UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2019~~2020

¨ ☐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: 333-206745

LEAFBUYER TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

Nevada		38-3944821
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6888 S. Clinton Street, Suite 300, Greenwood Village, CO 80112

(Address of principal executive offices, including zip code)

(720)-235-0099

(Registrant’s telephone number, including area code)

_____________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Exchange Act:~~None~~

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~~

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. Yes x ☒ No ¨☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x ☒ No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of ~~"large~~“large accelerated filer,~~" "accelerated~~” “accelerated filer,~~" "smaller~~” “smaller reporting company,"” and ~~"emerging~~“emerging growth ~~company"~~company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨☐	Accelerated filer	¨☐
Non-accelerated filer	x☒	Smaller reporting company	x☒
~~(Do not check if a smaller reporting company)~~		Emerging growth company	x☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ¨☐ YES x☒ NO

APPLICABLE ONLY TO ~~ISSUERS INVOLVED IN BANKRUPTCY~~

~~PROCEEDINGS DURING THE PRECEDING FIVE YEARS~~

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.. ¨ ~~YES~~ ¨ NO

~~Securities registered pursuant to Section 12(b) of the Act: None~~

~~Title of each class~~		~~Trading~~		~~Name of each exchange on~~ ~~which registered Symbol(s)~~
~~None~~		~~None~~		~~None~~

~~APPLICABLE ONLY TO~~ CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the ~~issuer's~~issuer’s classes of common stock, as of the latest practicable date.

As of May ~~9, 2019,~~14, 2020, the Registrant had ~~47,749,427~~81,495,022 shares of common stock outstanding.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.	Interim Condensed Consolidated Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1920
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2325
Item 4.	Controls and Procedures	2325

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	27

SIGNATURES		28

Table of Contents

PART 1I – FINANCIAL INFORMATION

Item 1. Interim Condensed Consolidated Financial Statements

~~Item 1.~~ ~~Interim Condensed Consolidated Financial Statements~~

The unaudited interim condensed consolidated financial statements of Leafbuyer Technologies, Inc. (“we”, “our”, “us”, the “Company”) follow. All currency references in this report are to US dollars unless otherwise noted.

PART I. Financial Information

Item 1. Financial Statements

~~Item 1.~~~~Financial Statements~~

LEAFBUYER TECHNOLOGIES INC.
CONDENSED CONSOLDIATED BALANCE SHEETS

	March 31, 2020			June 30, 2019
	(Unaudited)			(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	642,656		$	181,647
Accounts receivable (net of allowance for doubtful accounts of $7,452 and $53,815, respectively)		29,942			68,821
Inventory		622			1,230
Prepaid expenses and other current assets		137,520			129,323
Total current assets		810,740			381,021
Noncurrent assets:
Fixed assets (net of accumulated depreciation and amortization of $902,744 and $389,257, respectively)		3,512,713			3,534,174
Right of use assets		290,220			-
Total assets	$	4,613,673		$	3,915,195

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	464,651		$	290,032
Accrued liabilities		358,197			530,968
Deferred revenue		155,956			275,624
Current lease obligation		74,618			-
Debt, current		1,970,807			2,182,247
Total current liabilities		3,024,229			3,278,871

Lease obligation		217,838			-

Total liabilities		3,242,067			3,278,871

Commitments and contingencies (Note 6)		-			-

Equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 3,000,000 and 3,000,000 shares issued and outstanding for class A convertible preferred stock and 1,120,000 and 1,120,000 shares issued and outstanding for class B convertible preferred stock at March 31, 2020 and June 30, 2019, respectively		4,120			4,120
Common stock, $0.001 par value; 150,000,000 shares authorized; 81,257,802 shares issued and outstanding at March 31, 2020 and 47,914,967 shares issued and outstanding at June 30, 2019		81,258			47,915
Additional paid in capital		16,186,537			11,076,165
Accumulated deficit		(14,900,309	)		(10,491,876	)
Total equity		1,371,606			636,324
Total liabilities and equity	$	4,613,673		$	3,915,195

~~LEAFBUYER TECHNOLOGIES INC.~~

~~UNAUDITED INTERIM CONDENSED CONSOLDIATED BALANCE SHEETS~~

March 31,
2019

June 30,
2018

ASSETS

Current assets:

Cash and cash equivalents

$ 563,383

$ 375,938

Accounts receivable, net (allowance for doubtful accounts was $53,815 at March 31, 2019 and $6,617 at June 30, 2018)

58,318

8,279

Inventory

3,530

3,530

Prepaid expenses and other current assets

147,721

172,566

Total current assets

772,952

560,313

Noncurrent assets:

Intangible assets, net

3,215,250

-

Fixed assets, net

495

873

Total noncurrent assets

3,215,745

873

Total assets

$ 3,988,697

$ 561,186

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$ 194,498

$ 290,783

Accrued liabilities

459,086

66,087

Deferred revenue

221,715

156,530

Debt, current

1,640,197

805,684

Total current liabilities

2,515,496

1,319,084

    Debt, long-term

110,145

-

Total liabilities

2,625,641

1,319,084

    Commitments and contingencies (Note 7)

-

-

Equity:

Preferred stock, $0.001 par value; 10,000,000 shares authorized; 6,750,000 shares issued and outstanding for class A convertible preferred stock and 70,000 shares issued and outstanding for class B convertible preferred stock at March 31, 2019 and June 30, 2018, respectively

6,820

6,820

Common stock, $0.001 par value; 150,000,000 shares authorized; 47,147,804 shares issued and outstanding at March 31, 2019 and 42,661,228 shares issued and outstanding at June 30, 2018

47,148

42,661

Additional paid in capital

10,064,214

3,130,831

Accumulated deficit

(8,755,126 )

(3,938,210 )
Total equity (deficit)

1,363,056

(757,898 )
    Total liabilities and equity

$ 3,988,697

$ 561,186

See accompanying notes to condensed consolidated financial statements.

Table of Contents

LEAFBUYER TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	Three Months Ended March 31,						Nine Months Ended March 31,
	2020			2019			2020			2019

Sales revenue	$	575,002		$	489,320		$	1,870,518		$	1,296,550
Cost of sales		-			-			-			-
Gross profit		575,002			489,320			1,870,518			1,296,550

Operating expenses:
Selling expenses		155,414			70,025			714,585			200,300
General and administrative		508,461			1,408,470			1,935,319			2,935,797
Personnel expenses		735,280			539,325			2,240,246			1,425,735
Stock based compensation expense		105,115			-			712,326			1,195,369
Total operating expenses		1,504,270			2,017,820			5,602,476			5,757,201

Loss from operations		(929,268	)		(1,528,500	)		(3,731,958	)		(4,460,651	)

Other income (expense):
Interest expense		(106,783	)		(181,643	)		(676,475	)		(356,265	)
Other income		-			-			-			-
Other income (expense), net		(106,783	)		(181,643	)		(676,475	)		(356,265	)

Net loss	$	(1,036,051	)	$	(1,710,143	)	$	(4,408,433	)	$	(4,816,916	)

Net loss per common share:
Basic and diluted	$	(0.01	)	$	(0.04	)	$	(0.06	)	$	(0.10	)

Weighted average common shares outstanding:
Basic and diluted		81,257,802			45,418,004			75,146,637			48,337,990

~~LEAFBUYER TECHNOLOGIES INC.~~

~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~

Three Months Ended
March 31,

Nine Months Ended
March 31,

2019

2018

2019

2018

    Sales revenue

$ 489,320

$ 287,224

$ 1,296,550

$ 785,969

    Cost of sales

-

-

-

-

    Gross profit

489,320

287,224

1,296,550

785,969

    Operating expenses:

Selling expenses

70,025

53,966

200,300

138,821

General and administrative

1,947,795

1,060,829

5,556,901

1,945,141

    Total operating expenses

2,017,820

1,114,795

5,757,201

2,083,962

Loss from operations

(1,528,500 )

(827,571 )

(4,460,651 )

(1,297,993 )

    Other income (expense):

    Interest expense

(181,643 )

(12,919 )

(356,265 )

(12,948 )
    Other income

-

-

-

-

    Other income (expense), net

(181,643 )

(12,919 )

(356,265 )

(12,948 )

    Income tax expense

-

-

-

-

    Net loss

$ (1,710,143 )

$ (840,490 )

$ (4,816,916 )

$ (1,310,941 )

    Net loss per common share:

    Basic and diluted

$ (0.04 )

$ (0.02 )

$ (0.10 )

$ (0.03 )

    Weighted average common shares outstanding:

    Basic and diluted

45,418,004

40,418,163

48,337,990

39,197,367

See accompanying notes to condensed consolidated financial statements

4
Table of Contents

LEAFBUYER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

	Preferred Stock				Common Stock
	# of Shares		Amount		# of Shares		Amount		APIC		Acc Deficit			Total
Balance, June 30, 2019		4,120,000	$	4,120		47,914,967	$	47,915	$	11,076,165	$	(10,491,876	)	$	636,324

Stock based compensation		-		-		-		-		605,709		-			605,709

Issuance of common stock for cash		-		-		30,299,998		30,300		4,007,588		-			4,037,888

Issuance of common stock in settlement of acquisition		-		-		366,667		367		262,133		-			262,500

Net loss for the three months ended September 30, 2019		-		-		-		-		-		(2,102,542	)		(2,102,542	)

Balance, September 30, 2019		4,120,000	$	4,120		78,581,632	$	78,582	$	15,951,595	$	(12,594,418	)	$	3,439,879

Stock based compensation		-		-		-		-		1,502		-			1,502

Net loss		-		-		-		-		-		(1,269,840	)		(1,269,840	)

Balance, December 31, 2019		4,120,000	$	4,120		78,581,632	$	78,582	$	15,953,097	$	(13,864,258	)	$	2,171,541

Stock based compensation						860,950		861		104,255					105,116

Issuance of common stock for conversion of debt						1,815,220		1,815		129,185					131,000

Net Loss for 3 months ended March 31 2020												(1,036,051	)		(1,036,051	)

March 31, 2020		4,120,000	$	4,120		81,257,802	$	81,258	$	16,186,537	$	(14,900,309	)	$	1,371,606

~~LEAFBUYER TECHNOLOGIES, INC.~~

~~CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY~~

Preferred Stock

Common Stock

Accumulated

# of Shares

Amount

# of Shares

Amount

APIC

Deficit

Total

2019

Balance, June 30, 2018

6,820,000

$ 6,820

42,661,228

$ 42,661

$ 3,130,831

$ (3,938,210 )

$ (757,898 )

Issuance of common stock for exercise of options

-

-

86,000

86

21,414

-

21,500

Issuance of common stock in conversion of notes payable and accrued interest

-

-

123,324

123

119,800

-

119,923

Stock based compensation

-

-

-

-

598,076

-

598,076

Issuance of warrant in connection with convertible notes payable

-

-

-

-

85,724

-

85,724

Net loss for the three month's ended September 30, 2018

-

-

-

-

-

(1,428,903 )

(1,428,903 )

Balance, September 30, 2018

6,820,000

$ 6,820

42,870,552

$ 42,870

$ 3,955,845

$ (5,367,113 )

$ (1,361,578 )

Issuance of common stock for cash

-

-

1,116,738

1,117

1,043,883

-

1,045,000

Issuance of common stock for services

-

-

60,000

60

39,540

-

39,600

Issuance of common stock for exercise of options

-

-

92,947

93

23,144

-

23,237

Issuance of common stock for acquisition

-

-

2,666,667

2,667

2,557,333

-

2,560,000

Issuance of warrant in connection with convertible notes payable

-

-

-

-

171,447

-

171,447

Stock based compensation

-

-

-

-

597,293

-

597,293

Net loss for the three month's ended December 31, 2018

-

-

-

-

-

(1,677,870 )

(1,677,870 )

Balance, December 31, 2018

6,820,000

$ 6,820

46,806,904

$ 46,807

$ 8,388,485

$ (7,044,983 )

$ 1,397,129

Issuance of common stock for exercise of options

-

-

88,900

89

22,136

-

22,225

Issuance of common stock for services

-

-

2,000

2

958

-

960

Stock based compensation

-

-

-

-

573,507

-

573,507

Issuance of common stock for acquisition

-

-

250,000

250

239,750

-

240,000

Beneficial Conversion Feature of Notes Payable

-

-

-

-

839,378

-

839,378

Net loss for the three month's ended March 31, 2019

-

-

-

-

-

(1,710,143 )

