United States securities and exchange commission logo
September 22, 2021
Mark Breen
Chief Financial Officer
Leafbuyer Technologies, Inc.
6888 S. Clinton Street, Suite 300
Greenwood Village, Colorado 80112
Re: Leafbuyer
Technologies, Inc.
Form 10-K for the
Fiscal Year ended June 30, 2020
Filed September 25,
2020
File No. 000-55855
Response Letter
dated August 27, 2021
Dear Mr. Breen :
We have reviewed your August 27, 2021 response to our comment
letter and have the
following comments. In some of our comments, we may ask you to provide
us with information
so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your response to these comments, we may have
additional
comments. Unless we note otherwise, our references to prior comments are
to comments in our
May 18, 2021 letter.
Form 10-K for the Fiscal Year ended June 30, 2020
Financial Statements
Note 4 - Capital Stock and Equity Transactions, page 41
1. We understand from your
response to reissued comment eight that you increased the
number of authorized
shares to 700 million on August 11, 2021 and plan to amend the
Series A preferred
stock Certificate of Designation to remove the conversion provisions,
while adjusting and
retaining a fixed number of voting rights, as indicated in the draft
amendment to the
Certificate of Designation submitted as Exhibit B to your response.
Tell us if you have
obtained permission from all holders of those instruments for the
changes reflected in
that document and whether any consideration has been or will be
Mark Breen
FirstName LastNameMark Breen
Leafbuyer Technologies, Inc.
Comapany 22,
September NameLeafbuyer
2021 Technologies, Inc.
September
Page 2 22, 2021 Page 2
FirstName LastName
exchanged and if any new agreements with the holders have been or will
be introduced in
connection with the changes proposed. Please describe any remaining
steps that you will
need to take to complete the amendment, indicate the timeframe, and
provide timely
disclosure of the change as appropriate.
2. We note your response to reissued comments two, four and five,
including the tabulation
at Exhibit C, reflecting the composition of fully diluted shares and
your computation of
the number of shares that would be issuable pursuant to the Series A
preferred stock, for
various periods subsequent to issuance.
We previously referenced in part, information from the Announcement,
Agreement and
Plan of Merger, and Certificate of Designation filed with the Form 8-K
on March 29,
2017, indicating that 21,750,000 common shares were issued to the
holders of the Series
A preferred stock and would be considered in computing the incremental
shares that
would become issuable in subsequent periods to maintain their 55%
interest; these
beneficial interests are also disclosed in Item 12 of your annual
report.
However, the figures in Exhibit C and the corresponding disclosures in
your draft
amendments appear to overstate both the number of issuable shares and
the number of
fully diluted shares because the common shares already owned were not
considered in
computing the shares needed to reach the target.
Unless you believe a different computational approach should be used
and are able to
show how any such other method would be consistent with the numerical
illustration in
the Certificate of Designation, indicating the number of issuable
shares was then 3 million
based on 45 million fully diluted shares, please revise accordingly.
3. As discussed in our phone conference on September 22, 2021, we have
further considered
the implications of your Series A preferred stock conversion
provisions relative to the
requirements in FASB ASC 815-15-25-1, which requires bifurcation of an
embedded
conversion feature if certain criteria are met, and an exception does
not apply.
For example, the exception outlined in FASB ASC 815-10-15-74(a) would
be available if
the contract were indexed to your own stock and classified in equity.
However, FASB
ASC 815-10-15-75(b) clarifies that if a contract that could be settled
by issuing your
common shares is indexed in part or in full to something other than
your own stock, it
does not qualify for the exception and if it meets the definition of a
derivative would need
to be accounted for as a liability or asset.
FASB ASC 815-40-15-7 through 15-8A provide guidance on determining
whether the
conversion feature is indexed to your stock. Paragraphs 15-7D, 7E, and
7F clarify that if
settlement amounts are affected by variables that are extraneous to
the pricing of a fixed-
for-fixed option or forward contract on equity shares, the conversion
feature would not be
considered indexed to your stock, while paragraph 8A stipulates that
if not indexed, it
shall be accounted for as a liability or asset.
Mark Breen
FirstName LastNameMark Breen
Leafbuyer Technologies, Inc.
Comapany 22,
September NameLeafbuyer
2021 Technologies, Inc.
September
Page 3 22, 2021 Page 3
FirstName LastName
Given that settlement amounts pursuant to the conversion provisions of
the Series A
preferred stock are affected by changes in the number of fully diluted
shares, which is not
an input to the pricing of a fixed-for-fixed option or forward
contract on equity shares, the
embedded feature would not be considered indexed to your stock.
