UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2020

 

or

 

☐    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: 333-206745

 

LEAFBUYER TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

  

Nevada

 

38-3944821

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

6888 S. Clinton Street, Suite 300, Greenwood Village, CO 80112

(Address of principal executive offices, Zip Code)

 

Registrant’s telephone number, including area code (720)-235-0099

 

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

 

Title of Each Class

Trading Symbol(s)

Name of each exchange on which registered

None

None

None

  

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 Company is a larger accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting 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 the 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 ☒

   

The number of shares of outstanding of the Registrant’s Common Stock as of February 16, 2021 was 88,015,532

  

 

 

   

Table of Contents

 

PART I – FINANCIAL INFORMATION

 

 

 

 

Item 1.

Interim Condensed Consolidated Financial Statements

 

3

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

16

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

21

 

Item 4.

Controls and Procedures

 

21

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

 

22

 

Item 1A.

Risk Factors

 

 22

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

22

 

Item 3.

Defaults Upon Senior Securities

 

22

 

Item 4.

Mine Safety Disclosures

 

22

 

Item 5.

Other Information

 

22

 

Item 6.

Exhibits

 

23

 

 

SIGNATURES

 

24

 

 

 

2

 

   

PART I – FINANCIAL INFORMATION

 

Item 1. Interim Condensed Consolidated Financial Statements 

 

The unaudited interim condensed consolidated financial statements of Leafbuyer Technologies, Inc. (“we”, “our”, “us”, the “Company”) follow. All currency references in this report are to US dollars unless otherwise noted.

 

PART I. Financial Information

 

Item 1. Financial Statements 

 

LEAFBUYER TECHNOLOGIES INC.

 

 

 

 

UNAUDITED CONDENSED CONSOLDIATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

 

December 31,

2020

 

 

June 30,

2020

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$ 669,173

 

 

$ 1,309,912

 

Accounts receivable (net of allowance for doubtful accounts of $19,968 and $14,037, respectively,)

 

 

19,968

 

 

 

14,037

 

Inventory

 

 

622

 

 

 

622

 

Prepaid expenses and other current assets

 

 

60,495

 

 

 

87,895

 

Total current assets

 

 

750,258

 

 

 

1,412,466

 

Noncurrent assets:

 

 

 

 

 

 

 

 

Fixed assets, net

 

 

3,036,147

 

 

 

3,398,370

 

Right of use assets

 

 

100,626

 

 

 

165,965

 

Total assets

 

$ 3,887,031

 

 

$ 4,976,801

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$ 210,985

 

 

$ 487,890

 

Accrued liabilities

 

 

787,605

 

 

 

413,314

 

Deferred revenue

 

 

90,613

 

 

 

117,904

 

Lease obligation, current

 

 

94,098

 

 

 

103,049

 

Debt, current

 

 

2,200,125

 

 

 

2,134,487

 

Total current liabilities

 

 

3,383,426

 

 

 

3,256,644

 

 

 

 

 

 

 

 

 

 

Debt, net of current portion

 

 

1,102,478

 

 

 

1,102,478

 

Lease obligation, net of current portion

 

 

-

 

 

 

65,149

 

Total liabilities

 

 

4,485,904

 

 

 

4,424,271

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 6)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity (Deficit):

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized; 3,000,000 and 3,000,000 shares issued and outstanding for class A convertible preferred stock and 1,120,000 and 1,120,000 shares issued and outstanding for class B convertible preferred stock at December 31, 2020 and June 30, 2020, respectively

 

 

4,120

 

 

 

4,120

 

Common stock, $0.001 par value; 150,000,000 shares authorized; 83,927,139 shares issued and outstanding at December 31, 2020 and 81,772,802 shares issued and outstanding at June 30, 2020

 

 

83,926

 

 

 

81,773

 

Additional paid in capital

 

 

16,722,110

 

 

 

16,467,761

 

Accumulated deficit

 

 

(17,409,029 )

 

 

(16,001,124 )

Total stockholders’ equity (deficit)

 

 

(598,873 )

 

 

552,530

 

Total liabilities and stockholders’ equity (deficit)

 

$ 3,887,031

 

 

$ 4,976,801

 

 

See accompanying notes to condensed consolidated financial statements.

  

 
3

Table of Contents

 

LEAFBUYER TECHNOLOGIES INC.

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

December 31,

 

 

Six Months Ended

December 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales revenue

 

$ 602,787

 

 

$ 805,281

 

 

$ 1,255,510

 

 

$ 1,295,516

 

Cost of sales

 

 

487,041

 

 

 

576,611

 

 

 

943,946

 

 

 

1,025,353

 

Gross profit

 

 

115,746

 

 

 

228,670

 

 

 

311,564

 

 

 

270,163

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling expenses

 

 

230,852

 

 

 

627,578

 

 

 

495,696

 

 

 

1,239,512

 

General and administrative

 

 

149,527

 

 

 

267,899

 

 

 

379,703

 

 

 

575,869

 

Personnel expenses

 

 

101,387

 

 

 

287,274

 

 

 

444,317

 

 

 

650,261

 

Stock based compensation expense

 

 

101,591

 

 

 

1,502

 

 

 

184,522

 

 

 

607,211

 

Total operating expenses

 

 

583,357

 

 

 

1,184,253

 

 

 

1,504,238

 

 

 

3,072,853

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(467,611 )

 

 

(955,583 )

 

 

(1,192,674 )

 

 

(2,802,690 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(73,260 )

 

 

(314,257 )

 

 

(215,231 )

 

 

(569,692 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$ (540,871 )

 

$ (1,269,840 )

 

$ (1,407,905 )

 

$ (3,372,382 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$ (0.01 )

 

$ (0.02 )

 

$ (0.02 )

 

$ (0.05 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

83,110,513

 

 

 

78,581,632

 

 

 

82,806,038

 

 

 

72,861,221

 

 

See accompanying notes to condensed consolidated financial statements

 

 
4

Table of Contents

    

LEAFBUYER TECHNOLOGIES, INC.

