LBUY 10-Q Quarterly Report March 31, 2018 | Alphaminr
LEAFBUYER TECHNOLOGIES, INC.
ALPHAMINR

LBUY 10-Q Quarter ended March 31, 2018

Balance Sheet
Cash Flow
Income Statement
LEAFBUYER TECHNOLOGIES, INC.
10-Q 1 form10q.htm 10-Q
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 March 31, 2018

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 80108
(Address of principal executive offices, including zip code)

(720)-235-0099
(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 Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, Par Value $0.001

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 ☒

As of May 16, 2018, the Registrant had 41,175,228 shares of common stock outstanding.
Table of Contents

PART I – FINANCIAL INFORMATION
Item 1.
3
Item 2.
14
Item 3.
18
Item 4.
18
PART II – OTHER INFORMATION
Item 1.
19
Item 2.
19
Item 3.
19
Item 4.
20
Item 5.
20
Item 6.
20
20
PART 1 – FINANCIAL INFORMATION

Item 1.
Interim Consolidated Financial Statements

The unaudited interim 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.
CONSOLIDATED BALANCE SHEETS
March 31, 2018
(Unaudited)
June 30, 2017
ASSETS
Current assets:
Cash and cash equivalents
$
195,593
$
164,680
Accounts receivable
9,538
-
Inventory
3,652
-
Prepaid expenses and other current assets
218,414
30,867
Total current assets
427,197
195,547
Noncurrent assets:
Fixed assets, net
1,286
1,500
Total assets
$
428,483
$
197,047
LIABILITIES AND EQUITY
Current liabilities:
Accrued liabilities
$
88,650
$
45,049
Deferred revenue
121,723
55,533
Debt, current
790,603
-
Total current liabilities
1,000,976
100,582
Total liabilities
1,000,976
100,582
Commitments and contingencies (Note 6)
-
-
Equity:
Preferred stock, $.001 par value; 10,000,000 shares authorized; 6,750,000 shares issued and outstanding for class A convertible preferred stock and 160,000 and 250,000 shares issued and outstanding for class B convertible preferred stock at March 31, 2018 and June 30, 2017, respectively
6,910
7,000
Common stock, $.001 par value; 150,000,000 shares authorized; 40,205,663 shares issued and outstanding at March 31, 2018 and 38,000,663 shares issued and outstanding at June 30, 2017
40,205
38,000
Additional paid in capital
1,649,868
1,010,000
Accumulated deficit
(2,269,476
)
(958,535
)
Total equity (deficit)
(572,493
)
96,465
Total liabilities and equity
$
428,483
$
197,047
See accompanying notes to condensed consolidated financial statements.
LEAFBUYER TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended March 31,
Nine Months Ended March 31,
2018
2017
2018
2017
Sales revenue
$
287,224
$
231,504
$
785,969
$
715,158
Cost of sales
-
-
-
-
Gross profit
287,224
231,504
785,969
715,158
Operating expenses:
Selling expenses
53,966
450
138,821
450
General and administrative
1,060,829
339,370
1,945,141
750,965
Total operating expenses
1,114,795
339,820
2,083,962
751,415
Loss from operations
(827,571
)
(108,316
)
(1,297,993
)
(36,257
)
Other income (expense):
Interest expense
(12,919
)
(39
)
(12,948
)
(39
)
Other income
-
-
-
1,438
Other income (expense), net
(12,919
)
(39
)
(12,948
)
1,399
Net loss
$
(840,490
)
$
(108,355
)
$
(1,310,941
)
$
(34,858
)
Net loss per common share:
Basic and diluted
$
(0.02
)
$
(0.00
)
$
(0.03
)
$
(0.00
)
Weighted average common shares outstanding:
Basic and diluted
40,418,163
25,830,511
39,197,367
23,090,337
See accompanying notes to condensed consolidated financial statements
LEAFBUYER TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)

