UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2020

☐ 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.)

134 Penn St.,

El Segundo, CA 90245

(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 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 ☐ No ☒

Explanatory Note: The Company has filed all reports required 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), however, the Company is not subject to such filing requirements.

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 ☒ 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 such files). Yes ☒ 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	☐	Smaller reporting company	☒
		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 ☒ No

As of November 19, 2020, there were 77,517,539 shares of the issuer’s common stock outstanding.

Driven Deliveries, Inc.

Form 10-Q Report

For the Fiscal Quarter Ended September 30, 2020

TABLE OF CONTENTS

		Page
Part I.	Financial Information	1

Item 1	Financial Statements:	1

	Condensed Consolidated Balance Sheets at September 30, 2020 (unaudited) and December 31, 2019	1

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019 (unaudited)	2

	Condensed Consolidated Statements of Stockholders’ Equity for Nine Months Ended September 30, 2020 and 2019 (unaudited)	3

	Condensed Consolidated Statements of Cash Flows for Nine Months Ended September 30, 2020 and 2019 (unaudited)	4

	Notes to Condensed Consolidated Financial Statements (unaudited)	5

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3	Quantitative and Qualitative Disclosures about Market Risk	35

Item 4	Controls and Procedures	35

Part II.	Other Information	36

Item 1	Legal Proceedings	36

Item 1A	Risk Factors	37

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 3	Defaults upon Senior Securities	37

Item 4	Mine Safety Disclosures	37

Item 5	Other Information	37

Item 6	Exhibits	37

Signatures		38

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DRIVEN DELIVERIES, INC. & SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2020			2019
	(Unaudited)
ASSETS

CURRENT ASSETS
Cash	$	511,318		$	266,869
Accounts receivable		69,571			127,747
Receivable from merchant processor		-			206,734
Due from affiliate		-			346,610
Inventory		247,282			149,946

TOTAL CURRENT ASSETS		828,171			1,097,906

Notes receivable		500,000			-
Prepaid expenses		107,231			-
Intangible assets, net		11,677,585			4,622,267
Goodwill		1,820,999			1,271,718
Right of use asset		544,032			115,859
Fixed assets, net		52,626			81,839
Deposit		191,213			61,138

TOTAL ASSETS	$	15,721,857		$	7,250,727

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Accounts payable	$	3,097,922		$	1,238,239
Accrued expenses		3,417,195			462,414
Accrued taxes		782,874			784,168
Settlement payable		642,045			352,272
Notes payable, net of unamortized debt discount of $333,728 and $480,108 as of September 30, 2020 and December 31, 2019, respectively		3,338,772			1,016,892
Notes payable - related party, net of unamortized debt discount of $32,226 and $234,667 as of September 30, 2020 and December 31, 2019, respectively		202,441			-
Lease liability		257,772			40,217
Derivative liability		178,108			306,762
Acquisition liability		1,956,497			908,469

TOTAL CURRENT LIABILITIES		13,873,626			5,109,433

Lease liability - long term		286,260			76,264
Acquisition liability - long term		-			442,617

TOTAL LIABILITIES		14,159,886			5,628,314

COMMITMENTS AND CONTINGENCIES – Note 8

STOCKHOLDERS’ EQUITY
Preferred stock, $0.0001 par value, 15,000,000 shares authorized, no shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		-			-
Common stock, $0.0001 par value, 200,000,000 shares authorized, 77,517,539 and 40,961,054 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		7,752			4,096
Additional paid in capital		31,436,888			17,387,684
Accumulated deficit		(29,882,669	)		(15,241,762	)
TOTAL STOCKHOLDERS’ EQUITY		1,561,971			2,150,018

NON-CONTROLLING INTEREST		-			(527,605	)

TOTAL STOCKHOLDERS’ EQUITY		1,561,971			1,622,413

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	15,721,857		$	7,250,727

See accompanying notes to the condensed consolidated financial statements.

DRIVEN

DELIVERIES, INC. & SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended			For the Three Months Ended			For the Nine Months Ended			For the Nine Months Ended
	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019

REVENUE
Gross Sales	$	7,212,418		$	1,237,885		$	16,608,963		$	1,284,292
Discounts and returns		1,232,543			25,222			2,761,335			25,222
Net Sales		5,979,875			1,212,663			13,847,628			1,259,070

Cost of goods sold - Product costs		2,598,193			458,239			6,195,462			458,239
Cost of goods sold - Fulfilment Costs and Other		5,372,005			97,536			9,225,191			145,930
Total Cost of goods sold		7,970,198			555,775			15,420,653			604,169

