
We have uncollateralized convertible debt obligations with unaffiliated
investors outstanding at September 30, 2018 and December 31, 2017 as follows:
11
September 30, 2018 December 31, 2017
--------------------------------------------------- ----------------------------------------
Less Less Net
Debt Plus Net Note Accrued Debt Note Accrued
Note Principal Discount Premium Balance Interest Principal Discount Balance Interest
-------------------------------------------------------------- ----------------------------------------
(a) $ - $ - $ - $ - $ - $100,000 $ (6,158) $ 93,842 $ 6,748
(b) - - - - - 25,000 (18,408) 6,592 362
(c) - - - - - 25,000 (22,917) 2,083 127
(d) - - - - - - - - -
(e) - - - - -
(f) 75,000 (7,031) 93,750 161,719 3,511
(g) - - - - -
(h) 50,000 - - 50,000 1,417
(i) 125,000 (15,937) 96,436 205,499 1,687
(j) 63,000 (7,055) 48,604 104,549 756
(k) 65,000 (7,377) 50,310 107,933 957
(l) 125,000 (20,578) 100,848 205,270 1,667
(m) 150,000 (23,228) 116,362 243,134 2,200
(n) 50,000 (7,535) 47,655 90,120 111
-------- -------- -------- ---------- ------- --------- -------- -------- ------
Totals $703,000 $(88,741) $553,965 $1,168,224 $12,306 $150,000 $(47,483) $102,517 $7,237
|
(a) On September 22, 2016 ($50,000), January 12, 2017 ($25,000), and March 27,
2017 ($25,000), the Company entered into notes payable with a single
investor totaling $100,000. The notes carried an interest rate of 6% and
each matured one year following its issuance date. The notes and accrued
interest were convertible into the Company's common stock at a fixed rate
of $.275 per share. Upon the notes' inceptions, there was an aggregate
beneficial conversion feature totaling $40,000, which was being amortized
and netted against the aggregate principal balance as a debt discount. On
January 8, 2018, the noteholder converted the $100,000 principal plus
accrued interest of $6,313 into 386,593 shares of common stock (Note D),
and the remaining unamortized debt discount of $6,158 was amortized to
interest expense.
(b) On September 25, 2017, the Company entered into a note payable in the
amount of $25,000. The note carried an interest rate of 6% and matured on
September 25, 2018. The note and accrued interest were convertible at the
option of the lender into the Company's common stock at a fixed rate of
$.275 per share. Upon the note's inception, there was a beneficial
conversion feature of $25,000, which was being amortized and netted against
the principal balance as a debt discount. On January 8, 2018, the
noteholder converted the $25,000 principal plus accrued interest of $375
into 92,273 shares (Note D), and the remaining unamortized debt discount of
$18,408 was amortized to interest expense.
(c) On November 30, 2017, the Company entered into a note payable in the amount
of $25,000 with an unaffiliated lender. The note carried an interest rate
of 6% and matured on November 30, 2018. The note and accrued interest were
convertible at the option of the lender into the Company's common stock at
a fixed rate of $.275 per share. Upon the note's inception, there was a
beneficial conversion feature of $25,000, which was being amortized and
netted against the principal balance as a debt discount. On January 8,
2018, the noteholder converted the $25,000 principal plus accrued interest
of $125 into 91,364 shares (Note D), and the remaining debt discount of
$22,917 was amortized to interest expense.
