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 September 30, 2021 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, 2022. 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, 2021, 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

Our wholly owned subsidiary, LB Media Group, LLC has evolved and grown from a listing website to a comprehensive marketing technology platform. Our clients, medical and recreational dispensaries in legalized cannabis states, along with cannabis product companies subscribe to our technology platform to assist in new customer acquisition and provide retention tools that include texting/loyalty and ordering ahead technology.

The Leafbuyer Technology Platform reaches millions of cannabis consumers every month through its web-based platform, loyalty platform and smart application technology. Our website's sophisticated vendor dashboard allows our clients to update menus, deals and create real-time messages to communicate to consumers 24/7. The platform also provides a robust reporting feature to track the vendors' return on investment. With the increased popularity of Leafbuyer texting/loyalty program, clients can communicate through SMS, MMS as well as push notifications within a custom branded application. Our website, Leafbuyer.com, and its progressive web application hosts a robust search algorithm similar to popular travel or hotel sites, where our clients customers can search the database for appealing offers. 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. In November of 2020 Leafbuyer Technologies Inc. completed a customizable white label application for the dispensary clients. Consumers have the ability to search, shop, earn rewards, place orders and communicate with their favorite stores all in one convenient application. The application can also be completely branded for the dispensary and allows for 24/7 communication with their patrons.

We continue an aggressive push into all legal cannabis states. Increasing our marketing and sales presence in new markets is a primary objective. Along with this expansion, we continue 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 $70 billion in revenue by the year 2028. Our founders and our Board of Directors has 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 significant market share in the industry in the future 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.






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The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.





Comparison of results of operations for the three months ended September 30,
2021 and 2020



                                          Three months Ended
                                            September 30,
                                         2021            2020          Change          %
Revenue                               $   851,693     $  652,723     $   198,970         30 %
Cost of revenue                           630,536        455,819         174,717         38 %
Gross profit                              221,157        196,904          24,253         12 %

Total operating expenses                  809,639        921,967        (112,328 )      (12 )%

Gain (loss) on derivative liability     3,046,772        922,334       2,124,458        230 %
Gain of PPP Forgiveness                   577,977              -         557,977            %
Interest expense                          (57,286 )     (141,971 )        84,685        (60 )%

Net income                            $ 2,958,981     $   55,280     $ 2,903,701       5253 %




Revenues

During the three months ended September 30, 2021, we generated $851,693 of revenues, compared to revenues of $652,723 during the three months ended September 30, 2020. The increase was primarily due to the increase in text services which is up 15% over the prior year.





Gross Profit

Gross profit increased to $221,157 for the period ended September 30, 2021 which was an increase of $24,253 over the same period ended September 30, 2020. Gross profit as a percentage of revenue decreased from 30% to 26% for because of the increased 3rd party software development costs expended on the technology platform.





Expenses

During the three months ended September 30, 2021, we incurred total operating expenses of $809,639, including $578,133 in general and administrative expenses, and $231,506 in selling expenses. During the three months ended September 30, 2020, we incurred total operating expenses of $921,967, including $657,123 in general and administrative expenses, and $264,844 in selling expenses. The decrease of $112,328 or 12% was primarily due to less payroll expense and lower general and administrative expense. Management expects the general and administrative expenses to continue to decrease as management focuses on getting current operations to positive cash flow.

We did not properly record a derivative liability related to the 55% conversion feature in the Series A preferred stock in prior periods. We corrected this error by recording a liability and charging this amount against retained earnings as of June 30, 2019. Each period thereafter we are required to perform a mark to market adjustment to the derivative liability. During the three months ended September 30, 2021 we recorded an unrealized gain of $3,046,772 the estimated fair value of the derivative changed at the end of the period. During this same period in 2020, the estimated fair value of the derivative decreased therefore the liability was reduced generating unrealized gain of $922,314.

Other income during the period ended September 30, 2021 was the result of the SBA PPP loan forgiveness of $577,977, offset by recurring interest expense. Interest expense was $57,286 for the three months ended September 30, 2021 compared to interest expense of $141,971 for the same period ending September 30, 2020 because of the reduction in notes payable during the year.






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Net Income

During the three months ended September 30, 2021 we realized net income of $2,958,981, compared to a net income of $55,280 for the three months ended September 30, 2020.

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.

At September 30, 2021 we had $568,148 in cash and cash equivalents.





Cash Flows



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



                                                Three months Ended September,
                                                 2021                  2020

Net cash used in operating activities $ (116,491 ) $ (427,685 ) Net cash used in investing activities $

             -       $             -
Net cash provided by financing activities   $             -       $             -

As of September 30, 2021, we had $568,148 in cash and cash equivalents and a working capital deficit of $6,037,824. We are dependent on funds raised through equity financing. Our cumulative net loss of $21,847,200 was funded by equity financing and we reported a net loss from operations of $588,482 for the three months ended September 30, 2021. During the three months ending September 30, 2021, we did not raise or expended any monies through financing activities, and we did not expend any monies through investing activities (acquiring assets).

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of September 30, 2021 and June 30, 2021.





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, 2021 form 10-K in the Critical Accounting Policies section of Management's Discussion and Analysis of Financial Condition and Results of Operations.






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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. For a detailed discussion about the Company's significant accounting policies, refer to Note 2 - "Summary of Significant Accounting Policies," in the Company's consolidated financial statements included in the Company's June 30, 2021 Form 10-K. 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

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. Actual results could differ from those estimates.





Revenue Recognition

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.

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

Recent Accounting Guidance Adopted

We have implemented all new accounting pronouncements that are in effect and applicable to us. These pronouncements did not have any material impact on our financial statements unless otherwise disclosed, and we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.






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