LIFEAPPS BRAND INC.

LGBTQ Loyalty Holdings, Inc.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017MARCH 31, 2020

TABLE OF CONTENTS

LIFEAPPS BRAND INC.

LGBTQ Loyalty Holdings, Inc.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LifeApps Brands Inc.LGBTQ LOYALTY HOLDINGS, INC.

CONDENSED Condensed Consolidated Balance SheetsCONSOLIDATED BALANCE SHEETS

(Unaudited)

See the accompanying notes to the condensed consolidated financial statements

LifeApps Digital Media Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

* Denotes a loss of less than $(0.01) per share.   

See the accompanying notes to the unaudited condensed consolidated financial statements

LifeApps Brands Inc.LGBTQ LOYALTY HOLDINGS, INC.

CONDENSEDCondensed Consolidated Statements of Cash FlowsCONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See the accompanying notes to the unaudited condensed consolidated financial statements

LifeApps Brands Inc.LGBTQ LOYALTY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See the accompanying notes to the unaudited condensed consolidated financial statements

LGBTQ LOYALTY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

See the accompanying notes to the unaudited condensed consolidated financial statements

LGBTQ LOYALTY HOLDINGS, INC.

Notes to Condensed Consolidated Financial StatementsNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017 and 2016(Unaudited)

(Unaudited)

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.

On January 25, 2019, we acquired LGBT Loyalty LLC, a New York limited liability company, with the goal of creating the first LGBTQ Loyalty Preference Index ETF (the “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 accompanying unaudited condensed consolidated financial statementsIndex ETF is intended to link the growing economic influence of LifeApps Brands Inc.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 September 30, 2017a higher level financially than their peers. This includes advancing a more invigorated workforce that attracts and 2016retains the best talent. Innovation and agility have been prepared in accordanceidentified 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, through our wholly-owned subsidiary Loyalty Preference Index, Inc. (“LPI”) and our strategically aligned partnerships with generally accepted accounting principles (“GAAP”)crowd sourced data and analytic providers, we launched the LGBTQ100 ESG Index which integrates LGBTQ community survey data into the methodology for interim financial statements, instructionsa benchmark listing of the nation’s highest financially performing large-cap publicly listed corporations that our respondents believe are most committed 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 withadvancing equality. LPI is the financial statements and notes thereto included in our annual report on Form 10-Kindex provider for the year ended December 31, 2016. 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 operationsLGBTQ + ESG100 ETF; LGBTQ Loyalty was the Sponsor for the periods ended September 30, 2017prospectus that was filed by the licensed Fund Adviser ProcureAM, and 2016 presented are not necessarily indicativewas approved by the Securities and Exchange Commission (“SEC”) in early January 2020. The LGBTQ + ESG100 ETF (the “Fund”) seeks to track the investment results (before fees and expenses) of the resultsLGBTQ100 ESG Index. The Fund earns management fees based on assets under management (“AUM”) and is expected to be expectedlaunch in the third quarter of 2020 on the NASDAQ.

Through our wholly owned subsidiary LifeApps, Inc., we are a licensed developer and publisher of apps for the full year. The December 31, 2016 balance sheet has been derived from our audited financial statements included in our annual report on Form 10-KApple Apps Store for the year ended December 31, 2016.

iPhone, iPod touch, iPad and iPad mini. We are building health, fitnessalso a licensed developer on both Google Play and sports communities across multiple digital platforms including mobileAmazon Appstore for Android. We have distributed apps digital sports and fitness publications, sports and fitness products, sporting events, gateway platforms, online websites and social media.on all three platforms.

Note 2. Summary of Significant Accounting Policies

Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with principles generally accepted accounting principlesin the United States (“US GAAP”), which contemplates our continuation as a going concern. We have incurred losses to date of $2,958,010.$10,054,580 and have negative working capital of $3,461,248 as of March 31, 2020. To date we have funded our operations through advances from a related party, issuance of convertible debt, and the sale of our common 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.

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. and, Sports One Group Inc. and Loyalty Preference Index, Inc. (“LPI”), which was formed on July 24, 2019. All material inter-company transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in accordance with 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.

Reclassifications

The Company has reclassified certain previously reported amounts in its consolidated financial statements. Accordingly, prior year amounts were reclassified to conform to the current year presentation.

Concentrations of Credit Risk

Financial Instrumentsinstruments 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 March 31, 2020 and December 31, 2019, all of the Company’s cash and cash equivalents were held at one accredited financial institution.

Fair Value Measurements

ASC Topic 820, Fair Value Measurements and Disclosures (“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:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The estimatedtypes 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 values forvalue of financial transmission rights and derivative liabilities.

