UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q10-Q/A
Amendment No. 1
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period endedSeptemberJune 30, 20172022
☐ | 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 wereNovember 9, 2022 the Company had shares of common stock, $0.001 par value, issued and outstanding 25,311,186 sharesoutstanding.
EXPLANATORY NOTE
This Amendment No. 1 to Form 10-Q, or this Amendment, amends the Quarterly Report on Form 10-Q for the three-and six months periods ended June 30, 2022 that we originally filed with the Securities and Exchange Commission, or the Commission, on October 17, 2022 or the Original Filing. The nature of Common Stock, $0.001 par value.our amendment was due to various accounts that required correction on our consolidated balance sheets and statements of operations.
Refer to Note 2 in the notes to the condensed consolidated financial statements for a further explanation of the restated figures.
LIFEAPPS BRAND INC.LGBTQ Loyalty Holdings, Inc.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBERJUNE 30, 20172022
TABLE OF CONTENTS
i |
LGBTQ Loyalty Holdings, Inc.
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PAGE | ||
LIFEAPPS BRAND INC.
PART I – FINANCIAL INFORMATION
1 |
LifeApps Brands Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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 |
To the Board of Directors and
Stockholders of LGBTQ Loyalty Holdings, Inc.
See the accompanying notes toResults of Review of Interim Financial Information
We have reviewed the condensed consolidated balance sheets of LGBTQ Loyalty Holdings, Inc. (the Company) as of June 30, 2022 and 2021 and the related condensed consolidated statements of operations and stockholders’ deficit for the three-month and six-month periods ended June 30, 2022 and 2021, and the related condensed consolidated statements of cash flows for the six-month period then ended, and the related notes (collectively referred to as the interim financial statements). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements
LifeApps Digital Media Inc.
Condensed Consolidated Statements for them to be in conformity with accounting principles generally accepted in the United States of Operations
(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. America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the balance sheet of the Company as of December 31, 2021, and the related statements of operations, stockholders’ deficit, and cash flows for the year then ended (not presented herein); and in our report dated April 15, 2022, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived.
Basis for Review Results
These interim financial statements are the responsibility of the Company’s management. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
Respectfully yours,
Haynie and Company
PCAOB ID 457
We have served as the Company’s auditor since 2018.
Salt Lake City, Utah
November 14, 2022
2 |
LGBTQ LOYALTY HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, | December 31, | |||||||
2022 | 2021 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 12,934 | $ | 78,348 | ||||
Prepaid expenses and other current assets | 8,270 | 6,925 | ||||||
Total current assets | 21,204 | 85,273 | ||||||
Intangible assets, net | 40,347 | 53,243 | ||||||
Total assets | $ | 61,551 | $ | 138,516 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,408,776 | $ | 985,917 | ||||
Accrued salaries and consulting fees | 723,007 | 660,331 | ||||||
Accrued interest and dividends | 861,384 | 640,153 | ||||||
Notes payable | 256,986 | 126,986 | ||||||
Notes payable to related party | 71,800 | 1,800 | ||||||
Convertible notes payable, net of debt discount | 2,415,028 | 2,195,145 | ||||||
Derivative liability on convertible notes payable | 2,781,435 | 1,398,127 | ||||||
Series D preferred stock | 1,758,224 | - | ||||||
Total liabilities | 10,276,640 | 6,008,459 | ||||||
Commitments and contingencies | - | - | ||||||
Stockholders’ equity (deficit): | ||||||||
Preferred stock, $ | par value, shares authorized||||||||
Series A, | share designated, shares issued or outstanding as of June 30, 2022 and December 31, 2021- | - | ||||||
Series B, | shares designated, shares issued and outstanding as of June 30, 2022 and December 31, 2021- | - | ||||||
Series C, | shares designated, shares issued and outstanding as of June 30, 2022 and December 31, 202152 | 52 | ||||||
Series D, | shares designated, and shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively1 | 1 | ||||||
Common stock, $ | par value, shares authorized, and shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively1,132,010 | 832,719 | ||||||
Additional paid-in capital | 12,549,667 | 13,215,129 | ||||||
Accumulated deficit | (23,896,819 | ) | (19,917,844 | ) | ||||
Total stockholders’ equity (deficit) | (10,215,089 | ) | (5,869,943 | ) | ||||
Total liabilities and stockholders’ equity (deficit) | $ | 61,551 | $ | 138,516 |
See the accompanying notes to the unaudited condensed consolidated financial statements
3 |
LifeApps Brands Inc.
Condensed Consolidated Statements of Cash FlowsLGBTQ LOYALTY HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
2022 | 2021 | 2022 | 2021 | |||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Revenue | $ | - | $ | - | $ | - | $ | - | ||||||||
Cost of net revenue | - | - | - | $ | - | |||||||||||
Gross profit | - | - | - | - | ||||||||||||
Operating expenses: | ||||||||||||||||
Personnel costs | 46,407 | 93,121 | 160,401 | 1,389,121 | ||||||||||||
Consulting fees | 11,250 | 38,500 | 26,500 | 71,500 | ||||||||||||
Legal and professional fees | 124,992 | 153,527 | 281,785 | 258,650 | ||||||||||||
Fund expenses | - | - | 100,000 | - | ||||||||||||
Sales and marketing | 71,237 | 40,500 | 98,939 | 40,500 | ||||||||||||
General and administrative | 15,028 | 28,392 | 51,345 | 56,514 | ||||||||||||
Depreciation and amortization | 6,448 | 6,448 | 12,896 | 12,896 | ||||||||||||
Total operating expenses | 275,362 | 360,488 | 731,866 | 1,829,181 | ||||||||||||
Loss from operations | (275,362 | ) | (360,488 | ) | (731,866 | ) | (1,829,181 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Interest expense | (1,419,622 | ) | (727,642 | ) | (1,525,750 | ) | (1,289,328 | ) | ||||||||
Change in derivative liability | (794,036 | ) | (2,658,949 | ) | (1,153,224 | ) | (2,245,976 | ) | ||||||||
Total other income (expense), net | (2,213,658 | ) | (3,386,591 | ) | (2,678,974 | ) | (3,535,304 | ) | ||||||||
Provision for income taxes | - | - | - | - | ||||||||||||
Net loss | $ | (2,489,020 | ) | $ | (3,747,079 | ) | $ | (3,410,840 | ) | $ | (5,364,485 | ) | ||||
Weighted average common shares outstanding - basic and diluted | 994,630,987 | 553,901,386 | 938,916,526 | 432,821,915 | ||||||||||||
Net loss per common share - basic and diluted | $ | (0.003 | ) | $ | (0.01 | ) | $ | (0.004 | ) | $ | (0.01 | ) |
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 | $ | — |
See the accompanying notes to the unaudited condensed consolidated financial statements
4 |
LifeApps Brands Inc.
