The unaudited interim condensed consolidated financial statements of Leafbuyer Technologies, Inc. (“we”, “our”, “us”, the “Company”) follow. All currency references in this report are to US dollars unless otherwise noted.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1 — Description of Business
All references herein to “us,” “we,” “our,” “Leafbuyer,” or the “Company” refer to Leafbuyer Technologies, Inc. and its subsidiary, LB Media.
Description of Business
The Company has evolved and grown from a listing website (Leafbuyer.com) to a comprehensive marketing technology platform that focuses on new customer acquisition, retention and now online-order ahead services. By combining years of experience in the consumer marketing space and the increased popularity of Leafbuyer’s texting/loyalty program, Leafbuyer has developed a diverse product offering with a distinct competitive advantage. Through proprietary technology, dispensary owners can leverage SMS and MMS messaging to connect customers directly to loyalty and rewards programs as well as the ability to confirm online orders for either pickup or delivery. Leafbuyer has also developed technology designed to attract new dispensary customers to become part of loyalty and rewards programs.
The Company’s website, Leafbuyer.com, and its progressive web application hosts a robust search algorithm similar to popular travel or hotel sites, where consumers 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. The site’s sophisticated vendor dashboard pairs vendor data with consumer needs and presents a robust, 24/7 real-time dashboard where vendors can update menus, specials, available jobs, and more. The system helps to track the vendors’ return on investment. The company monetizes its platform through a combination of monthly subscription fees, sign up credits and certain transaction fees associated with consumer engagement.
Basis of Presentation
The accompanying condensed consolidated balance sheet as of June 30, 2020, has been derived from audited financial statements. The accompanying unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements being audited and in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. In the opinion of management, such unaudited information includes all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of this interim information. All intercompany transactions have been eliminated in consolidation. Operating results and cash flows for interim periods are not necessarily indicative of results that can be expected for the entire year. The Company uses the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. The information included in this report should be read in conjunction with our audited financial statements and notes thereto.
Going Concern
As of March 31, 2021 we had $844,860 in cash and cash equivalents and a working capital deficit of $1,775,378. We are dependent on funds raised through equity financing. Our cumulative net loss of $17,307,556 was funded by debt and equity financing and we reported a net loss of $1,306,432 for the nine months ended March 31, 2021. Accordingly, there is substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued.
Our ability to continue as a going concern is dependent upon our generating profitable operations in the future and / or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. 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.
Note 2 — Summary of Significant Accounting Policies
Significant Accounting Policies
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, LB Media. All significant inter-company transactions and balances have been eliminated in consolidation.
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, 2020 Form 10-K. During the nine months ended March 31, 2021, there were no significant changes made to the Company’s significant accounting policies.
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. Examples of estimates include loss contingencies; useful lives of our tangible and intangible assets; allowances for doubtful accounts; and stock-based compensation forfeiture rates. Examples of assumptions include: the elements comprising a software arrangement, including the distinction between upgrades or enhancements and new products; when technological feasibility is achieved for our products; the potential outcome of future tax consequences of events that have been recognized in our financial statements or tax returns. Actual results could differ from those estimates.
Reclassifications
Certain prior period amounts have been reclassified to conform with the current period presentation. The Cost of sales presented on the unaudited Consolidated Statements of Operations was included in prior presentations as operating expenses such as personnel expenses and general and administration. For the three months ended March 31, 2021 $395,421 of the cost of sales came from personnel expense and $53,541 of cost of sales came from general and administrative expense. For the nine months ended March 31, 2021 $1,250,126 of cost of sales came from personnel expense and $224,188 of cost of sales came from general and administrative expense.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which introduces new guidance for the accounting for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale (AFS) debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The pronouncement will be effective for public business entities that are SEC filers in fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The effect of the adoption of this pronouncement to the Company was immaterial.
In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s own Equity (Subtopic 815-40). ASU 2020-06 requires entities to provide expanded disclosures about the terms and features of convertible instruments and reduces the number of accounting models for convertible instruments and allows more contracts to qualify for equity classification. The pronouncement will be effective for public business entities that are SEC filers in fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted but no earlier than fiscal years beginning December 15, 2020.
