Company Quick10K Filing
Quick10K
Results Based Outsourcing
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
8-K 2019-07-10 Enter Agreement, Exhibits
8-K 2019-06-21 Enter Agreement, Exhibits
8-K 2019-05-03 Officers
8-K 2019-04-09 Officers
8-K 2019-03-12 Officers
8-K 2019-03-04 Officers, Amend Bylaw, Other Events, Exhibits
8-K 2019-02-15 Officers, Other Events, Exhibits
8-K 2018-12-28 Officers, Exhibits
8-K 2018-09-07 Enter Agreement, M&A, Sale of Shares, Control, Officers, Amend Bylaw, Shell Status, Exhibits
SIR Select Income REIT 2,027
ZYXI Zynex 290
FXB Invesco Currencyshares British Pound Sterling Trust 119
MBCQ Madison Bank 33
SCND Scientific Industries 10
MCTC Microchannel Technologies 9
GETH Green Envirotech Holdings 5
NXMD Nexeon Medsystems 0
JMIA Jumia 0
NRU National Rural Utilities Cooperative Finance 0
RBOI 2019-06-30
Part I - Financial Information
Item 1. Financial Statements
Note 1 – Organization and Nature of Business
Note 2 – Going Concern Analysis
Note 3 - Summary of Significant Accounting Policies
Note 4 – Merger Agreement
Note 5 – Notes Payable
Note 6 - Stockholders’ Deficit
Note 7 – Commitments and Contingencies
Note 8 – Related Party Transactions
Note 9 - Subsequent Events
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operation
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Part Ii: Other Information
EX-31.1 drvd_ex311.htm
EX-31.2 drvd_ex312.htm
EX-32.1 drvd_ex321.htm
EX-32.2 drvd_ex322.htm
EX-99.1 drvd_ex991.htm

Results Based Outsourcing Earnings 2019-06-30

RBOI 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 drvd_10q.htm QUARTERLY REPORT Blueprint
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
  
FORM 10-Q
   
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended June 30, 2019
or
[  ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from _________to___________
 
Commission File Number: 333-209836
  
Driven Deliveries, Inc.
(Exact name of registrant as specified in its charter)
  
Delaware
 
32-0416399
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
5710 Kearny Villa Road, Ste 205 San Diego, CA 92123
 (Address of Principal Executive Office)
 
(833) 378 6420
Registrant’s Telephone Number Including Area Code
  
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
N/A
 
N/A
 
N/A
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]
 
Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
[  ]
Accelerated filer
[  ]
Non-accelerated filer
[X]
Smaller reporting company
[X]


Emerging Growth Company
[  ]
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[  ] Yes [X] No
  
As of August 19, 2019, there were 51,126,679 shares of the issuer's common stock outstanding.


 
 
 
Driven Deliveries, Inc.
Form 10-Q Report
For the Fiscal Quarter Ended June 30, 2019
 
TABLE OF CONTENTS
 
 
 
Page
Part I.
 
 
 
Item 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2
 
 
 
Item 3
 
 
 
Item 4
 
 
 
Part II.
 
 
 
Item 1
 
 
 
Item 1A
 
 
 
Item 2
 
 
 
Item 3
 
 
 
Item 4
 
 
 
Item 5
 
 
 
Item 6
 
 
 
 
 
 
 
 
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
 
 
  DRIVEN DELIVERIES, INC. & SUBSIDIARY      
 
 
  CONSOLIDATED CONDENSED BALANCE SHEETS      
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30,
 
 
December 31,
 
 
 
2019
 
 
2018
 
 
 
(Unaudited)
 
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
Cash
 $354,585 
 $5,249 
Accounts receivable
  400 
  400 
Right of use asset
  154,041 
  - 
Inventory
  186,367 
  - 
 
    
    
TOTAL CURRENT ASSETS
  695,393 
  5,649 
 
    
    
Excess purchase price over net liabilities acquired
  3,014,832 
  - 
Right of use asset - long term
  186,669 
  - 
Fixed assets, net
  76,984 
  24,344 
Deposit
  4,190 
  3,920 
 
    
    
TOTAL ASSETS
 $3,978,068 
 $33,913 
 
    
    
LIABILITIES AND STOCKHOLDERS' EQUITY
    
    
 
    
    
CURRENT LIABILITIES
    
    
 
    
    
Accounts payable and accrued expenses
 $727,157 
 $219,137 
Notes payable
  - 
  150,000 
Notes payable - related party
  26,726 
  11,705 
Deferred Rent
  - 
  4,900 
Lease liability
  152,407 
  - 
Contingent liability
  1,318,524 
  - 
 
    
    
TOTAL CURRENT LIABILITIES
  2,224,814 
  385,742 
 
    
    
Lease liability - long term
  198,024 
  - 
Contingent liability - long term
  779,454 
  - 
 
    
    
TOTAL LIABILITIES
  3,202,292 
  385,742 
 
    
    
COMMITMENTS AND CONTINGENCIES
    
    
 
    
    
STOCKHOLDERS’ EQUITY
    
    
Preferred stock, $0.0001 par value, 15,000,000 shares authorized, no shares issued and outstanding
  - 
  - 
Common stock, $0.0001 par value, 200,000,000 shares authorized, 50,576,679 and 40,875,014 shares issued and outstanding
  5,058 
  4,088 
Additional paid in capital
  5,975,132 
  2,425,275 
Accumulated deficit
  (5,204,414)
  (2,681,192)
Stock subscription receivable
  - 
  (100,000)
TOTAL STOCKHOLDERS' EQUITY
  775,776 
  (351,829)
 
    
    
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 $3,978,068 
 $33,913 
 
    
    
 
See accompanying notes to the condensed consolidated financial statements.
 
 
 
 
3
 
 
 
 
DRIVEN DELIVERIES, INC. & SUBSIDIARY
 
 
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
 
For the Three Months Ended
 
 
For the Six Months Ended
 
 
For the Six Months Ended
 
 
 
June 30, 2019
 
 
June 30, 2018
 
 
June 30, 2019
 
 
June 30, 2018
 
 
 
 (Unaudited)
 
 
 (Unaudited)
 
 
 (Unaudited)
 
 
 (Unaudited)
 
REVENUE
 
 
 
 
 
 
 
 
 
 
 
 
Sales
 $53,050 
 $(24,156)
 $33,633 
 $(17,961)
Other revenue
  12,774 
  - 
  12,774 
  - 
Cost of goods sold
  48,394 
  35 
  48,394 
  35 
Gross Profit (Loss)
  17,430 
  (24,191)
  (1,987)
  (17,996)
 
    
    
    
    
 
    
    
    
    
OPERATING EXPENSES
    
    
    
    
Professional fees
  341,113 
  32,259 
  508,870 
  70,332 
Compensation
  959,470 
  26,837 
  1,496,653 
  60,772 
General and administrative expenses
  234,568 
  23,745 
  413,432 
  49,843 
Sales and marketing
  52,503 
  26,122 
  93,277 
  44,011 
Total Operating Expenses
  1,587,654 
  108,963 
  2,512,232 
  224,958 
 
    
    
    
    
NET LOSS FROM OPERATIONS
  (1,570,224)
  (133,154)
  (2,514,219)
  (242,954)
 
    
    
    
    
OTHER EXPENSES
    
    
    
    
Interest expense
  (691)
  (1,870)
  (10,858)
  (3,456)
Gain on extinguishment of debt
  2,080 
  - 
  1,855 
  - 
Total Other Expenses
  1,389 
  (1,870)
  (9,003)
  (3,456)
 
    
    
    
    
Net loss before provision for income taxes
  (1,568,835)
  (135,024)
  (2,523,222)
  (246,410)
 
    
    
    
    
Provision for Income Taxes
  - 
  - 
  - 
  - 
 
    
    
    
    
NET LOSS
 $(1,568,835)
 $(135,024)
 $(2,523,222)
 $(246,410)
 
    
    
    
    
Net loss per share - basic and diluted
 $(0.03)
 $(0.39)
 $(0.05)
 $(0.71)
 
    
    
    
    
Weighted average number of shares outstanding during the period - basic and diluted
  48,046,180 
  346,556 
  46,179,458 
  346,556 
 
    
    
    
    
 
See accompanying notes to the condensed consolidated financial statements.
 