LGBTQ LOYALTY HOLDINGS, INC.
NotesCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
2022 | 2021 | |||||||
Six Months Ended | ||||||||
June 30, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (3,410,840 | ) | $ | (5,364,485 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Amortization of debt discount and original issue discount | 109,690 | 704,007 | ||||||
Change in fair value of derivative liability | 1,153,224 | 2,245,976 | ||||||
Financing related costs - debt | 1,220,986 | 460,780 | ||||||
Stock-based compensation expense | - | 1,218,114 | ||||||
Depreciation and amortization | 12,896 | 12,896 | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other current assets | (1,345 | ) | 14,058 | |||||
Accounts payable | 422,984 | (105,699 | ) | |||||
Accrued salaries and consulting fees | 62,550 | 201,470 | ||||||
Accrued interest and dividends | 194,441 | 93,663 | ||||||
Net cash used in operating activities | (235,414 | ) | (519,220 | ) | ||||
Cash flows from investing activities: | ||||||||
Other receivables | - | (205,000 | ) | |||||
Net cash used in investing activities | - | (205,000 | ) | |||||
Cash flows from financing activities: | ||||||||
Net proceeds (repayments) from promissory note agreements | 170,000 | (1,000 | ) | |||||
Proceeds from issuance of convertible debenture agreements | - | 300,000 | ||||||
Proceeds from issuance of Series D preferred stock | - | 574,100 | ||||||
Net cash provided by financing activities | 170,000 | 873,100 | ||||||
Net change in cash | (65,414 | ) | 148,880 | |||||
Cash at beginning of period | 78,348 | 30,312 | ||||||
Cash at end of period | $ | 12,934 | $ | 179,192 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for income taxes | $ | - | $ | - | ||||
Cash paid for interest | $ | - | $ | - | ||||
Supplemental disclosure of non-cash financing activities: | ||||||||
Exercise of common stock warrants | $ | 140,966 | $ | 61,775 | ||||
Dividends on preferred stock | $ | 44,870 | $ | 11,241 | ||||
Conversion of Series D preferred stock for common stock | $ | 74,000 | $ | - | ||||
Deemed dividend on conversion of preferred stock | $ | 523,266 | $ | - | ||||
Debenture conversions | $ | 126,562 | $ | - | ||||
Reclassification of Series D preferred stock | $ | 1,015,999 | $ | - | ||||
Derivative liability – inception | $ | 306,646 | $ | - | ||||
Conversion of accrued consulting fees into common shares | $ | - | $ | 338,608 | ||||
Conversion of related party notes payable into common shares | $ | - | $ | 16,085 | ||||
Conversion of Series C preferred stock into common stock | $ | - | $ | 53,000 |
See the accompanying notes to Condensed Consolidated Financial Statementsthe unaudited condensed consolidated financial statements
September
5 |
LGBTQ LOYALTY HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||||||||||||||
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 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 | |||||||||||||||||||||||||||||||||||||||
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, 2021 | - | $ | - | - | $ | - | 51,559 | $ | 52 | 1,050 | $ | 1 | 832,719,287 | $ | 832,719 | $ | 13,215,129 | $ | (19,917,844 | ) | $ | (5,869,943 | ) | |||||||||||||||||||||||||||||
Exercise of warrants | - | - | - | - | - | - | - | - | 43,349,000 | 43,349 | (43,349 | ) | - | - | ||||||||||||||||||||||||||||||||||||||
Conversion of Series D preferred stock for common stock | - | - | - | - | - | - | (45 | ) | - | 36,000,000 | 36,000 | (36,000 | ) | - | �� | - | ||||||||||||||||||||||||||||||||||||
Deemed dividend on conversion of preferred stock | - | - | - | - | - | - | - | - | - | - | 237,924 | (237,924 | ) | - | ||||||||||||||||||||||||||||||||||||||
Dividends on preferred stock | - | - | - | - | - | - | - | - | - | - | - | (22,720 | ) | (22,720 | ) | |||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | - | (921,819 | ) | (921,819 | ) | |||||||||||||||||||||||||||||||||||||
Balances at March 31, 2022 | - | - | - | - | 51,559 | 52 | 1,005 | 1 | 912,068,287 | 912,068 | 13,373,704 | (21,100,307 | ) | (6,814,482 | ) | |||||||||||||||||||||||||||||||||||||
Debenture conversions | - | - | - | - | - | - | - | - | 84,325,397 | 84,325 | 42,237 | - | 126,562 | |||||||||||||||||||||||||||||||||||||||
Exercise of warrants | - | - | - | - | - | - | - | - | 97,617,300 | 97,617 | (97,617 | ) | - | - | ||||||||||||||||||||||||||||||||||||||
Conversion of Series D preferred stock for common stock | - | - | - | - | - | - | (19 | ) | - | 38,000,000 | 38,000 | (38,000 | ) | - | - | |||||||||||||||||||||||||||||||||||||
Deemed dividend on conversion of preferred stock | - | - | - | - | - | - | - | - | - | - | 285,342 | (285,342 | ) | - | ||||||||||||||||||||||||||||||||||||||
Reclassification of Series D preferred stock | - | - | - | - | - | - | - | - | - | - | (1,015,999 | ) | - | (1,015,999 | ) | |||||||||||||||||||||||||||||||||||||
Dividends on preferred stock | - | - | - | - | - | - | - | - | - | - | - | (22,150 | ) | (22,150 | ) | |||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | - | (2,489,020 | ) | (2,489,020 | ) | |||||||||||||||||||||||||||||||||||||
Balances at June 30, 2022 | - | $ | - | - | $ | - | 51,559 | $ | 52 | 986 | $ | 1 | 1,132,010,984 | $ | 1,132,010 | $ | 12,549,667 | $ | (23,896,819 | ) | $ | (10,215,089 | ) |
See the accompanying notes to the unaudited condensed consolidated financial statements
6 |
LGBTQ LOYALTY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 2017 and 20162022
(Unaudited)
Note 1. Nature of Business
Throughout this report, the terms “our,” “we,” “us,” and the “Company” refer to LGBTQ Loyalty Holdings, Inc. (formerly LifeApps Brands Inc.), including its subsidiaries.