12
(d) On March 2, 2018, the Company entered into an uncollateralized note payable
with an unaffiliated investor in the amount of $301,875. The note carried
an interest rate of 12% and matured on March 2, 2019. The note and accrued
interest, or any portion thereof, were convertible at the option of the
lender, into the Company's common stock at a rate of 58% of the lowest
market trading price per share during the 25 days preceding conversion. At
the note's inception, there was an original issue discount of $39,375, a
transaction fee of $12,500, and a finder's fee of common stock valued at
$15,000 (Note D), which in the aggregate resulted in a total discount of
$66,875 to be amortized to interest expense over the life of the note, and
net proceeds received by the Company of $250,000. Additionally, the note's
variable conversion rate component requires that the note be valued at its
stock redemption value (i.e., "if-converted" value) pursuant to ASC 480,
Distinguishing Liabilities from Equity, with the excess over the note's
undiscounted face value being deemed a premium to be added to the principal
balance and amortized to additional paid-in capital over the life of the
note. As such, the Company recorded a premium on the note of $284,063 as a
reduction to additional paid-in capital based on a discounted
"if-converted" rate of $.32 per share (58% of the $.55 lowest trading price
during the 25 days preceding the note's issuance), which computed to
781,250 shares of "if-converted" common stock with a redemption value of
$585,938 due to $.75 per share fair market value of the Company's stock on
the note's date of issuance. Debt discount amortization is recorded as
interest expense, while debt premium amortization is recorded as an
increase to additional paid-in capital. Debt discount and premium
amortizations for the three months ended March 31, 2018 totaled $4,753 and
$23,348, respectively, while interest expense was $2,264. During the period
May 15 through May 30, 2018 the note's principal and interest balance
totaling $284,797 was converted into 632,020 shares of our common stock in
accordance with terms of the convertible promissory note (Note D), while
the remaining unamortized discount of $62,122 was amortized to interest and
the remaining premium of $255,307 was amortized to additional paid-in
capital.
(e) On May 11, 2018, the Company entered into an uncollateralized note payable
with an unaffiliated investor in the amount of $45,000. The note carried an
interest rate of 12% and matured on May 11, 2019. The note and accrued
interest, or any portion thereof, were convertible at the option of the
lender, into the Company's common stock at a rate of 58% of the lowest
market trading price per share during the 20 days preceding conversion. At
the note's inception, there was a transaction fee of $3,000 and a finder's
fee of $4,200, which in the aggregate resulted in a total discount of
$7,200 to be amortized to interest expense over the life of the note, and
net proceeds received by the Company of $37,800. Additionally, the note's
variable conversion rate component required that the note be valued at its
stock redemption value (i.e., "if-converted" value) pursuant to ASC 480,
Distinguishing Liabilities from Equity, with the excess over the note's
undiscounted face value being deemed a premium to be added to the principal
balance and amortized to additional paid-in capital over the life of the
note. As such, the Company recorded a premium on the note of $114,947 as a
reduction to additional paid-in capital based on a discounted
"if-converted" rate of $.67 per share (58% of the average of the two lowest
trading day prices during the 15 days preceding the note's issuance), which
computed to 76,680 shares of "if-converted" common stock with a redemption
value of $92,016 due to $1.20 per share fair market value of the Company's
stock on the note's date of issuance. Debt discount amortization was
recorded as interest expense, while debt premium amortization was recorded
as an increase to additional paid-in capital. This note was paid in full on
August 7, 2018, on which date the remaining debt premium in the amount of
$95,789 was amortized to additional paid-in capital and the remaining debt
discount of $6,000 was amortized to interest expense. Accrued interest and
prepayment fees totaling $12,693 were paid in cash at the time the note was
repaid.
(f) On May 15, 2018, the Company entered into an uncollateralized note payable
with an unaffiliated investor in the amount of $75,000. The note carries an
interest rate of 12% and matures on May 15, 2019. The note and accrued
interest, or any portion thereof, are convertible at the option of the
lender, into the Company's common stock at a rate of 60% of the lowest
13
market trading price per share during the 20 days preceding conversion. At
the note's inception, there was an original issue discount of $3,750 a
transaction fee of $2,000, and a finder's fee of $5,500, which in the
aggregate resulted in a total discount of $11,250 to be amortized to
interest expense over the life of the note, and net proceeds received by
the Company of $63,750. Additionally, the note's variable conversion rate
component requires that the note be valued at its stock redemption value
(i.e., "if-converted" value) pursuant to ASC 480, Distinguishing
Liabilities from Equity, with the excess over the note's undiscounted face
value being deemed a premium to be added to the principal balance and
amortized to additional paid-in capital over the life of the note. As such,
the Company recorded a premium on the note of $150,000 as a reduction to
additional paid-in capital based on a discounted "if-converted" rate of
$.51 per share (60% of the $.85 lowest trading price during the 20 days
preceding the note's issuance), which computed to 126,000 shares of
"if-converted" common stock with a redemption value of $192,780 due to
$1.53 per share fair market value of the Company's stock on the note's date
of issuance. Debt discount amortization is recorded as interest expense,
while debt premium amortization is recorded as an increase to additional
paid-in capital. Debt discount and premium amortizations for the nine
months ended September 30, 2018 totaled $4,219 and $56,250, respectively,
while interest expense was $3,511.