Our financial instruments were determined at discrete points in time based on relevant market information. These estimates involved uncertaintiesconsist of cash, other current assets, accounts payables, accruals, and could not be determined with precision.notes payable. The carrying amountsvalues of accounts receivable, accounts payable and accrued liabilities approximatedthese instruments approximate fair value because of the short-term maturities of these instruments.maturities. The fair value of the Company’s convertible debentures and promissory notes payable approximated toapproximates their carrying valuevalues as generally theirthe underlying imputed interest rates reflectedapproximates 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 effective annual borrowing rate.

LifeApps Brands Inc.financial instruments measured at fair value:

Notes to Condensed Consolidated Financial Statements

September 30, 2017 and 2016

(Unaudited)

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 websites andwebsite 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 350Intangibles – Goodwill and Other (“ASC 350”), the costs to obtain and register internet domain names were capitalized.

Fixed Assets

Website and Software Development Costs

Fixed assets consists

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 linestraight-line basis over the estimated useful lives of the assets. The estimated useful lives used for financial statement purposes isare 3 years.

Derivative Financial Instruments: Instruments

We do not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivativeThe Company has financial instruments that are accounted forconsidered 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 derivative instrument is initially recordedCompany’s balance sheet. The Company measures these instruments at itstheir estimated fair value and is then re-valued at each reporting date, withrecognizes changes in thetheir estimated fair value reported in results of operations during the statementsperiod of operations. For stock-based derivative financialchange. The Company has a sequencing policy regarding share settlement wherein instruments we usedwith a Black Scholes valuation model to value the derivative instruments at inceptionfixed conversion price or floor would be settled first, and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity,interest payable in shares settle next. Thereafter, share settlement order is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion ofinstrument 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 instrument could be required within 12 months ofevent giving rise to the balance sheet date.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.

Revenue Recognition

ASC Topic 606, “Revenue is derived primarilyfrom Contracts with Customers” establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the sale of sports and fitness apparel and equipment, and software applications designed for use on mobile devices such as smart phones and tablets. Revenue is recognized only when persuasive evidence of an arrangement exists, the fee is fixedentity’s contracts to provide goods or determinable, the product or service has been delivered, and collectability is probable.services to customers.

We sell our software directly via Internet download through third party agents. We recognizeRevenues 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 when payment is received from the agent. Payment is received netto be recognized as it fulfills its obligations under each of commission paid to the agent, usually 70% to us and 30% to the agent. We record the net amount received as revenue.its agreements:

We also publish and sell digital magazines through the internet. Magazines can be purchased as individual volumes or as a subscription. To date we have not had any subscription sales.

Cost of RevenueStock-Based Compensation

Cost of revenue includes the cost of amounts paid for articles, photography, editorial and production cost of the magazine and ongoing web hosting costs. Cost of revenue related to product sales includes the direct cost of those products sold.

LifeApps Brands Inc.

Notes to Condensed Consolidated Financial Statements

September 30, 2017 and 2016

(Unaudited)

Research and development, Website Development Costs, and Software Development Costs

All research and development costs are expensed as incurred. Software development costs eligible for capitalization under ASC 350-50,Website Development Cost, and ASC 985-20,Software-Costs of Software to be Sold, Leased or Marketed, were not material to our financial statements for the periods ended September 30, 2017 and 2016. Research and development expenses amounted to $0 and $200 for three months ended September 30, 2017 and 2016, respectively and $0 and $200 for nine months ended September 30, 2017 and 2016, respectively. Research and development expenses were included in general and administrative expenses.

Advertising Costs

We recognize advertising expense when incurred. Advertising expense was $0 and $130The Company accounts for the three months ended September 30, 2017 and 2016, respectively and $0 and $130 for nine months ended September 30, 2017 and 2016, respectively.

Rent Expense

We recognize rent expense on a straight-line basis over the reasonably assured lease term as defined in ASC Topic 840,Leases(“ASC 840”). Our lease is short term and will be renewed on a month to month basis. Rent expense was $363 and $2,110 for the for three months ended September 30, 2017 and 2016, respectively and $3,975 and $5,685 for the for nine months ended September 30, 2017 and 2016, respectively.

Equity-Based Compensation

Stock-basedstock-based compensation is presented in accordance with the guidance of ASC Topic 718,Compensation –- Stock Compensation (“ASC 718”). Under the fair value recognition provisions of ASC 718, companies are required to estimatestock-based compensation cost is measured at the grant date based on the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vestand is recognized as expense ratably over the requisite service periods in our consolidated statementsperiod, which is generally the option vesting period. The Company uses the Black-Scholes option pricing model to determine the fair value of operations.stock options.