On January 25, 2019, we acquired LGBT Loyalty LLC, a New York limited liability company, with the goal of creating the first LGBTQ Loyalty Preference Index ETF (the “Index ETF”) to provide the LGBTQ community with the power to influence the allocation of capital within a financial Index ETF based upon LGBTQ consumer preferences. The Index ETF was 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 has become 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 become 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. This Index 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”) sought to track the investment results (before fees and expenses) of the LGBTQ100 ESG Index. In late 2020, LPI was renamed to Advancing Equality Preference, Inc.
On March 25, 2022, ProcureAM, LLC (“Adviser”), the adviser to the Fund, after consultation with the Company, the sponsor of the ETF, determined that the Fund should be closed. Based upon a recommendation by the Adviser, the Board of Trustees of Procure ETF Trust I (the “Trust”) approved a Plan of Liquidation for the Fund under which the Fund would be liquidated on or about April 28, 2022 (the “Liquidation Date”). The Liquidation Date may be changed without notice at the discretion of the officers of the Trust. Beginning when the Fund commences the liquidation of its portfolio, the Fund will not pursue its investment objectives or, with certain exceptions, engage in normal business activities, and the Fund may hold cash and securities that may not be consistent with the Fund’s investment objective and strategy, which may adversely affect Fund performance. On April 28, 2022, the Company effectuated the termination and liquidation of the Fund pursuant to the terms of a Plan of Liquidation. As of this date, the Fund has ceased operations.
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Note 2. Correction of Previously Issued Financial Statements
Subsequent to the issuance of its Quarterly Report on SEC Form 10-Q for the three and six months ended June 30, 2022, the Company discovered several errors in its accounts on its condensed consolidated balance sheets and statements of operations.
The tables below reflect the effect of restatement on the Company’s financial statements for the three and six month periods ending June 30, 2022:
Schedule of Restatement of Company’s Financial Statements
June 30, 2022 | ||||||||||||
Original | Adjustment | As Restated | ||||||||||
Cash | $ | 11,269 | $ | 1,665 | $ | 12,934 | ||||||
Total assets | $ | 59,886 | $ | 1,665 | $ | 61,551 | ||||||
Accounts payable | $ | 1,386,797 | $ | 21,979 | $ | 1,408,776 | ||||||
Accrued salaries and consulting fees | 743,321 | (20,314 | ) | 723,007 | ||||||||
Derivative liability on convertible notes payable | 2,769,066 | 12,369 | 2,781,435 | |||||||||
Total liabilities | 10,262,606 | 14,034 | 10,276,640 | |||||||||
Common stock | 1,132,007 | 3 | 1,132,010 | |||||||||
Additional paid-in capital | 12,549,666 | 1 | 12,549,667 | |||||||||
Accumulated deficit | (23,884,446 | ) | (12,373 | ) | (23,896,819 | ) | ||||||
Total stockholders’ equity (deficit) | (10,202,720 | ) | (12,369 | ) | (10,215,089 | ) | ||||||
Total liabilities and stockholders’ equity (deficit) | $ | 59,886 | $ | 1,665 | $ | 61,551 |
Six Months Ended June 30, 2022 | ||||||||||||
Original | Adjustment | As Restated | ||||||||||
General and administrative | $ | 39,453 | $ | 11,892 | $ | 51,345 | ||||||
Total operating expenses | 719,974 | 11,892 | 731,866 | |||||||||
Interest expense | (1,525,116 | ) | (634 | ) | (1,525,750 | ) | ||||||
Change in derivative liability | (1,105,465 | ) | (47,759 | ) | (1,153,224 | ) | ||||||
Net loss | $ | (3,350,555 | ) | $ | (60,285 | ) | $ | (3,410,840 | ) |
Six Months Ended June 30, 2022 | ||||||||||||
Original | Adjustment | As Restated | ||||||||||
Net cash used in operating activities | $ | (237,079 | ) | $ | 1,665 | $ | (235,414 | ) |
Three Months Ended June 30, 2022 | ||||||||||||
Original | Adjustment | As Restated | ||||||||||
Debenture conversions | $ | 114,040 | $ | 12,522 | $ | 126,562 |
Furthermore, in the three months ended March 31, 2022, the deemed dividends related to Preferred Stock conversions were incorrectly recorded (instead of debiting shareholder deficit and crediting additional paid in capital, it did the opposite). They have been corrected in the second quarter. As the effect is a reclass within equity, we consider the change to be qualitatively immaterial.
Note 3. 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.$23,896,819 and have negative working capital of $10,255,436 as of June 30, 2022. To date we have funded our operations through advances from a related party, issuanceissuances of convertible debt, and the sale of our common stock.stock, preferred stock and warrants. We intend to raise additional funding through third partythird-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 unaudited 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 2022. Certain information and footnote disclosures normally included in unaudited condensed consolidated financial statements prepared in accordance with US GAAP have been omitted in accordance with the rules and regulations of the SEC. These unaudited 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, 2021 filed with the SEC. The unaudited condensed consolidated balance sheet as of December 31, 2021 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.
Prior Period Adjustments
In the first quarter of 2022, we determined that the Series D preferred stock included a substantive conversion option, and therefore should be equity classified. Previously, the amount was included as a current liability. We have reclassified the amount to Series D preferred stock equity and additional paid-in capital on the consolidated balance sheet and consolidated statement of stockholders’ equity as of December 31, 2021. We do not believe the change to be qualitatively material to the consolidated financial statements as of December 31, 2021.
