UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period endedSeptemberJune 30, 20172021
☐ | 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
LIFEAPPS BRANDSLGBTQ 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.) |
Polo Plaza, 3790 Via De La Valle, #125E, Del Mar, CA 920142435 Dixie Highway, Wilton Manors, FL33305
(Address of principal executive offices, including zip code)
Tel: (858) 527-1746-577-1746
(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☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company”company,” and emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | Smaller reporting company | ☒ | |
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☒
As of Novemebr 13, 2017 there wereAugust 16, 2021 the Company had shares of common stock, $0.001 par value, issued and outstanding 25,311,186 shares of Common Stock, $0.001 par value.outstanding.
LIFEAPPS BRAND INC.LGBTQ Loyalty Holdings, Inc.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBERJUNE 30, 20172021
TABLE OF CONTENTS
i |
LIFEAPPS BRAND INC.
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
1 |
LifeApps Brands Inc.
Condensed Consolidated Balance Sheets
(Unaudited)LGBTQ LOYALTY HOLDINGS, INC.
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 1,282 | $ | 1,388 | ||||
Other current assets | 595 | 940 | ||||||
Total current assets | 1,877 | 2,328 | ||||||
Intangible asset, net of amortization | 450 | 1,125 | ||||||
Total Assets | $ | 2,327 | $ | 3,453 | ||||
Liabilities and Stockholders’ Equity (Deficit) | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 130,708 | $ | 130,708 | ||||
Amounts due to related party | 697,649 | 536,639 | ||||||
Total current liabilities | 828,357 | 667,347 | ||||||
Stockholders’ Equity (Deficit) | ||||||||
Preferred stock, $.001 par value, 10,000,000 authorized, none issued or outstanding | ||||||||
Common stock, $0.001 par value, 300,000,000 shares authorized, 25,311,186 shares issued and outstanding, as of September 30, 2017 and December 31, 2016 | 25,311 | 25,311 | ||||||
Additional paid in capital | 2,106,699 | 2,099,358 | ||||||
Accumulated (deficit) | (2,958,010 | ) | (2,788,563 | ) | ||||
Total stockholders’ (deficit) | (826,030 | ) | (663,894 | ) | ||||
Total Liabilities and Stockholders’ Equity (Deficit) | $ | 2,327 | $ | 3,453 |
CONDENSED CONSOLIDATED BALANCE SHEETS
See the accompanying notes to the condensed consolidated financial statements
LifeApps Digital Media Inc.(Unaudited)
Condensed Consolidated Statements of Operations
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 179,192 | $ | 30,312 | ||||
Other receivables | 305,000 | 100,000 | ||||||
Other current assets | 6,925 | 20,983 | ||||||
Total current assets | 491,117 | 151,295 | ||||||
Intangible assets, net | 66,139 | 78,285 | ||||||
Total assets | $ | 557,256 | $ | 229,580 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 814,869 | $ | 920,569 | ||||
Accrued salaries and consulting fees | 468,719 | 605,857 | ||||||
Accrued interest and dividends | 313,506 | 226,108 | ||||||
Notes payable | 126,986 | 127,986 | ||||||
Notes payable to related party | 1,800 | 17,885 | ||||||
Convertible notes payable, net of debt discount | 1,897,277 | 1,661,520 | ||||||
Derivative liability on convertible notes payable | 3,154,374 | 1,930,235 | ||||||
Series D preferred stock | 577,356 | - | ||||||
Total liabilities | 7,354,887 | 5,490,160 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity (deficit): | ||||||||
Preferred stock, $ par value, shares authorized | ||||||||
Series A, share designated, shares issued or outstanding as of June 30, 2021 and December 31, 2020 | - | - | ||||||
Series B, December 31, 2020, respectively shares designated, shares issued and outstanding as of June 30, 2021 and | 50 | 50 | ||||||
Series C, shares designated, and shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively | 77 | 130 | ||||||
Series D, shares designated, and shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively | 1 | - | ||||||
Preferred stock value | ||||||||
Common stock, $ par value, shares authorized, and shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively | 669,389 | 263,725 | ||||||
Additional paid-in capital | 11,721,866 | 7,714,704 | ||||||
Accumulated deficit | (18,614,915 | ) | (13,239,189 | ) | ||||
Total stockholders’ equity (deficit) | (6,797,631 | ) | (5,260,580 | ) | ||||
Total liabilities and stockholders’ equity (deficit) | $ | 557,256 | $ | 229,580 |
(Unaudited)
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenue | $ | 787 | 147 | 3,093 | 11,168 | |||||||||||
Cost of revenue | — | 51 | 49 | 8,122 | ||||||||||||
Gross profit (loss) | 787 | 96 | 3,044 | 3,046 | ||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | 47,726 | 56,670 | 171,816 | 171,719 | ||||||||||||
Depreciation and amortization | 225 | 225 | 675 | 9,574 | ||||||||||||
Total operating expenses | 47,951 | 56,895 | 172,491 | 181,293 | ||||||||||||
(Loss) before income taxes | (47,164 | ) | (56,799 | ) | (169,447 | ) | (178,247 | ) | ||||||||
Provision for income taxes | — | — | — | — | ||||||||||||
Net (loss) | $ | (47,164 | ) | $ | (56,799 | ) | $ | (169,447 | ) | $ | (178,247 | ) | ||||
Per share information - basic and fully diluted: | ||||||||||||||||
Weighted average shares outstanding | 25,311,186 | 20,515,731 | 25,311,186 | 20,500,239 | ||||||||||||
Net (loss) per share | $ | (0.00 | )* | $ | (0.00 | )* | $ | (0.0 | 1) | $ | (0.01 | ) |
* Denotes a loss of less than $(0.01) per share.
See the accompanying notes to the unaudited condensed consolidated financial statements
2 |
LifeApps Brands Inc.
Condensed Consolidated Statements of Cash FlowsLGBTQ LOYALTY HOLDINGS, INC.
(Unaudited)CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended | ||||||||
September 30, | ||||||||
2017 | 2016 | |||||||
Net cash used in operations | $ | (48,616 | ) | $ | (54,918 | ) | ||
Cash flows from investing activities: | ||||||||
Net Cash used in investing activities | — | — | ||||||
Cash flow from financing activities: | ||||||||
Related party advances | 49,310 | 54,485 | ||||||
Repayments of advances from related parties | (800) | (2,000 | ) | |||||
Net cash provided by financing activities | 48,510 | 52,485 | ||||||
Net increase (decrease) in cash | (106) | (2,433) | ||||||
Cash at beginning of period | 1,388 | 4,968 | ||||||
Cash at end of period | $ | 1,282 | $ | 2,535 | ||||
Non-cash financing activities: | ||||||||
Conversion of accounts payable to common stock | $ | — | $ | 8,058 | ||||
Officer salary accrual | $ | 112,500 | $ | 112,500 | ||||
Stock based compensation expense | $ | 7,312 | $ | — |
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue | $ | - | $ | - | $ | - | $ | 560 | ||||||||
Cost of net revenue | - | - | - | - | ||||||||||||
Gross profit | - | - | - | 560 | ||||||||||||
Operating expenses: | ||||||||||||||||
Personnel costs | 93,121 | 284,507 | 1,389,121 | 499,462 | ||||||||||||
Consulting fees | 38,500 | 93,515 | 71,500 | 168,015 | ||||||||||||
Legal and professional fees | 153,527 | 95,347 | 258,650 | 222,342 | ||||||||||||
Sales and marketing | 40,500 | 45 | 40,500 | 7,590 | ||||||||||||
General and administrative | 28,392 | 20,736 | 56,514 | 70,728 | ||||||||||||
Depreciation and amortization | 6,448 | 6,448 | 12,896 | 12,896 | ||||||||||||
Total operating expenses | 360,488 | 500,598 | 1,829,181 | 981,033 | ||||||||||||
Loss from operations | (360,488 | ) | (500,598 | ) | (1,829,181 | ) | (980,473 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Interest expense | (727,642 | ) | (376,473 | ) | (1,289,328 | ) | (737,312 | ) | ||||||||
Other income | - | 3,000 | - | 3,000 | ||||||||||||
Change in derivative liability | (2,658,949 | ) | 442,626 | (2,245,976 | ) | 324,872 | ||||||||||
Total other income (expense), net | (3,386,591 | ) | 69,154 | (3,535,304 | ) | (409,440 | ) | |||||||||
Provision for income taxes | - | - | - | - | ||||||||||||
Net loss | $ | (3,747,079 | ) | $ | (431,445 | ) | $ | (5,364,485 | ) | $ | (1,389,913 | ) | ||||
Weighted average common shares outstanding -basic and diluted | 553,901,386 | 190,052,683 | 432,821,915 | 187,427,874 | ||||||||||||
Net loss per common share - basic and diluted | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) |
See the accompanying notes to the unaudited condensed consolidated financial statements
3 |
LifeApps Brands Inc.