The Company measures compensation expense for its non-employee stock-based compensation under ASC 505, Equity. The fair value of the option or warrant issued or (committed to be issued) is used to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company’s common stock or stock award on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged directly to stock-based compensation expense and credited to additional paid-in capital.

Income Taxes

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 those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

ASC 740 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 the tax authority assuming full knowledge of the position and relevant facts.

For the for three and six months ended September 30, 2017March 31, 2020 and 20162019 we did not have any interest, penalties or any significant unrecognized uncertain tax positions.

LifeApps Brands Inc.

Notes to Condensed Consolidated Financial Statements

September 30, 2017 and 2016

(Unaudited)

Earnings per share Share

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 for three months ended September 30, 2017March 31, 2020 and 2016,2019, and the outstanding stock options and warrants are anti-dilutive. For the three months ended March 31, 2020 and 2019, the following number of potentially dilutive shares have been excluded from diluted net loss since such inclusion would be anti-dilutive:

Recent Pronouncements

From time to time, newOther accounting pronouncements are issued that we adopt as of the specified effective date. We believe that the recently issued 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 yet effective may notexpected to have ana material impact on our results of operations andthe Company’s consolidated financial position.statements upon adoption.

Note 3. Fixed Assets

At September 30, 2017 and December 31, 2016, fixed assets consisted of the following:

The amount charged to depreciation expense furniture and equipment was $0 and $629 for of the three months ended September 30, 2017 and 2016, respectively and was $0 and $1,278 for of the nine months ended September 30, 2017 and 2016, respectively.

Note 4.3. 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 September 30, 2017March 31, 2020 and December 31, 2016,2019, intangible assets, consist of the following:

LifeApps Brands Inc. 

Notes to Condensed Consolidated Financial Statements

September 30, 2017net was $97,628 and 2016

(Unaudited)

We recognized identifiable intangibles arising from the allocation of the purchase prices of assets acquired in accordance with ASC 805.. We have not recognized any goodwill in these financial statements. Additionally, ASC 805 gives guidance on five types of assets: marketing-related, customer-related, artistic-related, contract-related, and technology based intangible assets. We identified identifiable intangibles that are marketing-related, customer-related, and technology based.

The amount charged to amortization$73,076. Amortization expense for all intangibles was $225 and $9,356$6,448 for the three months ended September 30, 2017 and 2016, respectively and was $675 and $18,055 for the nine months ended September 30, 2017 and 2016, respectively.March 31, 2020.

Note 4. Notes Payable

Estimated future amortization expense related toAs of March 31, 2020 and December 31, 2019, the intangibles asCompany has a note payable outstanding in the amount of September 30, 2017$5,986 and $7,986, respectively. The note is as follows:past due at March 31, 2020 and is therefore in default. The note accrues interest at a rate of 2% per annum.

In January 2020, the Company issued a note payable to a lender for a principal amount of $50,000. The Company received proceeds of $47,500 and the note matured on February 5, 2020. As of March 31, 2020, the note is past due and in default.

In December 2019, the Company issued a promissory note to 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 March 31, 2020, the full principal amount was outstanding.

Note 5. Amounts DueConvertible 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, the 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 10, 2020, the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd (“Power Up Note”. Pursuant to the terms of the Power Up Note, the lender agreed to purchase 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 becomes due and payable on March 10, 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 maturity date.

The Power Up Note is convertible into shares of the Company’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 floor.

During the three months ended March 31, 2020, the Company recorded amortization of debt discount and original discount of $202,239 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 three months ended March 31, 2020:

The following comprises the balance of the convertible debenture outstanding at March 31, 2020 and December 31, 2019:

Note 6. Derivative Liability

We evaluated the terms of the conversion features of the debentures in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock, and determined they are indexed to the Company’s common stock and that the conversion features meet the definition of a liability. Therefore, we 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 consolidated financial statements, resulting in significant fluctuations in other income (expense) because of the corresponding non-cash gain or loss recorded.

We value the conversion feature at origination of the notes using the Black-Scholes valuation model. We value the derivative liability at the end of each accounting period, and upon conversion of the underlying note or warrant, with the difference in value recognized as gain or loss included in other income (expense) in our consolidated statements of operations.

The original debentures had conversion features that resulted in derivative liabilities. We valued the conversion features at each origination date with the following assumptions, on a weighted-average basis:

During the three months ended March 31, 2020, the entire value of the principal of the debentures were assigned to the derivative liability and recognized as a debt discount on the convertible debentures. The debt discount is recorded as reduction (contra-liability) to the debentures and are being amortized over the initial term. The balance of $118,191 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 debentures would be settled subsequent to the Company’s Series B preferred stock.

The following is a summary of the activity of the derivative liability for the three months ended March 31, 2020:

Note 7. Stockholders’ Equity

Common Stock

2020 Transactions

In January 2020, we issued 294,994 shares of common stock to a bridge noteholder in connection with promissory notes received.