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 measured at fair value:
Schedule of Financial Instruments at Fair Value
Fair Value Measurements | ||||||||||||||||
as of June 30, 2022: | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Liabilities: | ||||||||||||||||
Derivative liability on convertible notes payable and preferred stock | $ | - | $ | - | $ | 2,781,435 | $ | 2,781,435 | ||||||||
$ | - | $ | - | $ | 2,781,435 | $ | 2,781,435 |
Fair Value Measurements | ||||||||||||||||
as of December 31, 2021: | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Liabilities: | ||||||||||||||||
Derivative liability on convertible notes payable | $ | - | $ | - | $ | 1,398,127 | $ | 1,398,127 | ||||||||
$ | - | $ | - | $ | 1,398,127 | $ | 1,398,127 |
Refer to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accountedNote 7 for as liabilities,detail on the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changesunobservable inputs used 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 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.liability.
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Revenue is derived primarily from the sale of sports and fitness apparel and equipment, and software applications designed for use on mobile devices such as smart phones and tablets. Revenue is recognized only when persuasive evidence of an arrangement exists, the fee is fixed or determinable, the product or service has been delivered, and collectability is probable.
We sell our software directly via Internet download through third party agents. We recognize revenue when payment is received from the agent. Payment is received net of commission paid to the agent, usually 70% to us and 30% to the agent. We record the net amount received as revenue.
We also publish and sell digital magazines through the internet. Magazines can be purchased as individual volumes or as a subscription. To date we have not had any subscription sales.
Cost of Revenue
Cost of revenue includes the cost of amounts paid for articles, photography, editorial and production cost of the magazine and ongoing web hosting costs. Cost of revenue related to product sales includes the direct cost of those products sold.
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, 20172022 and 2016,2021, and the outstanding stock options and warrants are anti-dilutive. For the three and six months ended June 30, 2022 and 2021, the following number of potentially dilutive shares have been excluded from diluted net loss since such inclusion would be anti-dilutive:
2022 | 2021 | |||||||
Six Months Ended | ||||||||
June 30, | ||||||||
2022 | 2021 | |||||||
Stock options outstanding | - | 1,800,000 | ||||||
Warrants | 28,333,333 | 204,946,057 | ||||||
Shares to be issued upon conversion of notes | 6,170,908,567 | 203,651,096 | ||||||
Series D preferred stock | 2,010,000,000 | 67,826 | ||||||
Anti-dilutive securities | 8,209,241,900 | 410,464,979 |
Recent Pronouncements
From timeIn August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature and convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt and will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that is within the scope of ASU 2020-06. ASU 2020-06 is applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company has elected to time, newearly adopt this ASU in the first quarter of 2022 and the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements and related disclosures.
Other accounting pronouncementsstandards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are issued that we adopt asnot expected to have a material impact on the Company’s consolidated financial statements upon adoption.
Note 4. Intangible Assets
The Company capitalizes costs pertaining to the development of the specified effective date. We believe thatLGBTQ100 ESG Index website. The Company began amortizing these costs upon the recently issued standards that are not yet effective may not have an impact on our resultslaunch of operationsthe index, and financial position.will amortize the costs over a three-year useful life.
Note 3. Fixed Assets
At SeptemberJune 30, 20172022 and December 31, 2016, fixed2021, net intangible assets consisted ofwere $40,347 and $53,243, respectively. Amortization expense was $12,896 for both the following:
2017 | 2016 | |||||||
Furniture and Equipment | $ | 7,670 | $ | 7,670 | ||||
Less accumulated depreciation | (7,670 | ) | (7,670 | ) | ||||
$ | — | $ | — |
The amount charged to depreciation expense furniture and equipment was $0 and $629 for of the threesix months ended SeptemberJune 30, 20172022 and 2016, respectively and was $0 and $1,278 for2021, respectively.
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Note 5. Notes Payable
As of the nine months ended SeptemberJune 30, 2017 and 2016, respectively.
Note 4. Intangible Assets
At September 30, 20172022 and December 31, 2016, intangible assets consist2021, the Company has a note payable outstanding in the amount of $1,986. The note is past due at June 30, 2022 and is, therefore, in default. The note accrues interest at a rate of 2% per annum.
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, 2022, the full principal amount was outstanding and in default.
In 2019, the Company issued a promissory note for $50,000. The note includes $2,500 in original issue discount. The noted is unsecured and matured in December 2019. As of June 30, 2022, the full principal amount was outstanding an in default.
In April 2022, Advancing Equality Preference entered into a loan payable for $130,000 for proceeds of $100,000. The loan matured on June 30, 2022 and is currently in default.
Note 6. Convertible Notes Payable
During the six months ended June 30, 2022 and 2021, the Company recorded amortization of debt discount and original issue discount of $109,690 and $582,631, respectively, for all convertible debentures. This amount is included in interest expense in our consolidated statements of operations.
The Company did not file its Form 10-Q for the quarter ended March 31, 2022 on a timely basis. As a result, several default provisions were triggered with the Company’s outstanding debentures. The Company recorded an additional $374,125 in additional principal owed upon this default provision. Accordingly, the Company recorded $374,125 in interest expense in the consolidated statements of operations.
The following is a summary of the following:
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 allocationactivity of the purchase pricesconvertible notes payable and convertible debenture for the six months ended June 30, 2022:
Schedule of assets acquiredConvertible Notes Payable and Convertible Debentures Activity
Convertible | ||||
Debenture | ||||
Balance as of December 31, 2021 | $ | 2,195,145 | ||
Convertible debenture - debt discount | (213,932 | ) | ||
Additional principal per default provisions | 374,125 | |||
Amortization of debt discount and original issue discount | 109,690 | |||
Conversion to common stock, net of discount | (50,000 | ) | ||
Balance as of June 30, 2022 | $ | 2,415,028 |
The following comprises the balance of the convertible debenture outstanding at June 30, 2022 and December 31, 2021:
Schedule of Convertible Debenture Outstanding
June 30, | December 31, | |||||||
2022 | 2021 | |||||||
Principal amount outstanding | $ | 2,545,152 | $ | 2,221,027 | ||||
Less: Unamortized original debt discount | (123,421 | ) | - | |||||
Less: Unamortized original issue discount | (6,703 | ) | (25,882 | ) | ||||
Total | $ | 2,415,028 | $ | 2,195,145 |
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As of June 30, 2022 and December 31, 2021, the EMA Note was in default and the parity value of the EMA Note was determined to be $434,687. In 2021, the Company issued shares of common stock pursuant to conversions of outstanding principal.