LGBTQ LOYALTY HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended | ||||||||
June 30, | ||||||||
2021 | 2020 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (5,364,485 | ) | $ | (1,389,913 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Amortization of debt discount and original issue discount | 704,007 | 403,267 | ||||||
Change in fair value of derivative liability | 2,245,976 | (324,872 | ) | |||||
Financing related costs - debt | 460,780 | 257,158 | ||||||
Stock-based compensation expense | 1,218,114 | 213,276 | ||||||
Depreciation and amortization | 12,896 | 12,896 | ||||||
Changes in operating assets and liabilities: | ||||||||
Other current assets | 14,058 | - | ||||||
Bank overdraft | - | 1,279 | ||||||
Accounts payable | (105,699 | ) | 89,514 | |||||
Accrued salaries and consulting fees | 201,470 | 304,115 | ||||||
Accrued interest and dividends | 93,663 | 60,250 | ||||||
Net cash used in operating activities | (519,220 | ) | (373,030 | ) | ||||
Cash flows from investing activities: | ||||||||
Other receivables | (205,000 | ) | - | |||||
Investment in intangible assets | - | (31,000 | ) | |||||
Net cash used in investing activities | (205,000 | ) | (31,000 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of convertible debenture agreements | 300,000 | 250,000 | ||||||
Net proceeds (repayments) from promissory note agreements | (1,000 | ) | 47,500 | |||||
Proceeds from issuance of Series D preferred stock | 574,100 | - | ||||||
Proceeds from exercise of warrants | - | 93,342 | ||||||
Net cash provided by financing activities | 873,100 | 390,842 | ||||||
Net increase (decrease) in cash | 148,880 | (13,888 | ) | |||||
Cash at beginning of period | 30,312 | 13,188 | ||||||
Cash at end of period | $ | 179,192 | $ | - | ||||
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 | $ | 338,608 | $ | 617,750 | ||||
Conversion of related party notes payable into common shares | $ | 16,085 | $ | - | ||||
Conversion of Series C preferred stock into common stock | $ | 53,000 | $ | - | ||||
Exercise of common stock warrants - derivative liability | $ | - | $ | 32,742 | ||||
Amortization of preferred stock discount | $ | - | $ | 31,820 | ||||
Dividends on preferred stock | $ | 11,241 | $ | 10,400 |
See the accompanying notes to the unaudited condensed consolidated financial statements
4 |
LGBTQ LOYALTY HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
Preferred Stock | Additional | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
Series A | Series B | Series C | Series D | Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2020 | - | $ | - | 50,000 | $ | 50 | 129,559 | $ | 130 | - | $ | - | 263,725,234 | $ | 263,725 | 7,714,704 | $ | (13,239,189 | ) | $ | (5,260,580 | ) | ||||||||||||||||||||||||||||||
Common shares issued in connection with notes payable | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Common shares issued in connection with notes payable, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Common shares issued for accrued services | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Common shares issued for accrued services, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Common shares issued to board of directors | - | - | - | - | - | - | - | - | 140,000,000 | 140,000 | 980,000 | - | 1,120,000 | |||||||||||||||||||||||||||||||||||||||
Common shares issued for services and compensation | - | - | - | - | - | - | - | - | 31,834,386 | 31,834 | 204,614 | - | 236,448 | |||||||||||||||||||||||||||||||||||||||
Debenture conversions | - | - | - | - | - | - | - | - | 37,538,998 | 37,539 | 318,815 | - | 356,354 | |||||||||||||||||||||||||||||||||||||||
Conversion of notes and payables | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of notes and payables, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of warrants | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of warrants, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of Series C preferred stock into common stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of Series C preferred stock into common stock, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of common stock warrants | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of common stock warrants, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of Series B preferred stock for common shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of Series B preferred stock for common shares, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Series B dividend common shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Series B dividend common shares, shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of preferred stock discount | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends on preferred stock | - | - | - | - | - | - | - | - | - | - | - | (1,722 | ) | (1,722 | ) | |||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | - | (1,617,405 | ) | (1,617,405 | ) | |||||||||||||||||||||||||||||||||||||
Balances at March 31, 2021 | - | $ | - | 50,000 | $ | 50 | 129,559 | $ | 130 | - | $ | - | 473,098,618 | $ | 473,098 | 9,218,133 | $ | (14,858,316 | ) | $ | (5,166,906 | ) | ||||||||||||||||||||||||||||||
Debenture conversions | - | - | - | - | - | - | - | - | 100,448,779 | 100,449 | 1,821,061 | - | 1,921,510 | |||||||||||||||||||||||||||||||||||||||
Conversion of notes and payables | - | - | - | - | - | - | - | - | 11,956,004 | 11,956 | 192,408 | - | 204,364 | |||||||||||||||||||||||||||||||||||||||
Exercise of warrants | - | - | - | - | - | - | 30,887,276 | 30,887 | (30,887 | ) | - | - | ||||||||||||||||||||||||||||||||||||||||
Conversion of Series C preferred stock into common stock | - | - | - | - | (53,000 | ) | (53 | ) | - | - | 53,000,000 | 53,000 | (52,947 | ) | - | - | ||||||||||||||||||||||||||||||||||||
Dividends on preferred stock | - | - | - | - | - | - | - | - | - | - | - | (9,519 | ) | (9,519 | ) | |||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | - | (3,747,079 | ) | (3,747,079 | ) | |||||||||||||||||||||||||||||||||||||
Balances at June 30, 2021 | - | $ | - | 50,000 | $ | 50 | 76,559 | $ | 77 | 550 | $ | 1 | 669,390,677 | $ | 669,390 | $ | 11,147,767 | $ | (18,614,915 | ) | $ | (6,797,631 | ) | |||||||||||||||||||||||||||||
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 | $ | 181,344 | 6,511,211 | $ | (10,054,580 | ) | $ | (3,361,820 | ) | ||||||||||||||||||||||||||||||
Beginning balance | - | $ | - | 75,000 | $ | 75 | 129,559 | $ | 130 | - | $ | - | 181,344,766 | $ | 181,344 | 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 | ) | |||||||||||||||||||||||||||||
Ending Balance | - | $ | - | 50,000 | $ | 50 | 129,559 | $ | 130 | - | $ | - | 214,614,749 | $ | 214,615 | $ | 7,002,953 | $ | (10,503,660 | ) | $ | (3,285,912 | ) |
See the accompanying notes to Condensed Consolidated Financial Statementsthe unaudited condensed consolidated financial statements
September 30, 2017 and 2016
5 |
(Unaudited)LGBTQ LOYALTY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 2021
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 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, 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 LGBTQ + ESG100 ETF; LGBTQ Loyalty was the Sponsor for the prospectus that was filed by the licensed Fund Adviser ProcureAM, and was approved by the Securities and Exchange Commission (“SEC”) in early January 2020. The LGBTQ + ESG100 ETF (the “Fund”) launched in May 2021 on the NASDAQ. The Fund seeks to track the investment results (before fees and expenses) of the LGBTQ100 ESG Index and earns management fees based on assets under management (“AUM”).