In January 2020, we issued 6,662,312 shares to a consultant for 2019 services which were accrued at a fair value of $318,000.

In March 2020, we issued 1,000,000 shares to Orlando Reece pursuant to his appointment to the Board of Directors.

During the three months ended March 31, 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 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.

In February 2019, we issued an aggregate of 750,000 shares of common stock to a consultant in accordance with a service contract that provided for a 250,000 share stock grant for 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.

In March 2019, we issued an aggregate of 8,600,298 shares of our common stock pursuant to the automatic exercise of warrants issued to two current and prior company officers.

In March 2019, we issued an aggregate of 3,000,000 shares of common stock to three unrelated individuals in accordance with their appointment as directors of the Company.

During the three months ended March 31, 2019, we issued 26,398,704 shares of our common stock to a lender pursuant to note conversions.

Series B Convertible Preferred Stock

As of March 31, 2020, we had $10,350 in remaining accrued Series B dividends.

Note 8. Options and Warrants

Options

As of March 31, 2020 and December 31, 2019, we had 5,800,000 options remaining outstanding pursuant to the 2012 Equity Incentive Plan.

There was no stock based compensation expense for options for the three months ended March 31, 2020 and 2019. There will be no additional compensation expense recognized in future periods.

Warrants

During the three months ended March 31, 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 March 31, 2020, Pride had no outstanding warrants remaining. The Company received total proceeds of $93,342 a result of the warrant exercises.

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.

The following is a summary of the warrant activity for the three months ended March 31, 2020:

Note 9. Related PartiesParty 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.

Amount dueNotes Payable to Related Party

Notes payable to related parties represent cash advances, salary accruals and amounts paid on our behalf by officers and shareholders of the Company. These advances are non-interest bearing, short term in nature and due on demand. The balance at September 30, 2017March 31, 2020 and December 31, 2016, was $697,649 and $536,639, respectively. Salary accruals for each period amounted to $112,500 and net cash advances amounted to $48,510 and $52,485, respectively for2019 totaled $17,885 with a 2% annual interest rate. Currently the nine months ended September 30, 2017 and 2016, and were included in amounts due toCompany has defaulted on all of their related party.

LifeApps Brands Inc. 

Notes to Condensed Consolidated Financial Statements

September 30, 2017 and 2016

(Unaudited)

party loan obligations. Forbearance has been granted by the related parties on all loans.

Note 7. Stock Based Compensation

Accrued Salaries

In prior periods, our BoardMarch 2019, we issued an aggregate of Directors adopted the 2012 Equity Incentive Plan (“2012 Plan”), which was approved by our shareholders. The 2012 Plan provided for the issuance of up to 666,667 shares of our common stock. During October 2015 the Board of Directors amended the plan to increase the number of shares issuable under the LifeApps Digital Media Inc. 2012 Equity Incentive Plan to 20,000,000, on a post-Reverse Stock Split basis. The plan provides for the award of options, stock appreciation rights, performance share awards, and restricted stock and stock units. The plan is administered by the Board of Directors. Pursuant to the 2012 Plan our Board of Directors granted options to purchase 418,3338,600,298 shares of our common stock pursuant to the automatic exercise of warrants issued to two current and prior company officers. The warrants were issued in periods prior to December 31, 2015. All of those options have been cancelled or lapsed as of December 31, 2016. On May 24, 2016 our Board of Directors granted options to purchase 15,000,000 shares of our common stock to officers and or directors and a consultant. The options are exercisable quarterly from the grant date over a four-year term.

The fair value of the options granted, $39,000, was estimated at the date of grant using the Black-Scholes option pricing model, with the following assumptions:

Stock based compensation expense recordedexchange for the periods ended September 30, 2017 and 2016 was $7,312 and $0, respectively.

The following is a summary of stock options issued to employees and directors:

There will be approximately $17,875 of additional compensation expense recognized in future periods.

LifeApps Brands Inc.

Notes to Condensed Consolidated Financial Statements

September 30, 2017 and 2016

(Unaudited)

The following is a summary of stock options issued to non-employees, excluding Directors:.

There will be approximately $8,935 of additional compensation expense recognized in future periods.

Note 8. Outstanding Warrants

There were no warrants issued during the periods ended September 30, 2017 or 2016. At December 31, 2016 there were warrants outstanding for the purchasecancellation of an aggregate of 400,000$348,312 of salary and interest accruals through December 31, 2018.

As of March 31, 2020 and December 31, 2019, accrued salaries to our company officers and executive director totaled $171,352 and $91,352, respectively, and is included in accrued salaries and consulting fees in our consolidated balance sheets.