 
 
 
4
 
 
 
 
DRIVEN DELIVERIES, INC. & SUBSIDIARY
 
 
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
 
 
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional
 
 
 
 
 
 
 
 
Total
 
 
 
Common
 
 
 
 
 
Paid-in
 
 
Accumulated
 
 
Stock Subscription
 
 
Stockholders'
 
 
 
Shares
 
 
Par
 
 
Capital
 
 
Deficit
 
 
Receivable
 
 
Deficit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the three months ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance December 31, 2017
  - 
 $- 
 $- 
 $(52,375)
 $- 
 $(52,375)
 
    
    
    
    
    
    
Net loss
  - 
  - 
  - 
  (111,386)
  - 
  (111,386)
 
    
    
    
    
    
    
Balance March 31, 2018
  - 
 $- 
 $- 
 $(163,761)
 $- 
 $(163,761)
 
    
    
    
    
    
    
Issuance of Founders' shares
  28,340,000 
  2,834 
  (539)
  - 
  - 
  2,295 
 
    
    
    
    
    
    
Contribution of capital
  - 
  - 
  15,705 
  - 
  - 
  15,705 
 
    
    
    
    
    
    
Sale of common stock
  2,850,000 
  285 
  149,715 
  - 
  - 
  150,000 
 
    
    
    
    
    
    
Net loss
  - 
  - 
  - 
  (135,024)
  - 
  (135,024)
 
    
    
    
    
    
    
Balance June 30, 2018
  31,190,000 
 $3,119 
 $164,881 
 $(298,785)
 $- 
 $(130,785)
 
    
    
    
    
    
    
 
    
    
    
    
    
    
For the three months ended June 30, 2019
    
    
    
    
    
    
 
    
    
    
    
    
    
Balance December 31, 2018
  40,875,014 
 $4,088 
 $2,425,275 
 $(2,681,192)
 $(100,000)
 $(351,829)
 
    
    
    
    
    
    
Sale of common stock
  5,060,000 
  506 
  1,011,494 
  - 
  - 
  1,012,000 
 
    
    
    
    
    
    
Issuance of options for services
  - 
  - 
  244,062 
  - 
  - 
  244,062 
 
    
    
    
    
    
    
Issuance of warrants for services
  - 
  - 
  103,632 
  - 
  - 
  103,632 
 
    
    
    
    
    
    
Issuance of common stock and warrants for cancellation of debt
  375,000 
  37 
  53,823 
  - 
  - 
  53,860 
 
    
    
    
    
    
    
Proceeds from stock subscription receivable
  - 
  - 
  - 
  - 
  100,000 
  100,000 
 
    
    
    
    
    
    
Net loss
  - 
  - 
  - 
  (954,387)
  - 
  (954,387)
 
    
    
    
    
    
    
Balance March 31, 2019
  46,310,014 
 $4,631 
 $3,838,286 
 $(3,635,579)
 $- 
 $207,338 
 
    
    
    
    
    
    
Sale of common stock
  3,005,000 
  301 
  960,700 
  - 
  - 
  961,001 
 
    
    
    
    
    
    
Issuance of options for services
  - 
  - 
  106,986 
  - 
  - 
  106,986 
 
    
    
    
    
    
    
Issuance of warrants for services
  - 
  - 
  516,953 
  - 
  - 
  516,953 
 
    
    
    
    
    
    
Issuance of common stock for conversion of debt
  261,665 
  26 
  52,307 
  - 
  - 
  52,333 
 
    
    
    
    
    
    
Issuances of common stock for acquisition
  1,000,000 
  100 
  499,900 
  - 
  - 
  500,000 
 
    
    
    
    
    
    
Net loss
  - 
  - 
  - 
  (1,568,835)
  - 
  (1,568,835)
 
    
    
    
    
    
    
Balance June 30, 2019
  50,576,679 
 $5,058 
 $5,975,132 
 $(5,204,414)
 $- 
 $775,776 
 
    
    
    
    
    
    
 
See accompanying notes to the condensed consolidated financial statements.
 
 
 
 
5
 
 
 
 
DRIVEN DELIVERIES, INC. & SUBSIDIARY
 
 
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 
 
 
 
 
 
For the Six Months Ended
 
 
For the Six Months Ended
 
 
 
June 30, 2019
 
 
June 30, 2018
 
 
 
(Unaudited)
 
 
(Unaudited)
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
Net loss
 $(2,523,222)
 $(246,410)
   Adjustments to reconcile net loss to net cash used in operating activities
    
    
     Gain on extinguishment of debt
  (1,856)
  - 
     Stock based compensation
  971,633 
  2,295 
     Amortization of right-of-use asset
  46,800 
  - 
     Depreciation expense
  6,052 
  1,742 
   Changes in operating assets and liabilities
    
    
    Inventory
  (47,350)
  - 
    Deposit
  (270)
  - 
    Accounts payable and accrued compensation
  (30,621)
  16,090 
    Accounts receivable
  - 
  (600)
    Bank overdraft
  - 
  1,466 
    Cash paydowns of lease liability
  (42,601)
  - 
Net Cash Used In Operating Activities
  (1,621,435)
  (225,417)
 
    
    
CASH FLOWS FROM INVESTING ACTIVITIES
    
    
     Cash acquired in acquisition
  123,088 
  - 
     Cash used in acquisition
  (150,000)
    
    Purchase of fixed assets
  (40,339)
  (28,472)
Net Cash Used In Investing Activities
  (67,251)
  (28,472)
 
    
    
CASH FLOWS FROM FINANCING ACTIVITIES:
    
    
     Contribution of capital
  - 
  15,705 
     Proceeds from stock receivable
  100,000 
  - 
     Proceeds from loan payable
  - 
  50,000 
     Repayments of loan payable
  (50,000)
  - 
     Proceeds from loan payable - related party
  23,726 
  - 
     Repayments of loan payable - related party
  (8,705)
  - 
     Common Stock issued for cash
  1,973,001 
  150,000 
Net Cash Provided By Financing Activities
  2,038,022 
  215,705 
 
    
    
NET DECREASE IN CASH
  349,336 
  (38,184)
 
    
    
CASH AT BEGINNING OF PERIOD
  5,249 
  38,184 
 
    
    
CASH AT END OF PERIOD
 $354,585 
 $- 
 
    
    
Supplemental cash flow information:
    
    
Cash paid for income taxes
 $- 
    
Cash paid for interest expense
 $- 
    
 
    
    
NON-CASH INVESTING AND FINANCING ACTIVITIES
    
    
Common stock and contingent consideration - business combination
 $2,597,978 
 $- 
Issuance of common stock and warrants for cancellation of debt
 $106,193 
 $- 
Lease liability recognized from right of use asset
 $266,869 
 $- 
 
    
    
 
See accompanying notes to the condensed consolidated financial statements.
 
