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.
The Company was formed as AP Event, Inc., ("Registrant") a Nevada corporation on
October 16, 2014. The Registrant 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 the
Registrant. On March 23, 2017, the Registrant consummated an Agreement and Plan
Merger ("Merger") with LB Media and LB Acquisition Corp., a wholly owned
subsidiary of the Registrant, whereby LB Acquisition was merged with and into LB
Media Group, LLC. Simultaneously with the Merger, the Registrant accepted
subscriptions in a private placement offering ("Offering") of its 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 Offering, the members of LB Media beneficially own
approximately fifty-five percent (55%) of the issued and outstanding Common
Stock of the Registrant.
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On March 24, 2017, the Registrant amended its Articles of Incorporation (the
"Amendment") to (i) change its name to LeafBuyer Technologies, Inc., (ii) to
increase the number of its 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 (the "Common Stock") and 10,000,000 shares were
designated "blank check" preferred stock, par value $0.001 per share (the
"Preferred Stock") and (iii) to effect 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 Amendment (the "Split").
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 of the Company's
common stock for 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 registered 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").
During October and November 2018, the Company used the SEDA to receive
$1,045,000. The Company issued 1,116,738 common shares which were valued at fair
market at the date issued.
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 2,916,667
shares of common stock, par value $0.001 per share and cash of approximately
$450,000. Total value of the Loyalty Software was estimated at approximately
$3,010,000. During the year ended June 30, 2020 additional Incentive Shares of
366,667 for a value of $262,500 was issued to shareholders of GTI as final
settlement of the Purchase Agreement.
On July 2, 2019, the Company, entered into a Securities Purchase Agreement (the
"Purchase Agreement") with certain institutional investors (the "Investors"),
pursuant to which the Company agreed to issue and sell directly to the Investors
in a private offering (the "Offering"), an aggregate of 7,211,538 shares of
common stock (the "Shares"), par value $0.001 per share, at $0.624 per Share or
a 20% discount to the closing price as of July 2, 2019, for gross proceeds of
approximately $4,500,000 before deducting offering expenses. The Purchase
Agreement contains customary representations and warranties, and the Offering
was subject to customary closing conditions. The Shares were offered by the
Company pursuant to the exemption provided in Section 4(a)(2) under the
Securities Act, and Rule 506(b) promulgated thereunder. The Company was
obligated in accordance with the terms of a Registration Rights Agreement (the
"Rights Agreement") to register the Shares and the shares of common stock
underlying the warrants described below, within 90 days from the date of the
Purchase Agreement.
The Company issued 30,299,998 shares of common stock for the private placement
and the issuance of Series C Warrants. The Company received approximately
$4,060,000, net of the placement fees, legal and other expenses incurred for the
placement of the share. The investors received Series A Warrants to allow the
Investors to purchase an aggregate of 7,018,091 shares of common stock, and
Series B Warrants to allow the Investors to purchase an aggregate of 28,072,364
shares of common stock at a purchase price of $0.1603 per common share.
The equity incentive plan of the Company dated February of 2017 was amended and
restated by The Board of Directors of the Company in April 2020 to increase the
number of options available from 10,000,000 to 20,000,000.
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Business Overview
Leafbuyer.com Platform
The Company's wholly owned subsidiary, LB Media Group, LLC has evolved and grown
as a listing website to a comprehensive marketing technology platform that
focuses on new customer acquisition, retention and now online-order ahead
services. With the increased popularity of Leafbuyers texting/loyalty program,
clients can communicate through SMS and MMS messaging to inform consumers of
specials as well as confirm online ordering details. This creates more diverse
product offering for our clients. Leafbuyers proprietary systems are integrated
to form a seamless process for the user to find, research, compare and
communicate on the thousands of products available.The Company's website,
Leafbuyer.com, and its progressive web application hosts a robust search
algorithm similar to popular travel or hotel sites, where consumers can search
the database for appealing offers. They can also search through thousands of
menu items and products, create a profile, sign up to receive deal alerts and
place online orders for pick up or delivery.With a worldwide pandemic from
Covid-19, the need for an order ahead solution in the cannabis industry was put
to the test in early March of 2020. Technology enhancements were made that now
include delivery features for Medical and Recreational stores, increased POS
integrations and real-time notifications.
The Leafbuyer Network reaches millions of consumers every month through its
web-based platforms, loyalty platform and partner sites. The site's
sophisticated vendor dashboard pairs vendor data with consumer needs and
presents a robust, 24/7 real-time dashboard where vendors can update menus,
specials, available jobs, and more. The system helps to track the vendors'
return on investment.
The Company continues an aggressive push into all legal cannabis markets.
Increasing the company's marketing and sales presence in new markets is a
primary objective. Along with this expansion, the Company continues to develop
new technologies that will serve cannabis dispensaries and product companies in
attracting and retaining consumers.
