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 nine months ended March 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, 2021. Our unaudited consolidated financial statements and notes included therein have been prepared on a basis consistent with and should be read in conjunction with our audited financial statements and notes for the year ended June 30, 2020, as filed in our annual report on Form 10-K.

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





Business Overview



Leafbuyer.com Platform

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

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

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

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

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






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Comparison of results of operations for the three months ended March 31, 2021
and 2020



                               Three months Ended
                                   March 31,
                             2021            2020           Change          %
Revenue                    $ 672,149     $    575,002     $    97,147         17 %
Cost of revenue              500,818          448,961          51,857         12 %
Gross profit                 171,331          126,041          45,290         36 %

Total operating expenses     600,732        1,055,309        (454,578 )      (43 )%

Other income/(expense)       530,874         (106,783 )       637,657       (597 )%

Net profit/(loss)          $ 101,473     $ (1,036,051 )   $ 1,137,525       (110 )%

Revenue, Cost of Revenue and Gross Profit

During the three months ended March 31, 2021, we generated $672,149 of revenues, compared to revenues of $575,002 during the same period ending in 2020. The increase of $97,147 was primarily because of the increase in MRR (monthly recurring revenue) contribution. Our market penetration is still below 25% in Colorado and less than 1% in other states. Management expects to have continued high quarter over quarter revenue growth as we expand our platform and our geographical service area.

Cost of revenue is comprised of software development costs from staff and third-party providers, third-party text provider services and amortization costs related to internal use software. During the three months ended March 31, 2021 compared to the same period in the prior year, third-party text provider services were higher because of the increased number of customers subscribing to this service.

Gross profit increased by $45,290 for the three months ended March 31, 2021 primarily because of the increased subscription services for loyalty programs. Gross profit as a percentage of revenue increased from 22% to 25% for the three months ended March 31, 2021 over March 31, 2020.

Other income during the period ending March 31, 2021 was the result of the SBA PPP loan forgiveness of $602,478, offset by recurring interest expense.

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





Operating Expenses



                                          Three months Ended
                                               March 31,
                                         2021           2020           Change           %
Selling expenses                       $ 153,094     $   424,858     $ (271,764 )         (64 )%
General and administrative               125,602         185,476        (59,875 )         (32 )%
Wages, payroll taxes and other
employee expenses                        185,352         339,859       (154,507 )         (45 )%
Stock based compensation expense         136,685         105,116         31,569            30 %
                                       $ 600,732     $ 1,055,309     $ (454,578 )         (43 )%





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The decrease in operating expenses during the three months ended March 31, 2021 compared to 2020 was driven by a reduction in selling and advertising expense as well as less wages and payroll expense. Management expects the general and administrative expenses to continue to decrease as management focuses on getting current operations to positive cash flow.





Comparison of results of operations for the nine months ended March 31, 2021 and
2020



                                 Nine months Ended
                                     March 31,
                               2021             2020            Change          %
Revenue                    $  1,927,659     $  1,870,518     $     57,141         3 %
Cost of revenue               1,443,678        1,474,314          (30,636 )      (2 )%
Gross profit                    483,981          396,204           87,777        22 %

Total operating expenses      2,106,056        4,128,162       (2,022,106 )     (49 )%

Other income/(expense)          315,643         (676,475 )        992,118       147 %

Net loss                   $ (1,306,432 )   $ (4,408,433 )   $  3,102,001        70 %

Revenue, Cost of Revenue and Gross Profit

During the nine months ended March 31, 2021, we generated $1,927,659 of revenues, compared to revenues of $1,870,518 during the same period ending in 2020. In December 2019, the Company recognized revenue of $182,008 related to the SWCH Tradeshow, excluding this onetime event, revenue increased for this period by $239,149 or 14%. The SWCH Tradeshow produced minimal margin and no monthly recurring revenue contribution. Our market penetration is still below 25% in Colorado and less than 1% in other states. Management expects to have continued high quarter over quarter revenue growth as we expand our platform and our geographical service area.

Gross profit increased to $483,981 for the nine months ended March 31, 2021 which was an increase of $87,777 or 22% over the same period in 2020. Gross profit as a percentage of revenue increased from 21% to 25% for the nine months ended March 31, 2021 over March 31, 2020 primarily because the SWCH Tradeshow realized 6% gross profit in 2020.

Other income during the nine months ended March 31, 2021 was the result of the SBA PPP loan forgiveness of $602,478, offset by recurring interest expense.





Operating Expenses



                                        Nine months Ended
                                            March 31,
                                      2021            2020            Change            %
Selling expenses                   $   648,790     $ 1,664,370     $ (1,015,580 )         (61 )%
General and administrative             505,305         761,346         (256,041 )         (34 )%
Wages, payroll taxes and other
employee expenses                      630,755         990,120         (359,365 )         (36 )%

Stock based compensation expense 321,207 712,326 (391,120 ) (55 )%

$ 2,106,056     $ 4,128,162     $ (2,022,106 )         (49 )%

The decrease in operating expenses during the nine months ended March 31, 2021 compared to 2020 was driven by a reduction in selling and advertising expense and less stock compensation expense. Management expects the general and administrative expenses to continue to decrease as management focuses on getting current operations to positive cash flow.






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Liquidity and Capital Resources

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





Cash Flows



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



                                                      Nine months Ended
                                                          March 31,
                                                    2021            2020
Net cash used in operating activities            $ (698,029 )   $ (2,797,081 )
Net cash used in investing activities            $        -     $   (492,899 )

Net cash used provided by financing activities $ 232,977 $ 3,750,989

As of March 31, 2021 we had $844,860 in cash and cash equivalents and a working capital deficit of $1,775,378. We are dependent on funds raised through equity financing. Our cumulative net loss of $17,307,556 was funded by equity financing and we reported a net loss of $1,306,432 for the nine months ended March 31, 2021. During the nine months ending March 31, 2021, we did not raise any monies through financing activities, and we did not expend any monies through investing activities.

While the Company booked a GAAP loss for the period, the Company realized positive operating cash flow all months during the period.





Inflation

Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the nine-month period ended March 31, 2021.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of March 31, 2021 and June 30, 2020.





Critical Accounting Estimates

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






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Critical Accounting Policies

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





Use of Estimates

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





Revenue Recognition

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

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

We recognize revenue upon completion of our performance obligations or expiration of the contractual time to use services such as bulk texting. The Company receives payments from its customers based on billing schedules established in each contract. Up-front payments and fees are recorded as deferred revenue upon receipt or when due until the Company performs its obligation under these arrangements. There is no significant judgment performed by management and revenue recognized from deferred revenue during the nine months ended March 31, 2021 is $53,917.






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