No other recent accounting pronouncements were issued by FASB and the SEC that are believed by management to have a material impact on the Company’s present or future condensed consolidated financial statements.
Note 3 — Property and Equipment
Property and equipment consist of the following:
|
|
|
March 31,
2021
|
|
|
June 30,
2020
|
|
|
|
|
|
|
|
|
|
|
Software platform
|
|
$
|
4,482,225
|
|
|
$
|
4,482,225
|
|
|
Furniture and fixtures
|
|
|
1,500
|
|
|
|
1,500
|
|
|
Less accumulated depreciation and amortization
|
|
|
(1,628,689
|
)
|
|
|
(1,085,355
|
)
|
|
Property and equipment, net
|
|
$
|
2,855,036
|
|
|
$
|
3,398,370
|
|
On November 6, 2018, the Company acquired a customer facing software (“Loyalty Software”) through a Stock Purchase Agreement, where the Company acquired all the issued and outstanding capital stock of Greenlight Technologies, Inc. (“GTI”) from its shareholders. At the time of the transaction, there were no employees working for GTI, no systems and no assets, other than the Loyalty Software. GTI’s legal entity was dissolved in the transition and the Loyalty Software was assumed by the Company. Management determined that the purchase of GTI did not constitute a business purchase and recorded the transaction as a purchase of software. The consideration for the Loyalty Software was 2,916,667 shares of common stock, par value $0.001 per share and cash of approximately $450,000. Total value of the Loyalty Software was estimated at approximately $3,010,000. The additional consideration for future developments will be evaluated and considered enhancements which will either be capitalized to the software or expensed as research and development costs. During the year ended June 30, 2020 additional Incentive Shares of 366,667 for a value of $262,500 was issued to shareholders of GTI as final settlement of the 2018 agreement. During the nine months ended March 31, 2021 there was no software capitalized and for the same period ended 2020, the Company capitalized approximately $492,899 of software enhancements.
GTI provides cannabis consumers real-time mobile ordering and loyalty rewards through an internally developed application that integrates with the local dispensary’s point of sale system. The Company plans to fully integrate this technology into the current platform and create an “Ultimate Bundle” of services for the cannabis industry.
Amortization expense, recorded as cost of revenue, related to internal use software totaled $543,334 during the nine months ended March 31, 2021 and for the same period ended 2020 amortization expenses was $514,360. Amortization expense for the next five years is as follows:
|
2021
|
|
$
|
724,445
|
|
|
2022
|
|
|
724,445
|
|
|
2023
|
|
|
724,445
|
|
|
2024
|
|
|
622,359
|
|
|
2025
|
|
|
59,342
|
|
|
Total Unamortized Expense
|
|
$
|
2,855,036
|
|
Note 4 — Capital Stock and Equity Transactions
The Company has 150,000,000 shares of common stock authorized with a par value of $0.001 per share as of March 31, 2021. In addition, the Company has 10,000,000 shares of preferred stock authorized with a par value of $0.001 per share as of March 31, 2021 of which 3,000,000 shares of preferred stock are designated as Series A Preferred Shares, all of which were issued and outstanding as of March 31, 2021 and 1,120,000 shares of preferred stock are designated as Series B Preferred Shares, all of which were issued and outstanding as of March 31, 2021.
The Series A Preferred Shares currently outstanding are convertible into the greater of one share of Common Stock or a number of shares of Common Stock so that the Series A holders would hold 55% of the number of outstanding shares of Common Stock. The Series A Shares vote on an “as-converted” basis. Series A Convertible Preferred Stock was originally convertible into 3,000,000 common shares based on the total outstanding equity as of March 23, 2017. As of March 31, 2021, the Series A Convertible Preferred Stock would be convertible into approximately 113,985,000 common shares, based on 140,331,966 fully diluted common shares outstanding as of March 31, 2021.
Issuance of Common Stock
During the nine months ended March 31, 2021, the Company issued 4,000,000 shares of Common Stock to Note Payable Holders as satisfaction of principal obligations. These shares were valued at fair market value of $300,000.
During the nine months ended March 31, 2021 the Company issued 1,219,833 shares of Common Stock to employees. These shares were valued at fair market value of $119,737 and expensed in the accompanying Condensed Consolidated Statement of Operations.