 
 
6
 
 
 
DRIVEN DELIVERIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2019 AND 2018
 
 
 
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
  
Overview
 
Driven Deliveries Inc. (formerly Results-Based Outsourcing Inc) (the “Company” or “Driven”), formed on July 22, 2013, is engaged in providing delivery services of legal cannabis products to consumers in California.
 
On August 29, 2018, Driven Deliveries, Inc., a Nevada company (“Driven Nevada”), was acquired by Results-Based Outsourcing as part of a reverse merger transaction. As consideration for the merger, Results-Based Outsourcing issued the equity holders of Driven Nevada an aggregate of 30,000,000 post-split shares of their common. Following the merger, the Company adopted the business plan of Driven Nevada as a delivery company focused on deliveries for consumers of legal cannabis products, in California. The merger was accounted for as a recapitalization of the Company, therefore the financial statements as presented in this report include the historical results of Driven Nevada. 
 
In June 2019, the Company completed its acquisition of Ganjarunner, Inc. and Global Wellness, LLC, which are engaged in the business of providing delivery services of legal cannabis products to consumers. See Note 4 – Merger Agreement below for more information on the acquisition.
 
Risks and Uncertainties
 
The Company has a limited operating history and has generated limited revenues from its operations. The Company's business and operations are sensitive to general business and economic conditions in the U.S. along with local, state, and federal governmental policy decisions. A host of factors beyond the Company's control could cause fluctuations in these conditions. Adverse conditions may include: changes in cannabis regulatory environment and competition from larger more well-funded companies. These adverse conditions could affect the Company's financial condition and the results of its operations.
 
NOTE 2 – GOING CONCERN ANALYSIS
 
Going Concern Analysis
 
For the six months ended June 30, 2019, the Company had a net loss of $2,523,222 and working capital deficit of $1,529,421. The Company will require additional capital in order to continue its operations in the normal course of business. Management has concluded that due to these conditions, there is substantial doubt about the company’s ability to continue as a going concern. The accompanying consolidated condensed financial statements have been prepared assuming that the Company will continue as a going concern.
 
 
7
 
 
 
Management’s plans include raising capital though the sale of debt and/or equity. The Company’s ability to continue as a going concern is dependent upon its ability to raise capital to implement the business plan, generate sufficient revenues and to control operating expenses. While we believe in the viability of our strategy to generate sufficient revenue, control costs and the ability to raise additional funds, there can be no assurances that our strategy will be successful. The Company’s financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the matters discussed herein.  
 
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of presentation
  
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC” for interim financial information. In the opinion of the Company’s management, the accompanying condensed financial statements reflect all adjustments, consisting of normal, recurring adjustments, considered necessary for a fair presentation of the results for the interim period ended June 30, 2019. Although management believes that the disclosures in these unaudited condensed financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in financial statements that have been prepared in accordance U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC.
 
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s financial statements for the year ended December 31, 2018, which contains the audited financial statements and notes thereto, for the year ended December 31, 2018 included within the Company’s Form 10-K filed with the SEC on April 15, 2019. The interim results for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ended December 31, 2019 or for any future interim periods. The December 31, 2018 Balance Sheet is derived from the Company's audited financial statements but does not include all necessary disclosures for full U.S. GAAP presentation.
 
Use of estimates
 
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates.
 
Concentrations of Credit Risk
 
The Company maintains its cash accounts at financial institutions which are insured by the Federal Deposit Insurance Corporation. At times, the Company may have deposits in excess of federally insured limits.
 
Cash and Cash Equivalents
 
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. As of June 30, 2019, the Company did not have any cash equivalents.
 
Equipment
 
Equipment is stated at cost less accumulated depreciation. Cost includes expenditures for vehicles and computer equipment. Maintenance and repairs are charged to expense as incurred. When assets are sold, retired, or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations. The cost of equipment is depreciated using the straight-line method over the estimated useful lives of the related assets which is three years for computer equipment and five years for vehicles. Depreciation expense was $6,052 and $1,742 for the six months ended June 30, 2019 and 2018, respectively.
  
 
 
8
 
 
 
Inventory
 
Inventory is stated at the lower of cost or net realizable value. Inventory is determined to be salable based on demand forecast within a specific time horizon. Inventory in excess of salable amounts and inventory which is considered obsolete. At the point of recognition, a new lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that new cost basis. Inventory is costed on the FIFO basis.
 
Stock-Based Compensation
 
The Company accounts for stock-based compensation costs under the provisions of ASC 718, “Compensation—Stock Compensation”, which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock based compensation expense recognized includes the compensation cost for all stock-based payments granted to employees, officers, and directors based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or canceled during the periods reported.
 
Stock-Based Compensation for Non-Employees
 
The Company accounts for warrants and options issued to non-employees under ASU 2018-07, Equity – Equity Based Payments to Non-Employees, using the Black-Scholes option-pricing model.
  
Debt Issued with Warrants
 
Debt issued with warrants is accounted for under the guidelines established by ASC 470-20 – Accounting for Debt with Conversion or Other Options. We record the relative fair value of warrants related to the issuance of convertible debt as a debt discount or premium. The discount or premium is subsequently amortized to interest expense over the expected term of the convertible debt. The value of the warrants issued with the debt was de minimis.
 
Revenue Recognition
 
As of January 1, 2018, the company adopted ASC 606. The adoption of ASC 606, Revenue From Contracts With Customers, represents a change in accounting principle that will more closely align revenue recognition with the delivery of the Company’s services and will provide financial statement readers with enhanced disclosures. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. Revenue is recorded gross of taxes related to taxable sales transactions, such as sales tax, use tax, or other government fees. The Company used the Modified-Retrospective Method when adopting this standard. There was no accounting effect due to the initial adoption. To achieve this core principle, the Company applies the following five steps:
 
1) Identify the contract with a customer
 
A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay.
 
The Company has three contracts with different customers with the same terms. All of these qualify as contracts since they have been approved by both parties, have identifiable rights and payment terms regarding the services to be transferred, have commercial substance, and it is probable that the entity will collect the consideration in exchange for the services.
 
 
9
 
 
 
The Company also sells directly to customers through their Ganjarunner website. The Company takes customer orders through the website and delivers directly to the customer. In these sales the Company does not enter into a formal contract but sells directly to the customer as a retailer.
 
2) Identify the performance obligations in the contract
 
Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation.
 
The Company’s performance obligations are to (1) deliver cannabis in compliance with California law, (2) provide a platform to sell the retailer’s products, and (3) sell directly to customers through the Ganjarunner website. These items represent performance obligations since they are distinct services and products and are distinct in the context of the contract.
 
3) Determine the transaction price
 
The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of the Company’s contracts as of June 30, 2019 contained a significant financing component. Determining the transaction price requires significant judgment, which is discussed by revenue category in further detail below.
 
The Company provides delivery services in exchange for a flat fee per delivery and an additional charge per mile. As mandated by the California Bureau of Cannabis Control, delivery drivers are required to be on the payroll of a licensed retailer. In order to fulfill the performance obligation, delivery drivers are included on the payroll of the customer, and the Company reimburses the customer for the drivers’ wages at a premium. The cost of paying the drivers are considered a cost to fulfill a contract for which the Company receives no benefit, so it is consideration payable to the customer, which is considered in determining the transaction price. In addition, the Company currently nets the amounts owed by the customers for deliveries with the amounts owed to the customers for drivers’ wages. As such, the company reduces the delivery fee by the drivers’ wages to determine the transaction price. These elements of the transaction price are based on variable consideration determined to be constrained and are recognized as of the later of when the service is rendered or when the Company pays or promises to pay the consideration, which will generally be on a monthly basis. If the cost of the drivers’ wages exceeds the total fees for delivery, the Company would present a net negative revenue. For the six months ended June 30, 2019 and 2018, the Company had net negative revenue related to delivery of cannabis.
 