 

 

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

# of

Shares

 

 

Amount

 

 

# of

Shares

 

 

Amount

 

 

APIC

 

 

Acc

Deficit

 

 

Total

 

Balance, June 30, 2020

 

 

4,120,000

 

 

$ 4,120

 

 

 

81,772,802

 

 

$ 81,773

 

 

$ 16,467,761

 

 

$ (16,001,124 )

 

$ 552,530

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

54,123

 

 

 

-

 

 

 

54,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for vendor payments

 

 

-

 

 

 

-

 

 

 

433,077

 

 

 

433

 

 

 

30,837

 

 

 

-

 

 

 

31,270

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock as employee compensation

 

 

-

 

 

 

-

 

 

 

475,365

 

 

 

475

 

 

 

28,333

 

 

 

-

 

 

 

28,808

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(867,034 )

 

 

(867,034 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2020

 

 

4,120,000

 

 

$ 4,120

 

 

 

82,681,244

 

 

$ 82,681

 

 

$ 16,581,054

 

 

$ (16,868,158 )

 

$ (200,303 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

33,437

 

 

 

-

 

 

 

33,437

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for vendor payments

 

 

-

 

 

 

-

 

 

 

596,428

 

 

 

596

 

 

 

40,114

 

 

 

-

 

 

 

40,710

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock as employee compensation

 

 

-

 

 

 

-

 

 

 

649,467

 

 

 

649

 

 

 

67,505

 

 

 

-

 

 

 

68,154

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(540,871 )

 

 

(540,871 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2020

 

 

4,120,000

 

 

$ 4,120

 

 

 

83,927,139

 

 

$ 83,926

 

 

$ 16,722,110

 

 

$ (17,409,029 )

 

$ (598,873 )

 

 

 

Preferred Stock

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

# of

Shares

 

 

Amount

 

 

# of

Shares

 

 

Amount

 

 

APIC

 

 

Acc

Deficit

 

 

Total

 

Balance, June 30, 2019

 

 

4,120,000

 

 

$ 4,120

 

 

 

47,914,967

 

 

$ 47,915

 

 

$ 11,076,165

 

 

$ (10,491,876 )

 

$ 636,324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

605,709

 

 

 

-

 

 

 

605,709

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for cash

 

 

-

 

 

 

-

 

 

 

30,299,998

 

 

 

30,300

 

 

 

4,007,588

 

 

 

-

 

 

 

4,037,888

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock in settlement of acquisition

 

 

-

 

 

 

-

 

 

 

366,667

 

 

 

367

 

 

 

262,133

 

 

 

-

 

 

 

262,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,102,542 )

 

 

(2,102,542 )

Balance, September 30, 2019

 

 

4,120,000

 

 

$ 4,120

 

 

 

78,581,632

 

 

$ 78,582

 

 

$ 15,951,595

 

 

$ (12,594,418 )

 

$ 3,439,879

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,502

 

 

 

-

 

 

 

1,502

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,269,840 )

 

 

(1,269,840 )

Balance, December 31, 2019

 

 

4,120,000

 

 

$ 4,120

 

 

 

78,581,632

 

 

$ 78,582

 

 

$ 15,953,097

 

 

$ (13,864,258 )

 

$ 2,171,541

 

   

See accompanying notes to condensed consolidated financial statements.

 

 
5

Table of Contents

   

LEAFBUYER TECHNOLOGIES INC.

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

December 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$ (1,407,905 )

 

$ (3,372,382 )

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

 

 

 

 

Stock based compensation

 

 

256,502

 

 

 

607,211

 

Provision of bad debt expenses

 

 

-

 

 

 

7,452

 

Amortization of note payable discount

 

 

65,638

 

 

 

206,459

 

Depreciation and amortization

 

 

362,223

 

 

 

336,471

 

Changes in assets and liabilities:

 

 

 

 

 

 

-

 

Accounts receivable

 

 

(5,931 )

 

 

18,096

 

Inventory

 

 

-

 

 

 

608

 

Prepaid expenses and other

 

 

27,400

 

 

 

(75,021 )

Other Assets

 

 

(8,761 )

 

 

-

 

Accounts payable

 

 

(276,905 )

 

 

117,298

 

Accrued liabilities

 

 

347,000

 

 

 

12,600

 

Net cash used in operating activities

 

 

(640,739 )

 

 

(2,141,208 )

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capitalized software

 

 

-

 

 

 

(405,992 )

Net cash used in investing activities

 

 

-

 

 

 

(405,992 )

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of stock

 

 

-

 

 

 

4,037,888

 

Repayment of debt

 

 

-

 

 

 

(807,418 )

Net cash provided by financing activities

 

 

-

 

 

 

3,230,470

 

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

(640,739 )

 

 

683,270

 

Cash and cash equivalents, beginning of period

 

 

1,309,912

 

 

 

181,647

 

Cash and cash equivalents, end of period

 

$ 669,173

 

 

$ 864,917

 

 

 

 

 

 

 

 

 

 

Cash paid for interest

 

$ -

 

 

$ 8,619

 

Cash paid for taxes

 

$ -

 

 

$ -

 

Supplemental information for non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Issuance of common stock for vendor payments

 

$ 71,980

 

 

$ -

 

Issuance of common stock for accrued expenses

 

$ -

 

 

$ -

 

 

See accompanying notes to condensed consolidated financial statements.

 

 
6

Table of Contents

   

LEAFBUYER TECHNOLOGIES INC.

Notes to Unaudited Condensed Consolidated Financial Statements

 

Note 1 — Description of Business

 

Formation of the Company

 

On March 23, 2017, AP Event Inc. (“AP” or the “Registrant”) consummated an Agreement and Plan of Merger (the “Merger Agreement”) with LB Media Group, LLC, a Colorado limited liability Company (“LB Media”), August Petrov (the principal stockholder of AP), and LB Acquisition Corp., a Colorado corporation and a wholly-owned subsidiary of AP (“Acquisition”) whereby Acquisition was merged with and into LB Media (the “Merger”).