Nine Months Ended March 31,
2018
2017
Cash flows from operating activities:
Net loss
$
(1,310,941
)
$
(34,858
)
Adjustments to reconcile net income to net cash used in operating activities:
Stock based compensation
239,133
Stock issued for services
280,850
Depreciation
214
-
Changes in assets and liabilities:
Accounts receivable
(9,538
)
-
Inventory
(3,652
)
-
Prepaid expenses and other
(187,547
)
1,644
Accounts payable and accrued liabilities
109,791
(32,180
)
Net cash used in operating activities
(881,690
)
(65,394
)
Cash flows from investing activities:
Acquisition of office equipment
-
(1,500
)
Net cash provided by (used in) investing activities
-
(1,500
)
Cash flows from financing activities:
Proceeds from issuance of debt
790,603
-
Proceeds from issuance of stock
122,000
850,000
Distributions
-
(611,065
)
Net cash provided by financing activities
912,603
238,935
Net change in cash and cash equivalents
30,913
172,041
Cash and cash equivalents, beginning of period
164,680
52,360
Cash and cash equivalents, end of period
$
195,593
$
224,401
See accompanying notes to condensed consolidated financial statements.
LEAFBUYER TECHNOLOGIES INC.
CONSOLIDATED STATEMENT OF STOCKHOLERS' EQUITY
(Unaudited)
Preferred Stock
Common Stock
# of Shares
Amount
# of Shares
Amount
APIC
Acc Deficit
Total
June 30, 2017
7,000,000
7,000
38,000,663
38,000
1,010,000
(958,535
)
96,465
Issuance of common stock for cash
-
-
620,000
620
119,380
-
120,000
Issuance of common stock for exercise of options
-
-
8,000
8
1,992
-
2,000
Stock based compensation
-
-
-
-
239,133
-
239,133
Issuance of common stock in conversion of preferred stock
(90,000
)
(90
)
1,440,000
1,440
(1,350
)
-
-
Issuance of common stock for services
137,000
137
280,713
-
280,850
Net loss for the nine months ended March 31, 2018
-
-
-
-
-
(1,310,941
)
(1,310,941
)
March 31, 2018
6,910,000
6,910
40,205,663
40,205
1,649,868
(2,269,476
)
(572,493
)
LEAFBUYER TECHNOLOGIES INC.
Notes to 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”) in consideration for: cash in the amount of Six Hundred Thousand Dollars ($600,000); 2,351,355 newly-issued, pre-split shares of the Registrant’s Common Stock (the “Merger Shares”); and 324,327 pre-split shares of the Registrant’s Series A Preferred Stock, par value $0.001 per share (the “Series A Shares,” and collectively with the Merger Shares, the “Merger Consideration”).  Pursuant to the terms of the Merger Agreement, LB Media agreed to retire 5,000,000 pre-split shares of Common Stock of the Registrant held immediately prior to 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, 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 contains 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 subsidiaries.
Description of Business
We are focused on providing valuable information for the savvy cannabis consumer looking to make a purchase via deals and a dispensary database.  We connect consumers with dispensaries by working alongside businesses to showcase their unique products and build a network of loyal patrons.  Our national network of cannabis deals and information reaches millions of consumers monthly.

LB Media was founded in 2012 by a group of technology and industry veterans and provides online resources for cannabis deals and specials.  Our headquarters are located in Greenwood Village, Colorado.
Basis of Presentation

The accompanying condensed consolidated balance sheet as of June 30, 2017, 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 information included in this report should be read in conjunction with our audited financial statements and notes thereto.
Going Concern
As shown in the accompanying condensed consolidated financial statements, we had total stockholders’ deficit of $572,493 and a working capital deficit of $573,779 of March 31, 2018.  We reported a net loss of $1,310,941 for the nine months ended March 31, 2018, and we anticipate further losses in the development of our business.  Accordingly, there is substantial doubt about our ability to continue as a going concern.

