10-Q: Leafbuyer Technologies Reports Mixed Results in Q3 2024, Revenue Up but Losses Widen

Leafbuyer Technologies saw a revenue increase in Q3 2024, but also experienced a widening net loss compared to the same period last year.

Summary

• Leafbuyer Technologies reported a revenue of $1.5 million for the three months ended March 31, 2024, an increase from $1.3 million in the same period of 2023.
• The company's gross profit for the quarter was $563,051, up from $516,431 in the prior year.
• Operating expenses totaled $702,483 for the quarter, compared to $651,521 in the same period of 2023.
• The net loss for the quarter was $171,649, slightly higher than the $170,458 loss in the same quarter of the previous year.
• For the nine months ended March 31, 2024, revenue was $4.1 million, up from $3.8 million in the same period of 2023.
• However, gross profit for the nine-month period decreased to $1.37 million from $1.7 million in the prior year.
• The net loss for the nine-month period was $790,260, significantly higher than the $416,320 loss in the same period of 2023.
• The company had $155,942 in cash and cash equivalents as of March 31, 2024, and a working capital deficit of $2,011,802.
• The company's accumulated deficit was $25,225,958 as of March 31, 2024.

Sentiment

Score: 3

Explanation: The document presents a mixed picture with revenue growth offset by significant losses and a going concern issue, indicating a negative outlook from an investment perspective.

Positives

• The company experienced a 16% increase in revenue for the quarter ending March 31, 2024, driven by additional text services.
• Gross profit increased by 9% for the quarter ending March 31, 2024, as the company passed along cost increases.
• Revenue increased by 9% for the nine months ended March 31, 2024, driven by additional text services.
• Interest expense decreased due to a reduction in notes payable.

Negatives

• The company's net loss widened to $790,260 for the nine months ended March 31, 2024, compared to $416,320 in the same period of 2023.
• Gross profit decreased by 20% for the nine months ended March 31, 2024, due to increased provider costs.
• The company has a significant accumulated deficit of $25,225,958.
• The company has a working capital deficit of $2,011,802.
• The company has a going concern issue due to recurring losses and a significant accumulated deficit.

Risks

• The company is dependent on funds raised through equity financing.
• There is substantial doubt about the company's ability to continue as a going concern within one year.
• The company operates in a rapidly evolving and highly regulated industry.
• The company's ability to generate profitable operations is uncertain.
• The company may not be able to obtain necessary financing to meet its obligations.

Future Outlook

Management intends to finance operating costs over the next twelve months with existing cash on hand and/or the private placement of common stock or obtaining debt financing, but there is no assurance that the company will be able to raise additional capital.

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.
• 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.

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, indicating significant growth potential but also intense competition and regulatory challenges.

Comparison to Industry Standards

• Leafbuyer's revenue growth of 9% for the nine months ended March 31, 2024, is below the average growth rate of some of the larger players in the cannabis technology sector, such as Akerna Corp, which has seen higher growth rates in some quarters.
• The company's gross profit margin has decreased to 33% for the nine months ended March 31, 2024, which is lower than some of its competitors, such as Weedmaps, which has reported higher gross margins.
• Leafbuyer's net loss of $790,260 for the nine months ended March 31, 2024, is a concern, especially when compared to companies like Shopify, which has a similar business model but is profitable.
• The company's reliance on debt financing and equity raises is similar to other early-stage cannabis tech companies, but the going concern issue is a significant risk.
• Compared to companies like Dutchie, which has raised significant capital, Leafbuyer's financial position is weaker, indicating a need for more robust financial strategies.

Related Party Transactions

• The company entered into promissory notes with the Chief Executive Officer and Chief Technology Officer.
• The company entered into two promissory notes with executives of the company for a total value of $65,000.

Stakeholder Impact

• Shareholders face significant risk due to the company's going concern issue and widening losses.
• Employees may be impacted by the company's financial instability.
• Customers may be affected by potential changes in the company's services.
• Suppliers and creditors face increased risk due to the company's financial challenges.

Next Steps

• The company plans to continue an aggressive push into all legal cannabis states.
• The company plans to increase its marketing and sales presence in new markets.
• The company plans to develop innovative technologies to serve cannabis dispensaries and product companies.
• The company may look for acquisitions to obtain a significant market share.

Key Dates

Keywords

cannabis, marketing technology, revenue, net loss, financial results, going concern, debt, equity financing, SaaS, text messaging, loyalty program