 

As a result of the Merger, LB Media became a wholly-owned subsidiary of the Registrant, and immediately following the consummation of the Merger and giving effect to the securities sold in the Offering, which was consummated as part of the Merger, the members of LB Media beneficially owned approximately fifty-five percent (55%) of the issued and outstanding Common Stock of the Registrant. The Merger Agreement contained customary representations, warranties, and covenants of the Registrant and LB Media for like transactions.

  

As a result of the reorganization and name change discussed later, Leafbuyer Technologies, Inc. (“Leafbuyer”) became the publicly quoted parent holding company with LB Media becoming a wholly owned subsidiary of Leafbuyer. Upon consummation of the Agreement, Leafbuyer common stock was deemed to be registered under Section 12(b) of the Securities Exchange Act of 1934, as amended, pursuant to Rule 12g-3(a) promulgated thereunder. For purposes of Rule 12g-3(a), Leafbuyer is the successor issuer to AP.

 

AP was established under the corporation laws in the State of Nevada on October 16, 2014. On March 24, 2017, the Registrant changed its name to Leafbuyer Technologies, Inc.

 

All references herein to “us,” “we,” “our,” “Leafbuyer,” or the “Company” refer to Leafbuyer Technologies, Inc. and its subsidiary, LB Media.

 

Description of Business

 

LB Media was founded in 2012 by a group of technology and industry veterans and provides smart technology to the cannabis industry. Each month through the website and its partner sites, the Leafbuyer network reaches millions of cannabis consumers nationwide. This provides a valuable resource for dispensaries to reach new consumers while helping them grow their customer base. Leafbuyer also provides retention technology, including a robust Texting and Loyalty platform that is integrated into the Leafbuyer network. With the latest release of a customized branded application, dispensaries now have the ability to interact with their customer base 24/7. This application allows the customer to see the latest deals, check loyalty points, see purchase history and place orders, all through the convenience of their smart phone.

 

Basis of Presentation

 

The accompanying condensed consolidated balance sheet as of June 30, 2020, has been derived from audited financial statements. The accompanying unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements being audited and in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. In the opinion of management, such unaudited information includes all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of this interim information. All intercompany transactions have been eliminated in consolidation. Operating results and cash flows for interim periods are not necessarily indicative of results that can be expected for the entire year. The Company uses the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. The information included in this report should be read in conjunction with our audited financial statements and notes thereto.

 

 
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Going Concern

 

As of December 31, 2020, we had $669,173 in cash and cash equivalents and a working capital deficit of $2,633,168. We are dependent on funds raised through equity financing. Our cumulative net loss of $17,409,029 was funded by debt and equity financing and we reported a net loss of $1,407,905 for the six months ended December 31, 2020. Accordingly, there is substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued.

 

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 believes that actions presently being taken to further implement our business plan of expansion of products, geographical locations we sell our services and deeper market penetration will generate additional revenues and eventually positive cash flow and provide opportunity for the Company to continue as a going concern. While we believe in the viability of our strategy to generate additional revenues and our ability to raise additional funds, there can be no assurances to that effect.

 

Note 2 — Summary of Significant Accounting Policies

 

Significant Accounting Policies

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, LB Media. All significant inter-company transactions and balances have been eliminated in consolidation.

 

For a detailed discussion about the Company’s significant accounting policies, refer to Note 2 — “Summary of Significant Accounting Policies,” in the Company’s consolidated financial statements included in the Company’s June 30, 2020 Form 10-K. During the six months ended December 31, 2020, there were no significant changes made to the Company’s significant accounting policies.

 

Use of Estimates

 

Management uses estimates and assumptions in preparing these condensed consolidated financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Examples of estimates include loss contingencies; useful lives of our tangible and intangible assets; allowances for doubtful accounts; and stock-based compensation forfeiture rates. Examples of assumptions include: the elements comprising a software arrangement, including the distinction between upgrades or enhancements and new products; when technological feasibility is achieved for our products; the potential outcome of future tax consequences of events that have been recognized in our financial statements or tax returns. Actual results could differ from those estimates.

  

Reclassifications

  

Certain prior period amounts have been reclassified to conform with the current period presentation. The Cost of sales presented on the Consolidated Statements of Operations was included in prior presentations as operating expenses such as personnel expenses and general and administration. For the three months ended December 31, 2019 $488,833 of the cost of sales came from personnel expense and $87,778 of cost of sales came from general and administrative expense. For the six months ended December 31, 2019 $854,705 of cost of sales came from personnel expense and $170,648 of cost of sales came from general and administrative expense.

       

 
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Recently Issued Accounting Pronouncements

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which introduces new guidance for the accounting for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale (AFS) debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The pronouncement will be effective for public business entities that are SEC filers in fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The effect of the adoption of this pronouncement to the Company was immaterial.

 

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s own Equity (Subtopic 815-40). ASU 2020-06 requires entities to provide expanded disclosures about the terms and features of convertible instruments and reduces the number of accounting models for convertible instruments and allows more contracts to qualify for equity classification. The pronouncement will be effective for public business entities that are SEC filers in fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted but no earlier than fiscal years beginning December 15, 2020.

 

No other recent accounting pronouncements were issued by FASB and the SEC that are believed by management to have a material impact on the Company’s present or future condensed consolidated financial statements.