Note 7. Derivative Liability
We evaluated the terms of the conversion features of the debentures and related debenture warrants as noted above and below, in accordance with ASC 805.. We have not recognized any goodwillTopic No. 815 - 40, Derivatives and Hedging - Contracts in these financial statements. Additionally, ASC 805 gives guidance on five typesEntity’s Own Stock, and determined they are indexed to the Company’s common stock and that the conversion features meet the definition of assets: marketing-related, customer-related, artistic-related, contract-related,a liability. Therefore, we bifurcated the conversion feature and technology based intangible assets. We identified identifiable intangibles that are marketing-related, customer-related,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 technology based.
derivative term. The amount charged to amortization expense for all intangibles was $225 and $9,356fair value recorded for the threederivative 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 with the below assumptions. 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.
Schedule of Conversion Feature of Derivative Liability
Six Months Ended | ||||||||
June 30, | ||||||||
2022 | 2021 | |||||||
Risk-free interest rate | 2.01 | % | 0.09 | % | ||||
Expected term (in years) | 0.48 | 1.00 | ||||||
Expected volatility | 154.5 | % | 237.4 | % | ||||
Expected dividend yield | 0 | % | 0 | % | ||||
Exercise price of underlying common shares | $ | 0.001 | $ | 0.004 |
During the six months ended SeptemberJune 30, 20172022, the entire value of the principal of the debentures was assigned to the derivative liability and 2016, respectivelyrecognized as a debt discount. The debt discount is recorded as reduction (contra-liability) to the debentures and is being amortized over the initial term. Any excess balance was $675recognized as origination interest on the derivative liability and $18,055expensed 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 ninesix months ended SeptemberJune 30, 20172022:
Schedule of Derivative Liability Activity
Debenture | ||||
Balance as of December 31, 2021 | $ | 1,398,127 | ||
Initial fair value per derivative recognition | 306,646 | |||
Conversion of debenture to common stock | (76,562 | ) | ||
Change in fair value of derivative liability | 1,153,224 | |||
Balance as of June 30, 2022 | $ | 2,781,435 |
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Note 8. 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 2016, respectively.
Estimated future amortization expense relatedthe 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 intangiblesRescission 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.
On July 14, 2021, the Company issued 237,500. On August 20, 2021, the Company issued shares of Series D Preferred Stock to GHS pursuant to a Securities Purchase Agreement (“GHS August Agreement”) for net proceeds of $250,000. shares of Series D Preferred Stock to GHS pursuant to a Securities Purchase Agreement (“GHS July Agreement”) for net proceeds of $
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.
In January 2022, GHS converted 54,000 for shares of common stock at a conversion price of $0.0015 per share. As a result of the conversion, the Company recorded a deemed dividend of $237,924, which is calculated as the number of Septembershares of common stock issued multiplied by the difference between the conversion price ($0.0015) and original fixed conversion price of $0.008109. shares of Series D preferred stock with a stated value of $
In June 2022, GHS converted 22,800 for shares of common stock at a conversion price of $0.0006 per share. As a result of the conversion, the Company recorded a deemed dividend of $285,342, which is calculated as the number of shares of common stock issued multiplied by the difference between the conversion price ($0.0006) and original fixed conversion price of $0.008109. shares of Series D preferred stock with a stated value of $
As of June 30, 20172022, there were shares of Series D preferred stock outstanding, and $97,814 in accrued Series D dividends. As of December 31, 2021, there were shares of Series D preferred stock outstanding, and $52,944 in accrued Series D dividends.
Due to the Company’s late filing on its Form 10-Q for the quarter ended March 31, 2022 (see Note 7), default provisions were triggered with the GHS agreement. As a result, it was determined all preferred stock were due for redemption immediately. The Company determined that $1,758,224, inclusive of the stated value of the Series D preferred stock, and inclusive of accrued dividends, default penalties and interest, was due. As such, the Company reclassified $1,015,999 of Series D preferred stock from additional paid-in capital to a current liability. The remaining amount of $644,411 was included in interest expense in the consolidated statements of operations.
Note 9. Stockholders’ Equity (Deficit)
Common Stock
In January 2022, GHS converted 54,000 for shares of common stock at a conversion price of $0.0015 per share. shares of Series D preferred stock with a stated value of $
In June 2022, GHS converted 57,000 for shares of common stock at a conversion price of $0.0006 per share. shares of Series D preferred stock with a stated value of $
In the six months ended June 30, 2022, Auctus exercised warrants for shares of common stock.
In March 2021, an aggregate of 961,666 is as follows: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, $
Year Ended December 31, | |||||
2017 | 225 | ||||
2018 | 225 | ||||
$ | 450 |
In March 2021, an aggregate of shares of common stock were issued to employees and consultants for accrued and current consulting services for a total fair value of $ .
In June 2021, an aggregate of shares of common stock were issued pursuant to conversion of balances owed to a related party and accrued consulting services totaling $ .
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, 2022 and 2021, the Company issued 50,000 and $495,247, all respectively. and shares of common stock pursuant to conversion of debentures in the principal amount of $
Options
As of June 30, 2022 and December 31, 2021, we had options remaining outstanding pursuant to the 2012 Equity Incentive Plan.
Warrants
As of June 30, 2022 and December 31, 2021, we had 0.01 and $0.02 per share. In the six months ended June 30, 2022, Auctus exercised warrants for shares of common stock. and warrants outstanding, respectively, with a weighted average exercise price of $
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Note 11. Related PartiesParty Transactions
Parties, which can be a corporation or an individual, are considered to be related if we have the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
Amount dueNotes Payable to Related Party
Notes payable to related parties represent cash advances, salary accruals and amounts paid on our behalf by officers and shareholders of the Company. These advances are non-interest bearing, short term in nature and due on demand. The balance at SeptemberJune 30, 20172022 and December 31, 2016,2021 included a note of $1,800 with a 2% annual interest rate. Currently the Company has defaulted on this obligation. Forbearance has been granted by the related party.
In February 2022, the Company issued a promissory note to a related party for $70,000. The note is unsecured and matured in April 2022. The note does not bear interest. The note includes a promise to issue shares of the Company’s preferred stock, which was $697,649undetermined as of June 30, 2022. As of June 30, 2022, the note was in default.
Accrued Salaries and $536,639, respectively. Salary accrualsCompensation
As of June 30, 2022 and December 31, 2021, accrued salaries to our company officers and executive director totaled $522,804 and $472,804, respectively, and is included in accrued salaries and consulting fees in our consolidated balance sheets.