(1,710,143 )

Balance, March 31, 2019

6,820,000

$ 6,820

47,147,804

$ 47,148

$ 10,064,214

$ (8,755,126 )

$ 1,363,056

	Preferred Stock				Common Stock
	# of Shares		Amount		# of Shares		Amount		APIC		Acc Deficit			Total
Balance, June 30, 2018		6,820,000	$	6,820		42,661,228	$	42,661	$	3,130,831	$	(3,938,210	)	$	(757,898	)

Issuance of common stock for exercise of options		-		-		86,000		86		21,414		-			21,500

Issuance of common stock in conversion of notes payable and accrued interest		-		-		123,324		123		119,800		-			119,923

Stock based compensation		-		-		-		-		598,076		-			598,076

Issuance of warrant in connection with convertible notes payable		-		-		-		-		85,724		-			85,724

Net loss for the three months ended September 30, 2018		-		-		-		-		-		(1,428,903	)		(1,428,903	)

Balance, September 30, 2018		6,820,000	$	6,820		42,870,552	$	42,870	$	3,955,845	$	(5,367,113	)	$	(1,361,578	)

Issuance of common stock for cash		-		-		1,116,738		1,117		1,043,883		-			1,045,000

Issuance of common stock for services		-		-		60,000		60		39,540		-			39,600

Issuance of common stock for exercise of options		-		-		92,947		93		23,144		-			23,237

Issuance of common stock for acquisition		-		-		2,666,667		2,667		2,557,333		-			2,560,000

Issuance of warrant in connection with convertible notes payable		-		-		-		-		171,447		-			171,447

Stock based compensation		-		-		-		-		597,293		-			597,293

Net loss for the three months ended December 31, 2018		-		-		-		-		-		(1,677,870	)		(1,677,870	)

Balance, December 31, 2018		6,820,000	$	6,820		46,806,904	$	46,807	$	8,388,485	$	(7,044,983	)	$	1,397,129

Issuance of common stock for exercise of options		-		-		88,900		89		22,136		-			22,225

Issuance of common stock for services		-		-		2,000		2		958		-			960

Stock based compensation		-		-		-		-		573,507		-			573,507

Issuance of common stock for acquisition		-		-		250,000		250		239,750		-			240,000

Beneficial Conversion Feature of Notes Payable		-		-		-		-		779,378		-			779,378

Original Issue Discount of Notes Payable		-		-		-		-		60,000		-			60,000

Net loss for the three months ended March 31, 2019		-		-		-		-		-		(1,710,143	)		(1,710,143	)

Balance, March 31, 2019		6,820,000	$	6,820		44,747,804	$	47,148	$	10,064,214	$	(8,755,126	)	$	1,363,056

~~See accompanying notes to condensed consolidated financial statements.~~

Preferred Stock

Common Stock

# of Shares

Amount

# of Shares

Amount

APIC

Deficit

Total

2018

Balance, June 30, 2017

7,000,000

$ 7,000

38,000,663

$ 38,000

$ 1,010,000

$ (958,535 )

$ 96,465

Issuance of common stock for cash

-

-

380,000

380

(380 )

-

-

Stock based compensation

-

-

-

-

120,000

-

120,000

Net loss for the three month's ended September 30, 2017

-

-

-

-

-

(229,814 )

(229,814 )

Balance, September 30, 2017

7,000,000

$ 7,000

38,380,663

$ 38,380

$ 1,129,620

$ (1,188,349 )

$ (13,349 )

Net loss for the three month's ended December 31, 2017

-

-

-

-

-

(240,636 )

(240,636 )

Balance, December 31, 2017

7,000,000

$ 7,000

38,380,663

$ 38,380

$ 1,129,620

$ (1,428,985 )

$ (253,985 )

Issuance of common stock for cash

-

-

240,000

240

119,760

-

120,000

Issuance of common stock for exercise of options

-

-

8,000

8

1,992

-

2,000

Stock based compensation

-

-

-

-

119,133

-

119,133

Issuance of common stock in conversion of preferred stock

(90,000 )

(90 )

1,440,000

1,440

(1,350 )

-

-

Issuance of common stock for services

137,000

137

280,713

-

280,850

Net loss for the three month's ended March 31, 2018

-

-

-

-

-

(840,490 )

(840,490 )

Balance, March 31, 2018

6,910,000

$ 6,910

40,205,663

$ 40,205

$ 1,649,868

$ (2,269,475 )

$ (572,492 )

See accompanying notes to condensed consolidated financial statements.

65
Table of Contents

LEAFBUYER TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)

	Nine Months Ended March 31,
	2020			2019
Cash flows from operating activities:
Net loss	$	(4,408,433	)	$	(4,816,916	)
Adjustments to reconcile net income to net cash used in operating activities:
Stock based compensation		712,327			1,768,876
Provision of bad debt expenses		-			40,560
Amortization of note payable discount		206,459			281,130
Depreciation and amortization		514,360			234,369
Changes in assets and liabilities:
Accounts receivable		38,879			(50,039	)
Inventory		608			-
Prepaid expenses and other		(8,197	)		24,845
Other Assets		11,864			-
Accounts payable		174,619			(96,285	)
Accrued liabilities		(39,567	)		258,184
Net cash used in operating activities		(2,797,081	)		(2,355,276	)

Cash flows from investing activities:
Capitalized software		(492,899	)		(449,241	)
Net cash used in investing activities		(492,899	)		(449,241	)

Cash flows from financing activities:
Proceeds from issuance of stock		4,037,888			1,111,962
Proceeds from issuance of debts		-			2,100,000
Repayment of debt		(286,899	)		(220,000	)
Net cash provided by financing activities		3,750,989			2,991,962

Net change in cash and cash equivalents		461,009			187,445
Cash and cash equivalents, beginning of period		181,647			375,938
Cash and cash equivalents, end of period	$	642,656		$	563,383

Cash paid for interest	$	8,619		$	-
Cash paid for taxes	$	-		$	-
Supplemental information for non-cash investing and financing activities:
Conversion of debt and interest	$	131,000		$	377,094
Software Acquisition	$	-		$	2,800,000

~~LEAFBUYER TECHNOLOGIES INC.~~

~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW~~

Nine Months Ended March 31,

2019

2018

Cash flows from operating activities:

Net loss

$ (4,816,916 )

$ (1,310,941 )
Adjustments to reconcile net income to net cash (used in)

provided by operating activities:

Stock compensation expense

1,768,876

239,133

Stock issued for services

40,560

280,850

Amortization of note payable discount

281,130

-

Depreciation and amortization expense

234,369

214

Changes in assets and liabilities:

Accounts receivable

(50,039 )

(9,538 )
Inventory

-

(3,652 )
Prepaid expenses and other

24,845

(187,547 )
Accounts payable

(96,285 )

-

Accrued liabilities

258,184

109,791

Net cash used in operating activities

(2,355,276 )

(881,690 )

Cash flows from investing activities:

Software acquisition

(449,241 )

-

Net cash provided by (used in) investing activities

(449,241 )

-

Cash flows from financing activities:

Proceeds from issuance of common stock

1,111,962

122,000

Proceeds from issuance of debt

2,100,000

790,603

Repayment of debt

(220,000 )

-

Net cash provided by financing activities

2,991,962

912,603

Net change in cash and cash equivalents

187,445

30,913

Cash and cash equivalents, beginning of period

375,938

164,680

Cash and cash equivalents, end of period

$ 563,383

$ 195,593

Cash paid for interest

$ -

$ -

Cash paid for taxes

$ -

$ -

Supplemental information for non-cash investing and financing activities:

Conversion of debt and interest plus issuance of warrants

$ 377,094

$ -

Software acquisition

$ 2,800,000

$ -

See accompanying notes to condensed consolidated financial statements.

76
Table of Contents

LEAFBUYER TECHNOLOGIES INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1 — Description of Business

Formation of the Company

On March 23, 2017, AP Event Inc. (“AP” or the “Registrant”) consummated an Agreement and Plan of Merger (the “Merger Agreement”) with LB Media Group, LLC, a Colorado limited liability Company (“LB Media”), August Petrov (the principal stockholder of AP), and LB Acquisition Corp., a Colorado corporation and a wholly-owned subsidiary of AP (“Acquisition”) whereby Acquisition was merged with and into LB Media (the “Merger”)~~. (See Note 3)~~.

As a result of the Merger, LB Media became a wholly-owned subsidiary of the Registrant, and immediately following the consummation of the Merger and giving effect to the securities sold in the Offering, the members of LB Media beneficially owned approximately fifty-five percent (55%) of the issued and outstanding Common Stock of the Registrant. The Merger Agreement contains customary representations, warranties, and covenants of the Registrant and LB Media for like transactions.

As a result of the reorganization and name change discussed later, Leafbuyer Technologies, Inc. (“Leafbuyer”) became the publicly quoted parent holding company with LB Media becoming a ~~wholly-owned~~wholly owned subsidiary of Leafbuyer. Upon consummation of the Agreement, Leafbuyer common stock was deemed to be registered under Section 12(b) of the Securities Exchange Act of 1934, as amended, pursuant to Rule 12g-3(a) promulgated thereunder. For purposes of Rule 12g-3(a), Leafbuyer is the successor issuer to AP.

AP was established under the corporation laws in the State of Nevada on October 16, 2014. On March 24, 2017, the Registrant changed its name to Leafbuyer Technologies, Inc.

All references herein to “us,” “we,” “our,” “Leafbuyer,” or the “Company” refer to Leafbuyer Technologies, Inc. and its subsidiary, LB Media.

Description of Business

~~We are focused on providing~~As a Technology Platform, Leafbuyer Technologies Inc. provides valuable information for ~~the savvy~~millions of cannabis ~~consumer looking~~consumers nationwide. Through its web-based platform, progressive web application, texting and loyalty services and now online order ahead technology, consumers are able to ~~make~~use Leafbuyer.com as a ~~purchase via deals and a dispensary database. We connect~~one stop shop while searching for their favorite products. Connecting consumers with dispensaries and product companies by working alongside businesses to ~~showcase their unique products and~~help them build a network of loyal ~~patrons.~~patrons is our number one goal. Our national network ~~of cannabis deals and information~~ reaches millions of consumers monthly.

Our business is based on a monthly subscription model that can vary depending on the products or services a customer may choose. All products are integrated to provide a seamless A to Z experience for the consumer and client alike. LB Media Group was founded in 2012 by a group of technology and industry veterans, went public in April of 2017 and ~~provides online resources for cannabis deals and specials. Our headquarters~~ is ~~located~~headquartered in Greenwood Village, Colorado.

Basis of Presentation

The accompanying condensed consolidated balance sheet as of March 31, ~~2019,~~2020, has been derived from audited financial statements. The accompanying unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements being audited and in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. In the opinion of management, such unaudited information includes all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of this interim information. All intercompany transactions have been eliminated in consolidation. Operating results and cash flows for interim periods are not necessarily indicative of results that can be expected for the entire year. The information included in this report should be read in conjunction with our audited financial statements and notes thereto.

Table of Contents

Going Concern

As shown in the accompanying condensed consolidated financial statements, we had an equity balance of ~~approximately $1,363,056~~$1,371,606 and a working capital deficit of ~~$1,742,544~~$2,213,489 as of March 31, ~~2019.~~2020. We reported a net loss of ~~$4,816,916~~$4,408,433 for the nine months ended March 31, ~~2019,~~2020, and we anticipate further losses in the development of our business. Accordingly, there is substantial doubt about our ability to continue as a going concern.

Our ability to continue as a going concern is dependent upon our generating profitable operations in the future ~~and/~~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 and generate additional revenues 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.

~~Reclassifications~~

~~Certain prior period amounts have been reclassified to conform with the current period presentation.~~

Note 2 — Summary of Significant Accounting Policies

Significant Accounting Policies

~~Principles of Consolidation~~

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, LB Media. All significant inter-company transactions and balances have been eliminated in consolidation.

~~Use of Estimates~~

Management uses estimates and assumptions in preparing these condensed consolidated financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Examples of estimates include loss contingencies; useful lives of our tangible and intangible assets; allowances for doubtful accounts; and stock-based compensation forfeiture rates. Examples of assumptions include: the elements comprising a software arrangement, including the distinction between upgrades or enhancements and new products; when technological feasibility is achieved for our products; the potential outcome of future tax consequences of events that have been recognized in our financial statements or tax returns. Actual results could differ from those estimates.