In late 2020, LPI was renamed to Advancing Equality Preference, Inc.
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Note 2. Summary of Significant Accounting Policies
Going Concern
The accompanying unaudited condensed consolidated financial statements of LifeApps Brands Inc. at September 30, 2017 and 2016 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, 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 operations for the periods ended September 30, 2017 and 2016 presented are not necessarily indicative of the results to be expected 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-K for the year ended December 31, 2016.
We are building health, fitness and sports communities across multiple digital platforms including mobile apps, digital sports and fitness publications, sports and fitness products, sporting events, gateway platforms, online websites and social media.
Note 2. Summary of Significant Accounting Policies
The accompanying financial statements have been prepared in conformity with accounting 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.$18,614,915and have negative working capital of $6,863,770as of June 30, 2021. 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 2021. 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 Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC. The condensed consolidated balance sheet as of December 31, 2020 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries, LifeApps Inc.LGBTQ Loyalty, LLC, and Sports One GroupAdvancing Equality Preference, 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.
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Financial InstrumentsFair 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 reflected our effective annual borrowing rate.
LifeApps Brands Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2017 and 2016
(Unaudited)
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 350Intangibles – Goodwill and Other (“ASC 350”), the costs to obtain and register internet domain names were capitalized.
Fixed Assets
Fixed assets consists 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 overapproximates the estimated useful lives ofcurrent market rate for similar instruments. The derivative is measured as a Level 3 instrument due to the assets. various inputs which requires significant management judgment. Refer to Note 6 for detail.
The estimated useful lives used for financial statement purposesfollowing table is 3 years.
Derivative Financial Instruments:
We do not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate alla summary of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recordedmeasured at its fair value and is then re-valuedvalue:
Schedule of Financial Instruments at each reporting date, with changesFair Value
Fair Value Measurements | ||||||||||||||||
as of June 30, 2021: | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Liabilities: | ||||||||||||||||
Derivative liability on convertible notes payable | $ | - | $ | - | $ | 3,154,374 | $ | 3,154,374 | ||||||||
$ | - | $ | - | $ | 3,154,374 | $ | 3,154,374 |
Fair Value Measurements | ||||||||||||||||
as of December 31, 2020: | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Liabilities: | ||||||||||||||||
Derivative liability on convertible notes payable | $ | - | $ | - | $ | 1,930,235 | $ | 1,930,235 | ||||||||
$ | - | $ | - | $ | 1,930,235 | $ | 1,930,235 |
Other Receivables – Related Party
Other receivables represent amounts held in the fair value reported in the statements of operations. For stock-based derivative financial instruments, we used a Black Scholes valuation model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluatedescrow at the endFund’s custodian. In the second quarter of each reporting period. Derivative liabilities are classified2021, the Company retrieved $100,000from the Fund’s custodian, and provided $305,000 related to the ETF launch. As of June 30, 2021, $305,000was in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.escrow.
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Revenue Recognition
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.
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 $130 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-based compensation is presented in accordance with the guidance of ASC Topic 718,Compensation – Stock Compensation (“ASC 718”). Under the provisions of ASC 718, companies are required to estimate 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 vest is recognized as expense over the requisite service periods in our consolidated statements of operations.
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, 2017 and 2016 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 and six months ended SeptemberJune 30, 20172021 and 2016,2020, and the outstanding stock options and warrants are anti-dilutive. For the three and six months ended June 30, 2021 and 2020, the following number of potentially dilutive shares have been excluded from diluted net loss since such inclusion would be anti-dilutive:
Six Months Ended | ||||||||
June 30, | ||||||||
2021 | 2020 | |||||||
Series D preferred stock | 67,826 | - | ||||||
Stock options outstanding | 1,800,000 | 1,800,000 | ||||||
Warrants | 204,946,057 | - | ||||||
Shares to be issued upon conversion of notes | 203,651,096 | 173,870,349 | ||||||
410,464,979 | 175,670,349 |
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. Intangible Assets
The Company capitalizes costs pertaining to the development of the LGBTQ100 ESG Index website. The Company began amortizing these costs upon the launch of the index, and will amortize the costs over a three-year useful life.
At June 30, 2021 and December 31, 2020, intangible assets, net was $66,139 and $78,285, respectively. Amortization expense was $6,448 and $12,895 for both the three and six months ended June 30, 2021 and 2020, respectively.
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Note 4. Notes Payable
As of June 30, 2021 and December 31, 2020, the Company has a note payable outstanding in the amount of $1,986 and $2,986, respectively. The note is past due at June 30, 2021 and is, therefore, in default. The note accrues interest at a rate of 2% per annum. During the six months ended June 30, 2021, the Company repaid $1,000 pertaining to this note.
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 matured on June 20, 2020. As of June 30, 2021, the full principal amount was outstanding and in default.
Note 5. Convertible Notes Payable
On January 21, 2021, the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd (“Power Up January 2021 Note”). Pursuant to the terms of the Power Up January 2021 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 $86,350. The Power Up January 2021 Note matures and becomes due and payable on March 5, 2022 and accrues interest at a rate of 10% per annum. The Power Up January 2021 Note, plus all accrued but unpaid interest, may be prepaid at any time prior to the maturity date.
The Power Up January 2021 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.
On March 5, 2021, the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd (“Power Up March 2021 Note”). Pursuant to the terms of the Power Up March 2021 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 $86,350. The Power Up March 2021 Note matures and becomes due and payable on March 5, 2022 and accrues interest at a rate of 10% per annum. The Power Up March 2021 Note, plus all accrued but unpaid interest, may be prepaid at any time prior to the maturity date.
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The Power Up March 2021 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.
On May 4, 2021, the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd (“Power Up May 2021 Note”). Pursuant to the terms of the Power Up 2021 Note, the lender agreed to purchase from the Company, for a purchase price of $150,000, a 10% convertible note in the principal amount of $169,125. The Power Up 2021 Note matures and becomes due and payable on May 4, 2022 and accrues interest at a rate of 10% per annum. The Power Up May 2021 Note, plus all accrued but unpaid interest, may be prepaid at any time prior to the maturity date.