During the nine months ended March 31, 2021, the Company issued 1,340,630 and 62,288 shares of Common Stock respectively to vendors and non-management members of the board of directors for services rendered. These shares were valued at fair market value of $154,376 and expensed in the accompanying Condensed Consolidated Statement of Operations.
During the nine months ended March 31, 2020, the Company issued 860,950 shares of Common Stock to employees. These shares were valued at fair market value of $105,116 and expensed in the accompanying Condensed Consolidated Statement of Operations.
During the nine months ended March 31, 2020, the Company issued 1,815,220 shares of Common Stock to Note Payable Holders as satisfaction of these obligations. These shares were valued at fair market value of $131,000.
During the nine months ended March 31, 2020 the Company issued 366,667 shares of Common Stock valued at $262,500 to shareholders of GTI as final settlement of the 2018 agreement. See Footnote 3.
During the nine months ended March 31, 2020, the Company issued 30,299,998 shares of common stock pursuant to the Purchase Agreement and received $4,037,888.
Note 5 — Debt
During February 2018, the Company issued a promissory note in favor of an investor of the Company in the amount of $150,000 in exchange for $132,000 cash. The note has an original issue discount of $18,000 that is being amortized to interest expense over the term of the note. In March 2019, the loan maturity date was extended to August 8, 2019, the discount is fully amortized and total unpaid principal and interest is approximately $206,515, accruing at 12% at March 31, 2021, and is payable upon demand.
On September 21, 2018, the Company entered into a promissory note with an investor of the Company with a face value of $440,000 in exchange for a $400,000 cash payment (“Convertible Note”). The discount of the Convertible Note will be amortized over the life of the Convertible Note and have an interest rate of 10%. The Convertible Note has a twelve-month term with no payment required for the initial six months; after six months, the Company will repay the investors interest and principal in six equal installments. The principal and interest of the note is convertible into the Company’s common stock at a purchase price of $0.70 per common share after the six months. If the Company defaults on the Convertible Note, the interest is increased to 12% and at the investors’ option, the principal and interest can be converted into the Company common stock at a 20% discount to the then current market. In addition, the Company issued five-year warrants to purchase up to 200,000 common shares of the Company at a price of $0.75 per share. The value assigned to the warrants of $125,723 has been fully amortized. The cash for this Convertible Note was received prior to September 30, 2018. As of March 31, 2021, the Convertible Note is payable upon demand and total unpaid principal and interest outstanding is approximately $568,311.
On September 21, 2018, the Company entered into several promissory notes with various investors of the Company with an aggregate face value of $440,000 in exchange for $440,000 cash payment (“the 2018 Notes”), the discount of the Notes will be amortized over the life of the Note and have an interest rate of 10%. The 2018 Notes have a twelve-month term with no payment required for the initial six months; after six months, the Company will repay the investors interest and principal in six equal installments. The principal and interest of the note is convertible into the Company’s common stock at a purchase price of $0.70 per common share after the six months. If the Company defaults on the 2018 Notes, the interest is increased to 12% and at the investors’ option, the principal and interest can be converted into the Company common stock at a 20% discount to the then current market price. In addition, the Company issued five-year warrants to purchase up to 200,000 of the Company’s common shares at a price of $0.75 per share. The cash for the 2018 Notes was received prior to September 30, 2018. The value assigned to the warrants of $62,862 has been fully amortized. In March 2020, $220,000 of the 2018 Notes have been fully extinguished and the remaining $220,000 is in default and payable upon demand. As of March 31, 2021, the total unpaid principal and interest is approximately $284,156.
During the year ended June 30, 2019, the Company entered into several promissory notes with various investors of the Company with an aggregate face value of $960,000 in exchange for a total of $900,000 cash payments (“the 2019 Notes”). The 2019 Notes have a beneficial conversion feature valued at $839,378, which is recorded as a discount. The total discount on the Notes will be amortized over the life of the 2019 Notes and recorded as interest expense. The notes have an interest rate of 7% and have an eighteen-month term with no payment required for the initial six months; after six months, the Company will repay the investors interest and principal in twelve equal installments. The principal and interest of the note is convertible into the Company’s common stock at a purchase price of $0.75 per common share at any time after the Original Issue Date. If the Company defaults on the Notes, the interest is increased to 15% and at the investors’ option, the principal and interest can be converted into the Company common stock at a 20% discount to the then current market price. The beneficial ownership value assigned to the conversion feature of $801,741 has been fully amortized. As of March 31, 2020, $533,000 of the 2019 Notes have been fully extinguished as $402,000 of debt repayment and the issuance of common stock valued at $131,000. On January 25, 2021, $300,000 of the 2019 Notes have been fully extinguished with the issuance of 4,000,000 of common stock at a price of $0.075 per share. The remaining principal of $90,124 is in default and payable upon demand. As of March 31, 2021, the total unpaid principal and interest is approximately $150,407.
