UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from ______________ to ______________
Commission file number:
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code (
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.
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 | ☐ |
☒ | 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 11, 2022 was
Table of Contents
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Table of Contents |
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. |
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UNAUDITED CONDENSED CONSOLDIATED BALANCE SHEETS |
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| December 31, 2021 |
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| June 30, 2021 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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Accounts receivable (net of allowance for doubtful accounts of $ |
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Prepaid expenses and other current assets |
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Total current assets |
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Noncurrent assets: |
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Fixed assets and intangible assets, net |
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Total assets |
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LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
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Current liabilities: |
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Accounts payable |
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Accrued liabilities |
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Deferred revenue |
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Debt, related party (Note 9) |
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Debt |
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Derivative liability |
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Total current liabilities |
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Debt, net of current portion |
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Total liabilities |
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Commitments and contingencies (Note 6) |
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Stockholders’ Equity (Deficit): |
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Convertible Preferred Stock, $ |
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Convertible Preferred Stock Series A, $ |
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Convertible Preferred Stock, $ |
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Common stock, $ |
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Additional paid in capital |
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Accumulated deficit |
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Total stockholders’ equity (deficit) |
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Total liabilities and stockholders’ equity (deficit) |
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See accompanying notes to condensed consolidated financial statements.
| 3 |
| Table of Contents |
LEAFBUYER TECHNOLOGIES INC. | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |
(Unaudited) | |
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| Three Months Ended December 31, |
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| Six Months Ended December 31, |
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| 2020 |
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Sales revenue |
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Cost of sales |
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Gross profit |
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Operating expenses: |
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Selling expenses |
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General and administrative |
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Personnel expenses |
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Stock based compensation expense |
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Total operating expenses |
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Loss from operations |
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Interest expense |
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Unrealized gain(loss) on Derivative |
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Other Income |
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Net loss |
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Net loss per common share: |
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Basic |
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Fully Diluted |
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Weighted average common shares outstanding: |
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Basic |
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Fully Diluted |
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See accompanying notes to condensed consolidated financial statements
| 4 |
| Table of Contents |
LEAFBUYER TECHNOLOGIES, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) |
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| Preferred Stock A |
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| Common Stock |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| APIC |
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| Acc Deficit |
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| Total |
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Balance, June 30, 2021 |
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Stock based compensation |
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Issuance of common stock for vendor payments |
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Cancellation of Bifurcated Derivative PS A |
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Issuance of common stock as employee compensation |
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| - |
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| - |
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Net gain |
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Balance, December 31, 2021 |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
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| Preferred Stock A |
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| Preferred Stock B |
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| Common Stock |
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| Shares |
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| Amount |
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| Amount |
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| APIC |
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| Acc Deficit |
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| Total |
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Balance, June 30, 2020 (RESTATED) |
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| $ |
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Stock based compensation |
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Issuance of common stock for vendor payments |
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Issuance of common stock as employee compensation |
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Net loss |
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| - |
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Balance, December 31, 2020 (RESTATED) |
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See accompanying notes to condensed consolidated financial statements.
| 5 |
| Table of Contents |
LEAFBUYER TECHNOLOGIES INC. |
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW |
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(Unaudited) |
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| Six months Ended December 31, |
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Cash flows from operating activities: |
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Net Income |
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Adjustments to reconcile net income to net cash used in operating activities: |
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Stock based compensation |
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Amortization of note payable discount |
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Loss (gain) on derivative liability |
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Forgiveness of PPP loan |
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Depreciation and amortization |
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Changes in assets and liabilities: |
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Accounts receivable |
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Prepaid expenses and other |
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Accounts payable |
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Accrued liabilities |
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Net cash used in operating activities |
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Cash flows from investing activities: |
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Net cash used in investing activities |
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Cash flows from financing activities: |
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Net cash provided by financing activities |
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Net change in cash and cash equivalents |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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Cash paid for interest |
| $ | - |
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| $ |
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Cash paid for taxes |
| $ | - |
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Supplemental information for non-cash investing and financing activities: |
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Issuance of common stock for vendor payments |
| $ |
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| $ |
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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
Description of Business
The Company was founded in 2012 by a group of technology and industry veterans and provides online resources for cannabis deals and specials. Our headquarters is located in Greenwood Village, Colorado.