In March 2021, we issued shares of common stock to the Chief Operating Officer for a total fair value of $ .
Board of Directors
In March 2021, we issued period amounted to $112,500of the seven board members, including the Chief Executive Officer, for an aggregate of shares. Of these share issuances, $961,666 is included in personnel costs in the consolidated statements of operations and net cash advances amounted to $48,510the remaining $ was converted from accrued salaries and $52,485, respectivelyconsulting fees. shares of common stock to each
A former board member is the co-founder and president of ProcureAM, LLC, the fund advisor for the nine months ended September 30, 2017Fund. During 2021, we initially received $100,000 from ProcureAM and 2016, and were included in amounts due to related party.
LifeApps Brands Inc.
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 666,667 shares of our common stock. During October 2015 the Board of Directors amended the plan to increase the number of shares issuable under the LifeApps Digital Media Inc. 2012 Equity Incentive Plan to 20,000,000, on a post-Reverse Stock Split basis. The plan provides for the award of options, stock appreciation rights, performance share awards, and restricted stock and stock units. The plan is administered by the Board of Directors. Pursuantan additional $305,000 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 ascustodian. As of December 31, 2016. 2021, we have recorded $305,000 in fund expenses and do not expect to receive any amounts back from ProcureAM. In the six months ended June 30, 2022, we recorded an additional $100,000 in fund expenses which we do not expect to receive any amounts back from ProcureAM. As such, other receivable was $0 on the consolidated balance sheets.
On May 24, 2016 ourApril 15, 2022, Deborah Fuhr submitted her resignation as a member of the Board, effective immediately. Ms. Fuhr submitted her resignation to pursue other interests. The Company’s Board accepted Ms. Fuhr’s resignation and expressed its appreciation for the services she provided to the Company.
Accounts Payable
As of Directors granted optionsJune 30, 2022 and December 31, 2021, the Company had $168,308 and $102,808, respectively, included in accounts payable to purchase 15,000,000 shares of our common stock torelated parties including officers and or directors and a consultant. The options are exercisable quarterly from the grant date over a four-year term.board members.
The fair value of the options granted, $39,000, was estimated at the date of grant using the Black-Scholes option pricing model, with the following assumptions:
Stock based compensation expense recorded for the periods ended September 30, 2017 and 2016 was $7,312 and $0, respectively.
The following is a summary of stock options issued to employees and directors:
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, 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 authorities in federal and state jurisdictions to audit our tax returns from 2010 through the current period. Our policy is to account for income tax related interest and penalties in income tax expense in the consolidated statement of operations. There have been no income tax related interest or penalties assessed or recorded.
Note 11. Business Segments
We currently have two business segments; (i) the sale of physical products (“Products”) and (ii) digital publishing (“Publishing”). The accounting policies of the segments are the same as those described in the summary of significant accounting policies.
The publishing segment does not meet the quantitative threshold for disclosure as outlined ASC Topic 280Segment Reporting.
All of our revenue is generated in the United States and accordingly no geographic segment reporting is included.
No customers accounted for more than 10% of our revenues in the periods September 30, 2017 and 2016.
Note 12. Subsequent Events
Management has evaluated all activity up to November 11, 2022 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 August 25, 2022, Barney Frank and Martina Navratilova submitted their resignations as Directors of LGBTQ Loyalty Holdings, Inc. (the “Company”) with immediate effect. Additionally, on August 27, 2022, William Bean submitted his resignation as a Director of the Company with immediate effect. Mr. Frank and Mr. Bean submitted their resignations due to differences of opinion in the direction of the Company. Each of Messrs. Frank and Bean and Ms. Navratilova have offered to tender their respective shares of Common Stock back to the Company.
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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, 20162022 and for the ninethree and six months ended SeptemberJune 30, 20172022 and 20162021 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, 20162021 filed with the Securities and Exchange Commission (the “SEC”) on April 18, 2017.15, 2022. 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. Moreover, we operate in a very competitive changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and certainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.
Business Overview
On January 25, 2019, we 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 was 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 has become 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 become known as ‘the power of difference’.
Overview
LifeApps®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. This Index 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 a licensed developer and publisher of appsthe 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 licensed Fund Adviser ProcureAM, and iPad mini. LifeApps® is alsowas approved by the Securities and Exchange Commission (“SEC”) in early January 2020. The LGBTQ + ESG100 ETF (the “Fund”) sought to track the investment results (before fees and expenses) of the LGBTQ100 ESG Index. In late 2020, LPI was renamed to Advancing Equality Preference, Inc.
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Fund Closure
On March 25, 2022, ProcureAM, LLC (“Adviser”), the adviser to the Fund, after consultation with the Company, the sponsor of the ETF, determined that the Fund should be closed. Based upon a licensed developer on both Google Play and Amazon Appstore for Android. LifeApps®recommendation by the Adviser, the Board of Trustees of Procure ETF Trust I (the “Trust”) has distributed apps/publications on all three platforms. Moving forward LifeApps® is developing new apps, and exploring new opportunities pairing apps with physical retail and e-commerce/mobile-commerce products.
approved a Plan of OperationLiquidation for the Fund under which the Fund will be liquidated on or about April 28, 2022 (the “Liquidation Date”). The Liquidation Date may be changed without notice at the discretion of the officers of the Trust. Beginning when the Fund commences the liquidation of its portfolio, the Fund will not pursue its investment objectives or, with certain exceptions, engage in normal business activities, and the Fund may hold cash and securities that may not be consistent with the Fund’s investment objective and strategy, which may adversely affect Fund performance.
LifeApps® intendsLGBTQ 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 continuecenter stage overnight in the financial sector. In addition, LGBTQ Loyalty was featured at the Inside ETFs Summit in early 2020 with Board Members, Barney Frank and Billy Bean speaking on the “The Power of Inclusion & Equality” for investors. Our media strategy objective is to lay the groundwork for additional high-profile positioning of the brand as we work to achieve the desired increased financial media coverage and growth in AUM valuation for our company and shareholders.
Our Products
Our mission is to build a sustainable and well recognized brand focused on unlocking the growing purchasing power of the LGTBQ community globally by offering a robust LGBTQ Index and core ETF portfolio that attracts key institutional investors and corporations.
