10-K: Leafbuyer Technologies Achieves Profitability in FY2025

Leafbuyer Technologies, Inc. reported a net profit of $260,672 for the fiscal year ended June 30, 2025, marking a significant turnaround from the previous year's loss, driven by revenue growth and cost efficiencies.

Summary

• Leafbuyer Technologies, Inc. (LBUY) reported a net profit of $260,672 for the fiscal year ended June 30, 2025, a substantial improvement from a net loss of $709,430 in the prior year.
• Revenue increased by 16% to $6,471,573 in FY2025, up from $5,601,357 in FY2024, primarily due to upgrades from existing contracts and new channel partner agreements.
• Gross profit rose by 38% to $2,824,810 in FY2025, with gross profit margin improving from 37% to 44% due to more favorable pricing negotiated with third-party text providers.
• Total operating expenses decreased by 4% to $2,522,633 in FY2025, mainly due to reduced sales payroll, commission, and stock-based compensation expenses.
• Cash and cash equivalents increased significantly to $853,759 as of June 30, 2025, from $165,332 in the prior year.
• Despite the profit, the company still has a working capital deficit of $1,042,874 and an accumulated deficit of $24,884,457 as of June 30, 2025, raising substantial doubt about its ability to continue as a going concern.
• Leafbuyer launched two new products in June 2024: an enhanced loyalty program and "Instant Action" for video/social media reels in MMS messaging, creating a new premium revenue stream.
• The company continues an aggressive expansion into all legal cannabis states, currently operating in 26 states, and has solid integrations with 90% of top Point-of-Sale (POS) companies.

Sentiment

Score: 6

Explanation: The company achieved profitability and revenue growth, demonstrating operational improvements and successful product launches. However, the persistent "going concern" doubt, substantial accumulated deficit, working capital deficit, and identified material weaknesses in internal controls present significant risks and uncertainties. The market headwinds in texting services also pose a challenge.

Positives

• Achieved a net profit of $260,672 in FY2025, a significant turnaround from a $709,430 net loss in FY2024.
• Revenue increased by 16% to $6,471,573 in FY2025, driven by contract upgrades and new channel partner agreements.
• Gross profit margin improved from 37% in FY2024 to 44% in FY2025 due to favorable pricing negotiations with third-party text providers.
• Operating expenses decreased by 4% to $2,522,633 in FY2025, reflecting successful cost control measures.
• Net cash provided by operating activities was $855,488 in FY2025, a substantial improvement from net cash used of $131,136 in FY2024.
• Cash and cash equivalents increased to $853,759 as of June 30, 2025, from $165,332 in the prior year.
• Launched new products in June 2024, including an enhanced loyalty program and "Instant Action" for video messaging, which is expected to generate new premium revenue.
• Expanded operations to 26 legal cannabis states and maintains integrations with 90% of top POS companies.
• Reduced accumulated deficit from $25,145,128 in FY2024 to $24,884,457 in FY2025.

Negatives

• Substantial doubt about the company's ability to continue as a going concern due to recurring losses from operations and a significant accumulated deficit of $24,884,457 as of June 30, 2025.
• A working capital deficit of $1,042,874 as of June 30, 2025, indicates short-term liquidity challenges.
• Internal control over financial reporting was not effective as of June 30, 2025, due to material weaknesses including inadequate segregation of duties, lack of multiple levels of supervision, and insufficient technical accounting support for complex transactions.
• The company is completely dependent on the services of its President, CEO, and CFO, with no contractual obligation for them to remain employed.
• Faces headwinds in terms of decreased market demand for texting products due to mandatory DLC registration and increased scrutiny of marketing messages.
• The common stock is quoted on the OTC Markets, characterized by thin trading, wide price fluctuations, and subject to penny stock rules, limiting liquidity and potentially affecting market value.
• Outstanding notes payable to related parties and other notes payable are in default and due upon demand, totaling $429,000 in notes payable and accrued interest on related party notes.

