10-Q: Leafbuyer Technologies Reports Mixed Results in Q2 2024, Revenue Up but Losses Widen

Leafbuyer Technologies saw a slight increase in revenue but experienced a significant widening of net losses in the second quarter of fiscal year 2024.

Summary

• Leafbuyer Technologies reported a revenue increase to $2.6 million for the six months ended December 31, 2023, compared to $2.5 million for the same period in 2022.
• The company's gross profit decreased to $804,942 for the six months ended December 31, 2023, down from $1,192,291 in the same period of 2022, due to increased provider costs.
• Operating expenses rose to $1,363,030 for the six months ended December 31, 2023, compared to $1,215,114 in 2022, primarily due to increased commissions and other fees.
• The company's net loss widened to $618,608 for the six months ended December 31, 2023, compared to a net loss of $114,576 for the same period in 2022.
• As of December 31, 2023, Leafbuyer had $226,681 in cash and cash equivalents and a working capital deficit of $2,123,872.
• The company's ability to continue as a going concern is dependent on generating profitable operations or securing additional financing.

Sentiment

Score: 3

Explanation: The document presents a mixed picture with revenue growth offset by significant losses and a going concern warning. The financial situation is concerning, and the company's future is uncertain.

Positives

• The company experienced a slight increase in revenue, reaching $2.6 million for the six months ended December 31, 2023.
• The company is actively working to pass on increased provider costs to customers, which may improve gross margins in the future.

Negatives

• Gross profit decreased significantly due to industry-wide increased provider costs.
• The company's net loss widened considerably to $618,608 for the six months ended December 31, 2023.
• The company has a substantial working capital deficit of $2,123,872.
• There is substantial doubt about the company's ability to continue as a going concern.

Risks

• The company's ability to continue as a going concern is dependent on generating profitable operations or securing additional financing.
• The company operates in a rapidly evolving and highly regulated industry.
• The company is dependent on funds raised through equity financing.
• The company has a significant accumulated deficit of $25,054,306.

Future Outlook

The company plans to grow organically through aggressive sales and marketing in legal cannabis states and may look for acquisitions. Management intends to finance operating costs over the next twelve months with existing cash, private placements of common stock, or debt financing.

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.
• The company has been able to pass along most of the recent cost increases and is hopeful that gross margins return to mid-year 2023 levels going forward.

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. The company is focused on expanding its marketing and sales presence in legal cannabis states and developing innovative technologies to serve dispensaries and product companies.

Comparison to Industry Standards

• Leafbuyer's performance is mixed when compared to industry standards. While the company has shown revenue growth, the significant increase in net losses and the going concern warning are concerning.
• Many cannabis technology companies are experiencing rapid growth, but also face challenges with profitability and regulatory hurdles. Companies like Weedmaps and Jane Technologies have achieved significant scale, but also face similar challenges with profitability.
• Leafbuyer's focus on a comprehensive marketing technology platform, including texting/loyalty and order ahead technology, is in line with industry trends, but the company needs to improve its financial performance to compete effectively.
• The company's gross margin decline due to increased provider costs is a common issue in the industry, but the ability to pass these costs on to customers will be crucial for long-term success.

Related Party Transactions

• In March 2020, the Company entered into a promissory note with the Chief Executive Officer for $600,000.
• In March 2020, the Company entered into a promissory note with the Chief Technology Officer for $50,000.

Stakeholder Impact

• Shareholders face significant risk due to the company's substantial losses and going concern warning.
• Employees may be concerned about the company's financial stability and future prospects.
• Customers may be impacted if the company's financial difficulties affect its ability to provide services.
• Creditors face increased risk due to the company's high debt levels and financial instability.

Next Steps

• The company plans to continue an aggressive push into all legal cannabis states.
• The company will continue to develop innovative technologies that will serve cannabis dispensaries and product companies.
• Management intends to finance operating costs over the next twelve months with existing cash, private placements of common stock, or debt financing.

Key Dates

Keywords

cannabis, marketing technology, loyalty program, dispensaries, revenue, net loss, financial results, going concern, software platform, text messaging