Our ability to continue as a going concern is dependent upon our generating profitable operations in the future and / or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due.  Management believes that actions presently being taken to further implement our business plan and generate additional revenues 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.
Reclassifications
Certain prior period amounts have been reclassified to conform with the current period presentation.
Note 2 — Summary of Significant Accounting Policies

Fair Value Measurements

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

The estimated fair value of certain financial instruments, including cash and cash equivalents are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

The Company has no assets or liabilities valued at fair value on a recurring basis.

Revenue Recognition

The Company follows the guidance of the Accounting Standards Codification ("ASC") Topic 605, "Revenue Recognition."  We record revenue when persuasive evidence of an arrangement exists, services have been rendered, the selling price to the customer is fixed or determinable and collectability of the revenue is reasonably assured.  In the normal course of business, we receive payments from our customers which include payments for both current and future services.  We do not recognize payment for future services in current income; rather, we record the amounts of those payments as deferred revenue in the current period and recognize the appropriate amounts in income in future periods as applicable.  No costs are recorded to cost of sales as we are unable to directly allocate any costs of our revenue.

Principles of Consolidation

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

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, cash and cash equivalents includes demand deposits, time deposits, certificates of deposit and short-term liquid investments with original maturities of three months or less when purchased. As of March 31, 2018, and June 30, 2017, the Company did not hold any cash equivalents.  The Federal Deposit Insurance Corporation provides coverage for all accounts of up to $250,000. As of March 31, 2018, and June 30, 2017, none of the Company’s cash was in excess of federally insured limits.

Stock-Based Compensation

The Company accounts for stock-based awards to employees in accordance with applicable accounting principles, which requires compensation expense related to share-based transactions, including employee stock options, to be measured and recognized in the financial statements based on a determination of the fair value of the stock options. The grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model. For all employee stock options, we recognize expense over the requisite service period on an accelerated basis over the employee’s requisite service period (generally the vesting period of the equity grant). The Company’s option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense.
Options awarded to purchase shares of common stock issued to non-employees in exchange for services are accounted for as variable awards in accordance with applicable accounting principles. Such options are valued using the Black-Scholes option pricing model.
See Note 8 for the assumptions used to calculate the fair value of stock-based employee and non-employee compensation.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.”  Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date.  A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

ASC Topic 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  ASC Topic 740 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.  There are no material uncertain tax positions at March 31, 2018.
Recently Issued Accounting Pronouncements
In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606) (ASU 2016-12).  ASU 2016-12 provides guidance that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  ASU 2016-12 provides clarification on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications.  This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position.

The Financial Accounting Standards Board and other entities issued new or modifications to, or interpretations of, existing accounting guidance during 2017 and 2018.  Management has carefully considered the new 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.
Note 3 — Recapitalization

On March 23, 2017, we completed the Merger Agreement with AP.  The impact to equity of the Merger Agreement includes a) the issuance of 2,351,355 new pre-split shares of the Company’s common stock; b) the issuance of 324,327 new pre-split shares of the Company’s Series A Convertible Preferred Stock; c) the retirement of 5,000,000 shares of the Company’s pre-split common stock; and d) removing the Company’s accumulated deficit and adjusting equity for the recapitalization.  Simultaneously with the Merger, the Company accepted subscriptions in a private placement offering of 476,092 new pre-split shares of the Company’s common stock in the amount of $600,000 as well as 27,027 new pre-split shares of the Company’s Series B Convertible Preferred Stock in the amount of $250,000. These shares are considered to be outstanding beginning January 1, 2015.  However, as the cash to purchase these shares was received in 2017, we have recorded the cash received in connection with these shares in additional paid-in capital during 2017.
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 March 31, 2018.  In addition, the Company has 10,000,000 preferred stock authorized with a par value of $0.001 per share as of March 31, 2018.