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 March 2019, we issued an aggregate of 3,000,000 shares of the company’s common stock at an exercise priceto three unrelated individuals in accordance with their appointment as directors of $15 per share.

The warrants expired on September 20, 2017. the Company, and recognized $313,600 in compensation expense.

Note 10. Income TaxesTotal accrued directors’ compensation of $123,750 and $80,000 at March 31, 2020 and December 31, 2019, respectively, is included in accrued salaries and consulting fees on our consolidated balance sheets.

Income tax provision (benefit)As of March 31, 2020 there is an aggregate of 7,000,000 warrants outstanding to the board of directors.

A board member is the co-founder and president of ProcureAM, LLC, the fund advisor for the periods ended September 30, 2017Fund. As of March 31, 2020 and 2016, is summarized below:

The provision for income taxes differs fromDecember 31, 2019, we have $100,000 included as other receivables of on our consolidated balance sheet, which represents amounts held in escrow at the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The sources and tax effects of the differences as of September 30, 2017 and 2016 are as follows:Fund’s custodian.

LifeApps Brands Inc.

Notes to Condensed Consolidated Financial Statements

September 30, 2017 and 2016

(Unaudited)

There are open statutes of limitations for taxing authorities in federal and state jurisdictions to audit our tax returns from 2010 through the current period. Our policy is to account for income tax related interest and penalties in income tax expense in the consolidated statement of operations. There have been no income tax related interest or penalties assessed or recorded.

Note 11. Business Segments

We currently have two business segments; (i) the sale of physical products (“Products”) and (ii) digital publishing (“Publishing”). The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

The publishing segment does not meet the quantitative threshold for disclosure as outlined ASC Topic 280Segment Reporting.

All of our revenue is generated in the United States and accordingly no geographic segment reporting is included.

No customers accounted for more than 10% of our revenues in the periods September 30, 2017 and 2016.

Note 12.10. Subsequent Events

Management has evaluated all activity up to July 6, 2020 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:

In April 2020, a Series B investor converted 25,000 shares of Series B Preferred Stock for 958,333 shares of common stock.

In May 2020, the Company cancelled the outstanding warrants and issued an aggregate of 8,000,000 shares of common stock to the board members.

On May 26, 2020, we entered into a Securities Purchase Agreement (the “SPA”) with an unrelated entity. Pursuant to the terms of the SPA, the Purchaser agreed to purchase from the Company, for a purchase price of $75,000, a 10% Convertible Note (the “Note”) in the principal amount of $85,800. The Note matures and becomes due and payable on May 26, 2021 and accrues interest at a rate of 10% per annum (increasing to 22% upon an event of default) while the Note remains outstanding. The Note, plus all accrued but unpaid interest and other amounts due on the Note, may be prepaid, at varying amounts, at any time prior to the maturity date. The Note is convertible into shares of the Company’s common stock at any time at a conversion price (the “Conversion Price”), which shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments by the Company relating to the Company’ securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price” shall mean 60% multiplied by the Market Price (as defined herein) (representing a discount rate of 40%). “Market Price” means the lowest Trading Price (as defined below) 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 floor.

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 September 30, 2017 and September 30, 2016March 31, 2020 and for the ninethree months ended September 30, 2017March 31, 2020 and 20162019 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 LifeApps BrandsLGBTQ 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, 20162019 filed with the Securities and Exchange Commission (the “SEC”) on April 18, 2017.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

LifeApps®On January 25, 2019, we acquired LGBT Loyalty LLC, a New York limited liability company, with the goal of creating the first LGBTQ Loyalty Preference Index ETF (the “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 licensed developercompany’s recruitment and publisherhuman resource policies is becoming a key concern to investors as part of appstheir 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, 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 integrates LGBTQ community survey data into the methodology for a benchmark listing of the nation’s highest financially performing large-cap publicly listed corporations that our respondents believe are most committed to advancing equality. LPI is the index provider for the Apple App StoreLGBTQ + ESG100 ETF; LGBTQ Loyalty was the Sponsor for iPhone, iPod touch, iPadthe prospectus that was filed by the highly regarded licensed Fund Adviser ProcureAM, a wholly owned subsidiary of Procure Holdings, LLC., which is through our platform service agreement (“PSA”), and iPad mini. LifeApps®was approved by the Securities and Exchange Commission (“SEC”) in early 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 also a licensed developerexpected to launch in Q3- 2020 on both Google Play and Amazon Appstore for Android. LifeApps® has distributed apps/publications on all three platforms. Moving forward LifeApps® is developing new apps, and exploring new opportunities pairing apps with physical retail and e-commerce/mobile-commerce products.the NASDAQ.