In March 2020, the Company entered into a promissory note with a related party (see Note 9) with a face value of $600,000 in exchange for a total of $565,000 cash payments. The total discount of the Note will be amortized over the life of the Note and recorded as interest expense which matured on December 1, 2020. In January 2021, the Company repaid $300,000 of the promissory note balance. The note is in default and due upon demand and the interest rate was increased to 12%. As of March 31, 2021, the total unpaid principal and interest is approximately $349,841.
In March 2020, the Company entered into a promissory note with a related party (see Note 9) with a face value of $50,000. In January 2021, the Company repaid $25,000 of the promissory note balance. The note is in default and the interest rate increased to 12%. As of March 31, 2021, the total unpaid principal and interest is approximately $29,137.
On April 30, 2020 the Company executed the standard loan documents required for securing a loan (the “EIDL Loan”) from the United States Small Business Administration (the “SBA”) under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. The principal amount of the EIDL Loan is $500,000, with proceeds to be used for working capital purposes. Interest on the EIDL Loan accrues at the rate of 3.75% per annum and installment payments, including principal and interest, are due monthly beginning twelve months from the date of the EIDL Loan in the amount of $2,437 The balance of principal and interest is payable thirty years from the date of the promissory note.
On May 29, 2020, the Company was granted a loan from American Express National Bank in the aggregate amount of $602,478, pursuant to the Paycheck Protection Program (“PPP) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The Loan which was in the form of a Note dated May 29, 2020, matures on May 29, 2022 and bears interest at a rate of 1.00% per annum, payable monthly commencing on December 29, 2020. The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties. Funds from the Loan may only be used for payroll costs, costs used to continue group health care benefits, rent, utilities and interest on other debt obligations incurred before February 15, 2020. The Company intends to use the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. While the Company currently believes that its use of the loan proceeds will meet the conditions for forgiveness of the loan, it cannot be assured that the Company will be ineligible for forgiveness of the loan, in whole or in part. On January 5, 2021 the Company was notified by American Express National Bank that the United States Small Business Administration has approved our Loan Forgiveness Application and the loan has been closed. The Company realized other income from the forgiveness of the PPP loan in the Condensed Consolidated Statement of Operations for the three months ended March 30, 2021.
On March 30, 2021, the Company was granted a loan from American Express National Bank in the aggregate amount of $557,977, pursuant to the Paycheck Protection Program (“PPP) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The Loan which was in the form of a Note dated March 30, 2021, matures on March 30, 2023 and bears interest at a rate of 1.00% per annum, payable monthly commencing on March 30, 2022. The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties. Funds from the Loan may only be used for payroll costs, costs used to continue group health care benefits, rent, utilities and interest on other debt obligations incurred before February 15, 2020. The Company intends to use the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. While the Company currently believes that its use of the loan proceeds will meet the conditions for forgiveness of the loan, it cannot be assured that the Company will be ineligible for forgiveness of the loan, in whole or in part.
The Company recognized $71,604 and $286,835 of interest expense for the three and nine months ended March 31, 2021 and $106,400 and $676,092 of interest expense for the three and nine months ended March 31, 2020. As of March 31, 2021 and June 30, 2020, accrued interest on the above notes was $382,645 and $117,816, respectively.
