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 endedSeptemberJune 30, 20192020
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to ____________
Commission file number:000-54867
LGBTQ LOYALTY HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 80-0671280 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
2435 Dixie Highway, Wilton Manors, FL 33305
(Address of principal executive offices, including zip code)
Tel: (858)-577-1746
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | N/A | N/A |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically 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 definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and emerging growth company in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | [ ] | Accelerated filer | [ ] |
| Non-accelerated filer | [X] | Smaller reporting company | [X] |
| Emerging growth company | [ ] |
If an emerging growth company, indicate by check mark if this 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]
As of NovemberAugust 14, 20192020 there were 167,682,460214,614,749 shares of common stock, $0.001 par value, issued and outstanding.
LGBTQ Loyalty Holdings, Inc.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBERJUNE 30, 20192020
TABLE OF CONTENTS
| PAGE | ||
| PART I - FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |
| Item 4. | Controls and Procedures | |
| PART II - OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | |
| Item 1A. | Risk Factors | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
| Item 3. | Defaults Upon Senior Securities | |
| Item 4. | MineSafety Disclosures | |
| Item 5. | Other Information | |
| Item 6. | Exhibits | |
| SIGNATURES |
| i |
LGBTQ Loyalty Holdings, Inc.
PART I – FINANCIAL INFORMATION
| 1 |
LGBTQ LOYALTY HOLDINGS, INC.
LGBTQ Loyalty Holdings, Inc.CONDENSED CONSOLIDATED BALANCE SHEETS
Condensed Consolidated Balance Sheets
(Unaudited)
September 30, 2019 | December 31, 2018 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 14,093 | $ | 40,908 | ||||
| Other current assets | 9,220 | 595 | ||||||
| Total current assets | 23,313 | 41,503 | ||||||
| Property and equipment, net of depreciation | 1,900 | - | ||||||
| Intangible assets, net of amortization | 47,500 | - | ||||||
| Total Assets | $ | 72,713 | $ | 41,503 | ||||
| Liabilities and Stockholders’ (Deficit) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 502,818 | $ | 245,133 | ||||
| Accrued salaries | 116,250 | 348,800 | ||||||
| Accrued interest and dividends | 37,435 | 20,397 | ||||||
| Notes payable | 10,986 | 33,000 | ||||||
| Notes payable to related party | 17,885 | 17,885 | ||||||
| Advances due to related party | 10,900 | 10,974 | ||||||
| Total current liabilities | 696,274 | 676,189 | ||||||
| Long term convertible notes payable, net of debt discount | 151,395 | 34,065 | ||||||
| Derivative liability on long term convertible notes payable | 1,602,309 | 42,104 | ||||||
| Total liabilities | 2,449,978 | 752,358 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ (Deficit) | ||||||||
| Preferred stock, $0.001 par value, 10,000,000 shares authorized | ||||||||
| Series A, 1 share designated; no shares issued or outstanding as of September 30, 2019 and December 31, 2018 | - | - | ||||||
| Series B, 1,500,000 shares designated; 100,000 and no shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively | 38,633 | - | ||||||
| Series C, 129,559 shares designated; 129,559 and no shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively | 129,559 | - | ||||||
| Common stock, $0.001 par value,1,000,000,000 shares authorized, 165,504,936 and 121,984,192 shares issued and outstanding, as of September 30, 2019 and December 31, 2018 , respectively | 165,505 | 121,984 | ||||||
| Additional paid in capital | 5,423,528 | 3,242,449 | ||||||
| Deferred officer compensation | (42,410 | ) | (195,054 | ) | ||||
| Accumulated (deficit) | (8,092,081 | ) | (3,880,234 | ) | ||||
| Total stockholders’ (deficit) | (2,377,265 | ) | (710,855 | ) | ||||
| Total Liabilities and Stockholders’ (Deficit) | $ | 72,713 | $ | 41,503 | ||||
| June 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | - | $ | 13,188 | ||||
| Other receivables | 100,000 | 100,000 | ||||||
| Other current assets | 9,220 | 9,220 | ||||||
| Total current assets | 109,220 | 122,408 | ||||||
| Property and equipment, net | 1,800 | 1,800 | ||||||
| Intangible assets, net | 91,181 | 73,076 | ||||||
| Total assets | $ | 202,201 | $ | 197,284 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Bank overdraft | $ | 1,279 | $ | - | ||||
| Accounts payable | 861,580 | 772,065 | ||||||
| Accrued salaries and consulting fees | 324,963 | 650,133 | ||||||
| Accrued interest and dividends | 131,462 | 71,212 | ||||||
| Notes payable | 129,986 | 82,986 | ||||||
| Notes payable to related party | 17,885 | 17,885 | ||||||
| Convertible notes payable, net of debt discount | 767,036 | 363,769 | ||||||
| Derivative liability on convertible notes payable | 1,253,922 | 1,111,879 | ||||||
| Total liabilities | 3,488,113 | 3,069,929 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity (deficit): | ||||||||
| Preferred stock, $0.001 par value, 10,000,000 shares authorized | - | - | ||||||
| Series A, 1 share designated, no shares issued or outstanding as of June 30, 2020 and December 31, 2019 | ||||||||
| Series B, 500,000 shares designated, 50,000 and 75,000 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively | 50 | 75 | ||||||
| Series C, 129,559 shares designated, 129,559 and no shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively | 130 | 130 | ||||||
| Common stock, $0.001 par value, 1,000,000,000 shares authorized, 214,614,479 and 169,217,460 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively | 214,615 | 169,217 | ||||||
| Additional paid-in capital | 7,002,953 | 6,035,547 | ||||||
| Accumulated deficit | (10,503,660 | ) | (9,077,614 | ) | ||||
| Total stockholders’ equity (deficit) | (3,285,912 | ) | (2,872,645 | ) | ||||
| Total liabilities and stockholders’ equity (deficit) | $ | 202,201 | $ | 197,284 | ||||
See the accompanying notes to the unaudited condensed consolidated financial statements
| 2 |
LGBTQ LOYALTY HOLDINGS, INC.
LGBTQ Loyalty Holdings, Inc.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| September 30, | September 30, | Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | June 30 | June 30 | |||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||
| Revenue | $ | 748 | $ | 525 | $ | 2,812 | $ | 2,119 | $ | - | $ | - | $ | 560 | $ | 2,064 | ||||||||||||||||
| Cost of revenue | - | - | - | - | ||||||||||||||||||||||||||||
| Cost of net revenue | - | �� | - | - | - | |||||||||||||||||||||||||||
| Gross profit | 748 | 525 | 2,812 | 2,119 | - | - | 560 | 2,064 | ||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||
| Personnel costs | 284,508 | 466,004 | 499,462 | 897,667 | ||||||||||||||||||||||||||||
| Consulting fees | 93,515 | 104,021 | 168,015 | 104,021 | ||||||||||||||||||||||||||||
| Legal and professional fees | 95,347 | 12,353 | 222,342 | 179,361 | ||||||||||||||||||||||||||||
| Merger costs | - | - | - | 388,675 | ||||||||||||||||||||||||||||
| Sales and marketing | 45 | 9,750 | 7,590 | 9,750 | ||||||||||||||||||||||||||||
| General and administrative | 681,911 | 218,988 | 2,308,536 | 564,824 | 20,736 | 1,435 | 70,728 | 47,151 | ||||||||||||||||||||||||
| Depreciation and amortization | 100 | - | 100 | 150 | 6,448 | - | 12,896 | - | ||||||||||||||||||||||||
| Total operating expenses | 682,011 | 218,988 | 2,308,636 | 564,974 | 500,599 | 593,563 | 981,033 | 1,626,625 | ||||||||||||||||||||||||
| Operating loss | (681,263 | ) | (218,463 | ) | (2,305,824 | ) | (562,855 | ) | ||||||||||||||||||||||||
| Loss from operations | (500,599 | ) | (593,563 | ) | (980,473 | ) | (1,624,561 | ) | ||||||||||||||||||||||||
| Other (income) expense: | ||||||||||||||||||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||||||||||
| Interest expense | 199,170 | 68,748 | 1,384,782 | 107,692 | (376,472 | ) | (500,442 | ) | (737,312 | ) | (489,893 | ) | ||||||||||||||||||||
| Other income | 3,000 | - | 3,000 | - | ||||||||||||||||||||||||||||
| Change in derivative liability | 225,593 | (28,592 | ) | 492,401 | (33,094 | ) | 442,626 | (266,808 | ) | 324,872 | (962,527 | ) | ||||||||||||||||||||
| Total other (income) expense | 424,763 | 40,156 | 1,877,183 | 74,598 | ||||||||||||||||||||||||||||
| Total other income (expense), net | 69,154 | (767,250 | ) | (409,440 | ) | (1,452,420 | ) | |||||||||||||||||||||||||
| Provision for income taxes | - | - | - | - | ||||||||||||||||||||||||||||
| Net loss | $ | (1,106,026 | ) | $ | (258,619 | ) | $ | (4,183,007 | ) | $ | (637,453 | ) | $ | (431,445 | ) | $ | (1,360,813 | ) | $ | (1,389,913 | ) | $ | (3,076,981 | ) | ||||||||
| Per share information - basic: | ||||||||||||||||||||||||||||||||
| Weighted average common shares outstanding | 163,569,530 | 92,561,268 | 234,277,621 | 91,208,732 | ||||||||||||||||||||||||||||
| Net loss per share – basic and diluted | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.02 | ) | $ | (0.01 | ) | ||||||||||||||||||||
| Weighted average common shares outstanding - basic and diluted | 190,052,683 | 251,971,535 | 187,427,874 | 239,581,001 | ||||||||||||||||||||||||||||
| Net loss per common share - basic and diluted | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||||||||||||||||||
See the accompanying notes to the unaudited condensed consolidated financial statements
| 3 |
LGBTQ LOYALTY HOLDINGS, INC.
LGBTQ Loyalty Holdings, Inc.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Condensed Consolidated Statements of Cash Flows(Unaudited)
| Nine Months Ended September 30, | ||||||||
| 2019 | 2018 | |||||||
| Net cash flows used in operating activities | $ | (846,796 | ) | $ | (53,734 | ) | ||
| Cash flow from investing activities: | ||||||||
| Purchase of property and equipment | (2,000 | ) | - | |||||
| Investment in intangible assets | (47,500 | ) | - | |||||
| Net Cash used in investing activities | (49,500 | ) | - | |||||
| Cash flow from financing activities: | ||||||||
| Proceeds from issuance of convertible notes | 700,000 | 32,000 | ||||||
| Proceeds from issuance of convertible preferred stock | 125,000 | - | ||||||
| Proceeds from exercise of warrants | 51,569 | - | ||||||
| Proceeds from note payable | - | 10,000 | ||||||
| Proceeds from sale of common stock | - | 10,000 | ||||||
| Shareholder advances (repayments) | (74 | ) | 3,599 | |||||
| Repayment of note payable | (7,014 | ) | (2,000 | ) | ||||
| Net cash provided by financing activities | 869,481 | 53,599 | ||||||
| Net (decrease) increase in cash | (26,815 | ) | (135 | ) | ||||
| Cash at beginning of period | 40,908 | 1,084 | ||||||
| Cash at end of period | $ | 14,093 | $ | 949 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | - | $ | - | ||||
| Cash paid for income taxes | $ | - | $ | - | ||||
| Non-cash investing and financing activities | ||||||||
| Stock issued for services | $ | 562,900 | $ | 44,100 | ||||
| Officer salary accrual | $ | 81,000 | $ | 243,000 | ||||
| Stock issued for debt conversion | $ | - | $ | 10,375 | ||||
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2020 | 2019 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (1,389,913 | ) | $ | (3,076,981 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of debt discount and original issue discount | 403,267 | 2,394 | ||||||
| Change in fair value of derivative liability | (324,872 | ) | 962,527 | |||||
| Financing related costs - debt | 257,158 | 478,640 | ||||||
| Merger expenses | - | 388,675 | ||||||
| Stock-based compensation expense | 213,276 | 562,901 | ||||||
| Officer deferred compensation | - | 109,331 | ||||||
| Depreciation and amortization | 12,896 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Bank overdraft | 1,279 | - | ||||||
| Accounts payable | 89,514 | 91,959 | ||||||
| Accrued salaries and consulting fees | 304,115 | 106,432 | ||||||
| Accrued interest and dividends | 60,250 | - | ||||||
| Net cash used in operating activities | (373,030 | ) | (374,122 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | - | (2,000 | ) | |||||
| Investment in intangible assets | (31,000 | ) | (37,500 | ) | ||||
| Net cash used in investing activities | (31,000 | ) | (39,500 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of convertible debenture agreements | 250,000 | 500,000 | ||||||
| Net proceeds (repayments) from promissory note agreements | 47,500 | (2,014 | ) | |||||
| Proceeds from Series B preferred stock | - | 125,000 | ||||||
| Proceeds from exercise of warrants | 93,342 | - | ||||||
| Net cash provided by financing activities | 390,842 | 622,986 | ||||||
| Net increase (decrease) in cash | (13,188 | ) | 209,364 | |||||
| Cash at beginning of period | 13,188 | 40,908 | ||||||
| Cash at end of period | $ | - | $ | 250,272 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for income taxes | $ | - | $ | - | ||||
| Cash paid for interest | $ | 12,500 | $ | - | ||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Conversion of accrued consulting fees into common shares | $ | 617,750 | $ | 348,312 | ||||
| Exercise of common stock warrants - derivative liability | $ | 32,742 | $ | - | ||||
| Amortization of preferred stock discount | $ | 31,820 | $ | - | ||||
| Exercise of options | $ | 10,400 | $ | - | ||||
| Conversion of notes payable | $ | - | $ | 98,383 | ||||
See the accompanying notes to the unaudited condensed consolidated financial statements
| 4 |
CondensedConsolidated Statement of Stockholders’ DeficitLGBTQ LOYALTY HOLDINGS, INC.