Our subsidiary, LB Media Group, LLC has evolved and grown as a listing website to a comprehensive marketing technology platform. Our clients, medical and recreational dispensaries in legalized cannabis states, along with cannabis product companies subscribe to our technology platform to assist in new customer acquisition and provide retention tools that include texting/loyalty and order ahead technology.
Basis of Presentation
The accompanying condensed consolidated balance sheet as of June 30, 2021, 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.
Going Concern
As of December 31, 2021, we had $
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.
| 7 |
| Table of Contents |
Error Correction
Series A B Shares Outstanding
The Company’s annual financial statements ended June 30, 2020 contained three errors related to the Preferred Stock issued in connection with the March 23, 2017 Merger Agreement.
In accordance with the Merger Agreement, the Company issued 324,327 new pre-split shares of Series A Convertible Preferred Stock and accepted subscriptions in a private placement offering of
On March 24, 2017, the Company effected a forward split such that
This presentation was incorrect because in connection with stock splits by the Company, the certificate of designation for each of the Series A Convertible Preferred Stock and the Series B Convertible Preferred Stock provide for an adjustment to the common stock underlying such shares and not the shares of preferred stock. Therefore, the September 30, 2020 Consolidated Statement of Equity and Footnote 4 have been changed to reflect
Therefore, the Consolidated Balance Sheet, Consolidated Statement of Equity and Footnote 4 have been changed to reflect the Number of shares of Series A and Series B preferred stock and the par value of those shares.
Balance Sheet – December 31, 2020
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| As Computed - Restated |
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| As Reported |
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| Effect of Change |
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Convertible Preferred Stock Series A - Value |
| $ |
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| $ |
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| $ | ( | ) | ||
Convertible Preferred Stock Series B - Value |
| $ |
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| $ |
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| $ | ( | ) | ||
Additional Paid in Capital |
| $ |
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| $ |
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| $ |
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Convertible Preferred Stock Series A - Shares |
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|
|
| ( | ) | ||
Convertible Preferred Stock Series B - Shares |
|
|
|
|
|
|
|
| ( | ) | ||
Series A convertible feature not accounted properly
The Series A Preferred Shares are convertible into a number of shares of Common Stock so that the holders of Series A Convertible Preferred Stock would hold 55% of the number of outstanding shares of Common Stock on a fully diluted basis after giving effect to such conversion. The Series A Convertible Preferred Stock vote on an “as-converted” basis.
The Company has determined that the Series A Preferred Stock conversion provisions meet the accounting requirements of FASB ASC 815 which requires a bifurcation of an embedded conversion feature and classification of the derivative as a liability on the balance sheet at the end of each reporting period. The fair value of the derivative liability is estimated each period as a Level 3 – Significant Unobservable Inputs based upon the numbers of common shares stock at an estimated conversion price.
| 8 |
| Table of Contents |
The following table represents the value of the derivative and number of shares of common stock issuable for the holders to obtain 55% of the number of outstanding shares of common stock:
Balance Sheet – December 31, 2020
|
| As Computed - Restated |
|
| As Reported |
|
| Effect of Change |
| |||
Derivative liability |
| $ |
|
| $ |
|
| $ |
| |||
Total current liabilities |
| $ |
|
| $ |
|
| $ |
| |||
Total liabilities |
| $ |
|
| $ |
|
| $ |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated deficit |
| $ |
|
| $ |
|
| $ |
| |||
Total equity (deficit) |
| $ | ( | ) |
| $ |
|
| $ | ( | ) | |
Income Statement – December 31, 2020
|
| As Computed - Restated |
|
| As Reported |
|
| Effect of Change |
| |||
Unrealized gain(loss) on derivative |
| $ | ( | ) |
| $ |
|
| $ | ( | ) | |
Other income/ (expense) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Net (loss) income |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Earnings (loss) per share - Basic |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Earnings (loss) per share – Fully Diluted |
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |
Statement of Cash Flow – December 31, 2020
|
| As Computed - Restated |
|
| As Reported |
|
| Effect of Change |
| |||
Net (loss) income |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Loss (gain) on derivative liability |
| $ |
|
| $ |
|
| $ |
| |||
Statement of Equity –December 31,2020
|
| As Computed - Restated |
|
| As Reported |
|
| Effect of Change |
| |||
|
|
|
|
|
|
|
|
|
| |||
December 31, 2020 – Accumulated Deficit |
| $ | (23,977,270 | ) |
| $ | ( | ) |
| $ | ( | ) |
Fully Diluted shares exceed Authorized Shares
The Company has determined that as of December 31, 2020 the Series A Preferred stock would be convertible into
| 9 |
| Table of Contents |
Note 2 — Summary of 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, 2021 Form 10-K. During the three months ended December 31, 2021, 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.