       

Note 3 — Property and Equipment

 

Property and equipment consist of the following:

 

 

 

December 31,

2020

 

 

June 30,

2020

 

 

 

 

 

 

 

 

Software platform

 

$ 4,482,225

 

 

$ 4,482,225

 

Furniture and fixtures

 

 

1,500

 

 

 

1,500

 

Less accumulated amortization

 

 

(1,447,578 )

 

 

(1,085,355 )

Property and equipment, net

 

$ 3,036,147

 

 

$ 3,398,370

 

 

On November 6, 2018, the Company acquired a customer facing software (“Loyalty Software”) through a Stock Purchase Agreement, where the Company acquired all the issued and outstanding capital stock of Greenlight Technologies, Inc. (“GTI”) from its shareholders. At the time of the transaction, there were no employees working for GTI, no systems and no assets, other than the Loyalty Software. GTI’s legal entity was dissolved in the transition and the Loyalty Software was assumed by the Company. Management determined that the purchase of GTI did not constitute a business purchase and recorded the transaction as a purchase of software. The consideration for the Loyalty Software was 2,916,667 shares of common stock, par value $0.001 per share and cash of approximately $450,000. Total value of the Loyalty Software was estimated at approximately $3,010,000. The additional consideration for future developments will be evaluated and considered enhancements which will either be capitalized to the software or expensed as research and development costs. During the year ended June 30, 2020 additional Incentive Shares of 366,667 for a value of $262,500 was issued to shareholders of GTI as final settlement of the 2018 agreement. During the six months ended December 31, 2020 there was no software capitalized and for the same period ended 2019, the Company capitalized approximately $405,992 of software enhancements.

 

GTI provides cannabis consumers real-time mobile ordering and loyalty rewards through an internally developed application that integrates with the local dispensary’s point of sale system. The Company plans to fully integrate this technology into the current platform and create an “Ultimate Bundle” of services for the cannabis industry. 

    

 
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Amortization expense, recorded as cost of revenue, related to internal use software totaled $362,223 during the six months ended December 31, 2020 and for the same period ended 2019 amortization expenses was $336,219. Amortization expense for the next five years is as follows:

 

2021

 

$ 724,445

 

2022

 

 

724,445

 

2023

 

 

724,445

 

2024

 

 

622,359

 

Thereafter

 

 

240,453

 

Total Unamortized Expense

 

$ 3,036,147

 

 

Note 4 — Capital Stock and Equity Transactions

 

The Company has 150,000,000 shares of common stock authorized with a par value of $0.001 per share as of December 31, 2020. In addition, the Company has 10,000,000 shares of preferred stock authorized with a par value of $0.001 per share as of December 31, 2020 of which 3,000,000 shares of preferred stock are designated as Series A Preferred Shares, all of which were issued and outstanding as of December 31, 2020 and 1,120,000 shares of preferred stock are designated as Series B Preferred Shares, all of which were issued and outstanding as of December 31, 2020.

 

The Series A Preferred Shares currently outstanding are convertible into the greater of one share of Common Stock or a number of shares of Common Stock so that the Series A holders would hold 55% of the number of outstanding shares of Common Stock. The Series A Shares vote on an “as-converted” basis. The Series B Convertible Preferred Stock of 1,120,000 shares are convertible into 1,120,000 common shares.

 

Issuance of Common Stock

 

During the six months ended December 31, 2020 the Company issued 1,124,832 shares of Common Stock to employees. These shares were valued at fair market value of $96,962 and expensed in the accompanying Condensed Consolidated Statement of Operations.

 

During the six months ended December 31, 2020, the Company issued 1,019,505 and 10,000 shares of Common Stock respectively to vendors and non-management members of the board of directors for services rendered. These shares were valued at fair market value of $71,980 and expensed in the accompanying Condensed Consolidated Statement of Operations.

   

During the six months ended December 31, 2019 the Company issued 366,667 shares of Common Stock valued at $262,500 to shareholders of GTI as final settlement of the 2018 agreement. See Footnote 3.

 

During the six months ended December 31, 2019, the Company issued 30,299,998 shares of common stock pursuant to the Purchase Agreement and received approximately $4,038,000.

  

Note 5 — Debt

 

During February 2018, the Company issued a promissory note in favor of an investor of the Company in the amount of $150,000 in exchange for $132,000 cash. The note has an original issue discount of $18,000 that is being amortized to interest expense over the term of the note. In March 2019, the loan maturity date was extended to August 8, 2019, the discount is fully amortized and total unpaid principal and interest is approximately $202,077, accruing at 12% at December 31, 2020, and is payable upon demand.

 

 
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On September 21, 2018, the Company entered into a promissory note with an investor of the Company with a face value of $440,000 in exchange for a $400,000 cash payment (“Convertible Note”). The discount of the Convertible Note will be amortized over the life of the Convertible Note and have an interest rate of 10%. The Convertible Note has a twelve-month term with no payment required for the initial six months; after six months, the Company will repay the investors interest and principal in six equal installments. The principal and interest of the note is convertible into the Company’s common stock at a purchase price of $0.70 per common share after the six months. If the Company defaults on the Convertible Note, the interest is increased to 12% and at the investors’ option, the principal and interest can be converted into the Company common stock at a 20% discount to the then current market. In addition, the Company issued five-year warrants to purchase up to 200,000 common shares of the Company at a price of $0.75 per share. The cash for this Convertible Note was received prior to September 30, 2018. As of December 31, 2020, the Convertible Note is payable upon demand and total unpaid principal and interest outstanding is approximately $539,693.

   

On September 21, 2018, the Company entered into several promissory notes with various investors of the Company with an aggregate face value of $440,000 in exchange for $440,000 cash payment (“the 2018 Notes”), the discount of the Notes will be amortized over the life of the Note and have an interest rate of 10%. The 2018 Notes have a twelve-month term with no payment required for the initial six months; after six months, the Company will repay the investors interest and principal in six equal installments. The principal and interest of the note is convertible into the Company’s common stock at a purchase price of $0.70 per common share after the six months. If the Company defaults on the 2018 Notes, the interest is increased to 12% and at the investors’ option, the principal and interest can be converted into the Company common stock at a 20% discount to the then current market price. In addition, the Company issued five-year warrants to purchase up to 200,000 of the Company’s common shares at a price of $0.75 per share. The cash for the 2018 Notes was received prior to September 30, 2018. In March 2020, $220,000 of the 2018 Notes have been fully extinguished and the remaining $220,000 is in default and payable upon demand. As of December 31, 2020, the total unpaid principal and interest is approximately $269,847.

