Datz World Holdings Corp 10-K, filed Nov 5, 2024
Datz World Holdings Corp. (BOTX)
About this 10-K
Datz World Holdings Corp filed this 10-K on November 5, 2024, covering the fiscal year ended June 30, 2024.
Headline figures
Fiscal year ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $5.6M
- up 10.0% from $5.09M a year earlier
- Net loss
- $709.43K
- compared with a net loss of $585.21K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________ to_________
Commission file number:
(Exact name of registrant as specified in its charter) |
| ||
(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 |
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $0.001 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐
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 registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The aggregate market value of the common equity held by non-affiliates of the Registrant (assuming for this purpose, but without conceding, that all executive officers and Directors are “affiliates” of the Registrant) as of December 31, 2023 the last day of business day of the Registrant’s most recently completed second fiscal quarter was $
The number of shares of outstanding of the Registrant’s Common Stock as of November 5, 2024 was
DOCUMENTS INCORPORATED BY REFERENCE
None
Table of Contents
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PART I
ITEM 1. BUSINESS
Forward Looking Statements
This annual report 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.
As used in this annual report, the terms “we”, “us” and “our” mean Leafbuyer Technologies, Inc., unless otherwise indicated.
Business Overview
Leafbuyer.com Platform
Our 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 and retention tools that include texting and loyalty and application software technology. 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. The platform gives dispensary owners the ability to target market their customer base by spending limits, brands, frequency, and product types. The Leafbuyer platform alerts consumers of specials as well as online ordering features that help create a more diverse product offering for our clients. Through our total network program, text messages that are sent are converted into add units that are posted to Leafbuyer.com in real-time. This is part of our “Live Deals” section and is up to the minute content that is 100% searchable the minute it goes live. This allows new customers more visibility into the latest deals and specials but also gives the dispensary a new opportunity to sign up a new customer. Leafbuyer’s proprietary systems are integrated to form a seamless process for the user to locate, research, and compare prices on thousands of available products. Our 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. Consumers 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 due to Covid-19 and the lockdowns, the need for an instant digital solution in the cannabis industry was put to the test in early March of 2020. We believe we answered that test with new technology enhancements that now include delivery features, increased POS integrations, real-time posting of messages to Leafbuyer.com, notifications through SMS/MMS and push notification technology and the ability to target market consumers buy spending habits.
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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 vendors 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.
We continue an aggressive push into all legal cannabis states. Increasing our marketing and sales presence in new legal markets as they come open. Along with this expansion, we continue 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 has been estimated by Fortune Business Insights to reach a global market size of 197 billion by 2028. The founders and our Board of Directors have been, and will continue to be, aggressive in pursuing long-term opportunities.
In November of 2020 Leafbuyer Technologies Inc. completed a customizable white label application for our dispensary clients. 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.
In April of 2022 Leafbuyer Technologies Inc. launched our data segmentation feature that allows dispensaries to target market their customers. Clients can direct messaging based on spending limits, product types, shopping frequency just to name a few and target market their customer base. Through our advanced integrations, this feature helps increase ROI for the dispensaries and generates more revenue for Leafbuyer. We will continue to expand this feature in the coming months to include more data points based on our customer’s needs.
In March of 2023 Leafbuyer Technologies Inc. launched the very successful “Total Network Solution” that allows dispensaries that send SMS and MMS text messaging to be posted in real-time to Leafbuyer.com. This allows dispensaries access to new customers they can’t get with other competitors, and it helps them gain more signups through the platform. The fresh content is updated in real-time and gives users of the site an opportunity to search thousands of deals nationwide.
In June of 2024 Leafbuyer Technologies Inc. released 2 new products, an enhanced loyalty program that includes more features and the ability for larger MSO to customize a loyalty program based on their needs. This gives us a competitive advantage and flexibility to fit the needs of our customers. Leafbuyer Technologies Inc. also released Instant Action, this gives customers the ability to send video messages, social media reels as part of their MMS messaging service. This allows a more impactful text message and produces a new revenue stream for Leafbuyer as this is a premium service upgrade to sending a regular SMS or MMS message.
COVID -19 and Reduction of Costs
We were affected in 2020 by the COVID-19 outbreak and worldwide pandemic. We saw some postponements in orders in the first few weeks of March 2020 but by the end of March 2020 orders stabilized to a normal level. Many companies in 2020 including Leafbuyer were forced to operate remotely for most of the year which ultimately led to some cost saving benefits. With the effectiveness of a remote sales and development teams, we made the decision to reduce office space in California and Colorado which has significantly reduced costs on an annual basis. We then also made a significant pivot to enhance and automate our technology in 2020 in order to further reduce costs but also provide more tools to increase consumer engagement.
Cost Control
One of our top priorities has been reducing costs by building better more efficient technology, while converting some positions to part time and focusing on high margin products that help retain current customers. In 2024 we have continued a focus on cutting and renegotiating system costs, credit card expenses and other insurance related costs to improve efficiencies of the company. This has translated into thousands of dollars in monthly savings.
The Team
As of June 30th 2024 we have 12 full-time and part-time employees and our headquarters are located in Greenwood Village, Colorado. In addition, we currently have sales teams in Colorado, Oklahoma and Iowa. Leafbuyer also has relationships with numerous contractors including development and referral partners which it retains from time to time. A majority of our employees are involved in sales and customer service roles.
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Growth State by State
As new states continue to legalize marijuana sales and the market expands, so does Leafbuyer. As of June 2024, Leafbuyer now works with clients in 26 legal states including California, Colorado, Washington, Oklahoma, Oregon, and Michigan and we are continuing our efforts to expand into all legal markets. Our primary focus are markets that have the most potential and that are continuing to expand and show stability.
The marginal cost for Leafbuyer to enter a market is minimal in comparison to growers or retail operations. In order for us to enter a new market, most of our costs include sales and marketing personnel and grassroots efforts to grow the consumer base in the new market. With the changing times of Covid-19, virtual meetings have doubled and are more accepted which reduces the cost of travel and office space into smaller markets.
We have formed numerous partnerships in the industry with Point-of-Sale (“POS”) companies. We have solid integrations with 90% of the top POS companies and are continuing to work to deepen those capabilities as they are built.
2024 and Beyond
With 40 states with some form of legal cannabis and with the global market expanding the legal use of marijuana for medicinal and recreational purposes is expected to continue.
Our business model is designed to benefit from this trend. When a new state passes a medical or recreational cannabis law, we can start marketing to consumers and businesses in that state with minimal marginal cost. Because Leafbuyer is not involved in the production or sale of cannabis, we do not have to build expensive growing operations or open brick and mortar stores. As more states pass laws to offer legal cannabis products, we begin marketing into the state and sign-up dispensaries to use the Leafbuyer platform.
We are accelerating growth with our platform by offering custom branded applications. This product works in conjunction with our texting and loyalty platform to provide a truly unique value proposition. Text marketing is monetized through a monthly usage fee while the Custom Application is monetized as a monthly subscription fee. We anticipate a significant reduction in provider costs over time as each application sold allows for push notifications which reduces our overall cost to send via SMS or MMS.
We will also continue 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 in the industry in the future it will require us to look for acquisitions for a significant 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.
ITEM 1A. RISK FACTORS
Risks Related to the Business
We have minimal financial resources. Our company financial statements includes a footnote disclosure stating that there is substantial doubt about our ability to continue as a going concern.
Leafbuyer Technologies, Inc. operates in a highly regulated industry, is an early-stage company and has minimal financial resources. We had a cash balance of $165,332 as of June 30, 2024. We had an accumulated deficit of $25,247,214 at June 30, 2024. We may seek additional financing. The financing sought may be in the form of equity or debt financing from various sources yet unidentified. We cannot assure you that we will generate sufficient revenue or obtain the necessary financing to continue as a going concern.
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 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.
Leafbuyer is and will continue to be completely dependent on the services of our president, chief executive officer and chief financial officer, the loss of whose services may cause our business operations to cease, and we will need to engage and retain qualified employees and consultants to further implement our strategy.
Leafbuyer’s operations and business strategy are completely dependent upon the knowledge, Technology Development and business connections of Rossner, Goerner and Breen our executive officers. They are under no contractual obligation to remain employed by Leafbuyer. If they should choose to leave us for any reason or become ill and unable to work for an extended period of time before we have hired additional personnel, our operations could likely fail. Even if we can find additional personnel, it is uncertain whether we could find someone who could develop our business along the lines described in this Annual Report. We will likely fail without the services of our current executive officers (or hiring appropriate replacement(s)).
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Because we operate in the cannabis industry, we face a high risk of business failure due to the nature of advertising a federally Illegal product.
We were formed in April 2013. Our efforts to date have related to developing our business plan and beginning business activities. We face a high risk of business failure. The likelihood of our success must be considered in light of the expenses, complications and delays frequently encountered in connection with the establishment and expansion of new businesses and the competitive environment in which we operate. We cannot assure you that future revenues will occur or be significant enough or that we will be able to sell our products and services at a profit, if at all. Future revenues and/or profits, if any, will depend on many various factors, including, but not limited to both initial and continued market acceptance of our website and telecommunication services and the successful implementation of our planned growth strategy.
The regulation of cannabis in the United States is uncertain.
Our activities are subject to regulation by various state and local governmental authorities including telecommunication companies. Our business objectives are contingent upon, in part, compliance with regulatory requirements enacted by these governmental authorities and obtaining all regulatory approvals necessary for the sale of our products in the jurisdictions in which we operate. Any delays in obtaining or failure to obtain necessary regulatory approvals would significantly delay our development of markets and products, which could have a material adverse effect on our business, results of operations and financial condition. Furthermore, although we believe that our operations are currently carried out in accordance with all applicable state and local rules and regulations, no assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner that could limit or curtail our ability to distribute or produce marijuana. Amendments to current laws and regulations governing the importation, distribution, transportation and/or production of marijuana, or more stringent implementation thereof could have a substantial adverse impact on us.
The cannabis industry is relatively new.
We are operating in a relatively new industry and market. In addition to being subject to general business risks, we must continue to build brand awareness in this industry and market share through significant investments in our strategy, production capacity, quality assurance and compliance with regulations. Research in Canada, the United States and internationally regarding the medical benefits, viability, safety, efficacy and dosing of cannabis or isolated cannabinoids, such as cannabidiol, or CBD, and tetrahydrocannabinol, or THC, remains in relatively early stages. Few clinical trials on the benefits of cannabis or isolated cannabinoids have been conducted. Future research and clinical trials may draw opposing conclusions to statements contained in the articles, reports and studies currently favored, or could reach different or negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing or other facts and perceptions related to medical cannabis, which could adversely affect social acceptance of cannabis and the demand for our products and dispensary services.