(g) On June 21, 2018, the Company entered into an uncollateralized note payable
with an unaffiliated investor in the amount of $78,000. The note carried an
interest rate of 12% and matured on June 21, 2019. The note and accrued
interest, or any portion thereof, were convertible at the option of the
lender, into the Company's common stock at a rate of 58% of the average of
the two lowest market trading price per share during the 15 days preceding
conversion. At the note's inception, there was a transaction fee of $3,000
and a finder's fee of $7,500, which in the aggregate resulted in a total
discount of $10,500 to be amortized to interest expense over the life of
the note, and net proceeds received by the Company of $67,500.
Additionally, the note's variable conversion rate component required that
the note be valued at its stock redemption value (i.e., "if-converted"
value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with
the excess over the note's undiscounted face value being deemed a premium
to be added to the principal balance and amortized to additional paid-in
capital over the life of the note. As such, the Company recorded a premium
on the note of $62,086 as a reduction to additional paid-in capital based
on a discounted "if-converted" rate of $.84 per share (58% of the $.1.44
lowest trading price during the 15 days preceding the note's issuance),
which computed to 132,912 shares of "if-converted" common stock with a
redemption value of $201,168 due to $1.50 per share fair market value of
the Company's stock on the note's date of issuance. Debt discount
amortization was recorded as interest expense, while debt premium
amortization was recorded as an increase to additional paid-in capital.
This note was repaid in full on August 14, 2018, on which date the
remaining debt premium in the amount of $60,534 was amortized to additional
paid-in capital and the remaining debt discount of $10,237 was amortized to
interest expense. Accrued interest and prepayment fees totaling $17,077
were paid in cash at the time the note was repaid.
(h) On June 11, 2018, we issued a fixed price convertible note payable in the
amount of $50,000 as a commitment fee to Tangiers in order to provide a
long-term funding facility for our operations. The note bears interest at
10% per year, 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. Accrued interest and interest expense as of and for the nine
months ended September 30, 2018 totaled $1,417.
14
(i) On August 2, 2018 the Company issued a convertible promissory note (the
"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 nine months ended September 30, 2018, totaled $2,813
and $17,018, respectively, while interest expense was $1,687.
(j) On August 2, 2018 the Company issued a convertible promissory note (the
"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. Debt discount and premium
amortizations for the nine months ended September 30, 2018, totaled $1,245
and $8,577, respectively, while interest expense was $756.
(k) On August 2, 2018 the Company issued a convertible promissory note (the
"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
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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. Debt discount and premium
amortizations for the nine months ended September 30, 2018, totaled $1,273
and $8,686, respectively, while interest expense was $957.
(l) On August 2, 2018 the Company issued a convertible promissory note (the
"Note") with a face value of $125,000, maturing on August 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. Debt discount and premium
amortizations for the nine months ended September 30, 2018, totaled $2,572
and $12,606, respectively, while interest expense was $1,667.
(m) On August 9, 2018 the Company issued a convertible promissory note (the
"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 $0.500 per share fair market value of the
Company's stock on the note's date of issuance. Debt discount amortization
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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 nine months ended September 30, 2018, totaled
$4,522 and $22,655, respectively, while interest expense was $2,200.
(n) On September 17, 2018 the Company issued a convertible promissory note
(the "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. Debt discount and premium
amortizations for the nine months ended September 30, 2018, totaled $215
and $1,361, respectively, while interest expense was $111.
Note D - Stockholders' Equity
Common Stock
We are authorized to issue 2,000,000,000 shares of our $.0001 par value common
stock, of which 16,520,092 and 14,664,718 were issued and outstanding at
September 30, 2018 and December 31, 2017, respectively.