Gross Profit (Loss)		(1,990,323	)		656,888			(1,573,025	)		654,901

OPERATING EXPENSES
Professional fees		413,906			296,735			1,261,084			805,605
Compensation, includes stock-based compensation of $1,941,362 and $5,007,996 for the three months ended September 30, 2020 and 2019 and $3,022,063 and $5,979,629 for the nine months ended September 30, 2020 and 2019		2,848,861			5,691,843			5,643,563			7,188,496
General and administrative expenses		2,219,705			709,536			4,243,070			1,122,968
Sales and marketing		355,733			134,142			817,103			227,419
Total Operating Expenses		5,838,205			6,832,256			11,964,820			9,344,488

NET LOSS FROM OPERATIONS		(7,828,528	)		(6,175,368	)		(13,537,845	)		(8,689,587	)

OTHER EXPENSES
Interest expense		(168,263	)		(52,318	)		(755,056	)		(63,176	)
Loss on sale of fixed asset		-			23,727			(11,970	)		25,582
Change in fair value of derivative liability		694,291			(807,250	)		345,897			(807,250	)
Gain (loss) on extinguishment of debt		-			521,387			(810,518	)		521,387
Total Other Expenses		526,028			(314,454	)		(1,231,647	)		(323,457	)

Net loss before provision for income taxes		(7,302,500	)		(6,489,822	)		(1,231,647	)		(9,013,044	)

Provision for Income Taxes		-			169,166			-			169,166

NET LOSS		(7,302,500	)		(6,658,988	)		(14,769,492	)		(9,182,210	)

NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST		-			-			(128,584	)		-

NET LOSS ATTRIBUTABLE TO DRIVEN DELIVERIES, INC. & SUBSIDIARY	$	(7,302,500	)	$	(6,658,988	)	$	(14,640,908	)	$	(9,182,210	)

Net loss per share - basic and diluted	$	(0.10	)	$	(0.12	)	$	(0.24	)	$	(0.19	)

Weighted average number of shares outstanding during the period - basic and diluted		72,054,338			54,222,493			61,263,796			48,886,493

See accompanying notes to the condensed consolidated financial statements.

DRIVEN DELIVERIES, INC. & SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER’S EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(Unaudited)

	Common						Additional Paid-in			Accumulated			Non- controlling		Stock Subscription			Total Stockholders’
	Shares			Par			Capital			Deficit			Interest		Receivable			Deficit

Balance January 1, 2019		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

Sale of common stock		1,320,000			132			659,868			-			-		-			660,000
Cancelation of stock from legal settlement		(12,272,616	)		(1,227	)		(121,499	)		-			-		-			(122,726	)
Cancelation of stock from debt		(2,500,000	)		(250	)		-			-			-		-			(250	)
Issuance of options for services		-			-			118,065			-			-		-			118,065
Issuance of warrants for services		-			-			4,890,181			-			-		-			4,890,181
Issuance of common stock for conversion of warrants		5,072,812			507			(507	)		-			-		-			-
Warrants issued with notes		-			-			418,541			-			-		-			418,541
Issuances of common stock for acquisition		1,960,756			196			1,709,804			-			-		-			1,710,000
Net loss		-			-			-			(6,658,988	)		-		-			(6,658,988	)

Balance September 30, 2019		44,157,671		$	4,416		$	13,649,585		$	(11,683,402	)	$	-	$	-		$	1,790,599

	Common				Additional Paid-in			Accumulated			Non- controlling			Stock Subscription		Total Stockholders’
	Shares		Par		Capital			Deficit			Interest			Receivable		Deficit
Balance January 1, 2020		40,961,054	$	4,096	$	17,387,684		$	(15,241,762	)	$	(527,605	)	$	-	$	1,622,413
Sale of common stock		674,000		68		336,932			-			-			-		337,000
Issuance of options for services		-		-		121,539			-			-			-		121,539
Issuance of warrants for services		-		-		206,265			-			-			-		206,265
Warrants issued with notes		-		-		622,373			-			-			-		622,373
Issuances of common stock for merger		12,000,000		1,200		5,998,800			-			-			-		6,000,000
Reclassification of non-controlling interest for merger		-		-		(656,189	)		-			656,189			-		-
Net loss		-		-		-			(3,576,755	)		(128,584	)		-		(3,705,339	)

Balance March 31, 2020		53,635,054	$	5,364	$	24,017,404		$	(18,818,517	)	$	-		$	-	$	5,204,251

Sale of common stock		1,110,000	$	111	$	554,889		$	-		$	-		$	-	$	555,000
Issuance of common stock and warrants for settlement of AP		188,000		19		93,981			-			-			-		94,000
Issuance of common stock for exercise of warrants		10,628,611		1,063		(1,063	)		-			-			-		-
Issuance of common stock for exercise of options		450,000		45		(45	)		-			-			-		-
Issuance of options for services		-		-		121,977			-			-			-		121,977
Issuance of warrants for services		-		-		630,920			-			-			-		630,920
Net loss		-		-		-			(3,761,652	)		-			-		(3,761,652	)