Accordingly, there is no assurance that the cannabis industry and the market for medicinal and/or adult-use cannabis will continue to exist and grow as currently anticipated or function and evolve in a manner consistent with management’s expectations and assumptions. Any event or circumstance that adversely affects the cannabis industry, such as the imposition of further restrictions on sales and marketing or further restrictions on sales in certain areas and markets could have a material adverse effect on our business, financial condition and results of operations.
We may not be successful in hiring technical personnel because of the competitive market for qualified technical people.
Our future success depends largely on our ability to attract, hire, train and retain highly qualified technical personnel to provide our services. Competition for such personnel is intense. We cannot assure you that we will be successful in attracting and retaining the technical personnel we require to conduct and expand our operations successfully and to differentiate ourselves from our competitors. Our results of operations and growth prospects could be materially adversely affected if we are unable to attract, hire, train and retain such qualified technical personnel.
We will face competition from companies with significantly greater resources and name recognition.
The markets in which we will operate are characterized by intense competition from several types of solution and technical service providers. We expect to face further competition from new market entrants and possible alliances among competitors in the future as the convergence of information processing and telecommunications continues. Many of our current and potential competitors have significantly greater financial, technical, marketing and other resources than we do. As a result, they may be better able to respond or adapt to new or emerging technologies and changes in client requirements or to devote greater resources to the development, marketing and sales of their services than us. We cannot assure you that we will be able to compete successfully. In addition, we will be faced with numerous competitors, both strategic and financial, in attempting to obtain competitive products. Many actual and potential competitors may be part of much larger companies with substantially greater financial, marketing and other resources than us, and there can be no assurance that we will be able to compete effectively against any of those future competitors.
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To continue to expand and innovate, we may need additional financing.
We may need to obtain additional financing in order to conduct our business in a manner consistent with our proposed operations. There is no guaranty that additional funds will be available when, and if, needed. If we are unable to obtain financing, or if its terms are too costly, we may be forced to curtail expansion of operations until such time as alternative financing may be arranged, which could have a materially adverse impact on our operations and our shareholders’ investment.
Risks Related to Our Securities
Our officers and directors currently own the majority of our voting power, and through this ownership, control us and our corporate actions.
Our current Board of Directors and executive officers hold approximately 25.8% of the voting power of our outstanding voting capital stock as of June 30, 2024. These parties have a controlling influence in determining the outcome of any corporate transaction or other matters submitted to our stockholders for approval, including mergers, consolidations and the sale of all or substantially all our assets, election of directors, and other significant corporate actions. As such, these shareholders have the power to prevent or cause a change in control; therefore, without their consent we could be prevented from entering into transactions that could be beneficial to us. The interests of our executive officers may give rise to a conflict of interest with us and our shareholders.
There is a substantial lack of liquidity of our common stock and volatility risks.
Our common stock is quoted on the OTC Markets platform under the symbol “LBUY.” The liquidity of our common stock may be very limited and affected by our limited trading market. The OTC Markets quotation platform is an inter-dealer market much less regulated than the major exchanges, and is subject to abuses, volatilities, and short selling. There is currently no broadly followed and established trading market for our common stock. An established trading market may never develop or be maintained. Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders. The absence of an active trading market reduces the liquidity of the shares traded.
The trading volume of our common stock may be limited and sporadic. This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. Consequently, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained. As a result of such trading activity, the quoted price for our common stock on the OTC Markets may not necessarily be a reliable indicator of our fair market value. In addition, if our shares of common stock cease to be quoted, holders would find it more difficult to dispose of or to obtain accurate price quotation as to the market value of, our common stock and as a result, the market value of our common stock likely would decline.
Change of auditing firm.
On a letter from the SEC dated May 3rd, 2024, we disclosed the firing of our audit firm BF Borgers on May 8th, 2024 and the hiring of our current new firm BCRG Group (BCRG) to re-review and re-audit our 2023 and 2024 3rd quarter 10-Q, as well as our 2023 and 2024 10-K filings. We expect no significant or material changes to our reporting numbers.
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The market price for our stock may be volatile and subject to fluctuations in response to factors, including the following:
● | the increased concentration of the ownership of our shares by a limited number of affiliated stockholders following the share exchange may limit interest in our securities; |
| ● | variations in quarterly operating results from the expectations of securities analysts or investors; |
| ● | revisions in securities analysts’ estimates or reductions in security analysts’ coverage; |
| ● | announcements of new products or services by us or our competitors; |
| ● | reductions in the market share of our products and services; |
| ● | announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; |
| ● | general technological, market or economic trends; |
| ● | investor perception of our industry or prospects; |
| ● | insider selling or buying; |
| ● | investors entering into short sale contracts; |
| ● | regulatory developments affecting our industry; and |
| ● | additions or departures of key personnel. |
Many of these factors are beyond our control and may decrease the market price of our common stock, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common stock will be at any time, including as to whether our common stock will sustain current market prices, or as to what effect that the sale of shares or the availability of common stock for sale at any time will have on the prevailing market price.
Our common stock may never be listed on a major stock exchange.
We currently do not satisfy the initial listing standards and cannot ensure that we will be able to satisfy such listing standards or that our common stock will be accepted for listing on any such exchange. Should we fail to satisfy the initial listing standards of such exchanges, or our common stock is otherwise rejected for listing, the trading price of our common stock could suffer, the trading market for our common stock may be less liquid, and our common stock price may be subject to increased volatility.
A decline in the price of our common stock could affect our ability to raise working capital and adversely impact on our ability to continue operations.
A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. A decline in the price of our common stock could be especially detrimental to our liquidity and our operations. Such reductions may force us to reallocate funds from other planned uses and may have a significant negative effect on our business plan and operations, including our ability to develop new services and continue our current operations. If our common stock price declines, we can offer no assurance that we will be able to raise additional capital or generate funds from operations sufficient to meet our obligations. If we are unable to raise sufficient capital in the future, we may not be able to have the resources to continue our normal operations.
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Concentrated ownership of our common stock creates a risk of sudden changes in our common stock price.
The sale by any shareholder of a significant portion of their holdings (particularly of our existing significant shareholders and executive management) could have a material adverse effect on the market price of our common stock.
Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares and have a depressive effect on the price of the shares of our common stock.
A number of the outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”) (“Rule 144”). As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides in essence that a non-affiliate who has held restricted securities for a period of at least six months may sell their shares of common stock. Under Rule 144, affiliates who have held restricted securities for a period of at least six months may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volume during the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Markets). A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of common stock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.
If we issue additional shares or derivative securities in the future, it will result in the dilution of our existing stockholders.
The Company has 700,000,000 shares of common stock authorized with a par value of $0.001 per share as of June 30, 2024.
In addition, the Company has 10,000,000 preferred stock authorized with a par value of $0.001 per share as of June 30, 2024. 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.
We do not plan to declare or pay any dividends to our stockholders in the near future.
We have not declared any dividends in the past, and we do not intend to distribute dividends in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of the Board of Directors and will depend upon, among other things, the results of operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant. We cannot assure you that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend.
The requirements of being a public company may strain our resources and distract management.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). These requirements are extensive. The Exchange Act requires that we file annual, quarterly, and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting.
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We may incur significant costs associated with our public company reporting requirements and costs associated with applicable corporate governance requirements. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time-consuming and costly. This may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, and results of operations. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our Board of Directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
Persons associated with securities offerings, including consultants, may be deemed to be broker dealers.
In the event that any of our securities are offered without engaging a registered broker-dealer, we may face claims for rescission and other remedies. If any claims or actions were to be brought against us relating to our lack of compliance with the broker-dealer requirements, we could be subject to penalties, required to pay fines, make damages payments or settlement payments, or repurchase such securities. In addition, any claims or actions could force us to expend significant financial resources to defend our company, could divert the attention of our management from our core business and could harm our reputation.
Future changes in financial accounting standards or practices may cause adverse unexpected financial reporting fluctuations and affect reported results of operations.
A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct business.
“Penny Stock” rules may make buying or selling our common stock difficult.
Trading in our common stock is subject to the “penny stock” rules. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer that recommends our common stock to persons other than prior customers and accredited investors, must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our common stock, which could severely limit the market price and liquidity of our common stock.
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Our ability to issue preferred stock may adversely affect the rights of holders of our common stock and may make takeovers more difficult, possibly preventing you from obtaining the optimal price for our common stock.
Our Articles of Incorporation authorizes the issuance of shares of “blank check” preferred stock, which would have the designations, rights and preferences as may be determined from time to time by the Board of Directors. Accordingly, the Board of Directors is empowered, without shareholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of our common stock. The issuance of preferred stock could be used, under certain circumstances, as a method of discouraging, delaying, or preventing a change in control of our company.
We rely significantly on information technology and any failure, inadequacy, or security lapse of that technology, including any cybersecurity incidents, could harm us.
We believe that companies have been increasingly subject to a wide variety of security incidents, cyberattacks and other attempts to gain unauthorized access. These threats can come from a variety of sources, ranging in sophistication from an individual hacker to a state-sponsored attack. Cyber threats may be generic, or they may be custom-crafted against our information systems. Over the past few years, cyber-attacks have become more prevalent and much harder to detect and defend against. Several key areas of our business depend on the use of information technologies, including production, manufacturing, marketing, and logistics, as well as clinical and regulatory matters. We also utilize systems that allow for the secure storage and transmission of proprietary or confidential information regarding our customers, employees, and others, including personal information. If we fail to maintain or protect our information systems and data integrity effectively, we could have problems in determining product cost estimates and establishing appropriate pricing, have difficulty preventing, detecting, and controlling fraud, have disputes with physicians, and other health care professionals, have regulatory sanctions or penalties imposed, have increases in operating expenses, incur expenses or lose revenues as a result of a data privacy breach, or suffer other adverse consequences and reputational damages. While we have invested in the protection of data and information technology, there can be no assurance that our efforts or those of our third-party collaborators, if any, or manufacturers, to implement adequate security and quality measures for data processing would be sufficient to protect against data deterioration or loss in the event of a system malfunction, or to prevent data from being stolen or corrupted in the event of a security breach. Any such loss or breach could harm our business, operating results, and financial condition. For a discussion of our management of cybersecurity risks, see Item 1C. “Cybersecurity-Risk Management” and “-Governance.”
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risks related to Cybersecurity Incidents
We face significant risks related to cybersecurity threats, which could adversely affect our business, financial condition, and results of operations. Cybersecurity incidents, including but not limited to unauthorized access, data breaches, and other malicious activities, could result in the loss or theft of sensitive information, disruption of our operations, and damage to our reputation. While we have implemented measures to protect our information systems, there can be no assurance that these measures will effectively prevent all cybersecurity incidents.
