Leafbuyer Technologies (LBUY) is in hot water after the OTC Markets Group, Inc. flagged the company for heavy stock promotion. In an announcement made after the close of the markets, Leafbuyer disclosed that OTC Markets had questioned the company about a recent distributed newsletter and e-mail promoting the company.
Since February of this year, Leafbuyer has engaged the services of MIDAM Ventures, the parent company of MarijuanaStocks.com, to promote its stock. The amount in which MIDAM was paid by Leafbuyer to promote its stock is somewhat in dispute.
According to the disclaimer in one of the recently released promotional “reports,” MIDAM was paid up to $445,000 in cash as well as 77,000 restricted common shares of the company. Leafbuyer contents that the disclaimer was incorrect and only paid $225,000; which is nevertheless a substantial sum.
The sheer size of this sum becomes even more apparent when you consider the company’s financial situation. According to the company’s most recent filings with the SEC, the company reported sales totaling to the amount of $287,224 and a loss of $1.1 million for the quarter ending on March 31, 2018; up from a loss $339,820 during the same period last year.
With a significant portion of the company’s revenue being spent on promotion, some have begun to question the soundness of this strategy. Alan Brochstein of New Cannabis Ventures described the move as bordering on “sheer lunacy” and urged investors to ask “why the company has been so promotional, as the business certainly appears to be real though not financially stable.”
For their part, Leafbuyer defends its actions by stating that the company’s directors, officers, and controlling shareholders have not sold any company stock on the open market within the last 90 days. Furthermore, Leafbuyer contends that the company’s stock has only declined since engaging MIDAM’s services and that none of its promotional material contained false or misleading information.
In a statement the company said, “The company states definitively that its officers, directors and, to the Company’s knowledge, its controlling shareholders (i.e., shareholders owning 10% or more of the Company’s securities), of which there are only three, have not sold or purchased the Company’s securities within the past 90 days on the open market. The promotional material primarily consisted of previously disclosed and available information. After a review of the material, the statements contained therein are neither materially false nor misleading.”
News of the inquiry by OTC Markets caused the company’s stock to plunge at the opening of the markets today, falling 3.29% from $1.33 per share to $1.29, with some fluctuations.