LGBTQ Loyalty (LFAP) 10-Q/A2022 Q2 Quarterly report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

Amendment No. 1

For the quarterly period ended June 30, 2022

For the transition period from ____________ to ____________

Commission file number: 000-54867

LGBTQ LOYALTY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

2435 Dixie Highway, Wilton Manors, FL 33305

(Address of principal executive offices, including zip code)

Tel: (858)-577-1746

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and emerging growth company in Rule 12b-2 of the Exchange Act.

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 November 9, 2022 the Company had 1,179,890,617 shares of common stock, $0.001 par value, issued and outstanding.

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 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.

LGBTQ Loyalty Holdings, Inc.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022

TABLE OF CONTENTS

LGBTQ Loyalty Holdings, Inc.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of LGBTQ Loyalty Holdings, Inc.

Results 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 for them to be in conformity with accounting principles generally accepted in the United States of 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

LGBTQ LOYALTY HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

See the accompanying notes to the unaudited condensed consolidated financial statements

LGBTQ LOYALTY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See the accompanying notes to the unaudited condensed consolidated financial statements

LGBTQ LOYALTY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See the accompanying notes to the unaudited condensed consolidated financial statements

LGBTQ LOYALTY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

See the accompanying notes to the unaudited condensed consolidated financial statements

LGBTQ LOYALTY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

June 30, 2022

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.

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

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 have been prepared in conformity with accounting principles generally accepted in the United States (“US GAAP”), which contemplates our continuation as a going concern. We have incurred losses to date of $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, issuances of convertible debt, and the sale of common 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.

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, LGBTQ Loyalty, LLC, and Advancing 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.

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 and derivative liabilities.

Our financial instruments consist of cash, other current assets, accounts payables, accruals, and notes payable. The carrying values of these instruments approximate fair value because of the short-term maturities. The fair value of the Company’s convertible debentures and promissory notes approximates their carrying values as the underlying imputed interest rates approximates the estimated current market rate for similar instruments. The derivative is measured as a Level 3 instrument due to the various inputs which requires significant management judgment. Refer to Note 6 for detail.

The following table is a summary of our financial instruments measured at fair value:

Schedule of Financial Instruments at Fair Value 

Refer to Note 7 for detail on the unobservable inputs used in the fair value of the derivative liability.

Earnings per Share

We calculate earnings per share in accordance with ASC Topic 260 Earnings 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 three and six months ended June 30, 2022 and 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:

 Schedule of Anti-dilutive Securities Excluded from Diluted Net Loss

Recent Pronouncements

In 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 early 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 standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

Note 4. Intangible Assets

The Company capitalizes costs pertaining to the development of the LGBTQ100 ESG Index website. The Company began amortizing these costs upon the launch of the index, and will amortize the costs over a three-year useful life.

At June 30, 2022 and December 31, 2021, net intangible assets were $40,347 and $53,243, respectively. Amortization expense was $12,896 for both the six months ended June 30, 2022 and 2021, respectively.

Note 5. Notes Payable

As of June 30, 2022 and December 31, 2021, 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 activity of the convertible notes payable and convertible debenture for the six months ended June 30, 2022:

Schedule of Convertible Notes Payable and Convertible Debentures Activity

The following comprises the balance of the convertible debenture outstanding at June 30, 2022 and December 31, 2021:

Schedule of Convertible Debenture Outstanding 

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 60,714,000 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 Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock, and determined they are indexed to the Company’s common stock and that the conversion features meet the definition of a liability. Therefore, we bifurcated the conversion feature and accounted for it as a separate derivative liability.

To determine the fair value of our embedded derivatives, management evaluates assumptions regarding the probability of certain future events. Other factors used to determine fair value include our period end stock price, historical stock volatility, risk free interest rate and derivative term. The fair value recorded for the derivative liability varies from period to period. This variability may result in the actual derivative liability for a period either above or below the estimates recorded on our consolidated financial statements, resulting in significant fluctuations in other income (expense) because of the corresponding non-cash gain or loss recorded.

We value the conversion feature at origination of the notes using the Black-Scholes valuation model 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

During the six months ended June 30, 2022, the entire value of the principal of the debentures was assigned to the derivative liability and recognized 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 recognized as origination interest on the derivative liability and expensed on origination. In accordance with the Company’s sequencing policy, shares issuable pursuant to the convertible debentures would be settled subsequent to the Company’s Series B preferred stock.

The following is a summary of the activity of the derivative liability for the six months ended June 30, 2022:

Schedule of Derivative Liability Activity 

Note 8. Preferred Stock

Series D Convertible Preferred Stock

On April 8, 2021, the Company issued 400 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 150 shares of Series D Preferred Stock to GHS Investments, LLC pursuant to a Securities Purchase Agreement (“GHS May Agreement”) for net proceeds of $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.

Notwithstanding, on June 23, 2021, GHS and the Company entered into a Rescission Agreement (the “Rescission Agreement”) pursuant to which the Company and GHS agreed to rescind, ab initio, the issuances of Warrants to GHS. Pursuant to the Rescission Agreement, GHS and the Company agreed that the issuance of the Warrants are unconditionally and irrevocably rescinded ab initio by GHS and the Company, and the Warrants are neither valid nor effective in any manner whatsoever. Further, GHS and the Company acknowledged that each has been restored to the position in which such party found itself on the date that the respective GHS Agreement was executed but without any references, rights or obligations relative to the Warrants contained in, or otherwise granted in, either the GHS Agreements or the Warrants. As a result, GHS has no rights whatsoever to the Warrants and the Company has no rights whatsoever to the any exercise price that it may have received pursuant to the Warrants. In connection with the execution and delivery of the Rescission Agreement, the Company and GHS entered into two (2) Amended and Restated Purchase Agreements which each seek to amend and restate the terms and conditions contained in the April Agreement and the May Agreement.