Balance June 30, 2020		66,011,665	$	6,602	$	25,418,063		$	(22,580,169	)	$	-		$	-	$	2,844,496

Sale of common stock, net of issuance costs		2,600,000		260		1,125,740			-			-			-		1,126,000
Issuance of common stock for settlement		5,000,000		500		2,749,500			-			-			-		2,750,000
Common stock issued with notes		100,000		10		133,333			-			-			-		133,343
Issuance of common stock for conversion of interest and penalties		1,088,893		108		69,162			-			-			-		69,270
Issuance of common stock for exercise of warrants		2,716,981		272		(272	)		-			-			-		-
Issuance of options for services		-		-		67,797			-			-			-		67,797
Issuance of warrants for services		-		-		1,873,565			-			-			-		1,873,565
Net loss		-		-		-			(7,302,500	)		-			-		(7,302,500	)

Balance September 30, 2020		77,517,539	$	7,752	$	31,371,545		$	(29,882,669	)	$	-		$	-	$	1,561,971

See accompanying notes to the condensed consolidated financial statements.

DRIVEN DELIVERIES, INC. & SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended			For the Nine Months Ended
	September 30, 2020			September 30, 2019

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(14,769,492	)	$	(9,182,210	)
Adjustments to reconcile net loss to net cash used in operating activities
Gain/loss on extinguishment of debt		810,518			(521,387	)
Stock-based compensation		3,022,063			5,979,629
Amortization of right-of-use asset		(621	)		4,199
Amortization of debt discount		548,752			45,959
Depreciation and amortization expense		1,441,619			123,229
Change in fair value of derivative liability		(345,897	)		807,250
Settlement expense paid in stock		2,144,606			-
Gain/loss on sale of fixed asset		11,970			(25,582	)
Changes in operating assets and liabilities
Inventory		35,114			(107,679	)
Settlement payable		289,773			-
Deposit		(101,575	)		-
Accounts payable and accrued compensation		3,542,556			388,475
Accrued taxes		(1,294	)		168,766
Accounts receivable		58,176			(5,993	)
Other current asset		206,734			-
Prepaid expense		(107,231	)		-
Net Cash Used In Operating Activities		(3,214,229	)		(2,325,344	)

CASH FLOWS FROM INVESTING ACTIVITIES
Cash acquired in acquisition		20,678			123,088
Cash payment for acquisition liability		(220,000	)		(150,000	)
Purchase of fixed assets		-			(40,537	)
Contingent liability		-			(320,000	)
Cash used in the acquisition of intangible assets		-			(200,000	)
Net Cash Used In Investing Activities		(199,322	)		(587,449	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash paid from loan receivable		(500,000	)		-
Proceeds from stock receivable		-			100,000
Proceeds from loan payable		2,140,000			508,333
Repayments of loan payable		-			(50,000	)
Proceeds from loan payable - related party		-			78,726
Repayments of loan payable - related party		-			(8,705	)
Common stock issued for cash		2,018,000			2,633,001
Net Cash Provided By Financing Activities		3,658,000			3,261,355

NET INCREASE IN CASH		244,449			348,562

CASH AT BEGINNING OF PERIOD		266,869			5,249

CASH AT END OF PERIOD	$	511,318		$	353,811

Supplemental cash flow information:

NON-CASH INVESTING AND FINANCING ACTIVITIES
Warrants issued in conjunction with - business combination	$	7,398,191		$	-
Common stock and contingent consideration - business combination	$	-		$	5,944,827
Issuance of common stock and warrants for cancellation of debt	$	-		$	106,193
Issuance of common stock for conversion of interest and penalties		69,270			-
Lease liability recognized from right of use asset	$	582,065		$	266,869
Settlement of related party AP for related party debt	$	30,000		$	-
Issuance of common stock and warrants for settlement of AP	$	94,000		$	-
Debt discount on conversion feature	$	-		$	295,575
Settlement expense	$	605,394		$	-

See accompanying notes to the condensed consolidated financial statements.

DRIVEN DELIVERIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020 AND 2019

(Unaudited)

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 selling 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 Inc. as part of a reverse merger transaction. As consideration for the merger, Results-Based Outsourcing Inc. issued the equity holders of Driven Nevada an aggregate of 30,000,000 post-split shares of their common stock. 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 selling legal cannabis products to consumers in California. See Note 4 – Merger and Asset Purchase Agreement below for more information on the acquisition.