The Power Up May 2021 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 and six months ended June 30, 2021, the Company recorded amortization of debt discount and original issue discount of $364,877 and $582,631, respectively, for all convertible debentures. 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, 2021:
Summary of Activity of Convertible Notes Payable and Convertible Debenture
Convertible | ||||
Debenture | ||||
Balance as of December 31, 2020 | $ | 1,661,520 | ||
Issuance of convertible debenture - principal amount | 341,825 | |||
Issuance of convertible debenture - debt discount and original issue discount | (341,825 | ) | ||
Amortization of debt discount and original issue discount | 582,631 | |||
Conversion to common stock, net of discount | (346,874 | ) | ||
Balance as of June 30, 2021 | $ | 1,897,277 |
The following comprises the balance of the convertible debenture outstanding at June 30, 2021 and December 31, 2020:
Schedule of Balance Convertible Debenture Outstanding
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
Principal amount outstanding | $ | 2,304,602 | $ | 2,458,024 | ||||
Less: Unamortized original issue discount | (55,271 | ) | (94,857 | ) | ||||
Less: Unamortized debt discount | (352,053 | ) | (701,647 | ) | ||||
Convertible note payable, net of debt discount | $ | 1,897,277 | $ | 1,661,520 |
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At December 31, 2020, convertible notes payable includes a balance of $615,134 pertaining to a parity default penalty booked in 2020. The EMA Note has an original principal of $85,000. In the second quarter of 2021, EMA converted $ in principal for shares of common stock, with an outstanding principal balance of $434,687 as of June 30, 2021. The Company is currently settling the remaining note into shares and warrants to be issued to EMA, and expects the ultimate value to be less than the stated balance included in the consolidated balance sheet.
Note 6. Derivative Liability
We evaluated the terms of the conversion features of each of the outstanding convertible 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:
Schedule of Conversion Feature of Derivative Liability
Six Months Ended | ||||||||
June 30, | ||||||||
2021 | 2020 | |||||||
Risk-free interest rate | 0.09 | % | 0.78 | % | ||||
Expected term (in years) | 1.00 | 0.90 | ||||||
Expected volatility | 237.4 | % | 161.9 | % | ||||
Expected dividend yield | 0 | % | 0 | % | ||||
Exercise price of underlying common shares | $ | $ |
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During the six months ended June 30, 2021, 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 $460,780 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 six months ended June 30, 2021:
Schedule of Derivative Liability Activity
Derivative | ||||
Liability | ||||
Balance as of December 31, 2020 | $ | 1,930,235 | ||
Initial fair value on issuance of convertible debenture | 760,740 | |||
Conversion of debenture to common stock | (1,782,577 | ) | ||
Change in fair value of derivative liability | 2,245,976 | |||
Balance as of June 30, 2021 | $ | 3,154,374 |
Note 7. Preferred Stock
Series D Convertible Preferred Stock
On April 8, 2021, the Company issued shares of Series D Convertible Preferred Stock (the Series D Preferred Stock”) to GHS Investments, LLC (“GHS”) pursuant to a Securities Purchase Agreement (“GHS April Agreement”) for net proceeds of $427,600. In conjunction with the GHS Agreement, the Company issued warrants to purchase 40,000,000 shares of common stock at an exercise price of $0.001.
On May 12, 2021, the Company issued 146,500. In conjunction with the GHS Agreement, the Company issued warrants to purchase 1,500,000 shares of common stock at an exercise price of $0.001. shares of Series D Preferred Stock to GHS Investments, LLC pursuant to a Securities Purchase Agreement (“GHS May Agreement”) for net proceeds of $
Notwithstanding, on June 23, 2021, GHS and the Company entered into a Rescission Agreement (the “Rescission Agreement”) pursuant to which the Company and GHS agreed to rescind, ab initio, the issuances of Warrants to GHS. Pursuant to the Rescission Agreement, GHS and the Company agreed that the issuance of the Warrants are unconditionally and irrevocably rescinded ab initio by GHS and the Company, and the Warrants are neither valid nor effective in any manner whatsoever. Further, GHS and the Company acknowledged that each has been restored to the position in which such party found itself on the date that the respective GHS Agreement was executed but without any references, rights or obligations relative to the Warrants contained in, or otherwise granted in, either the GHS Agreements or the Warrants. As a result, GHS has no rights whatsoever to the Warrants and the Company has no rights whatsoever to the any exercise price that it may have received pursuant to the Warrants. In connection with the execution and delivery of the Rescission Agreement, the Company and GHS entered into two (2) Amended and Restated Purchase Agreements which each seek to amend and restate the terms and conditions contained in the April Agreement and the May Agreement.
In connection with the issuance of the Series D Preferred Stock, on April 7, 2021 and May 12, 2021, we filed a Certificates of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock (the “Series D COD”) with the Delaware Secretary of State to create a new class of preferred stock, $ par value per share, designated Series D Convertible Preferred Stock and authorized the issuance of up to one thousand ( ) shares of Series D Preferred Stock.
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From
The Series D Preferred Stock has a stated value of $1,200 per share (“Stated Value”) and the holder of the Series D Preferred Stock has the right to receive a dividend equal to eight percent (8%) per annum, payable quarterly, beginning on the issuance date of the Series D Preferred Stock and ending on the date that Series D Preferred Share has been converted or redeemed. Dividends may be paid in cash or in shares of Series D Preferred Stock at the discretion of the Company. Further, the holders of the Series D Preferred Stock has the right to receive assets in the event of liquidation, dissolution or winding up before any distribution or payment shall be made to the holders of any securities junior to the Series D Preferred Stock.
The conversion price (the “Conversion Price”) for the Series D Preferred Stock shall be $0.008109, equal to 90% of the average VWAP for the ten (10) Trading Days immediately preceding the date of the SPA. The Conversion Price will be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock. Following an “Event of Default,” as defined in the SPA, the Conversion price shall equal the lower of: (a) the then applicable Conversion Price; or (b) a price per share equaling eighty percent (80%) of the lowest traded price for the Company’s common stock during the fifteen (15) Trading Days immediately preceding, but not including, the Conversion Date.
Each share of Series D Preferred Stock is convertible, at any time and from time to time, new accounting pronouncements are issued that we adopt asat the option of the specified effective date. We believeholder thereof, into that number of shares of Common Stock (subject in each case to a 4.99% beneficial ownership limitation) determined by dividing the recently issued standards that areStated Value of such share of Series D Preferred Stock by the Series D Preferred Stock Conversion Price.
Additionally, the Company shall have the right to redeem (a “Corporation Redemption”), all (but not yet effective may not have an impact on our results of operations and financial position.
Note 3. Fixed Assets
At September 30, 2017 and December 31, 2016, fixed assets consistedless than all), shares of the following:Series D Preferred Stock issued and outstanding at any time after the issuance date, upon five (5) business days’ notice, at a redemption price per Series D Preferred Stock then issued and outstanding (the “Corporation Redemption Price”), equal to the product of (i) the Premium Rate multiplied by (ii) the sum of (x) the Stated Value, (y) all accrued but unpaid dividends, and (z) all other amount due to the holder pursuant to the Series D COD and the SPA including, but not limited to late fees, liquidated damages and the legal fees and expenses of the holder’s counsel relating to the Series D COD and/or the SPA. “Premium Rate” means (a) 1.15 if all of the Series D Preferred Stock is redeemed within ninety (90) calendar days from the issuance date thereof; (b) 1.2 if all of the Series D Preferred Stock is redeemed after ninety (90) calendar days and within one hundred twenty (120) calendar days from the issuance date thereof; (c) 1.25 if all of the Series D Preferred Stock is redeemed after one hundred twenty (120) calendar days and within one hundred eighty (180) calendar days from the issuance date thereof; and (iv) each share of Series D Preferred Stock shall be redeemed on the date that is one (1) calendar year from the date of its issuance.
2017 | 2016 | |||||||
Furniture and Equipment | $ | 7,670 | $ | 7,670 | ||||
Less accumulated depreciation | (7,670 | ) | (7,670 | ) | ||||
$ | — | $ | — |
On the one-year anniversary of the date of issuance of the Preferred Stock, the Company must redeem the Preferred Stock then outstanding at a price equal to the outstanding Stated Value together with any accrued but unpaid dividends.