Specific risks include, but are not limited to:
| 1. | Data Breaches: A breach of our information systems could lead to unauthorized access to customer or employee data, resulting in reputational harm and legal liabilities. |
| 2. | Operational Disruption: Cybersecurity incidents could disrupt our operations, leading to delays in production, delivery, or fulfillment of customer orders. |
| 3. | Intellectual Property Theft: Unauthorized access to our proprietary information could result in intellectual property theft, impacting our competitive position in the market. |
| 4. | Regulatory and Legal Compliance: Cybersecurity incidents may subject us to regulatory investigations, legal claims, and penalties, affecting our compliance with applicable laws and regulations. |
| 5. | Third-Party Relationships: Our reliance on third-party vendors and service providers exposes us to additional cybersecurity risks, and a security breach affecting these entities could impact our operations. |
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Although, to date, cybersecurity incidents have not materially impacted our business strategy, results of operations, or financial condition, there can be no assurances that they will not do so in the future.
Refer to “Item 1A. Risk factors” in this Annual Report for additional information about cybersecurity-related risks.
Risk Management and Strategy
Assessing, Identifying, and Managing Material Cyber Threats
We have in place certain infrastructure, systems, policies, and procedures that are designed to proactively and reactively address circumstances that arise when unexpected events such as a cybersecurity incident occur. These include processes for assessing, identifying, and managing material risks from cybersecurity threats. We consult with external parties, such as cybersecurity firms and risk management and governance experts, on risk management and strategy. We use a team of outside vendors and government services specializing in IT and cybersecurity that provide expertise, tools, and methodologies to identify and assess vulnerabilities and potential threats. Automated tools and
AI-based user behavior analytics also support identification and management of cyber threats. Response to a broad category of threats is immediate and automatic. Security personnel and members of our management are alerted when cyber threats or anomalies are detected. Persistent threats or issues that, in the opinion of management, are material are immediately brought to the attention of our board of directors.
In the event of a detected cyber incident by 24/7 monitoring software or employee notification, our IT and cybersecurity provider performs a detailed assessment of the incident, identifies the source of the problem, and resolves the issue as appropriate. If they are unable to resolve the issue, the problem is escalated to our cybersecurity monitoring and detection software provider for resolution. Events which are not routinely resolved by our IT and cybersecurity provider are brought to the attention of the board.
In order to mitigate risks of cybersecurity incidents, critical business and operational data are backed up at night and stored offsite for security purposes and to restore data in the event of a breach. Additionally, we provide cybersecurity awareness training of our employees, incident response personnel, and senior management.
Governance
Our executive management team is primarily responsible for assessing and managing our material risks from cybersecurity threats. Management supervises both our internal cybersecurity and IT related personnel, as well as our retained external cybersecurity consultants and vendors. Additionally, they supervise efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefing from internal or external security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants or vendors engaged by us; and alerts and reports produced by security tools deployed in our IT environment.
Our board of directors provides oversight and oversees management’s processes for identifying and mitigating risks, including cybersecurity risks, to help align our risk exposure with our strategic objectives. Two of our management have received training on cyber risk governance for public companies, regularly brief our board of directors on our cybersecurity and information security posture as well as cybersecurity incidents deemed to have a moderate or higher business impact, even if viewed as immaterial to us. As cyber threats evolve and become more sophisticated, we believe that the board’s involvement in cybersecurity governance ensures that we are adequately focused on resources and protecting the Company’s assets and reputation.
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ITEM 2. PROPERTIES
Our executive office is located at 6888 S. Clinton Street, Suite 301, Greenwood Village, CO 80112.
ITEM 3. 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 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is quoted on the OTC Markets under the trading symbol “LBUY”. Trading in stocks quoted on the OTC Markets is often thin and is characterized by wide fluctuations in trading prices due to many factors that may have little to do with a company’s operations or business prospects. We cannot assure you that there will be a market for our common stock in the future. Our common stock commenced trading on April 5, 2017 under the symbol “APVT”.
The following quotations reflect the high and low bids for our common stock based on inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
|
| Year ended June 30, 2024 |
| |||||
|
| High |
|
| Low |
| ||
Quarter ended June 30, 2024 |
| $ | 0..03 |
|
| $ | 0.02 |
|
Quarter ended March 31, 2024 |
| $ | 0..03 |
|
| $ | 0.03 |
|
Quarter ended December 31, 2023 |
| $ | 0.04 |
|
| $ | 0.04 |
|
Quarter ended September 30, 2023 |
| $ | 0.07 |
|
| $ | 0.06 |
|
|
| Year ended June 30, 2023 |
| |||||
|
| High |
|
| Low |
| ||
Quarter ended June 30, 2023 |
| $ | 0.12 |
|
| $ | 0.07 |
|
Quarter ended March 31, 2023 |
| $ | 0.13 |
|
| $ | 0.05 |
|
Quarter ended December 31, 2022 |
| $ | 0.06 |
|
| $ | 0.04 |
|
Quarter ended September 30, 2022 |
| $ | 0.05 |
|
| $ | 0.04 |
|
Holders
As of June 30, 2024, there were approximately 9,000 holders of record of our common stock.
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Dividends
We have not paid cash dividends on shares of our common stock, and we do not expect to declare or pay dividends on shares of our common stock for the foreseeable future. We intend to retain earnings, if any, to finance the development and expansion of our business. Our future dividend policy will be subject to the discretion of our Board of Directors and will depend upon our future earnings, if any, our financial condition, our capital requirements, general business conditions and other factors.
Equity Compensation Plans
We have an equity incentive plan that was established in February of 2017. Our Board of Directors may from time to time, in its discretion grant to our directors, officers, consultants and employees, non-transferable options to purchase our common stock, provided that the number of options issued do not exceed 25,000,000. The options are exercisable for a period of up to 4 years from the date of the grant. The number of shares authorized to be issued under the equity incentive plan was increased from 10,000,000 to 25,000,000 through a consent of stockholders to amend and restate the equity incentive plan.
Recent Sales of Unregistered Securities
On July 2, 2019, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors (the “Investors”), pursuant to which we agreed to issue and sell directly to the Investors in a private offering (the “Offering”), an aggregate of 7,211,538 shares of our 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 shares were offered by us pursuant to the exemption provided in Section 4(a)(2) under the Securities Act, and Rule 506(b) promulgated thereunder. We were 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. All shares of the common stock and shares of common stock underlying the warrants have been registered.
As additional consideration for the purchase of the Shares, we agreed to issue to the Investors Series A Warrants, Series B Warrants, and Series C Warrants (collectively, the “Warrants”). The number of shares for the Warrants and exercise price of the Warrants is subject to adjustment; provided, however, on each of (i) the 3rd trading day following the effective date (the “Effective Date”) of the Registration Statement to be filed by us (the “Interim True-Up Date”), and (ii) the 6th trading day following the Effective Date (the “Final True-Up Date”), the exercise price shall be reduced, and only reduced, to equal the lower of (1) the then exercise price and (2) 100% of the lowest VWAP during the 2 trading days prior to the Interim True-Up Date or 5 trading days prior to the Final True-Up Date, as applicable, immediately following the Effective Date. The Series C Warrants, which are considered pre-funded, allow each Investor to purchase an amount of shares equal to the sum of (a) any shares purchased by the Investor pursuant to the Purchase Agreement that would have resulted in the beneficial ownership of greater than 4.99% of our outstanding common stock, (b) on the 3rd trading day following the Effective Date, if 80% of the lowest VWAP during the 2 trading days immediately prior to such date (“Primary Effective Date Price”) is less than $0.624, then a number of shares of our common stock equal to such Investor’s Purchase Agreement purchase amount divided by the Primary Effective Date Price less any shares of our common stock (i) issued at the closing and (ii) issuable pursuant to clause (a) above, if any, and (c) on the 6th trading day following the Effective Date, if 80% of the lowest VWAP during the 5 trading days immediately prior to such date (“Secondary Effective Date Price”) is less than $0.624, then a number of shares of our common stock equal to such holder’s subscription amount at the closing divided by the Secondary Effective Date Price less any shares of common stock (i) issued at the closing, (ii) issuable pursuant to clause (a) above, if any or (iii) issuable pursuant to clause (b) above, if any. The Series C Warrants are exercisable at a price of $0.001 per share.
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We issued 30,299,998 shares of common stock pursuant to the Purchase Agreement, as well as the exercise of the Series C Warrants and fees paid in shares of common stock. We received approximately $4,038,000, 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 7,018,091 shares of common stock which expired in July 2020 and were not exercised. The Series B Warrants 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. If the Investors choose to exercise the Series B Warrants, we would receive proceeds of $4,500,000.
In the execution of the transactions referred to above we relied on the exemptions from registration under Section 4(2) of the Securities Act and Rule 506 promulgated thereunder. The subscription agreements with the Investors contained representations to support our reasonable belief that the Investors had access to information concerning our operations and financial condition, the Investors acquired the securities for their own account and not with a view to the distribution (in the absence of an effective registration statement or an applicable exemption from registration) and that the Investors are sophisticated within the meaning of Section 4(2) of the Securities Act and are “accredited investors” (as defined by Rule 501 under the Securities Act). In addition, the sale of securities did not involve a public offering; we made no solicitation in connection with the sale other than communications with the Investors; we obtained representations from the Investors regarding their investment intent, experience and sophistication; and the Investors either received or had access to adequate information about our company in order to make an informed investment decision.
Item 6. Selected Financial Data
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 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 June 30, 2024.
In addition, the Company has 10,000,000 preferred stocks authorized with a par value of $0.001 per share as of June 30, 2024. 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. 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, and its progressive web applications, host a robust search algorithm like popular travel or hotel sites, where our clients' and 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 solution 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. Through this application we have been able to reduce costs, increase customer retention, and improve deliverability for our clients. In March of 2023 we launched our total network program that posts SMS/MMS messages directly to Leafbuyer.com from our texting and loyalty platform. This gives our customers the ability to reach a brand new audience and also gain signups through Leafbuyer.com. This gives us a competitive advantage over other texting companies and provides fresh content daily to users of Leafbuyer.com.
