10-Q: Leafbuyer Reports Q1 Loss, Revenue Drop; RagingBull Merger

Leafbuyer Technologies reported a significant revenue decline and net loss for Q1 2026, while announcing a transformative merger with RagingBull.com, LLC, including a reverse stock split and management changeover.

Summary

• Reported a net loss of $43,985 for the three months ended September 30, 2025, a significant decline from a net income of $11,502 in the prior year period.
• Revenue decreased by 40% to $973,201 for the quarter, down from $1,609,473 in the same period last year.
• Gross profit fell by 34% to $494,217, primarily due to the revenue decrease.
• Operating expenses decreased by 27% to $522,663, mainly due to lower stock-based compensation and sales commissions.
• The company announced a definitive merger agreement with RagingBull.com, LLC on November 10, 2025, which includes a reverse stock split, a name change to RagingBull.com, Inc., and a complete management changeover.
• The merger plan also involves the sale of LB Media Group LLC (operating assets) to current management, with proceeds used to pay down approximately $750,000 of debt.
• The company continues to face substantial doubt about its ability to continue as a going concern, citing a working capital deficit of $986,670 and an accumulated deficit of $24,928,442.

Sentiment

Score: 3

Explanation: The company reported significant financial deterioration with a 40% revenue drop and a shift to a net loss, coupled with a going concern warning. While the announced merger with RagingBull.com, LLC represents a potential strategic pivot and debt reduction, its execution and future success are uncertain, and the terms (e.g., $1,000 for Series A Super Voting Preferred Stock) suggest a distressed situation for existing shareholders. The ineffective disclosure controls also add to the negative sentiment.

Positives

• Reduced cash used in financing activities to $7,311 for the quarter, down from $145,128 in the prior year, primarily due to debt repayments.
• Successfully paid off all related party notes payable totaling $137,817 on September 17, 2024.
• Completed a restructuring of the technology platform to ensure 100% compliance with new FCC 23-107 regulations, leading to some customer returns and expected revenue recovery.
• The announced merger with RagingBull.com, LLC presents a strategic pivot and potential for future growth and stability, including a significant debt paydown.

Negatives

• Reported a net loss of $43,985 for the three months ended September 30, 2025, compared to a net income of $11,502 in the same period last year.
• Revenue decreased by 40% to $973,201 for the quarter, primarily due to new FCC regulations impacting SMS/MMS marketing.
• Gross profit decreased by 34% to $494,217.
• The company has a working capital deficit of $986,670 and an accumulated deficit of $24,928,442 as of September 30, 2025.
• Management concluded that disclosure controls and procedures were not effective as of June 30, 2025.
• Substantial doubt exists about the company's ability to continue as a going concern.

Risks

• Substantial doubt about the ability to continue as a going concern due to recurring losses, significant accumulated deficit, and dependence on future profitable operations or additional financing.
• Operating in a rapidly evolving and highly regulated cannabis industry, which can impact business operations and compliance requirements.
• The recent FCC 23-107 regulations significantly impacted SMS/MMS marketing strategies, leading to a 40% revenue decrease.
• Inability to raise additional capital through equity or debt financing on acceptable terms, which is crucial for financing operations.
• Uncertainty regarding the success of the proposed merger with RagingBull.com, LLC and the ability to realize anticipated benefits.
• Potential for material tax contingencies related to stock options granted below fair market value, though management does not expect it to be material.
• The company's disclosure controls and procedures were not effective as of June 30, 2025, indicating potential weaknesses in financial reporting.

Future Outlook

Management believes that actions being taken to expand products, geographical locations, and market penetration will generate additional revenues and eventually positive cash flow. The company expects to earn back some lost revenue moving forward due to platform restructuring for FCC compliance and new channel partner agreements. The announced merger with RagingBull.com, LLC is a significant strategic move aimed at transforming the company, with a name change, reverse stock split, and new management team.