The transaction price of the commissions is a variable consideration as the price is determined to be 10% of a delivered sale from an order generated on the Company’s online platform. The variable consideration is also constrained as the amount of the consideration is dependent on the cost of the products purchased; and is further constrained as the company has little history to predict the amount to be recognized. Transaction price for the commissions will be determined as the company satisfies the performance obligation.
 
The direct sales made through the Ganjarunner website do not have a variable consideration and are accounted for as product sales.
 
 
 
10
 
 
 
4) Allocate the transaction price to performance obligations in the contract
 
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. For example, a bonus or penalty may be associated with one or more, but not all, distinct services promised in a series of distinct services that forms part of a single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.
 
The Company will allocate the transaction price of the delivery fees and to the deliveries that they perform separately for the customer. The transaction price of the commissions will be allocated per each sale that the Company generates for a retailer that is delivered. There are no discounts to allocate and there have been no changes in the transaction price to allocate.
 
For the sales made through the Ganjarunner website, the transaction price is allocated to the product and the delivery fees associated with the sale.
 
5) Recognize revenue when or as the Company satisfies a performance obligation
 
The Company satisfies performance obligations either over time or at a point in time. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.
 
Both performance obligations are satisfied at a point in time, and as such revenue will be recognized when the delivery is completed. The revenue will not be recognized for orders not fulfilled, but the delivery fee is earned even if the delivery is rejected or the person who placed the order is not present or available at the time of delivery. The consideration payable to the customer for drivers’ wages is recognized over time based on the inputs to determine the drivers’ wage obligations, but the net transaction price is known and therefore recognized by the end of each reporting period.
 
For the sales made through the Ganjarunner website, the performance obligation is satisfied at a point in time, and as such revenue will be recognized when the delivery is completed.
 
Disaggregation of Revenue
 
The following table depicts the disaggregation of revenue according to revenue type.
 
Revenue Type
 
Revenue for the three months ended
June 30, 2019
 
 
Revenue for the three months ended
June 30, 2018
 
 
Revenue for the six months ended
June 30, 2019
 
 
Revenue for the six months ended
June 30, 2018
 
Delivery Income
 $18,973 
  6,192 
 $34,343 
  13,160 
Dispensary Cost Reimbursements
  (28,559)
  (30,391)
  (63,346)
  (31,164)
Delivery Income, net
  (9,586)
  (24,199)
  (29,003)
  (18,004)
Product Sales
  62,607 
  - 
  62,607 
  - 
Commission Income
  29 
  43 
  29 
  43 
Other Revenue
  12,774 
  - 
  12,774 
  - 
Total
 $65,824 
  (24,156)
  46,407 
  (17,961)
 
Due to this reduction of revenue from the reimbursement of wages for the delivery couriers, the Company is presenting a net negative delivery income for the three and six months ended June 30, 2018 and 2019.
 
 
 
11
 
 
 
Leases
 
Under Topic 842, operating lease expense is generally recognized evenly over the term of the lease. The Company has operating leases primarily consisting of office space with remaining lease terms of 11 months to 28 months. Current facility leases include our offices in Las Vegas, Nevada, Long Beach, California, San Diego, California, Glendale, California, and Sacramento, California. Lease costs were $96,708 for the six months ended June 30, 2019. There was no sublease rental income for the six months ended June 30, 2019.
 
 Leases with an initial term of twelve months or less are not recorded on the balance sheet. For lease agreements entered into or reassessed after the adoption of Topic 842, we combine the lease and non-lease components in determining the lease liabilities and right of use (“ROU”) assets.
 
 Our lease agreements generally do not provide an implicit borrowing rate, therefore an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments. We used the incremental borrowing rate on December 31, 2018 for all leases that commenced prior to that date.
 
Lease Costs
 
 
 
Six Months Ended 
June 30, 2019
 
Components of total lease costs:
 
 
 
Operating lease expense
 $96,708 
Total lease costs
 $96.708 
 
 
 
Three Months Ended 
June 30, 2019
 
Components of total lease costs:
 
 
 
Operating lease expense
 $52,648 
Total lease costs
 $52,648 
 
Lease Positions as of June 30, 2019
 
ROU lease assets and lease liabilities for our operating leases were recorded in the condensed consolidated balance sheet as follows:
 
 
 
June 30, 2019
 
Assets
 
 
 
Right of use asset – short term
 $154,041 
Right of use asset – long term
  186,669 
Total assets
 $340,710 
 
    
Liabilities
    
Operating lease liabilities – short term
  152,407 
Operating lease liabilities – long term
 $198,024 
Total lease liability
 $350,431 
 
Lease Terms and Discount Rate
 
Weighted average remaining lease term (in years) – operating lease
  2.63 
Weighted average discount rate – operating lease
  10.91%
 
 
 
12
 
 
 
 Cash Flows
 
 
 
Six Months Ended 
June 30, 2019
 
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
ROU amortization
 $44,823 
Cash paydowns of operating liability
 $(42,601)
Supplemental non-cash amounts of lease liabilities arising from obtaining
    
ROU assets
 $(390,109)
Lease Liability
 $369,986 
 
The future minimum lease payments under the leases are as follows:
 
2019 (nine months)
 $165,229 
2020
  156,916 
2021
  44,851 
2022
  39,535 
2023
  3,303 
Total future minimum lease payments
  409,834 
Lease imputed interest
  59,403 
Total
 $350,431 
 
Basic and Diluted Net Loss per Common Share
 
Basic loss per common share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for each period. Diluted loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding plus the dilutive effect of shares issuable through the common stock equivalents. The weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. As of June 30, 2019, common stock equivalents are comprised of 13,176,750 warrants and 10,161,869 options.
 
Recent Accounting Pronouncements
  
The FASB issues ASUs to amend the authoritative literature in ASC. There have been several ASUs to date, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our financial statements.
 
NOTE 4 – MERGER AGREEMENT
 
On June 21, 2019, the Company, GR Acquisition, Inc. (“GRA”), a Nevada corporation ,Ganjarunner, Inc. (“Ganjarunner”), a California corporation, and Global Wellness, LLC (“GW”), a California limited liability company, (Ganjarunner and GW are hereafter referred to collectively as “GR/GW”) entered into an Agreement and Plan of Merger (the “Agreement”), pursuant to which GR/GW shall merge with and into GRA, with GRA continuing as the surviving entity and wholly-owned subsidiary of the Company (the “Merger”). The Merger closed on June 24, 2019 (the “Closing Date”). Pursuant to the Agreement, the Company agreed to pay to GR/GW $450,000, $150,000 of which has already been paid to GR/GW with the remaining $300,000 to be paid in two equal tranches of $150,000 whereby each tranche is subject to GRA’s achievement of certain milestones. Additionally, the Company shall pay to GR/GW (i) $350,000 at the earlier to occur of the 6-month anniversary of the Closing Date or upon the Company raising additional funding of at least $2,000,000 and (ii) $300,000 at the end of the 24-month anniversary of the Closing Date. In addition, as further consideration, the Company issued to GR/GW’s founders 1,000,000 shares of the Company’s common stock on the Closing Date and shall make two additional issuances of 2,000,000 shares of common stock on the 12-month and 24-month anniversaries of the Closing Date, with each respective issuance contingent upon GRA’s achievement of certain milestones as set forth in the Agreement.
 