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 Fortune Business Insights to reach a global market size of 197 billion by 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 as well as adding new feature product sets to increase revenue from our current client base. 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, 2024, versus June 30, 2023
|
| Year Ended |
|
| Year Ended |
|
|
|
|
| ||||||
|
| June 30, 2024 |
|
| June 30, 2023 |
|
| $ Change |
|
| % Change |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue |
| $ | 5,601,357 |
|
| $ | 5,090,846 |
|
|
| 510,511 |
|
|
| 10 | % |
Cost of revenue |
|
| 3,549,328 |
|
|
| 2,842,786 |
|
|
| 706,542 |
|
|
| 25 | % |
Gross profit |
|
| 2,052,029 |
|
|
| 2,248,060 |
|
|
| (196,031 | ) |
|
| (9 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses |
|
| 816,180 |
|
|
| 717,270 |
|
|
| 98,910 |
|
|
| 14 | % |
General and administrative |
|
| 1,822,365 |
|
|
| 1,951,013 |
|
|
| (128,648 | ) |
|
| (7 | )% |
Total operating expenses |
|
| 2,638,545 |
|
|
| 2,668,283 |
|
|
| (29,738 | ) |
|
| (1 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| (586,516 | ) |
|
| (420,221 | ) |
|
| (166,293 | ) |
|
| (40 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income/(expense) |
|
| (122,914 | ) |
|
| (164,988 | ) |
|
| 42,074 |
|
|
| 26 | % |
Net loss |
| $ | (709,430 | ) |
| $ | (585,211 | ) |
|
| (124,219 | ) |
|
| (21 | )% |
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Revenues
During the year ended June 30, 2024, we generated $5,601,357 of revenues, compared to revenues of $5,090,846 during the year ended June 30, 2023. The increase was primarily due to the increase in text services which is up 10% over the prior year.
Gross Profit
Gross profit decreased to $2,052,029 for the period ended June 30, 2024, which was an decrease of $196,031 over the same period last year of June 30, 2023. Gross profit as a percentage of revenue decreased from 44% to 37% for the period ended June 30, 2024 over June 30, 2023 because of the increase of 3rd party text service expense.
Expenses
During the year ended June 30, 2024, we incurred total operating expenses of $2,638,545, including $1,822,365 in general and administrative expenses, and $816,180 in selling expenses. During the year ended June 30, 2023, we incurred total operating expenses of $2,668,283, including $1,951,013 in general and administrative expenses, and $717,270 in selling expenses. The decrease of $29,738 or 1% was primarily due to less payroll expense and stock-based compensation expense. Management expects the general and administrative expenses to continue to decrease as management focuses on getting current operations to positive cash flow.
Other expense of $122,914 for the yearend June 30, 2024 compared to other expense of $164,988 for the same period ending June 30, 2023 because of the reduction in notes payable during the year.
Net Loss
During the year ended June 30, 2024 we incurred a net loss of $709,430, compared to a net loss of $585,211 for the year ended June 30, 2023.
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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 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 we will be able to raise any additional capital through any type of offering on terms acceptable to us. We believe that existing cash on hand will be sufficient to finance operations over the next twelve months.
At June 30, 2024 we had $165,332 in cash and cash equivalents.
Cash Flows
Our cash flows from operating, investing and financing activities were as follows:
|
| Year Ended June 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Net cash provided (used) in operating activities |
| $ | (131,136 | ) |
| $ | 422,592 |
|
Net cash used in investing activities |
| $ | - |
|
| $ | - |
|
Net cash (used) provided by financing activities |
| $ | (149,244 | ) |
| $ | (344,116 | ) |
Net change in cash and cash equivalents |
| $ | (280,380 | ) |
| $ | 78,476 |
|
As of June 30, 2024, we had $165,332 in cash and cash equivalents and a working capital deficit of $1,835,385. We are dependent on funds raised through equity financing. Our cumulative net loss of $25,247,214 was funded by equity financing.
During the year ended June 30, 2024, net cash used from operations was $131,136 compared to net cash provided from operations of $422,592 for the same period ending June 30, 2023. The difference is primarily because of the lower net loss from operations realized in fiscal year 2024.
During the years ended June 30, 2024 and 2023, we did not use any cash for investing activities.
Net cash flow used for financing activities for the year ended June 30, 2024 was $149,244 compared to cash used for financing activities during the same period in 2023 of $344,116. The difference is primarily because less cash was used to reduce debt obligations.
Our decrease in cash and cash equivalents for the year ended June 30, 2024, was primarily net cash used from operating activities.
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 the existing cash on hand will be sufficient 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.
Item 7A. 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 8. Financial Statements and Supplementary Data
The information required by Item 8 appears after the signature page of this report.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
On a letter from the SEC dated May 3rd, 2024, we disclosed the firing of our audit firm BF Borgers on May 8th, 2024 and the hiring of our current new firm BCRG Group (BCRG) to re-review and re-audit our 2023 and 2024 3rd quarter 10-Q, as well as our 2023 and 2024 10-K filings. We expect no significant or material changes to our reporting numbers.
Item 9A. Controls and Procedures
Management’s Report on 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, 2024. 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 fiscal year ended June 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over our financial reporting in order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002. Our management, with the participation of our principal executive officer and principal financial officer have conducted an assessment, including testing, using the criteria in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) (2013). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. This assessment included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of June 30, 2024. The ineffectiveness of our internal control over financial reporting was due to the following material weaknesses, which are indicative of many small companies with small staff:
(i) | inadequate segregation of duties consistent with control objectives; and |
| |
(ii) | lack of multiple levels of supervision and review; and |
|
|
(iii) | technical accounting support for complex debt and preferred stock transactions. |
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In our assessment of the effectiveness of internal control over financial reporting as of June 30, 2024, we determined that our disclosure controls and procedures are not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time provided in the SEC rules and forms.
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We believe that the weaknesses identified above have not had any material effect on our financial results. We have implemented new layers of supervision with accounting and are continuing to review our disclosure controls and procedures related to these material weaknesses and expect to implement changes in the current fiscal year, including identifying specific areas within our governance, accounting and financial reporting processes to add adequate resources to potentially mitigate these material weaknesses.
Our management will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Management’s Remediation Plan
In light of the control deficiencies identified at December 31, 2019, and described in the section titled “Management Report on Internal Control Over Financial Reporting,” we have designed and plan to implement the specific remediation initiatives described below:
(i) | Appoint additional qualified personnel to address inadequate segregation of duties and implement modifications to our financial controls to address such inadequacies; and |
(ii) | We will attempt to implement remediation efforts. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. | |
|
|
|
| (iii) | Management has implemented new controls to allow one individual in accounting to access systems, contracts, payments and other critical accounting software. C Level executives and the Director of Customer Service have view only access to conduct monthly audits of all accounting transactions. We have also implemented dual approval on all AP transactions and monthly audits are conducted on all contracts that are written. |
Management believes that despite our material weaknesses set forth above, our financial statements for years ended June 30, 2024 and 2023 are fairly stated, in all material respects, in accordance with U.S. GAAP.
Item 9B. Other Information
None
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The following table sets forth certain information of our directors and officers as of the date of this report.
Name |
| Age |
| Position | Director/Officer Since | |
|
|
|
|
|
|
|
Kurt Rossner |
| 55 |
| Chairman, Chief Executive Officer and President |
| March 23, 2017 |
Mark Breen |
| 52 |
| Chief Financial Officer and Director |
| March 23, 2017 |
Michael Goerner |
| 55 |
| Treasurer, Chief Technology Officer and Director |
| March 23, 2017 |
Jeff Rudolph |
| 63 |
| Director |
| October 15, 2018 |
Kristin Baca |
| 54 |
| Director |
| October 15, 2018 |
Kurt Rossner, 55, Co-Founder, Chairman and Chief Executive Officer
Prior to founding LB Media Group in May 2013, Mr. Rossner started his career with MCI Telecommunications Corporation as a Business Sales Manager in 1993. Mr. Rossner founded several successful technology companies and was a pioneer in the Internet web hosting industry. He founded one of the largest platforms in the county, selling it to Micron Electronics (NASDAQ: MUEI) in 2000. Mr. Rossner leads our operations and overall strategic direction. He holds a Bachelor of Science Degree in Economics from The Florida State University.
Mark Breen, 52, Co-Founder, Director and Chief Financial Officer
Prior to Co-founding LB Media Group in May 2013, Mr. Breen served in various Sales Executive positions at CBS Corporation from Oct 2010 to October of 2013. Mr. Breen heads up our sales and market expansion strategy. He has worked in various sales, operation and management positions within Tribune Broadcasting, Gannett and CBS in both Chicago and Denver over his 20-year career. Mr. Breen earned a Bachelor of Arts Degree in Broadcasting from Western Illinois University.
Michael Goerner, 55, Co-Founder, Director and Chief Technology Officer
Prior to founding LB Media Group in May 2013, Mr. Goerner served as the C.T.O of WHIP Systems from March 2001 to May 2013. Mr. Goerner is responsible for our technology direction and has significant experience with various Internet and IT companies. Prior thereto and from June 1998 through December 2000 to Mr. Goerner served as the Founder and C.T.O of Indigio Group. In the early 1990s he was involved in the early-stage development of successful Internet properties in the areas of online mapping, real estate, news media. Mr. Goerner has a Bachelor of Science Degree in Computer Science from Millersville University of Pennsylvania.
Jeff Rudolph, 63, Director
Mr. Rudolph is a Certified Public Accountant. He began his accounting career at Coopers & Lybrand, LLP from 1983 to 1994, where he was a staff then manager in the Corporate Finance Group (Merger & Acquisition Practice). From 1994 to 1997, he was the Managing Director of Finance and Operations for Intelligent Electronics, Inc. From 1997 to 2003, he was employed by SSDS Inc./Knowledge Workers, Inc., a leading provider of client/server and web-based network integration services. He served on the Board of Directors, as Executive Vice President, Chief Operations Officer and Chief Financial Officer throughout his time there. From 2003 to 2005, he was the Executive Vice President and Chief Financial Officer at Entrust Financial Services, Inc., a publicly traded company focused on wholesale mortgage banking and full-service mortgage lender. In 2005 he was also the President and Chief Executive Officer of the company. From 2005 to 2007, Mr. Rudolph was the Executive Vice President and Chief Financial Officer of Stonecreek Funding Investment Corp., a national private equity firm focused on acquiring portfolio companies in the residential mortgage sector. From 2009 to 2010, Mr. Rudolph was the President and Chief Executive Officer of American Civil Constructors Holdings, Inc. one of the nation’s premier construction and maintenance companies with comprehensive services including the Civil, Marine and Landscape industries. Mr. Rudolph is currently the founder and General Partner of the CFO Advisory Group, a company that specializes in providing CFO services to companies who need assistance in finding solutions to their business challenges. Mr. Rudolph earned his Master’s in Business Administration from the University of Denver and a Bachelor of Arts degree in Accounting from Wittenberg University.