In accordance with the Merger Agreement, the Company issued 2,351,355 new, pre-split shares of common stock in addition to the 6,280,000 shares that were already outstanding.  The Company also issued 324,327 new, pre-split shares of Series A Convertible Preferred Stock.  In addition, the Company accepted subscriptions in a private placement offering of 476,092 new pre-split shares of the Company’s common stock in the amount of $600,000 as well as 27,027 new pre-split shares of the Company’s Series B Convertible Preferred Stock, of which each share of Series B Convertible Preferred Stock is convertible into 16 Common Shares at any time, in the amount of $250,000.  All shares issued in accordance with the Merger Agreement are considered to be outstanding beginning January 1, 2015 as these shares relate to the change in capital structure.  Furthermore, 5,000,000 pre-split shares of common stock were retired in accordance with the Merger Agreement.  In connection with the Merger Agreement, the Company made distributions totaling $600,000 to officers of the Company.  Both Series A Convertible Preferred Stock and Series B Convertible Preferred Stock have rights to dividends when declared; however, there is no stated dividend rate and no such dividends have yet been declared by the Company.  We evaluated the convertible preferred stock agreements for derivatives and determined that they do not qualify for derivative treatment for financial reporting purposes.  We also determined this does not qualify as a beneficial conversion feature.  Accordingly, the balances have been reported at the carrying amounts.
On March 24, 2017, the Company effected a forward split such that 9.25 shares of Common Stock were issued for every 1 share of Common Stock issued and outstanding immediately prior to the forward split.  Immediately following the forward split, there were 38,000,663 shares of post-split common stock, 3,000,000 shares of post-split Series A Convertible Preferred Stock, and 250,000 shares of post-split Series B Convertible Preferred Stock outstanding.  The par value of all classes of shares remained at $0.001 per share after the forward split.  During the six months ended June 30, 2017, an additional 3,750,000 shares of post-split Series A Convertible Preferred Stock were purchased from the Company.  All references to shares herein refer to post-split shares, unless otherwise noted.

During the nine months ended March 31, 2018, the Company accepted subscription for the issuance of 620,000 post-split common shares for total subscriptions of $120,000 in cash.
During the nine month’s ended March 31, 2018, the Company issued 8,000 shares of common stock for the exercise of options and $2,000 cash.  The  Company also received notice from a Preferred Stock Series B stockholder to convert 90,000 shares of preferred stock into 1,440,000 shares of common stock.

During the nine month’s ended the Company issued 137,000 shares of common stock to vendor’s for services.  These shares were valued at fair market value of $280,850 and will be amortized over 6 month’s ending in June 2018.  The Company has expensed $140,425 and the remainder of $140,425 is included in prepaid expenses at March 31, 2018.
Note 5 — Debt
On September 28, 2017, the Company entered into a promissory note with an investor of the Company in the amount of $200,000.  The note bears no interest and is payable in full on September 30, 2018.  In addition, on December 20, 2017, the Company entered into a promissory note with the same investor of the Company in the amount of $150,000.  This note also bears no interest and is payable in full on December 20, 2018.  The investor has agreed to convert the loan into 437,500 shares of common stock.  The Company has not issued these shares at this time.

During February 2018, the Company entered into two promissory notes with an investor of the Company in the amount of $28,000 and $84,000 in exchange for $25,000 and $75,000, respectively.  Each of the notes have an original issue discount of $3,000 and $9,000, respectively that is being amortized to interest expense over the term of the notes.  As of March 31, 2018, $2,155 and $6,514 of the discount remains to be amortized.  The notes bear interest at 12% and is payable in full in August 2018.
During February 2018, the Company entered into a promissory note with an investor of the Company in the amount of $150,000 in exchange for $132,000.  The note has an original issue discount of $18,000 that is being amortized to interest expense over the term of the note.  As of March 31, 2018, $12,729 of the discount remains to be amortized.  The note bears interest at 12% and is payable in full in August 2018.

Note 6 — Commitments and Contingencies

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 — Net Earnings or Loss per Share
Basic net earnings or loss per share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period.  Diluted net loss per share is computed similarly to basic net loss per share, except that it includes the potential dilution that could occur if dilutive securities are exercised.  We have prepared the calculation of earnings or loss per share using the weighted-average number of common shares of the Company that were outstanding during the three and nine months ended March 31, 2018 and 2017.