Fair Value Measurements

The Company adopted the provisions of FASB Accounting Standards Codification (“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 are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

9
~~Table of Contents~~

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 no assets or liabilities valued at fair value on a recurring basis.

Revenue Recognition

The Company follows the guidance of the Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” which is effective as of the annual reporting period beginning after December 15, 2017 using either of two methods: (1) retrospective application of Topic 606 to each prior reporting period presented with the option to elect certain practical expedients as defined within Topic 606 or (2) retrospective application of Topic 606 with the cumulative effect of initially applying Topic 606 recognized at the date of initial application and providing certain additional disclosures as defined per Topic 606. We adopted Topic 606 pursuant to the method (2) and we determined that any cumulative effect for the initial application did not require an adjustment to retained earnings at July 1, 2018.

Table of Contents

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

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

We recognize revenue upon completion of our performance obligations or expiration of the contractual time to use services such as bulk texting. The Company receives payments from its customers based on billing schedules established in each contract. Up-front payments and fees are recorded as deferred revenue upon receipt or when due until the Company performs its obligation under these arrangements. There is no significant judgment performed by management and revenue recognized from deferred revenue during the three months and nine months ended March 31, 2020 is $4,448 and $119,668, respectively.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, LB Media. All significant inter-company transactions and balances have been eliminated in consolidation.

Cash and Cash Equivalents

For purposes of the condensed consolidated statements of cash flows, cash and cash equivalents includes demand deposits, time deposits, certificates of deposit and short-term liquid investments with original maturities of three months or less when purchased. As of March 31, 2020, and June 30, 2019, the Company did not hold any cash equivalents. The Federal Deposit Insurance Corporation provides coverage for all accounts of up to $250,000. As of March 31, 2020, none of the Company’s cash was in excess of federally insured limits.

Accounts Receivable, Net

Accounts receivable are stated at the amount management expects to collect. An allowance for doubtful accounts is recorded, as a charge to bad debt expense, where collection is doubtful due to credit issues. These allowances together reflect the Company’s estimate of potential losses inherent in accounts receivable balances, based on historical loss and known factors impacting its customers. Management has determined that an allowance is required at March 31, 2020 and June 30, 2019 of $7,452 and $53,815, respectively. During the nine months ended March 31, 2020, the Company wrote off accounts receivable of approximately $7,452. The Company does not accrue interest on past due receivables.

Inventory

Inventory consists of merchandise and is stated at the lower of cost, determined by last-in, first-out method or market. Market is determined based on the net realizable value, with appropriate consideration given to obsolescence, excessive levels, deterioration and other factors. At March 31, 2020 and June 30, 2019, the Company had $622 and $1,230 of inventory, respectively. A reserve is recorded for any inventory deemed excessive or obsolete. No reserve is considered necessary at March 31, 2020 and at June 30, 2019.

Use of Estimates

Table of Contents

Reclassifications

Certain prior period amounts have been reclassified to conform with the current period presentation.

Internal Use Software

The Company capitalizes certain development costs related to upgrades and enhancements to its cloud commerce platform when it is probable the expenditures will result in additional functionality. Such development costs are capitalized when the preliminary project stage is completed and it is probable that the project will be completed and the software will be used to perform the function intended. These capitalized costs include external direct costs of services consumed in developing or obtaining internal-use software and personnel and related expenses for employees who are directly associated with and who devote time to internal-use software projects. Capitalization of these costs cease once the project is substantially complete and the software is ready for its intended purpose. Post configuration training and maintenance costs are expensed as incurred. Capitalized internal use software costs are recorded as part of fixed assets and amortized using a straight-line method, over the estimated useful life of the software, generally three to seven years, commencing when the software is ready for its intended use.

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 March 31, 2020 and June 30, 2019, there were no impairments of long-lived assets.

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.

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.

Table of Contents

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 applicable accounting principles. Such options are valued using the Black-Scholes option pricing model.

See Note 7 for the assumptions used to calculate the fair value of stock-based employee and non-employee compensation.

In June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which eliminates the separate accounting model for nonemployee share-based payment awards and generally requires companies to account for share-based payment transactions with nonemployees in the same way as share-based payment transactions with employees. The accounting remains different for attribution, which represents how the equity-based payment cost is recognized over the vesting period, and a contractual term election for valuing nonemployee equity share options. The standard is effective for interim and annual periods beginning after December 15, 2018. We adopted ASU 2018-07 on July 1, 2019 and the adoption of this standard did not have a material impact on our condensed consolidated financial statements.

Earnings or Loss per Share

Basic earnings or loss per share is computed by dividing net income 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. We have prepared the calculation of earnings or loss per share using the weighted-average number of common shares of the Company that were outstanding for the three and nine months ended March 31, 2020 and 2019.

Dilutive instruments had no effect on the calculation of earnings or loss per share during the three and nine months ended March 31, 2020 and 2019.

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. As of March 31, 2020, the Company had approximately $12,088,000 of net operating loss carry forward that was unrecognized tax benefits, these unrecognized tax benefits begin to expire in 2036.

Under Internal Revenue Code 382, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited. We have not completed a study to assess whether an “ownership change” has occurred or whether there have been multiple ownership changes since we became a “loss corporation” as defined in Section 382. Future changes in our stock ownership, which may be outside of our control, may trigger an “ownership change”. In addition, future equity offerings or acquisitions that have equity as a component of the purchase price could result in an “ownership change.” If an “ownership change” has occurred or does occur in the future, utilization of the NOL carryforwards or other tax attributes may be limited, which could potentially result in increased future tax liability to us.

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 December 31, 2019.

Table of Contents

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).

Leases

In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. In July 2018, the FASB issued ASU No. 2018-10, “Codification Improvements to Topic 842, Leases.” The amendments in ASU 2018-10 clarify, correct or remove inconsistencies in the guidance provided under ASU 2016-02 related to sixteen specific issues identified. Also in July 2018, the FASB issued ASU No. 2018-11 “Leases (Topic 842): Targeted Improvement” which now allows entities the option of recognizing the cumulative effect of applying the new standard as an adjustment to the opening balance of retained earnings in the year of adoption while continuing to present all prior periods under previous lease accounting guidance. The effective date and transition requirements for these two ASUs are the same as the effective date and transition requirements as ASU 2016-02. The standard is effective for the Company for the fiscal year beginning July 1, 2019. The adoption of this standard increased assets and liabilities by approximately $409,900, which is accreted over the remainder of the lease agreements.

The Company is a lessee under leases for office space with remaining lease terms between 15 months and 27 months. Lease expenses for these leases is recognized on a straight-line basis over the lease term, with variable lease payment recognized in the period those payments are incurred. Most of the leases do not provide implicit interest rates and therefore we determined the discount rate based upon our incremental borrowing rate. The weighted average remaining lease term is 22 months and the weighted average discount rate is 10%.

New Accounting Pronouncements

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which introduces new guidance for the accounting for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale (AFS) debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The pronouncement will be effective for public business entities that are SEC filers in fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The effect of the adoption of this pronouncement to the Company was immaterial.

No other recent accounting pronouncements were issued by FASB and the SEC that are believed by management to have a material impact on the Company’s present or future condensed consolidated financial statements.

Note 3 — Property and Equipment

Property and equipment consist of the following:

	March 31, 2020			June 30, 2019

Software platform	$	4,415,457		$	3,922,558
Furniture and fixtures		1,500			1,500
Less accumulated amortization		(902,744	)		(389,884	)
Property and equipment, net	$	3,512,713		$	3,534,174

Table of Contents

On November 6, 2018, the Company acquired an identified intangible asset (“Loyalty Software”) through a Stock Purchase Agreement, where the Company acquired all the issued and outstanding capital stock of Greenlight Technologies, Inc. (“GTI”) from its shareholders. At the time of the transaction, there were no employees working for GTI, no systems and no assets, other than the Loyalty Software. GTI’s legal entity currently has no activity and will be dissolved and the Loyalty Software has been assumed by the Company. Management determined that the purchase of GTI did not constitute a business purchase and recorded the transaction as a purchase of software. The consideration for the Loyalty Software was 2,666,667 shares of common stock, par value $0.001 per share and cash of approximately $450,000. Total value of the Loyalty Software was estimated at approximately $3,010,000. The additional consideration for future developments will be evaluated and considered enhancements which will either be capitalized to the software or expensed as research and development costs. The additional Incentive Shares is approximately $1,152,000. During the period ended March 31, 2020 the Company capitalized approximately 492,899 of software enhancements.

GTI provides cannabis consumers real-time mobile ordering and loyalty rewards through an internally developed application that integrates with the local dispensary’s point of sale system. The Company plans to fully integrate this technology into the current platform and create an “Ultimate Bundle” of services for the cannabis industry. The current revenues of GTI are minimal, and the Company expects higher sales in the California market as the system is fully integrated.

During the nine months ended March 31, 2020, amortization expense related to internal use software totaled $514,360. During the period ended March 31, 2019, the Company capitalized approximately $3 million of software acquisition costs. Amortization expense related to internal use software totaled $177,773 during the period ended March 31, 2020.

Note 4 — Capital Stock and Equity Transactions

The Company has 150,000,000 shares of common stock authorized with a par value of $0.001 per share as of March 31, 2020. In addition, the Company has 10,000,000 preferred stock authorized with a par value of $0.001 per share as of March 31, 2020.

On April 19, 2018, the Company entered into a Standby Equity Distribution Agreement (the “SEDA”) with YA II PN Ltd. (“Investor”), a Cayman Island exempt limited partnership and an affiliate of Yorkville Advisors Global, LLC, whereby the Company sold and the Investor purchased 869,565 shares (the “Initial Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”) for the purchase price of One Million Dollars ($1,000,000), Additionally, under the SEDA the Company may sell to the Investor up to $5 million of shares of Common Stock over a two-year commitment period. Under the terms of the SEDA, the Company may from time to time, in its discretion, sell newly issued shares of its common stock to the Investor at a discount to market of 8% of the lowest daily volume weighted average price during the relevant pricing period. The Company is obligated to 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 of 1933, as amended (the “Securities Act”).

The Company is not obligated to utilize any portion of the SEDA and there are no minimum commitments or minimum use penalties provided the Company does not terminate the SEDA by October 2020 wherein the Company would be required to pay a termination fee of $100,000. The Company issued One Hundred Thousand (100,000) shares of Common Stock as a commitment fee (the “Commitment Shares”) to an affiliate of the Investor. The total amount of funds that ultimately can be raised under the SEDA over the two-year term will depend on the market price for the Company’s common stock and the number of shares actually sold.

The SEDA does not impose any restrictions on the Company’s operating activities. During the term of the SEDA, the Investor is prohibited from engaging in any short selling or hedging transactions related to the Common Stock.

In connection with the SEDA, the Company engaged Garden State Securities, Inc. (“GSS”) as its exclusive selling/placement agent. In connection with the transactions set forth in the SEDA, GSS shall receive a fee equal to 10% of the purchase price of the Initial Shares in cash plus warrants to purchase 86,957 shares of Common Stock at an exercise price of $1.15 per share, expiring in five years. GSS will also receive a cash fee equal to 5% of the amount paid by the Investor for each Advance under the SEDA.

Table of Contents

On October 9, 2018, the Company used the SEDA to receive $400,000. The Company issued 274,292 common shares for a per share price of the issuance of approximately $1.46 per common share.

On October 22, 2018, the Company used the SEDA to receive $300,000. The Company issued 300,000 common shares for a per share price of the issuance of approximately $1.00 per common share.

On July 2, 2019, the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors (the “Investors”), pursuant to which the Company agreed to issue and sell directly to the Investors in a private offering (the “Offering”), an aggregate of 7,211,538 shares of common stock (the “Shares”), par value $0.001 per share, at $0.624 per Share or a 20% discount to the closing price as of July 2, 2019, for gross proceeds of approximately $4,500,000 before deducting offering expenses. The Purchase Agreement contained customary representations and warranties. The Shares were offered by the Company pursuant to the exemption provided in Section 4(a)(2) under the Securities Act, and Rule 506(b) promulgated thereunder. The Company was obligated in accordance with the terms of a Registration Rights Agreement (the “Rights Agreement”) to register the Shares and the shares of common stock underlying the warrants described below, within 90 days from the date of the Purchase Agreement. All shares of common stock and shares of common stock underlying the warrants have been registered.