 
13
 
 
 
Following the closing of the transaction, Ganjarunner’s financial statements as of the Closing were consolidated with the Consolidated Financial Statements of the Company. These amounts are provisional and may be adjusted during the measurement period.
 
The following presents the unaudited pro-forma combined results of operations of the Company with the Ganjarunner Business as if the entities were combined on January 1, 2019.
 
 
 
Six Months Ended
 
 
Six Months Ended
 
 
 
June 30, 2019
 
 
June 30, 2018
 
Gross Revenue
 $1,651,200 
  1,008,191 
Gross Profit
 $832,367 
  496,703 
Net loss
 $(2,582,625)
  (277,921)
Net loss per share
 $(0.06)
  (0.80)
Weighted average number of shares outstanding
  46,179,458 
  346,556 
 
The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the acquisitions been completed as of January 1, 2018 or to project potential operating results as of any future date or for any future periods.
 
The Company consolidated Ganjarunner as of the closing date of the agreement, and the results of operations of the Company include that of Ganjarunner.
 
The following presents the consideration paid for the acquisition of Ganjarunner and the preliminary purchase price allocation. These amounts are provisional and may be adjusted during the measurement period.
 
Purchase Price
 
 
 
Cash consideration
 $150,000 
Future cash consideration
  903,886 
Stock consideration
  500,000 
Future stock consideration
  1,194,092 
Total purchase price
 $2,747,978 
 
    
Allocation of purchase price
    
Cash
 $123,088 
Inventory
  139,017 
Fixed assets, net
  18,353 
ROU asset
  125,541 
Lease Liability
  (126,163)
Accounts payable
  (546,690)
Goodwill and intangible assets
  3,014,832 
Total allocation of purchase price
 $2,747,978 
 
NOTE 5 – NOTES PAYABLE
 
On November 7, 2017 the Company issued a promissory note for $75,000 that accrues interest of 6% annually. The promissory note is due on the earlier of January 31, 2018 or in the event of default, as such term is defined in the agreement. The terms of the promissory note provide that the principal amount of the note is convertible into the same security that is sold and issued in the next Qualified Financing Round completed by the Company, except that the conversion price shall be at a ten percent (10%) discount to the equity price per share raised in such Qualified Financing Round. Qualified Financing Round is defined as an equity financing of the Company that is consummated during the term of the promissory note which results in gross proceeds of not less than $925,000. The note was in default but as of the date of this report, has been fully paid off.
 
 
 
14
 
 
 
On February 1, 2018, the Company entered into a convertible bridge loan agreement providing for a loan in the principal amount of $50,000 to the Company. The loan bears interest at the rate of 6% annually and is convertible into shares the Company’s common stock at a 10% discount to the equity price per share that is sold and issued in the next Qualified Financing Round completed by the Company. Qualified Financing Round is defined as an equity financing of the Company that is consummated during the term of the loan which results in gross proceeds of not less than $925,000. In connection with the loan, the Company issued to the lender a three year warrant to purchase 12,500 shares of common stock of the Company at an exercise price of $0.50 per share. The bridge loan was due on March 31, 2018. In March 2019, the Company entered into a debt cancellation agreement with the lender pursuant to which the Company agreed to issue to the lender 375,000 shares of the Company’s common stock and a three year warrant to purchase 25,000 shares of the Company’s common stock at an exercise price of $0.20. The Company recorded a loss on extinguishment of debt of $225 related to the cancellation.
 
On October 25, 2018, the Company issued a convertible promissory note in the principal amount of $50,000 which is convertible into shares the Company’s common stock at a price of $0.20 per share. This note accrues interest of 8% annually. The note is due on October 25, 2019. During the second quarter of 2019 the note was converted into 261,665 shares of the Company’s common stock.
 
NOTE 6 - STOCKHOLDERS’ DEFICIT
  
Common Stock
 
The Company is authorized to issue 200,000,000 shares of common stock, par value $0.0001 per share.
 
During the six months ended June 30, 2019, the company issued 8,065,000 shares of common stock for cash of $1,973,001, 636,665 shares of common stock for conversion or cancellation of debt, and 1,000,000 shares related to the acquisition of Ganjarunner. 
 
Preferred Stock
 
The Company is authorized to issue 15,000,000 shares of preferred stock, par value $0.0001 per share. The preferred stock may be issued from time to time in one or more series as the Company’s Board may authorize. None of the preferred stock have been designated and none are issued and outstanding.  
 
Warrants
 
A summary of warrant issuances are as follows:
 
 
 
 
 
 
 
Weighted Average
 
 
Weighted Average Remaining
 
 
 
Number
 
 
Exercise
Price
 
 
Contractual
Life
 
Warrants
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding January 1, 2018
  18,750 
 $0.50 
  2.85 
Granted
  9,112,500 
  0.19 
  3.83 
Outstanding December 31, 2018
  9,131,250 
  0.19 
  3.83 
Granted
  4,058,000 
  0.16 
  6.73 
Forfeited
  (12,500)
  0.50 
  1.84 
Outstanding June 30, 2019
  13,176,750 
 $0.18 
  4.38 
 
 
15
 
 
 
During the first quarter of 2019, the Company issued warrants to purchase 1,558,000 shares of common stock of the Company at an exercise price of $0.10 per share. The warrants may be exercised on a cashless basis and have a term of seven years. The warrants were issued for consulting services.
 
During the second quarter of 2019, the Company issued warrants to purchase 2,500,000 shares of common stock of the Company at an exercise price of $0.20 per share. The warrants may be exercised on a cashless basis and have a term of seven years. The warrants were issued for consulting services.
 
Options
 
A summary of options issuances are as follows:
 
 
 
 
 
 
Weighted Average
 
 
Weighted Average Remaining
 
 
Weighted Average
 
 
 
Number
 
 
Exercise
Price
 
 
Contractual
Life
 
 
Grant Date Fair Value
 
Options
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding January 1, 2018
  - 
 $- 
  - 
 $- 
Granted
  4,854,692 
  0.04 
  3.00 
  0.19 
Outstanding December 31, 2018
  4,854,692 
  0.04 
  3.00 
  0.19 
Granted
  5,610,022 
  0.22 
  6.74 
  0.28 
Forfited
  (302,845)
  0.04 
  2.67 
  0.04 
Outstanding June 30, 2019
  10,161,869 
 $0.14 
  4.84 
 $0.24 
 
Nonvested Shares
 
Shares
 
Nonvested at January 1, 2018
  - 
Granted
  4,854,692 
Vested
  (1,213,673)
Forfeited
  - 
Nonvested at December 31, 2018
  3,641,019 
Granted
  5,610,022 
Vested
  (1,803,627)
Forfeited
  (302,845)
Nonvested at June 30, 2019
  7,144,569 
 
During the first quarter of 2019, the Company issued stock options purchase 3,922,522 shares of common stock of the Company at an exercise price of $0.10 per share. The options have a term of seven years. The company recognized a stock compensation expense of $187,306 related to the issuance of these options for the three months ended March 31, 2019.
 