Dilutive instruments had no effect on the calculation of earnings or loss per share during the three and nine months ended March 31, 2018 and 2017.
Note 8 — Stock Based Compensation

The equity incentive plan of the Company was established in February of 2017.  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 5,000,000. The options are exercisable for a period of up to 10 years from the date of the grant.
The following table reflects the continuity of stock options for the nine months ended March 31, 2018:

A summary of stock option activity is as follows:
March 31,
2018
Number of options outstanding:
Beginning of year
-
Granted
1,014,770
Exercised, converted
(8,000
)
Forfeited / exchanged / modification
(163,500
)
End of period
843,270
Number of options exercisable at end of period
28,000
Number of options available for grant at end of period
4,148,730
Weighted average option prices per share:
Granted during the period
$
0.25
Exercised during the period
$
0.25
Terminated during the period
$
0.25
Outstanding at end of period
$
0.25
Exercisable at end of period
$
0.25

The average fair value of stock options granted was estimated to be $1.73 per share for the period ended March 31, 2018. This estimate was made using the Black-Scholes option pricing model and the following weighted average assumptions:

2018
Expected option life (years)
2.5 - 3
Expected stock price volatility
144
%
Expected dividend yield
—
%
Risk-free interest rate
2.31
%

Stock-based compensation expense attributable to stock options was approximately $1,454,000 for the nine month period ended March 31, 2018.  As of March 31, 2018, there was approximately $1,215,000 of unrecognized compensation expense related to unvested stock options outstanding, and the weighted average vesting period for those options was 3 years.

Note 9 — Subsequent Events
Management of the Company determined a reportable subsequent event required to be disclosed as follows:
On April 19, 2018, the Company entered into a Standby Equity Distribution Agreement (the “SEDA”) with YA II PN Ltd. (“Investor”), a Cayman Island exempt limited partnership and an affiliate of Yorkville Advisors Global, LLC, whereby the Company sold and the Investor purchased 869,565 shares (the “Initial Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”) for the purchase price of One Million Dollars ($1,000,000),  Additionally, under the SEDA the Company may sell to the Investor up to $5 million of shares of Common Stock over a two-year commitment period.  Under the terms of the SEDA, the Company may from time to time, in its discretion, sell newly-issued shares of its common stock to the Investor at a discount to market of 8% of the lowest daily volume weighted average price during the relevant pricing period.  The Company is obligated to register the Initial Shares, the Commitment Shares (as defined below), and the shares of Common Stock issuable under the SEDA pursuant to a registration statement under the Securities Act of 1933, as amended (the “Securities Act”).

The Company is not obligated to utilize any portion of the SEDA and there are no minimum commitments or minimum use penalties provided the Company does not terminate the SEDA within 18 months wherein the Company would be required to pay a termination fee of $100,000.  The Company issued One Hundred Thousand (100,000) shares of Common Stock as a commitment fee (the “Commitment Shares”) to an affiliate of the Investor.  The total amount of funds that ultimately can be raised under the SEDA over the two-year term will depend on the market price for the Company’s common stock and the number of shares actually sold.

The SEDA does not impose any restrictions on the Company’s operating activities. During the term of the SEDA, the Investor is prohibited from engaging in any short selling or hedging transactions related to the Common Stock.

A copy of the SEDA is attached as Exhibit 10.1 to the Current Report on Form 8-K as filed with the SEC on April 20, 2018.

In connection with the SEDA, the Company engaged Garden State Securities, Inc. (“GSS”) as its exclusive selling/placement agent.  In connection with the transactions set forth in the SEDA, GSS shall receive a fee equal to 10% of the purchase price of the Initial Shares in cash plus warrants to purchase 86,957 shares of Common Stock at an exercise price of $1.15 per share, expiring in five years.  GSS will also receive a cash fee equal to 5% of the amount paid by the Investor for each Advance under the SEDA.