As additional consideration for the purchase of the Shares, the Company 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 the Company (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 the outstanding common shares of the Company, (b) on the 3^rd 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 6^th 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, (ii) issuable pursuant to clause (b) above, if any. The Series C Warrants are exercisable at a price of $0.001 per share.

The Company 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. The Company 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, and Series B Warrants to allow the Investors to purchase an aggregate of 28,072,364 shares of common stock at a purchase price of $0.1603 per common share. If the investors choose to exercise all Series A and Series B Warrants, the Company would receive proceeds of $5,625,000.

The Series A Preferred Shares of 3,000,000 units are convertible into the greater of one share of Common Stock or a number of shares of Common Stock so that the Series A holders would hold 55% of the number of outstanding shares of Common Stock. The Series A Shares vote on an “as-converted” basis. The Series B Convertible Preferred Stock of 1,120,00 units are convertible into 1,120,000 common shares.

Table of Contents

Issuance of Common Stock

On January 15, 2020 the Company issued 860,950 shares of Common Stock to employees. These shares were valued at fair market value of $105,116 and expensed in the accompanying Condensed Consolidated Statement of Operations.

During the three-month period ended March 31, 2020, the Company issued 1,815,220 shares of Common Stock to Note Payable Holders are satisfaction of these obligations. These shares were valued at fair market value of $131,000.

During the nine months ended March 31, 2019, the Company issued 264,847 shares of Common Stock to employees and consultants related to the exercise of stock options. The company received $66,962 for the issuance of these shares.

During the nine months ended March 31, 2019, the Company accepted subscriptions for the issuance of 1,116,738 shares of Common Stock for total subscriptions of $1,045,000 in cash.

During the nine months ended March 31, 2019, the Company issued 62,000 shares of Common Stock to vendors for services rendered. These shares were valued at fair market value of $40,560 and expensed in the accompanying Condensed Consolidated Statement of Operations.

Note 5 — Debt

During February 2018, the Company entered into two promissory notes with an investor of the Company in the amount of $28,000 and $84,000 in exchange for $25,000 and $75,000, respectively. Each of the notes have an original issue discount of $3,000 and $9,000, respectively that was amortized to interest expense over the term of the notes. The principle and interest were converted into common stock during the three months ended September 30, 2018. The Company issued 123,324 shares of Common Stock in full satisfaction of the notes.

During February 2018, the Company issued a promissory note in favor of an investor of the Company in the amount of $150,000 in exchange for $132,000 cash. The note has an original issue discount of $18,000 that is being amortized to interest expense over the term of the note. As of March 31, 2019, the loan maturity date was extended to August 8, 2019, the discount is fully amortized and total unpaid principal and interest is approximately $188,564, accruing at 12% at March 31, 2020, and is payable upon demand.

On September 21, 2018, the Company entered into a promissory note with an investor of the Company with a face value of $440,000 in exchange for $400,000 cash payment (“the Convertible Note”), the discount of the Convertible Note will be amortized over the life of the Convertible Note and have an interest rate of 10%. The Convertible Note has a twelve-month term with no payment required for the initial six months; after six months, the Company will repay the investors interest and principle in six equal installments. The principle and interest of the note is convertible into the Company’s common stock at a purchase price of $0.70 per common share after the six months. If the Company defaults on the Convertible Note, the interest is increased to 12% and at the investors’ option, the principle and interest can be converted into the Company common stock at a 20% discount to the then current market. In addition, the Company issued five-year warrants to purchase up to 200,000 common shares of the Company at a price of $0.75 per share. The cash for this Convertible Note was received prior to September 30, 2018. As of March 31, 2020, the Convertible Note is payable upon demand.

Table of Contents

On September 21, 2018, the Company entered several promissory notes with various investors of the Company with a face value of $400,000 in exchange for $400,000 cash payment (“the Notes”), the discount of the Notes will be amortized over the life of the Note and have an interest rate of 10%. The Notes have a twelve-month term with no payment required for the initial six months; after six months, the Company will repay the investors interest and principle in six equal installments. The principle and interest of the note is convertible into the Company’s common stock at a purchase price of $0.70 per common share after the six months. If the Company defaults on the Notes, the interest is increased to 12% and at the investors’ option, the principle and interest can be converted into the Company common stock at a 20% discount to the then current market price. In addition, the Company issued five-year warrants to purchase up to 200,000 of the Company’s common shares at a price of $0.75 per share. The cash for these Notes was received prior to September 30, 2018. As of March 31, 2020, $220,000 of the Notes have been fully extinguished and the remaining $220,000 is in default and payable upon demand.

During the year ended June 30, 2019, the Company entered into several promissory notes with various investors of the Company with a face value of $960,000 in exchange for a total of $900,000 cash payments (“the Notes”). The Notes have a beneficial conversion feature valued at $839,378, which is recorded as a discount. The total discount on the Notes will be amortized over the life of the Notes and recorded as interest expense. The notes have an interest rate of 7% and have an eighteen-month term with no payment required for the initial six months; after six months, the Company will repay the investors interest and principle in twelve equal installments. The principle and interest of the note is convertible into the Company’s common stock at a purchase price of $0.75 per common share at any time after the Original Issue Date. If the Company defaults on the Notes, the interest is increased to 15% and at the investors’ option, the principle and interest can be converted into the Company common stock at a 20% discount to the then current market price. As of March 31, 2020, $533,000 of the Notes have been fully extinguished as $402,000 of debt repayment and the issuance of common stock valued at $131,000. The remaining principal of $390,125 is due August 2020. The unamortized discounts to the note as of March 31, 2020 are $196,277.

During the quarter ended March 31, 2020, the Company entered into a promissory note with a face value of $600,000 in exchange for a total of $565,000 cash payments. The total discount the Note will be amortized over the life of the Note and recorded as interest expense. The note has an interest rate of 8% and matures on December 1, 2020.

During the quarter ended March 31, 2020 the Company entered into a promissory note with a face value of $50,000. The note has an interest rate of 8% and matures on January 1, 2021.

The Company recognized $106,400 and $676,092 of interest expense for the three and nine months ended March 31, 2020, respectively and $181,643 and $356,265 of interest expense for the three and nine months ended March 31, 2019, respectively. As of March 31, 2020 and June 30, 2019, accrued interest on the above notes was $150,198 and $118,193, respectively.

Notes payable and long-term debt outstanding as of March 31, 2020 and June 30, 2019 are summarized below:

	Maturity Date	March 31, 2020		June 30, 2019
12% $150,000 Convertible Note Payable, net of unamortized discount of $0 and $14,320, respectively	Due on Demand	$	150,000	$	150,000
12% $440,000 Convertible Note Payable, net of unamortized discount of $28,589	Due on Demand		440,000		411,411
12% $220,000 Convertible Note Payable, net of unamortized discount of $14,295	Due on Demand		—		205,705
12% $220,000 Convertible Note Payable, net of unamortized discount of $14,295	Due on Demand		220,000		205,705
7% $426,667 Convertible Note Payable, net of unamortized discount of $314,401	August 15, 2020		98,025		112,266
7% $106,667 Convertible Note Payable, net of unamortized discount of $78,601	August 15, 2020		—		28,066
7% $213,333 Convertible Note Payable, net of unamortized discount of $153,786	September 20, 2020		—		59,547
7% $213,333 Convertible Note Payable, net of unamortized discount of $153,786	September 20, 2020		97,782		59,547
5% Note Payable	Due on Demand		—		600,000
8% Note Payable	December 1, 2020		565,000		—
8% Note Payable	January 1, 2021		50,000		—
5% Note Payable	Due on Demand (1)		350,000		350,000
Total notes payable			1,970,807		2,182,247
Less current portion of notes payable			1,970,807		2,182,247
Notes payable, Non-current portion		$	—	$	—

⁽¹⁾ The Company entered two promissory notes with an investor of the Company in the amount of $350,000. The investor had agreed to convert the loan into 437,500 shares of common stock in 2018. The Company has not issued these shares to the investor and booked the notes as a short-term loan. This loan is considered payable upon demand.

Table of Contents

Note 6 — Commitments and Contingencies

The Company leases office space. Future minimum lease payments are as follows:

June 30, 2020	$	42,666
June 30, 2021	$	174,254
June 30, 2022	$	89,042

The Company does not have a concentration of revenues from any individual customer (less than 10%).

The Company records tax contingencies when the exposure item becomes probable and reasonably estimable. As of March 31, 2020, the Company had a tax contingency related to stock options granted below the fair market value on date of grant. The Company is in the process of determining the possible exposure and necessary expense accrual for the related tax, penalties and interest. Management has not been able to determine the amount as of the date of this report, however, does not expect the amount to be material to the financial statements.

To the best of the Company’s knowledge and belief, no legal proceedings of merit are currently pending or threatened against the Company.

Note 7 — Stock Based Compensation

The equity incentive plan of the Company was established in February of 2017. The Board of Directors of the Company may from time to time, in its discretion grant to directors, officers, consultants and employees of the Company, non-transferable options to purchase common shares, provided that the number of options issued do not exceed 20,000,000. The options are exercisable for a period of up to 10 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 20,000,000 through a consent of stockholders to amend and restate the equity incentive plan.

Table of Contents

The following table reflects the continuity of stock options for the nine months ended March 31, 2020:

A summary of stock option activity is as follows:

	March 31, 2020

Number of options outstanding:
Beginning of year		4,598,823
Granted		9,990,875
Exercised, converted		-
Forfeited / exchanged / modification		(4,571,823	)

End of period		10,017,875

Number of options exercisable at end of period		27,000
Number of options available for grant at end of period		9,982,125

Weighted average option prices per share:
Granted during the period	$	0.07
Exercised during the period	$	0.00
Terminated during the period	$	0.45
Outstanding at end of period	$	0.71
Exercisable at end of period	$	0.71

Stock-based compensation expense attributable to stock options and stock grants was approximately $711,511 for the nine-month period ended March 31, 2020. As of March 31, 2020, there was approximately $6,509 of unrecognized compensation expense related to unvested stock options outstanding, and the weighted average vesting period for those options was 3 years.

Table of Contents

Warrants

At March 31, 2020, 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-Financing		86,957		3.05	$	1.15
Warrants-Issued with Convertible Notes		600,000		3.48	$	0.75
Warrants - Financing		360,577		4.27	$	0.78
Warrants A - Financing		7,018,090		.27	$	0.16
Warrants B – Financing		28,072,364		4.27	$	0.16
Total		36,137,988

Note 8 — Subsequent Events

The Company has evaluated subsequent events through May 14, 2020 and has not identified any items requiring additional disclosure except as follows:

COVID -19 and Worldwide Pandemic Outlook

The company was affected in March by the COVID-19 outbreak and worldwide pandemic. The company saw some postponements in orders in the first few weeks of the month but later in the month orders stabilized to a normal level. We anticipate that some of these postponed orders will be placed in the following quarters. The company has made a significant pivot to online ordering and curbside pickup with technology that had already been built out. We will be announcing major additions to our platform to adjust to the new business environment. The company believes the pivot to these new areas will enhance future revenue opportunities with minimal additional cost.

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report. Except as required by applicable law, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our unaudited interim condensed consolidated financial statements for the three months ended March 31, 2020 are expressed in US dollars and are prepared in accordance with generally accepted accounting principles in the United States of America. They reflect all adjustments (all of which are normal and recurring in nature) that, in the opinion of management, are necessary for fair presentation of our interim financial information. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for our fiscal year ending June 30, 2020. Our unaudited consolidated financial statements and notes included therein have been prepared on a basis consistent with and should be read in conjunction with our audited financial statements and notes for the year ended June 30, 2019, as filed in our annual report on Form 10-K.