Earnings (Loss) per Share
Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the reporting period. Diluted loss per share is computed similarly to basic loss per share, except that it includes the potential dilution that could occur if dilutive securities are exercised. Dilutive instruments had no effect on the calculation of earnings or loss per share during the period ended December 31, 2021. For the period ended December 31, 2020 warrants of
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.
| 10 |
| Table of Contents |
Note 3 — Fixed Assets and Intangible Assets
Fixed Assets and intangible assets consist of the following
|
| December 31, 2021 |
|
| June 30, 2021 |
| ||
|
|
|
|
|
|
| ||
Software platform |
| $ |
|
| $ |
| ||
Furniture and fixtures |
|
|
|
|
|
| ||
Less accumulated amortization |
|
| ( | ) |
|
| ( | ) |
Property and equipment, net |
| $ |
|
| $ |
| ||
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 will be dissolved in the transition and the Loyalty Software will be 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
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. The current revenues of GTI are minimal, and the Company expects higher sales in the California market as the system is fully integrated.
Amortization expense, recorded as cost of revenue, related to internal use software totaled $
2022 |
| $ |
| |
2023 |
|
|
| |
2024 |
|
|
| |
2025 |
|
|
| |
Total Unamortized Expense |
| $ |
|
Note 4 — Capital Stock and Equity Transactions
The Company has
| 11 |
| Table of Contents |
In addition, the Company has
Effective October 13, 2021, the Company executed and filed with the State of Nevada a Certificate of Designation of Preferred Stock of the Corporation fixing the designations, power, preferences, and rights of the shares. The total of
The value as of October 13, 2021 for the derivative liability was $
As of December 31, 2020 the
Issuance of Common Stock
During the six months ended December 31, 2021 the Company issued
During the six months ended December 31, 2021, the Company issued 290,000 shares of Common Stock to vendors for services rendered. These shares were valued at fair market value of $
During the six months ended December 31, 2020 the Company issued
During the six months ended December 31, 2020, the Company issued
Note 5 — Debt
During February 2018, the Company issued a promissory note in favor of an investor of the Company in the amount of $
On September 21, 2018, the Company entered into a promissory note with an investor of the Company with a face value of $
| 12 |
| Table of Contents |
On September 21, 2018, the Company entered several promissory notes with various investors of the Company with a face value of $
During the year ended June 30, 2019, the Company entered into several promissory notes with various investors of the Company with a face value of $
During the year ended June 30, 2020, the Company entered into a promissory note with a related party (see Note 9) with a face value of $600,000 in exchange for a total of $
During the year ended June 30, 2020, the Company entered into a promissory note with a related party (see Note 9) with a face value of $50,000. In January 2021, the Company repaid $
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 $
| 13 |
| Table of Contents |
On March 30, 2021, the Company was granted a loan from American Express National Bank in the aggregate amount of $
The Company recognized $102,777 and $215,231 of interest expense for the six months ended December 31, 2021 and 2020, respectively. As of December 31, 2021 and 2020, accrued interest on the above notes was $524,035 and $319,523, respectively. The weighted average interest rates as of December 31, 2021 and 2020 was
Notes payable and long-term debt outstanding as of December 31, 2021 and June 30, 2021 are summarized below:
|
| Maturity Date |
| December 31, 2021 |
|
| June 30, 2021 |
| ||
12% $150,000 Convertible Note Payable, net of unamortized discount of $0 and $0, respectively |
|
| $ |
|
| $ |
| |||
12% $440,000 Convertible Note Payable, net of unamortized discount of $0 and $0, respectively |
|
|
|
|
|
|
| |||