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| Table of Contents |
Kristin Baca, 54, Director
Ms. Baca has served in various financial roles during her career. From 1998 to 1999, she was the Regional Finance Director of Countrywide Home Loans. She was responsible for monthly and quarterly reporting, interpretation of financial results, development and analysis of analytical models and evaluation of growth opportunities and resource needs. From 1999 to 2006, Ms. Baca served as the Vice President of Business/Financial for ACS. She ensured accountability, integrity and reliability of financial systems and controls as well as oversaw the activities of 35 cost centers. Ms. Baca partnered with the acquisitions department on due diligence, modeling and strategic analysis and planning. From 2006 to 2009, Ms. Baca was the Vice President and Transition Executive Payroll Shared Services at ACS. In this role, she optimized functions by creating and executing global payroll shared service models and was integral in driving enterprise goals and objectives by implementing global operational plans and resource optimization. From 1999 to 2012, she served as the Vice President of Global Technology Operations at Xerox. She managed the 1,300 employees, drove divisional objectives, boosted performance and captured both revenue and profit improvements by innovative initiatives. From 2012 to 2013, Ms. Baca was the Executive Vice and Chief Operating Officer of Healthplan Services, Inc. While there, she orchestrated top-performing, customer focused operations, encompassing member services, enrollment and billing and call center operations. Currently, Ms. Baca is the Senior Vice President of Strategy and Global Operations at Xerox/Conduent. She is responsible for leadership, staffing and budgeting for strategy, development and planning, project planning and management, client delivery and analytical review. Ms. Baca has a Master of Business Administration from Regis University and a Bachelor of Science and Arts in Finance with a minor in Economics from the University of Colorado.
Family Relationships
There are no family relationships among our directors, executive officers or persons nominated or chosen by us to become directors or executive officers.
Legal Proceedings
None of our directors, executive officers, promoters or control persons has been involved in any of the following events during the past 10 years:
· | any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; | |
|
|
|
· | any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); | |
|
|
|
· | being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; | |
|
|
|
· | being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated any federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated; | |
|
|
|
· | any judicial or administrative proceedings resulting from involvement in mail or wire fraud or fraud in connection with any business activity; | |
|
|
|
· | and judicial or administrative proceedings based on violations of federal or state securities, commodities, banking or insurance laws and regulations, or any settlement to such actions; or | |
|
|
|
· | any disciplinary sanctions or orders imposed by a stock, commodities or derivatives exchange or other self-regulatory organization. |
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Section 16(a) Beneficial Ownership Compliance Reporting
Section 16(a) of the Exchange Act requires our directors, executive officers and persons who own more than 10% of our common stock to file reports regarding ownership of, and transactions in, our securities with the SEC and to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during the fiscal year ended June 30, 2024 our directors, executive officers and 10% stockholders complied with all applicable filing requirements.
Code of Ethics
We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions.
Audit Committee
Our Audit Committee is primarily concerned with the effectiveness of our accounting policies and practices, our financial reporting and our internal accounting controls. In addition, the Audit Committee reviews and approves the scope of the annual audit of our books, reviews the findings and recommendations of the independent registered public accounting firm at the completion of their audit, and approves annual audit fees and the selection of an auditing firm. The Audit Committee met two times during the year ended June 30, 2024.
The Audit Committee is presently composed of three members: Jeffrey Rudolph, Kristin Baca and Kurt Rossner. The Board of Directors has determined that Kristin Baca is considered “audit committee financial expert” (as defined by rules of the SEC) and that each of the “audit committee financial experts” meet the independence criteria.
Nomination Procedures for Directors
We do not have a nominating committee. Our Board of Directors selects individuals to stand for election as members of the Board and does not have a policy with regards to the consideration of any director candidates recommended by our security holders. Our Board of Directors has determined that it is in the best position to evaluate our company’s requirements as well as the qualifications of each candidate when it considers a nominee for a position on our Board. If security holders wish to recommend candidates directly to our Board of Directors, they may do so by communicating directly with our President at the address specified on the cover of this annual report. There has not been any change to the procedures involved when our shareholders wish to recommend nominees to our Board of Directors.
| 27 |
| Table of Contents |
Item 11. Executive Compensation
The following table sets forth the compensation paid or accrued by us to our President, Chief Executive Officer, Chief Financial Officer and each of our other officers for the fiscal years ended June 30, 2024, 2023 and 2022.
Name and principal position |
| Year |
| Salary |
|
| Bonus |
|
| Stock awards |
|
| Option awards |
|
| Nonequity incentive plan compensation |
|
| Nonqualified deferred compensation earnings |
|
| All other compensation |
|
| Total Compensation |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Kurt Rossner Chief Executive Officer and Director |
| 2024 |
|
| 120,000 |
|
|
| - |
|
|
| - |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 120,000 |
| |
|
| 2023 |
|
| 112,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 112,000 |
|
|
| 2022 |
|
| 112,000 |
|
|
| - |
|
|
| - |
|
|
| 120,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 232,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Breen Chief Financial Officer, Director |
| 2024 |
|
| 120,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| -- |
|
|
| 120,000 |
|
|
| 2023 |
|
| 112,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| -- |
|
|
| 112,000 |
|
|
| 2022 |
|
| 112,000 |
|
|
| - |
|
|
| - |
|
|
| 120,000 |
|
|
| - |
|
|
| - |
|
|
| -- |
|
|
| 232,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Micheal Goener, Treasurer, Director |
| 2024 |
|
| 120,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 120,000 |
|
|
| 2023 |
|
| 112,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 112,000 |
|
|
| 2022 |
|
| 112,000 |
|
|
| - |
|
|
| - |
|
|
| 120,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 232,000 |
|
Compensation Committee
We currently do not have a compensation committee of the Board of Directors or a committee performing similar functions. It is the view of the Board of Directors that it is appropriate for us not to have such a committee because of our size and because the Board of Directors participates in the consideration of executive compensation. None of our executive officers served as a director or member of the compensation committee of any entity that has one or more executive officers serving on our Board of Directors.
Board Leadership Structure and Role in Risk Oversight
Although we have not adopted a formal policy on whether the Chairman and Chief Executive Officer positions should be separate or combined, we have traditionally determined that it is in our best interests and our shareholders to combine these roles. Kurt Rossner serves as our Chairman and Chief Executive Officer. We believe it is in our best interest to have the Chairman and Chief Executive Officer roles combined due to our small size and limited resources.
Our Board of Directors is primarily responsible for overseeing our risk management processes. The Board of Directors receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks. The Board of Directors focuses on the most significant risks facing our company and our company’s general risk management strategy and ensures that risks undertaken by our company are consistent with the Board of Directors appetite for risk. While the Board of Directors oversees our company, our company’s management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that our Board of Directors leadership structure supports this approach.
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| Table of Contents |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth the ownership, as of June 30, 2024 of our common stock by each of our directors, by all of our executive officers and directors as a group and by each person known to us who is the beneficial owner of more than 5% of any class of our securities. As of June 30, 2024, there were 100,071,075 shares of our common stock issued and outstanding. All persons named have sole or shared voting and investment control with respect to the shares, except as otherwise noted. The number of shares described below includes shares which the beneficial owner described has the right to acquire within 60 days of June 30, 2024.
Name and Address of Beneficial Owner (1) |
| Common Stock Beneficially Owned |
|
| Percentage of Common Stock (2) |
| ||
Directors and Officers: |
|
|
|
|
|
| ||
Kurt Rossner (3) |
|
| 8,250,012 |
|
|
| 8.2 | % |
Mark Breen (3) |
|
| 8,250,012 |
|
|
| 8.2 | % |
Michael Goerner (3) |
|
| 8,250,012 |
|
|
| 8.2 | % |
Jeffrey Rudolph |
|
| 909,322 |
|
| * |
| |
Kristin Baca |
|
| 193,662 |
|
| * |
| |
All officers and directors as a group (five persons) 5% Beneficial Owners: |
|
| 25,853,020 |
|
|
| 25.8 | % |
Anson Investments Master Fund LP(4) |
|
| 14,999,999 |
|
|
| 15.1 | % |
Hudson Bay Master Fund LTD(5) |
|
| 14,999,999 |
|
|
| 15.1 | % |
__________
* | less than 1% |
| |
(1) | Except as otherwise indicated, the address of each beneficial owner is our company’s address. |
(2) | Applicable percentage ownership is based on 100,071,075 shares of common stock outstanding as of June 30, 2024 together with securities exercisable or convertible into shares of common stock within 60 days of June 30, 2024, for each stockholder. Beneficial ownership is determined in accordance with the rules of the Commission and generally includes voting or investment power with respect to securities. Shares of common stock that are currently exercisable or exercisable within 60 days of June 30, 2024, are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. |
| |
(3) | Includes 108,109 shares of Series A Preferred Stock. The Series A Shares are subject to 9.25:1 reverse stock split upon their conversion into Common Stock. The effective number of common shares outstanding is 1,000,000. |
|
|
(4) | Includes 14,999,999 shares of common stock. Excludes 14,036,048 shares of common stock underlying Series A Warrants which have been issued, assuming an exercise price of $0.1624, assuming a floor reset price of the common stock and a floor reset exercise price of the Warrants of $0.15 per share. The Series A Warrants do not allow for any exercise that would result in the beneficial ownership of greater than 4.99% of the number of our shares of common stock outstanding immediately after giving effect to such exercise. Anson Advisors Inc., and Anson Funds Management LP, the Co-Investment Advisers of Anson Investments Master Fund LP, hold voting and dispositive power over the Common Shares held by Anson. Bruce Winson is the managing member of Anson Management GP LLC, which is the general partner of Anson Funds Management LP. Moez Kassam and Amin Nathoo are directors of Anson Advisors Inc. Mr. Winson, Mr. Kassam and Mr. Nathoo each disclaim beneficial ownership of these shares of common stock except to the extent of their pecuniary interest therein. The principal business address of Anson is Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road, George Town, Grand Cayman KY1-9008, Cayman Islands. |
| |
(5) | Includes 14,999,999 shares of common stock. Excludes 14,036,048 shares of common stock underlying Series A Warrants which have been issued, assuming an exercise price of $0.1624, assuming a floor reset price of the shares of common stock and a floor reset exercise price of the Warrants of $0.15 per share. The Warrants do not allow for an exercise that would result in the beneficial ownership of greater than 9.99% of our outstanding common stock immediately after giving effect to their exercise. Hudson Bay Capital Management LP, the investment manager of Hudson Bay Master Fund Ltd., has voting and investment power over these securities. Sander Gerber is the managing member of Hudson Bay Capital GP LLC, which is the general partner of Hudson Bay Capital Management LP. Each of Hudson Bay Master Fund Ltd. and Sander Gerber disclaims beneficial ownership over these securities. |
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| Table of Contents |
Item 13. Certain Relationships and Related Transactions, and Director Independence
On July 2, 2019, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors (the “Investors”), pursuant to which we 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 us pursuant to the exemption provided in Section 4(a)(2) under the Securities Act, and Rule 506(b) promulgated thereunder. We were 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.