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

Business Overview

Leafbuyer.com Platform

The Company’s wholly owned subsidiary, LB Media Group, LLC has evolved and grown as a listing website to a comprehensive marketing technology platform that focuses on new customer acquisition, retention and now online-order ahead services. With the increased popularity of Leafbuyers texting/loyalty program, clients can communicate through SMS and MMS messaging to inform consumers of specials as well as confirm online ordering details. This creates more touch points for our clients. Leafbuyers proprietary systems are integrated to form a seamless process for the user to find, research, compare and communicate on the thousands of products available. The Company’s website, Leafbuyer.com, and its progressive web application hosts a robust search algorithm similar to Trivago, where consumers can search the database for appealing offers or specific items. They can also search through thousands of menu items and products, create a profile, sign up to receive deal alerts and place online orders for pick up or delivery. With a worldwide pandemic from Covid-19, the need for an order ahead solution in the cannabis industry was put to the test in early March of 2020. Technology enhancements were made that now include delivery features for Medical and Recreational stores, increased POS integrations and real-time notifications.

The Leafbuyer Network reaches millions of consumers every month through its web-based platforms, loyalty platform and partner sites. The site’s sophisticated vendor dashboard pairs vendor data with consumer needs and presents a robust, 24/7 real-time dashboard where vendors can update menus, specials, available jobs, and more. The system helps to track the vendors’ return on investment.

Table of Contents

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

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

Leafbuyer’ s condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

Comparison of results of operations for the three months ended March 31, 2020 and 2019

	Three Months Ended March 31,
	2020			2019			Change			%
Sales revenue	$	575,002		$	489,320		$	85,682			18	%

Total operating expenses		1,504,270			2,017,820			(513,550	)		(25	)%

Interest expense		(106,783	)		(181,643	)		(74,860	)		(41	)%

Net loss	$	(1,036,051	)	$	(1,710,143	)	$	(674,092	)		(39	)%

Sales Revenue, Cost of Revenue and Gross Profit

Revenues increased for the three months ended March 31, 2020 compared to the same period in 2019 as we expanded our customer base and continued to implement our growth plan. Through our national network of cannabis deals and information, we are able to reach millions of consumers monthly and are looking to continue to expand our presence in the marketplace.

COVID - 19 and Worldwide Pandemic Outlook

Operating Expenses

	Three Months Ended March 31,
	2020		2019		Change			%
Selling expenses	$	155,414	$	70,025	$	85,389			122	%
General and administrative		508,461		1,408,470		(900,009	)		(64	)%
Wages, payroll taxes, commissions and other employee expenses		735,280		539,325		195,955			36	%
Stock based compensation expense		105,115		---		105,115			100	%
	$	1,504,270	$	2,017,820	$	(513,550	)		(25	)%

Table of Contents

The decrease in operating expenses during the three months ended March 31, 2020 compared to 2019 was driven by a reduction in G&A spending for advertising, contractor costs related to the Greenlight platform and software development costs. The company made a significant investment in the Leafbuyer website technology and an enterprise level loyalty and texting platform. Most of those expenses have been realized and the company plans for most further development to be done in house by Leafbuyer technology employees that we already have on staff.

Comparison of results of operations for the nine months ended March 31, 2020 and 2019

	Nine Months Ended March 31,
	2020			2019			Change			%
Sales revenue	$	1,870,518		$	1,296,550		$	573,968			44	%

Total operating expenses		5,602,476			5,757,201			(154,725	)		(3	)%

Interest expense		(676,475	)		(356,265	)		320,210			90	%

Net loss	$	(4,408,433	)	$	(4,816,916	)	$	(408,483	)		(8	)%

Sales Revenue, Cost of Revenue and Gross Profit

Revenues increased for the nine months ended March 31, 2020 compared to the same period in 2019 as we expanded our customer base and continued to implement our growth plan. Through our national network of cannabis deals and information, we are able to reach millions of consumers monthly and are looking to continue to expand our presence in the marketplace.

Operating Expenses

	Nine Months Ended March 31,
	2020		2019		Change			%
Selling expenses	$	714,585	$	200,300	$	514,285			257	%
General and administrative		1,935,319		2,935,797		(1,000,478	)		(34	)%
Wages, payroll taxes and other employee expenses		2,240,246		1,425,735		814,511			57	%
Stock based compensation expense		712,326		1,195,369		(783,043	)		(40	)%
	$	5,602,476	$	5,757,201	$	(154,725	)		(3	)%

The decrease in operating expenses during the nine months ended March 31, 2020 compared to 2019 was driven by a reduction in G&A costs such as outsources development, which was offset by our growth and expansion, particularly on the personnel side as we added new sales and account management staff to sell our services in new markets and handle the increased customer base.

Liquidity and Capital Resources

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

Table of Contents

At March 31, 2020 we had $642,656 in cash and cash equivalents. Our cash flows from operating, investing and financing activities were as follows:

Cash Flows

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

	Nine Months Ended March 31,
	2020			2019
Net cash used in operating activities	$	(2,797,081	)	$	(2,355,276	)
Net cash used in investing activities	$	(492,899	)	$	(449,241	)
Net cash provided by financing activities	$	3,750,989		$	2,991,962

Working Capital

Working capital is the amount by which current assets exceed current liabilities. We had negative working capital of $2,213,489 and $2,897,850, respectively, as of March 31, 2020 and June 30, 2019. The decrease in working capital is due to the net loss for the period.

Inflation

Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the nine-month period ended March 31, 2020.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of March 31, 2020 and June 30, 2019.

Critical Accounting Estimates

Our condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and estimates used to prepare the condensed consolidated financial statements. The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed in our June 30, 2019 form 10-K in the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Table of Contents

Critical Accounting Policies

Our unaudited condensed consolidated interim financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of these policies is included in Note 2 of the notes to our unaudited interim condensed consolidated 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. Management has carefully considered the recently issued accounting pronouncements that altered generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.

Use of Estimates

Revenue Recognition

Topic ASC 606 is effective as of the annual reporting period beginning after December 15, 2017 using either of two methods: (1) retrospective application of Topic ASC 606 to each prior reporting period presented with the option to elect certain practical expedients as defined within Topic ASC 606 or (2) retrospective application of Topic ASC 606 with the cumulative effect of initially applying Topic ASC 606 recognized at the date of initial application and providing certain additional disclosures as defined per Topic ASC 606. We adopted Topic ASC 606 pursuant to the method (2) and we determined that any cumulative effect for the initial application did not require an adjustment to retained earnings at July 1, 2018.

~~We recognize revenue upon completion of our performance obligations or expiration of the contractual time to use services such as bulk texting.~~

~~Cash and Cash Equivalents~~

For purposes of the condensed consolidated statements of cash flows, cash and cash equivalents includes demand deposits, time deposits, certificates of deposit and short-term liquid investments with original maturities of three months or less when purchased. As of March 31, 2019 and June 30, 2018, the Company did not hold any cash equivalents. The Federal Deposit Insurance Corporation provides coverage for all accounts of up to $250,000.

~~Accounts Receivable, Net~~

Accounts receivable are stated at the amount management expects to collect. An allowance for doubtful accounts is recorded, as a charge to bad debt expense, where collection is considered to be doubtful due to credit issues. These allowances together reflect the Company’s estimate of potential losses inherent in accounts receivable balances, based on historical loss and known factors impacting its customers. Management has determined that an allowance is required at March 31, 2019 and June 30, 2018 of $53,815 and $6,617, respectively. The Company ~~does not accrue interest on past due receivables.~~

10
~~Table of Contents~~

~~Inventory~~

Inventory consists of merchandise and is stated at the lower of cost, determined by last-in, first-out method or market. Market is determined based on the net realizable value, with appropriate consideration given to obsolescence, excessive levels, deterioration and other factors. At March 31, 2019 and June 30, 2018, the Company had $3,530 and $3,530 of inventory, respectively. A write-off is recorded for any inventory deemed excessive or obsolete. No write off was necessary at March 31, 2019 and at June 30, 2018.

~~Internal Use Software~~

Software development costs associated with internal use software are incurred in three stages of development: the preliminary project stage, the application development stage, and the post-implementation stage. Costs incurred during the preliminary project and post-implementation stages are expensed as incurred. Certain internal and external qualifying costs incurred during the application development stage are capitalized as property and equipment. Internal use software is amortized on a straight-line basis over its estimated useful life of seven years, beginning when the software is ready for its intended use.

During the nine months ended March 31, 2019, the Company capitalized approximately $3.4 million of software acquisition costs. Amortization expense related to internal use software totaled $233,991 during the nine months ended March 31, 2019.

~~Identified Intangible 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 March 31, 2019 and June 30, 2018, there were no impairments of intangible assets.

~~Stock-Based Compensation~~

~~See Note 9 for the assumptions used to calculate the fair value of stock-based employee and non-employee compensation.~~

~~The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of ASC 505-50 Equity-Based~~ ~~Payments to Non-Employees~~. Stock-based compensation related to non-employees is accounted for based on the fair value of the related stock or options or the fair value of the services, whichever is more readily determinable. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.

11
~~Table of Contents~~

~~Income Taxes~~

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. As~~economic factors that may affect its revenues. Because all of ~~March 31, 2019, the Company had approximately $7,652,000 of net operating loss carry forward that was unrecognized tax benefits.~~

~~Under Internal Revenue Code 382, if a corporation undergoes an “ownership change,” the corporation’s ability to use~~ its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited. We have not completed a study to assess whether an “ownership change” has occurred or whetherrevenues are from cannabis customers, there have been multiple ownership changes since we became a “loss corporation” as defined in Section 382. Future changes in our stock ownership, which may be outside of our control, may trigger an “ownership change”. In addition, future equity offerings or acquisitions that have equity as a component of the purchase price could result in an “ownership change.” If an “ownership change” has occurred or does occurare no differences in the ~~future, utilization of the NOL carryforwards or other tax attributes may be limited, which could potentially result in increased future tax liability to us.~~

~~ASC Topic 740 clarifies the accounting for~~nature, timing an 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 March 31, 2019.

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. We continue to evaluate the impact of the Tax Act.

~~New Accounting Pronouncements~~

In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. In July 2018, the FASB issued ASU No. 2018-10, “Codification Improvements to Topic 842, Leases.” The amendments in ASU 2018-10 clarify, correct or remove inconsistencies in the guidance provided under ASU 2016-02 related to sixteen specific issues identified. Also in July 2018, the FASB issued ASU No. 2018-11 “Leases (Topic 842): Targeted Improvement” which now allows entities the option of recognizing the cumulative effect of applying the new standard as an adjustment to the opening balance of retained earnings in the year of adoption while continuing to present all prior periods under previous lease accounting guidance. The effective date and transition requirements for these two ASUs are the same as the effective date and transition requirements as ASU 2016-02. The standard will be effective for the Company for the quarter ended September 30, 2019.

12
~~Table of Contents~~

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard will be effective for the Company in the first quarter of 2020. The adoption of this standard does not have a material impact on the condensed consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, which simplifies the accounting for non-employee share-based payment transactions. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor's own operations by issuing share-based payment awards. The standard will be effective in the first quarter of fiscal year 2019, although early adoption is permitted. The adoption of this standard does not have a material impact on the condensed consolidated financial statements.

No other recent accounting pronouncements were issued by FASB and the SEC that are believed by management to have a material impact on the Company's present or future condensed consolidated financial statements.

~~Note 3 — Recapitalization and Preferred Shares~~

~~On March 23, 2017, we completed the Merger Agreement with AP. The impact to equity of the Merger Agreement includes a) the issuance of 2,351,355 new pre-split shares~~ of the Company’s ~~common stock; b) the issuance of 324,327 new pre-split shares of the Company’s Series A Convertible Preferred Stock; c) the retirement of 5,000,000 shares of the Company’s pre-split common stock;~~revenue and d) removing the Company’s accumulated deficit and adjusting equity for the recapitalization. Simultaneously with the Merger, the Company accepted subscriptions in a private placement offering of 476,092 new pre-split shares of the Company’s common stock in the amount of $600,000 as well as 27,027 new pre-split shares of the Company’s Series B Convertible Preferred Stock in the amount of $250,000. These shares are considered to be outstanding beginning January 1, 2015. However, as the cash to purchase these shares was received in 2017, we have recorded the cash received in connection with these shares in additional paid-in capital during 2017.

Series A Convertible Preferred Stock was originally convertible into 3,000,000 common shares based on the total outstanding equity as of March 23, 2017. As of March 31, 2019, the Series A Convertible Preferred Stock would be convertible into approximately 10,660,000 common shares, based on 47,747,804 common shares outstanding as of March 31, 2019. The Series B Convertible Preferred Stock is convertible into 1,120,000 common shares.

