The following discussion should be read in conjunction with our financial
statements, including the notes thereto, appearing elsewhere in this Annual
Report. The discussions of results, causes and trends should not be construed to
imply any conclusion that these results or trends will necessarily continue into
the future.
We were initially formed as AP Event, Inc., ("APEI") a Nevada corporation on
October 16, 2014. APEI was originally in the business of travel agency to
provide individual and group leisure tours to music festivals, and concerts
combined with local excursions. On March 21, 2017 LB Media Group, LLC ("LB
Media") acquired eighty percent (80%) of the outstanding common stock of APEI.
On March 23, 2017, APEI consummated an Agreement and Plan Merger ("Merger") with
LB Media and LB Acquisition Corp., a wholly owned subsidiary of APEI, whereby LB
Acquisition was merged with and into LB Media Group, LLC. Simultaneously with
the Merger, of APEI accepted subscriptions in a private placement ("Private
Offering") of our common stock. As a result of the Merger, LB Media became a
wholly owned subsidiary of the Registrant and following the consummation of the
Merger and giving effect to the securities sold in the Private Offering, the
members of LB Media beneficially own approximately fifty-five percent (55%) of
our issued and outstanding common stock.
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On March 24, 2017, we amended our Articles of Incorporation (the "Amendment") to
(i) change our name to LeafBuyer Technologies, Inc., (ii) to increase the number
of our authorized shares of capital stock from 75,000,000 to 160,000,000 shares
of which 150,000,000 shares were designated common stock, par value $0.001 per
share and 10,000,000 shares were designated "blank check" preferred stock, par
value $0.001 per share and (iii) to effect a forward split such that 9.25 shares
of our common stock were issued for every 1 share of our common stock issued and
outstanding immediately prior to the Amendment (the "Split").
On April 19, 2018, we entered into a Standby Equity Distribution Agreement (the
"SEDA") with YA II PN Ltd. ("YA Investor"), a Cayman Island exempt limited
partnership and an affiliate of Yorkville Advisors Global, LLC, whereby we sold,
and the YA Investor purchased, 869,565 shares of our common stock for one
million dollars ($1,000,000). Additionally, under the SEDA we may sell to the YA
Investor up to $5,000,000 of shares of our common stock over a two-year
commitment period. Under the terms of the SEDA, we may, from time to time, in
our discretion, sell newly issued shares of our common stock to the YA Investor
at a discount to market of 8% of the lowest daily volume weighted average price
during the relevant pricing period. We are 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.
During October and November 2018, we used the SEDA to receive $1,045,000. We
issued 1,116,738 shares of our common stock which were valued at fair market at
the date issued.
On November 6, 2018, we acquired a customer facing software ("Loyalty Software")
through a Stock Purchase Agreement, in which we acquired all the issued and
outstanding capital stock of Greenlight Technologies, Inc. ("GTI") from its
shareholders. At the time of the transaction, there were no employees working
for GTI, no systems and no assets, other than the Loyalty Software. GTI's legal
entity was dissolved in the transaction and the Loyalty Software was assumed by
us. Management determined that the purchase of GTI did not constitute a business
purchase and recorded the transaction as a purchase of software. The
consideration for the Loyalty Software was 2,916,667 shares of our common stock,
par value $0.001 per share and cash of approximately $450,000. Total value of
the Loyalty Software was estimated at approximately $3,010,000. During the year
ended June 30, 2020 an additional 366,667 of our shares of common stock (for a
value of $262,500) was issued to shareholders of GTI as final settlement of the
purchase agreement.
We issued 30,299,998 shares of common stock for the private placement and the
issuance of Series C Warrants. We received approximately $4,060,000, net of the
placement fees, legal and other expenses incurred for the placement of the
shares. The Investors received Series A Warrants to allow the Investors to
purchase an aggregate of 28,072,364 shares of our common stock, and Series B
Warrants to allow the Investors to purchase an aggregate of 7,018,091 shares of
common stock at a purchase price of $0.1603 per common stock share.