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 consolidated financial statements for the three and nine months ended March 31, 2018 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, 2018. 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, 2017, as filed in our annual report on Form 10-KT.
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

LB Media Group, LLC introduced Leafbuyer.com in 2013 as a consumer portal that would allow cannabis consumers to find the best deals and information from their favorite local dispensary. The platform also allowed cannabis businesses to attract new customers by posting more information and better cannabis deals. As the market has matured and our clients have become more sophisticated, their needs have changed. The Company is now focused on developing multiple technology solutions to help our customers achieve their objectives. Resources are being put into broadening the platform in several key features. The fully-developed Leafbuyer platform will host many tools for our clients to attract, retain and grow customers. We plan to expand the platform into a full-service solution that can monetize any type of technology need a client may have.
The site’s sophisticated vendor dashboard pairs vendor data with consumer needs to find exactly what deals, products or menu items the consumer is looking for.  Vendors engage consumers through a robust 24/7 real-time dashboard that allows updates on menus, specials, jobs, and tracks return on investment reporting.

We operate in a rapidly evolving and highly regulated industry that, as has been estimated by some, will exceed $30 billion in revenue by the year 2020.  We have been and will continue to be aggressive in pursuing opportunities that we believe will benefit us in the long-term.
Our condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  The condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.
Comparison of results of operations for the three months ended March 31, 2018 and 2017
Three months ended March 31,
2018
2017
Change
%
Sales revenue
$
287,224
$
231,504
$
55,720
24
%
Total operating expenses
1,114,795
339,820
774,975
228
%
Interest expense
(12,919
)
(39
)
(12,880
)
33,026
%
Other income (expense)
-
-
-
Net loss
$
(840,490
)
$
(108,355
)
$
(732,135
)
676
%
Sales Revenue, Cost of Revenue and Gross Profit
Revenues increased for the three months ended March 31, 2018 compared to the same period in 2017 as we expanded our customer base and continued to implement our growth plan.  Cash received from customers increased by 42 % for the three months ended March 31, 2018 compared to the same period in 2017. However, the growth in GAAP basis revenue was lower due solely to the timing of recognition of deferred revenue.  Through our national network of cannabis deals and information, we are able to reach millions of consumers monthly and are looking to continue to expand our presence in the marketplace.
Operating expenses
Three months ended March 31,
2018
2017
Change
%
Selling expenses
$
53,966
$
450
$
53,516
11,892
%
General and administrative
1,060,829
339,370
721,459
213
%
$
1,114,795
$
339,820
$
774,975
228
%

The increase in operating expenses during the three months ended March 31, 2018 compared to 2017 was driven by our growth and expansion, particularly on the personnel side as we added new staff.  In addition, we incurred additional costs related to operating as a publicly traded company in 2018 than we incurred in 2017.

Comparison of results of operations for the nine months ended March 31, 2018 and 2017

Nine months ended March 31,
2018
2017
Change
%
Sales revenue
$
785,969
$
715,158
$
70,811
10
%
Total operating expenses
2,083,962
751,415
1,332,547
177
%
Interest expense
(12,949
)
(39
)
(12,909
)
(33,100
)%
Other income (expense)
-
1,438
(1,438
)
100
%
Net loss
$
(1,310,941
)
$
(34,858
)
$
(1,276,083
)
(3,661
)%

Sales Revenue, Cost of Revenue and Gross Profit
Revenues increased for the nine months ended March 31, 2018 compared to the same period in 2017 as we expanded our customer base and continued to implement our growth plan.  Cash received from customers increased by 36 % for the nine months ended March 31, 2018 compared to the same period in 2017. However, the growth in GAAP basis revenue was lower due solely to the timing of recognition of deferred revenue.  Through our national network of cannabis deals and information, we are able to reach millions of consumers monthly and are looking to continue to expand our presence in the marketplace.
Operating Expenses

Nine months ended March 31,
2018
2017
Change
%
Selling expenses
$
138,821
$
450
$
138,371
30,749
%
General and administrative
1,945,141
750,965
1,194,176
159
%
$
2,083,962
$
751,415
$
1,332,547
177
%