PlanLGBTQ Loyalty has generated an abundance of Operationmedia 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.

Our Products

LifeApps® intendsOur mission is to continuebuild a sustainable and well recognized brand focused on unlocking the growing 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 investing. This is achieved through an elevated screening process of financial performance data and ESG standards and practices, whereby LGBTQ community data on diversity and inclusion compliance directly impacts corporate financial results and transparently identifies and recognizes high performance companies who have consistently outperformed the S&P 500 index or equivalent sector standards and norms.

We intend to extend the LGBTQ Loyalty Index brand with future plans to develop and licenseindices with a focus on the LifeApps Mobile App Platform. We will research and seek out aligned companies with need for tutorial based apps for mobile and we will work‘Social’ component of ESG utilizing our proprietary financial slogan of “Advancing Equality” within other gender, minority interest groups.

Revenue

The Company focus in 2019 was to create new revenueand launch our first of many financial Index products through developmentan equality driven thematic ESG screened and licensing ofalpha 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 presentation format for their use. We will pursue a business model of physical-tied-to-mobile, combining mobile app training with a physical retail product. LifeApps®collective efforts and focus is developing a suite of software tools and enhanced customer experiences that will enable us to scale the LifeApps Mobile App Platform through technology enhancements.

LifeApps® intends to monetize and drivescale 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 combinationbreak-even point when we have secured AUM benchmarked against the LGBTQ100 Index in excess of its software development, e-commerce/mobile-commerce$50,000,000.

We intend to introduce a new key partnered revenue source derived from Direct Index Licensing Fees generated by financial institutions and asset 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 mobile applicationsfunds 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 in-app sales, subscriptionshistorical data and advertising across all platforms.information generated by our wholly owned division Loyalty Preference Index, Inc., and through our 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 brand loyalty to corporations. We consider the companies that best capture the spending trends and loyalty of the LGBTQ 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 Loyalty 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 Loyalty Sponsorship packages starting in Q2-2020.

Our SportsOneinitial 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 hasplatform.

We have achieved no revenues to date from our LGBTQ related operations and have been curtailed in order to better utilize resources to servefocused on building our product and achieving performance results and media branding over the new direction and focuscourse of the Company.

The Company’s acquisition strategy of purchasing companies, development resources and assetspast twelve months. There are no assurances that are aligned with our areas of interest can further aid in our entering additional market segments. Webe given that we will actively research and engageachieve revenues or profitability in the acquisition of companies and resources that can expedite our entrance into new markets, or strengthen our position in existing ones.future.

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”),GAAP, which contemplates our continuation as a going concern. As of September 30, 2017,March 31, 2020, we have incurred losses to date of $2,958,010.$10,054,580 and have negative working capital of $3,461,248. To date we have funded our operations through advances from a related party, issuance of convertible debt, and the sale of our common 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 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.

Fair Value Measurements:

ASC Topic 820, Fair Value Measurements and Disclosures (“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:

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.

Our financial instruments consist of cash and cash equivalents, short-term trade receivables, prepaid expenses, payables, accruals and convertible notes payable. The carrying values of cash and cash equivalents, short-term trade receivables, prepaid expenses, payables, and accruals approximate fair value because of the short term maturities of these instruments.

Inventory

Inventory consists of finished goods, sports and fitness products, and is stated at the lower of cost or net realizable value, with cost being determined on a first-in first-out basis.

Intangibles

Intangibles, which include websites and 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.

Derivative Financial Instruments:

We do not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivativeThe Company has financial instruments that are accounted forconsidered 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 derivative instrument is initially recordedCompany’s balance sheet. The Company measures these instruments at itstheir estimated fair value and is then re-valued at each reporting date, withrecognizes changes in thetheir estimated fair value reported in results of operations during the statementsperiod of operations. For stock-based derivative financialchange. The Company has a sequencing policy regarding share settlement wherein instruments we usedwith a Black Scholes valuation model to value the derivative instruments at inceptionfixed conversion price or floor would be settled first, and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity,interest payable in shares settle next. Thereafter, share settlement order is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion ofinstrument 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 instrument could be required within 12 months ofevent giving rise to the balance sheet date.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.

Revenue RecognitionResults of Operations

Revenue is derived primarily from the sale of sports and fitness apparel and equipment, and software applications designed for use on mobile devices such as smart phones and tablets. Revenue is recognized only when persuasive evidence of an arrangement exists, the fee is fixed or determinable, the product or service has been delivered, and collectability is probable.

We sell our software directly via Internet download through third party agents. We recognize revenue when payment is received from the agent. Payment is received net of commission paid to the agent, usually 70% to us and 30% to the agent. We record the net amount received as revenue.