As additional consideration for the purchase of the Shares, we agreed to issue to the Investors Series A Warrants, Series B Warrants, and Series C Warrants (collectively, the “Warrants”). The number of shares for the Warrants and exercise price of the Warrants is subject to adjustment; provided, however, on each of (i) the 3rd Trading Day following the effective date (the “Effective Date”) of the Registration Statement to be filed by us (the “Interim True-Up Date”), and (ii) the 6th trading day following the Effective Date (the “Final True-Up Date”), the exercise price shall be reduced, and only reduced, to equal the lower of (1) the then exercise price and (2) 100% of the lowest VWAP during the 2 trading days prior to the Interim True-Up Date or 5 trading days prior to the Final True-Up Date, as applicable, immediately following the Effective Date. The Series C Warrants, which are considered pre-funded, allow each Investor to purchase an amount of shares equal to the sum of (a) any shares purchased by the Investor pursuant to the Purchase Agreement that would have resulted in the beneficial ownership of greater than 4.99% of our outstanding common stock, (b) on the 3rd trading day following the Effective Date, if 80% of the lowest VWAP during the 2 trading days immediately prior to such date (“Primary Effective Date Price”) is less than $0.624, then a number of shares of common stock equal to such Investor’s Purchase Agreement purchase amount divided by the Primary Effective Date Price less any shares of common stock (i) issued at the closing and (ii) issuable pursuant to clause (a) above, if any, and (c) on the 6th trading day following the Effective Date, if 80% of the lowest VWAP during the 5 trading days immediately prior to such date (“Secondary Effective Date Price”) is less than $0.624, then a number of shares of common stock equal to such holder’s subscription amount at the closing divided by the Secondary Effective Date Price less any shares of common stock (i) issued at the closing, (ii) issuable pursuant to clause (a) above, if any or (iii) issuable pursuant to clause (b) above, if any. The Series C Warrants are exercisable at a price of $0.001 per share.
We issued 30,299,998 shares of common stock for the private placement and the issuance of the 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 28,072,365 shares of 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 share.
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| Table of Contents |
Related Person Transaction Policy
Our Board of Directors is responsible for approving all related party transactions. We have not adopted written policies and procedures specifically for related person transactions.
In March 2020, the Company entered a promissory note with the Chief Executive Officer for $600,000 in exchange for a total of a $565,000 cash payment. The note matured in December 2020 and $500,000 of principal payments have been made to date. The note is in default and due upon demand and the interest rate was increased to 12%. As of June 30, 2024 and June 30, 2023, the total unpaid principal and interest is $163,344 and $152,363, respectively. This principal amount of $100,000 is classified as current debt, related party on the June 30, 2024 and June 30, 2023 balance sheet.
In April 2020, the Company entered a promissory note with the Chief Technology Officer for $50,000. The note matured on January 1, 2021 and $42,183 of principal payments have been made to date. The note is in default and due upon demand and the interest rate was increased to 12%. As of June 30, 2024 and June 30, 2023, the total unpaid principal and interest is $13,985 and $13,134, respectively. This principal amount of $7,817 is classified as current debt, related party on the June 30, 2024 and June 30, 2023 balance sheet.
During the quarter ended March 31, 2024, the Company entered two promissory notes with executives of the Company (see Note 5) with a total value of $65,000. The notes mature in 120 days and accrue interest at 12%. During the year ended June 30, 2024 the Company paid $35,000 and as of June 30, 2024, the total unpaid principal and interest is approximately $33,205. This is classified as current debt, related party on the balance sheet.
Director Independence
We currently use NASDAQ’s general definition for determining director independence, which states that “independent director” means a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, that, in the opinion of the company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of the director.
Item 14. Principal Accountant Fees and Services
Audit and Non-Audit Fees
The following table sets forth the fees for professional audit services and the fees billed for other services rendered by our auditors, in connection with the audit of our financial statements for the years ended June 30, 2024 and 2023, and any other fees billed for services rendered by our auditors during these periods.
|
| Year Ended June 30, 2024 ($) |
|
| Year Ended June 30, 2023 ($) |
| ||
Audit fees |
| $ | 75,100 |
|
| $ | 55,100 |
|
Audit-related fees |
| -0- |
|
| -0- |
| ||
Tax fees |
| -0- |
|
| -0- |
| ||
All other fees |
| -0- |
|
| -0- |
| ||
Total |
| $ | 75,100 |
|
| $ | 55,100 |
|
Since our inception, our Board of Directors, performing the duties of the audit committee, has reviewed all audit and non-audit related fees at least annually. The Board of Directors, acting as the audit committee, pre-approved all audit related services for the year ended June 30, 2024.
| 31 |
| Table of Contents |
PART IV
Item 15. Exhibits, Financial Statement Schedules
___________
* | Filed herewith. |
|
|
** | Furnished herewith. |
| 32 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
LEAFBUYER TECHNOLOGIES, INC. |
| ||
| |||
Date: November 5, 2024 | By: | /s/ Kurt Rossner |
|
| Kurt Rossner |
| |
| Chief Executive Officer, Director (principal executive officer) |
| |
| |||
| By: | /s/ Mark Breen |
|
| Mark Breen |
| |
| Chief Financial Officer, Director (principal financial and accounting officer) |
| |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Signature |
| Capacity |
| Date |
|
|
| ||
/s/ Kurt Rossner |
| Chief Executive Officer, Director |
| November 5, 2024 |
Kurt Rossner |
| (Principal Executive Officer) |
| |
|
|
| ||
/s/ Mark Breen |
| Chief Financial Officer, Director |
| November 5, 2024 |
Mark Breen |
| (Principal Financial and Accounting Officer) |
| |
|
|
| ||
/s/ Michael Goerner |
| Chief Technology Officer, Director |
| November 5, 2024 |
Michael Goerner |
|
|
|
|
| 33 |
| Table of Contents |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
| F-1 |
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| F-2 |
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| F-3 |
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| F-4 |
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| F-5 |
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| F-6 |
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| 34 |
| Table of Contents |
Report of Independent Registered Public Accounting Firm
To the Board of Directors
and Stockholders of Leafbuyer Technologies, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Leafbuyer Technologies, Inc. and subsidiary (collectively, the “Company”) as of June 30, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. 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 consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
| · | Going Concern – As discussed in Note 1 to the consolidated financial statements, the Company has a going concern due to negative working capital and losses from operations which raises substantial doubt about its ability to continue as a going concern. Auditing management’s evaluation of a going concern can be a significant judgment given the fact that the Company uses management estimates on future revenues and expenses, which are difficult to substantiate. To evaluate the appropriateness of the going concern, we examined and evaluated the financial information along with management’s plans to mitigate the going concern and management’s disclosure on going concern. |
/s/
BCRG Group (PCAOB ID
We have served as the Company’s auditor since 2024.
November 5, 2024
| F-1 |
| Table of Contents |
LEAFBUYER TECHNOLOGIES, INC.
Consolidated Balance Sheets
|
| June 30, 2024 |
|
| June 30, 2023 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
| $ |
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| $ |
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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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Intangible assets, net |
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Other assets |
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Total assets |
| $ |
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| $ |
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LIABILITIES AND EQUITY (DEFICIT) |
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Current liabilities: |
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Accounts payable |
| $ |
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| $ |
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Accrued liabilities |
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Deferred revenue |
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Notes payable to related parties |
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Notes payable |
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Notes payable to bank – EIDL loan |
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Convertible notes payable |
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Total current liabilities |
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Notes payable to bank – EIDL loan, net of current portion |
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Total liabilities |
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Commitments and contingencies (Note 6) |
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Equity: |
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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 |
|
| ( | ) |
|
| ( | ) |
Total equity (deficit) |
|
| ( | ) |
|
| ( | ) |
Total liabilities and equity |
| $ |
|
| $ |
| ||
See accompanying notes to consolidated financial statements.
| F-2 |
| Table of Contents |
LEAFBUYER TECHNOLOGIES, INC.
Consolidated Statements of Operations
|
| Years Ended June 30, |
| |||||
|
| 2024 |
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| 2023 |
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Revenue |
| $ |
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| $ |
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Cost of revenue |
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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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Total operating expenses |
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Loss from operations |
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| ( | ) |
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| ( | ) |
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Other income (expense): |
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Interest expense |
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| ( | ) |
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| ( | ) |
Other Income |
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Other income / (expense) |
|
| ( | ) |
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| ( | ) |
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Net (loss) income |
| $ | ( | ) |
| $ | ( | ) |
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Earnings (loss) per common share: |
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Basic |
| $ |
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| $ |
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Weighted average common shares outstanding: |
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Basic |
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See accompanying notes to consolidated financial statements.
| F-3 |
| Table of Contents |
LEAFBUYER TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows
|
| Years Ended June 30, |
| |||||
|
| 2024 |
|
| 2023 |
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Cash flows from operating activities: |
|
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Net (loss) income |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net (loss) income to net cash used in operating activities |
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Stock based compensation |
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Stock issued for services |
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Depreciation/amortization expense |
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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 and accrued liabilities |
|
| ( | ) |
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| ( | ) |
Accrued liabilities |
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| ( | ) |
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| ( | ) |
Deferred revenue |
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| ( | ) | |
Net cash from (used) in operating activities |
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Cash flows from financing activities: |
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Net borrowings from notes payable to related parties |
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| ( | ) | |
Repayments on notes payable |
|
| ( | ) |
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Repayments on note payable to bank under EIDL loan |
|
| ( | ) |
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| ( | ) |
Repayments on convertible notes payable |
|
| ( | ) |
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| ( | ) |
Net cash (used) provided by financing activities |
|
| ( | ) |
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| ( | ) |
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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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| $ |
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SUPPLEMENTAL CASH FLOW INFORMATION: |
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Cash paid for interest |
| $ |
|
| $ |
| ||
Cash paid for taxes |
| $ |
|
| $ |
| ||
See accompanying notes to consolidated financial statements.
| F-4 |
| Table of Contents |
LEAFBUYER TECHNOLOGIES, INC.
Consolidated Statements of Equity
|
| Preferred Stock A |
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| Preferred Stock B |
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| Common Stock |
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| ||||||||||||||||||
|
| # of Shares |
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| Amount |
|
| # of Shares |
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| Amount |
|
| # of Shares |
|
| Amount |
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| APIC |
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| Acc Deficit |
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| Total |
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Balance, June 30, 2022 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) | |||||||
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Stock based compensation for employees |
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| - |
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| - |
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Issuance of Common Stock for employee Compensation |
|
| - |
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Issuance of common stock for services |
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| - |
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| - |
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Issuance of common stock to reduce debt |
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Net Income |
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| - |
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| - |
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| - |
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| ( | ) |
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| ( | ) | ||||
Balance. June 30, 2023 |
|
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | )) | |||||||
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Stock based compensation for employees |
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| - |
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| - |
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Issuance of common stock for employee Compensation |
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| - |
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Issuance of common stock for services |
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| - |
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| - |
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Net loss |
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| - |
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| - |
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| - |
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| ( | ) |
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| ( | ) | ||||
Balance, June 30, 2024 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) | |||||||
See accompanying notes to consolidated financial statements.
| F-5 |
| Table of Contents |
LEAFBUYER TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
Note 1 — Description of Business
Description of Business
Leafbuyer Technologies, Inc. (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.