 

During the year ended June 30, 2019, the Company entered into several promissory notes with various investors of the Company with an aggregate face value of $960,000 in exchange for a total of $900,000 cash payments (“the 2019 Notes”). The 2019 Notes have a beneficial conversion feature valued at $839,378, which is recorded as a discount. The total discount on the Notes will be amortized over the life of the 2019 Notes and recorded as interest expense. The notes have an interest rate of 7% and have an eighteen-month term with no payment required for the initial six months; after six months, the Company will repay the investors interest and principal in twelve equal installments. The principal and interest of the note is convertible into the Company’s common stock at a purchase price of $0.75 per common share at any time after the Original Issue Date. If the Company defaults on the Notes, the interest is increased to 15% and at the investors’ option, the principal and interest can be converted into the Company common stock at a 20% discount to the then current market price. As of March 31, 2020, $533,000 of the 2019 Notes have been fully extinguished as $402,000 of debt repayment and the issuance of common stock valued at $131,000. The remaining principal of $390,125 is in default and payable upon demand. As of December 31, 2020, the total unpaid principal and interest is approximately $417,415.

  

In March 2020, the Company entered into a promissory note with a related party (see Note 8) with a face value of $600,000 in exchange for a total of $565,000 cash payments. The total discount of the Note will be amortized over the life of the Note and recorded as interest expense which matured on December 1, 2020. The note is in default and due upon demand and the interest rate was increased to 12%. As of December 31, 2020, the total unpaid principal and interest is approximately $636,164.

 

In March 2020, the Company entered into a promissory note with a related party (see Note 8) with a face value of $50,000. The note matured on January 1, 2021 and no principal or interest payments were made on that date therefore the note is in default and the interest rate increased to 12%. As of December 31, 2020, the total unpaid principal and interest is approximately $53,167.

 

 
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On April 30, 2020 the Company executed the standard loan documents required for securing a loan (the “EIDL Loan”) from the United States Small Business Administration (the “SBA”) under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. The principal amount of the EIDL Loan is $500,000, with proceeds to be used for working capital purposes. Interest on the EIDL Loan accrues at the rate of 3.75% per annum and installment payments, including principal and interest, are due monthly beginning twelve months from the date of the EIDL Loan in the amount of $2,437 The balance of principal and interest is payable thirty years from the date of the promissory note.

 

On May 29, 2020, the Company was granted a loan from American Express National Bank in the aggregate amount of $602,478, pursuant to the Paycheck Protection Program (“PPP) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The Loan which was in the form of a Note dated May 29, 2020, matures on May 29, 2022 and bears interest at a rate of 1.00% per annum, payable monthly commencing on December 29, 2020. The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties. Funds from the Loan may only be used for payroll costs, costs used to continue group health care benefits, rent, utilities and interest on other debt obligations incurred before February 15, 2020. The Company intends to use the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. While the Company currently believes that its use of the loan proceeds will meet the conditions for forgiveness of the loan, it cannot be assured that the Company will be ineligible for forgiveness of the loan, in whole or in part. On January 5, 2021 the Company was notified by American Express National Bank that the United States Small Business Administration has approved our Loan Forgiveness Application and the loan has been paid in full and the loan has been closed.

 

The Company recognized $198,802 of interest expense for the six months ended December 31, 2020 and $570,787 of interest expense for the six months ended December 31, 2019. As of December 31, 2020 and June 30, 2020, accrued interest on the above notes was $319,523 and $117,816, respectively.

 

Notes payable and long-term debt outstanding as of December 31, 2020 and June 30, 2020 are summarized below:

 

 

 

Maturity

Date

 

December 31,

2020

 

 

June 30,

2020

 

12% $150,000 Convertible Note Payable, net of unamortized discount of $0 and $0, respectively

 

Due on Demand

 

$ 150,000

 

 

$ 150,000

 

12% $440,000 Convertible Note Payable, net of unamortized discount of $0 and $0, respectively

 

Due on Demand

 

 

440,000

 

 

 

440,000

 

12% $220,000 Convertible Note Payable, net of unamortized discount of $0 and $0, respectively

 

Due on Demand

 

 

220,000

 

 

 

220,000

 

7% $426,667 Convertible Note Payable, net of unamortized discount of $0 and $35,866. respectively

 

Due on Demand

 

 

201,375

 

 

 

182,326

 

7% $213,333 Convertible Note Payable, net of unamortized discount of $0 and $28,492, respectively

 

Due on Demand

 

 

188,750

 

 

 

164,072

 

12% Note Payable, net of unamortized discount of $0 and $21,911, respectively – See Footnote 9

 

Due on Demand

 

 

600,000

 

 

 

578,089

 

12% Note Payable – See Footnote 9

 

January 1, 2021

 

 

50,000

 

 

 

50,000

 

5% Note Payable

 

Due on Demand (1)

 

 

350,000

 

 

 

350,000

 

1% PPP Note Payable; Loan forgiveness granted on January 5, 2021

 

May 29, 2022

 

 

602,478

 

 

 

602,478

 

3.75% SBA EIDL Note Payable

 

April 30, 2050

 

 

500,000

 

 

 

500,000

 

Total notes payable

 

 

 

 

3,302,603

 

 

 

3,236,965

 

Less current portion of notes payable

 

 

 

 

2,200,125

 

 

 

2,134,487

 

Notes payable, Non-current portion

 

 

 

$ 1,102,478

 

 

$ 1,102,478

 

 

(1) The Company entered two promissory notes with an investor of the Company in the amount of $350,000. The investor had agreed to convert the loan into 437,500 shares of common stock in 2018. The Company has not issued these shares to the investor and booked the notes as a short-term loan. This loan is considered payable upon demand.

 

 
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Note 6 — Commitments and Contingencies

 

The Company records tax contingencies when the exposure item becomes probable and reasonably estimable. As of December 31, 2020, the Company had a tax contingency related to stock options granted below the fair market value on date of grant. The Company is in the process of determining the possible exposure and necessary expense accrual for the related tax, penalties and interest. Management has not been able to determine the amount as of the date of this report, however, does not expect the amount to be material to the financial statements.

 

To the best of the Company’s knowledge and belief, no legal proceedings of merit are currently pending or threatened against the Company.