The Company has 700,000,000 shares of common stock authorized with a par value
of $0.001 per share as of December 31, 2021. On August 13, 2021 the Company
filed Articles of Amendment to Amended and Restated Articles of Incorporation
with the State of Nevada increasing the number of common shares from 150,000,000
to 700,000,000.
In addition, the Company has 10,000,000 preferred stock authorized with a par
value of $0.001 per share as of September 30, 2021.
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
324,325 shares of preferred stock series A with a par value of $0.001 per share,
of the Corporation are herby designated as Series A Super Voting Preferred
Stock. These shares are not entitled to receive dividends and shall not be
entitled to any liquidation preference. Further the holders shall have no
conversion rights and the holders shall have the right to vote in an amount
equal to 600 votes per share of Series A Preferred Stock.
Our equity incentive plan was amended and restated by our Board of Directors in
April 2020 to increase the number of options available from 10,000,000 to
25,000,000.
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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. We provide retention tools to those companies 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 their menus, deals and create real-time messages to communicate with
consumers 24/7/365. 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 SMS, MMS as
well as push notifications within a custom branded application. Our website,
Leafbuyer.com, and its progressive web application, hosts a robust search
algorithm like popular travel or hotel sites, where our clients' 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. In November of 2020 Leafbuyer
Technologies Inc. completed a customizable white label application for the
dispensary clients. Consumers can 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 innovative technologies that will serve
cannabis dispensaries and product companies in attracting and retaining
consumers.
Leafbuyer operates in a rapidly evolving and highly regulated industry that, as
has been estimated by grandviewresearch.com, to exceed $70 billion in revenue by
the year 2028. Our founders and our Board of Directors have been, and will
continue to be, aggressive in pursuing long-term opportunities.
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We plan to grow organically through the aggressive deployment of sales and
marketing resources into legal cannabis states. We understand that to obtain a
significant market share we may need to look for acquisitions for a sizable
portion of that growth. 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.
The accompanying financial statements have been prepared assuming that we will
continue as a going concern. As discussed in Note 1 of the financial statements,
we have suffered recurring losses from operations and have a significant
accumulated deficit. These factors raise substantial doubt about our ability to
continue as a going concern. Management's plans regarding 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.
Results of Operations for the years ended June 30, 2022, versus June 30, 2021
The following table summarizes the results of operations for the years ended
June 30, 2022, and 2021:
Year Ended Year Ended
June 30, 2022 June 30, 2021 $ Change % Change
Revenue $ 3,807,053 $ 2,666,829 1,140,224 43 %
Cost of revenue 2,713,676 1,943,683 769,994 40 %
Gross profit 1,093,377 723,147 370,231 51 %
Operating expenses:
Selling expenses 774,468 864,196 (89,728 ) (10 %)
General and
administrative 1,923,845 2,190,441 (266,596 ) (35 %)
Total operating expenses 2,698,313 3,054,637 (356,324 ) (12 %)
Loss from operations (1,604,936 ) (2,331,490 ) 726,554 31 %
Gain (loss) on
derivative liability 2,208,469 (2,825,661 ) 5,034,130 178 %
Other income/(expense) 352,162 127,771 224,391 65 %
Net (loss) Profit $ 955,695 $ (5,029,380 ) 5,985,075 119 %
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Revenues
During the year ended June 30, 2022, we generated $3,807,053 of revenues,
compared to revenues of $2,666,829 during the year ended June 30, 2021. The
increase was primarily due to the increase in text services which is up 40% over
the prior year.
Gross Profit
Gross profit increased to $1,093,377 for the period ended June 30, 2022, which
was an increase of $370,231 over the same period last year of June 30, 2021.
Gross profit as a percentage of revenue increased from 27% to 29% for the period
ended June 30, 2022 over June 30, 2021 because of the increased text services.