For the Period Ended September 30, 2019CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
| Preferred Stock | Additional | |||||||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Series C | Common Stock | Paid in | Deferred | Accumulated | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Compensation | Deficit | Total | |||||||||||||||||||||||||||||||||||||
| Balance December 31, 2018 | 121,984,192 | $ | 121,984 | $ | 3,242,449 | $ | (195,054 | ) | $ | (3,880,234 | ) | $ | (710,855 | ) | ||||||||||||||||||||||||||||||||||
| Amortization of deferred compensation | 66,018 | 66,018 | ||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for services | 250,000 | 250 | 7,250 | 7,500 | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 500,000 | 500 | 4,500 | 5,000 | ||||||||||||||||||||||||||||||||||||||||||||
| Maxim Partners - Merger | 1 | $ | - | 129,558,574 | 129,559 | 259,116 | 388,675 | |||||||||||||||||||||||||||||||||||||||||
| Conversion of preferred stock | -1 | - | ||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued to directors | 3,000,000 | 3,000 | 310,600 | 313,600 | ||||||||||||||||||||||||||||||||||||||||||||
| Related party debt conversions | 8,600,298 | 8,600 | 339,712 | 348,312 | ||||||||||||||||||||||||||||||||||||||||||||
| Loan conversion | 26,398,734 | 26,399 | 735,961 | 762,360 | ||||||||||||||||||||||||||||||||||||||||||||
| Loss for the period | (1,716,168 | ) | (1,716,168 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance March 31, 2019 | - | - | - | - | - | - | 290,291,798 | 290,291 | 4,899,588 | (129,036 | ) | (5,596,402 | ) | (535,558 | ) | |||||||||||||||||||||||||||||||||
| Issuance of Series B preferred stock, net of discount | 125,000 | $ | 35,389 | 89,611 | 125,000 | |||||||||||||||||||||||||||||||||||||||||||
| Amortization of preferred stock discount | 11,201 | (11,201 | ) | - | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of deferred compensation | 43,313 | 43,313 | ||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for services | 2,000,000 | 2,000 | 239,800 | 241,800 | ||||||||||||||||||||||||||||||||||||||||||||
| Loan conversion | 187,500 | 188 | 14,813 | 15,000 | ||||||||||||||||||||||||||||||||||||||||||||
| Maxim Exchange Agreement | 129,559 | $ | 129,559 | (129,558,574 | ) | (129,559 | ) | - | - | |||||||||||||||||||||||||||||||||||||||
| Loss for the period | (1,360,813 | ) | (1,360,813 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance June 30, 2019 | - | $ | - | 125,000 | $ | 46,590 | 129,559 | $ | 129,559 | 162,920,724 | 162,921 | 5,243,811 | (85,723 | ) | (6,968,415 | ) | (1,471,257 | ) | ||||||||||||||||||||||||||||||
| Conversion of Series B preferred stock | (25,000 | ) | $ | (9,658 | ) | 734,918 | 735 | 8,923 | - | |||||||||||||||||||||||||||||||||||||||
| Amortization and revaluation of preferred stock discount | 1,701 | 7,600 | (9,301 | ) | - | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series B dividend shares | 16,794 | 17 | 1,421 | 1,438 | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of deferred compensation | 43,313 | 43,313 | ||||||||||||||||||||||||||||||||||||||||||||||
| Dividends on preferred stock | (8,338 | ) | (8,338 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Debenture conversions | 427,500 | 427 | 45,620 | 46,047 | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of common stock warrants | 1,405,000 | 1,405 | 116,155 | 117,560 | ||||||||||||||||||||||||||||||||||||||||||||
| Loss for the period | (1,106,026 | ) | (1,106,026 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance September 30, 2019 | - | $ | - | 100,000 | $ | 38,633 | 129,559 | $ | 129,559 | 165,504,936 | $ | 165,505 | $ | 5,423,528 | $ | (42,410 | ) | $ | (8,092,081 | ) | $ | (2,377,265 | ) | |||||||||||||||||||||||||
| For the Period Ended September 30, 2018 (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance December 31, 2017 | 87,704,686 | $ | 87,704 | $ | 2,579,489 | $ | (391,010 | ) | $ | (3,045,388 | ) | $ | (769,205 | ) | ||||||||||||||||||||||||||||||||||
| Amortization of deferred compensation | 48,990 | 48,990 | ||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for services | 3,000,000 | 3,000 | 41,100 | 44,100 | ||||||||||||||||||||||||||||||||||||||||||||
| Loss for the period | (225,449 | ) | (225,449 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance March 31, 2018 | - | - | - | - | - | - | 90,704,686 | 90,704 | 2,620,589 | (342,020 | ) | (3,270,837 | ) | (901,564 | ) | |||||||||||||||||||||||||||||||||
| Amortization of deferred compensation | 48,990 | 48,990 | ||||||||||||||||||||||||||||||||||||||||||||||
| Loss for the period | (153,385 | ) | (153,385 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance June 30, 2018 | - | - | - | - | - | - | 90,704,686 | 90,704 | 2,620,589 | (293,030 | ) | (3,424,222 | ) | (1,005,959 | ) | |||||||||||||||||||||||||||||||||
| Amortization of deferred compensation | 48,986 | 48,986 | ||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for cash | 2,000,000 | 2,000 | 8,000 | 10,000 | ||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for services | 750,000 | 750 | 5,977 | 6,727 | ||||||||||||||||||||||||||||||||||||||||||||
| Loan conversion | 1,777,778 | 1,778 | 8,597 | 10,375 | ||||||||||||||||||||||||||||||||||||||||||||
| Loss for the period | - | (258,619 | ) | (258,619 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance September 30, 2018 | - | - | - | - | - | - | 95,232,464 | $ | 95,232 | $ | 2,643,163 | $ | (244,044 | ) | $ | (3,682,841 | ) | $ | (1,188,490 | ) | ||||||||||||||||||||||||||||
| Preferred Stock | Additional | Total | ||||||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Series C | Common Stock | Paid-in | Deferred | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Compensation | Deficit | Deficit | |||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2019 | - | $ | - | 75,000 | $ | 75 | 129,559 | $ | 130 | 169,217,460 | $ | 169,217 | 6,035,547 | $ | - | $ | (9,077,614 | ) | $ | (2,872,645 | ) | |||||||||||||||||||||||||||
| Common shares issued in connection with notes payable | - | - | - | - | - | - | 294,994 | 295 | 9,705 | - | - | 10,000 | ||||||||||||||||||||||||||||||||||||
| Common shares issued for accrued services | - | - | - | - | - | - | 6,662,312 | 6,662 | 311,338 | - | - | 318,000 | ||||||||||||||||||||||||||||||||||||
| Common shares issued to board of directors | - | - | - | - | - | - | 1,000,000 | 1,000 | 16,800 | - | - | 17,800 | ||||||||||||||||||||||||||||||||||||
| Exercise of common stock warrants | - | - | - | - | - | - | 4,170,000 | 4,170 | 121,914 | - | - | 126,084 | ||||||||||||||||||||||||||||||||||||
| Amortization of preferred stock discount | - | - | - | - | - | - | - | - | 15,910 | - | (15,910 | ) | - | |||||||||||||||||||||||||||||||||||
| Dividends on preferred stock | - | - | - | - | - | - | - | - | - | - | (2,588 | ) | (2,588 | ) | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | (958,468 | ) | (958,468 | ) | ||||||||||||||||||||||||||||||||||
| Balances at March 31, 2020 | - | $ | - | 75,000 | $ | 75 | 129,559 | $ | 130 | 181,344,766 | $ | 181,345 | $ | 6,511,211 | $ | - | $ | (10,054,580 | ) | $ | (3,361,820 | ) | ||||||||||||||||||||||||||
| Common shares issued to board of directors | - | - | - | - | - | - | 11,942,161 | 11,942 | 202,652 | - | - | 214,595 | ||||||||||||||||||||||||||||||||||||
| Common shares issued for services and compensation | - | - | - | - | - | - | 16,279,273 | 16,279 | 264,353 | - | - | 280,632 | ||||||||||||||||||||||||||||||||||||
| Exercise of stock options | - | - | - | - | - | - | 4,000,000 | 4,000 | 6,400 | - | - | 10,400 | ||||||||||||||||||||||||||||||||||||
| Conversion of Series B preferred stock for common shares | - | - | (25,000 | ) | (25 | ) | - | - | 958,333 | 958 | (933 | ) | - | - | - | |||||||||||||||||||||||||||||||||
| Issuance of Series B dividend common shares | - | - | - | - | - | - | 90,216 | 90 | 3,360 | - | - | 3,450 | ||||||||||||||||||||||||||||||||||||
| Amortization of preferred stock discount | - | - | - | - | - | - | - | - | 15,910 | - | (15,910 | ) | - | |||||||||||||||||||||||||||||||||||
| Dividends on preferred stock | - | - | - | - | - | - | - | - | - | - | (1,725 | ) | (1,725 | ) | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | (431,445 | ) | (431,445 | ) | ||||||||||||||||||||||||||||||||||
| Balances at June 30, 2020 | - | $ | - | 50,000 | $ | 50 | 129,559 | $ | 130 | 214,614,749 | $ | 214,615 | $ | 7,002,953 | $ | - | $ | (10,503,660 | ) | $ | (3,285,912 | ) | ||||||||||||||||||||||||||
| Balances at December 31, 2018 | - | $ | - | - | $ | - | - | $ | - | 121,984,192 | $ | 121,984 | $ | 3,242,449 | $ | (195,054 | ) | $ | (3,880,234 | ) | $ | (710,855 | ) | |||||||||||||||||||||||||
| Merger with Maxim Partners | 1 | - | - | - | - | - | 129,558,574 | 129,559 | 259,116 | - | - | 388,675 | ||||||||||||||||||||||||||||||||||||
| Common shares issued for related party debt conversions | - | - | - | - | - | - | 8,600,298 | 8,600 | 339,712 | - | - | 348,312 | ||||||||||||||||||||||||||||||||||||
| Common shares issued pursuant to note conversions | - | - | - | - | - | - | 26,398,704 | 26,399 | 735,961 | - | - | 762,360 | ||||||||||||||||||||||||||||||||||||
| Common shares issued for services performed | - | - | - | - | - | - | 3,250,000 | 3,250 | 317,850 | - | - | 321,100 | ||||||||||||||||||||||||||||||||||||
| Exercise of stock options | - | - | - | - | - | - | 500,000 | 500 | 4,500 | - | - | 5,000 | ||||||||||||||||||||||||||||||||||||
| Amortization of deferred compensation | - | - | - | - | - | - | - | - | - | 66,018 | - | 66,018 | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | (1,716,168 | ) | (1,716,168 | ) | ||||||||||||||||||||||||||||||||||
| Balances at March 31, 2019 | 1 | $ | - | - | $ | - | - | $ | - | 290,291,768 | $ | 290,292 | $ | 4,899,587 | $ | (129,036 | ) | $ | (5,596,402 | ) | $ | (535,560 | ) | |||||||||||||||||||||||||
| Common shares issued for services performed | - | - | - | - | - | - | 2,000,000 | 2,000 | 239,801 | - | - | 241,801 | ||||||||||||||||||||||||||||||||||||
| Common shares issued pursuant to note conversions | - | - | - | - | - | - | 187,500 | 188 | 14,812 | - | - | 15,000 | ||||||||||||||||||||||||||||||||||||
| Maxim exchange agreement | - | - | - | - | 129,559 | 129,559 | (129,558,574 | ) | (129,559 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of Series B preferred stock, net of discount | - | - | 125,000 | 125 | - | - | - | - | 124,875 | - | - | 125,000 | ||||||||||||||||||||||||||||||||||||
| Amortization of preferred stock discount | - | - | - | - | - | - | - | - | 11,201 | - | (11,201 | ) | - | |||||||||||||||||||||||||||||||||||
| Amortization of deferred compensation | - | - | - | - | - | - | - | - | - | 43,313 | - | 43,313 | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | (1,360,813 | ) | (1,360,813 | ) | ||||||||||||||||||||||||||||||||||
| Balances at June 30, 2019 | 1 | $ | - | 125,000 | $ | 125 | 129,559 | $ | 129,559 | 162,920,694 | $ | 162,921 | $ | 5,290,276 | $ | (85,723 | ) | $ | (6,968,416 | ) | $ | (1,471,259 | ) | |||||||||||||||||||||||||
See the accompanying notes to the unaudited condensed consolidated financial statements
| 5 |
LGBTQ LOYALTY HOLDINGS, INC.
LGBTQ Loyalty Holdings, Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(formerly LifeApps Brands Inc.)