The Company 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
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions. Furthermore, when testing assets for impairment in future periods, if management uses different assumptions or if different conditions occur, impairment charges may result.
| F-6 |
| Table of Contents |
Going Concern
As of June 30, 2024, 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.
Note 2 — Summary of Significant Accounting Policies
Principles of Consolidation
The 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.
Use of Estimates
Management uses estimates and assumptions in preparing these 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 fixed assets 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.
| F-7 |
| Table of Contents |
Accounts Receivable, Net
Accounts Receivable from services are short-term nature of the Company’s receivables, where payment terms are typically 30 days. Receivables more than 90 days past due are considered delinquent. Delinquent receivables are evaluated and may be written off based on individual credit evaluation and specific circumstances of the customer.
The Company’s allowance for credit losses considers historical experience, the age of certain receivable balances, credit history, current economic conditions and other factors that may affect the counterparty’s ability to pay. At each balance sheet date, all potentially uncollectable accounts are assessed individually for the purpose of determining the appropriate provision for doubtful accounts. Management has elected to use a credit risk-based, pool-level segmentation framework to calculate the expected loss rate. Management evaluates its experience with historical losses and then applies the historical loss ratio or its determination of risk pools may be adjusted for changes in customer, economic, market, or other circumstances. The Company may also establish an allowance for credit losses for specific receivables when it is probable that the receivable will not be collected, and the loss can be reasonably estimated. Amounts are written off against the allowance when they are considered to be collectible, and reversals of previously reserved amounts are recognized if a specifically reserved item is settled for an amount exceeding the previous estimate. Balances that are still outstanding after management has made reasonable collection efforts are written off through a charge to the valuation allowance and a credit to contract receivables. The Company’s allowance for doubtful accounts was $
Intangible Assets
Intangible Assets - Capitalized Product Development Costs
Accounting Standards Codification (“ASC”) Topic 350, “Intangibles - Goodwill and Other” includes software that is part of a product or process to be sold to a customer and shall be accounted for under Subtopic 985-20. Our products contain embedded software internally developed by FTI, which is an integral part of these products because it allows the various components of the products to communicate with each other and the products are clearly unable to function without this coding.
The costs of product development that are capitalized once technological feasibility is determined (noted as Technology in progress in the Intangible Assets table, in Note 2 to Notes to Consolidated Financial Statements) include certifications, licenses, payroll, employee benefits, and other headcount-related expenses associated with product development. We determine that technological feasibility for our products is reached after all high-risk development issues have been resolved. Once the products are available for general release to our customers, we cease capitalizing the product development costs and any additional costs, if any, are expensed. The capitalized product development costs are amortized on a product-by-product basis using the straight-line amortization. The amortization begins when the products are available for general release to our customers.
As of June 30, 2024, and 2023, capitalized product development costs in progress were $
Impairment Assessment of Long-Lived Assets
The Company reviews identified intangible assets and long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset is less than its carrying amount, the asset is considered to be impaired. Impairment losses are measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the asset. As of June 30, 2024 and 2023, there were no impairments of long-lived assets.
| F-8 |
| Table of Contents |
Convertible Debt and Securities
The Company follows beneficial conversion feature guidance in ASC 470-20, which applies to convertible stock as well as convertible debt. A beneficial conversion feature is defined as a nondetachable conversion feature that is in the money at the commitment date. The beneficial conversion feature guidance requires recognition of the conversion option's in-the-money portion, the intrinsic value of the option, in equity, with an offsetting reduction to the carrying amount of the instrument. The resulting discount is amortized as interest over the life of the instrument, if a stated maturity date exists, or to the earliest conversion date, if there is no stated maturity date. If the earliest conversion date is immediately upon issuance, the expense must be recognized at inception. When there is a subsequent change to the conversion ratio based on a future occurrence, the new conversion price may trigger the recognition of an additional beneficial conversion feature on occurrence.
Segment Reporting
Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” requires public companies to report financial and descriptive information about their reportable operating segments. The Company identifies its operating segments based on how our chief operating decision maker internally evaluates separate financial information, business activities and management responsibilities. Accordingly, the company has one reportable segment, consisting of providing a comprehensive marketing technology platform.
Stock-Based Compensation
The Company accounts for stock-based awards to employees in accordance with applicable accounting principles, which requires compensation expense related to share-based transactions, including employee stock options, to be measured and recognized in the financial statements based on a determination of the fair value of the stock options. The grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model. For all employee stock options, we recognize expense over the requisite service period on an accelerated basis over the employee’s requisite service period (generally the vesting period of the equity grant). The Company’s option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense.
Options awarded to purchase shares of common stock issued to non-employees in exchange for services are accounted for as variable awards in accordance with the same principles as awards to employees. Such options are valued using the Black-Scholes option pricing model.
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 years ended June 30, 2024 and June 30, 2023.
| F-9 |
| Table of Contents |
Leases
The Company accounts for leases in accordance with ASC 842, Leases (“ASC 842”). At the inception or modification of a contract, the Company determines whether a lease exists and classifies its leases as an operating or finance lease at commencement. Right-of-use ("ROU") assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent their obligation to make lease payments arising from the lease.
Leases with an initial expected term of 12 months or less are not recorded in the Company's balance sheets and the related lease expense is recognized on a straight-line basis over the lease term. For certain classes of underlying assets, the Company has elected to not separate fixed lease components from the fixed non-lease components.
The Company did not have any long-term leases that require lease accounting under ASC 842, Leases as of June 30, 2024 and 2023.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
ASC Topic 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. There are no material uncertain tax positions at June 30, 2024, other than as disclosed in Note 6.
On December 22, 2017, the U.S. government enacted the Tax Act, which made significant changes to the Internal Revenue Code of 1986, as amended, including, but not limited to, reducing the U.S. corporate statutory tax rate and the net operating loss incurred after December 31, 2017 can be carried forward indefinitely and the two year net operating loss carried back was eliminated (prohibited).
| F-10 |
| Table of Contents |
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification, or ASC, 606, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation.
The Company recognizes revenue from each customer contract to provide access to the technology platform for a certain period of time (typically monthly) on dates determined by the customer per order requests received by the Company.
Deferred Revenue represents an obligation to provide access to our technology platform to a customer for consideration we have already received from the customer but not yet earned by the Company.
Deferred Revenue as of June 30, 2023 |
| $ |
| |
Revenue earned |
|
| ||
Customer payments received |
|
| ||
Deferred Revenue as of June 30, 2024 |
| $ |
|
Costs of Revenue
Costs of revenue primarily consists of the costs associated with the operation of the Company’s platform, such as third party fees paid for texting services, server and hosting charges, technology support costs, amortization, maintenance costs, staff costs and other expenses directly attributable to the online marketplace services.
Fair Value Measurements
The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures,” which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value, and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, including cash and cash equivalents, and debt are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 — quoted prices in active markets for identical assets or liabilities
Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
The Company has a derivative liability valued at fair value on a recurring basis.
Preferred Stock and Derivative Liability
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.
Accounting Pronouncements – Current Adoption
In June 2016, the FASB issued Accounting Standards Update (“ASU”), Financial Instruments—Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), 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. As of January 1, 2023, the Company adopted ASU 2016-13. AU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. The adoption of this standard did not result in any material adjustment to the Company’s financial statements.
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 is effective for public business entities that are SEC filers in fiscal years beginning after December 15, 2023, including interim periods within those fiscal years The adoption of this standard did not result in any material adjustment to the Company’s financial statements.
Recently Issued Accounting Pronouncements
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 financial statements.
| F-11 |
| Table of Contents |
Note 3 — Intangible Assets
Intangible assets consisted of the following:
|
| June 30, 2024 |
|
| June 30, 2023 |
| ||
|
|
|
|
|
|
| ||
Software platform |
| $ |
|
| $ |
| ||
Less accumulated amortization |
|
| ( | ) |
|
| ( | ) |
Total intangible assets, net |
| $ |
|
| $ |
| ||
Amortization expense, recorded as cost of revenue, related to internal use software totaled $
Amortization expenses for the future years are as follows:
Year ended June 30, 2024 |
| Amount |
| |
2025 |
| $ |
| |
2026 |
|
|
| |
Total Unamortized Expense |
| $ |
| |
Note 4 — Capital Stock and Equity Transactions
The Company has
In addition, the Company has
The
Issuance of Common Stock
During the year ended June 30, 2024, the Company issued
During the year ended June 30, 2024, the Company issued
During the year ended June 30, 2023, the Company issued
During the year ended June 30, 2023, the Company issued
| F-12 |
| Table of Contents |
Note 5 — Notes Payable to Related Parties
Notes payable to related parties consisted of the following:
|
| June 30, 2024 |
|
| June 30, 2023 |
| ||
March 2020 – Total loan of $600,000 with interest rate at 12% per annum due in December 2020, currently due upon demand. |
| $ |
|
| $ |
| ||
April 2020 – Total loan of $50,000 with interest rate at 12% per annum due in January 2021, currently due upon demand. |
|
|
|
|
|
| ||
March 2024 – Total loan of $65,000 with interest rate at 12% per annum due in May 2024. |
|
|
|
|
|
| ||
Total notes payable to related parties |
|
|
|
|
|
| ||
Less current portion of notes payable to related parties |
|
| ( | ) |
|
| ( | ) |
Notes payable to related parties, less current portion |
| $ |
|
| $ |
| ||
| · | March 2020 - $600,000 |
|
|
|
|
| During the year ended June 30, 2020, the Company entered into a promissory note with a related party with a face value of $ |
|
|
|
| · | April 2020 - $50,000 |
|
|
|
|
| During the year ended June 30, 2020, the Company entered into a promissory note with a related party with a face value of $
|
| · | March 2024 - $65,000 |
|
|
|
|
| During the quarter ended March 31, 2024, the Company entered into two promissory notes with related parties with a total value of $ |
Total interest expense on notes payable to related parties was $
| F-13 |
| Table of Contents |
Note 6 — Notes Payable
Notes payable consisted of the following:
|
| June 30, 2024 |
|
| June 30, 2023 |
| ||
November and December 2017 – Total loan of $350,000 with no interest rate with maturity date of November and December 2018, currently the note is due upon demand. |
| $ |
|
| $ |
| ||
February 2018 – Total loan of $150,000 with interest rate at 12% per annum with maturity date of August 2018, currently the note is due upon demand. |
|
|
|
|
|
| ||
Total notes payable |
|
|
|
|
|
| ||
Less current portion of notes payable |
|
| ( | ) |
|
| ( | ) |
Notes payable, less current portion |
| $ |
|
| $ |
| ||
| · | November and December 2017 - $350,000 |
|
|
|
|
| During the year ended June 30, 2018, the Company entered two promissory notes with an investor of the Company in the total amount of $ |
|
|
|
| · | February 2018 - $150,000 |
|
|
|
|
| During the year ended June 30, 2018, the Company issued a promissory note with an investor of the Company in the amount of $ |
Total interest expense on notes payable was $
Note 7 — Notes Payable to Bank – EIDL Loan
Notes payable to bank – EIDL loan consisted of the following:
|
| June 30, 2024 |
|
| June 30, 2023 |
| ||
3.75% SBA EIDL Note Payable |
|
|
|
|
|
| ||
Less current portion of notes payable to bank – EIDL loan |
|
|
|
|
|
| ||
Notes payable to bank – EIDL loan, less current portion |
| $ |
|
| $ |
| ||
During the year ended June 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 $
Total interest expense on notes payable to bank was $
| F-14 |
| Table of Contents |
Note 8 — Convertible Notes Payable
Convertible notes payable consisted of the following:
|
| June 30, 2024 |
|
| June 30, 2023 |
| ||
September 2018 – Convertible note of $440,000 with interest rate at 10% per annum with maturity date of September 2019. |
|
|
|
|
|
| ||
September 2018 – Convertible note of $220,000 with interest rate at 10% per annum with maturity date of September 2019. |
|
|
|
|
|
| ||
March 2019 – Convertible note of $640,000 with interest rate at 7% per annum with maturity date of September 2020. |
|
|
|
|
|
| ||
Total notes payable |
|
|
|
|
|
| ||
Less current portion of notes payable |
|
| ( | ) |
|
| ( | ) |
Notes payable, less current portion |
| $ |
|
| $ |
| ||
| · | September 2018 - $440,000 | |
|
|
| |
|
| On September 21, 2018, the Company entered into a convertible note with an investor of the Company with a face value of $
The key term of this convertible note is as follows: | |
|
|
| |
|
|
|
|
|
| o | |
|
| o | The principal and interest of the note is convertible into the Company’s common stock at a purchase price of $ |
|
| o | If the Company defaults on this note, the interest is increased to |
|
| o | The Company issued five-year warrants to purchase up to |
|
|
| |
|
| As of June 30, 2024 and 2023, the total unpaid and accrued interest was $ | |
|
|
| |
| · | September 2018 - $220,000 | |
|
|
During the year ended June 30, 2019, the Company entered a convertible note with an investor of the Company with a face value of $ | |
|
|
| |
| · | March 2019 - $640,000 | |
|
|
During the year ended June 30, 2019, the Company entered into two promissory notes with an investor of the Company with a face value of $ | |
Total interest expense on convertible notes payable was $
| F-15 |
| Table of Contents |
Note 9 – Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires the use of the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets are also recognized for net operating losses (NOLs) and tax credit carryforwards.