Pursuant to the Series D COD, we are required to reserve and keep available out of our authorized and unissued shares of Common Stock two times the number of Common Stock needed to convert or exercise all Series D Preferred Stock. Further, the holders of the Series D Preferred Stock are entitled to vote with all holders of the Common Stock on an as converted or as exercised basis.
The Series D COD provides for conversion price adjustments in the event of stock dividends, stock splits and similar transactions. It also provides for certain adjustments in connection with subsequent rights offerings, pro rata distributions to holders of our Common Stock and fundamental transactions. Additionally, from the date of the SPA until the date when the holder no longer holds any Series D Preferred Stock, upon any issuance by the Company or any of its subsidiaries of Common Stock or common stock equivalents (as defined in the Series D COD) for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), the holder may elect, in its sole discretion, to exchange (in lieu of conversion), if applicable, all or some of the shares of Series D Preferred Stock then held for any securities or units issued in a Subsequent Financing on a $1.00 for $1.00 basis.
Following an “Event of Default” (as defined in the Series D COD), all outstanding shares of Series D Preferred Stock shall come immediately due for redemption and the redemption amount chargedshall accrue interest at the lesser of: (a) eighteen percent (18%) per annum; or (b) the maximum legal rate. Redemption following an Event of Default shall occur at an amount equaling: 1.35 multiplied by the sum of the Stated Value, all accrued but unpaid dividends and all other amounts due pursuant to depreciationthe Series D COD for all Series D Preferred Stock outstanding. Additionally, following an Event of Default, the Conversion Price shall equal the lower of: (a) the then applicable conversion price; or (b) a price per share equaling eighty percent (80%) of the lowest traded price for the Company’s Common Stock during the fifteen (15) trading days preceding the relevant conversion.
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The Series D Preferred Stock will vote together with the common stock on an as-converted basis subject to the Beneficial Ownership Limitation (as defined in the Series D COD). However, as long as any shares of Series D Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series D Preferred Stock directly and/or indirectly (a) alter or change adversely the powers, preferences or rights given to the Series D Preferred Stock or alter or amend the Series D COD, (b) authorize or create any class of stock ranking as to redemption or distribution of assets upon a Liquidation (as defined in the Series D COD) senior to, or otherwise pari passu with, the Series D Preferred Stock or, authorize or create any class of stock ranking as to dividends senior to, or otherwise pari passu with, the Series D Preferred Stock, (c) amend its Articles of Incorporation or other charter documents in any manner that adversely affects any rights of the Holders (as defined in the Series D COD), (d) increase the number of authorized shares of Series D Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing.
Due to the mandatorily redeemable features, the Series D preferred stock was classified as a liability pursuant to ASC 480-10. The Company recorded a debt discount of $15,900, of which $3,256 was amortized to interest expense furniture and equipment was $0 and $629 for ofin the three months ended SeptemberJune 30, 20172021. The Company also determined that the conversion option represented a beneficial conversion feature, however calculated the fair value of this feature to be negligible.
As of June 30, 2021, we had $9,159 in accrued Series D dividends.
Note 8.Stockholders’ Equity (Deficit)
Common Stock
2021 Transactions
In March 2021, an aggregate of 961,666 is included in personnel costs in the consolidated statements of operations. shares of common stock were issued to the board members for accrued dividends as well as current compensation the year ended December 31, 2021. Of these shares issuances, $
In March 2021, an aggregate of 2016, respectivelyconsultants for accrued and was $0current consulting services for a total fair value of $ . shares of common stock were issued to employees and
In June 2021, an aggregate of $1,278accrued consulting services totaling $204,364. shares of common stock were issued pursuant to conversion of balances owed to a related party and
In June 2021, Auctus exercised warrants into shares of common stock.
During the six months ended June 30, 2021, Pride converted shares of Series C preferred stock for shares of common stock.
During the six months ended June 30, 2021, the Company issued 495,247. shares of common stock pursuant to conversion of debentures in the principal amount of $
2020 Transactions
In January 2020, we issued shares of common stock to a bridge noteholder in connection with promissory notes received.
During the six months ended June 30, 2020, we issued an aggregate of 459,417. shares of common stock to consultants for 2019 services which were accrued at a fair value of $
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In March 2020, we issued shares to Orlando Reece pursuant to his appointment to the Board of Directors.
In May 2020, we issued an aggregate of shares to directors as compensation.
In April 2020, we issued nineSeries B Preferred Stock. shares and shares of common stock to a Series B Preferred Stock investor for accrued dividends and conversion of shares of the
In May 2020, we issued an aggregate of 139,215. shares of common stock to executives, officers and consultants for services rendered for a total fair value of $
In June 2020, two option holders exercised their outstanding options for a total of 10,400 was converted from outstanding accounts payable. shares of common stock at an exercise price of $ . The value of $
During the six months ended SeptemberJune 30, 20172020, we issued an aggregate of shares of common stock to Pride Partners pursuant to warrant exercises. Refer to Note 9.
Series B Convertible Preferred Stock
As of June 30, 2021, we had $13,800 in remaining accrued Series B dividends.
Series C Convertible Preferred Stock
During the quarter ended June 30, 2021, Pride converted 2016, respectively.outstanding. shares of Series C preferred stock for shares of common stock. As of June 30, 2021, there were shares of Series C preferred stock issued and
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At SeptemberOptions
As of June 30, 20172021 and December 31, 2016, intangible assets consist of2020, we had options remaining outstanding pursuant to the following:2012 Equity Incentive Plan.
2017 | 2016 | |||||||
Internet domain names | $ | 58,641 | $ | 58,641 | ||||
Less accumulated amortization | (58,641 | ) | (58,641 | ) | ||||
$ | — | $ | — | |||||
Website and data bases | $ | 56,050 | $ | 56,050 | ||||
Less accumulated amortization | (56,050 | ) | (56,050 | ) | ||||
$ | — | $ | — | |||||
Customer and supplier lists | $ | 4,500 | $ | 4,500 | ||||
Less accumulated amortization | (4,050 | ) | (3,375 | ) | ||||
$ | 450 | $ | 1,125 | |||||
Total intangibles | $ | 119,191 | $ | 119,191 | ||||
(118,741 | ) | (118,066 | ) | |||||
$ | 450 | $ | 1,125 |
LifeApps Brands Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2017 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 technologyThere was intangible assets. We identified identifiable intangibles that are marketing-related, customer-related, and technology based. stock based
The amount charged to amortizationcompensation expense for all intangibles was $225 and $9,356options for the threesix months ended SeptemberJune 30, 20172021 and 2016,2020. There will be no additional compensation expense recognized in future periods.
Warrants
As of June 30, 2021 and December 31, 2020, we had and was $675 and $18,055 for the nine months ended September 30, 2017 and 2016, respectively.with a weighted average exercise price of $ per share. In June 2021, Auctus exercised warrants into shares of common stock. and warrants outstanding, respectively,
Estimated future amortization expense related to the intangibles as of September 30, 2017 is as follows:Note 10. Related Party Transactions
Year Ended December 31, | |||||
2017 | 225 | ||||
2018 | 225 | ||||
$ | 450 |
Note 5. Amounts Due Related Parties
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 SeptemberJune 30, 20172021 and December 31, 2016, was $697,6492020 totaled $1,800 and $536,639, respectively. Salary accruals for each period amounted$17,885, respectively, with a 2% annual interest rate. In June 2021, the Company converted $ of a related party note payable into shares of common stock.
Currently the Company has defaulted on all of their remaining related party loan obligations. Forbearance has been granted by the related parties on all loans.