In July 2019, the Company entered into an Asset Purchase Agreement with Mountain High Recreation, Inc., in which the Company acquired certain limited assets from Mountain High Recreation, Inc. See Note 4 – Merger and Asset Purchase Agreement for more information on the asset purchase.

In September 2019 the Company entered into a Joint Venture agreement with Budee, Inc. to expand our operations and engaged in the business of providing delivery services of legal cannabis products to the consumer in California. See Note 5 – Joint Venture for more information on the Joint Venture.

On February 27, 2020, the Company entered into an Agreement and Plan of Merger by and among the Company, Budee Acquisition, Inc., a Nevada corporation and Budee, Inc., a California corporation, pursuant to which the Company acquired Budee. See Note 4 – Merger and Asset Purchase Agreement for more information on the acquisition.

On April 9, 2020 our common stock became quoted on the OTCQB under the symbol DRVD.

Risks and Uncertainties

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 the 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.

In December 2019, a novel strain of coronavirus, COVID-19, surfaced in Wuhan, China. This virus continues to spread around the world, resulting in business and social disruption. The coronavirus was declared a Public Health Emergency of International Concern by the World Health Organization on January 30, 2020. The operations and business results of the Company could be materially adversely affected as a result of the pandemic. Employers are also required to prepare for and increase, by as much capacity as possible, the arrangement for employees to work remotely. The extent to which the coronavirus may impact business activity or results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions required to contain the coronavirus or treat its impact, among others.

NOTE 2 – GOING CONCERN ANALYSIS

Going Concern Analysis

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

For the nine months ended September 30, 2020, the Company had a net loss of $14,769,492 and working capital deficit of ($13,045,455). The Company will require additional capital in order to continue its operations in the normal course of business.

Management’s plans include raising capital through 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.

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 condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern for one year from the issuance of these financial statements.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited condensed consolidated 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 consolidated financial statements reflect all adjustments, consisting of normal, recurring adjustments, considered necessary for a fair presentation of the results for the interim period ended September 30, 2020. Although management believes that the disclosures in these unaudited condensed consolidated 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 consolidated financial statements should be read in conjunction with the Company’s financial statements for the year ended December 31, 2019, which contains the audited financial statements and notes thereto, for the year ended December 31, 2019 included within the Company’s Form 10-K filed with the SEC on May 22, 2020. The interim results for the nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ended December 31, 2020 or for any future interim periods. The December 31, 2019 Balance Sheet is derived from the Company’s audited financial statements but does not include all necessary disclosures for full U.S. GAAP presentation.

Principles of consolidation

The consolidated condensed financial statements include the accounts of Driven Deliveries, Inc., and its wholly-owned subsidiaries, Budee, Inc., Ganjarunner, Inc. and Global Wellness, LLC. All intercompany balances and transactions have been eliminated in the consolidated condensed financial statements.

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.

Coronavirus Aid, Relief and Economic Security Act (“CARES Act”)

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law in March 2020. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”). Corporate taxpayers may carryback net operating losses (NOLs) originating between 2018 and 2020 for up to five years, which was not previously allowed under the 2017 Tax Act. The CARES Act also eliminates the 80% of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 or 2020. Taxpayers may generally deduct interest up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for 2019 and 2020. The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in 2020 for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the 2017 Tax Act.

In addition, the CARES Act raises the corporate charitable deduction limit to 25% of taxable income and makes qualified improvement property generally eligible for 15-year cost-recovery and 100% bonus depreciation.

Concentrations

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 September 30, 2020 and December 31, 2019, the Company did not have any cash equivalents.

Inventory

Inventory consists of finished goods and applicable capitalized costs and is stated at the lower of cost or net realizable value, on an average cost basis. Inventory is determined to be salable based on demand forecast within a specific time horizon. Inventory in excess of salable amounts is considered obsolete, at which point it is written down to its net realizable value.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company generally does not require collateral to support customer receivables. The Company determines if receivables are past due based on days outstanding, and amounts are written off when determined to be uncollectible by management. As of September 30, 2020 and 2019, there was no allowance for doubtful accounts deemed necessary.

Goodwill

We review goodwill for impairment at least annually or more frequently if events or changes in circumstances would more likely than not reduce the fair value of our single reporting unit below its carrying value. As of September 30, 2020, no impairment of goodwill has been identified.