Expenses
During the year ended June 30, 2022, we incurred total operating expenses of
$2,698,313, including $1,923,845 in general and administrative expenses, and
$774,468 in selling expenses. During the year ended June 30, 2021, we incurred
total operating expenses of $3,054,637, including $2,190,441 in general and
administrative expenses, and $864,196 in selling expenses. The decrease of
$356,324 or 12% was primarily due to less payroll expense and stock based
compensation expense. We have increased sales automating and enhanced the
technology platform for significant cost savings. Management expects the general
and administrative expenses to continue to decrease as management focuses on
getting current operations to positive cash flow.
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 period ended
June 30, 2022 we recorded a realized gain of $2,208,469 the estimated fair value
of the derivative changed at the end of the period. During this same period in
2021, the estimated fair value of the derivative increased therefore the
liability was reduced generating unrealized loss of $2,825,661.
Other income during the period ended June 30, 2022 was the result of the SBA PPP
loan forgiveness of $557,977 compared to the first round of SBA PPP Loan
forgiveness of $602,478 as of June 30, 2021, offset by recurring interest
expense. Interest expense was $205,815 for the yearend June 30, 2022 compared to
interest expense of $478,388 for the same period ending June 30, 2021 because of
the reduction in notes payable during the year.
Net Loss
During the year ended June 30, 2022 we incurred a net profit of $955,695,
compared to a net loss of $5,029,380 for the year ended June 30, 2021.
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Liquidity and Capital Resources
Our ability to continue as a going concern is dependent upon 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 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 we will be able to raise any additional capital
through any type of offering on terms acceptable to us, as we believe that
existing cash on hand will be insufficient to finance operations over the next
twelve months.
At June 30, 2022 we had $367,245 in cash and cash equivalents.
Cash Flows
Our cash flows from operating, investing and financing activities were as
follows:
Year Ended June 30,
2022 2021
Net cash used in operating activities $ (317,394 ) $ (858,250 )
Net cash used in investing activities $ - $ -
Net cash provided by financing activities $ - $ 232,977
Net change in cash and cash equivalents $ (317,394 ) $ (625,273 )
As of June 30, 2022, we had $367,245 in cash and cash equivalents and a working
capital deficit of $2,862,026. We are dependent on funds raised through equity
financing. Our cumulative net loss of $23,850,487 was funded by equity
financing. During the year ended June 30, 2021 we raised gross proceeds of
$557,977 in cash proceeds through government supported disaster relief programs
and this loan was forgiven during fiscal 2022.
During the year ended June 30, 2022, we used $317,394 in operating activities
compared to $858,250 for the same period ending June 30, 2021. The difference is
primarily because of the lower net loss from operations realized in fiscal year
2022.
During the year ended June 30, 2022 and 2021, we did not use any cash for
investing activities.
Net cash flow provided by financing activities for the year ended June 30, 2022
was $0 compared to $232,977 of financing activity in 2021 related to proceeds
from proceeds from government supported disaster relief programs and repayment
to related parties notes.
Our decrease in cash and cash equivalents for the year ended June 30, 2022, was
primarily net cash used for operating activities.
During the year ended June 30, 2022, our monthly cash requirements to fund our
operating activities, was approximately $40,000, compared to approximately
$85,000 during the year ended June 30, 2021. In the absence of the continued
sale of our common and preferred stock or advances from related parties, our
cash of $367,245 as of June 30, 2022 is insufficient to cover our current
monthly burn rate for next twelve months.
Our ability to continue as a going concern is dependent upon 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 intends to finance operating costs
over the next twelve months from the date of the issuance of these consolidated
financial statements with existing cash on hand and/or the private placement of
common stock. There is, however, no assurance that we will be able to raise any
additional capital through any type of offering on terms acceptable to us, as we
believe that existing cash on hand will be insufficient to finance operations
over the next twelve months.
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Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical Accounting Policies
Our audited 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
audited 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.
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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LEAFBUYER TECHNOLOGIES, INC. 