During the second quarter of 2019, the Company issued stock options purchase 1,687,500 shares of common stock of the Company at an exercise price of $0.10 to $0.50 per share. The options have a term of seven years. The company recognized a stock compensation expense of $5,182 related to the issuance of these options for the three months ended June 30, 2019.
 
The company recognized a stock compensation expense of $106,986 and $351,048 respectively for the three and six months ended June 30, 2019, related to stock options.
 
 
 
16
 
 
 
NOTE 7 – COMMITMENTS AND CONTINGENCIES
 
On May 15, 2018, the Company entered into a three (3) year lease to rent office space for its principal executive office, with an effective date of June 1, 2018. The lease provides for monthly rent of $2,800 per month for the first year of the lease, $3,780 per month for the second year and $3,920 per month for the third year. The Company is also required to pay a monthly common area maintenance fee of $420.
 
On February 1, 2019, the Company entered into a twelve-month lease for office space in Las Vegas, Nevada. The lease requires a monthly payment of $1,764 and terminates on February 14, 2020.
 
The Company assumed a three (3) year lease, with an effective date of February 5, 2019, from a related party. The Company paid $20,839 upon signing the assignment. The lease provides for monthly rent of $5,345 per month through June 30, 2019, $5,880 per month through June 30, 2020 and $6,468 per month through June 30, 2021. The Company is also required to pay a monthly common area maintenance fee of $695.
 
The Company assumed a five (5) year lease, with an effective date of June 24, 2019, the acquisition of Ganjarunner. The lease provides for monthly rent of $3,113 per month through July 31, 2021, $3,206 per month through July 31, 2022 and $3,302 per month through July 31, 2023.
 
On February 22, 2019, the Company entered into a consulting agreement for public and media relations services. As part of this agreement the Company will pay $4,000 per month to the consultant.
 
On March 7, 2019, the Company entered into a consulting agreement for business advisory services. Pursuant to the terms of the consulting agreement, the Company agreed to pay cash compensation of $10,417 per month. The Company also agreed to pay a one-time payment of $5,000 within 5 days of the execution of the agreement. The Company also agreed to issue the consultant 125,000 options to purchase shares of the Company’s common stock, which options will vest quarterly over a 3 year period.
 
On April 1, 2019 the Company entered into a consulting agreement for business advisory services. As part of this agreement the Company will pay the consultant $20,000 per month. Additionally, the Company agreed to issue 500,000 warrants to purchase shares of its common stock. These warrants have an exercise price of $0.20 and a term of 7 years.
 
During the second quarter of 2019, the Company entered into three delivery contractor agreements with retailers. As part of these contracts the Company will offer delivery services in exchange for a delivery fee from each of these retailers.
 
During the six months ended June 30, 2019, the Company entered into seven employment agreements. As part of these agreements the Company will issue a total of 1,687,500 options to purchase shares of the Company's common stock. These options vest quarterly over two or three years.
 
NOTE 8 – RELATED PARTY TRANSACTIONS
  
During the year ended December 31, 2018, the Company entered into a loan agreement with the Company’s CFO, Brian Hayek, pursuant to which Mr. Hayek extended an interest free loan to the Company in the amount of $30,705. As of June 30, 2019, the amount due on this loan was $3,000.
 
On January 16, 2019, the Company appointed Jerrin James as the Company’s COO. Pursuant to the terms of the agreement with Mr. James, the Company agreed to issue 2,897,522 shares either in the form of stock options or warrants, to purchase shares of the Company’s common stock 25% of which will vest immediately upon grant with the remainder vesting quarterly over three years.
 
On March 5, 2019, the Company appointed Adam Berk as a Director to the Company. In connection with his appointment the Company agreed to issue to Mr. Berk, options to purchase 450,000 shares of common stock which vest immediately upon grant.
 
 
17
 
 
 
On April 3, 2019, the Company appointed Christian Schenk as a Director to the Company. In connection with his appointment the Company agreed to issue to Mr. Schenk, warrants to purchase 1,500,000 shares of common stock which will vest immediately upon grant. The Company also agreed to issue warrants to purchase 500,000 shares of common stock of the Company after the close of the merger with Ganjarunner (see below for details on the business combination), and issue warrants to purchase 1,000,000 shares of common stock of the Company after successfully closing the Company’s pending business arrangement with a cannabis B2B transportation provider or other business as determined by the Board of Directors.
 
NOTE 9 - SUBSEQUENT EVENTS
 
On July 10, 2019 (the “Closing Date”), the Company and Mountain High Recreation, Inc. (“MH”), a California corporation, entered into an Asset Purchase Agreement (the “Agreement”), pursuant to which the Company acquired certain assets from MH as specified in the Agreement, which included (i) the option to purchase to MH’s California Cannabis - Retailer Nonstorefront License (ii) the option to purchase a certain real property lease located at 8 Light Sky Ct, Sacramento, CA 95828 associated with that certain license , (iii) the right to use all trademarks and intellectual property associated with the MH brand (the “Assets”). The Company assumed no liabilities of MH. The transactions contemplated by the Agreement, closed on July 10, 2019 (the “Closing”).
 
Pursuant to the Agreement, the Company agreed to pay to MH the following: $200,000 at Closing, $150,000 on or before December 20, 2019, $150,000 on or before March 31, 2020, $250,000 at the end of the twelfth (12th) month (on a rolling basis) following the Closing Date and $250,000 at the end of the twenty-fourth (24th) month (on a rolling basis) following the Closing Date. In addition, at the Closing, the Company issued to MH 1,000,000 shares of its common stock . At the end of the twelfth month (on a rolling basis) from the Closing Date, the Company agreed to issue to MH warrants to purchase 2,000,000 shares of the Company’s Common Stock with an exercise price equal to the per share purchase price paid by investors of the Company’s then most recent private placement and exercisable for a period of three (3) years from the date of issuance (the “2020 Warrants”). At the end of the twenty-fourth month (on a rolling basis) from the Closing Date, the Company shall issue to MH warrants to purchase 2,000,000 shares of the Company’s Common Stock with an exercise price equal to the per share purchase price paid by investors of the Company’s then most recent private placement price, exercisable for a period of three (3) years from the date of issuance (the “2021 Warrants”). The 2020 Warrants and 2021 Warrants are subject to adjustment, based on the amount of gross revenue the Company recognized in connection with the Assets.
 
Subsequent to the second quarter of 2019, the Company issued 550,000 shares of its common stock for consideration of $274,945.
 
 
18
 
 
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation
 
Certain statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below, and elsewhere in this quarterly report, are not related to historical results, and are forward-looking statements. Forward-looking statements present our expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements frequently are accompanied by such words such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of such terms or other words and terms of similar meaning. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, or timeliness of such results. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this quarterly report. Subsequent written and oral forward looking statements attributable to us or to persons acting in our behalf are expressly qualified in their entirety by the cautionary statements and risk factors set forth in our annual report on Form 10-K filed with the SEC on April 15, 2019, and in other reports filed by us with the SEC.
 
You should read the following description of our financial condition and results of operations in conjunction with the financial statements and accompanying notes included in this report. 
 
Overview
   
We were formed on July 22, 2013 and are engaged in the business of delivering legal cannabis products to consumers in California.
 
On August 29, 2018, Driven Deliveries, Inc., a Nevada company (“Driven Nevada”), was acquired by Results-Based Outsourcing as part of a reverse merger transaction. As consideration for the merger, Results-Based Outsourcing issued the equity holders of Driven Nevada an aggregate of 30,000,000 post-split shares of their common. Following the merger, the Company adopted the business plan of Driven Nevada as a delivery company focused on deliveries for consumers of legal cannabis products, in California. The merger was accounted for as a recapitalization of the Company, therefore the financial statements as presented in this report include the historical results of Driven Nevada. 
 