Notes payable and long-term debt outstanding as of March 31, 2021 and June 30, 2020 are summarized below:
|
|
|
Maturity
Date
|
|
March 31,
2021
|
|
|
June 30,
2020
|
|
|
12% $150,000 Convertible Note Payable, net of unamortized discount of $0 and $0, respectively
|
|
Due on Demand
|
|
$
|
150,000
|
|
|
$
|
150,000
|
|
|
12% $440,000 Convertible Note Payable, net of unamortized discount of $0 and $0, respectively
|
|
Due on Demand
|
|
|
440,000
|
|
|
|
440,000
|
|
|
12% $220,000 Convertible Note Payable, net of unamortized discount of $0 and $0, respectively
|
|
Due on Demand
|
|
|
220,000
|
|
|
|
220,000
|
|
|
7% $426,667 Convertible Note Payable, net of unamortized discount of $0 and $35,866. respectively
|
|
Due on Demand
|
|
|
-
|
|
|
|
182,326
|
|
|
7% $213,333 Convertible Note Payable, net of unamortized discount of $0 and $28,492, respectively
|
|
Due on Demand
|
|
|
90,125
|
|
|
|
164,072
|
|
|
12% Note Payable, net of unamortized discount of $0 and $21,911, respectively – See Footnote 9
|
|
Due on Demand
|
|
|
300,000
|
|
|
|
578,089
|
|
|
12% Note Payable – See Footnote 9
|
|
Due on Demand
|
|
|
25,000
|
|
|
|
50,000
|
|
|
5% Note Payable
|
|
Due on Demand (1)
|
|
|
350,000
|
|
|
|
350,000
|
|
|
1% PPP Note Payable; Loan forgiveness granted on January 5, 2021
|
|
May 29, 2022
|
|
|
-
|
|
|
|
602,478
|
|
|
3.75% SBA EIDL Note Payable
|
|
April 30, 2050
|
|
|
500,000
|
|
|
|
500,000
|
|
|
1% PPP Note Payable
|
|
March 30, 2023
|
|
|
557,977
|
|
|
|
-
|
|
|
Total notes payable
|
|
|
|
|
2,633,102
|
|
|
|
3,236,965
|
|
|
Less current portion of notes payable
|
|
|
|
|
1,575,125
|
|
|
|
2,134,487
|
|
|
Notes payable, Non-current portion
|
|
|
|
$
|
1,057,977
|
|
|
$
|
1,102,478
|
|
(1) The Company entered two promissory notes with an investor of the Company in the amount of $350,000. The investor had agreed to convert the loan into 437,500 shares of common stock in 2018. The Company has not issued these shares to the investor and booked the notes as a short-term loan. This loan is considered payable upon demand.
Note 6 — Commitments and Contingencies
The Company records tax contingencies when the exposure item becomes probable and reasonably estimable. As of March 31, 2021, the Company had a tax contingency related to stock options granted below the fair market value on date of grant. The Company is in the process of determining the possible exposure and necessary expense accrual for the related tax, penalties and interest. Management has not been able to determine the amount as of the date of this report, however, does not expect the amount to be material to the financial statements.
To the best of the Company’s knowledge and belief, no legal proceedings of merit are currently pending or threatened against the Company.
Note 7 —Risks and Uncertainties
The Company does not have a concentration of revenues from any individual customer (less than 10%).
The Company operates in a rapidly evolving and highly regulated industry and will only conduct business in states where cannabis has been legalized.
The Company was affected in March by the COVID-19 outbreak and worldwide pandemic. The Company saw some postponements in orders in the first few weeks March 2020 but by the end of March 2020 orders stabilized to a normal level.
Note 8 — Stock Based Compensation
The equity incentive plan of the Company was established in February of 2017 and was amended and restated on April 14, 2020. The Board of Directors of the Company may from time to time, in its discretion grant to directors, officers, consultants and employees of the Company, non-transferable options to purchase common shares, provided that the number of options issued do not exceed 20,000,000. The options are exercisable for a period of up to 10 years from the date of the grant. The number of shares authorized to be issued under the equity incentive plan was increased from 10,000,000 to 20,000,000 through a consent of stockholders to amend and restate the equity incentive plan.