The increase in operating expenses during the nine months ended March 31, 2018 compared to 2017 was driven by our growth and expansion, particularly on the personnel side as we added new staff.  In addition, we incurred additional costs related to operating as a publicly traded company in 2018 than we incurred in 2017.
Liquidity and Capital Resources
At March 31, 2018 we had $195,593 in cash and cash equivalents.  Our cash flows from operating and financing activities were as follows:

Cash Flows

Our cash flows from operating, investing and financing activities were as follows:
Nine months ended March 31,
2018
2017
Net cash used in operating activities
$
(881,690
)
$
(65,394
)
Net cash used in investing activities
-
(1,500
)
Net cash provided by financing activities
$
912,603
$
238,935

Working Capital
Working capital is the amount by which current assets exceed current liabilities.  We had negative working capital of $573,779 and working capital of $94,965, respectively, as of March 31, 2018 and June 30, 2017.  The decrease in working capital is due to the increase in current portion of debt and deferred revenue at March 31, 2018.

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 nine month period ended March 31, 2018.
Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of March 31, 2018 and June 30, 2017.

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 Transitional Annual Report on Form 10-KT for the transition period from January 1, 2017 through June 30, 2017 in the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.
There is substantial doubt about our ability to continue as a going concern.  Our ability to continue as a going concern is dependent upon our generating profitable operations in the future and / or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due.  Management believes that actions presently being taken to further implement our business plan and generate additional revenues 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.
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. A complete summary of these policies is included in Note 2 of the notes to our unaudited interim condensed consolidated financial statements. 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.

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

Disclosure Controls

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) designed to provide reasonable assurance the information required to be reported in our Exchange Act filings is recorded, processed, summarized and reported within the time periods specified and pursuant to Securities and Exchange Commission (“SEC”) rules and forms, including controls and procedures designed to ensure that this information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining effective internal control over financial reporting. Under the supervision of our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2018 using the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In our assessment of the effectiveness of internal control over financial reporting as of March 31, 2018, we determined that our disclosure controls and procedures are not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time provided in the SEC rules and forms.
Management is currently evaluating remediation plans for the above control deficiencies.

Changes in Internal Control
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) during the nine months ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. However, as a result of the Company’s recent change of control, we have added several additional employees in accounting which we hope will improve the Company’s internal control over financial reporting.
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
During the nine months ended March 31, 2018, the Company accepted subscription for the issuance of 1,057,500 post-split common shares for total subscriptions of $470,000 in cash.
During the nine month’s ended March 31, 2018, the Company issued 8,000 shares of common stock for the exercise of options and $2,000 cash.  The  Company also received notice from a Preferred Stock Series B stockholder to convert 90,000 shares of preferred stock into 1,440,000 shares of common stock.
During the nine month’s ended the Company issued 137,000 shares of common stock to vendor’s for services.  These shares were valued at fair market value of $280,850 and will be amortized over 6 month’s ending in June 2018.  The Company has expensed $140,425 and the remainder of $140,425 is included in prepaid expenses at March 31, 2018.
All of the securities set forth above were issued by the Company pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, or the provisions of Rule 504 of Regulation D promulgated under the Securities Act. All such shares issued contained a restrictive legend and the holders confirmed that they were acquiring the shares for investment and without intent to distribute the shares. All of the purchasers were friends or business associates of the Company’s management and all were experienced in making speculative investments, understood the risks associated with investments, and could afford a loss of the entire investment. The Company did not utilize an underwriter or a placement agent for any of these offerings of its securities.
Item 3.
Defaults Upon Senior Securities

None.
Item 4.
Mine Safety Disclosures

Not applicable.

Item 5.
Other Information

None

Item 6.
Exhibits

Exhibit
Number
Exhibit
Description
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*
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*
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 **
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**

* Filed herewith.

** Furnished herewith.
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.

Date: May 16, 2018
LEAFBUYER TECHNOLOGIES, INC.
By:
/s/ Kurt Rossner
Kurt Rossner
Chief Executive Officer, Director (principal executive officer)
By:
/s/ Mark Breen
Mark Breen
Chief Financial Officer and Director
20
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