Provision for Income Taxes
The components of the provision for income taxes are as follows:
|
| Years Ended |
| |||||
|
| June 30, 2024 |
|
| June 30, 2023 |
| ||
Current |
|
|
|
|
|
| ||
Federal |
|
|
|
|
|
| ||
State |
|
|
|
|
|
| ||
Total current |
| $ |
|
| $ |
| ||
Deferred |
|
|
|
|
|
|
|
|
Federal |
|
|
|
|
|
| ||
State |
|
|
|
|
|
| ||
Total deferred |
| $ |
|
| $ |
| ||
Total |
| $ |
|
| $ |
| ||
Deferred Tax Assets and Liabilities
Significant components of the Company’s deferred tax assets and liabilities as of June 30, 2024, and June 30, 2023 are as follows:
|
| Period Ended |
| |||||
|
| June 30, 2024 |
|
| June 30, 2023 |
| ||
Deferred tax assets: |
|
|
|
|
|
| ||
Net operating loss carryforwards |
| $ |
|
| $ |
| ||
Other temporary differences |
|
|
|
|
|
| ||
Total deferred tax assets |
|
|
|
|
|
| ||
Change in valuation allowance |
|
| ( | ) |
|
| ( | ) |
Effective income tax rate |
| $ |
|
| $ |
| ||
Valuation Allowance
The Company has established a full valuation allowance against its net deferred tax assets as of June 30, 2024, and June 30, 2023. The valuation allowance was recorded because it is more likely than not that the Company will not realize its deferred tax assets, primarily due to cumulative losses incurred in recent years.
Unrecognized Tax Benefits
The Company has no unrecognized tax benefits as of June 30, 2024, and June 30, 2023.
The Company files income tax returns in the U.S. federal jurisdiction and is subject to income tax examinations by federal tax authorities for tax years ended 2019 and later. The Company currently is not under examination by any tax authority. The Company’s policy is to record interest and penalties on uncertain tax positions as income tax expense.
| F-16 |
| Table of Contents |
Note 10 — Commitments and Contingencies
The Company records tax contingencies when the exposure item becomes probable and reasonably estimable. As of June 30, 2024, 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 11 — 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 legal cannabis states.
Note 12 — Stock Based Compensation and Payments
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 $
|
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
|
| ||
Expected option life (years) |
|
|
|
| ||||
Expected stock price volatility |
| % |
| % | ||||
Expected dividend yield |
|
| - |
|
|
| — |
|
Risk-free interest rate |
| % |
| % | ||||
| F-17 |
| Table of Contents |
A summary of option activity under the employee share option plan as of June 30, 2024 and 2023 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, 2023 |
|
|
|
| $ |
|
|
|
|
|
|
| ||||
Granted |
|
|
|
| $ |
|
|
|
|
|
|
| ||||
Exercised, converted |
|
| ( | ) |
| $ |
|
|
|
|
|
|
| |||
Forfeited / exchanged / modification |
|
| - |
|
|
| - |
|
|
|
|
|
|
| ||
Outstanding at July 1, 2023 |
|
|
|
| $ |
|
|
|
|
|
|
| ||||
Granted |
|
| - |
|
| $ |
|
|
|
|
|
|
| |||
Exercised, converted |
|
| - |
|
| $ |
|
|
|
|
|
|
| |||
Forfeited / exchanged / modification |
|
| ( | ) |
| $ |
|
|
|
|
|
|
| |||
Outstanding at June 30, 2024 |
|
|
|
| $ |
|
|
|
|
| $ | - |
| |||
Exercisable at June 30, 2024 |
|
|
|
| $ |
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of options available for grant at end of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
A summary of the status of the Company’s nonvested shares as of and for the years ended June 30, 2024 and 2023 is presented below
Options |
| Shares |
|
| Weighted-Average Grant-Date Fair Value |
| ||
Nonvested at July 1, 2023 |
|
|
|
| $ |
| ||
Granted |
|
|
|
| $ |
| ||
Vested |
|
| ( | ) |
| $ |
| |
Forfeited |
|
| - |
|
|
|
| |
Nonvested at July 1, 2023 |
|
|
|
| $ |
| ||
Granted |
|
|
|
|
| $ | - |
|
Vested |
|
| ( | ) |
| $ |
| |
Forfeited |
|
| - |
|
| $ | - |
|
Nonvested at June 30, 2024 |
|
| - |
|
| $ |
| |
Stock-based compensation expense attributable to stock options was approximately $
As of June 30, 2024 and 2023, there was approximately $
| F-18 |
| Table of Contents |
Warrants
At June 30, 2023, 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 June 30, 2023 |
| $ |
|
|
|
|
|
|
|
|
| |
At June 30, 2024, 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 - Securities Purchase Agreement |
|
|
|
|
|
|
|
|
| |||
Warrants A - Securities Purchase Agreement |
|
|
|
|
|
|
| $ |
| |||
Total |
|
|
|
|
|
|
|
|
|
|
| |
Aggregate intrinsic value at June 30, 2024 |
| $ |
|
|
|
|
|
|
|
|
| |
Note 13 — Related Party Transactions
The Company had the following related party transactions:
| · | Notes payable to related parties: |
| o | March 2020 - $600,000 |
|
|
|
|
| During the year ended June 30, 2020, the Company entered into a promissory note with the Chief Executive Officer with a face value of $ |
|
|
|
| o | April 2020 - $50,000 |
|
|
|
|
| During the year ended June 30, 2020, the Company entered into a promissory note with the Chief Technology officer for $ |
|
|
|
| o | March 2024 - $65,000 |
|
|
|
|
| During the quarter ended March 31, 2024, the Company entered into two promissory notes with the executives of the Company with a total value of $ |
Total interest expense on notes payable to related parties was $
Note 14 — Leases
On January 1, 2024 the Company extended its Denver, Colorado headquarter lease for
Note 15 — Subsequent Events
The Company evaluated all events or transactions that occurred after June 30, 2024, through November 5, 2024. The Company determined that it does not have any subsequent event requiring recording or disclosure in the financial statements for the period ended June 30, 2024.
| F-19 |
EXHIBIT 31.1
CERTIFICATION
Pursuant to Rule 13a-14(a) and 15d-14(a)
Under the Securities Exchange Act of 1934, as Amended
I, Kurt Rossner, certify that:
|
| 1. | I have reviewed this annual report on Form 10-K for the year ended June 30, 2024 of Leafbuyer Technologies, Inc.; |
|
|
|
|
|
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
|
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report; |
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| 4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
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| 5. | The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): |
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| a) | All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
| Date: November 5, 2024 | /s/ Kurt Rossner | ||
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| Kurt Rossner |
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| Chief Executive Officer and Chairman |
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| (Principal Executive Officer and Principal Financial Officer) |
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EXHIBIT 31.2
CERTIFICATION
Pursuant to Rule 13a-14(a) and 15d-14(a)
Under the Securities Exchange Act of 1934, as Amended
I, Mark Breen, certify that:
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| 1. | I have reviewed this annual report on Form 10-K for the year ended June 30, 2024 of Leafbuyer Technologies, Inc.; | |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report; | |
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| 4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
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| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
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| 5. | he registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): | |
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| a) | All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
| Date: November 5, 2024 | /s/ Mark Breen | ||
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| Mark Breen |
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| Chief Financial Officer and Director |
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| (Principal Executive Officer and Principal Financial Officer) |
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report (the “Report”) of Leafbuyer Technologies, Inc. (the “Company”) on Form 10-K for the year ended June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof, I, Kurt Rossner, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
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| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: November 5, 2024 | /s/ Kurt Rossner | ||
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| Kurt Rossner |
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| Chief Executive Officer and Chairman |
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| (Principal Executive Officer and Principal Financial Officer) |
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EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report (the “Report”) of Leafbuyer Technologies, Inc. (the “Company”) on Form 10-K for the year ended June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof, I, Mark Breen, Chief Financial Officer and Director of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
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| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: November 5, 2024 | /s/ Mark Breen | ||
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| Mark Breen |
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| Chief Financial Officer and Director |
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| (Principal Executive Officer and Principal Financial Officer) |
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