Accrued Salaries and Compensation
As of June 30, 2021 and December 31, 2020, accrued salaries to $112,500our company officers and net cash advances amounted to $48,510executive director totaled $319,735 and $52,485,$299,732, respectively for the nine months ended September 30, 2017 and 2016, and wereis included in amounts due to related party.
LifeApps Brands Inc. accrued salaries and consulting fees in our consolidated balance sheets.
Notes to Condensed Consolidated Financial Statements
September 30, 2017 and 2016
(Unaudited)
Note 7. Stock Based Compensation
In prior periods, our Board 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 666,667March 2021, we issued 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 418,333 shares of our common stock 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 andthe Chief Operating Officer for a consultant. The options are exercisable quarterly from the grant date over a four-year term.
Thetotal fair value of the options granted, $39,000, was estimated at the date of grant using the Black-Scholes option pricing model, with the following assumptions:$ .
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Stock based compensation expense recordedBoard of Directors
In March 2021, we issued the periods ended September 30, 2017 and 2016 was $7,312 and $0, respectively. shares of common stock to each of the seven board members, including the Chief Executive Officer, for
The following is a summary of stock options issued to employees and directors:
Options | Weighted Price | Weighted (in years) | Aggregate Value | ||||||||||||||
Outstanding January 1, 2017 | 10,000,000 | $ | 0.0026 | 3.4 | — | ||||||||||||
Granted | — | $ | — | — | — | ||||||||||||
Exercised | — | $ | — | — | — | ||||||||||||
Cancelled | — | $ | — | — | — | ||||||||||||
Outstanding September 30, 2017 | 10,000,000 | $ | .0026 | 2.65 | — | ||||||||||||
Exercisable September 30, 2017 | 3,125,000 | $ | .0026 | 2.65 | — |
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:.
Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value at date of grant | ||||||||||||||
Outstanding January 1, 2016 | 5,000,000 | $ | 0.026 | 3.4 | — | ||||||||||||
Granted | — | $ | — | — | — | ||||||||||||
Exercised | — | $ | — | — | — | ||||||||||||
Cancelled | — | $ | — | — | — | ||||||||||||
Outstanding September 30, 2017 | 5,000,000 | $ | 0.0026 | 2.65 | $ | — | |||||||||||
Exercisable September 30, 2017 | 1,562,500 | $ | 0.026 | 2.65 | $ | — |
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 purchase of an aggregate of 400,000 shares of the company’s common stock at an exercise price of $15 per share.
The warrants expired on September 20, 2017.
Note 10. Income Taxes
Income tax provision (benefit) for the periods ended September 30, 2017 and 2016, shares. Of these share issuances, $961,666 is summarized below:
2017 | 2016 | |||||||
Current: | ||||||||
Federal | $ | — | $ | — | ||||
State | — | — | ||||||
Total current | — | — | ||||||
Deferred: | ||||||||
Federal | (19,400 | ) | (41,300 | ) | ||||
State | (3,100 | ) | (6,700 | ) | ||||
Total deferred | (22,500 | ) | (48,000 | ) | ||||
Increase in valuation allowance | 22,500 | 48,000 | ||||||
Total provision | $ | — | $ | — |
The provision for income taxes differs from 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:
2017 | 2016 | |||||||
Income tax provision at the federal statutory rate | 34.0 | % | 34.0 | % | ||||
State income taxes, net of federal benefit | 5.5 | % | 5.5 | % | ||||
Increase in valuation allowance | (39.5 | )% | (39.5 | )% | ||||
0.0 | % | 0.0 | % |
LifeApps Brands Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2017 and 2016
(Unaudited)
There are open statutes of limitations for taxing authoritiesincluded 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 expensepersonnel costs in the consolidated statementstatements of operations. Thereoperations and the remaining $ was converted from accrued salaries and consulting fees.
Total accrued directors’ compensation of $0 and $94,584 at June 30, 2021 and December 31, 2020, 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, 2021 and December 31, 2020, we have been no income tax related interest or penalties assessed or recorded.$305,000 and $100,000, respectively, included as other receivables on our consolidated balance sheet, which represents amounts held in escrow at the Fund’s custodian.
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. Subsequent Events
Management has evaluated all activity up to August 16, 2021 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:
On July 6, 2021, the Board increased the size of its Board from seven persons to nine persons and appointed Andrea Breanna to fill a vacant director position created thereby, effective immediately. At this time, Ms. Breanna has not been named to any committees of the Board.
On July 13, 2021, we entered into a Securities Purchase Agreement (the “July SPA”) with GHS Investments, LLC (the “Purchaser”), a Nevada limited liability company, pursuant to which for a purchase price of $250,000, the Purchaser purchased an additional two hundred and fifty ( ) shares of the Company’s Series D Convertible Preferred Stock (“Series D Preferred Stock”). Further, subject to the terms and conditions contained in the July SPA, on or prior to the thirtieth (30) calendar day following the initial Closing Date (as defined in the July SPA), the Company agrees to sell, and the Purchaser agrees to purchase an additional two hundred and fifty (250) shares of Preferred Stock at price of $ per share of Preferred Stock. As previously reported on a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on April 16, 2021, we filed a Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock (the “Series D COD”) with the Delaware Secretary of State to create a new class of preferred stock, $ par value per share, designated Series D Convertible Preferred Stock and authorized the issuance of up to four hundred ( ) shares of Series D Preferred Stock. On the April 9, 2021, all of the four hundred ( ) shares of Series D Preferred Stock were issued to the Purchaser. The Series D Preferred Stock has a stated value of $1,200 per share (“Stated Value”) and the holder of the Series D Preferred Stock has the right to receive a dividend equal to eight percent (8%) per annum, payable quarterly, beginning on the issuance date of the Series D Preferred Stock and ending on the date that Series D Preferred Share has been converted or redeemed. Dividends may be paid in cash or in shares of Series D Preferred Stock at the discretion of the Company. Further, the holders of the Series D Preferred Stock have the right to receive assets in the event of liquidation, dissolution or winding up before any distribution or payment shall be made to the holders of any securities junior to the Series D Preferred Stock.
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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, 2017 and September 30, 20162021 and for the ninethree and six months ended SeptemberJune 30, 20172021 and 20162020 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, 20162020 filed with the Securities and Exchange Commission (the “SEC”) on April 18, 2017.15, 2021. 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 LGBTQ + ESG100 ETF (the “Fund”) launched in May 2021 on the NASDAQ. The Fund seeks to track the investment results (before fees and expenses) of the LGBTQ100 ESG Index and earns management fees based on assets under management (“AUM”).
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 alsoto 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.
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Our Products
Our mission is to build a licensed developersustainable and well recognized brand focused on both Google Playunlocking the growing purchasing power of the LGTBQ community globally by offering a robust LGBTQ Index and Amazon Appstore for Android. LifeApps® has distributed apps/publicationscore 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 all three platforms. Moving forward LifeApps® is developing new apps,diversity and exploring new opportunities pairing appsinclusion 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 physical retail and e-commerce/mobile-commerce products.
Plan of Operation
LifeApps® intends to continuefuture plans to develop indices with a focus on the ‘Social’ component of ESG utilizing our proprietary financial slogan of “Advancing Equality” within other gender, minority interest groups.
Revenue
The Company focus in 2019 and license the LifeApps Mobile App Platform. We will research and seek out aligned companies with need for tutorial based apps for mobile and we will work2020 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 Advancing Equality Preference Inc., and through our strategic partnerships for new potential financial equality-driven Indices.
Our SportsOne business has been curtailedNew initiatives in order2021 include a plan to better utilize resourcescreate ancillary revenue streams to servecomplement and support this unique platform for the new directiontop 100 Equality driven Corporations in America represented in the LGBTQ100 Index. We believe our index will reward and focuselevate 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 Company.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 Q4-2021.