12% $220,000 Convertible Note Payable, net of unamortized discount of $0 and $0, respectively |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
7% $213,333 Convertible Note Payable, net of unamortized discount of $0 and $28,492, respectively |
|
|
|
|
|
|
| |||
8% $600,000 Related Party Note Payable, net of unamortized discount of $0 and $21,911 respectively |
|
|
|
|
|
|
| |||
8% $50,000 Related Party Note Payable |
|
|
|
|
|
|
| |||
5% Note Payable |
|
|
|
|
|
|
| |||
1% PPP #2 Note Payable |
|
|
|
|
|
|
| |||
3.75% SBA EIDL Note Payable |
|
|
|
|
|
|
| |||
Total notes payable |
|
|
|
|
|
|
|
| ||
Less current portion of notes payable |
|
|
|
|
|
|
|
| ||
Notes payable, net of current portion |
|
|
| $ |
|
| $ |
| ||
(1) The Company entered two promissory notes with an investor of the Company in the amount of $
| 14 |
| Table of Contents |
Note 6 — Commitments and Contingencies
The Company records tax contingencies when the exposure item becomes probable and reasonably estimable. As of December 31, 2021, 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 state legal cannabis markets.
The Company was affected in 2020 by the COVID-19 outbreak and worldwide pandemic. The Company saw some postponements in orders in the first few weeks March 2020 but orders stabilized to a normal level by the end of fiscal year 2020. The Company made a significant pivot to a complete solution when it comes to online ordering and communication.
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
The average fair value of stock options granted was estimated to be $0.14 and $0.07. This estimate was made using the Black-Scholes option pricing model and the following weighted average assumptions for the three months ended December 31, 2021:
Expected option life (years) |
|
| ||
Expected stock price volatility |
| % | ||
Expected dividend yield |
|
| - |
|
Risk-free interest rate |
| % |
| 15 |
| Table of Contents |
A summary of option activity under the employee share option pan as of December 31, 2021 and changes during the year then ended is presented below.
|
| Shares |
|
| Weighted-Average Exercise Price |
|
| Weighted-Average Remaining Contractual Price |
|
| Aggregate Intrinsic Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Options: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Outstanding at July 1, 2021 |
|
|
|
| $ |
|
|
|
|
|
|
| ||||
Granted |
|
|
|
| $ |
|
|
|
|
|
|
| ||||
Exercised, converted |
|
| - |
|
| $ |
|
|
|
|
|
|
| |||
Forfeited / exchanged / modification |
|
| ( | ) |
| $ |
|
|
|
|
|
|
| |||
Outstanding at December 31, 2021 |
|
|
|
| $ |
|
|
|
|
| $ | - |
| |||
Exercisable at December 31, 2021 |
|
|
|
| $ |
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of options available for grant at end of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
A summary of the status of the Company’s non vested shares as of December 31, 2021, and changes during the year quarter December 31, 2021, is presented below:
Options |
| Shares |
|
| Weighted-Average Grant-Date Fair Value |
| ||
Nonvested at July 1, 2021 |
|
|
|
| $ |
| ||
Granted |
|
|
|
| $ |
| ||
Vested |
|
| ( | ) |
| $ |
| |
Forfeited |
|
| ( | ) |
| $ |
| |
Nonvested at December 31, 2021 |
|
|
|
| $ |
| ||
Stock-based compensation expense attributable to stock options was approximately $
| 16 |
| Table of Contents |
Warrants
At December 31, 2021, 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 - SEDA Financing |
|
|
|
|
|
|
| $ |
| |||
Warrants - Issued with Convertible Notes |
|
|
|
|
|
|
| $ |
| |||
Warrants - Securities Purchase Agreement |
|
|
|
|
|
|
| $ |
| |||
Warrants A - Securities Purchase Agreement |
|
|
|
|
|
|
| $ |
| |||
Total |
|
|
|
|
|
|
|
|
|
|
| |
Aggregate intrinsic value at December 31, 2021 |
| $ |
|
|
|
|
|
|
|
|
| |
Note 9 — Related Party Transactions
In March 2020, the Company entered into a promissory note with the Chief Executive Officer for $
In March 2020, the Company entered into a promissory note with the Chief Technology Officer for $
Note 10 — Leases