	Goodwill
Balance, January 1, 2019	$	-
Additions		1,271,718
Balance, December 31, 2019		1,271,718
Additions		549,281
Balance, September 30, 2020	$	1,820,999

Intangible Assets

The Company’s intangible assets include the following at September 30, 2020:

	Cost Basis		Accumulated Amortization			Net		Estimated Life
Trade Names/Trademarks	$	4,440,962	$	(388,625	)	$	4,052,337		10
IP/Trade Secrets		3,053,060		(619,828	)		2,433,232		5
License		1,064,684		(170,642	)		894,042		15
Proprietary Software/Technology		4,189,000		(354,139	)		3,834,861		7
Non-Compete Agreements		536,009		(251,304	)		284,705		2
Customer Relations		211,000		(32,592	)		178,408		7
Total Intangible Assets	$	13,494,715		(1,817,130	)	$	11,677,585

The Company’s intangible assets include the following at December 31, 2019:

	Cost Basis		Accumulated Amortization			Net		Estimated Life
Trade Names/Trademarks	$	1,918,962	$	(95,324	)	$	1,823,638		10
IP/Trade Secrets		1,978,060		(195,616	)		1,782,444		5
License		678,684		(22,463	)		656,221		15
Proprietary Software/Technology		289,009		(69,742	)		219,267		7
Customer Relations		152,000		(11,303	)		140,697		7
Total Intangible Assets	$	5,016,715	$	(394,448	)	$	4,622,267

There was no impairment recorded to intangible assets as of September 30, 2020. Amortization expense was $1,422,682 and $0 for the nine months ended September 30, 2020 and September 30, 2019, respectively. Amortization expense was $551,881 and $0 for the three months ended September 30, 2020 and September 30, 2019, respectively.

The future amortization expense intangible assets are as follows:

2020 (remainder)	$	551,881
2021		2,119,392
2022		1,814,416
2023		1,728,525
2024		1,535,478
2025 and after		3,927,893
Total	$	11,677,585

Cost of Sales

Cost of sales consists of:

Product costs: Product costs include the purchase price of products sold.

Fulfillment costs and other: includes the costs of outbound shipping and handling and other costs which include direct and indirect labor costs, rent, and depreciation expenses, and inbound shipping and handling costs for inventory related to delivering products to the customer.

The Company’s cost of sales for September 30, 2020 and 2019 are as follows:

Cost of Sales Type	Nine months ended September 30, 2020		Nine months ended September 30, 2019
Cost of Sales – Product Costs	$	6,195,462	$	458,239
Cost of Sales – Fulfilment Costs and Other		9,225,191		145,930
Total	$	15,420,653	$	604,169

Advertising

The Company expenses the cost of advertising and promotions as incurred. Advertising expense was $817,103 and $227,419 for the nine months ended September 30, 2020 and 2019, respectively. Advertising expense was $355,733 and $134,142 for the three months ended September 30, 2020 and 2019, respectively.

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 cancelled during the periods reported. 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.

The Black–Scholes option valuation model requires the development of assumptions that are inputs into the model. These assumptions are the value of the underlying share, the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and are accounted for as they occur. Due to the lack of sufficient trading history, the Company benchmarked their volatility to similar companies in a similar industry over the expected option life and other appropriate factors. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its Common stock and does not intend to pay dividends on its Common stock in the foreseeable future. The Company records forfeitures as they occur.

The Company’s stock-based compensation expense was $3,022,063 and $5,979,629 for the nine months ended September 30, 2020 and 2019, respectively. The Company’s stock-based compensation expense was $1,941,362 and $5,007,996 for the three months ended September 30, 2020 and 2019, respectively.

Fair Value Measurements

ASC 820, “Fair Value Measurements and Disclosure,” defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels giving the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels are described below:

Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that is accessible by the Company;

Level 2 Inputs – Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly;

Level 3 Inputs – Unobservable inputs for the asset or liability including significant assumptions of the Company and other market participants.

The carrying amount of the Company’s financial assets and liabilities, such as cash, accounts payable, accounts receivables, and accrued expenses approximate their fair value because of the short maturity of those instruments. Non- recurring fair value items are re-assessed at the end of each reporting period.

The assets or liability’s fair value measurement within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. The following table provides a summary of financial instruments that are measured at fair value as of September 30, 2020.

	Carrying			Fair Value Measurement Using
	Value			Level 1		Level 2		Level 3			Total

Derivative liabilities	$	(178,108	)	$	-	$	-	$	(178,108	)	$	(178,108	)

The following table provides a summary of financial instruments that are measured at fair value as of December 31, 2019.