With regard to FASB ASC 815-15-25-1(a), considering the economic
characteristics of
the conversion feature compared to those of the preferred share host,
where the economic
value of the conversion feature (as represented by the number of
issuable shares) changes
by a multiple of about 1.2 (or 0.55/0.45) for all changes in the
number of fully diluted
shares (excluding change in the number of issuable shares), and that
the value of
a preferred share absent this conversion feature would not be
correlated in this manner, the
"not clearly and closely related" criteria appears to characterize the
relationship.
With regard to FASB ASC 815-15-25-1(c), and that aspect of the
derivative definition
described in FASB ASC 815-10-15-83(c), considering that the conversion
provision is
oriented entirely to securing shares to achieve the specified
ownership percentage, and
that conversion does not require any payment of cash, it also appears
the net share
settlement criteria would be met, following the guidance in FASB ASC
815-10-15-102.
Based on the observations outlined above, it appears that you would
need to bifurcate and
account for the embedded conversion feature as a derivative at fair
value, consistent with
the guidance in FASB ASC 815-10-30-1 and 35-1. However, if you have an
alternate
view, please address the guidance cited above and submit your analysis
for review.
4. We note that disclosures proposed in Note 1 to each of the draft
amendments reference the
Series A preferred shares and states that you are "required to
evaluate the fair market
value of these shares as of the Balance Sheet date" and that you have
determined that the
par value represents the fair value of the Series A stock "because of
the accumulated
deficit" and because there is not enough liquidity in the public
market.
We do not believe that you have described an approach to valuing the
Series A preferred
stock that would be consistent with GAAP, considering the conversion
feature, an
established market for your common shares, and various issuances of
shares in exchange
for cash both concurrently with and subsequent to origination.
As indicated in the preceding comment, we believe that you will need
to account for the
embedded derivative at fair value to comply with FASB ASC 815. Please
refer to the
definition of readily determinable fair value in FASB ASC 820-10-20
and the associated
guidance in FASB ASC 820-10-35-36B, as it pertains to the underlying
common shares.
Please further revise your proposed disclosures pertaining to the
required accounting and
valuation methodology accordingly. Please also expand your proposed
disclosures to
address the error correction accounting and disclosure requirements in
FASB ASC 250-
10-45-22 through 28, and 50-7 through 50-11.
Mark Breen
Leafbuyer Technologies, Inc.
September 22, 2021
Page 4
5. We note that you have submitted draft amendments to your annual report
and the three
subsequent interim reports, and that each draft amendment includes
error correction
disclosures covering revisions to the numbers of Series A and Series B
preferred shares
outstanding, and clarifying certain conversion provisions. In addition
to the revisions that
will be required to address the other comments in this letter, please
revise to address the
following inconsistencies.
Note 4 on page 12 of both the second and third quarter reports
continues to indicate
the company has 3,000,000 Series A shares outstanding and
1,120,000 Series B
shares outstanding (in the first paragraph); these should be
revised to remove the
effect of the stock split.
Note 4 to each of the draft amendments indicates that because
the Series A preferred
shares would convert into more common shares than the company has
available "the
Company needs to present the Series A Convertible Preferred Stock
separate as a
mezzanine equity" while the error correction disclosures in Note
1 indicate you
would not be reporting the instruments in this manner; please
revise the language in
Note 1 and Note 4 to address the requirements of FASB ASC 815,
which would
preclude any change in the classification of your Series A
preferred stock.
Note 4 to each of the interim reports references the issuable
and fully diluted shares
that you calculated for June 30, 2020 and are not consistent with
the corresponding
references in Note 1; both references should be revised to
include the revised
numbers that pertain to the interim reporting dates.
The March 31, 2021 APIC balance in the third quarter Statement
of Stockholders'
Equity of 17,24,509 appears to be missing a digit.
The explanatory notes to each of the interim reports appear to
pertain to the annual
report rather than to the specific interim reports.
You may contact Lily Dang at (202) 551-3867 if you have questions
regarding comments
on the financial statements and related matters. Please contact Karl Hiller -
Branch Chief at
(202) 551-3686 with any other questions.
FirstName LastNameMark Breen Sincerely,
Comapany NameLeafbuyer Technologies, Inc.
Division of
Corporation Finance
September 22, 2021 Page 4 Office of
Energy & Transportation
FirstName LastName