Financial Results
 
We have a limited operating history. Therefore, there is limited historical financial information upon which to base an evaluation of our performance. Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations. Our financials for the six months ended June 30, 2019, show a net loss of $2,523,222. We expect to incur additional net expenses over the next several years as we continue to expand our existing operations. The amount of future losses and when, if ever, we will achieve profitability are uncertain.
 
 
 
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Results of Operations
 
Revenue
 
During the six months ended June 30, 2019, the Company recorded revenue in the amount of $46,407. The revenue for the period ended June 30, 2019 was comprised of dispensary cost reimbursements of $63,346 offsetting the delivery income of $34,343, product sales of $62,607, and other revenue of $12,774. This left the Company with a gross profit of ($1,987) for the six months ended June 30, 2019. The Company had a negative revenue of ($17,961) during the six months ended June 30, 2018. The revenue for the period ended June 30, 2018 was comprised of dispensary cost reimbursements of $31,164 offsetting the delivery income of $13,160. The change in revenue between the six months ended June 30, 2019 and 2018 resulted from the Company expanding its operations and acquisition of Ganjarunner in 2019.
 
During the three months ended June 30, 2019, the Company recorded revenue in the amount of $65,824. The revenue for the period ended June 30, 2019 was comprised of dispensary cost reimbursements of $28,559 offsetting the delivery income of $18,972, product sales of $62,607, and other revenue of $12,774. This left the Company with a gross profit of $17,430 for the three months ended June 30, 2019. The Company had a negative revenue of ($24,156) during the three months ended June 30, 2018. The revenue for the period ended June 30, 2018 was comprised of dispensary cost reimbursements of $30,391 offsetting the delivery income of $6,192. The change in revenue between the six months ended June 30, 2019 and 2018 resulted from the Company expanding its operations and acquisition of Ganjarunner in 2019.
 
Operating Expenses
 
During the six months ended June 30, 2019, we incurred a loss from operations of $2,514,219. This is due to professional fees of $508,870, compensation of $1,496,653 including stock-based compensation of $971,633, general and administrative of $413,332, and sales and marketing of $93,277.
 
During the six months ended June 30, 2018, we incurred a loss from operations of $242,954. This is due to professional fees of $70,332, compensation of $60,772 including stock-based compensation of $2,295, general and administrative of $49,843, and sales and marketing of $44,011.
 
During the three months ended June 30, 2019, we incurred a loss from operations of $1,570,224. This is due to professional fees of $341,113, compensation of $959,470 including stock-based compensation of $623,939, general and administrative of $234,568, and sales and marketing of $52,503.
 
During the three months ended June 30, 2018, we incurred a loss from operations of $133,154. This is due to professional fees of $32,259, compensation of $26,837 including stock-based compensation of $2,295, general and administrative of $23,745, and sales and marketing of $26,122.
 
The increase in operating expenses between the six months ended June 30, 2019 and 2018 are due to the Company expanding operations and acquisition of Ganjarunner. The increase in professional fees is primarily due to an increase in legal fees, business development fees, accounting fees, and consulting fees. The increase in compensation is primarily due to the increase in stock base compensation. The increase in general and administrative expenses is primarily due to rent expense and IT consulting expense. The increase in sales and marketing is primarily due to increases in public relations expense, marketing dues and subscriptions, and marketing expenses. 
 
Other Expenses
 
During the six months ended June 30, 2019, the Company incurred interest expense of $10,858 compared to interest expense of $3,456 in the six months ended June 30, 2018. During the six months ended June 30, 2019, the Company had a gain on extinguishment of debt of $1,855.
 
During the three months ended June 30, 2019, the Company incurred interest expense of $691 compared to interest expense of $1,870 in the three months ended June 30, 2018. During the three months ended June, 2019, the Company had a gain on extinguishment of debt of $2,080.
 
 
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Liquidity
 
We are a startup and anticipate that we will incur operating losses for the foreseeable future. As of June 30, 2019, we had cash of $354,585 and working capital deficit of $1,529,421. Based on our current forecast and budget, management believes that its cash resources will not be sufficient to fund its operations through the end of 2019. Unless the Company can generate sufficient revenue from the execution of the Company’s business plan, it will need to obtain additional capital to continue to fund the Company’s operations. There is no assurance that capital in any form would be available to us, and if available, on terms and conditions that are acceptable. If we are unable to obtain sufficient funds, we may be forced to curtail and/or cease operations.
 
Operating activities used $1,621,435 in cash for the six months ended June 30, 2019. This was comprised of a net loss of $2,523,222, $47,350 increase in inventory, and a $42,601 cash paydown of the lease liability that was offset by $971,633 in stock-based compensation and $46,800 amortization of the right of use asset.
 
Operating activities used $225,417 in cash for the six months ended June 30, 2018. This is comprised of a net loss of $246,410 was offset by a $16,090 increase in accounts payable and accrued expenses.
 
Investing activities used $67,251 in cash for the six months ended June 30, 2019 due to $40, 339 in the purchase of fixed assets and $123,088 in cash acquired in acquisition offset by $150,000 in cash used in acquisition.
 
Investing activities used $28,472 in cash for the six months ended June 30, 2018 due to the purchase of fixed assets.
 
Financing activities provided $2,038,022 in cash for the six months ended June 30, 2019 due to cash from repayment of loan payable of $50,000, proceeds of stock receivable of $100,000, and common stock issued for cash of $1,973,001.
 
Financing activities provided $215,705 in cash for the six months ended June 30, 2018 due to proceeds from loan payable of $50,000 and common stock issued for cash of $150,000.
 
Off-Balance Sheet Arrangements
 
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.
 
Critical accounting policies
 
Stock-Based Compensation
 
The Company accounts for stock-based compensation costs under the provisions of ASC 718, “Compensation—Stock Compensation”, which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock based compensation expense recognized includes the compensation cost for all stock-based payments granted to employees, officers, directors and non-employees based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or canceled during the periods reported.
  
Debt Issued with Warrants
 
Debt issued with warrants is accounted for under the guidelines established by ASC 470-20 – Accounting for Debt with Conversion or Other Options. We record the relative fair value of warrants related to the issuance of convertible debt as a debt discount or premium. The discount or premium is subsequently amortized to interest expense over the expected term of the convertible debt. The value of the warrants issued with the debt was de minimis. 
 
 
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Revenue Recognition
 
As of January 1, 2018, the company adopted ASC 606. The adoption of ASC 606, Revenue From Contracts With Customers, represents a change in accounting principle that will more closely align revenue recognition with the delivery of the Company’s services and will provide financial statement readers with enhanced disclosures. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. Revenue is recorded gross of taxes related to taxable sales transactions, such as sales tax, use tax, or other government fees. The Company used the Modified-Retrospective Method when adopting this standard. There was no accounting effect due to the initial adoption. To achieve this core principle, the Company applies the following five steps:
 
1) Identify the contract with a customer
 
A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay.
 
The Company has three contracts with different customers with the same terms. All of these qualify as contracts since they have been approved by both parties, have identifiable rights and payment terms regarding the services to be transferred, have commercial substance, and it is probable that the entity will collect the consideration in exchange for the services.
 
The Company also sells directly to customers through their Ganjarunner website. The Company takes customer orders through the website and delivers directly to the customer. In these sales the Company does not enter into a formal contract but sells directly to the customer as a retailer.
 