At the nucleus of our LGBTQ Loyalty Preference Index is our partner-driven Crowd Preference Index Methodology (CPIM) which we believe disrupts ESG investing. This is achieved through an elevated screening process of financial performance data and ESG standards and practices, whereby LGBTQ community data on diversity and inclusion compliance directly impacts corporate financial results and transparently identifies and recognizes high performance companies who have consistently outperformed the S&P 500 index or equivalent sector standards and norms.
We intend to extend the LGBTQ Loyalty Index brand with future plans to develop and licenseindices with a focus on the LifeApps Mobile App Platform. We will research and seek out aligned companies with need for tutorial based apps for mobile and we will work‘Social’ component of ESG utilizing our proprietary financial slogan of “Advancing Equality” within other gender, minority interest groups.
Revenue
The Company focus over the past few years 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 2022 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 order2022 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.
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The Company’s acquisition
We have achieved no revenues to date from our LGBTQ related operations and have been focused on building our product and achieving performance results and media branding over the course of the past twelve months. There are no assurances that can be given that we will achieve revenues or profitability in the future.
Business Strategy
Our business strategy is targeted to the estimated three trillion-dollar global purchasing power of purchasing companies, development resourcesthe LGBTQ consumer demographic. More than nineteen million people identify themselves as LGBTQ in the US and assetsfour-hundred-fifty million globally while the LGBTQ community is composed of some of the most loyalty-driven consumers in the world.
We believe that the LGBTQ demographic is one of the most highly sought-after economic groups in the world from corporate America down to the local business owner because of their higher median income and brand loyalty. What makes targeting and supporting this dynamic demographic even more extraordinary and rewarding is that friends, family, employers, employees, teachers, coaches and fans of our community so loyally support the brands, products and services that in turn support us. We further believe that this loyalty across the board is time tested, proven, growing and expanding and ultimately extremely rewarding to all that are aligned withembraced by the LGBTQ community. Connecting the world’s most supportive LGBTQ companies to the dynamic, loyal and ever-increasing spending power of the LGBTQ community is a consequential step forward for the LGBTQ movement and investment community.
Many Fortune 500 companies are directing more of their consumer advertising and promotional spend towards celebrating diversity and equality. Our long-term goal is to reinforce the financial performance of those Corporations as they foster and integrate LGBTQ equality practices through their Diversity and Inclusion policies as a cornerstone of their corporate culture. Our LGBTQ100 Index of the top 100 corporate constituents have already embraced and enacted this standard of Equality excellence. See our areas of interest can further aid intop LGBTQ100 Index constituents on our entering additional market segments. We will actively research and engage in the acquisition of companies and resources that can expedite our entrance into new markets, or strengthen our position in existing ones.website.
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.$23,896,819 and have negative working capital of $10,255,436 as of June 30, 2022. To date we have funded our operations through advances from a related party, issuanceissuances of convertible debt, and the sale of our common stock.stock, preferred stock and warrants. 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.
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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, 2017,2022 compared with the three months ended SeptemberJune 30, 20162021
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.2022 or 2021.
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, 20172022 and 2016:2021:
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, | ||||||||||||||||
2022 | 2021 | Change $ | Change % | |||||||||||||
Personnel costs | $ | 46,407 | $ | 93,121 | $ | (46,714 | ) | -50 | % | |||||||
Consulting fees | 11,250 | 38,500 | (27,250 | ) | -71 | % | ||||||||||
Legal and professional fees | 124,992 | 153,527 | (28,535 | ) | -19 | % | ||||||||||
Fund expenses | - | - | - | 100 | % | |||||||||||
Sales and marketing | 71,237 | 40,500 | 30,737 | 76 | % | |||||||||||
General and administrative | 15,028 | 28,392 | (13,364 | ) | -47 | % | ||||||||||
Depreciation and amortization | 6,448 | 6,448 | - | 0 | % | |||||||||||
$ | 275,362 | $ | 360,488 | $ | (85,126 | ) | -24 | % |
Personnel costs were constant for the periodsinclude officer salaries and consist solely of accrual of officer salary pursuant to an employment contract.directors’ compensation. The decrease in personnel costs is primarily due 2021 board compensation.
ProfessionalConsulting fees decreased $4,765 (73.3%) from $11,265 forby $27,250 during the three months ended SeptemberJune 30, 20162022, primarily due to $6,500 forlimited operations in developing the Index. Consulting fees represent our efforts to launch the LGBTQ100 ESG Index and LGBTQ + ESG100 ETF.
Legal and professional fees decreased by $28,535 primarily due to less financing matters in 2022.
Sales and marketing costs increased by $30,737 in the three months ended SeptemberJune 30, 2017. The decrease is a result of timing of accounting2022 based on some new branding efforts in 2022.
General and legal services rendered.
Marketing and advertisingadministrative expenses were not significant during the quarters ended September 30, 2017 and 2016.
Research and development includes website and applications development costs. Research and development and development activities were not significant during the quarters ended September 30, 2017 and 2016. Development is an ongoing cost and we anticipate that our development costs both for website and applications may increase in future periods.
Travel expenses were not significant during the quarters ended September 30, 2017 and 2016.
Rent expense decreased by $4,726 (650%) from $5,452 for$13,364 in 2022 due to less operations overall.
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Depreciation and amortization expense was $6,448 in 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 of2022 and 2021, 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, 2022 and 2021:
Three Months Ended | ||||||||||||||||
June 30, | ||||||||||||||||
2022 | 2021 | Change $ | Change % | |||||||||||||
Interest expense | $ | (1,419,622 | ) | $ | (727,642 | ) | (691,980 | ) | 95 | % | ||||||
Change in derivative liability | (794,036 | ) | (2,658,949 | ) | 1,864,913 | -70 | % | |||||||||
$ | (2,213,658 | ) | $ | (3,386,591 | ) | $ | 1,172,933 | -35 | % |
Interest expense is primarily attributable to origination interest and amortization of debt discount. Interest expense includes the default penalties to record additional amounts owed on the convertible debentures and Series D preferred stock.
Change in derivative liability includes the mark-to-market adjustment of the derivative liability in connection with our convertible debenture.
Net loss was $2,489,020 and $3,747,079 for the three months ended June 30, 2022 and 2021, respectively.