~~Note 4 — Intangible Assets~~

~~Intangible assets consist of the following:~~

March 31,
2019

March 31,
2018

Loyalty software

$ 3,449,241

-

Less accumulated amortization

(233,991 )

-

Intangible assets, net

$ 3,215,250

$ -

13
~~Table of Contents~~

On November 6, 2018, the Company acquired an identified intangible asset (“Loyalty Software”) through a Stock Purchase Agreement, where the Company acquired all the issued and outstanding capital stock of Greenlight Technologies, Inc. (“GTI”) from its shareholders. At the time of the transaction, there were no employees working for GTI, no systems and no assets, other than the Loyalty Software. GTI’s legal entity will be dissolved in the transition and the Loyalty Software will be assumed by the Company. Management determined that the purchase of GTI did not constitute a business purchase and recorded the transaction as a purchase of software. The consideration for the Loyalty Software was 2,666,667 shares of common stock, par value $0.001 per share and cash of approximately $450,000. Total value of the Loyalty Software was estimated at approximately $3,010,000. The additional consideration for future developments will be evaluated and considered enhancements which will either be capitalized to the software or expensed as research and development costs. The additional Incentive Shares is approximately $1,152,000. During the period ended March 31, 2019 the Company capitalized approximately $360,100 of software enhancements.

~~Note 5 — Capital Stock and Equity Transactions~~

The Company has 150,000,000 shares of common stock authorized with a par value of $0.001 per share as of March 31, 2019. In addition, the Company has 10,000,000 preferred stock authorized with a par value of $0.001 per share as of March 31, 2019.

On April 19, 2018, the Company entered into a Standby Equity Distribution Agreement (the “SEDA”) with YA II PN Ltd. (“Investor”), a Cayman Island exempt limited partnership and an affiliate of Yorkville Advisors Global, LLC, whereby the Company sold and the Investor purchased 869,565 shares (the “Initial Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”) for the purchase price of One Million Dollars ($1,000,000), Additionally, under the SEDA the Company may sell to the Investor up to $5 million of shares of Common Stock over a two-year commitment period. Under the terms of the SEDA, the Company may from time to time, in its discretion, sell newly-issued shares of its common stock to the Investor at a discount to market of 8% of the lowest daily volume weighted average price during the relevant pricing period. The Company is obligated to 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 of 1933, as amended (the “Securities Act”).

The Company is not obligated to utilize any portion of the SEDA and there are no minimum commitments or minimum use penalties provided the Company does not terminate the SEDA within 18 months wherein the Company would be required to pay a termination fee of $100,000. The Company issued One Hundred Thousand (100,000) shares of Common Stock as a commitment fee (the “Commitment Shares”) to an affiliate of the Investor. The total amount of funds that ultimately can be raised under the SEDA over the two-year term will depend on the market price for the Company’s common stock and the number of shares actually sold.

~~On October 9, 2018, the Company used the SEDA to receive $400,000. The Company issued 274,292 common shares for a per share price of the issuance of approximately $1.46 per common share.~~

~~On October 22, 2018, the Company used the SEDA to receive $300,000. The Company issued 300,000 common shares for a per share price of the issuance of approximately $1.00 per common share.~~

14
~~Table of Contents~~

~~Merger Agreement~~

All shares issued in accordance with the Merger Agreement are considered to be outstanding beginning January 1, 2015 as these shares relate to the change in capital structure. Furthermore, 5,000,000 pre-split shares of common stock were retired in accordance with the Merger Agreement. In connection with the Merger Agreement, the Company made distributions totaling $600,000 to officers of the Company. Both Series A Convertible Preferred Stock and Series B Convertible Preferred Stock have rights to dividends when declared; however, there is no stated dividend rate and no such dividends have yet been declared by the Company. We evaluated the convertible preferred stock agreements for derivatives and determined that they do not qualify for derivative treatment for financial reporting purposes. We also determined this does not qualify as a beneficial conversion feature. Accordingly, the balances have been reported at the carrying amounts.

On March 24, 2017, the Company effected a forward split such that 9.25 shares of Common Stock were issued for every 1 share of Common Stock issued and outstanding immediately prior to the forward split. Immediately following the forward split, there were 38,000,663 shares of post-split common stock, 3,000,000 shares of post-split Series A Convertible Preferred Stock, and 250,000 shares of post-split Series B Convertible Preferred Stock outstanding. The par value of all classes of shares remained at $0.001 per share after the forward split. In March of 2017, an additional 3,750,000 shares of post-split Series A Convertible Preferred Stock were purchased from the Company. All references to shares herein refer to post-split shares, unless otherwise noted.

~~Issuance of Common Stock~~

~~During the year ended June 30, 2018, the Company accepted subscriptions for the issuance of 1,589,565 shares of Common Stock for total subscriptions of $1,020,000 in cash.~~

During the year ended June 30, 2018, the Company issued 54,000 shares of Common Stock for the exercise of options and $13,500 cash. The Company also received notice from a Preferred Stock Series B stockholder to convert 180,000 shares of preferred stock into 2,880,000 shares of Common Stock.

During the year ended June 30, 2018, the Company issued 137,000 shares of Common Stock to vendors for services rendered. These shares were valued at fair market value of $280,850 and expensed in the accompanying Condensed Consolidated Statements of Operations.

During February 2018, the Company entered into two promissory notes with an investor of the Company in the amount of $28,000 and $84,000 in exchange for $25,000 and $75,000, respectively. Each of the notes have an original issue discount of $3,000 and $9,000, respectively that is being amortized to interest expense over the term of the notes. The principle and interest were converted into common stock during the quarter. The Company issued 123,324 shares of Common Stock in full satisfaction of the note on September 24, 2018.

During the nine months ended March 31, 2019, the Company issued 267,847 shares of Common Stock to employees and consultants related to the exercise of stock options. The Company received $66,962 for the issuance of these shares.

~~During the nine months ended March 31, 2019, the Company accepted subscriptions for the issuance of 1,116,738 shares of Common Stock for total subscriptions of $1,045,000 in cash.~~

15
~~Table of Contents~~

~~Note 6 — Debt~~

On September 28, 2017, the Company entered into a promissory note with an investor of the Company in the amount of $200,000. The note bears no interest and was payable in full on September 30, 2018. In addition, on December 20, 2017, the Company entered into a promissory note with the same investor of the Company in the amount of $150,000. During January 2018, the Company entered into a note with an investor of the Company in the amount of $224,000 in exchange for $200,000. As of December 31, 2018, the discount was fully amortized. The notes bear interest at 12% and were payable in full in July 2018. As of March 31, 2019, the amounts were fully repaid to the investor.

During February 2018, the Company entered into two promissory notes with an investor of the Company in the amount of $28,000 and $84,000 in exchange for $25,000 and $75,000, respectively. Each of the notes have an original issue discount of $3,000 and $9,000, respectively that was amortized to interest expense over the term of the notes. The principle and interest were converted into common stock during the quarter. The Company issued 123,324 shares of Common Stock in full satisfaction of the notes.

During February 2018, the Company issued a promissory note in favor of an investor of the Company in the amount of $150,000 in exchange for $132,000 cash. The note has an original issue discount of $18,000 that is being amortized to interest expense over the term of the note. As of March 31, 2019, the loan maturity date was extended to August 8, 2019, the discount is fully amortized and total unpaid principal and interest is approximately $170,564, accruing at 12%. Subsequent to March 31, 2019, the investor agreed to accept 245,207 shares of common stock for accrued interest and principal.

On September 21, 2018, the Company entered into a promissory note with an investor of the Company with a face value of $440,000 in exchange for $400,000 cash payment (“the Convertible Note”), the discount of the Convertible Note will be amortized over the life of the Convertible Note and have an interest rate of 10%. The Convertible Note has a twelve-month term with no payment required for the initial six months; after six months, the Company will repay the investors interest and principle in six equal installments. The principle and interest of the note is convertible into the Company’s common stock at a purchase price of $0.70 per common share after the six months. If the Company defaults on the Convertible Note, the interest is increased to 12% and at the investors’ option, the principle and interest can be converted into the Company's common stock at a 20% discount to the then current market. In addition, the Company issued five-year warrants to purchase up to 200,000 common shares of the Company’s common stock at a price of $0.75 per share. The cash for this Convertible Note was received prior to September 30, 2018. As of April 15, 2019, the investor has agreed to extend the Convertible Note for six months to September 2019.

On September 21, 2018, the Company entered several promissory notes with various investors of the Company with a face value of $880,000 in exchange for $800,000 cash payment (“the Notes”), the discount of the Notes will be amortized over the life of the Note and have an interest rate of 10%. The Notes have a twelve-month term with no payment required for the initial six months; after six months, the Company will repay the investors interest and principle in six equal installments. The principle and interest of the note is convertible into the Company’s common stock at a purchase price of $0.70 per common share after the six months. If the Company defaults on the Notes, the interest is increased to 12% and at the investors’ option, the principle and interest can be converted into the Company's common stock at a 20% discount to the then current market price. In addition, the Company issued five-year warrants to purchase up to 400,000 of the Company’s common shares at a price of $0.75 per share. The cash for these Notes was received prior to September 30, 2018. One investor has agreed to extend the Convertible Note of $220,000 to September 2019, while the other investors have agreed to convert notes with a face value of $660,000 and accrued interest into 987,641 share of the Company’s common stock.

16
~~Table of Contents~~

During the three month’s ended March 31, 2019, the Company entered into several promissory notes with various investors of the Company with a face value of $960,000 in exchange for a total of $900,000 cash payments (“the Notes”). The notes have a beneficial conversion feature valued at $839,378, which is recorded as a discount. The total discount on the Notes will be amortized over the life of the Notes and recorded as interest expense. The notes and have an interest rate of 7% and have an eighteen-month term with no payment required for the initial six months; after six months, the Company will repay the investors interest and principle in twelve equal installments. The principle and interest of the note is convertible into the Company’s common stock at a purchase price of $0.75 per common share at any time after the Original Issue Date. If the Company defaults on the Notes, the interest is increased to 15% and at the investors’ option, the principle and interest can be converted into the Company common stock at a 20% discount to the then current market price. Subsequent to March 31, 2019, the Company entered into an additional note with a face value of $233,334 under similar terms as above.

~~Note 7 — Commitments and Contingencies~~

~~The Company leases office space. Future minimum lease payments are as follows:~~

June 30, 2019, remaining

$ 30,432

June 30, 2020

$ 171,727

June 30, 2021

$ 125,419

June 30, 2022

$ 70,842

~~The Company does not have a concentration of revenues from any individual customer (less than 10%).~~

~~To the best of the Company’s knowledge and belief, no legal proceedings of merit are currently pending or threatened against the Company.~~

~~Note 8 — Earnings or Loss per Share~~

Basic earnings or loss per share is computed by dividing net income 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. We have prepared the calculation of earnings or loss per share using the weighted-average number of common shares of the Company that were outstanding during the three and nine months ended March 31, 2019 and 2018.

~~Dilutive instruments had no effect on the calculation of earnings or loss per share during the three and nine months ended March 31, 2019 and 2018.~~

~~Note 9 — Stock Based Compensation~~

The equity incentive plan of the Company was established in February of 2017. The Board of Directors of the Company may from time to time, in its discretion grant to directors, officers, consultants and employees of the Company, non-transferable options to purchase common shares, provided that the number of options issued do not exceed 10,000,000. The options are exercisable for a period of up to 10 years from the date of the grant. The number of options to purchase common shares was increased from 5,000,000 to 10,000,000 through a consent of stockholders to amend and restate the equity incentive plan.

~~The following table reflects the continuity of stock options for the nine months ended March 31, 2019:~~

17
~~Table of Contents~~

~~A summary of stock option activity is as follows:~~

March 31,
2019

Number of options outstanding:

Beginning of year

4,145,735

Granted

1,698,239

Exercised, converted

(267,847 )
Forfeited / exchanged / modification

(138,535 )

End of period

5,437,592

Number of options exercisable at end of period

763,453

Number of options available for grant at end of period

4,562,408

Weighted average option prices per share:

Granted during the period

$ 0.66

Exercised during the period

$ 0.25

Terminated during the period

$ 1.19

Outstanding at end of period

$ 0.25

Exercisable at end of period

$ 0.25

The average fair value of stock options granted was estimated to be $0.61 per share for the period ended March 31, 2019. This estimate was made using the Black-Scholes option pricing model and the following weighted average assumptions:

	~~2019~~

~~Expected option life (years)~~	~~3 - 5~~
~~Expected stock price volatility~~	~~147%-170~~		%
~~Expected dividend yield~~		—	%
~~Risk-free interest rate~~	~~2.35-3.01~~		%

Stock-based compensation expense attributable to stock options was approximately $1,768,876 for the nine-month period ended March 31, 2019. As of March 31, 2019, there was approximately $4,050,975 of unrecognized compensation expense related to unvested stock options outstanding, and the weighted average vesting period for those options was 3 years.