	Carrying			Fair Value Measurement Using
	Value			Level 1		Level 2		Level 3			Total

Derivative liabilities	$	(306,762	)	$	-	$	-	$	(306,762	)	$	(306,762	)

The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended September 30, 2020:

	Fair Value Measurement Using Level 3
	Inputs Total
Balance, January 1, 2019	$	-
Debt Discount		305,424
Change in fair value of derivative liabilities		1,338
Balance, December 31, 2019		306,762
Extinguishment		(311,360	)
Debt Discount		528,603
Change in fair value of derivative liabilities		(345,897	)
Balance, September 30, 2020	$	178,108

The level 3 financial instruments consist of embedded conversion features. The fair value of these embedded conversion features are estimated using a Black Scholes valuation model. The fair value of the derivative features were calculated using a Black-Scholes option model valued with the following assumptions:

	September 30, 2020			December 31, 2019
Exercise price	$	0.50		$	0.50
Risk free interest rate		0.16-1.12	%		1.52-1.81	%
Dividend yield		0.00	%		0.00	%
Expected volatility		97-157	%		93-109	%
Contractual term (Years)		0.38-1.19			0.91-1.37
Fair value of stock on grant date		$0.50-0.63		$	0.50

Risk-free interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Note with a similar expected term on the date of measurement.

Dividend yield: The Company uses a 0% expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring dividends in the near future.

Volatility: The Company calculates the expected volatility of the stock price based on the corresponding volatility of the Company’s peer group stock price for a period consistent with the warrants’ expected term.

Expected term: The Company’s expected term is based on the remaining contractual maturity of the warrants.

Changes in the unobservable input values would likely cause material changes in the fair value of the Company’s Level 3 financial instruments.

The most sensitive unobserved inputs used in valuing derivative instruments are volatility and estimated fair value of the Company’s stock on the grant date of the instruments. Significant changes in either of these inputs could have a material effect on the fair value measurement of the derivative instruments.

During the nine months ended September 30, 2020 and 2019, the Company marked the derivative feature of the warrants to fair value and recorded a gain of $345,897 and a loss of $807,250 relating to the change in fair value, respectively.

During the three months ended September 30, 2020 and 2019, the Company marked the derivative feature of the warrants to fair value and recorded a gain of $694,291 and a loss of $807,250 relating to the change in fair value, respectively.

Derivative Liability

The Company evaluates its options, warrants or other contracts, if any, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10-05-4 and 815-40-25. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the consolidated condensed statement of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then the related fair value is reclassified to equity or to gain or loss on extinguishment of the note if the derivative is attached to a note.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date. The pricing model includes subjective input assumptions that can materially affect the fair value estimates. The expected volatility is estimated based on the most recent historical period of time of comparable companies equal to the remaining contractual term of the instrument granted.

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. 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:

Identify the contract with a customer

The Company sells retail products directly to customers. In these sales there is no formal contract with the customer. These sales have commercial substance and there are no issues with collectability as the customer pays the cost of the goods at the time of purchase or delivery.

Identify the performance obligations in the contract

The Company sells its products directly to consumers. In this case these sales represent a performance obligation with the sales and any necessary deliveries of those products.

Determine the transaction price

The sales that are done directly to the customer have no variable consideration or financing component. The transaction price is the cost that those goods are being sold for plus any additional delivery costs.

Allocate the transaction price to performance obligations in the contract

For the goods that the Company sells directly to customers, the transaction price is allocated between the cost of the goods and any delivery fees that may be incurred to deliver to the customer.

Recognize revenue when or as the Company satisfies a performance obligation

For the sales of the Company’s own goods the performance obligation is complete once the customer has received their product.

Disaggregation of Revenue

The following table depicts the disaggregation of revenue according to revenue type.

Revenue Type	Revenue for the three months ended September 30, 2020		Revenue for the three months ended September 30, 2019			Revenue for the nine months ended September 30, 2020			Revenue for the nine months ended September 30, 2019
Delivery Income	$	-	$	53,496		$	27,043		$	87,869
Dispensary Cost Reimbursements		-		(36,007	)		(7,528	)		(99,353	)
Delivery Income, net		-		17,489			19,515			(11,484	)
Product Sales		5,979,875		1,195,174			13,828,113			1,270,554
Total	$	5,979,875	$	1,212,663		$	13,847,628		$	1,259,070

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 32 months to 34 months. Current facility leases include our offices in El Segundo California, Oakland California, and Sacramento California. Lease costs were $239,065 and $148,021 for the nine months ended September 30, 2020 and 2019. There was no sublease rental income for the nine months ended September 30, 2020 and 2019. Lease costs were $142,942 and $51,313 for the three months ended September 30, 2020 and 2019. There was no sublease rental income for the three months ended September 30, 2020 and 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 September 30, 2020 and December 31, 2019 for all leases that commenced prior to that date. In determining this rate, which is used to determine the present value of future lease payments, we estimate the rate of interest we would pay on a collateralized basis, with similar payment terms as the lease and in a similar economic environment.