Notes to Condensed Consolidated Financial Statements
September 30, 2019 and 2018
(Unaudited)
June 30, 2020
Note 1. Nature of Business
Throughout this report, the terms “our,” “we,” “us,” and the “Company” refer to LGBTQ Loyalty Holdings, Inc., (formerly LifeApps Brands Inc.), including its subsidiaries. The accompanying unaudited condensed consolidated financial statements of LGBTQ Loyalty Holdings, Inc. at and for the periods ended September 30, 2019 and 2018 have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial statements, instructions to Form 10-Q, and Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2018. In management’s opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation to make our financial statements not misleading have been included. The results of operations for the periods ended September 30, 2019 and 2018 presented are not necessarily indicative of the results to be expected for the full year. The December 31, 2018 condensed consolidated balance sheet has been derived from our audited financial statements included in our annual report on Form 10-K for the year ended December 31, 2018.
On January 25, 2019, we acquired LGBT Loyalty LLC, a New York limited liability company, with the goal of creating athe first LGBTQ Loyalty Preference Index ETF (the “Index”“Index ETF”) to provide the LGBTQ community with the power to influence the allocation of capital within thea financial Index ETF based upon theirLGBTQ consumer preferences. The Index ETF is intended to link the growing economic powerinfluence of the LGBTQ community and their allies with many of the top Fortune 500 companies that support and marketimplement diversity, inclusion and equality policies within their productsorganizations. The incorporation of diversity and inclusion in a company’s recruitment and human resource policies is becoming a key concern to investors as part of their growing focus on ESG allocations. Our data and analytics unequivocally reinforce that corporations that have embraced diversity and inclusion policies within their corporate culture perform at a higher level financially than their peers. This includes advancing a more invigorated workforce that attracts and retains the LGBTQ demographic. We also planbest talent. Innovation and agility have been identified as great benefits of diversity, and there is an increasing awareness of what has come to create ancillary businesses that are intended to complement and support the Index including LGBTQ Loyalty Sponsorship which will be established to promote the Index along with the companies from around the world that desire to market and advertise directly to LGBTQ consumers. We intend to join forces with someknown as ‘the power of the most recognizable LGBTQ community leaders from around the world and have them become LGBTQ Loyalty Sponsorship members. The LGBTQ Loyalty Sponsorship is expected to incorporate marketing and support of the companies included in the Index. All companies will be offered the opportunity to purchase LGBTQ Loyalty Sponsorship packages.difference’.
On October 30, 2019, through our wholly-owned subsidiary Loyalty Preference Index, Inc. (“LPI”) and our strategically aligned partnerships with crowd sourced data and analytic providers, we launched the LGBTQ100 ESG Index which referencesintegrates LGBTQ community survey data ininto the methodology for a benchmark listing of the nation’s highest financially performing companieslarge-cap publicly listed corporations that our respondents believe are most committed to advancing equality.
We also plan to develop a digital media network LPI is the index provider for the LGBTQ + ESG100 ETF; LGBTQ Loyalty was the Sponsor for the prospectus that will specializewas filed by the licensed Fund Adviser ProcureAM, and was approved by the Securities and Exchange Commission (“SEC”) in targeting highly sought-after niche demographic audiences. In that regard, we intend to focus on two core businesses, an LGBTQ Advertising Network and an LGBTQ Media Network. Through our digital platform, we expect to aggregate content from around the world. We also intend to create original content along with sponsored content in a 24/7 digital network.early January 2020. The LGBTQ Advertising Network is intended+ ESG100 ETF (the “Fund”) seeks to assist brands in global targetingtrack the investment results (before fees and expenses) of the LGBTQ demographic.LGBTQ100 ESG Index. The LGBTQ Advertising NetworkFund earns management fees based on assets under management (“AUM”) and is expected to provide advertisers and brands with over 300 mainstream digital platforms and access to this loyal, affluent and ever-expanding audience. We intend to deliver to our audience relevant sponsored content marketing message across all spectrumslaunch in the third quarter of digitally connected devices. We believe that our value proposition to our audience and sponsors will be2020 on the ability to deliver aggregated and original content, with emphasis on interactive content and captive video.NASDAQ.
LGBTQ Loyalty Holdings,On June 24, 2020, we formed two wholly-owned subsidiaries, Crowdex Equity Inc. and Advancing Equality Financial Network, Inc.
Notes to Condensed Consolidated Financial StatementsThrough our wholly owned subsidiary LifeApps, Inc., we are a licensed developer and publisher of apps for the Apple Apps Store for iPhone, iPod touch, iPad and iPad mini. We are also a licensed developer on both Google Play and Amazon Appstore for Android. We have distributed apps on all three platforms.
September 30, 2019 and 2018
| 6 |
(Unaudited)
Note 2. Summary of Significant Accounting Policies
Going Concern
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with GAAP,principles generally accepted in the United States (“US GAAP”), which contemplates our continuation as a going concern. We have incurred losses to date of $8,092,081$10,503,660 and have negative working capital of $672,961.$3,378,893 as of June 30, 2020. To date we have funded our operations through advances from a related parties, issuancesparty, issuance of convertible debt, and the sale of our common and preferred stock. We intend to raise additional funding through third party equity or debt financing. There is no certainty that funding will be available as needed. These factors raise substantial doubt about our ability to continue operating as a going concern. Our ability to continue our operations as a going concern, realize the carrying value of our assets, and discharge our liabilities in the normal course of business is dependent upon our ability to raise capital sufficient to fund our commitments and ongoing losses, and ultimately generate profitable operations. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Basis of Presentation
We have prepared the accompanying condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These condensed consolidated financial statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of our balance sheets, operating results, and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for fiscal year 2020. Certain information and footnote disclosures normally included in condensed consolidated financial statements prepared in accordance with US GAAP have been omitted in accordance with the rules and regulations of the SEC. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and accompanying notes.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of the CompanyLGBTQ Loyalty Holdings, Inc. and our wholly owned subsidiaries, LGBTQ Loyalty, LLC, LifeApps Inc., Sports One Group Inc. and, Loyalty Preference Index, Inc, Crowdex Equity Inc. (“LPI”), which was formed on July 24, 2019.and Advancing Equality Financial Network, Inc. All material inter-company transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the years reported. Actual results may differ from these estimates.
| 7 |
LGBTQ Loyalty Holdings, Inc.Reclassifications
NotesThe Company has reclassified certain previously reported amounts in its consolidated financial statements. Accordingly, prior year amounts were reclassified to Condensed Consolidated conform to the current year presentation. The reclassifications did not change the previously reported results of operations.
Concentrations of Credit Risk
Financial Statementsinstruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company generally maintains balances in various operating accounts at financial institutions that management believes to be of high credit quality, in amounts that may exceed federally insured limits. The Company has not experienced any losses related to its cash and cash equivalents and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. At June 30, 2020 and December 31, 2019, all of the Company’s cash and cash equivalents were held at one accredited financial institution and there were no uninsured amounts in excess of FDIC limits.
September 30, 2019
| 8 |
Fair Value Measurements
ASC Topic 820, Fair Value Measurements and 2018Disclosures (“ASC 820”), provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC 820 defines the hierarchy as follows:
(Unaudited)
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange.
Level 2 – Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs.
Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights and derivative liabilities.
Our financial instruments consist of cash, other current assets, accounts payables, accruals, and notes payable. The carrying values of these instruments approximate fair value because of the short-term maturities. The fair value of the Company’s convertible debentures and promissory notes approximates their carrying values as the underlying imputed interest rates approximates the estimated current market rate for similar instruments. The derivative is measured as a Level 3 instrument due to the various inputs which requires significant management judgment. Refer to Note 6 for detail.
The following table is a summary of our financial instruments measured at fair value:
| Fair Value Measurements | ||||||||||||||||
| as of June 30, 2020: | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liability on convertible notes payable | $ | - | $ | - | $ | 1,253,922 | $ | 1,253,922 | ||||||||
| $ | - | $ | - | $ | 1,253,922 | $ | 1,253,922 | |||||||||
| Fair Value Measurements | ||||||||||||||||
| as of December 31, 2019: | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liability on convertible notes payable | $ | - | $ | - | $ | 1,111,879 | $ | 1,111,879 | ||||||||
| $ | - | $ | - | $ | 1,111,879 | $ | 1,111,879 | |||||||||
Other Receivables – Related Party
Other receivables represent amounts held in escrow at the Fund’s custodian. The Company expects to retrieve the funds upon commencement of the Fund’s operations.
Intangibles
Intangibles, which include website development costs, databases acquired, internet domain name costs, and customer lists, are being amortized over the expected useful lives which we estimate to be three to five years. In accordance with Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) Topic 350 Intangibles – Goodwill and Other (“ASC 350”), the costs to obtain and register internet domain names were capitalized.
| 9 |
Website and Software Development Costs
Website and software costs are eligible for capitalization under ASC 350-50 and ASC 985-20, Software-Costs of Software to be Sold, Leased or Marketed. These amounts are included in the consolidated balance sheets. Amortization of these costs will begin when the website becomes active.
Property and Equipment
Property and equipment consist of furniture and equipment and are stated at cost less accumulated depreciation and accumulated impairment loss, if any. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. The estimated useful lives used for financial statement purposes are 3 years.
Derivative LiabilitiesFinancial Instruments
The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the Company’s balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. The Company has a sequencing policy regarding share settlement wherein instruments with a fixed conversion price or floor would be settled first, and interest payable in shares settle next. Thereafter, share settlement order is based on instrument issuance date – earlier dated instruments settling before later dated. The sequencing policy also considers contingently issuable additional shares, such as those issuable upon a stock split, to have an issuance date to coincide with the event giving rise to the additional shares. The policy includes all shares issuable pursuant to debenture and preferred stock instruments as well as shares issuable under service and employment contracts and interest on short term loans.
| 10 |
IntangiblesIncome Taxes
Intangibles,The provision for income taxes is determined in accordance with the provisions of ASC Topic 740, Accounting for Income Taxes (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which include websites and databases acquired, internet domain name costs, and customer lists,those temporary differences are being amortized over the expected useful lives which we estimate to be three to five years. In accordance with Financial Accounting Standards Board (“FASB”), ASC Topic 350Intangibles – Goodwillrecovered or settled. Any effect on deferred tax assets and Other (“ASC 350”),liabilities of a change in tax rates is recognized in income in the costs to obtain and register internet domain names were capitalized. We expended $10,000 and $0 for website development forperiod that includes the three months ended September 30, 2019 and 2018, respectively and $47,500 and $0 for the nine months ended September 30, 2019 and 2018, respectively. Amortization of these costs will begin when the website becomes active.
LGBTQ Loyalty Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2019 and 2018
(Unaudited)
Revenue Recognitionenactment date.
ASC Topic 606, “Revenue from Contracts740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements, uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with Customers” establishes principles for reporting information about the nature, amount, timingtax authority assuming full knowledge of the position and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers.relevant facts.
Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
Revenue was derived primarily from the sale of sports and fitness apparel and equipment.
Website and software development costs
Website and software costs are eligible for capitalization under ASC 350-50 and ASC 985-20, Software-Costs of Software to be Sold, Leased or Marketed. We expended $10,000 and $0 for website development forFor the three and six months ended SeptemberJune 30, 2020 and 2019 and 2018, respectively and $47,500 and $0 for the nine months ended September 30, 2019 and 2018, respectively. Amortization of these costs will begin when the website becomes active.
Rent Expense
We recognize rent expense on a straight-line basis over the reasonably assured lease term as defined in ASC Topic 842, Leases (“ASC 842”). Our membership agreement for shared office space expires on May 31, 2020. Rent expense was $13,671 and $0 for the three months ended September 30, 2019 and 2018, respectively and $17,894 and $255 for the nine months ended September 30, 2019 and 2018, respectively. We adopted ASC 842 on its effective date of January 1, 2019. The adoptionwe did not have any effect on our condensed consolidated financial statements.
LGBTQ Loyalty Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2019 and 2018
(Unaudited)interest, penalties or any significant unrecognized uncertain tax positions.
Earnings per shareShare
We calculate earnings per share in accordance with ASC Topic 260Earnings Per Share, which requires a dual presentation of basic and diluted earnings per share. Basic earnings per share are computed using the weighted average number of shares outstanding during the fiscal year. Diluted earnings per share represent basic earnings per share adjusted to include the potentially dilutive effect of outstanding stock options and warrants. The diluted earnings per share were not calculated because we recorded net losses for the periodsthree and six months ended SeptemberJune 30, 20192020 and 2018,2019, and the outstanding stock options and warrants are anti-dilutive. For the three and six months ended June 30, 2020 and 2019, the following number of potentially dilutive shares have been excluded from diluted net loss since such inclusion would be anti-dilutive:
Weighted average shares outstanding would have increased by approximately 7,717,000 and 3,098,000 for the nine months ended September 30, 2019 and 2018, respectively, and 7,252,000 and 2,885,000 for the three months ended September 30, 2019 and 2018, respectively, on a fully diluted basis.
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2020 | 2019 | |||||||
| Stock options outstanding | 1,800,000 | 5,800,000 | ||||||
| Shares to be issued upon conversion of notes | 173,870,349 | 7,311,593 | ||||||
| 175,670,349 | 13,111,593 | |||||||
Recent Pronouncements
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.
Note 3. Related Party Transactions – Officer, Director and Shareholder Advances
Amounts due to related party represent cash advances, salary accruals, notes payable, and amounts paid on our behalf by an officer, director and shareholders of the Company. The cash advances are non-interest bearing, short term in nature and due on demand. The balance of our cash advances at September 30, 2019 and December 31, 2018 was $10,900 and $10,974, respectively. Salary accruals as of September 30, 2019 and December 31, 2018 amounted to $116,250 and $348,800, respectively. Payments of accrued salaries for the three-month periods ended September 30, 2019 and 2018 amounted to $82,500 and $0, respectively. Payments of accrued salaries for the nine-month periods ended September 30, 2019 and 2018 amounted to $162,750 and $0, respectively.