We also publish and sell digital magazines through the internet. Magazines can be purchased as individual volumes or as a subscription. To date we have not had any subscription sales.

Cost of Revenue

Cost of revenue includes the cost of amounts paid for articles, photography, editorial and production cost of the magazine and ongoing web hosting costs. Cost of revenue related to product sales includes the direct cost of those products sold.

Equity Based Payments

Equity based payments are accounted for in accordance with ASC Topic 718, Compensation – Stock Compensation. The compensation cost is based upon fair value of the equity instrument at the date grant. The fair value has been estimated using the Black-Sholes option pricing model.

Results of Operations

Three months ended September 30, 2017,March 31, 2020 compared with the three months ended September 30, 2016March 31, 2019

Revenues for the three months ended September 30, 2017March 31, 2020 and 20162019 were $787$560 and $147,$2,064, respectively. Revenues for both periods were derived primarily from the sale of sports apparel and health and fitness products. We continue to have a limited number of apps in the Apple App store.

CostThe following is a breakdown of revenue normally includes our cost of products sold and amounts paid for articles, photography, editorial and production cost of the magazine. In the future we will incur direct cost related to revenue such as webhosting and direct cost for our customer support. For the foreseeable future we anticipate outsourcing such costs. Cost of revenue related to product sales includes the direct cost of those products sold.

Cost of revenueoperating expenses for the three months ended September 30, 2017March 31, 2020 and 2016 was $0 (0%)2019:

Personnel costs include officer salaries, directors’ compensation and $51 (34.7%), respectively. This resulteddeferred officer compensation. The decrease in a gross profit for three months ended September 30, 2017 and 2016 of $787 (100%) and $96 (65.3%), respectively. Costs were primarily the cost of products sold. The increase in gross marginpersonnel costs is primarily due to product mix andcompensation associated with the saleformation of inventory fully reservedour board of directors in prior years..the first quarter 2019.

We had net losses of $47,164 and $56,799 forConsulting fees were $74,500 in the three months ended September 30, 2017March 31, 2020, primarily due to our expanded operations and 2016, respectively.efforts to launch the LGBTQ100 ESG Index and LGBTQ + ESG100 ETF.

Legal and professional fees decreased by $40,013, primarily because of the Maxim transaction in 2019.

Merger costs represents expenses incurred upon the acquisition of LGBT Loyalty LLC in March 2019.

Sales and marketing expenses were $7,545, which included advertising and marketing efforts as we initiated our new business plans.

General and administrative expenses increased by $4,276 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 March 31, 2020, which represents amortization on our index development costs.

The following is a breakdown of our selling, general and administrative expensesother income (expenses) for the three months ended September 30, 2017March 31, 2020 and 2016:2019:

Personnel costs were constant for the periods and consist solely of accrual of officer salary pursuant to an employment contract.

Professional fees decreased $4,765 (73.3%) from $11,265

Interest expense increased by $371,389 in the three months ended March 31, 2020, primarily attributable to origination interest and amortization of debt discount in connection with our convertible debentures.

Change in derivative liability includes the mark-to-market adjustment of the derivative liability in connection with our convertible debenture.

Net loss was $958,468 and $1,716,168 for the three months ended September 30, 2016 to $6,500 for the three months ended September 30, 2017. The decrease is a result of timing of accountingMarch 31, 2020 and legal services rendered.

Marketing and advertising expenses were not significant during the quarters ended September 30, 2017 and 2016.

Research and development includes website and applications development costs. Research and development and development activities were not significant during the quarters ended September 30, 2017 and 2016. Development is an ongoing cost and we anticipate that our development costs both for website and applications may increase in future periods.

Travel expenses were not significant during the quarters ended September 30, 2017 and 2016.

Rent expense decreased by $4,726 (650%) from $5,452 for the three months ended September 30, 2016 to $363 for the three months ended September 30, 2017. The decrease is a result of the relocation of our corporate office to a shared office facility.

All of our other operating costs decreased as result of generally keeping costs down.

We had operating losses of $47,164 and $56,799 for the three months ended September 30, 2017 and 2016,2019, respectively.

Nine months ended September 30, 2017, compared with the nine months ended September 30, 2016

Liquidity and Capital Resources

Revenues for the nine months ended September 30, 2017Historically, we have been financed through advances from related parties, issuances of convertible debt, and 2016 were $3,093 and $11,168 respectively. Revenues for both periods were derived primarily from the sale of sports apparelour common and health and fitness products. The decrease in revenues is duepreferred stock. Our existing sources of liquidity will not be sufficient for us to an across the board downturn inimplement our business.