The Company’s acquisition strategyOur 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 purchasing companies, development resources and assetsthe past 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.
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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”),GAAP, which contemplates our continuation as a going concern. As of September 30, 2017, weWe have incurred losses to date of $2,958,010.$18,611,658 and have negative working capital of $6,286,415 as of June 30, 2021. 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 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.
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 of the instrument could be required within 12 months of the balance sheet date.
Revenue Recognition
Revenue is derived primarily from the sale of sports and fitness apparel and equipment, and software applications designed for use on mobile devicesissuance date – earlier dated instruments settling before later dated. The sequencing policy also considers contingently issuable additional shares, such as smart phones and tablets. Revenue is recognized only when persuasive evidence ofthose issuable upon a stock split, to have an arrangement exists,issuance date to coincide with 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 paidevent giving rise to the agent, usually 70%additional shares. The policy includes all shares issuable pursuant to usdebenture and 30% to the agent. We record the net amount receivedpreferred stock instruments as revenue.well as shares issuable under service and employment contracts and interest on short term loans.
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 SeptemberJune 30, 2017,2021 compared with the three months ended SeptemberJune 30, 20162020
Revenues forThere were no revenues during the three months ended SeptemberJune 30, 2017 and 2016 were $787 and $147, respectively. Revenues for both periods were derived primarily from the sale of sports apparel and health and fitness products.2021 or 2020.
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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 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 revenue for the three months ended September 30, 2017 and 2016 was $0 (0%) and $51 (34.7%), respectively. This resulted 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 margin is primarily due to product mix and the sale of inventory fully reserved in prior years..
We had net losses of $47,164 and $56,799 for the three months ended September 30, 2017 and 2016, respectively.
The following is a breakdown of our selling, general and administrativeoperating expenses for the three months ended SeptemberJune 30, 20172021 and 2016:2020:
Three months Ended September 30, | ||||||||||||
2017 | 2016 | Difference | ||||||||||
Personnel costs | $ | 37,500 | $ | 37,689 | $ | (179 | ) | |||||
Professional fees | 6,500 | 11,265 | (4,765 | ) | ||||||||
Marketing and advertising | — | 164 | (164 | ) | ||||||||
Travel and entertainment | 200 | — | 200 | |||||||||
Stock related expenses | 2,437 | — | 2,437 | |||||||||
Research and development | — | — | — | |||||||||
Rent | 363 | 2,110 | (1,747 | ) | ||||||||
Other expenses | 726 | 5,452 | (4,726 | ) | ||||||||
$ | 47,726 | $ | 56,670 | $ | (8,499 | ) |
Three Months Ended | ||||||||||||||||
June 30, | ||||||||||||||||
2021 | 2020 | Change $ | Change % | |||||||||||||
Personnel costs | $ | 93,121 | $ | 284,507 | $ | (191,386 | ) | -67 | % | |||||||
Consulting fees | 38,500 | 93,515 | (55,015 | ) | -59 | % | ||||||||||
Legal and professional fees | 153,527 | 95,347 | 58,181 | 61 | % | |||||||||||
Sales and marketing | 40,500 | 45 | 40,455 | 89840 | % | |||||||||||
General and administrative | 28,392 | 20,736 | 7,655 | 37 | % | |||||||||||
Depreciation and amortization | 6,448 | 6,448 | - | 0 | % | |||||||||||
$ | 360,488 | $ | 500,598 | $ | (140,110 | ) | -28 | % |
Personnel costs were constant forinclude officer salaries and directors’ compensation. The decrease in personnel costs is primarily due to stock compensation to the periodsboard and consist solely of accrual of officer salary pursuant to an employment contract.executives in 2020.
ProfessionalConsulting fees decreased $4,765 (73.3%) from $11,265 forby $55,015 during the three months ended SeptemberJune 30, 20162021, primarily due to $6,500 forlimited operations in developing the Index in 2021. Consulting fees represent our efforts to launch the LGBTQ100 ESG Index and LGBTQ + ESG100 ETF.
Legal and professional fees increased by $58,181, primarily due to increased legal costs pertaining to our financing activities.
Sales and marketing costs were $40,500 in the three months ended SeptemberJune 30, 2017. The decrease is a result2021 as we began our marketing efforts over the launch of timing of accountingthe ETF.
General and legal services rendered.administrative expenses increased by $7,655 in 2021 due to increased operations surrounding the ETF launch.
MarketingDepreciation 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 increaseamortization expense was $6,448 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 SeptemberJune 30, 2016 to $363 for the three months ended September 30, 2017. The decrease is a result of the relocation of2021, which represents amortization on our corporate office to a shared office facility.index development costs.
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, respectively.
Nine months ended September 30, 2017, compared with the nine months ended September 30, 2016
Revenues for the nine months ended September 30, 2017 and 2016 were $3,093 and $11,168 respectively. Revenues for both periods were derived primarily from the sale of sports apparel and health and fitness products. The decrease in revenues is due to an across the board downturn in 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 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 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, generalother income (expenses) for the three months ended June 30, 2021 and 2020:
Three Months Ended | ||||||||||||||||
June 30, | ||||||||||||||||
2021 | 2020 | Change $ | Change % | |||||||||||||
Interest expense | $ | (727,642 | ) | $ | (376,473 | ) | (351,169 | ) | 93 | % | ||||||
Other income | - | 3,000 | (3,000 | ) | -100 | % | ||||||||||
Change in derivative liability | (2,658,949 | ) | 442,626 | (3,101,576 | ) | -701 | % | |||||||||
$ | (3,386,591 | ) | $ | 69,154 | $ | (3,455,745 | ) | -4997 | % |
Interest expense increased by $351,169 in the three months ended June 30, 2021, primarily attributable to origination interest and amortization of debt discount of the newly issued and converted debentures.
Change in derivative liability includes the mark-to-market adjustment of the derivative liability in connection with our convertible debenture.
Net loss was $3,747,079 and $431,445 for the three months ended June 30, 2021 and 2020, respectively.
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Results of Operations
Six months ended June 30, 2021 compared with the six months ended June 30, 2020
There were no revenues during the three months ended June 30, 2021 and $560 in revenue for 2020.
The following is a breakdown of our operating expenses for the six months ended June 30, 2021 and 2020:
Six Months Ended | ||||||||||||||||
June 30, | ||||||||||||||||
2021 | 2020 | Change $ | Change % | |||||||||||||
Personnel costs | $ | 1,389,121 | $ | 499,462 | $ | 889,653 | 178 | % | ||||||||
Consulting fees | 71,500 | 168,015 | (96,515 | ) | -57 | % | ||||||||||
Legal and professional fees | 258,650 | 222,342 | 36,308 | 16 | % | |||||||||||
Sales and marketing | 40,500 | 7,590 | 32,910 | 434 | % | |||||||||||
General and administrative | 56,514 | 70,728 | (14,214 | ) | -20 | % | ||||||||||
Depreciation and amortization | 12,896 | 12,896 | - | 0 | % | |||||||||||
$ | 1,829,181 | $ | 981,033 | $ | 848,148 | 86 | % |
Personnel costs include officer salaries and directors’ compensation. The increase in personnel costs is primarily due to $1,141,666 in stock compensation for shares issued to the board and executives in March 2021.
Consulting fees decreased by $96,515 during the six months ended June 30, 2021, primarily due to limited operations in developing the Index in 2021.
Legal and professional fees increased by $36,308, primarily due to increased legal costs in 2021 pertaining to our financing activities.