Risks

• Minimal Financial Resources and Going Concern: Substantial doubt about the ability to continue as a going concern due to recurring losses, a significant accumulated deficit ($24,884,457), and dependence on future financing.
• Dependence on Key Personnel: Operations are completely dependent on the President, CEO, and CFO (Kurt Rossner, Michael Goerner, Mark Breen), who are not under contractual obligation to remain employed.
• High Risk of Business Failure in Cannabis Industry: Operating in a highly regulated industry where the core product is federally illegal, leading to uncertainty in regulation and potential for new restrictive laws.
• Uncertainty in Cannabis Industry Growth: The industry is relatively new, and future research or regulatory changes could adversely affect social acceptance and demand for cannabis products and services.
• Competition for Technical Personnel: Difficulty in attracting and retaining highly qualified technical personnel due to intense competition.
• Competition from Larger Companies: Faces intense competition from companies with significantly greater financial, technical, marketing, and other resources.
• Need for Additional Financing: May require additional financing for expansion, with no guarantee of availability or favorable terms, which could curtail operations.
• Concentrated Ownership: Officers and directors own 25.8% of voting power, and two institutional investors each own 15.1%, giving them controlling influence and potential for conflicts of interest.
• Lack of Liquidity and Volatility of Common Stock: Trading on OTC Markets, which is less regulated, subject to abuses, volatility, and short selling, with no assurance of an active trading market.
• Penny Stock Rules: Trading in common stock is subject to penny stock rules, which may discourage broker-dealers and limit market price and liquidity.
• Dilution from Future Issuances: Authorization for 700,000,000 common shares and 10,000,000 preferred shares could lead to dilution of existing stockholders.
• Public Company Requirements Strain: Significant legal and financial compliance costs, management distraction, and potential difficulty in attracting/retaining qualified directors/officers.
• Broker-Dealer Compliance Risk: Potential claims for rescission, penalties, or fines if securities are offered without engaging a registered broker-dealer.
• Cybersecurity Incidents: Significant risks including data breaches, operational disruption, intellectual property theft, regulatory/legal compliance issues, and third-party risks, despite implemented measures.
• Internal Control Weaknesses: Inadequate segregation of duties, lack of multiple levels of supervision and review, and insufficient technical accounting support for complex debt and preferred stock transactions.

Future Outlook

The company anticipates continued growth as more states legalize cannabis, benefiting from its asset-light business model. It plans to accelerate growth through custom-branded applications, which offer push notifications to reduce SMS/MMS costs, and will continue organic expansion through aggressive sales and marketing. Acquisitions are also considered for significant market share growth, though no assurances are given regarding their availability or favorable terms. The company acknowledges headwinds from decreased market demand for texting products due to mandatory DLC registration and increased scrutiny of marketing messages, hoping this is a temporary pullback.

Management Comments

• We believe we answered that test with new technology enhancements that now include delivery features, increased POS integrations, real-time posting of messages to Leafbuyer.com, notifications through SMS/MMS and push notification technology and the ability to target market consumers buy spending habits.
• One of our top priorities has been reducing costs by building better more efficient technology, while converting some positions to part-time and focusing on high-margin products that help retain current customers.
• In 2024 we have continued to focus on cutting and renegotiating system costs, credit card expenses and other insurance related costs to improve the efficiency of the company. This has translated into thousands of dollars in monthly savings.
• Our business model is designed to benefit from this trend [continued legalization]. When a new state passes a medical or recreational cannabis law, we can start marketing to consumers and businesses in that state with minimal marginal cost.
• We anticipate a significant reduction in provider costs over time as each application sold allows for push notifications, which reduces our overall cost to send via SMS or MMS.
• We understand that to obtain a significant market share in the industry in the future it will require us to look for acquisitions for a significant portion of that growth. However, there can be no assurance that we will be able to locate and acquire such opportunities or that they will be on terms that are favorable to us.
• The company does see headwinds on the horizon in terms of decreased market demand for texting products across the market. With the start of mandatory DLC registration, some customers have opted out of service contracts due to the increased scrutiny of marketing messages. The company's hope is this is a temporary pullback in ad spending and continued growth can possibly occur in the future.
• 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.
• Management believes that despite our material weaknesses set forth above, our financial statements for years ended June 30, 2025 and 2024 are fairly stated, in all material respects, in accordance with U.S. GAAP.