Management Comments

• "Management believes that actions presently being taken to further implement our business plan of expansion of products, geographical locations we sell our services and deeper market penetration will generate additional revenues and eventually positive cash flow and provide opportunity for the Company to continue as a going concern."
• "While we believe in the viability of our strategy to generate additional revenues and our ability to raise additional funds, there can be no assurances to that effect."
• "Over the last 5 months Leafbuyer has been on the front end of this change [FCC 23-107], working with our customers to navigate this new landscape. Our revenue decrease is primarily the result of customers sending less messages or looking for alternatives with competitors trying to circumvent the regulations."
• "We have completed a restructuring of our platform to ensure Leafbuyer Technologies Inc is 100% compliant and existing customers are able to send SMS or MMS messages without having to worry about compliance. Some customers have returned after realizing this change affects the entire text marketing industry, and after empty promises by competitors were found to be non-sustainable. With these changes and the addition of several channel partner agreements we expect to earn back some of this lost revenue moving forward."
• "Our founders and our Board of Directors have been, and will continue to be, aggressive in pursuing long-term opportunities. We plan to grow organically through the aggressive deployment of sales and marketing resources into legal cannabis states. We understand that to obtain a significant market share we may need to look for acquisitions for a sizable portion of that growth. However, there can be no assurance that we will be able to locate and acquire such opportunities or that they will be on terms that are favorable to us."

Industry Context

The company operates in the rapidly evolving and highly regulated cannabis industry, which is estimated to exceed $70 billion in revenue by 2028. Recent FCC regulations (FCC 23-107) for 10DLC compliance and mandatory age gating have significantly impacted SMS/MMS marketing strategies across the industry, leading to a temporary disruption and revenue decline for companies like Leafbuyer that rely on these communication channels. The industry's regulatory complexity and rapid growth necessitate continuous adaptation and strategic positioning.

Management Changes

Corporate Governance

Legal Proceedings

• No legal proceedings of merit are currently pending or threatened against the company.

Related Party Transactions

• Outstanding promissory notes to the Chief Executive Officer ($100,000), Chief Technology Officer ($7,817), and other executives ($30,000) were paid in full on September 17, 2024.
• The merger agreement includes a Debt Exchange where all outstanding promissory notes made by the Company in favor of the Investor (a RagingBull Holder) will be exchanged for a new convertible promissory note.
• The Spinoff involves selling LB Media Group LLC, a wholly owned subsidiary, to current management of the Company or a new entity formed and controlled by current management.

Stakeholder Impact

• Shareholders: Significant dilution and potential value changes due to the 1-for-156 reverse stock split and the issuance of 15,000,000 shares to RagingBull Holders. Series A Preferred Stockholders are selling their shares for a nominal $1,000. The going concern warning also poses a risk to shareholder value.
• Employees: Current management will take over LB Media Group LLC, suggesting a shift in employment structure for some, while RagingBull's management will take over the merged entity.
• Customers: The company's platform restructuring for FCC compliance aims to ensure continued service and potentially regain lost customers. The merger could bring new services or changes to the platform.
• Creditors: The merger plan includes a Lender Paydown of approximately $750,000 of debt principal to certain Senior Lenders and the assumption of SBA Debt by LB Newco, which could improve the company's debt profile.

Next Steps

• File an Information Statement on Schedule 14C with the U.S. Securities and Exchange Commission regarding the Reorganization.
• Mail a Notice of Internet Availability of the Information Statement to shareholders of record as of November 10, 2025.
• Allow for the running of all applicable comment, review, and notice periods required by the SEC, FINRA, and applicable law for the Reorganization.
• Complete the Series A Stock Sale, Debt Exchange, Spinoff, Lender Paydown, Name Change, Reverse Split, Common Stock Issuance, and Management Changeover as part of the Reorganization.
• Continue efforts to expand products, geographical locations, and market penetration to generate additional revenues and positive cash flow.
• Continue to invest resources to upgrade internal controls.
• Evaluate whether to keep the current Denver HQ location or relocate to a smaller facility after the lease expires on December 31, 2025.

Key Dates

Recommendation

The company faces severe financial distress, evidenced by a 40% revenue decline, a shift to a net loss, a substantial working capital deficit, and an explicit 'going concern' warning. The proposed merger, while a strategic pivot, involves a highly dilutive 1-for-156 reverse stock split and the issuance of 15,000,000 new shares to the acquiring entity's holders, effectively transferring control and significantly diminishing the value of existing common stock. The sale of Series A Super Voting Preferred Stock for a mere $1,000 further underscores the distressed nature of the transaction for current equity holders. Ineffective disclosure controls also raise governance concerns. Given the dire financial state and the highly unfavorable terms for existing shareholders in the proposed merger, a strong sell recommendation is warranted.

Keywords

Cannabis Technology, Marketing Platform, SEC Filing, Quarterly Report, Financial Results, Merger, RagingBull.com, Reverse Stock Split, Going Concern, Regulatory Compliance, SMS Marketing, MMS Marketing, FCC Regulations, Debt Reduction, LB Media Group, Equity Financing