 

Note 7 —Risks and Uncertainties

 

The Company does not have a concentration of revenues from any individual customer (less than 10%).

 

The Company operates in a rapidly evolving and highly regulated industry and will only conduct business in legal cannabis markets.

 

The Company was affected in March by the COVID-19 outbreak and worldwide pandemic. The Company saw some postponements in orders in the first few weeks March 2020 but by the end of March 2020 orders stabilized to a normal level.

 

Note 8 — Stock Based Compensation

 

The equity incentive plan of the Company was established in February of 2017 and was amended and restated on April 14, 2020. The Board of Directors of the Company may from time to time, in its discretion grant to directors, officers, consultants and employees of the Company, non-transferable options to purchase common shares, provided that the number of options issued do not exceed 20,000,000. The options are exercisable for a period of up to 10 years from the date of the grant. The number of shares authorized to be issued under the equity incentive plan was increased from 10,000,000 to 20,000,000 through a consent of stockholders to amend and restate the equity incentive plan.

 

 
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The following table reflects the continuity of stock options for the six months ended December 31, 2020:

 

A summary of stock option activity is as follows:

 

 

 

December 31,

2020

 

 

 

 

 

Number of options outstanding:

 

 

 

Beginning of year

 

 

12,558,375

 

Granted

 

 

300,000

 

Exercised, converted

 

 

-

 

Forfeited / exchanged / modification

 

 

(5,952,000 )

 

 

 

 

 

End of period

 

 

6,906,375

 

 

 

 

 

 

Number of options exercisable at end of period

 

 

1,998,444

 

Number of options available for grant at end of period

 

 

4,957,288

 

 

 

 

 

 

Weighted average option prices per share:

 

 

 

 

Granted during the period

 

$ 0.08

 

Exercised during the period

 

$ 0.00

 

Terminated during the period

 

$ 0.08

 

Outstanding at end of period

 

$ 0.08

 

Exercisable at end of period

 

$ 0.08

 

 

The average fair value of stock options granted was estimated to be $0.07 per share for the period ended December 31, 2020. This estimate was made using the Black-Scholes option pricing model and the following weighted average assumptions:

 

 

 

2020

 

 

 

 

 

Expected option life (years)

 

2 - 4

 

Expected stock price volatility

 

227 to 234

%

Expected dividend yield

 

 

 

Risk-free interest rate

 

0.44 to 0.54

%

   

Stock-based compensation expense attributable to stock options was approximately $87,560 for the six months ended December 31, 2020. As of December 31, 2020, there was approximately $369,011 of unrecognized compensation expense related to 6,906,375 unvested stock options outstanding, and the weighted average vesting period for those options was 3 years.

   

Warrants

 

At December 31, 2020, the Company had outstanding warrants to purchase the Company’s common stock which were issued in connection with multiple financing arrangements. Information relating to these warrants is summarized as follows:

 

Warrants

 

Remaining

Number

Outstanding

 

 

Weighted

Average

Remaining Life (Years)

 

 

Weighted

Average

Exercise Price

 

Warrants-Financing

 

 

86,957

 

 

 

2.80

 

 

$ 1.15

 

Warrants-Issued with Convertible Notes

 

 

600,000

 

 

 

2.73

 

 

$ 0.75

 

Warrants - Financing

 

 

360,577

 

 

 

3.52

 

 

$ 0.78

 

Warrants A – Financing

 

 

7,018,090

 

 

 

3.52

 

 

$

0.16

 

Warrants B – Financing (expired July 2020)

 

 

-

 

 

 

-

 

 

$ -

 

Total

 

 

8,065,624

 

 

 

 

 

 

 

 

 

 

 
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Note 9 — Related Party Transactions

 

In March 2020, the Company entered into a promissory note with the Chief Executive Officer for $600,000 in exchange for a total of a $565,000 cash payment. The note is in default and due upon demand and the interest rate was increased to 12%. 

 

In March 2020, the Company entered into a promissory note with the Chief Technology Officer for $50,000. The note matured on January 1, 2021 and no principal or interest payments were made on that date therefore the note is in default and the interest rate increased to 12%.

 

Note 10 — Leases

 

The following is a summary of future minimum lease payments and related liabilities for all non-cancelable operating leases maturing as of December 31:

 

 

 

Operating

Leases

 

2021

 

$ 37,335

 

2022

 

 

70,843

 

Thereafter

 

 

-

 

Total minimum lease payments including interest

 

 

108,178

 

Less: Amounts representing interest

 

 

(14,080 )

Present value of minimum lease payments

 

 

94,098

 

Less: Current portion of lease liabilities

 

 

(94,098 )

Non-current portion of lease liabilities

 

$ -

 

 

 

 

 

 

Cash payments on lease liabilities

 

$ 108,286

 

Weighted average remaining lease term

 

1 year

 

Weighted average discount rate

 

 

10 %

 

Note 11 — Subsequent Events

 

The Company has evaluated subsequent events through February 16, 2021 and has not identified any items requiring additional disclosure except as follows:

 

On January 5, 2021 the Company was notified by American Express National Bank that the United States Small Business Administration has approved our Loan Forgiveness Application and the loan has been paid in full and the loan has been closed.

 

 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 

 

Forward Looking Statements

 

This quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions.

 

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report. Except as required by applicable law, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our unaudited interim condensed consolidated financial statements for the six months ended December 31, 2020 are expressed in US dollars and are prepared in accordance with generally accepted accounting principles in the United States of America. They reflect all adjustments (all of which are normal and recurring in nature) that, in the opinion of management, are necessary for fair presentation of our interim financial information. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for our fiscal year ending June 30, 2021. Our unaudited consolidated financial statements and notes included therein have been prepared on a basis consistent with and should be read in conjunction with our audited financial statements and notes for the year ended June 30, 2020, as filed in our annual report on Form 10-K.

 

The following discussion should be read in conjunction with our interim financial statements and the related notes that appear elsewhere in this quarterly report.