Industry Context

Leafbuyer Technologies operates in the rapidly expanding legal cannabis market, which Fortune Business Insights estimates to reach a global market size of $444.34 billion by 2030 with a 34.03% CAGR. The company's asset-light marketing technology platform positions it to capitalize on state-by-state legalization without the heavy capital expenditure of cultivation or retail. However, the industry faces regulatory uncertainty due to cannabis's federal illegality in the U.S., and the company specifically notes headwinds in its texting services due to new mandatory DLC registration and increased scrutiny of marketing messages, which could impact demand.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results to global benchmarks.
• The company states it has "solid integrations with 90% of the top POS companies," which suggests a strong competitive position in terms of platform compatibility within its niche.
• The company's "Total Network Solution" and "Instant Action" products are presented as competitive advantages, allowing access to new customers and more impactful messaging compared to other texting companies.

Corporate Governance

Related Party Transactions

• March 2020 Promissory Note: Original $600,000 loan from a related party at 12% interest, due December 2020. $100,000 was outstanding as of June 30, 2024, and was repaid by June 30, 2025. The note was in default and due upon demand. Accrued interest was $15,146 as of June 30, 2025.
• April 2020 Promissory Note: Original $50,000 loan from a related party at 10% interest, due December 2020. $7,817 was outstanding as of June 30, 2024, and was repaid by June 30, 2025. The note was in default and due upon demand, with interest increased to 12%. Accrued interest was $2,373 as of June 30, 2025.
• March 2024 Promissory Notes: Two notes totaling $65,000 from related parties at 12% interest, due May 2024. $30,000 was outstanding as of June 30, 2024, and was paid on September 17, 2024. Accrued interest was $3,792 as of June 30, 2025.

Stakeholder Impact

• Shareholders: Potential for increased value due to profitability and revenue growth, but significant risks from going concern, internal control weaknesses, and market volatility on OTC Markets. Dilution risk from future capital raises.
• Employees: The company has 12 full-time and part-time employees. Management's focus on cost control and efficient technology could impact staffing levels or roles.
• Customers (Dispensaries/Product Companies): Benefit from new product offerings (enhanced loyalty, Instant Action), expanded state coverage, and robust POS integrations. Potential impact from "headwinds" in texting market demand.
• Creditors: Some related party notes were in default but have been repaid. The going concern risk could affect future credit availability or terms.
• Regulatory Bodies: The company operates in a highly regulated and federally illegal industry, requiring continuous compliance and facing potential changes in laws. Internal control weaknesses could draw regulatory scrutiny.

Next Steps

• Continue aggressive deployment of sales and marketing resources into legal cannabis states.
• Continue to develop new technologies to serve cannabis dispensaries and product companies.
• Look for acquisitions to obtain significant market share in the future.
• Implement remediation initiatives for internal control weaknesses, including appointing additional qualified personnel, modifying financial controls, and implementing new controls for accounting transactions.
• Monitor and evaluate the effectiveness of internal controls and procedures on an ongoing basis.
• Determine the possible exposure and necessary expense accrual for a tax contingency related to stock options granted below fair market value.

Key Dates

Recommendation

While Leafbuyer Technologies demonstrated a significant turnaround to profitability and strong revenue growth in FY2025, these positive developments are heavily offset by persistent and material risks. The "going concern" doubt, substantial accumulated deficit, and working capital deficit indicate ongoing financial fragility. Furthermore, the identified material weaknesses in internal controls over financial reporting are a serious concern for investors, suggesting potential for misstatements or operational inefficiencies. The company's dependence on key executives and the inherent volatility and limited liquidity of its common stock on the OTC Markets also add to the risk profile. Given the mix of positive operational momentum and severe financial and governance risks, a "hold" recommendation is appropriate. Investors should monitor the company's progress in addressing its going concern status and internal control weaknesses, as well as the impact of industry headwinds, before considering further investment.

Keywords

Cannabis technology, Marketing platform, Dispensary solutions, SMS marketing, MMS messaging, Loyalty program, Online ordering, Cannabis industry, SEC filing, 10-K, Financial results, Going concern, Risk factors, Leafbuyer Technologies