On January 1, 2021 the Company extended its Denver Colorado headquarter lease for 12 months through December 31, 2021. During the past fiscal year a majority of the Company’s employee have been working remotely and the Company does not know if they will continue to keep this location or relocate to a small facility. Therefore, in accordance with ASC 842 the Company will not record an operating right of use asset and operating lease liability because of the short-term nature of this amendment. The Company will recognize lease expense on a monthly basis through the life of this lease of approximately $
| 17 |
| Table of Contents |
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 three and six months ended December 31, 2021 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, 2022. 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, 2021, 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
Our wholly owned subsidiary, LB Media Group, LLC has evolved and grown from a listing website to a comprehensive marketing technology platform. Our clients, medical and recreational dispensaries in legalized cannabis states, along with cannabis product companies subscribe to our technology platform to assist in new customer acquisition and provide retention tools that include texting/loyalty and ordering ahead technology.
The Leafbuyer Technology Platform reaches millions of cannabis consumers every month through its web-based platform, loyalty platform and smart application technology. Our website’s sophisticated vendor dashboard allows our clients to update menus, deals and create real-time messages to communicate to consumers 24/7. The platform also provides a robust reporting feature to track the vendors’ return on investment. With the increased popularity of Leafbuyer texting/loyalty program, clients can communicate through multiple messaging avenues including push notifications and smart messaging within a custom branded application. Our website, Leafbuyer.com, and its progressive web application hosts a robust search algorithm similar to popular travel or hotel sites, where our client’s customers 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. 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. Consumers have the ability to search, shop, earn rewards, place orders and communicate with their favorite stores all in one convenient application.The application can also be completely branded for the dispensary and allows for 24/7 communication with their patrons.
We continue an aggressive push into all legal cannabis states. Increasing our marketing and sales presence in new markets is a primary objective. Along with this expansion, we continue to develop new technologies that will serve cannabis dispensaries and product companies in attracting and retaining consumers.
Leafbuyer Technologies is now integrated with over 10 major POS companies in the industry. This is a vital link to staying competitive in the market as well as powering our technology. We are currently working on 2 way integrations with many of our partners, to allow push order functionality into the POS systems. Having robust integrations with our partners, gives the business owner the ability to target message their customers by products, needs and behaviors. It also provides Leafbuyer the ability to offer more features that can be monetize, including a white label application experience that is built to scale.
Leafbuyer operates in a rapidly evolving and highly regulated industry that, as has been estimated by grandviewresearch.com, to exceed $70 billion in revenue by the year 2028. Our founders and our Board of Directors has been, and will continue to be, aggressive in pursuing long-term opportunities.
We plan to grow through the aggressive deployment of sales and marketing resources into legal cannabis states, reducing costs and adding more products that produce higher margins. The company also continues to look for acquisition partners to achieve strategic business objectives. However, there can be no assurance that we will be able to locate and acquire such opportunities or that they will be on terms that are favorable to us.
| 18 |
| Table of Contents |
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.