On July 14, 2021, the Company issued 250 shares of Series D Preferred Stock to GHS pursuant to a Securities Purchase Agreement (“GHS July Agreement”) for net proceeds of $237,500. On August 20, 2021, the Company issued 250 shares of Series D Preferred Stock to GHS pursuant to a Securities Purchase Agreement (“GHS August Agreement”) for net proceeds of $250,000.

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 45 shares of Series D preferred stock with a stated value of $54,000 for 36,000,000 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 shares of common stock issued multiplied by the difference between the conversion price ($0.0015) and original fixed conversion price of $0.008109.

In June 2022, GHS converted 19 shares of Series D preferred stock with a stated value of $22,800 for 38,000,000 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.

As of June 30, 2022, there were 986 shares of Series D preferred stock outstanding, and $97,814 in accrued Series D dividends. As of December 31, 2021, there were 1,050 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 45 shares of Series D preferred stock with a stated value of $54,000 for 36,000,000 shares of common stock at a conversion price of $0.0015 per share.

In June 2022, GHS converted 19 shares of Series D preferred stock with a stated value of $57,000 for 38,000,000 shares of common stock at a conversion price of $0.0006 per share.

In the six months ended June 30, 2022, Auctus exercised warrants for 140,966,300 shares of common stock.

In March 2021, an aggregate of 140,000,000 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, $961,666 is included in personnel costs in the consolidated statements of operations.

In March 2021, an aggregate of 31,834,386 shares of common stock were issued to employees and consultants for accrued and current consulting services for a total fair value of $236,448.

In June 2021, an aggregate of 11,956,004 shares of common stock were issued pursuant to conversion of balances owed to a related party and accrued consulting services totaling $204,364.

In June 2021, Auctus exercised 32,142,857 warrants into shares of common stock.

During the six months ended June 30, 2021, Pride converted 53,000 shares of Series C preferred stock for 53,000,000 shares of common stock.

During the six months ended June 30, 2022 and 2021, the Company issued 84,325,397 and 137,987,777 shares of common stock pursuant to conversion of debentures in the principal amount of $50,000 and $495,247, all respectively.

Note 10. Options and Warrants

Options

As of June 30, 2022 and December 31, 2021, we had 0 options remaining outstanding pursuant to the 2012 Equity Incentive Plan.

Warrants

As of June 30, 2022 and December 31, 2021, we had 28,333,333 and 174,058,782 warrants outstanding, respectively, with a weighted average exercise price of $0.01 and $0.02 per share. In the six months ended June 30, 2022, Auctus exercised warrants for 140,966,300 shares of common stock.

Note 11. Related Party Transactions

Parties, which can be a corporation or an individual, are considered to be related if we have the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.

Notes Payable to Related Party

Notes payable to related parties at June 30, 2022 and December 31, 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 undetermined as of June 30, 2022. As of June 30, 2022, the note was in default.

Accrued Salaries and Compensation

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 200,000,000 shares of common stock to the Chief Operating Officer for a total fair value of $160,000.

Board of Directors

In March 2021, we issued 20,000,000 shares of common stock to each of the seven board members, including the Chief Executive Officer, for an aggregate of 140,000,000 shares. Of these share issuances, $961,666 is included in personnel costs in the consolidated statements of operations and the remaining $138,334 was converted from accrued salaries and consulting fees.

A former board member is the co-founder and president of ProcureAM, LLC, the fund advisor for the Fund. During 2021, we initially received $100,000 from ProcureAM and provided an additional $305,000 to the custodian. As of December 31, 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 April 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 June 30, 2022 and December 31, 2021, the Company had $168,308 and $102,808, respectively, included in accounts payable to related parties including officers and board members.

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.

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 June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 and the related notes. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations section to “us,” “we,” “our,” and similar terms refer to LGBTQ Loyalty Holdings, Inc., a Delaware corporation. This discussion includes forward-looking statements, as that term is defined in the federal securities laws, based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. Words such as “anticipate,” “estimate,” “plan,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions are used to identify forward-looking statements.

We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Factors that may affect our results include, but are not limited to, the risk factors in Item 2.01 in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (the “SEC”) on April 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’.

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.

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 recommendation by the Adviser, the Board of Trustees of Procure ETF Trust I (the “Trust”) has approved a Plan of Liquidation 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.

LGBTQ Loyalty has generated an abundance of media coverage for our premier LGBTQ Index product with the launch and listing on NYSE of the LGBTQ100 ESG Index. The exclusive media launch with Bloomberg Media was instrumental in propelling the LGBTQ100 brand to center stage overnight in the financial sector. In addition, LGBTQ Loyalty was featured at the Inside ETFs Summit in early 2020 with Board Members, Barney Frank and Billy Bean speaking on the “The Power of Inclusion & Equality” for investors. Our media strategy objective is to lay the groundwork for additional high-profile positioning of the brand as we work to achieve the desired increased financial media coverage and growth in AUM valuation for our company and shareholders.

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