Notes payable to related parties at September 30, 2019 and December 31, 2018 totaled $17,885 with a 2% annual interest rate. Currently the Company has defaulted on all of their related party loan obligations. Forbearance has been granted by the related parties on all loans. Net cash advances to the Company amounted to $0 and $3,029, respectively, for the periods ended September 30, 2019 and 2018.
During the nine months ended September 30, 2019 we began the accrual of director’s fees for five individuals at the rate of $25,000 per annum. Four of the directors have agreed to receive their fee payments in shares of the Company’s common stock with the number of shares to be issued based on the 5-day average trading price of the stock at the end of each month. During the three and nine months ended September 30, 2019 we accrued an aggregate of $31,250 and $68,750, respectively, for director fees. As of September 30, 2019, an aggregate of 649,080 shares of our common stock are issuable pursuant to the director compensation agreements.
On March 21, 2019 all parties to the employment and service agreements converted amounts due thereunder at December 31, 2018 into 8,600,298 shares of common stock.
On December 19, 2017 we entered into an Employment Services Agreements with our Chief Executive Officer and our President and an Executive Management Consulting Agreement with our former Chief Executive Officer. The Agreements have a two-year term and are subject to automatic renewal for successive periods of one year unless either we or the counterparties give the other written notice of intention to not renew at least 30 days prior to the end of the existing term. The Agreements with our current and former Chief Executive Officers provide for base compensation of $150,000. We also have a separate Agreement with our President that provides for a base annual salary of $24,000. The compensation payments are payable in bi-weekly installments. In the event any of the payments are not made within 30 days of the due date, they accrue interest at the rate of 10% per annum.
LGBTQ Loyalty Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2019 and 2018
(Unaudited)
Each of the foregoing Agreements contain customary termination provisions including terminations with or without cause, for good reason or voluntarily, non-competition and non-solicitation provisions, and an inventions and patents provision which provides that all the work produced by the counterparties, which is created, designed, conceived or developed by them in the course of their employment under the Agreements belong to us. Effective January 1, 2018, the Agreements were modified to remove the conversion right provisions. On February 15, 2019 the Executive Management Consulting Agreement with our former Chief Executive Officer was terminated by mutual agreement.Intangible Assets
During the year ended December 31, 2019, the Company capitalized costs pertaining to the development of the LGBTQ100 ESG Index website. The Company began amortizing upon the launch of the index, and will amortize the costs over a three-year useful life.
At June 30, 2020 and December 31, 2019, intangible assets, net was $91,181 and $73,076, respectively. Amortization expense was $6,448 and $12,896, respectively, for the three and six months ended SeptemberJune 30, 2019 and 2018 we recorded interest accruals of $694 and $5,736, respectively, related to the contracts. During the nine months ended September 30, 2019 and 2018 we recorded interest accruals of $7,179 and $7,976, respectively, related to the contracts.2020.
| 11 |
Note 4. Notes Payable
Notes payable to unrelated third parties amounted to $10,986 at SeptemberAs of June 30, 20192020 and $33,000 at December 31, 2018 with interest rates of 2% and 7% per annum, respectively. The2019, the Company has a note payable outstanding in the amount of $10,986 at September 30, 2019$4,986 and $7,986, respectively. The note is past due at June 30, 2020 and is therefore in default. The other notes were issued in August and December of 2018 aggregating $15,000. On March 7, 2019, the lender agreed to convert the $15,000 in loan principal into shares of our common stocknote accrues interest at a conversion pricerate of $0.082% per share resulting in an issuanceannum.
In January 2020, the Company issued a note payable to a lender for a principal amount of 187,500 shares during$50,000. The Company received proceeds of $47,500 and the quarter endednote matured on February 5, 2020. As of June 30, 2019. The lender also agreed to waive all interest2020, the note is past due on the loans. During the nine months ended September 30,and in default.
In December 2019, the Company repaid $7,014 pertainingissued a promissory note to these notes.Pride Partners LLC (“Pride”) for $75,000. The note is secured, accrues interest at a rate of 10% per annum, and matures on June 20, 2020. As of June 30, 2020, the note is past due and in default.
Note 5. Convertible Notes Payable
Convertible Note
In February 2019, the holder of a March 2018 convertible promissory note in the original principal amount of $35,000 converted $26,920 in principal and $4,255 in interest into an aggregate of 26,398,704 shares of our common stock at a conversion price of $0.0015 per share. As the result of such conversions, this note has been repaid in full and terminated.
Convertible Debenture
On February 12, 2020, the Company entered into a Securities Purchase Agreement with Cavalry Fund I LP (the “Calvary Note”). Pursuant to the terms of the Calvary Note, Payablethe lender agreed to purchase from the Company, for a purchase price of $100,000, a 10% convertible note in the principal amount of $115,500. The Cavalry Note matures and becomes due and payable on November 11, 2020 and accrues interest at a rate of 10% per annum. The Calvary Note, plus all accrued but unpaid interest, may be prepaid at any time prior to the maturity date.
The Calvary Note is convertible into shares of the Company’s common stock at any time at a conversion price (the “Conversion Price”) equal to the lower of: (i) the lowest closing price of the common stock during the preceding twenty (20) trading day period ending on the latest complete trading day prior to the issuance date of the Note (the “Closing Price”), (ii) $0.04, or (iii) 60% of the lowest traded price for the Common Stock on the principal market on which the Common Stock is then trading during the twenty (20) consecutive trading days on which at least 100 shares of Common Stock were traded including and immediately preceding the date of conversion. Upon an event of default, the holder may elect to convert at an alternate conversion price which is the lower of: (i) the closing price of the Common Stock on the Principal Market on the Trading Day immediately preceding the issue date of the Calvary Note or (ii) 60% of either the lowest traded price or the closing bid price, whichever is lower for the common stock on the principal market during any trading day in which the event of default has not been cured. The conversion price of the Note will be further adjusted by another 15% reduction, regardless of whether there is an event of default, if (A) the Common stock is no longer a reporting company pursuant to the Securities Exchange Act of 1934, as amended, (B) the Note cannot be converted into free trading shares after 181 days from the issuance date of the Note, (C) the Common Stock is chilled for deposit at DTC or becomes chilled at any point while the Note remains outstanding, (D) deposit or other additional fees are payable due to a Yield Sign, Stop Sign or other trading restrictions, or (E) if the closing price at any time falls below $0.015. The conversion price is subject to customary adjustments. The conversion price is not subject to a floor.
On March 6, 2018, we executed10, 2020, the Company entered into a PromissorySecurities Purchase Agreement with Power Up Lending Group Ltd (“Power Up Note”. Pursuant to the terms of the Power Up Note, (the “2018 Note”)the lender agreed to an unrelated entitypurchase from the Company, for a purchase price of $75,000, a 10% convertible note in the principal amount of $85,800. The Power Up Note matures and received an aggregate of $32,000. The 2018 Note has an initial term of one yearbecomes due and provides for an original issue discount of $3,000, which is being amortized over the initial term. The 2018 Note carriespayable on March 10, 2021 and accrues interest at a face interest rate of 12%10% per annum. The lender had the right,Power Up Note, plus all accrued but unpaid interest, may be prepaid at any time and/or after 180 days at their electionprior to convert all or part of the outstanding and unpaid principal and accrued interestmaturity date.
| 12 |
The Power Up Note is convertible into shares of ourthe Company’s common stock.stock at any time at a conversion price (the “Conversion Price”), which shall equal the Variable Conversion Price. The “Variable Conversion Price” shall mean 60% multiplied by the Market Price, which is the lowest Trading Price for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date. The conversion price was 58% ofis subject to customary adjustments. The conversion price is not subject to a two-day averagefloor.
On May 26, 2020, the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd (“Power Up May Note”. Pursuant to the terms of the lowest tradingPower Up May Note, the lender agreed to purchase from the Company, for a purchase price of $75,000, a 10% convertible note in the rangeprincipal amount of 15 trading days$85,800. The Power Up May Note matures and becomes due and payable on May 26, 2021 and accrues interest at a rate of 10% per annum. The Power Up Note, plus all accrued but unpaid interest, may be prepaid at any time prior to the conversion. maturity date.
The 2018Power Up May Note provided for additional penalties if we could not deliveris convertible into shares of the underlyingCompany’s common stock at any time at a conversion price (the “Conversion Price”), which shall equal the Variable Conversion Price. The “Variable Conversion Price” shall mean 60% multiplied by the Market Price, which is the lowest Trading Price for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date. The conversion price is subject to customary adjustments. The conversion price is not subject to a timely basis.floor.
During the three and six months ended June 30, 2020, the Company recorded amortization of debt discount and original discount of $201,028 and $403,267, respectively, for all convertible debentures. This amount is included in interest expense in our consolidated statements of operations.
The following is a summary of the activity of the convertible notes payable and convertible debenture for the six months ended June 30, 2020:
| Total | ||||
| Balance as of December 31, 2019 | $ | 363,769 | ||
| Issuance of convertible debenture - principal amount | 287,100 | |||
| Issuance of convertible debenture - debt discount and original issue discount | (287,100 | ) | ||
| Amortization of debt discount and original issue discount | 403,267 | |||
| Balance as of June 30, 2020 | $ | 767,036 | ||
The following comprises the balance of the convertible debenture outstanding at June 30, 2020 and December 31, 2019:
| June 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Principal amount outstanding | $ | 1,365,190 | $ | 1,078,090 | ||||
| Less: Unamortized original issue discount | (41,313 | ) | (62,779 | ) | ||||
| Less: Unamortized debt discount | (556,841 | ) | (651,542 | ) | ||||
| $ | 767,036 | $ | 363,769 | |||||
Note 6. Derivative Liability
We evaluated the terms of the conversion features of the convertible notedebentures in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock, and determined it isthey are indexed to the Company’s common stock and that the conversion features meet the definition of a liability and thereforeliability. Therefore, we bifurcated the conversion feature and accounted for it as a separate derivative liability.
LGBTQ Loyalty Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2019 and 2018
(Unaudited)
To determine the fair value of our embedded derivatives, management evaluates assumptions regarding the probability of certain future events. Other factors used to determine fair value include our period end stock price, historical stock volatility, risk free interest rate and derivative term. The fair value recorded for the derivative liability varies from period to period. This variability may result in the actual derivative liability for a period either above or below the estimates recorded on our consolidated financial statements, resulting in significant fluctuations in other income (expense) because of the corresponding non-cash gain or loss recorded.
DuringWe value the quarter ended September 30, 2018, the Company became subject to a penalty assessment of $17,500 due to a loan covenant violation. Such amount has been expensed as additional interest. Additionally, the fair valueconversion feature at origination of the derivative liability associated withnotes using the penalty amounted to $29,265 and has been recorded as additional interest expense.
On September 20, 2018, the lender exercised conversion rights pursuant to the loan agreement and converted $8,000 of the loan principal into 1,777,778 shares of common stock. The Company recognized an aggregate of $10,375 of shareholder equity as a result of the conversion based of a fairBlack-Scholes valuation model. We value calculation at the conversion date and related adjustments to remaining loan discounts applicable to the converted loan amount. On December 31, 2018, the lender exercised conversion rights pursuant to the loan agreement and converted $8,000 of the loan principal into 5,305,040 shares of common stock. The Company recognized an aggregate of $7,583 of shareholder equity as a result of the conversion based of a fair value calculation at the conversion date and related adjustments to remaining loan discounts applicable to the converted loan amount.
We valued the derivative liability at estimated fair market value and at the end of each accounting period. Theperiod, and upon conversion of the underlying note or warrant, with the difference in value is recognized as gain or loss in the statement of operations.
During the period February 6, 2019 through and including February 11, 2019, the holder of the 2018 Note in the original principal amount of $35,000 converted the remaining $26,920 in principal and $4,255 in interest into an aggregate of 26,398,734 shares of our common stock at a conversion price of $0.0015 per share. As the result of such conversions, the 2018 Note has been repaid in full and terminated. The shares were issued in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended.
Note 6. Long-term Debt
On June 4, 2019 (the “Closing Date”), we entered into and closed a Securities Purchase Agreement (the “SPA”) with Pride Partners LLC (the “Purchaser” or “Pride”), a New York limited liability company, pursuant to which for a purchase price of $500,000, the Purchaser purchased $550,000 in principal amount of a 10% Original Issue Discount Senior Convertible Debenture (the “Debenture”) due 15 months following the date of issuance and an 18 month common stock purchase warrant (the “Warrant”) exercisable for up to 6,250,000 shares (subject to adjustment thereunder) of our common stock.