 

Business Overview

 

Leafbuyer.com Platform

 

The Company has evolved and grown from a listing website (Leafbuyer.com) to a comprehensive marketing technology platform that focuses on new customer acquisition, retention and now online-order ahead services.  By combining years of experience in the consumer marketing space and the increased popularity of Leafbuyer’ s texting/loyalty program, Leafbuyer has developed a diverse product offering with a distinct competitive advantage.  Through proprietary technology, dispensary owners can leverage SMS and MMS messaging to connect customers directly to loyalty and rewards programs as well as the ability to confirm online orders for either pickup or delivery.  Leafbuyer has also developed technology designed to attract new dispensary customers to become part of loyalty and rewards programs.  

 

The Company’s website, Leafbuyer.com, and its progressive web application hosts a robust search algorithm similar to popular travel or hotel sites, where consumers can search the database for appealing offers. They can also search through thousands of menu items and products, create a profile, sign up to receive deal alerts and place online orders for pick up or delivery.  The site’s sophisticated vendor dashboard pairs vendor data with consumer needs and presents a robust, 24/7 real-time dashboard where vendors can update menus, specials, available jobs, and more. The system helps to track the vendors’ return on investment. The company monetizes its platform through a combination of monthly subscription fees, sign up credits and certain transaction fees associated with consumer engagement.

 

The Company continues an aggressive push into all legal cannabis markets. Increasing the Company’s marketing and sales presence in new markets is a primary objective. Along with this expansion, the Company continues to develop new technologies that will serve cannabis dispensaries and product companies in attracting and retaining consumers.

 

Leafbuyer operates in a rapidly evolving and highly regulated industry that, as has been estimated by grandviewresearch.com, to exceed $73 billion in revenue by the year 2027. The founders and board of directors has been, and will continue to be, aggressive in pursuing long-term opportunities.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 
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Comparison of results of operations for the three months ended December 31, 2020 and 2019

 

 

 

Three months Ended

December 31,

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

 

%

 

Revenue

 

$ 602,787

 

 

$ 805,281

 

 

$ (202,494 )

 

 

(25 )%

Cost of revenue

 

 

487,041

 

 

 

576,611

 

 

 

(89,570 )

 

 

(16 )%

Gross profit

 

 

115,746

 

 

 

228,670

 

 

 

(112,924 )

 

 

(49 )%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

583,357

 

 

 

1,184,253

 

 

 

(600,896 )

 

 

(51 )%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

73,260

 

 

 

314,257

 

 

 

(240,997 )

 

 

(77 )%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$ (540,871 )

 

$ (1,269,840 )

 

$ (728,969 )

 

 

(57 )%

 

Revenue, Cost of Revenue and Gross Profit

 

During the three months ended December 31, 2020, we generated $602,787 of revenues, compared to revenues of $805,281 during the same period ending in 2019. The decrease of $202,494 was primarily because in December 2019 the Company recognized revenue of $182,008 related to the SWCH Tradeshow. The SWCH Tradeshow revenue had minimal margin and MRR (monthly recurring revenue) contribution. Our market penetration is still below 25% in Colorado and less than 1% in other states. Management expects to have continued high quarter over quarter revenue growth as we expand our platform and our geographical service area.

 

Gross profit decreased by $112,924 for the three months ended December 31, 2020. In December 2019 the SWCH Tradeshow contributed $83,555 to the gross profit results.

 

The overall focus of the Company is to continue to grow revenue while expanding the geographic footprint of operations. We will continue to broaden the Leafbuyer technology platform to increase the opportunity for customer value creation and upsell of our product line. Anticipated growth will come from both organic sources and acquisitions. The Company is constantly looking for acquisitions to complement the current platform and expand geographic reach.

 

Operating Expenses

 

 

 

Three months Ended

December 31,

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

 

%

 

Selling expenses

 

$ 230,852

 

 

$ 627,578

 

 

$ (396,726 )

 

 

(63 )%

General and administrative

 

 

149,527

 

 

 

267,899

 

 

 

(118,372 )

 

 

(44 )%

Wages, payroll taxes and other employee expenses

 

 

101,387

 

 

 

287,274

 

 

 

(185,887 )

 

 

(65 )%

Stock based compensation expense

 

 

101,591

 

 

 

1,502

 

 

 

100,089

 

 

 

6664 %

 

 

$ 583,357

 

 

$ 1,184,253

 

 

$ (600,896 )

 

 

(51 )%

   

 
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The decrease in operating expenses during the three months ended December 31, 2020 compared to 2019 was driven by a reduction in selling and advertising expense as well as less wages and payroll expense. Management expects the general and administrative expenses to continue to decrease as management focuses on getting current operations to positive cash flow. While the Company booked a GAAP loss for the period, the Company realized positive operating cash flow in both months of November and December. 

 

Comparison of results of operations for the six months ended December 31, 2020 and 2019

 

 

 

Six months Ended

December 31,

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

 

%

 

Revenue

 

$ 1,255,510

 

 

$ 1,295,516

 

 

$ (40,006 )

 

 

(3 )%

Cost of revenue

 

 

943,946

 

 

 

1,025,353

 

 

 

(81,407 )

 

 

(8 )%

Gross profit

 

 

311,564

 

 

 

270,163

 

 

 

41,401

 

 

 

15 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

1,504,238

 

 

 

3,072,853

 

 

 

(1,568,615 )

 

 

(51 )%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

215,231

 

 

 

569,692

 

 

 

(354.461 )

 

 

(62 )%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$ (1,407,905 )

 

$ (3,372,382 )

 

$ (1,964,477 )

 

 

(58 )%

 

Revenue, Cost of Revenue and Gross Profit

 

During the six months ended December 31, 2020, we generated $1,255,510 of revenues, compared to revenues of $1,295,516 during the same period ending in 2019. In December 2019, the Company recognized revenue of $182,008 related to the SWCH Tradeshow, excluding this onetime event, revenue increased for this period by $142,002 or 13%. Our market penetration is still below 25% in Colorado and less than 1% in other states. Management expects to have continued high quarter over quarter revenue growth as we expand our platform and our geographical service area.