~~Note 10 — Subsequent Events~~

~~The Company has evaluated subsequent events through May 14, 2019 and has not identified any items requiring additional disclosure.~~

18
~~Table of Contents~~

~~Item 2.~~~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

~~Forward Looking Statements~~

Our unaudited interim condensed consolidated financial statements for the three and nine months ended March 31, 2019 are expressed in US dollars and are prepared in accordance with generally accepted accounting principles in the United States of America. They reflect all adjustments (all of which are normal and recurring in nature) that, in the opinion of management, are necessary for fair presentation of our interim financial information. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for our fiscal year ending June 30, 2019. Our unaudited consolidated financial statements and notes included therein have been prepared on a basis consistent with and should be read in conjunction with our audited financial statements and notes for the year ended June 30, 2018, as filed in our annual report on Form 10-K.

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

~~Business Overview~~

~~Leafbuyer.com Platform~~

The Company’s wholly-owned subsidiary, LB Media Group, LLC has evolved and grown from a listing website focused on helping consumers find local cannabis-related retail establishments, into a comprehensive technology company with a suite of marketing tools designed to serve legal cannabis businesses. The Company’s website, Leafbuyer.com, hosts a robust search algorithm similar to Trivago, where consumers can search the database for appealing offers or specific items. In addition to these digital acquisition tools, Leafbuyer provides a loyalty platform, online ordering, and SEO services ultimately aiming to be the “one-stop shop” for businesses in the challenging cannabis industry. Leafbuyer reaches millions of consumers every month and is the official cannabis deals platform LA Weekly, Grasscity, Voice Media Group, and The Stranger.

The site’s sophisticated vendor dashboard pairs vendor data with consumer needs and presents a robust, 24/7 real-time dashboard where vendors can update menus, specials, available jobs, and more. The system helps to track the vendors’ return on investment.

19
~~Table of Contents~~

The Company continues an aggressive push into all legal cannabis markets, including initiating a presence in the Canadian market. Increasing the company’s marketing and sales presence in new markets is a primary objective. Along with this expansion, the Company continues to develop new technologies that will serve cannabis dispensaries and product companies in attracting and retaining consumers.

Leafbuyer operates in a rapidly evolving and highly-regulated industry that, as has been estimated by some, will exceed $30 billion in revenue by the year 2020. The founders and board of directors has been, and will continue to be, aggressive in pursuing long-term opportunities.

Leafbuyer’s condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

~~Comparison of results of operations for the three months ended March 31, 2019 and 2018~~

Three Months Ended March 31,

2019

2018

Change

%

Sales revenue

$ 489,320

$ 287,224

$ 202,096

70 %

Total operating expenses

2,017,820

1,114,795

903,025

81 %

Interest expense

(181,643 )

(12,919 )

(168,724 )

1,306 %

Net loss

$ (1,710,143 )

$ (840,490 )

$ (869,653 )

103 %

~~Sales Revenue, Cost of Revenue and Gross Profit~~

Revenues increased for the three months ended March 31, 2019 compared to the same period in 2018 as we expanded our customer base and continued to implement our growth plan. Through our national network of cannabis deals and information, we are able to reach millions of consumers monthly and are looking to continue to expand our presence in the marketplace.

~~Operating Expenses~~

Three Months Ended March 31,

2019

2018

Change

%

Selling expenses

$ 70,025

$ 53,966

$ 16,059

30 %
General and administrative

1,947,795

1,060,829

886,966

84 %

$ 2,017,820

$ 1,114,795

$ 903,025

81 %

~~The increase in operating expenses during the three months ended March 31, 2019 compared to 2018 was driven by our growth and expansion, particularly on the personnel side as we added new staff.~~

20
~~Table of Contents~~

~~Comparison of results of operations for the nine months ended March 31, 2019 and 2018~~

Nine Months Ended March 31,

2019

2018

Change

%

Sales revenue

$ 1,296,550

$ 785,969

$ 510,581

65 %

Total operating expenses

5,757,201

2,083,962

3,673,239

176 %

Interest expense

(356,265 )

(12,948 )

(343,317 )

2,652 %

Net loss

$ (4,816,916 )

$ (1,310,941 )

$ (3,505,975 )

267 %

~~Sales Revenue, Cost of Revenue and Gross Profit~~

Revenues increased for the nine months ended March 31, 2019 compared to the same period in 2018 as we expanded our customer base and continued to implement our growth plan. Through our national network of cannabis deals and information, we are able to reach millions of consumers monthly and are looking to continue to expand our presence in the marketplace.

~~Operating Expenses~~

Nine Months Ended March 31,

2019

2018

Change

%

Selling expenses

$ 200,300

$ 138,821

$ 61,479

44 %
General and administrative

5,556,901

1,945,141

3,611,760

186 %

$ 5,757,201

$ 2,083,962

$ 3,673,239

176 %

The increase in operating expenses during the nine months ended March 31, 2019 compared to 2018 was driven by our growth and expansion, particularly on the personnel side as we added new staff. In addition, we had approximately $261,000 of uncapitalizable software development during the period for software.

~~Liquidity and Capital Resources~~

~~At March 31, 2019 we had $563,383 in cash and cash equivalents. Our~~ cash flows from ~~operating, investing and financing activities were as follows:~~

~~Cash Flows~~

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

Nine Months Ended March 31,

2019

2018

Net cash used in operating activities

$ (2,355,276 )

$ (881,690 )
Net cash used in investing activities

$ (449,241 )

$ -

Net cash provided by financing activities

$ 2,991,962

$ 912,603

21
~~Table of Contents~~

~~Working Capital~~

~~Working capital is the amount by which current assets exceed current liabilities. We had negative working capital~~any of ~~$1,742,544 and $758,771, respectively, as of March 31, 2019 and June 30, 2018. The decrease in working capital is due to the net loss for the period.~~

~~Inflation~~

Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the nine month period ended March 31, 2019.

~~Off-Balance Sheet Arrangements~~

~~We had no off-balance sheet arrangements as of March 31, 2019 and June 30, 2018.~~

~~Critical Accounting Estimates~~

Our condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and estimates used to prepare the condensed consolidated financial statements. The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed in our June 30, 2018 form 10-K in the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

~~Critical Accounting Policies~~

~~Use of Estimates~~

22
~~Table of Contents~~

~~Revenue Recognition~~

Table of Contents

~~Item 3.~~~~Quantitative and Qualitative Disclosures About Market Risk~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by 17 C.F.R. 229 (10)(f)(i) and are not required to provide information under this item.

Item 4. Controls and Procedures

~~Item 4.~~~~Controls and Procedures~~

Disclosure Controls

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) designed to provide reasonable assurance the information required to be reported in our Exchange Act filings is recorded, processed, summarized and reported within the time periods specified and pursuant to Securities and Exchange Commission (“SEC”) rules and forms, including controls and procedures designed to ensure that this information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Please see our Form 10-K, annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the period ended June 30, 2019 and filed on September 24, 2019 for Item 9A. Controls and Procedures.

Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining effective internal control over financial reporting. Under the supervision of our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, ~~2019~~2020 using the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

23
~~Table of Contents~~

We maintain “disclosure controls and procedures”, as that term is defined in Rule 13a-15(e), promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by paragraph (b) of Rules 13a-15 under the Securities Exchange Act of 1934, our management, with the participation of our principal executive officer and our principal financial officer, evaluated our company’s disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our management concluded that as of the end of the period covered by this quarterly report on Form 10-Q, our disclosure controls and procedures were not effective.

~~Management Report on Internal Control Over Financial Reporting~~

Management is responsible for establishing and maintaining adequate internal control over the Company’s 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 March 31, 2019. The ineffectiveness of the Company’s 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.~~

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 March 31, 2019, 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.

We believe that the weaknesses identified above have not had any material effect on our financial results. We are currently reviewing 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.

24
~~Table of Contents~~

~~Management’s Remediation Plan~~

The weaknesses and their related risks are not uncommon in a company of our size because of the limitations in the size and number of staff. Due to our size and nature, segregation of all conflicting duties has not always been possible and may not be economically feasible.

However, we plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes in the current fiscal year as resources allow:

~~(i) appoint additional qualified personnel to address inadequate segregation of duties and implement modifications to our financial controls to address such inadequacies.~~

We will attempt to implement the remediation efforts set out herein by the end of the 2019 fiscal year. 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.

Management believes that despite our material weaknesses set forth above, our financial statements for the three and nine-month periods ended March 31, 2019 are fairly stated, in all material respects, in accordance with U.S. GAAP.

Changes in Internal Control

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) during the ~~nine~~three months ended March 31, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. However, as a result of the Company’s recent change of control, we have added several additional employees in accounting which we hope will improve the Company’s internal control over financial reporting.

25
Table of Contents

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

~~Item 1.~~~~Legal Proceedings~~

We are not aware of any legal proceedings to which we are a party or of which our property is the subject. None of our directors, officers, affiliates, any owner of record or beneficially of more than 5% of our voting securities, or any associate of any such director, officer, affiliate or security holder are (i) a party adverse to us in any legal proceedings, or (ii) have a material interest adverse to us in any legal proceedings. We are not aware of any other legal proceedings that have been threatened against us.

Item 2. Unregistered Sales of Equity Securities

~~Item 2.~~~~Unregistered Sales of Equity Securities~~~~and use of Proceeds~~

On ~~September 24, 2018,~~July 2, 2019, the Company, ~~issued 123,324~~entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors (the “Investors”), pursuant to which the Company agreed to issue and sell directly to the Investors in a private offering (the “Offering”), an aggregate of 7,211,538 shares of common stock (the “Shares”), par value $0.001 per share, at $0.624 per Share or a 20% discount to the closing price as of July 2, 2019, for gross proceeds of approximately $4,500,000 before deducting offering expenses. The Purchase Agreement contained customary representations and warranties. The Shares were offered by the Company pursuant to the exemption provided in Section 4(a)(2) under the Securities Act, and Rule 506(b) promulgated thereunder. The Company was obligated in accordance with the terms of a Registration Rights Agreement (the “Rights Agreement”) to register the Shares and the shares of common stock underlying the warrants described below, within 90 days from the date of the Purchase Agreement. All shares of common stock and shares of common stock underlying the warrants have been registered.

As additional consideration for the purchase of the Shares, the Company 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 the Company (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 the outstanding common shares of the Company, (b) on the 3^rd 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 ~~in full satisfaction of two promissory notes in~~equal to such Investor’s Purchase Agreement purchase amount divided by the ~~amount of $28,000 and $84,000 in exchange for $25,000 and $75,000, respectively.~~

~~During the nine months ended March 31, 2019, the Company issued 267,847~~Primary Effective Date Price less any shares of Common Stock (i) issued at the Closing and (ii) issuable pursuant to ~~employees~~clause (a) above, if any, and ~~consultants related~~(c) on the 6^th Trading Day following the Effective Date, if 80% of the lowest VWAP during the 5 Trading Days immediately prior to ~~the exercise~~such date (“Secondary Effective Date Price”) is less than $0.624, then a number of ~~stock options. The company received $66,962 for the issuance of these shares.~~

~~During the nine months ended March 31, 2019, the Company accepted subscriptions for the issuance of 1,116,738~~ shares of Common Stock ~~for total subscriptions~~equal to such Holder’s Subscription Amount at the Closing divided by the Secondary Effective Date Price less any shares of ~~$1,045,000 in cash.~~common stock (i) issued at the Closing, (ii) issuable pursuant to clause (a) above, if any, (ii) issuable pursuant to clause (b) above, if any. The Series C Warrants are exercisable at a price of $0.001 per share.