LGBTQ Loyalty Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2019 and 2018
(Unaudited)
Subject to earlier conversion or redemption, the Debenture is due on June 4, 2020 (the “Maturity Date”). At any time after June 4, 2019, the Debenture is convertible, in whole or in part, into shares of common stock (the “Conversion Shares”) at the option of the holder, at any time and from time to time (subject to a 4.99% beneficial ownership limitation). If, on the Maturity Date, the outstanding principal balance of the Debenture is $50,000 or less, the Debenture, including all accrued and unpaid interest then due thereon, is automatically convertible into common stock. Subject to adjustment, the per share conversion price for the Debenture on any conversion date is the lesser of (i) $0.1069 or (ii) 85% of the lowest single trading date volume weighted average price for our Common stock during the 5 trading days prior to the conversion date. No later than the earlier of (i) 2 trading days after our receipt of a notice of conversion and (ii) the number of trading days comprising the standard settlement period after our receipt of a notice of conversion, we are required to deliver Conversion Shares which, when permitted under applicable securities laws, will be delivered free of restrictive legends and trading restrictions. In the event that we fail to deliver Conversion Shares by the applicable delivery date, the holder may rescind such conversion until such time that the Conversion Shares are received by the holder. Our failure to timely deliver Conversion Shares subjects us to the payment of liquidated damages to the holder as well as buy-in liability under circumstances where the holder is required to purchase Common Stock in the open market in satisfaction of a sale by the holder of Conversion Shares which the holder was entitled to receive. We are required to reserve and keep available from our authorized and unissued shares of Common Stock a sufficient number of shares to cover conversions of the Debenture. The number and amount of Conversion Shares issuable upon conversion is subject to adjustment in the event of stock splits and stock dividends. The Debenture also provides for full ratchet anti-dilution price adjustments under circumstances where, during the term of the Debenture, we issue Common Stock or common stock equivalents, exclusive of certain exempt issuances, at prices below the then applicable Debenture conversion price. The Debenture further provides for adjustments in the event of certain rights offerings, pro rata distributions to shareholders and fundamental transactions. The Debenture is subject to optional redemption by us, for cash, in whole or in part, upon 20 trading days prior written notice by us but only in the event, unless waived by the holder, we satisfy certain equity conditions (as such term is defined in the Debenture) during such 20 trading day period. Penalty interest is payable by us if we fail to effect an optional redemption by the applicable optional redemption date. The Debenture subjects us to negative covenants while the Debenture is outstanding.
We evaluated the terms of the conversion features of the Debenture and the Warrant in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock and determined it is indexed to the Company’s common stock and that the conversion features meet the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability.
To determine the fair value of our embedded derivatives, management evaluates assumptions regarding the probability of certain future events. Other factors used to determine fair value include our period end stock price, historical stock volatility, risk free interest rate and derivative term. The fair value recorded for the derivative liability varies from period to period. This variability may result in the actual derivative liability for a period either above or below the estimates recorded on our condensed consolidated financial statements, resulting in significant fluctuationsincluded in other income (expense) becausein our consolidated statements of the corresponding non-cash gain or loss recorded.operations.
The original debentures had conversion features that resulted in derivative liabilities. We valued the conversion features at each origination of the Debenture and the Warrant at $962,887 using the Black Scholes valuation modeldate with the following assumptions: dividend yield of zero, 1.25 year to maturity, risk free interest rate of 2.11% and annualized volatility of 312.4%. $500,000assumptions, on a weighted-average basis:
| Six Months | ||||
| Ended | ||||
| June 30, 2020 | ||||
| Risk-free interest rate | 0.78 | % | ||
| Expected term (in years) | 0.90 | |||
| Expected volatility | 161.9 | % | ||
| Expected dividend yield | 0 | % | ||
| Exercise price of underlying common shares | $ | 0.01 | ||
| Year Ended December 31, 2019 | ||||||||||||||||
| Tranche 1 | Tranche 2 | Tranche 3 | Warrants | |||||||||||||
| Risk-free interest rate | 2.11 | % | 1.75 | % | 1.67 | % | 2.11 | % | ||||||||
| Expected term (in years) | 1.25 | 1.03 | 0.89 | 1.25 | ||||||||||||
| Expected volatility | 312.4 | % | 303.70 | % | 326.88 | % | 312.4 | % | ||||||||
| Expected dividend yield | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||
| Exercise price of underlying common shares | $ | 0.09 | $ | 0.04 | $ | 0.04 | $ | 0.08 | ||||||||
| 13 |
During the six months ended June 30, 2020, the entire value of the valueprincipal of the debentures were assigned to the derivative liability wasand recognized as a debt discount on the convertible debenture.debentures. The debt discount wasis recorded as reduction (contra-liability) to the convertible debenturedebentures and isare being amortized over the initial term of the convertible debenture.
LGBTQ Loyalty Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2019 and 2018
(Unaudited)
term. The balance of $462,887 of the value assigned to the derivative liability$249,469 was recognized as origination interest on the derivative liability and expensed on origination. In accordance with the Company’s sequencing policy, shares issuable pursuant to the convertible debenturedebentures would be settled subsequent to the Company’s Series B preferred stock as described in Note 1.stock.
On August 27, 2019, the Company entered into Amendment No. 1 to Securities Purchase Agreement, Debentures and Registration Rights Agreement (the “Amendment”) with Pride. Pursuant to the termsThe following is a summary of the Amendment, Pride agreed to purchase an additional $220,000 in principal amount of 10% Original Issue Discount Senior Convertible Debenture for $200,000 in cash, $100,000 of which was paid at signing of the Amendment and the remaining $100,000 of which was paid on September 16, 2019. As a result of this additional investment, the Company amended the currently outstanding 10% Original Issue Discount Senior Convertible Debenture that was issued to Pride on June 4, 2019 to increase the face value of the debenture from $550,000 to $770,000. No additional warrants were included in the amended agreement.
We valued the conversion features of the additional Debenture at $237,149 using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 1 year to maturity, risk free interest rate of 1.75% and annualized volatility of 303.7%. $200,000 of the value assigned to the derivative liability was recognized as a debt discount on the convertible debenture. The debt discount was recorded as reduction (contra-liability) to the convertible debenture and is being amortized over the remaining term of the convertible debenture. The balance of $37,149 of the value assigned to the derivative liability was recognized as origination interest on the derivative liability and expensed on origination.
During the period from August 14, 2019 to September 30, 2019 the Purchaser exercised an aggregate of 1,405,000 shares of common stock pursuant to the exercise provisions of the Warrant. The company received an aggregate of $51,569 as a result of the Warrant exercises.
During the period from July 25, 2019 to August 14, 2019 the Purchaser converted an aggregate of $21,910 of the Debenture into an aggregate of 427,500 shares of common stock. The company recognized $18,925 of interest expense related to the write-off of discounts related to the conversion amounts.
A summaryactivity of the derivative liability associated with the SPA for the periodsix months ended SeptemberJune 30, 2019 is as follows:2020:
| Convertible | ||||||||||||
| Debenture | Warrant | Total | ||||||||||
| Initial valuation | $ | 469,956 | $ | 492,931 | $ | 962,887 | ||||||
| Additional funding | 237,149 | 237,149 | ||||||||||
| Warrant exercises | (65,991 | ) | (65,991 | ) | ||||||||
| Debenture conversions | (24,137 | ) | (24,137 | ) | ||||||||
| Change in derivative value | 573,392 | (80,991 | ) | 492,401 | ||||||||
| Balance at September 30, 2019 | $ | 1,256,360 | $ | 345,949 | $ | 1,602,309 | ||||||
LGBTQ Loyalty Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2019 and 2018
(Unaudited)
| Debenture | Warrants | Total | ||||||||||
| Balance as of December 31, 2019 | $ | 1,047,977 | $ | 63,902 | $ | 1,111,879 | ||||||
| Initial fair value on issuance of convertible debenture | 499,469 | - | 499,469 | |||||||||
| New warrant issuances | - | 39,690 | 39,690 | |||||||||
| Common stock warrant exercises | - | (72,244 | ) | (72,244 | ) | |||||||
| Change in fair value of derivative liability | (293,524 | ) | (31,348 | ) | (324,872 | ) | ||||||
| Balance as of June 30, 2020 | $ | 1,253,922 | $ | - | $ | 1,253,922 | ||||||
Note 7. Stockholders’ Equity (Deficit)
Common Stock
Common Stock2020 Transactions
In January 2020, we issued 294,994 shares of common stock to a bridge noteholder in connection with promissory notes received.
OnDuring the six months ended June 30, 2020, we issued an aggregate of 10,052,318 shares of common stock to consultants for 2019 services which were accrued at a fair value of $459,417.
In March 2020, we issued 1,000,000 shares to Orlando Reece pursuant to his appointment to the Board of Directors.
In May 2020, we issued an aggregate of 11,942,161 shares to directors as compensation.
In April 2020, we issued 90,216 shares and 958,333 shares of common stock to a Series B Preferred Stock investor for accrued dividends and conversion of 25,000 shares of the Series B Preferred Stock.
In May 2020, we issued an aggregate of 12,889,267 shares of common stock to executives, officers and consultants for services rendered for a total fair value of $139,215.
In June 2020, two option holders exercised their outstanding options for a total of 4,000,000 shares of common stock at an exercise price of $0.0026. The value of $10,400 was converted from outstanding accounts payable.
During the six months ended June 30, 2020, we issued an aggregate of 4,170,000 shares of common stock to Pride Partners pursuant to warrant exercises. Refer to Note 8.
2019 Transactions
In January 25, 2019, we entered into and closed a securities exchange under a Securities Exchange Agreement (the “Securities Exchange Agreement”) with LGBT Loyalty LLC (“LGBT Loyalty”) and Maxim Partners, LLC (“Maxim”), pursuant to which we acquired all of the membership interests of LGBT Loyalty, making LGBT Loyalty a wholly owned subsidiary of ours, in exchange for 120,959,996 shares (the “Shares”) of our restricted common stock and one share of our newly created Series A Convertible Preferred Stock (the “Series A Preferred Stock”). The Shares issued to Maxim represented, upon issuance, 49.99% of our then issued and outstanding shares of common stock. On March 29, 2019 an additional 8,598,578 shares were issued to Maxim for the conversion of the Series A Convertible Preferred Stock. LGBT Loyalty has no assets, liabilities nor operations at the exchange date, therefore, the value ascribed to the issued stock ($388,675) has been charged to operations as expenses of the merger. On June 4, 2019 we entered into a Securities Exchange Agreement with Maxim pursuant to which the Maxim exchanged 129,558,574 shares of common stock for 129,559 shares of our Series C Preferred Stock.
EffectiveIn February 20, 2019, we issued an aggregate of 750,000 shares of restricted common stock to a consultant in accordance with a service contract that provided for a 250,000 share stock grant andfor services performed of $7,500, as well as the exercise of 500,000 stock options in exchange for the cancellation of $5,000 then outstanding accounts payable due to the consultant for prior services.
During the nine months ended September 30, 2019 we issued an aggregate of 3,000,000 shares of restricted common stock to three unrelated individuals in accordance with their appointment as directors of the Company.
EffectiveIn March 26, 2019, we issued an aggregate of 8,600,298 shares of our restricted common stock pursuant to the automatic exercise of warrants issued to two current and prior company officers on January 25, 2019. The warrants were issued in exchange for the cancellation of an aggregate of $348,312 of salary and interest accruals through December 31, 2018.officers.
During the period ended September 30, 2019 we issued 2,000,000 shares of common stock in connection with consulting agreements with two unrelated entities. The shares were valued at the respective trading prices of our common stock on the dates the agreements were signed.
On June 26, 2019 we issued 187,500 shares of restricted common stock in connection with the conversion of notes payable as described in Note 4 above.
During the quarter ended September 30,In March and April 2019, we issued an aggregate of 1,832,5005,000,000 shares of common stock to Pridefive unrelated individuals in accordance with their appointment as described in Note 6. Also duringdirectors of the quarterCompany.
During the six months ended SeptemberJune 30, 2019, we issued 16,79426,586,204 shares and 734,918 shares of our common stock to a Series B Preferred Stock investor for accrued dividends and conversion of 25,000 shares of the Series B Preferred Stock.lender pursuant to note conversions.
Series B Convertible Preferred Stock
On April 3, 2019As of June 30, 2020, we filed a Certificate of Designations, Preferences and Rights ofhad $8,625 in remaining accrued Series B Convertible Preferred Stock with the Delaware Secretary of State to create a new class of preferred stock, $0.001 par value per share, designated Series B Convertible Preferred Stock (“Series B Preferred Stock”) and authorized the issuance of up to 1,500,000 shares of Series B Preferred Stock. The Series B Preferred Stock has no voting, liquidation or other rights other than the right to receive dividends and to convert into common stock.
LGBTQ Loyalty Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2019 and 2018
(Unaudited)
The stated value of each share of Series B Convertible Preferred Stock for purposes of conversions and dividends is $1.15 (the “Conversion/Dividend Stated Value”). The stated value of each share of Series B Convertible Preferred for purposes of redemptions is $1.35 (the “Redemption Stated Value”). On April 3, 2019 we received an aggregate of $125,000 from the issuance of 125,000 shares of the Series B Convertible Preferred Stock. Each $25,000 of the preferred stock is convertible into $28,750 worth of common stock. The discount between the $28,750 and $25,000 for each $25,000 investment has been recognized and amortized. Additionally, the Preferred Stock contains a Beneficial Conversion Feature (BCF) that has been recognized. The BCF is the difference between the conversion price and the market price at inception multiplied by the number of common shares into which the Preferred Stock is convertible. The BCF is also treated as a discount on the Preferred Stock, which is amortized over the life of the instrument. Amortization of the discount will continue through April 3, 2021 and amounted to $50,913 for the period ended September 30, 2019. Subject to earlier conversion or redemption, the Series B Preferred Stock will automatically convert into fully paid and non-accessible shares of our common stock 24 months following the date of issuance of such Series B Preferred Stock without any action or payment required on the part of the holder of the Series B Convertible Preferred Stock. Subject to a floor price limitation of $0.03 per share, the automatic conversion price to which the Conversion/Dividend Stated Value will be applied will be the lower of (i) $0.10 per share of common stock; or (ii) a 20% discount to the lowest volume weighted average price (“VWAP”) for our common stock on our principal trading market during the five (5) trading days immediately prior to the automatic conversion date.
