LGBTQ LOYALTY HOLDINGS, INC. 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
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
Business Overview
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18 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 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 indices with a focus on the 'Social' component of ESG utilizing our proprietary financial slogan of "Advancing Equality" within other gender, minority interest groups.
Revenue
The Company focus in 2019 was to create and launch our first of many financial
Index products through an equality driven thematic ESG screened and alpha
performance benchmark. The Company achieved this through its LGBTQ100 ESG Index
listing and performance on the NYSE starting on
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
funds or as benchmarks for actively managed portfolios. We plan to capture Data
Subscriptions which could provide recurring subscription revenue from our LGBTQ
Index. This includes ongoing and historical data and information generated by
our wholly owned division
New initiatives in 2020 include a plan to create ancillary revenue streams to complement and support this unique platform for the top 100 Equality driven Corporations in America represented in the LGBTQ100 Index. We believe our index will reward and elevate the status of those corporations that have adopted diversity and inclusion best practices, cared for their employees and positively impacted LGBTQ communities. Expert LGBTQ economists have repeatedly stressed the value of the LGBTQ brand loyalty to corporations. We consider the companies that best capture the spending trends and loyalty of the LGBTQ consumer will be better positioned for financial growth and success. Given the opportunity to link to the power and status generated between the LGBTQ community, these companies and their own workforce, we will launch a Partner Loyalty Program which includes benefits afforded to defined sponsorship tiers. The LGBTQ Loyalty Sponsorship is designed to attract the significant marketing dollars Fortune 500 companies are allocating to D&I programs with an opportunity to purchase LGBTQ Loyalty Sponsorship packages, including participation and brand exposure at planned conferences and events. Companies will be offered the opportunity to purchase LGBTQ Loyalty Sponsorship packages starting in Q1-2021.
Our initial investments in creating a high performing product with a well-recognized brand have been established. As we begin to move into planning for the post-COVID-19 world, we will now shift our efforts to cultivate new revenue stream opportunities while building AUM as we construct a profitable business platform.
We have achieved no revenues to date from our LGBTQ related operations and have been focused on building our product and achieving performance results and media branding over the course of the past twelve months. There are no assurances that can be given that we will achieve revenues or profitability in the future.
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Critical Accounting Policies and Estimates
Going Concern
The accompanying unaudited condensed consolidated financial statements have been
prepared in conformity with GAAP, which contemplates our continuation as a going
concern. We have incurred losses to date of
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.
Derivative Financial Instruments:
The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the Company's balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. The Company has a sequencing policy regarding share settlement wherein instruments with a fixed conversion price or floor would be settled first, and interest payable in shares settle next. Thereafter, share settlement order is based on instrument issuance date - earlier dated instruments settling before later dated. The sequencing policy also considers contingently issuable additional shares, such as those issuable upon a stock split, to have an issuance date to coincide with the event giving rise to the additional shares. The policy includes all shares issuable pursuant to debenture and preferred stock instruments as well as shares issuable under service and employment contracts and interest on short term loans.
Results of Operations
Three months ended
There were no revenues during the three months ended
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The following is a breakdown of our operating expenses for the three months
ended
Three Months Ended
September 30,
2020 2019 Change $ Change %
Personnel costs $ 60,979 $ 119,608 $ (58,629 ) -49 %
Consulting fees 93,444 375,041 (281,597 ) -75 %
Legal and professional fees 140,873 36,606 104,267 285 %
Sales and marketing 25,392 31,989 (6,597 ) -21 %
General and administrative 89,698 118,667 (28,971 ) -24 %
Depreciation and amortization 6,448 100 6,348 100 %
$ 416,834 $ 682,011 $ (265,177 ) -39 %
Personnel costs include officer salaries, directors' compensation and deferred officer compensation. The decrease in personnel costs is primarily due to amortization of deferred compensation in the prior year.
Consulting fees decreased by
Legal and professional fees increased by
Sales and marketing expenses decreased in 2020 due to marketing efforts being halted with COVID-19.
General and administrative expenses decreased by
Depreciation and amortization expense was
The following is a breakdown of our other income (expenses) for the three months
ended
Three Months Ended
September 30,
2020 2019 Change $ Change %
Interest expense $ (436,939 ) $ (199,170 ) (237,769 ) 119 %
Other income - - - 0 %
Change in derivative liability 481,046 (225,593 ) 706,639 -313 %
$ 44,107 $ (424,763 ) $ 468,870 -110 %
Interest expense increased by
Change in derivative liability includes the mark-to-market adjustment of the derivative liability in connection with our convertible debenture.
Net loss was
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Nine months ended
Revenues for the nine months ended
The following is a breakdown of our operating expenses for the nine months endedSeptember 30, 2020 and 2019: Nine Months Ended September 30, 2020 2019 Change $ Change % Personnel costs$ 560,441 $ 1,017,275 $ (456,834 ) -45 % Consulting fees 261,459 479,062 (217,603 ) -45 % Legal and professional fees 363,216 215,967 147,249 68 % Merger costs - 388,675 (388,675 ) -100 % Sales and marketing 32,982 41,739 (8,757 ) -21 % General and administrative 160,425 165,818 (5,393 ) -3 % Depreciation and amortization 19,344 100 19,244 19244 %$ 1,397,867 $ 2,308,636 $ (910,769 ) -39 %
Personnel costs include officer salaries, directors' compensation and deferred
officer compensation. The decrease in personnel costs is primarily due to
compensation associated with the formation of our board of directors in nine
months ended
Consulting fees decreased by
Legal and professional fees increased by
Merger costs represents expenses incurred upon the acquisition of
Sales and marketing expenses decreased in 2020 due to marketing efforts being halted with COVID-19.
General and administrative expenses decreased by
Depreciation and amortization expense was
The following is a breakdown of our other income (expenses) for the nine months
ended
Nine Months Ended
September 30,
2020 2019 Change $ Change %
Interest expense $ (1,174,251 ) $ (1,384,782 ) 210,531 -15 %
Other income 3,000 - 3,000 100 %
Change in derivative liability 805,918 (492,401 ) 1,298,319 -264 %
$ (365,333 ) $ (1,877,183 ) $ 1,511,850 -81 %
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Interest expense increased by
Change in derivative liability includes the mark-to-market adjustment of the derivative liability in connection with our convertible debenture.
Net loss was
Liquidity and Capital Resources
Historically, we have been financed through advances from related parties,
issuances of convertible debt, and the sale of our common and preferred stock.
Our existing sources of liquidity will not be sufficient for us to implement our
business plans. There are no assurances that we will be able to raise additional
capital as and when needed. As of
As of
During the nine months ended
During the nine months ended
During 2020, we received an aggregate of
We will continue to seek out additional capital in the form of debt or equity under the most favorable terms we can find.
The Company is currently, and has for some time, been in financial distress. It has no cash resources and current assets and has no ongoing source of revenue. Management is continuing to address numerous aspects of the Company's operations and obligations, including, without limitation, debt obligations, financing requirements, and regulatory compliance, and has taken steps to continue to raise new debt and equity capital to fund the Company's business activities.
The 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 forward basis and 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 such financing will be available on terms acceptable to the Company, or at all.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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