Lease Costs

	Nine Months Ended September 30, 2020		Nine Months Ended September 30, 2019
Components of total lease costs:
Operating lease expense	$	239,065	$	148,021
Total lease costs	$	239,065	$	148,021

Lease Positions as of September 30, 2020

ROU lease assets and lease liabilities for our operating leases were recorded in the consolidated condensed balance sheet as follows:

	September 30, 2020		December 31, 2019
Assets
Right of use asset	$	544,032	$	115,859
Total assets	$	544,032	$	115,859

Liabilities
Operating lease liabilities – short term	$	257,772	$	40,217
Operating lease liabilities – long term		286,260		76,264
Total lease liability	$	544,032	$	116,481

Lease Terms and Discount Rate

Weighted average remaining lease term (in years) – operating lease			3.08
Weighted average discount rate – operating lease			10.91	%

Cash Flows

	Nine Months Ended September 30, 2020			Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
ROU amortization	$	153,893		$	44,823
Cash paydowns of operating liability	$	(153,893	)	$	(42,601	)
Supplemental non-cash amounts of lease liabilities arising from obtaining:
ROU asset	$	(544,032	)	$	(390,109	)
Lease Liability	$	544,032		$	369,986

The future minimum lease payments under the leases are as follows:

2020 (remainder)	$	72,519
2021		250,543
2022		231,678
2023		39,178
Total future minimum lease payments		593,918
Less: Lease imputed interest		49,886
Total	$	544,032

Excise and Sales Tax

The State of California and various local governments impose certain excise and state and local taxes on product sales. The Company’s policy is to include excise taxes as part of sales and cost of sales. The Company’s policy for various state and local sales taxes are to exclude them from revenue and cost of sales.

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. For diluted earnings per common share, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. As of September 30, 2020, common stock equivalents are comprised of 29,628,272 warrants and 6,611,434 options.

Recent Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350)—Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test referenced in Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other (“ASC 350”). As a result, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. However, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820 “Fair Value Measurement”. ASU 2018-13 eliminates certain disclosures related to transfers and the valuations process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. ASU 2018-13 is effective for the Company for annual and interim reporting periods beginning January 1, 2020. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In December 2019, the FASB issued authoritative guidance intended to simplify the accounting for income taxes (ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”). This guidance eliminates certain exceptions to the general approach to the income tax accounting model and adds new guidance to reduce the complexity in accounting for income taxes. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those annual periods. The Company is currently evaluating the potential impact of this guidance on its consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivative and Hedging (Topic 815), which clarifies the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. The guidance clarifies how to account for the transition into and out of the equity method of accounting when considering observable transactions under the measurement alternative. The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual periods, with early adoption permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity, and also improves and amends the related EPS guidance for both Subtopics. The ASU will be effective for annual reporting periods after December 15, 2021 and interim periods within those annual periods and early adoption is permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

NOTE 4 – MERGER AND ASSET PURCHASE AGREEMENTS

Ganjarunner Merger

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 “Merger 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 Merger Agreement, the Company agreed to pay to GR/GW $1,000,000, $150,000 of which has already been paid to GR/GW with $300,000 to be paid in two equal tranches of $150,000 whereby each tranche is subject to GRA’s achievement of certain milestones. (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 Merger Agreement.

On October 4, 2019, the Company amended the Merger Agreement with GR/GW. As part of this amendment, the Company issued 5,000,000 warrants to purchase shares of the Company’s common stock to GR/GW. These warrants have a term of three years and an exercise price of $0.50. These warrants replace the previously agreed upon common stock consideration of 5,000,000 shares and eliminated the contingencies related to achieving certain milestones as set forth in the initial merger agreement. The fair value of the stock warrant granted was estimated using the Black-Scholes valuation model. These warrants were valued at $1,933,368. $1,694,092 of the value from the warrants was booked against the previously recorded contingent liability for the stock that the warrants replaced and the remaining $239,276 value from the warrants was expensed.

As of September 30, 2020 and December 31, 2019, the Company owed a total of $300,000 and $685,000 on the acquisition, respectively, with a present value of $274,041 and $583,886, respectively. The amount owed as of September 30, 2020 consist of cash owed of $300,000.

Following the closing of the transaction, Ganjarunner’s financial statements as of the Closing Date were consolidated with the Condensed Consolidated Financial Statements of the Company.

The following presents the consideration paid for the acquisition of Ganjarunner and the purchase price allocation.

Purchase Price
Purchase Price	$	2,987,254
Total purchase price	$	2,987,254

Allocation of purchase price
Tangible Assets/(Liabilities)	$	(459,464	)
Trade Names/Trademarks		877,000
IP/Trade Secrets		801,000
License		306,000
Non-Compete Agreements		39,000
Customer Relationships		152,000
Goodwill		1,271,718
Total allocation of purchase price	$	2,987,254

Mountain High Asset Purchase

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 “Purchase Agreement”), pursuant to which the Company acquired certain assets from MH as specified in the Purchase 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 Purchase 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 June 30, 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 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.