In September 2019, a Series B investor converted 25,000 shares of Series B Preferred Stock for 734,918 shares of common stock.
LGBTQ Loyalty Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2019 and 2018
(Unaudited)
dividends.
Series C Convertible Preferred Stock
| 14 |
On June 3, 2019 we filed a Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock (the “Series C COD”) with the Delaware Secretary of State to create a new class of preferred stock, $0.001 par value per share, designated Series C Convertible Preferred Stock (“Series C Preferred Stock”) and authorized the issuance of up to 129,559 shares of Series C Preferred Stock. On the Closing Date, all of the 129,559 shares of Series C Preferred Stock were issued to Pride, the assignee of Maxim. On June 4, 2019 we entered into a Securities Exchange Agreement with Maxim (the “Holder”) pursuant to which the Holder exchanged 129,558,574 shares of Common Stock for 129,559 shares (the “Exchange Shares”) of our Series C Preferred Stock (the “Share Exchange”). At the request of the Holder, the Exchange Shares were issued to Holder’s assignee. The Series C Preferred Stock has no voting or other rights other than the right to receive dividends on a pari passu basis with holders of our Common Stock, the right to receive assets in the event of liquidation, dissolution or winding up on a pari passu basis with holders of our Common Stock and the right to convert into common stock. The stated value of each share of Series C Convertible Preferred for purposes of conversions is $1,000 (the “Stated Value”).
Each share of Series C Preferred Stock is convertible, at any time and from time to time, at the option of the holder thereof, into that number of shares of Common Stock (subject in each case to a 4.99% beneficial ownership limitation) determined by dividing the Stated Value of such share of Series C Preferred Stock by the Series C Preferred Stock conversion price of $1.00 per share. Consequently, each Share of Series C Preferred Stock is presently convertible into 1,000 shares of Common Stock.
Deferred Officer Compensation
We recorded $152,644 and $141,293 of amortization of deferred officer compensation during the periods ended September 30, 2019 and 2018, respectively. The 2019 amount includes the full amortization of the remaining balance due under the now terminated Executive Management Consulting Agreement with our former Chief Executive Officer.
LGBTQ Loyalty Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2019 and 2018
(Unaudited)
Note 8. Options and Warrants
The following is a summaryOptions
As of stockJune 30, 2020 and December 31, 2019, we had 1,800,000 and 5,800,000 options, issuedrespectively, remaining outstanding pursuant to the 2012 Equity Incentive Plan:Plan.
| Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding January 1, 2019 | 6,300,000 | $ | 0.0049 | 2.4 | - | |||||||||||
| Granted | - | $ | - | - | - | |||||||||||
| Exercised | 500,000 | $ | 0.01 | - | - | |||||||||||
| Cancelled | - | $ | - | - | - | |||||||||||
| Outstanding September 30, 2019 | 5,800,000 | $ | 0.0045 | 1.7 | $ | - | ||||||||||
| Exercisable September 30, 2019 | 5,800,000 | $ | 0.0045 | 1.7 | $ | - | ||||||||||
There was no stock based compensation expense for options for the periodssix months ended SeptemberJune 30, 20192020 and 2018.2019. There will be no additional compensation expense recognized in future periods.
Warrants
During the six months ended June 30, 2020, Pride exercised an aggregate of 4,170,000 shares of common stock pursuant to the exercise provisions of the warrant, including a simultaneous grant and exercise of 2,285,000 warrants. As of June 30, 2020, Pride had no outstanding warrants remaining. The Company received total proceeds of $93,342 a result of the warrant exercises.
In May 2020, we cancelled warrants that were issued in 2019 to board members to purchase an aggregate of 7,000,000 shares of our common stock. See Note 9.
On January 25, 2019 we issued warrants to two Company executives in exchange for the cancellation of an aggregate of $348,312 of salary and interest accruals through December 31, 2018. The warrants were fully exercised as described in Note 7 above.
OnThe following is a summary of the warrant activity for the six months ended June 4,30, 2020:
| Warrants | Weighted Average Exercise Price | |||||||
| Outstanding as of December 31, 2019 | 8,885,000 | $ | 0.04 | |||||
| Granted | 2,285,000 | 0.08 | ||||||
| Exercised | (4,170,000 | ) | 0.08 | |||||
| Forfeited | (7,000,000 | ) | 0.03 | |||||
| Outstanding as of June 30, 2020 | - | $ | - | |||||
Note 9. Related Party Transactions
Parties, which can be a corporation or an individual, are considered to be related if we have the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
Notes Payable to Related Party
Notes payable to related parties at June 30, 2020 and December 31, 2019 totaled $17,885 with a 2% annual interest rate. Currently the Company has defaulted on all of their related party loan obligations. Forbearance has been granted by the related parties on all loans.
Accrued Salaries
In March 2019, we issued a warrant to purchase an aggregate of 6,250,0008,600,298 shares of our common stock. The warrant is exercisable through December 4, 2020. The exercise price per share of Common Stock under this Warrant shall be the lesser of (i) $0.0855, or (ii) 75% of the lowest single trading day closing price during the five trading days prior to the exercise date. During the period from August 14, 2019 to September 30, 2019 the Purchaser exercised an aggregate of 1,405,000 shares of common stock pursuant to the automatic exercise provisions of warrants issued to two current and prior company officers. The warrants were issued in exchange for the Warrant. The company receivedcancellation of an aggregate of $51,569$348,312 of salary and interest accruals through December 31, 2018.
As of June 30, 2020 and December 31, 2019, accrued salaries to our company officers and executive director totaled $193,552 and $91,352, respectively, and is included in accrued salaries and consulting fees in our consolidated balance sheets.
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Board of Directors
In March 2020, the Company issued 1,000,000 shares to Orlando Reece pursuant to his appointment to the board, and recognized $17,800 in compensation expense.
In May 2020, we issued an aggregate of 11,942,161 shares to directors as a resultcompensation, including 3,942,161 shares pursuant to accrued monthly fees and 8,000,000 shares pursuant to 2020 annual compensation. In conjunction with this transaction, we cancelled 7,000,000 warrants that were issued to the board in December 2019. We accounted for the modification in accordance with ASC 718-20-35. Total fair value of the Warrant exercises.shares issued and warrant modification was $214,595.
In March and April 2019, we issued an aggregate of 5,000,000 shares of common stock to five unrelated individuals in accordance with their appointment as directors of the Company, and recognized $555,401 in compensation expense.
Total accrued directors’ compensation of $50,834 and $80,000 at June 30, 2020 and December 31, 2019, respectively, is included in accrued salaries and consulting fees on our consolidated balance sheets.
A board member is the co-founder and president of ProcureAM, LLC, the fund advisor for the Fund. As of June 30, 2020 and December 31, 2019, we have $100,000 included as other receivables on our consolidated balance sheet, which represents amounts held in escrow at the Fund’s custodian.
Note 9.10. Subsequent Events
Management has evaluated all activity up to NovemberAugust 14, 20192020 and concluded that no subsequent events have occurred that would require recognition in these financial statements or disclosure in the notes to these financial statements other than the following:
LGBTQ Loyalty Holdings, Inc.
NotesEffective July 14, 2020, the Company and Calvary Fund I LP entered into an amendment to Condensed Consolidated Financial Statements
September 30, 2019the Calvary Note to extend the maturity date of the note from November 11, 2020 to December 31, 2020, prohibit any conversions of the note prior to October 31, 2020, and 2018
(Unaudited)extend the prepayment option from August 9, 2020 to December 31, 2020.
On October 14, 2019 the CompanyAugust 11, 2020, we entered into that certain Amendment No. 2 toa Securities Purchase Agreement Debentures and Registration Rights Agreement (the “Second Amendment”“SPA”) with Pride. Pursuant to the terms of Amendment. Pride agreed to purchase an additional $330,000 in principal amount of 10% Original Issue Discount Senior Convertible Debenture for $300,000 in cash, $100,000 of which was paid at signing of the Second Amendment, $100,000 will be paid on or prior to November 14, 2019, and the remaining $100,000 will be paid on or prior to December 14, 2019. As a result of this additional investment, the Company amended the currently outstanding 10% Original Issue Discount Senior Convertible Debenture that was issued to Pride on June 4, 2019 and amended on August 27, 2019 to increase the face value of the debenture from $770,000 to $1,100,000 (provided that if Pride fails to make the second $100,000 or third $100,000 payment, the face value of the debenture will be reduced by $110,000 for each missed payment). As of November 14, 2019, the Company has received $200,000 pursuant to the Amendment.
unrelated entity. Pursuant to the terms of the Second Amendment,SPA, the Purchaser agreed to purchase from the Company, for a purchase price of $132,000, a 12% Convertible Note (the “Note”) in the principal amount of $150,000. The Note matures and becomes due and payable on August 11, 2021 and accrues interest at a rate of 12% per annum while the Note remains outstanding. The Note may be prepaid on a monthly basis commencing six months after closing. The Note is convertible into shares of the Company’s common stock at any time at a conversion price (“Conversion Price”) equal to the lesser of (i) Current Market Price and (ii) the Variable Conversion Price. The Variable Conversion Price shall mean 100% multiplied by the Market Price (representing a discount rate of 0%). Market Price means the average of the previous 5 days volume weighted average price. In connection with the Note, the Company issued two common stock purchase warrants to purchase up to an aggregate of 15,000,000 shares of common stock underlying(separately, "Warrant A" and "Warrant B", and together, the additional $330,000 in principal amount of 10% Original Issue Discount Senior Convertible Debenture (the “Additional Underlying Shares”"Warrants" and each a "Warrant") are not, upon the terms and subject to the registration rights agreement entered into betweenlimitations and conditions set forth in the parties on June 4, 2019, but the Company has granted certain demand registration rights to Pride in connection with the Additional Underlying Shares.Note.
Effective October 21, 2019 a Series B Preferred Stock investor notified the Company of intent to convert 25,000 shares of the Series B Preferred Stock into common stock. The Company has authorized the issuance of 731,031 shares of common to the investor stock pursuant to the conversion request.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial information included elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”), including our unaudited condensed consolidated financial statements as of SeptemberJune 30, 20192020 and for the three and ninesix months ended SeptemberJune 30, 20192020 and 20182019 and the related notes. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations section to “us,” “we,” “our,” and similar terms refer to LGBTQ Loyalty Holdings, Inc., a Delaware corporation. This discussion includes forward-looking statements, as that term is defined in the federal securities laws, based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. Words such as “anticipate,” “estimate,” “plan,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions are used to identify forward-looking statements.
We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Factors that may affect our results include, but are not limited to, the risk factors in Item 2.01 in our Annual Report on Form 10-K for the year ended December 31, 20182019 filed with the Securities and Exchange Commission (the “SEC”) on April 16, 2019.May 14, 2020. Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.
Business Overview
On January 25, 2019, we entered into and closed a Securities Exchange Agreement (the “Securities Exchange Agreement”) pursuant to whichacquired LGBT Loyalty LLC, (“LGBT Loyalty”) became a wholly owned subsidiaryNew York limited liability company, with the goal of ours. Through LGBT Loyalty, we intend to create, establish, develop, manage and fund ancreating the first LGBTQ Loyalty Preference Index ETF (the “Index”“Index ETF”) to provide the LGBTQ community with the power to influence the allocation of capital within a financial Index ETF based upon LGBTQ consumer preferences. The Index ETF is intended to link the growing economic influence of the LGBTQ community and their allies with many of the top Fortune 500 companies that support and implement diversity, inclusion and equality policies within their organizations. The incorporation of diversity and inclusion in a company’s recruitment and human resource policies is becoming a key concern to investors as part of their growing focus on ESG allocations. Our data and analytics unequivocally reinforce that corporations that have embraced diversity and inclusion policies within their corporate culture perform at a higher level financially than their peers. This includes advancing a more invigorated workforce that attracts and retains the best talent. Innovation and agility have been identified as great benefits of diversity, and there is an increasing awareness of what has come to be known as ‘the power of difference’.
On October 30, 2019, we launched the LGBTQ100 ESG Index through our wholly-owned subsidiary Loyalty Preference Index, Inc., The environmental, social (“LPI”) and governance (“ESG”)our strategically aligned partnerships with crowd sourced data and analytic providers, we launched the LGBTQ100 ESG Index is the first-ever Index that referenceswhich integrates LGBTQ community survey data ininto the methodology for a benchmark listing of the nation’s highest financially performing companieslarge-cap publicly listed corporations that our respondents believe are most committed to advancing equality. We believeLPI is the index provider for the LGBTQ + ESG100 ETF; LGBTQ Loyalty was the Sponsor for the prospectus that was filed by the news markshighly regarded licensed Fund Adviser ProcureAM, a significant momentwholly owned subsidiary of Procure Holdings, LLC., which is through our platform service agreement (“PSA”), and was approved by the Securities and Exchange Commission (“SEC”) in timeearly January 2020. The LGBTQ + ESG100 ETF (the “Fund”) seeks to track the investment results (before fees and expenses) of the LGBTQ100 ESG Index. The Fund earns management fees based on assets under management (“AUM”) and is expected to launch in Q3- 2020 on the NASDAQ.