~~During the nine months ended March 31, 2019, the~~The Company issued ~~62,000~~30,299,998 shares of ~~Common Stock~~common stock pursuant to ~~vendors~~the Purchase Agreement, as well as the exercise of the Series C Warrants and fees paid in shares of common stock. The Company received approximately $4,038,000, net of the placement fees, legal and other expenses incurred for ~~services rendered. These~~the placement of the Shares. The Investors received Series A Warrants to allow the Investors to purchase an aggregate of 7,018,091 shares ~~were valued~~of common stock, and Series B Warrants to allow the Investors to purchase an aggregate of 28,072,364 shares of common stock at ~~fair market value~~a purchase price of ~~$40,560 and expensed in the accompanying Condensed Consolidated Statements of Operations.~~$0.1603 per common share.

The Company relied on the exemptions from registration under Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder. The subscription agreements with the investors contained representations to support the Company’s reasonable belief that the investors had access to information concerning the Company’s operations and financial condition, the investors acquired the securities for their own account and not with a view to the distribution thereof 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; the Company made no solicitation in connection with the sale other than communications with the investors; the Company obtained representations from the investors regarding their investment intent, experience and sophistication; and the investors either received or had access to adequate information about the Company in order to make an informed investment decision.

Item 3. Defaults Upon Senior Securities

~~Item 3.~~~~Defaults Upon Senior Securities~~

None.

Item 4. Mine Safety Disclosures

~~Item 4.~~~~Mine Safety Disclosures~~

Not applicable.

Item 5. Other Information

~~Item 5.~~~~Other Information~~

On September 21, 2018, the Company entered into a promissory note with an investor of the Company with a face value of $440,000 in exchange for $400,000 cash payment (“the Convertible Note”), the discount of the Convertible Note will be amortized over the life of the Convertible Note and have an interest rate of 10%. The Convertible Note has a twelve-month term with no payment required for the initial six months; after six months, the Company will repay the investors interest and principal in six equal installments. The principal and interest of the note is convertible into the Company’s common stock at a purchase price of $0.70 per common share after the six months. If the Company defaults on the Convertible Note, the interest is increased to 12% and at the investors’ option, the principal and interest can be converted into the Company's common stock at a 20% discount to the then current market. In addition, the Company issued five-year warrants to purchase up to 200,000 of the Company’s common shares at a price of $0.75 per share. The cash for this Convertible Note was received prior to September 2018.None

On September 21, 2018, the Company entered several promissory notes with various investors of the Company with a face value of $880,000 in exchange for $800,000 cash payment (“the Notes”) with an interest rate of 10%. The Notes have a twelve-month term with no payment required for the initial six months; after six months, the Company will repay the investors principal and interest in six equal installments. The principal and interest of the note is convertible into the Company’s common stock at a purchase price of $0.70 per common share after the six months. If the Company defaults on the Notes, the interest is increased to 12% and at the investors’ option, the principal and interest can be converted into the Company's common stock at a 20% discount to the then current market. In addition, the Company issued five-year warrants to purchase up to 400,000 of the Company’s common shares at a price of $0.75 per share. The cash for these Notes was received prior to September 2018.

During the three months ended March 31, 2019, the Company entered several promissory notes with various investors of the Company with a face value of $960,000 in exchange for a total of $900,000 cash payments (“the Notes”). The notes have a beneficial conversion feature valued at $839,378, which is recorded as a discount. The total discount on the Notes will be amortized over the life of the Note and recorded as interest expense. The notes and have an interest rate of 7% and have a eighteen-month term with no payment required for the initial six months; after six months, the Company will repay the investors interest and principle in twelve equal installments. The principle and interest of the note is convertible into the Company’s common stock at a purchase price of $0.75 per common share at any time after the Original Issue Date. If the Company defaults on the Notes, the interest is increased to 15% and at the investors’ option, the principle and interest can be converted into the Company's common stock at a 20% discount to the then current market price.

26
Table of Contents

~~Item 6.~~~~Exhibits~~

Item 6. Exhibits

Exhibit Number		Exhibit Description

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 8

~~101~~101.INS		~~Interactive data files pursuant to Rule 405 of Regulation S-T~~Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase

~~___________~~

* Filed herewith.

** Furnished herewith.

27
Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	LEAFBUYER TECHNOLOGIES, INC.

Date: May ~~15, 2019~~14, 2020	By:	/s/ Kurt Rossner
		Kurt Rossner
		Chief Executive Officer, Director ~~(principal~~ (principal executive officer)

	By:	/s/ Mark Breen
		Mark Breen
		Chief Financial Officer and Director

	March 31, 2019			June 30, 2018
ASSETS

Current assets:
Cash and cash equivalents	$	563,383		$	375,938
Accounts receivable, net (allowance for doubtful accounts was $53,815 at March 31, 2019 and $6,617 at June 30, 2018)		58,318			8,279
Inventory		3,530			3,530
Prepaid expenses and other current assets		147,721			172,566
Total current assets		772,952			560,313
Noncurrent assets:
Intangible assets, net		3,215,250			-
Fixed assets, net		495			873
Total noncurrent assets		3,215,745			873
Total assets	$	3,988,697		$	561,186

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	194,498		$	290,783
Accrued liabilities		459,086			66,087
Deferred revenue		221,715			156,530
Debt, current		1,640,197			805,684
Total current liabilities		2,515,496			1,319,084
Debt, long-term		110,145			-
Total liabilities		2,625,641			1,319,084

Commitments and contingencies (Note 7)		-			-

Equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 6,750,000 shares issued and outstanding for class A convertible preferred stock and 70,000 shares issued and outstanding for class B convertible preferred stock at March 31, 2019 and June 30, 2018, respectively		6,820			6,820
Common stock, $0.001 par value; 150,000,000 shares authorized; 47,147,804 shares issued and outstanding at March 31, 2019 and 42,661,228 shares issued and outstanding at June 30, 2018		47,148			42,661
Additional paid in capital		10,064,214			3,130,831
Accumulated deficit		(8,755,126	)		(3,938,210	)
Total equity (deficit)		1,363,056			(757,898	)
Total liabilities and equity	$	3,988,697		$	561,186

	Three Months Ended March 31,						Nine Months Ended March 31,
	2019			2018			2019			2018

Sales revenue	$	489,320		$	287,224		$	1,296,550		$	785,969
Cost of sales		-			-			-			-
Gross profit		489,320			287,224			1,296,550			785,969

Operating expenses:
Selling expenses		70,025			53,966			200,300			138,821
General and administrative		1,947,795			1,060,829			5,556,901			1,945,141
Total operating expenses		2,017,820			1,114,795			5,757,201			2,083,962

Loss from operations		(1,528,500	)		(827,571	)		(4,460,651	)		(1,297,993	)

Other income (expense):
Interest expense		(181,643	)		(12,919	)		(356,265	)		(12,948	)
Other income		-			-			-			-
Other income (expense), net		(181,643	)		(12,919	)		(356,265	)		(12,948	)

Income tax expense		-			-			-			-
Net loss	$	(1,710,143	)	$	(840,490	)	$	(4,816,916	)	$	(1,310,941	)

Net loss per common share:
Basic and diluted	$	(0.04	)	$	(0.02	)	$	(0.10	)	$	(0.03	)

Weighted average common shares outstanding:
Basic and diluted		45,418,004			40,418,163			48,337,990			39,197,367

	Preferred Stock				Common Stock						Accumulated
	# of Shares		Amount		# of Shares		Amount		APIC		Deficit			Total
2019
Balance, June 30, 2018		6,820,000	$	6,820		42,661,228	$	42,661	$	3,130,831	$	(3,938,210	)	$	(757,898	)

Issuance of common stock for exercise of options		-		-		86,000		86		21,414		-			21,500

Issuance of common stock in conversion of notes payable and accrued interest		-		-		123,324		123		119,800		-			119,923

Stock based compensation		-		-		-		-		598,076		-			598,076

Issuance of warrant in connection with convertible notes payable		-		-		-		-		85,724		-			85,724

Net loss for the three month's ended September 30, 2018		-		-		-		-		-		(1,428,903	)		(1,428,903	)

Balance, September 30, 2018		6,820,000	$	6,820		42,870,552	$	42,870	$	3,955,845	$	(5,367,113	)	$	(1,361,578	)

Issuance of common stock for cash		-		-		1,116,738		1,117		1,043,883		-			1,045,000

Issuance of common stock for services		-		-		60,000		60		39,540		-			39,600

Issuance of common stock for exercise of options		-		-		92,947		93		23,144		-			23,237

Issuance of common stock for acquisition		-		-		2,666,667		2,667		2,557,333		-			2,560,000

Issuance of warrant in connection with convertible notes payable		-		-		-		-		171,447		-			171,447

Stock based compensation		-		-		-		-		597,293		-			597,293

Net loss for the three month's ended December 31, 2018		-		-		-		-		-		(1,677,870	)		(1,677,870	)

Balance, December 31, 2018		6,820,000	$	6,820		46,806,904	$	46,807	$	8,388,485	$	(7,044,983	)	$	1,397,129

Issuance of common stock for exercise of options		-		-		88,900		89		22,136		-			22,225

Issuance of common stock for services		-		-		2,000		2		958		-			960

Stock based compensation		-		-		-		-		573,507		-			573,507

Issuance of common stock for acquisition		-		-		250,000		250		239,750		-			240,000

Beneficial Conversion Feature of Notes Payable		-		-		-		-		839,378		-			839,378

Net loss for the three month's ended March 31, 2019		-		-		-		-		-		(1,710,143	)		(1,710,143	)

Balance, March 31, 2019		6,820,000	$	6,820		47,147,804	$	47,148	$	10,064,214	$	(8,755,126	)	$	1,363,056

	Nine Months Ended March 31,
	2019			2018
Cash flows from operating activities:
Net loss	$	(4,816,916	)	$	(1,310,941	)
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Stock compensation expense		1,768,876			239,133
Stock issued for services		40,560			280,850
Amortization of note payable discount		281,130			-
Depreciation and amortization expense		234,369			214
Changes in assets and liabilities:
Accounts receivable		(50,039	)		(9,538	)
Inventory		-			(3,652	)
Prepaid expenses and other		24,845			(187,547	)
Accounts payable		(96,285	)		-
Accrued liabilities		258,184			109,791
Net cash used in operating activities		(2,355,276	)		(881,690	)

Cash flows from investing activities:
Software acquisition		(449,241	)		-
Net cash provided by (used in) investing activities		(449,241	)		-

Cash flows from financing activities:
Proceeds from issuance of common stock		1,111,962			122,000
Proceeds from issuance of debt		2,100,000			790,603
Repayment of debt		(220,000	)		-
Net cash provided by financing activities		2,991,962			912,603

Net change in cash and cash equivalents		187,445			30,913
Cash and cash equivalents, beginning of period		375,938			164,680
Cash and cash equivalents, end of period	$	563,383		$	195,593

Cash paid for interest	$	-		$	-
Cash paid for taxes	$	-		$	-
Supplemental information for non-cash investing and financing activities:
Conversion of debt and interest plus issuance of warrants	$	377,094		$	-
Software acquisition	$	2,800,000		$	-

	March 31, 2019			March 31, 2018

Loyalty software	$	3,449,241			-
Less accumulated amortization		(233,991	)		-
Intangible assets, net	$	3,215,250		$	-

June 30, 2019, remaining	$	30,432
June 30, 2020	$	171,727
June 30, 2021	$	125,419
June 30, 2022	$	70,842

	March 31, 2019

Number of options outstanding:
Beginning of year		4,145,735
Granted		1,698,239
Exercised, converted		(267,847	)
Forfeited / exchanged / modification		(138,535	)

End of period		5,437,592

Number of options exercisable at end of period		763,453
Number of options available for grant at end of period		4,562,408

Weighted average option prices per share:
Granted during the period	$	0.66
Exercised during the period	$	0.25
Terminated during the period	$	1.19
Outstanding at end of period	$	0.25
Exercisable at end of period	$	0.25

	Three Months Ended March 31,
	2019			2018			Change			%
Sales revenue	$	489,320		$	287,224		$	202,096			70	%

Total operating expenses		2,017,820			1,114,795			903,025			81	%

Interest expense		(181,643	)		(12,919	)		(168,724	)		1,306	%

Net loss	$	(1,710,143	)	$	(840,490	)	$	(869,653	)		103	%