Comparison of results of operations for the three months ended December 31, 2021 and 2020
|
| Three months Ended December 31, |
|
|
|
|
|
|
| |||||||
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % |
| ||||
Revenue |
| $ | 923,829 |
|
| $ | 602,787 |
|
| $ | 321,042 |
|
|
| 53 | % |
Cost of revenue |
|
| 662,059 |
|
|
| 487,041 |
|
|
| 175,018 |
|
|
| 36 | % |
Gross profit |
|
| 261,770 |
|
|
| 115,746 |
|
|
| 146,024 |
|
|
| 126 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
| 750,675 |
|
|
| 583,357 |
|
|
| 167,318 |
|
|
| 29 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on derivative liability |
|
| (838,303 | ) |
|
| (3,714,877 | ) |
|
| 2,876,574 |
|
|
| 230 | % |
Gain of PPP Forgiveness |
|
| - |
|
|
| - |
|
|
| - |
|
| % | ||
Interest expense |
|
| (46,650 | ) |
|
| (73,260 | ) |
|
| (26,610 | ) |
|
| (36 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | (1,373,858 |
|
| $ | (4,255,748 | ) |
| $ | 2,881,891 |
|
|
| 68 | % |
Revenues
During the three months ended December 31, 2021, we generated $923,829 of revenues, compared to revenues of $602,787 during the three months ended December 31, 2020. The increase in revenue is primarily driven by our texting and loyalty platform along with large MSOs.
Gross Profit
Gross profit increased to $261,770 for the period ended December 31, 2021 which was an increase of $146,024 over the same period ended December 31, 2020. Gross profit as a percentage of revenue increased from 19% to 28% due to increased product margins and the implementation of cost cutting measures.
Expenses
During the three months ended December 31, 2021, we incurred total operating expenses of $750,675, including $150,078 in general and administrative expenses, and $210,885 in selling expenses. During the three months ended December 31, 2020, we incurred total operating expenses of $583,357, including $149,527 in general and administrative expenses, and $230,852 in selling expenses.
We did not properly record a derivative liability related to the 55% conversion feature in the Series A preferred stock in prior periods. We corrected this error by recording a liability and charging this amount against retained earnings as of June 30, 2019. Each period thereafter we are required to perform a mark to market adjustment to the derivative liability The value as of October 13, 2021 for the derivative liability was $4,392,870 which was an increase from September 30, 2020 of $838,303. The difference was recorded as an unrealized loss on the consolidated statement of operations as of December 31, 2021 compared to a loss for this same period in 2020 of $3,714,877. During this same period in 2020, the estimated fair value of the derivative increased therefore the liability increased generating unrealized gain of $3,714,877.
Interest expense was $46,650 for the three months ended December 31, 2021 compared to interest expense of $73,260 for the same period ending December 31, 2020 because of the reduction in notes payable during the year.
| 19 |
| Table of Contents |
Net Income
During the three months ended December 31, 2021 we realized net loss of $1,373,858, compared to a net loss of $4,255,748 for the three months ended December 31, 2020.
Comparison of results of operations for the six months ended December 31, 2021 and 2020
|
| Six months Ended December 31, |
|
|
|
|
|
|
| |||||||
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % |
| ||||
Revenue |
| $ | 1,775,522 |
|
| $ | 1,255,510 |
|
| $ | 520,012 |
|
|
| 41 | % |
Cost of revenue |
|
| 1,292,594 |
|
|
| 943,946 |
|
|
| 348,648 |
|
|
| 37 | % |
Gross profit |
|
| 482,928 |
|
|
| 311,564 |
|
|
| 171,364 |
|
|
| 55 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
| 1,559,925 |
|
|
| 1,504,238 |
|
|
| 55,687 |
|
|
| 4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on derivative liability |
|
| 2,208,470 |
|
|
| (2,792,563 | ) |
|
| 5,001,033 |
|
|
| (179 | )% |
Gain of PPP Forgiveness |
|
| 577,977 |
|
|
| - |
|
|
| 557,977 |
|
| % | ||
Interest expense |
|
| (104,321 | ) |
|
| (235,231 | ) |
|
| (110,910 | ) |
|
| (52 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 1,585,129 |
|
| $ | (4,200,468 | ) |
| $ | 5,785,597 |
|
|
| (138 | )% |
Revenues
During the six months ended December 31, 2021, we generated $1,775,522 of revenues, compared to revenues of $1,255,510 during the six months ended December 31, 2020. The increase was primarily due to the increase in text services which is up 41% over the prior year.