On February 1, 2018, the Company issued 17,273 shares of common stock based on
the stock's approximate trading price of $.75 per share for total value of
$13,818. The shares were issued to an independent consultant for services to be
rendered over the six months following issuance. The Company recorded the shares
as a prepaid expense (Note F).
On February 5, 2018, the Company issued 20,000 shares of common stock to an
unaffiliated individual as a finder's fee in connection with the procurement of
a variable rate convertible note with an unrelated party as detailed in Note C
(d). The stock was valued at $15,000 based on the per-share stock price of $.75
on the issuance date and recorded as a debt discount that was netted with the
underlying convertible note and amortized to interest expense over the length of
the note, which was converted in full in May 2018.
On May 21 through May 30, 2018, the Company issued 110,955 shares of common
stock to friends and family under the Company's Friends and Family Stock
Offering at a price of $.55 per share in exchange for $61,025 in cash.
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 expire 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
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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:
Number
Stock Exercise Expected Risk-Free Warrant of Extended
Warrants Price Price Life (yrs) Rate Value Warrants Value
-------------------------------------------------------------------------------
Series A
(expired) $.275 $0.55 .75 .54% $0.1168 181,818 $21,249
Series B
(expired) $.275 $1.10 1.75 .69% $0.1639 181,818 $29,817
Series C $.275 $2.20 1.75 .85% $0.1912 181,818 $34,767
----- ----- ---- ---- ------- ------- -------
Total $85,833
===== ===== ==== ==== ======= ======= =======
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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..
Debt Conversion
As summarized below, various noteholders elected to convert their notes payable
into shares of our common stock in accordance with terms of their promissory
notes from Note C. Our former officer, Philip Grey, converted his accrued wages
as well.
Post-Split
Conversion Shares
Total Rate Per Issued Upon
Name Principal Interest Converted Share Conversion
-------------------------------------------------------------------------------
Gulf Coast January 8, $ 24,090 $21,376 $45,466 $ .275 165,331
Capital 2018
Mark Bogani January 8, 12,500 188 12,688 .275 46,138
2018
Stephen January 8, 25,000 375 25,375 .275 92,273
Calandrella 2018
Clifford January 8, 100,000 6,313 106,313 .275 386,593
Thygesen 2018
Kevin Curtis January 8, 25,000 125 25,125 .275 91,364
2018
Phillip Grey January 8, 12,500 375 12,875 .275 46,818
2018
Phillip Grey* January 8, 38,500 - 38,500 .402 95,890
2018
Carebourn May 15, 2018 150,000 - 150,000 .377 397,878
Capital
Carebourn May 22, 2018 50,000 - 50,000 .493 101,419
Capital
Carebourn May 30, 2018 77,775 7,022 84,797 .638 132,723
Capital
Avcon
Services May 30, 2018 30,500 5,548 36,048 .275 131,083
----------------------------------------------------
Total $545,865 $41,332 $587,187 - 1,687,510
|
* Represents accrued wages converted at a rate agreed upon by management.
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,
2018 and December 31, 2017, 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. On October 26, 2017, our former CEO transferred 160,000 shares of our
Series B Preferred stock to be divided between our current CEO and our current
President.
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Note E - Related Party Transactions
We incur various consulting, management, and software licensing expenses with
our officers, directors, and companies owned by our officers and directors.
During the nine months ended September 30, 2018 and 2017, we incurred $316,000
and $366,012, respectively, with these individuals and companies, and we had
payable balances of $288,866 and $418,079 at September 30, 2018 and December 31,
2017, respectively.
We also had various convertible notes payable outstanding with related parties
at December 31, 2017 as detailed in Note C.
Note F - Prepaid Expenses
The Company's prepaid expenses consist of unamortized common stock that was
prepaid for consulting services (Note D), $989 in deposits for forthcoming
inventory, $3,725 in prepaid insurance, and $6,012 in prepaid software license.
The prepaid stock's value on the February 1, 2018 issuance date of $13,818 was
amortized over the six months following the issuance. The Company recorded
amortization expense of $13,818 during the nine months ended September 30, 2018,
resulting in unamortized prepaid stock of $0 and total prepaid expenses of
$10,726 and $0 at September 30, 2018 and December 31, 2017, respectively.
Note G - Subsequent Events
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.
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