2) Identify the performance obligations in the contract
 
Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation.
 
The Company’s performance obligations are to (1) deliver cannabis in compliance with California law, (2) provide a platform to sell the retailer’s products, and (3) sell directly to customers through the Ganjarunner website. These items represent performance obligations since they are distinct services and producets and are distinct in the context of the contract.
 
3) Determine the transaction price
 
The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of the Company’s contracts as of June 30, 2019 contained a significant financing component. Determining the transaction price requires significant judgment, which is discussed by revenue category in further detail below.
 
 
 
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The Company provides delivery services in exchange for a flat fee per delivery and an additional charge per mile. As mandated by the California Bureau of Cannabis Control, delivery drivers are required to be on the payroll of a licensed retailer. In order to fulfill the performance obligation, delivery drivers are included on the payroll of the customer, and the Company reimburses the customer for the drivers’ wages at a premium. The cost of paying the drivers are considered a cost to fulfill a contract for which the Company receives no benefit, so it is consideration payable to the customer, which is considered in determining the transaction price. In addition, the company currently nets the amounts owed by the customers for deliveries with the amounts owed to the customers for drivers’ wages. As such, the Company reduces the delivery fee by the drivers’ wages to determine the transaction price. These elements of the transaction price are based on variable consideration determined to be constrained and are recognized as of the later of when the service is rendered or when the Company pays or promises to pay the consideration, which will generally be on a monthly basis. If the cost of the drivers’ wages exceeds the total fees for delivery, the Company would present a net negative revenue. For the six months ended June 30, 2019 and 2018, the Company had net negative revenue related to delivery of cannabis.
 
The transaction price of the commissions is a variable consideration as the price is determined to be 10% of a delivered sale from an order generated on the Company’s online platform. The variable consideration is also constrained as the amount of the consideration is dependent on the cost of the products purchased; and is further constrained as the company has little history to predict the amount to be recognized. Transaction price for the commissions will be determined as the company satisfies the performance obligation.
 
The direct sales made through the Ganjarunner website do not have a variable consideration and are accounted for as product sales.
 
4) Allocate the transaction price to performance obligations in the contract
 
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. For example, a bonus or penalty may be associated with one or more, but not all, distinct services promised in a series of distinct services that forms part of a single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.
 
The Company will allocate the transaction price of the delivery fees and to the deliveries that they perform separately for the customer. The transaction price of the commissions will be allocated per each sale that the Company generates for a retailer that is delivered. There are no discounts to allocate and there have been no changes in the transaction price to allocate.
 
For the sales made through the Ganjarunner website, the transaction price is allocated to the product and the delivery fees associated with the sale.
 
5) Recognize revenue when or as the Company satisfies a performance obligation
 
The Company satisfies performance obligations either over time or at a point in time. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.
 
Both performance obligations are satisfied at a point in time, and as such revenue will be recognized when the delivery is completed. The revenue will not be recognized for orders not fulfilled, but the delivery fee is earned even if the delivery is rejected or the person who placed the order is not present or available at the time of delivery. The consideration payable to the customer for drivers’ wages is recognized over time based on the inputs to determine the drivers’ wage obligations, but the net transaction price is known and therefore recognized by the end of each reporting period.
 
 
 
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For the sales made through the Ganjarunner website, the performance obligation is satisfied at a point in time, and as such revenue will be recognized when the delivery is completed.
 
Disaggregation of Revenue
 
The following table depicts the disaggregation of revenue according to revenue type.
 
Revenue Type
 
Revenue for the three months ended
June 30, 2019
 
 
Revenue for the three months ended
June 30, 2018
 
 
Revenue for the six months ended
June 30, 2019
 
 
Revenue for the six months ended
June 30, 2018
 
Delivery Income
 $18,973 
  6,192 
 $34,343 
  13,160 
Dispensary Cost Reimbursements
  (28,559)
  (30,391)
  (63,346)
  (31,164)
Delivery Income, net
  (9,586)
  (24,199)
  (29,003)
  (18,004)
Product Sales
  62,607 
  - 
  62,607 
  - 
Commission Income
  29 
  43 
  29 
  43 
Other Revenue
  12,774 
  - 
  12,774 
  - 
Total
 $65,824 
  (24,156)
  46,407 
  (17,961)
 
Due to this reduction of revenue from the reimbursement of wages for the delivery couriers the Company is presenting a net negative delivery income for the three and six months ended June 30, 2018 and 2019.
 
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
 
Not applicable.
 
Item 4. Controls and Procedures
 
Disclosure Controls and Procedures
 
Evaluation of disclosure controls and procedures
 
Evaluation of Disclosure Controls and Procedures
 
As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial officer, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
 
Material Weakness in Internal Control Over Financial Reporting
 
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
 
The material weakness we identified is described below:
 
 
1)
We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
 
 
 
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This material weaknesses could result in a material misstatement to the annual or interim consolidated condensed financial statements that would not be prevented or detected.
  
Changes in Internal Control over Financial Reporting
 
There were no changes in our internal controls over financial reporting that occurred during the quarter covered by this Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
Part II: Other Information
 
Item 1. Legal Proceedings
 
We are not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of our business. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.
 
Item 1A. Risk Factors
 
Not applicable.
 
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
 
During the three months ended June 30, 2019, the Company sold a total of 3,005,000 shares of its common stock to nineteen (19) accredited investors, for an aggregate purchase price of $961,000.
 
During the three months ended June 30, 2019, the Company sold a total of 261,665 shares of its common stock for cancellation of debt.
 
The shares above were offered and sold in reliance upon an exemption from the registration requirements under Rule 506 of Regulation D and/or Section 4(a)(2) of the Securities Act since, among other things, the transactions did not involve a public offering of the shares.
 
Item 3. Defaults upon Senior Securities
 
None.
 
Item 4. Mine Safety Disclosures
 
Not applicable.
 
Item 5. Other Information
 
None.

 
 
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Item 6. Exhibits
 
The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K.
 
The following exhibits are filed as part of this Quarterly Report on Form 10-Q:
 
ExhibitNumber
 
Description
2.1
 
Agreement and Plan of Merger, dated as of June 21, 2019, by and among Driven Deliveries, Inc., GR Acquisition, Inc., Ganjarunner, Inc. and Global Wellness, LLC (Incorporated by reference to the Company’s current report on Form 8-K filed with the Securities and Exchange Commission on June 28, 2019)
 
Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
 
Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).
 
Certification of the Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
 
Certification of the Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
 
Driven Deliveries 2019 Shareholder Letter 
10.1
 
Asset Purchase Agreement, dated as of July 10, 2019, between Driven Deliveries, Inc. and Mountain High Recreation, Inc. (Incorporated by reference to the Company’s current report on Form 8-K filed with the Securities and Exchange Commission on July 25, 2019)
101.INS
 
XBRL Instance Document
101.SCH
 
XBRL Taxonomy Extension Schema
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase
101.LAB
 
XBRL Taxonomy Extension Label Linkbase
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase
 
 
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SIGNATURES
 
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
Driven Deliveries, Inc.
 
 
Date: August 19, 2019
/s/ Christian Schenk
 
Name: Christian Schenk
 
Title: Chairman and Chief Executive Officer
 
(Principal Executive Officer)
 
Date: August 19, 2019
/s/ Brian Hayek
 
Name: Brian Hayek
 
Title: Chief Financial Officer
 
(Principal Financial and Accounting Officer)
  
 
 
 
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