Six months ended June 30, 2022 compared with the six months ended June 30, 2021
There were no revenues during the six months ended June 30, 2022 or 2021.
The following is a breakdown of our operating expenses for the six months ended June 30, 2022 and 2021:
Six Months Ended | ||||||||||||||||
June 30, | ||||||||||||||||
2022 | 2021 | Change $ | Change % | |||||||||||||
Personnel costs | $ | 160,401 | $ | 1,389,121 | $ | (1,228,720 | ) | -88 | % | |||||||
Consulting fees | 26,500 | 71,500 | (45,000 | ) | -63 | % | ||||||||||
Legal and professional fees | 281,785 | 258,650 | 23,135 | 9 | % | |||||||||||
Fund expenses | 100,000 | - | 100,000 | 100 | % | |||||||||||
Sales and marketing | 98,939 | 40,500 | 58,439 | 144 | % | |||||||||||
General and administrative | 51,345 | 56,514 | (5,169 | ) | -9 | % | ||||||||||
Depreciation and amortization | 12,896 | 12,896 | - | 0 | % | |||||||||||
$ | 719,974 | $ | 1,829,181 | $ | (1,097,315 | ) | -60 | % |
Personnel costs include officer salaries and directors’ compensation. The decrease in personnel costs is primarily due 2021 board compensation.
Consulting fees decreased by $45,000 during the six months ended June 30, 2022, primarily due to limited operations in developing the Index. Consulting fees represent our efforts to launch the LGBTQ100 ESG Index and LGBTQ + ESG100 ETF.
Legal and professional fees increased by $23,135 due to less financings in 2022.
Fund expenses represented the $100,000 incurred to Procure.
Sales and marketing costs increased by $58,439 in the six months ended June 30, 2022 based on some new branding efforts in 2022.
General and administrative expenses decreased by $5,169 in 2022 due to less operations overall.
Depreciation and amortization expense was $12,896 in the six months ended June 30, 2022 and 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, 20172022 and 2016:2021:
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 |
Six Months Ended | ||||||||||||||||
June 30, | ||||||||||||||||
2022 | 2021 | Change $ | Change % | |||||||||||||
Interest expense | $ | (1,525,750 | ) | $ | (1,289,328 | ) | (236,422 | ) | 18 | % | ||||||
Change in derivative liability | (1,153,224 | ) | (2,245,976 | ) | 1,092,752 | -49 | % | |||||||||
$ | (2,678,974 | ) | $ | (3,535,304 | ) | $ | 856,330 | -24 | % |
Personnel costs were constant forInterest expense is primarily attributable to origination interest and amortization of debt discount. Interest expense includes the periodsdefault penalties to record additional amounts owed on the convertible debentures and consist solelySeries D preferred stock.
Change in derivative liability includes the mark-to-market adjustment of accrual of officer salary pursuant to an employment contract.
Professional fees decreased $7,570 (40.8%) from $30,930 for the nine months ended September 30, 2016 to $38,500 for the nine months ended September 30, 2017. The decrease is a result 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 $3,410,840 and $5,364,485 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.2022 and 2021, respectively.
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, 2022, we had $12,934 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, 2017,2022, we had negativea working capital deficit of $(826,480)$10,255,436 as compared to negativea working capital deficit of $(665,019)$7,001,879 at December 31, 2016.2021.
During the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, operations used cash of $48,616$235,414 and $54,918 respectively.
During the nine months ended September 30, 2017$519,220, 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 financing activities was $48,510changes in operating assets and $52,485, respectively.liabilities.
Additionally,In 2022, we received net amounts of $15,510 and $2,350 of cash advances from our chief executive officer and net amounts of $33,000 and $52,135 of cash advances$70,000 in proceeds from a directorrelated party note. Advanced Equity also entered into a loan for $100,000.
In 2021, we received $300,000 in proceeds from the issuance of convertible debentures and shareholders duringrepaid notes payable of $1,000. We also received $574,100 from the nine months ended September, 2017 and 2016, respectively.issuance of Series D preferred stock.
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 or 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.
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 and six months ended SeptemberJune 30, 20172022 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, 20162021 filed with the SEC on April 18, 2017,15, 2022, which may be accessed via EDGAR through the Internet atwww.sec.gov (the “2021 Form 10-K”). The Risk Factors set forth in the 2021 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 2021 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 made no salesRecent Sales of equity securities duringUnregistered Securities
Refer to the quarter ended September 30, 2017.footnotes of the accompanying consolidated financial statements for convertible debentures entered into and issuances of common and preferred stock.
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, 2022 the outstanding balance was approximately $1,986.
All other of the Company’s outstanding convertible debentures and notes payables are currently in default.
ITEM 4. MINE SAFETY DISCLOSURE
Not Applicable.
On June 1, 2017 we entered intoApril 15, 2022, Deborah Fuhr submitted her resignation as a non-binding Lettermember of Intent (“LOI”the Board, effective immediately. Ms. Fuhr submitted her resignation to pursue other interests. The Company’s Board accepted Ms. Fuhr’s resignation and expressed its appreciation for the services she provided to the Company.
On August 25, 2022, Barney Frank and Martina Navratilova submitted their resignations as Directors of LGBTQ Loyalty Holdings, Inc. (the “Company”) with Gents Group, Inc. (“Gents”),immediate effect. Additionally, on August 27, 2022, William Bean submitted his resignation as a men’s lifestyleDirector of the Company with immediate effect. Mr. Frank and fashion company, regarding our prospective purchaseMr. Bean submitted their resignations due to differences of substantially allopinion in the direction of Gents’ operating assetsthe Company. Each of Messrs. Frank and certain liabilities (upBean and Ms. Navratilova have offered to $150,000) in exchange for up to 10,000,000tender their respective shares of our common stock. The LOI had a 45-day term which was subjectCommon Stock back 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 companiesCompany.
Exhibit Number | Description of Exhibit | |
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
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. | |
Inline XBRL Instance Document | ||
Inline XBRL Taxonomy Extension Schema Document | ||
Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||
Inline XBRL Taxonomy Extension Labels Linkbase Document | ||
Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||
Inline XBRL Taxonomy Extension Definition Linkbase Document | ||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL 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.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
November | By: | /s/ Robert |
Robert |
November 14, 2022 | By: | /s/ Eric Sherb |
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