LGBTQ Loyalty has generated an abundance of media coverage for our premier LGBTQ Index product with the launch and listing on NYSE of the LGBTQ100 ESG Index. The exclusive media launch with Bloomberg Media was instrumental in propelling the LGBTQ100 brand to center stage overnight in the financial sector. In addition, LGBTQ Loyalty was featured at the Inside ETFs Summit in early 2020 with Board Members, Barney Frank and Billy Bean speaking on the “The Power of Inclusion & Equality” for investors. Our media strategy objective is to lay the groundwork for additional high-profile positioning of the brand as we work to achieve the desired increased financial media coverage and growth in AUM valuation for our company and shareholders.
On June 24, 2020, we formed two wholly-owned subsidiaries, Crowdex Equity Inc. (“Crowdex”) and Advancing Equality Financial Network, Inc. (“AEF”). AEF focuses on bringing to market and sales distribution a suite of thematic-ESG (Environmental, Social and Governance) Index financial products promoting diversity and inclusion initiatives(D&I) practices of leading corporations. This includes the first financial index branded as LGBTQ100 ESG Index (NYSE Index Ticker: LGBTQ100) representing 100 large-cap U.S. entities that are deemed the top LGBTQ Equality corporations. LGBTQ100 ESG Index was listed on the NYSE in financial markets and Corporate America asQ4 of 2019. Crowdex is currently in the Index is available on NYSE, Bloomberg and Thomson Reuters.process of finalizing a service provider relationship, which will be announced before the end of Q3 2020.
We also plan to create additional businesses that will enhance the Index, including LGBTQ Loyalty Sponsorship which we intend to establish to promote the growth of the Index. We will pursue partnerships with socially conscious companies globally that seek to market and advertise directly to LGBTQ consumers. We also intend to partner with some of the most recognizable LGBTQ community leaders from around the world to have them become LGBTQ Loyalty Sponsorship members that will promote the Index. The LGBTQ Loyalty Sponsorship will incorporate marketing and support of the companies included in the Index. Companies within the Index will be given the opportunity to purchase LGBTQ Loyalty Sponsorship packages. Sponsorship packages will be tier priced starting at ten thousand dollars for a first level package and increasing to one million dollars for a gold level package. We plan to utilize the networking and relationships of our Board of Directors to promote the LGBTQ Loyalty Sponsorship packages.
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We also intend to focus on two complimentary businesses, an LGBTQ Advertising Network and an LGBTQ Media Network. The LGBTQ Advertising Network will offer a direct link to the companies that desire to deliver a customized marketing campaign to the LGBTQ consumer. We intend to offer our expertise including our own survey data to help companies develop their targeted message in a powerful delivery network. The LGBTQ Media Network will aggregate content from around the world in a 24/7 digital delivery format that is intended to target the highly desired spending power of the LGBTQ consumer.
Our Products
Effective October 30, 2019, we officially launchedOur mission is to build a sustainable and well recognized brand focused on unlocking the LGBTQ100growing purchasing power of the LGTBQ community globally by offering a robust LGBTQ Index and core ETF portfolio that attracts key institutional investors and corporations.
At the nucleus of our LGBTQ Loyalty Preference Index is our partner-driven Crowd Preference Index Methodology (CPIM) which disrupts ESG Index. The Index, which will be reconstituted annually,investing. This is comprisedachieved through an elevated screening process of 100 LGBTQ equality-driven companies from the nation’s top 500 publicly traded companies based on our surveys. The LGBTQ100financial performance data and ESG Index will maintain industry sector groupingstandards and practices, whereby each sector can represent up to 25% in the weighting calculation. Details on the Index composition criteria include company securities that (a) nurture and promote equality in the workplace for employees across genders and sexual orientations; (b) maintain a strong track record of loyalty and brand awareness among millions of LGBTQ community members indata on diversity and inclusion compliance directly impacts corporate financial results and transparently identifies and recognizes high performance companies who have consistently outperformed the United States;S&P 500 index or equivalent sector standards and(c) possess a record of consistently strong financial performance.
The survey provides the ESG Index with added significance for corporate and financial sectors by tapping a nationally representative respondent base of LGBTQ self-identified adults from across the United States. Adult respondents were asked about their attitudes and behaviors toward companies as well as alignment with their personal values and issues critical to the LGBTQ community. norms.
We will attemptintend to grow and publicizeextend the Index through an LGBTQ Loyalty Sponsorship program. LGBTQ Loyalty Sponsorship packages will be offeredIndex brand with future plans to companies that supportdevelop indices with a focus on the LGBTQ community. We also intend to create a LGBTQ Advertising Network and a LGBTQ Media Network. Our LGBTQ Loyalty Sponsorships and LGBTQ Membership Programs will be offered to all companies that express an’Social’ component of ESG utilizing our proprietary financial slogan of “Advancing Equality” within other gender, minority interest in promoting their support for the LGBTQ community through marketing, hiring practices, charitable giving and other forms of support. The LGBTQ Advertising Network will deliver market specific messaging to this powerful consumer group and will be available to assist companies in tailoring their advertising for the greatest impact. The LGBTQ Media Network will attract viewers through breaking news and relevant content from the world of news, entertainment, sports, politics, travel and health and fitness. The LGBTQ Media Network will aggregate content from around the world in a 24/7 digital delivery format that is intended to target the highly desired spending power of the LGBTQ consumer. Subject to our receipt of required financing, we expect to launch our products during the fourth quarter of 2019.groups.
Revenue
The Company focus in 2019 was to create and launch our first of many financial Index products through an equality driven thematic ESG screened and alpha performance benchmark. The Company achieved this through its LGBTQ100 ESG Index listing and performance on the NYSE starting on October 30, 2019. In 2020 our collective efforts and focus is to monetize and scale our model by capturing recurring revenue streams through our current financial Index product. Our goal is to accelerate our revenue pursuits through our partnership and licensed relationships to achieve a break-even point when we have secured AUM benchmarked against the LGBTQ100 Index in excess of $50,000,000.
We intend to monetizeintroduce a new key partnered revenue source derived from Direct Index Licensing Fees generated by financial institutions and driveasset management companies for creating a product (e.g. , Index Funds, Structured Financial Products, Turnkey Asset Management Providers) based on or linked to the LGBTQ100 index. This includes fees to use the LGBTQ100 index to track the performance of funds or as benchmarks for actively managed portfolios. We plan to capture Data Subscriptions which could provide recurring subscription revenue from our LGBTQ Index. This includes ongoing and historical data and information generated by our wholly owned division Loyalty Preference Index, Inc., and through developmentour strategic partnerships for new potential financial equality-driven Indices.
New initiatives in 2020 include a plan to create ancillary revenue streams to complement and support this unique platform for the top 100 Equality driven Corporations in America represented in the LGBTQ100 Index. We believe our index will reward and elevate the status of those corporations that have adopted diversity and inclusion best practices, cared for their employees and positively impacted LGBTQ communities. Expert LGBTQ economists have repeatedly stressed the value of the LGBTQ Loyalty Preference Index.brand loyalty to corporations. We will receive a percentage ofconsider the revenues derived fromcompanies that best capture the Index. We expect the Index to reach the break-even point when its holdings of funds under management are approximately $40,000,000. We also intend to drive revenue through ancillary businesses that will supportspending trends and be supported by the LGBTQ Loyalty Preference Index. Our LGBTQ Loyalty Sponsorships and LGBTQ Membership Programs are intended to produce revenue through direct sales of the offerings to companies who desire to be recognized as supportiveloyalty of the LGBTQ community.consumer will be better positioned for financial growth and success. Given the opportunity to link to the power and status generated between the LGBTQ community, these companies and their own workforce, we will launch a Partner Loyalty Program which includes benefits afforded to defined sponsorship tiers. The LGBTQ Advertising NetworkLoyalty Sponsorship is designed to attract the significant marketing dollars Fortune 500 companies are allocating to D&I programs with an opportunity to purchase LGBTQ Loyalty Sponsorship packages, including participation and brand exposure at planned conferences and events. Companies will be offered the opportunity to purchase LGBTQ Media Network are expected to drive revenue as a vehicle to market and advertise to the highly sought-after LGBTQ consumer demographic.Loyalty Sponsorship packages starting in Q2-2020.
Our initial investments in creating a high performing product with a well-recognized brand have been established. As we begin to move into planning for the post-COVID-19 world, we will now shift our efforts to cultivate new revenue stream opportunities while building AUM as we construct a profitable business platform.
We have achieved no revenues to date from our LGBTQ related operations and have been focused on building our product and achieving performance results and media branding over the course of the past twelve months. There are no assurances that can be given that we will achieve revenues or profitability in the future.
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Critical Accounting Policies and Estimates
Going Concern
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles (“GAAP”),US GAAP, which contemplates our continuation as a going concern. As of SeptemberJune 30, 2019,2020, we have incurred accumulated losses to date of $8,092,081$10,503,660 and have negative working capital deficit of $672,961.$3,378,893. To date we have funded our operations through advances from a related parties, issuancesparty, issuance of convertible debt, and the sale of our common and preferred stock. We intend to raise additional funding through third party equity or debt financing. There is no certainty that funding will be available as needed. These factors raise substantial doubt about our ability to continue operating as a going concern. Our ability to continue our operations as a going concern, realize the carrying value of our assets, and discharge our liabilities in the normal course of business is dependent upon our ability to raise capital sufficient to fund our commitments and ongoing losses, and ultimately generate profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Use of Estimates
The preparation of financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the years reported. Actual results may differ from these estimates.
Revenue RecognitionDerivative Financial Instruments:
ASC Topic 606, “Revenue from Contracts with Customers” establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arisingThe Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting. Embedded derivatives are valued separately from the entity’s contracts to provide goods or services to customers.
Revenueshost instrument and are recognized when control ofas derivative liabilities in the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services.Company’s balance sheet. The Company appliesmeasures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the following five stepsperiod of change. The Company has a sequencing policy regarding share settlement wherein instruments with a fixed conversion price or floor would be settled first, and interest payable in shares settle next. Thereafter, share settlement order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
Revenue was derived primarily from the sale of sports and fitness apparel and equipment, and software applications designed for useis based on mobile devicesinstrument issuance date – earlier dated instruments settling before later dated. The sequencing policy also considers contingently issuable additional shares, such as smart phonesthose issuable upon a stock split, to have an issuance date to coincide with the event giving rise to the additional shares. The policy includes all shares issuable pursuant to debenture and tablets.preferred stock instruments as well as shares issuable under service and employment contracts and interest on short term loans.
Results of Operations
Three months ended SeptemberJune 30, 2019,2020 compared with the three months ended SeptemberJune 30, 20182019
There were no revenues during the three months ended June 30, 2020 and 2019.
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The following is a breakdown of our operating expenses for the three months ended June 30, 2020 and 2019:
| Three Months Ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2020 | 2019 | Change $ | Change % | |||||||||||||
| Personnel costs | $ | 284,508 | $ | 466,004 | $ | (181,496 | ) | -39 | % | |||||||
| Consulting fees | 93,515 | 104,021 | (10,506 | ) | 100 | % | ||||||||||
| Legal and professional fees | 95,347 | 12,353 | 82,994 | 672 | % | |||||||||||
| Merger costs | - | - | - | 100 | % | |||||||||||
| Sales and marketing | 45 | 9,750 | (9,705 | ) | 100 | % | ||||||||||
| General and administrative | 20,736 | 1,435 | 19,301 | 1345 | % | |||||||||||
| Depreciation and amortization | 6,448 | - | 6,448 | 100 | % | |||||||||||
| $ | 500,598 | $ | 593,563 | $ | (92,965 | ) | -16 | % | ||||||||
Personnel costs include officer salaries, directors’ compensation and deferred officer compensation. The decrease in personnel costs is primarily due to compensation associated with the formation of our board of directors in the second quarter 2019 as well as amortization of deferred compensation in the prior year.
Consulting fees decreased by $10,506 during the three months ended June 30, 2020, primarily due to costs paid to our former chief executive officer in the second quarter of 2019. Consulting fees represent our efforts to launch the LGBTQ100 ESG Index and LGBTQ + ESG100 ETF.
Legal and professional fees increased by $95,347, primarily because of increased accounting and audit fees in 2020.
Sales and marketing expenses decreased in 2020 due to marketing efforts being halted with COVID-19.
General and administrative expenses increased by $19,301 in 2020 due to the increased activity in our operations, including travel, insurance and rent.
Depreciation and amortization expense was $6,448 in the three months ended June 30, 2020, which represents amortization on our index development costs.
The following is a breakdown of our other income (expenses) for the three months ended June 30, 2020 and 2019:
| Three Months Ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2020 | 2019 | Change $ | Change % | |||||||||||||
| Interest expense | $ | (376,472 | ) | $ | (500,442 | ) | 123,970 | -25 | % | |||||||
| Other income | 3,000 | - | 3,000 | 100 | % | |||||||||||
| Change in derivative liability | 442,626 | (266,808 | ) | 709,434 | -266 | % | ||||||||||
| $ | 69,154 | $ | (767,250 | ) | $ | 836,404 | -109 | % | ||||||||
Interest expense decreased by $123,970 in the three months ended June 30, 2020, primarily attributable to origination interest incurred on the Pride convertible debenture in June 2019.
Change in derivative liability includes the mark-to-market adjustment of the derivative liability in connection with our convertible debenture.
Net loss was $431,445 and $1,360,813 for the three months ended June 30, 2020 and 2019, respectively.
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Six months ended June 30, 2020 compared with the six months ended June 30, 2019
Revenues for the threesix months ended SeptemberJune 30, 2020 and 2019 were $560 and 2018 were $748 and $525,$2,064, respectively. Revenues for both periods were derived primarily from the sale of sports apparel and health and fitness products. These revenues are derived fromWe continue to have a legacy business.