Leafbuyer operates in a rapidly evolving and highly regulated industry that, as
has been estimated by grandviewresearch.com, to exceed $73 billion in revenue by
the year 2027. The founders and board of directors has been, and will continue
to be, aggressive in pursuing long-term opportunities.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has a significant accumulated deficit. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Results of Operations for the years ended June 30, 2020 versus June 30, 2019
The following table summarizes the results of operations for the years ended
June 30, 2020 and 2019:
Year Ended Year Ended
June 30, June 30,
2020 2019
Revenue $ 2,528,356 $ 1,789,823
Cost of revenue 1,767,855 1,289,583
Gross profit 760,501 500,240
Operating expenses:
Selling expenses 842,736 1,249,539
General and administrative 4,409,769 5,124,824
Total operating expenses 5,252,505 6,374,363
Loss from operations (4,492,004 ) (5,874,123 )
Interest expense (1,017,244 ) (679,543 )
Net loss $ (5,509,248 ) $ (6,553,666 )
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Revenues
During the year ended June 30, 2020, we generated $2,528,356 of revenues,
compared to revenues of $1,789,823 during the year ended June 30, 2019. The
increase of $738,533 or 41% was primarily due to recent expansion of our
platform that enables us to sell more to a single customer, increasing our per
customer revenue and the initial expansion of our services into additional
states. Our market penetration is still below 25% in Colorado and less than 1%
in other states. Management expects to have continued high quarter over quarter
revenue growth as we expand our platform and our geographical service area.
Gross profit increased to $760,501 for the period ended June 30, 2020 which was
an increase of $260,261 or 52% over the same period last year of June 30, 2019.
Gross profit as a percentage of revenue increased from 28% to 30% for the period
ended June 30, 2020 over June 30, 2019.
The overall focus of the Company is to continue to grow revenue while expanding
the geographic footprint of operations. We will continue to broaden the
Leafbuyer technology platform to increase the opportunity for customer value
creation and upsell of our product line. Anticipated growth will come from both
organic sources and acquisitions. The Company is constantly looking for
acquisitions to complement the current platform and expand geographic reach.
Expenses
During the year ended June 30, 2020, we incurred total operating expenses of
$5,252,505, including $4,409,769 in general and administrative expenses, and
$842,736 in selling expenses. During the year ended June 30, 2019, we incurred
total operating expenses of $6,374,363, including $5,124,824 in general and
administrative expenses, and $1,249,539 in selling expenses The decrease of
$1,121,858 or 18% was primarily due less stock compensation expense. Management
expects the general and administrative expenses to continue to decrease as
management focuses on getting current operations to positive cash flow.
Net Loss
During the year ended June 30, 2020 we incurred a net loss of $5,509,248,
compared to a net loss of $6,553,666 for the year ended June 30, 2019.
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 June 30, 2020 we had $1,309,912 in cash and cash equivalents.
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Cash Flows
Our cash flows from operating, investing and financing activities were as
follows:
Year Ended June 30,
2020 2019
Net cash used in operating activities $ (2,808,559 ) $ (2,888,580 )
Net cash used in investing activities $ (559,667 ) $ (922,558 )
Net cash provided by financing activities $ 4,496,491 $ 3,616,847
Net change in cash and cash equivalents $ 1,128,265 $ (194,291 )
As of June 30, 2020, we had $1,309,912 in cash and cash equivalents and a
working capital deficit of $1,844,178. We are dependent on funds raised through
equity financing. Our cumulative net loss of $16,001,124 was funded by equity
financing. During the year ended June 30, 2020, we have raised gross proceeds of
$1,717,478 in cash from borrowings from related parties and through government
supported disaster relief programs.
During the year ended June 30, 2020, we used $2,808,559 in operating activities.
During the year ended June 30, 2019, we used $2,888,580 from operating
activities.
During the year ended June 30, 2020, we used $559,667 in investing activities,
primarily related to the enhancements of our software compared to $922,558 of
similar investing activities during the year ended June 30, 2019.
Net cash flow provided by financing activities for the years ended June 30, 2020
and 2019 was approximately $4,496,491 and $3,616,847, respectively.
Our increase in cash and cash equivalents for the year ended June 30, 2020 was
primarily borrowings from related parties and through government supported
disaster relief programs.
During the year ended June 30, 2020, our monthly cash requirements to fund our
operating activities, was approximately $100,000, compared to approximately
$150,000 during the year ended June 30, 2019. In the absence of the continued
sale of our common and preferred stock or advances from related parties, our
cash of $1,309,912 as of June 30, 2020 is insufficient to cover our current
monthly burn rate for next twelve months.
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
consolidated financial statements with existing cash on hand and/or the private
placement of common stock. 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 from the issuance of this annual
report.
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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.
The Company follows the guidance of the Accounting Standards Codification
("ASC") Topic 606, "Revenue from Contracts with Customers" which is effective as
of the annual reporting period beginning after December 15, 2017 using either of
two methods: (1) retrospective application of Topic 606 to each prior reporting
period presented with the option to elect certain practical expedients as
defined within Topic 606 or (2) retrospective application of Topic 606 with the
cumulative effect of initially applying Topic 606 recognized at the date of
initial application and providing certain additional disclosures as defined per
Topic 606. We adopted Topic 606 pursuant to the method (2) and we determined
that any cumulative effect for the initial application did not require an
adjustment to retained earnings at July 1, 2018.
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
The Company has implemented all new accounting pronouncements that are in
effect. These pronouncements did not have any material impact on the financial
statements unless otherwise disclosed, and the Company does not believe that
there are any other new accounting pronouncements that have been issued that
might have a material impact on its financial position or results of operations.
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 year ended June 30, 2020.
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LEAFBUYER TECHNOLOGIES, INC. 