The following table reflects the continuity of stock options for the nine months ended March 31, 2021:
A summary of stock option activity is as follows:
|
Number of options outstanding:
|
|
|
|
|
July 1, 2020
|
|
|
12,558,375
|
|
|
Granted
|
|
|
5,754,124
|
|
|
Forfeited / exchanged / modification
|
|
|
(5,952,000
|
)
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
12,360,499
|
|
|
Aggregate Intrinsic Value at March 31, 2021
|
|
$
|
222,126
|
|
|
|
|
|
|
|
|
Number of options exercisable at end of period
|
|
|
3,645,494
|
|
|
Number of options available for grant at end of period
|
|
|
4,957,288
|
|
|
|
|
|
|
|
|
Weighted average option prices per share:
|
|
|
|
|
|
Granted during the period
|
|
$
|
0.14
|
|
|
Exercised during the period
|
|
$
|
0.00
|
|
|
Terminated during the period
|
|
$
|
0.08
|
|
|
Outstanding at end of period
|
|
$
|
0.10
|
|
|
Exercisable at end of period
|
|
$
|
0.08
|
|
The average fair value of stock options granted was estimated to be $0.14 per share for the period ended March 31, 2021. This estimate was made using the Black-Scholes option pricing model and the following weighted average assumptions:
|
|
|
2020
|
|
|
|
|
|
|
|
Expected option life (years)
|
|
|
2 - 4
|
|
|
Expected stock price volatility
|
|
|
227 to 250
|
%
|
|
Expected dividend yield
|
|
|
—
|
|
|
Risk-free interest rate
|
|
|
0.44 to 0.54
|
%
|
Stock-based compensation expense attributable to stock options was approximately $201,470 for the nine months ended March 31, 2021. As of March 31, 2021, there was approximately $967,396 of unrecognized compensation expense related to 12,360,499 unvested stock options outstanding, and the weighted average vesting period for those options was 3 years.
Warrants
At March 31, 2021, the Company had outstanding warrants to purchase the Company’s common stock which were issued in connection with multiple financing arrangements. Information relating to these warrants is summarized as follows:
|
Warrants
|
|
Remaining
Number
Outstanding
|
|
|
Weighted
Average
Remaining Life (Years)
|
|
|
Weighted
Average
Exercise Price
|
|
|
Warrants-Financing
|
|
|
86,957
|
|
|
|
2.05
|
|
|
$
|
1.15
|
|
|
Warrants-Issued with Convertible Notes
|
|
|
600,000
|
|
|
|
2.48
|
|
|
$
|
0.75
|
|
|
Warrants - Financing
|
|
|
360,577
|
|
|
|
3.27
|
|
|
$
|
0.78
|
|
|
Warrants A – Financing
|
|
|
28,072,364
|
|
|
|
3.27
|
|
|
$
|
0.16
|
|
|
Total
|
|
|
29,119,898
|
|
|
|
3.25
|
|
|
$
|
0.18
|
|
|
Aggregate Intrinsic Value at March 31, 2021
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Note 9 — Related Party Transactions
In March 2020, the Company entered into a promissory note with the Chief Executive Officer for $600,000 in exchange for a total of a $565,000 cash payment. The note matured in December 2020 and $300,000 of principal payments have been made to date. The note is in default and due upon demand and the interest rate was increased to 12%.
In March 2020, the Company entered into a promissory note with the Chief Technology Officer for $50,000. The note matured on January 1, 2021 and $25,000 of principal payments have been made to date. The note is in default and due upon demand and the interest rate was increased to 12%.
Note 10 — Leases
On January 1, 2021 the Company extended its Denver Colorado headquarter lease for 12 months through December 31, 2021. During the past year a majority of the Company’s employee have been working remotely and the Company does not know if they will continue to keep this location or relocate to a small facility. Therefore, in accordance with ASC 842 the Company will not record an operating right of use asset and operating lease liability because of the short term nature of this amendment. The Company will recognize lease expense on a monthly basis through the life of this lease of approximately $51,786.
During the three months ended March 31,2021 the Company ceased to use its Los Angles sales office and vacated the real estate. As a result, the Company wrote off the right of use asset of $91,316. The company had an operating use liability of $94,098 with respect to the lease. During this same period, the Company completed negotiations with the landlord to settle the remaining amounts due of $86,970 for a cash payment of $25,000. The Company recorded a gain of $61,970 in the consolidated statements of operations for the settlement of the operating lease.
Note 11 — Subsequent Events
The Company has evaluated subsequent events through May 17, 2021 and has not identified any items requiring additional disclosure.