There were no costs associated withlimited number of apps in the revenue for the quarters resulting in gross profits for the three months ended September 30, 2019 and 2018 of $748 and $525 (100%), respectively.
We had net losses of $1,106,026 and $258,619 for the three months ended September 30, 2019 and 2018, respectively.Apple App store.
The following is a breakdown of our selling, general and administrativeoperating expenses for the threesix months ended SeptemberJune 30, 20192020 and 2018:2019:
| Three months Ended September 30, | ||||||||||||||||
| 2019 | 2018 | Difference | % Change | |||||||||||||
| Personnel costs | $ | 119,608 | $ | 85,412 | $ | 34,196 | 40.0 | % | ||||||||
| Professional fees | 36,606 | 79,797 | (43,191 | ) | (54.1 | )% | ||||||||||
| Travel and entertainment | 58,197 | 428 | 57,769 | * | ||||||||||||
| Consulting expense | 336,300 | 52,460 | 283,840 | 541.1 | % | |||||||||||
| Stock related expenses | 38,741 | - | 38,741 | * | ||||||||||||
| Marketing and promotion | 31,989 | - | 31,989 | * | ||||||||||||
| Rent | 13,670 | - | 13,670 | * | ||||||||||||
| Other expenses | 46,800 | 891 | 45,909 | * | ||||||||||||
| $ | 681,911 | $ | 218,988 | $ | 462,923 | 211.4 | % | |||||||||
| Six Months Ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2020 | 2019 | Change $ | Change % | |||||||||||||
| Personnel costs | $ | 499,462 | $ | 897,667 | $ | (398,205 | ) | -44 | % | |||||||
| Consulting fees | 168,015 | 104,021 | 63,994 | 100 | % | |||||||||||
| Legal and professional fees | 222,342 | 179,361 | 42,981 | 24 | % | |||||||||||
| Merger costs | - | 388,675 | (388,675 | ) | 100 | % | ||||||||||
| Sales and marketing | 7,590 | 9,750 | (2,160 | ) | 100 | % | ||||||||||
| General and administrative | 70,728 | 47,151 | 23,577 | 50 | % | |||||||||||
| Depreciation and amortization | 12,896 | - | 12,896 | 100 | % | |||||||||||
| $ | 981,033 | $ | 1,626,625 | $ | (645,592 | ) | -40 | % | ||||||||
Personnel costs during the quarter ended September 30, 2019 consisted principally of $76,295 ofinclude officer salaries, paid or accrued for our executive officersdirectors’ compensation and $43,313 of amortization of deferred officer compensation. PersonnelThe decrease in personnel costs during the quarter ended September 30, 2018 consisted principally of $43,500 of salaries accrued for our chief executive officer and president, $41,912 of amortization of deferred compensation.
Professional fees decreasedis primarily due to the timing of audit related costs and feescompensation associated with the formation of our filings with the US Securities and Exchange Commission.
Travel expenses increased as a resultboard of costs associated with increased business activity and financing efforts.
Consulting expenses during the quarterdirectors in six months ended SeptemberJune 30, 2019 consisted principally of costs paid or accrued pursuant to development of the LGBTQ Loyalty Preference Index. Consulting expenses during the quarter ended September 30, 2018 consisted principally of $37,500 of costs accrued for our former chief executive officer, $7,326 ofas well as amortization of deferred compensation and outside contractor costs of $7,633.in the prior year.
AllConsulting fees increased by $63,994 during 2020 primarily due to stock compensation to various consultants during the six months ended June 30, 2020.
Legal and professional fees increased by $42,981 primarily due to increased accounting and auditing costs.
Merger costs represents expenses incurred upon the acquisition of LGBT Loyalty LLC in March 2019.
Sales and marketing expenses decreased in 2020 due to marketing efforts being halted with COVID-19.
General and administrative expenses increased by $23,577 in 2020 due to the increased activity in our other operating costs were not significantoperations, including travel, insurance and rent.
Depreciation and amortization expense was $12,896 in the aggregate.
We had operating losses of $681,263 and $218,463 for the threesix months ended SeptemberJune 30, 2019 and 2018, respectively.
Interest expense of $199,170 is primarily related to the increase in2020, which represents amortization on our Convertible Debenture issued to a lender that was obtained during the quarter ended September 30, 2019 amounting to $57,149. Additionally, recorded amortization of discounts during the period amounting to $121,569.
Nine months ended September 30, 2019, compared with the nine months ended September 30, 2018
Revenues for the nine months ended September 30, 2019 and 2018 were $2,812 and $2,119, respectively. Revenues for both periods were derived primarily from the sale of sports apparel and health and fitness products. These revenues are derived from a legacy business.
There were no costs associated with the revenue for the quarters resulting in gross profits for the nine months ended September 30, 2019 and 2018 of $2,812 and $2,119 (100%), respectively.
We had net losses of $4,183,007 and $637,453 for the nine months ended September 30, 2019 and 2018, respectively.index development costs.
The following is a breakdown of our selling, general and administrative expensesother income (expenses) for the ninesix months ended SeptemberJune 30, 20192020 and 2018:2019:
| Nine months Ended September 30, | ||||||||||||||||
| 2019 | 2018 | Difference | % Change | |||||||||||||
| Personnel costs | $ | 1,017,275 | $ | 297,238 | $ | 720,037 | 242.2 | % | ||||||||
| Professional fees | 215,967 | 105,030 | 110,937 | 105.6 | % | |||||||||||
| Travel and entertainment | 88,377 | 10,827 | 77,550 | 716.3 | % | |||||||||||
| Consulting expense | 413,755 | 147,813 | 265,942 | 179.9 | % | |||||||||||
| Stock related expenses | 65,307 | 500 | 64,807 | * | ||||||||||||
| Merger costs | 388,675 | - | 388,675 | * | ||||||||||||
| Marketing and promotion | 41,739 | - | 41,739 | * | ||||||||||||
| Rent | 17,894 | 255 | 17,639 | * | ||||||||||||
| Other expenses | 59,547 | 3,161 | 56,386 | * | ||||||||||||
| $ | 2,308,536 | $ | 564,824 | $ | 1,743,712 | 308.7 | % | |||||||||
Personnel costs during the nine months ended September 30, 2019 consisted principally of $240,500 of salaries paid or accrued for our executive officers, $152,644 of amortization of deferred compensation and $624,150 related to the value of shares issued and accrued for director compensation. Personnel costs during the nine months ended September 30, 2018 consisted principally of $130,500 of salaries accrued for our chief executive officer and president, $166,738 of amortization of deferred compensation.
Professional fees increased primarily due to the timing of audit related costs and fees associated with the Securities Exchange Agreement with LGBT Loyalty LLC and completion of debt financing agreements.
Travel expenses increased as a result of costs associated with Securities Exchange Agreement with LGBT Loyalty LLC., increased business activity and financing agreements.
Consulting expenses during the nine months ended September 30, 2019 consisted principally of $18,750 of costs paid or accrued for our former chief executive officer, $22,705 of amortization of deferred compensation and of $226,000 costs paid or accrued pursuant to development of the LGBTQ Loyalty Preference Index. Consulting expenses during the nine months ended September 30, 2018 consisted principally of $112,500 of costs accrued for our former chief executive officer, $21,978 of amortization of deferred compensation. Additionally, we had $44,100 of costs associated with cash payments and common stock issued in connection with consulting contracts with third parties.
We incurred $388,675 of merger costs associated with the Securities Exchange Agreement with LGBT Loyalty LLC as a result of the issuance of 129,558,574 shares of our common stock.
All of our other operating costs were not significant in the aggregate.
We had operating losses of $2,305,824 and $562,855 for the nine months ended September 30, 2019 and 2018, respectively.
| Six Months Ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2020 | 2019 | Change $ | Change % | |||||||||||||
| Interest expense | $ | (737,312 | ) | $ | (489,893 | ) | (247,419 | ) | 51 | % | ||||||
| Other income | 3,000 | - | 3,000 | 100 | % | |||||||||||
| Change in derivative liability | 324,872 | (962,527 | ) | 1,287,399 | -134 | % | ||||||||||
| $ | (409,440 | ) | $ | (1,452,420 | ) | $ | 1,042,980 | -72 | % | |||||||
Interest expense includes $688,400 related to our Convertible Debenture and Warrants issued to a lender that was secured duringincreased by $247,419 in the ninesix months ended SeptemberJune 30, 2019. Additionally, we accrued2020, primarily attributable to origination interest related to service contractson 2020 debentures and amortization of $7,200 and $8,300 related to our Series B preferred stock. We recorded additional interest expense of $680,800 related todebt discount in connection with our convertible note payable to a third party. This note was fully converted to common stock during February 2019.debentures.
InterestChange in derivative liability includes the mark-to-market adjustment of the derivative liability in connection with our convertible debenture.
Net loss was $1,389,913 and derivative expenses in 2018 are primarily related to a convertible note payable to a third-party lender that was secured during$3,076,981 for the ninesix months ended SeptemberJune 30, 2018. The note was fully converted to common stock during the nine months ended September 30, 2019.2020 and 2019, respectively.
Liquidity and Capital Resources
Historically, we have been financed through advances from related parties, issuances of convertible debt, and the sale of our common and preferred stock. Our existing sources of liquidity will not be sufficient for us to implement our business plans. There are no assurances that we will be able to raise additional capital as and when needed. As of SeptemberJune 30, 2019,2020, we had $14,093 inno cash on hand. Based on our current planned expenditures, we will require approximately $2.5 million over the next 12 months. Our cash on hand asexisting sources of September 30, 2019, together with the proceeds received andliquidity may not be sufficient for us to be received from the Pride Second Amendment,implement our continuing business plan. Our need for future capital will be sufficient to cover operating expensesdependent upon the speed at which we expand our product offerings. There are no assurances that we will be able raise additional capital as and debt service requirements through December 2019.when needed.
As of SeptemberJune 30, 2019,2020, we had a working capital deficit of $672,961$3,378,893 as compared to a working capital deficit of $634,686$2,947,521 at December 31, 2018.2019.
During the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, operations used cash of $846,796$373,030 and $53,734,$374,122, respectively.
During the ninesix months ended SeptemberJune 30, 2020 and 2019, we purchased $2,000net cash used in investing activities was $31,000 and $39,500, respectively, primarily attributable to capitalized costs pertaining to the development of office furniturethe LGBTQ100 ESG Index and equipment and expended $47,500 for website development.ETF website.
DuringFrom February to May 2020, we received $250,000 in proceeds from the nine months ended September 30, 2019 and 2018, net cash provided by financing activities was $869,481 and $53,599, respectively.
issuance of three convertible debentures. In January 2020, we received $47,500 pursuant to a bridge note agreement. We also received $93,343 from the exercise of warrants. We received $125,000 in proceeds from the issuance of Series B Convertible Preferred Stock (Note 7)convertible preferred stock and $700,000 in$500,000 proceeds from the issuance of Convertible Debenturesthe Pride convertible debenture during the ninesix months ended SeptemberJune 30, 2019 (Note 6). We also received $51,569 from the exercise of warrants. We received $42,000 in proceeds from notes payables and $10,000 from the sale of common stock during the nine months ended September 30, 2018.
Additionally, we received net amounts of $650 of cash advances from our chief executive officer and net amounts of $2,950 of cash advances from a director and shareholders during the nine months ended September 30, 2018.2019.
We will continue to seek out additional capital in the form of debt or equity under the most favorable terms we can find.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) and are not required to provide the information required under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are not effective due to a lack of audit committee and segregation of duties caused by limited personnel to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
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Limitations on Effectiveness of Controls and Procedures
Our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), does not expect that our disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Management believes that the material weakness set forth above did not have an effect on our financial results.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting during the three months ended SeptemberJune 30, 20192020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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There are no pending, nor to our knowledge threatened, legal proceedings against us.
For information regarding risk factors, please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 20182019 filed with the SEC on April 16, 2019,May 14, 2020, which may be accessed via EDGAR through the Internet atwww.sec.gov.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
Other than what has previously been disclosed in public filings, there are no new sales of unregistered securities.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
We are in default under a $20,000 Promissory Note dated May 20, 2017 that became due on August 31, 2017. We have entered into a payment plan with the payee thereunder wherein we are making monthly cash payments to reduce the outstanding balance due. At SeptemberJune 30, 20192020 the outstanding balance was approximately $10,986.$4,986.
ITEM 4. MINE SAFETY DISCLOSURE
Not Applicable.
Effective April 25, 2019, we filed a Certificate of Amendment to our Certificate of Incorporation (the “Charter Amendment”) with the Delaware Secretary of State to change our name from LifeApps Brands Inc. to LGBTQ Loyalty Holdings, Inc. Our trading symbol will remain “LFAP”.None.
Exhibit Number | Description of Exhibit | |
| 31.1 | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1* | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2* | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | XBRL Instance Document | |
| 101.SCH | XBRL Taxonomy Extension Schema Document | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.LAB | XBRL Taxonomy Extension Labels Linkbase Document | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
| * | This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference. |
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In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| LGBTQ LOYALTY HOLDINGS, INC. | ||
| By: | /s/ Robert A. Blair | |
| Robert A. Blair, Chief Executive Officer | ||
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| LGBTQ LOYALTY HOLDINGS, INC. | ||
| By: | /s/ Eric Sherb | |
| Eric Sherb, Chief Financial Officer | ||
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