Cost of revenue normally includes our cost of products sold and amounts paid for articles, photography, editorial and production cost of the magazine. In the futurebusiness plans. There are no assurances that we will incur direct cost relatedbe able to revenue suchraise additional capital as webhosting and direct cost forwhen needed. As of March 31, 2020, we had $2,258 in cash on hand. Based on our customer support. Forcurrent planned expenditures, we will require approximately $2.5 million over the foreseeable future we anticipate outsourcing such costs. Cost of revenue related to product sales includes the direct cost of those products sold.

Cost of revenue for the nine months ended September 30, 2017 and 2016 was $49 (1.6%) and $8,122 (72.7%) respectively. This resulted in a gross profit for the nine months ended September 30, 2017 and 2016 of $3,044 (98.4%) and $3,046 (27.2%), respectively. Costs were primarily the cost of products sold and the margin varies depending on products sold has been sold. The decrease in gross margin is primarily to product mix and the sale if inventory fully reserved in prior years..

We had net losses of $169,447 and $178,247 for the nine months ended September 30, 2017 and 2016, respectively.

The following is a breakdown of our selling, general and administrative expenses for the nine months ended September 30, 2017 and 2016:

We were financed primarily by capital contributions from members of LifeApps LLC, the predecessor to LifeApps, from short term borrowings, and through our private placement which we completed in October 2012. next 12 months. Our existing sources of liquidity may not be sufficient for us to implement our initialcontinuing business plan. Our need for future capital will be dependent upon the speed at which we expand our product offerings. There are no assurances that we will be able raise additional capital as and when needed.

As of September 30, 2017,March 31, 2020, we had negativea working capital deficit of $(826,480)$3,461,248 as compared to negativea working capital deficit of $(665,019)$2,947,531 at December 31, 2016.2019.

During the ninethree months ended September 30, 2017March 31, 2020 and 2016,2019, operations used and provided cash of $48,616$295,772 and $54,918$601,806, respectively.

During the three months ended March 31, 2020, net cash used in investing activities was $31,000, primarily attributable to capitalized costs pertaining to the development of the LGBTQ100 ESG Index and ETF website.

From February to March 2020, we received $175,000 in proceeds from the issuance of two 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.

During the ninethree months ended September 30, 2017 and 2016,March 31, 2019 we used no cash in investing activities.

During the nine months ended September 30, 2017 and 2016, net cash provided by financing activities was $48,510 and $52,485, respectively.

Additionally, we received net amountsrepaid notes of $15,510 and $2,350 of cash advances from our chief executive officer and net amounts of $33,000 and $52,135 of cash advances from a director and shareholders during the nine months ended September, 2017 and 2016, respectively.$514.

We will continue to seek out additional capital in the form of debt or equity under the most favorable terms we can find.

Going Concern

Our financial statements have been prepared on a going concern basis which assumes that we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. We have incurred losses since inception resulting in an accumulated deficit of approximately $2,958,010 as of September 30, 2017 and further losses are anticipated in the development of our business raising substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our generating profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and/or additional officer and shareholder advances. These financials do not include any adjustments relating to the recoverability and reclassification of recorded asset amounts, or amounts and classifications of liabilities that might result from this uncertainty.

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.

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 September 30, 2017March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are no pending, nor to our knowledge threatened, legal proceedings against us.

ITEM 1A. RISK FACTORS

For information regarding risk factors, please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 20162019 filed with the SEC on April 18, 2017,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

We madeRecent Sales of Unregistered Securities

In April 2020, we issued 90,216 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 April 2020, we issued an aggregate of 3,942,160 shares of common stock to seven individuals consisting of active and former Board of Directors members pursuant to monthly compensation as defined in the director compensation agreements.

In June 2020, we issued an aggregate of 8,000,000 shares of common stock to the board of directors as annual compensation for appointment on the board.

In June 2020, we issued an aggregate of 14,529,273 shares of common stock to executives, employees and consultants for services performed.

Other than what has previously been disclosed in public filings, there are no new sales of equity securities during the quarter ended September 30, 2017.unregistered securities.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.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 March 31, 2020 the outstanding balance was approximately $5,986.

ITEM 4. MINE SAFETY DISCLOSURE

Not Applicable.

ITEM 5. OTHER INFORMATION

On June 1, 2017 we entered into a non-binding Letter of Intent (“LOI”) with Gents Group, Inc. (“Gents”), a men’s lifestyle and fashion company, regarding our prospective purchase of substantially all of Gents’ operating assets and certain liabilities (up to $150,000) in exchange for up to 10,000,000 shares of our common stock. The LOI had a 45-day term which was subject to a mutual cancellation and extension option. We were not able to complete the asset purchase during the term of the LOI. Discussions with Gents are continuing however, with respect to other marketable products that might benefit both companiesNone.

ITEM 6. EXHIBITS

* 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.

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.

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.

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