Gross Profit
Gross profit increased to $482,928 for the period ended December 31, 2021 which was an increase of $171,364 over the same period ended December 31, 2020. Gross profit as a percentage of revenue decreased from 25% to 27% for because of the increased 3rd party software development costs expended on the technology platform.
Expenses
During the six months ended December 31, 2021, we incurred total operating expenses of $1,559,925, including $298,243 in general and administrative expenses, and $442,390 in selling expenses. During the three months ended December 31, 2020, we incurred total operating expenses of $1,504,238, including $379,703 in general and administrative expenses, and $495,696 in selling expenses.
We did not properly record a derivative liability related to the 55% conversion feature in the Series A preferred stock in prior periods. We corrected this error by recording a liability and charging this amount against retained earnings as of June 30, 2019. Each period thereafter we are required to perform a mark to market adjustment to the derivative liability. During the six months ended December 31, 2021 we recorded an unrealized gain of $2,208,470 the estimated fair value of the derivative changed at the end of the period. During this same period in 2020, the estimated fair value of the derivative increased therefore the liability increased generating unrealized gain of $2,792,563.
Other income during the period ended December 31, 2021 was the result of the SBA PPP loan forgiveness of $577,977, offset by recurring interest expense. Interest expense was $104,321 for the six months ended December 31, 2021 compared to interest expense of $141,971 for the same period ending September 30, 2020 because of the reduction in notes payable during the year.
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Net Income
During the six months ended December 31, 2021 we realized net income of $1,585,129, compared to a net loss of $4,200,468 for the six months ended December 31, 2020.
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.
At December 31, 2021 we had $452,251 in cash and cash equivalents.
Cash Flows
Our cash flows from operating, investing and financing activities were as follows:
|
| Six months Ended September, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Net cash used in operating activities |
| $ | (232,388 | ) |
| $ | (640,739 | ) |
Net cash used in investing activities |
| $ | - |
|
| $ | - |
|
Net cash provided by financing activities |
| $ | - |
|
| $ | - |
|
As of December 31, 2021, we had $452,251 in cash and cash equivalents and a working capital deficit of $2,616,897. We are dependent on funds raised through equity financing. Our cumulative net loss of $23,221,054 was funded by debt and equity financing and we reported a net loss from operations of $1,585,128 for the six months ended December 31, 2021. During the six months ending December 31, 2021, we did not raise or expended any monies through financing activities, and we did not expend any monies through investing activities (acquiring assets).
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements as of December 31, 2021 and June 30, 2021.
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, 2021 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, 2021 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.
We recognize revenue upon completion of our performance obligations or expiration of the contractual time to use services such as bulk texting.
Recent Accounting Guidance Adopted
We have implemented all new accounting pronouncements that are in effect and applicable to us. These pronouncements did not have any material impact on our financial statements unless otherwise disclosed, and we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.
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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
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2021. Based on that evaluation, our management concluded that our disclosure controls and procedures were 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 periods specified in SEC rules and forms. Such officer also confirmed that there was no change in our internal control over financial reporting during the three months ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the three months ended December 31, 2021, 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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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 |
|
| |
| ||
| ||
| ||
| ||
| ||
| ||
| ||
|
|
|
101.INS |
| 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |
|
|
|
101.SCH |
| 101.SCH Inline XBRL Taxonomy Extension Schema Document. |
|
|
|
101.CAL |
| 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
|
101.DEF |
| 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. |
|
|
|
101.LAB |
| 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document. |
|
|
|
101.PRE |
| 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
|
|
|
104 |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
* 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 14, 2022 | By: | /s/ Kurt Rossner |
|
| Kurt Rossner |
| |
| Chief Executive Officer, Director (principal executive officer) |
| |
|
| ||
| By: | /s/ Mark Breen |
|
| Mark Breen |
| |
| Chief Financial Officer and Director |
| |
| 26 |