 

Gross profit increased to $311,564 for the six months ended December 31, 2020 which was an increase of $41,401 or 15% over the same period in 2019. Gross profit as a percentage of revenue increased from 21% to 25% for the six months ended December 31, 2020 over December 31, 2019.

 

Operating Expenses

 

 

 

Six months Ended

December 31,

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

 

%

 

Selling expenses

 

$ 495,696

 

 

$ 1,239,512

 

 

$ (743,816 )

 

 

(60 )%

General and administrative

 

 

379,703

 

 

 

575,869

 

 

 

(196,166 )

 

 

(34 )%

Wages, payroll taxes and other employee expenses

 

 

444,317

 

 

 

650,261

 

 

 

(205,944 )

 

 

(32 )%

Stock based compensation expense

 

 

184,522

 

 

 

607,211

 

 

 

(422,689 )

 

 

(70 )%

 

 

$ 1,504,238

 

 

$ 3,072,853

 

 

$ (1,568,615 )

 

 

(51 )%

 

The decrease in operating expenses during the six months ended December 31, 2020 compared to 2019 was driven by a reduction in selling and advertising expense and less stock compensation expense. Management expects the general and administrative expenses to continue to decrease as management focuses on getting current operations to positive cash flow.

 

 
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Liquidity and Capital Resources

 

The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months from the date of the issuance of these unaudited condensed consolidated financial statements with existing cash on hand and/or the private placement of common stock or obtaining debt financing. There is, however, no assurance that the Company will be able to raise any additional capital through any type of offering on terms acceptable to the Company, as existing cash on hand will be insufficient to finance operations over the next twelve months.

 

Cash Flows

 

Our cash flows from operating, investing and financing activities were as follows:

 

 

 

Six months Ended

December 31,

 

 

 

2020

 

 

2019

 

Net cash used in operating activities

 

$ (640,739 )

 

$ (2,141,208 )

Net cash used in investing activities

 

$ -

 

 

$ (405,992 )

Net cash provided by financing activities

 

$ -

 

 

$ 3,230,470

 

 

As of December 31, 2020, we had $669,173 in cash and cash equivalents and a working capital deficit of $2,633,168. We are dependent on funds raised through equity financing. Our cumulative net loss of $17,409,029 was funded by equity financing and we reported a net loss of $1,407,905 for the six months ended December 31, 2020. During the six months ending December 31, 2020, we did not raise or expended any monies through financing activities, and we did not expend any monies through investing activities.

 

Inflation

 

Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the six-month period ended December 31, 2020.

 

Off-Balance Sheet Arrangements

 

We had no off-balance sheet arrangements as of December 31, 2020 and June 30, 2020.

 

Critical Accounting Estimates

 

Our condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and estimates used to prepare the condensed consolidated financial statements. The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed in our June 30, 2020 form 10-K in the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

 
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Critical Accounting Policies

 

Our unaudited condensed consolidated interim financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. For a detailed discussion about the Company’s significant accounting policies, refer to Note 2 — “Summary of Significant Accounting Policies,” in the Company’s consolidated financial statements included in the Company’s June 30, 2020 Form 10-K. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by our management. Management has carefully considered the recently issued accounting pronouncements that altered generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.

 

Use of Estimates

 

Management uses estimates and assumptions in preparing these condensed consolidated financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates.

 

Revenue Recognition

 

For revenue recognition arrangements that we determine are within the scope of Topic ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, we evaluate the goods or services promised within each contract related performance obligation and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

 

The Company considered all of the economic factors that may affect its revenues. Because all of its revenues are from cannabis customers, there are no differences in the nature, timing an uncertainty of the Company’s revenue and cash flows from any of its product lines.

 

We recognize revenue upon completion of our performance obligations or expiration of the contractual time to use services such as bulk texting. The Company receives payments from its customers based on billing schedules established in each contract. Up-front payments and fees are recorded as deferred revenue upon receipt or when due until the Company performs its obligation under these arrangements. There is no significant judgment performed by management and revenue recognized from deferred revenue during the six months ended December 31, 2020 is $27,291.

 

 
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Item 3. Quantitative and Qualitative Disclosures About Market Risk 

 

We are a smaller reporting company as defined by 17 C.F.R. 229 (10)(f)(i) and are not required to provide information under this item.

 

Item 4. Controls and Procedures 

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2020. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during the six months ended December 31, 2020, which have materially affected or would likely materially affect our internal control over financial reporting. The Company continues to invest resources in order to upgrade internal controls.

 

 
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Table of Contents

   

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings 

 

We are not aware of any legal proceedings to which we are a party or of which our property is the subject. None of our directors, officers, affiliates, any owner of record or beneficially of more than 5% of our voting securities, or any associate of any such director, officer, affiliate or security holder are (i) a party adverse to us in any legal proceedings, or (ii) have a material interest adverse to us in any legal proceedings. We are not aware of any other legal proceedings that have been threatened against us.

 

Item 2. Unregistered Sales of Equity Securities 

 

None

 

Item 3. Defaults Upon Senior Securities 

 

None.

 

Item 4. Mine Safety Disclosures 

 

Not applicable.

 

Item 5. Other Information 

 

None

 

 
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Table of Contents

   

Item 6. Exhibits 

 

Exhibit

Number

 

Exhibit

Description

 

 

31.1

 

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

 

31.2

 

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

 

32.1

 

Certification of Chief Executive Officer pursuant to 18 U.S.C. 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. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 8**

 

101.INS

 

Inline XBRL Instance Document*

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema*

 

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase*

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase*

 

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase*

 

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase*

 

* Filed herewith.

 

** Furnished herewith.

 

 
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Table of Contents

   

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

LEAFBUYER TECHNOLOGIES, INC.

 

 

 

Date: February 16, 2021

By:

/s/ Kurt Rossner

 

 

Kurt Rossner

 

 

Chief Executive Officer, Director

(principal executive officer)

 

 

 

 

By:

/s/ Mark Breen

 

 

Mark Breen

 

 

Chief Financial Officer and Director

 

 

 
24