Sales and marketing costs increased by $32,910 in 202 as we began our marketing efforts over the launch of the ETF.
General and administrative expenses decreased by $14,214 due to our cost cutting measures in our operations.
Depreciation and amortization expense was $12,986 in the six months ended June 30, 2021, which represents amortization on our index development costs.
The following is a breakdown of our other income (expenses) for the ninesix months ended SeptemberJune 30, 20172021 and 2016:2020:
Nine months Ended September 30, | ||||||||||||
2017 | 2016 | Difference | ||||||||||
Personnel costs | $ | 112,500 | $ | 113,221 | $ | (721 | ) | |||||
Professional fees | 38,500 | 30,930 | (7,570 | ) | ||||||||
Marketing and advertising | 3,495 | 1,895 | 1,600 | |||||||||
Travel and entertainment | 2,810 | — | 2,810 | |||||||||
Stock related expenses | 7,311 | 7,534 | (223 | ) | ||||||||
Rent | 3,975 | 5,685 | (1,710 | ) | ||||||||
Research and development | — | 200 | (200 | ) | ||||||||
Other expenses | 3,225 | 12,254 | (9,028 | ) | ||||||||
$ | 171,816 | $ | 171,719 | $ | 97 |
Personnel costs were constant for
Six Months Ended | ||||||||||||||||
June 30, | ||||||||||||||||
2021 | 2020 | Change $ | Change % | |||||||||||||
Interest expense | $ | (1,289,328 | ) | $ | (737,312 | ) | (552,016 | ) | 75 | % | ||||||
Other income | - | 3,000 | (3,000 | ) | -100 | % | ||||||||||
Change in derivative liability | (2,245,976 | ) | 324,872 | (2,570,848 | ) | -791 | % | |||||||||
$ | (3,535,304 | ) | $ | (409,440 | ) | $ | (3,125,864 | ) | 763 | % |
Interest expense increased by $552,016 in the periods and consist solely of accrual of officer salary pursuant to an employment contract.
Professional fees decreased $7,570 (40.8%) from $30,930 for the ninesix months ended SeptemberJune 30, 20162021, primarily attributable to $38,500 fororigination interest and amortization of debt discount of the nine months ended September 30, 2017. The decrease is a resultnewly issued and converted debentures.
Change in derivative liability includes the mark-to-market adjustment of lower accounting and legal services rendered as a result of reduced business activities.
Marketing and advertising increased $1,600 (45.8%) from $1,895 for the nine months ended September 30, 2016 to $3,495 for the nine months ended September 30, 2017. The increase is a result of a consulting contract for new market research.
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 increased $2,810 (100%) from $0 for the nine months ended September 30, 2016 to $2,810 for the nine months ended September 30, 2017. The increase is due to executive travelderivative liability in connection with the new marketing research effort.our convertible debenture.
Rent expense decreased by $1,710 (43%) from $5,685Net loss was $5,364,485 and $1,389,913 for the ninesix months ended SeptemberJune 30, 2016 to $3,975 for the nine months ended September 30, 2017. The decrease is a result of the relocation of our corporate office to a shared office facility.2021 and 2020, respectively.
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All of our other operating costs decreased as result of generally keeping costs down.
We had operating losses of $169,447 and $178,247 for the nine months ended September 30, 2017 and 2016, respectively.
Liquidity and Capital Resources
We wereHistorically, we have been financed primarily bythrough 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 contributions from membersas and when needed. As of LifeApps LLC,June 30, 2021, we had $179,192 of cash on hand. Based on our current planned expenditures, we will require approximately $2.5 million over 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 SeptemberJune 30, 2017,2021, we had negativea working capital deficit of $(826,480)$6,863,770 as compared to negativea working capital deficit of $(665,019)$5,338,865 at December 31, 2016.2020.
During the ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, operations used cash of $48,616$519,220 and $54,918 respectively.
During the nine months ended September 30, 2017$727,216, respectively, primarily related to our net loss partially offset by non-cash charges and 2016, we used no cash in investing activities.
During the nine months ended September 30, 2017 and 2016, net cash provided by financingchanges in operating assets and liabilities.
During the six months ended June 30, 2021 and 2020, net cash used in investing activities was $48,510$205,000 and $52,485,$31,000, respectively. Cash used in 2021 pertains to the net funds provided to the Fund’s custodian for the ETF launch. Cash used in 2020 is attributable to capitalized costs pertaining to the development of the LGBTQ100 ESG Index and ETF website.
Additionally,In 2021, we received $300,000 in proceeds from the issuance of three convertible debentures and repaid notes payable of $1,000. We also received net amountsproceeds of $15,510 and $2,350$574,100 from the issuance of cash advancesSeries D preferred stock. From February to March 2020, we received $175,000 in proceeds from our chief executive officer and net amountsthe issuance of $33,000 and $52,135two convertible debentures. In January 2020, we received $47,500 pursuant to a bridge note agreement. We also received $93,343 from the exercise of cash advances from a director and shareholders during the nine months ended September, 2017 and 2016, respectively.warrants.
We will continue to seek out additional capital in the form of debt or equity under the most favorable terms we can find.
Going ConcernThe Company is currently, and has for some time, been in financial distress. It has no cash resources and current assets and has no ongoing source of revenue. Management is continuing to address numerous aspects of the Company’s operations and obligations, including, without limitation, debt obligations, financing requirements, and regulatory compliance, and has taken steps to continue to raise new debt and equity capital to fund the Company’s business activities.
Our financial statements have been preparedThe Company is continuing its efforts to raise additional capital in order to be able to pay its liabilities and fund its business activities on a going concernforward basis which assumesand regularly evaluates various measures to satisfy the Company’s liquidity needs. Though the Company actively pursues opportunities to finance its operations through external sources of debt and equity financing, there can be no assurance that wesuch financing 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 cashavailable on hand and/or additional officer and shareholder advances. These financials do not include any adjustments relatingterms acceptable to the recoverability and reclassification of recorded asset amounts,Company, or amounts and classifications of liabilities that might result from this uncertainty.at all.
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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.
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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, 20172021 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 referAs of the date of this filing, there have been no material changes to the Risk Factors included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20162020 filed with the SEC on April 18, 2017,15, 2021, which may be accessed via EDGAR through the Internet atwww.sec.gov (the “2020 Form 10-K”). The Risk Factors set forth in the 2020 Form 10-K should be read carefully in connection with evaluating the Company’s business and in connection with the forward-looking statements contained in this Quarterly Report on Form 10-Q. Any of the risks described in the 2020 Form 10-K could materially adversely affect the Company’s business, financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. These are not the only risks that the Company faces. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We madeRecent Sales of Unregistered Securities
On July 13, 2021, the Company issued 250 shares of Series D Preferred Stock to GHS Investments, LLC pursuant to a Securities Purchase Agreement for net proceeds of $237,500.
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.
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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 June 30, 2021 the outstanding balance was approximately $1,986.
ITEM 4. MINE SAFETY DISCLOSURE
Not Applicable.
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.
Exhibit Number | Description of Exhibit | |
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. | |
XBRL Instance Document | ||
XBRL Taxonomy Extension Schema Document | ||
XBRL Taxonomy Extension Calculation Linkbase Document | ||
XBRL Taxonomy Extension Labels Linkbase Document | ||
XBRL Taxonomy Extension Presentation Linkbase Document | ||
XBRL Taxonomy Extension Definition Linkbase Document |
* | Filed herewith |
** | 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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* 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.
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.
By: | /s/ Robert | |
Robert |
August 16, 2021 | By: | /s/ Eric Sherb |
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