On October 4, 2019, the Company amended the Asset Purchase Agreement with Mountain High Recreation, Inc. As part of this amendment, the Company issued 5,000,000 warrants to purchase shares of the Company’s common stock to Mountain High Recreation, Inc. These warrants have a term of three years and an exercise price of $0.50. These warrants replace the previously agreed upon share and warrant consideration and eliminated the contingencies related to the gross revenue recognized in connection with the assets. The fair value of the stock warrant granted was estimated using the Black-Scholes valuation model. These warrants were valued at $1,933,368.

As of September 30, 2020 and December 31, 2019, the Company owed a total of $850,000 and $850,000 on the acquisition, respectively, with a present value of $776,310 and $708,347, respectively. The amount owed as of September 30, 2020 consist of cash owed of $850,000.

The following presents the consideration paid for the asset acquisition of Mountain High Recreation, Inc. and the preliminary purchase price allocation. These amounts are provisional and may be adjusted during the measurement period.

Purchase Price
Purchase Price	$	2,841,715
Total purchase price	$	2,841,715

Allocation of purchase price
Trade Names / Trademarks	$	1,041,962
IP/Trade Secrets		1,177,060
License		372,684
Non-Compete Agreements		250,009
Total allocation of purchase price	$	2,841,715

Budee Merger

On February 27, 2020 (the “Effective Date”), Driven Deliveries, Inc. (the “Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Budee Acquisition, Inc., a Nevada corporation and Budee, Inc. (“Budee”), a California corporation, pursuant to which the Company acquired Budee (the “Budee Acquisition”). On the Effective Date, all then-issued and outstanding shares of Budee were canceled and Budee issued 1,000,000 new shares of its common stock, representing 100% of the now issued and outstanding shares of Budee, to the Company. As a result, Budee became a wholly-owned subsidiary of the Company. As consideration, the Company agreed to: i) cash payments to Budee of $725,000 in three payments of $225,000, $200,000 and $300,000, due April 15, 2020, July 15, 2020 and October 15, 2020, respectively, and ii) issue to Budee 13,333,333 shares of the Company’s common stock (the “Consideration Shares”). 1,333,333 of the 13,333,333 shares will not be issued until the completion of a lawsuit. Pursuant to the Merger Agreement, holders of the Consideration Shares received the right to have their Consideration Shares registered with the Securities and Exchange Commission if and when the Company files a new registration statement on Form S-1.

As of September 30, 2020 and December 31, 2019, the Company owed a total of $1,106,497 and $0 on the acquisition, respectively. The amount owed as of September 30, 2020 consist of cash owed of $505,000 and 1,333,333 shares of common stock value at $666,667.

The following presents the consideration paid for the asset acquisition of Budee, Inc. and the preliminary purchase price allocation. These amounts are provisional and may be adjusted during the measurement period. During the seconds quarter of 2020 the assumed liabilities was increase by $160,000 which lead to an increase in Goodwill for the same amount.

Purchase Price
Cash	$	690,504
Stock		6,603,722
Assumed liabilities		1,818,538
Total purchase price	$	9,112,764

Allocation of purchase price
Tangible Assets/(Liabilities)	$	85,483
Trade Names/Trademarks		2,522,000
IP/Trade Secrets		1,075,000
License		386,000
Proprietary Software/Technology		4,189,000
Non-Compete Agreements		247,000
Customer Relationships		59,000
Goodwill		549,281
Total allocation of purchase price	$	9,112,764

The following presents the unaudited pro-forma combined results of operations of the Company with the Ganjarunner and Budee Businesses as if the entities were combined on January 1, 2019.

	Nine Months			Nine Months
	September 30, 2020			September 30, 2019
Gross Revenue	$	14,529,993		$	6,223,725
Gross Profit	$	(1,237,660	)	$	4,944,064
Net loss	$	(14,304,770	)	$	(7,402,688	)
Net loss per share, basic and diluted	$	(0.23	)	$	(0.15	)
Weighted average number of shares outstanding		61,263,796			48,886,493

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, 2019, or to project potential operating results as of any future date or for any future periods.

NOTE 5 – JOINT VENTURE

On September 30, 2019, the Company entered into a joint venture agreement (the “JV Agreement”) with Budee, Inc., (“Budee’), a privately-held company involved in the delivery of cannabis-related products in California, pursuant to which the parties formed a joint venture company, GanjaBudee Inc., a Nevada Corporation (“GB”), in anticipation of a merger between the parties (the “GanjaBudee Merger’). GB is a separate and independent entity from either party with its own management team and Board of Directors and is owned 51% by the Company and 49% by Budee. The term of GB will continue until such GanjaBudee Merger is effective or any definitive agreement for such GanjaBudee Merger is terminated but in any case will not be for a period of more than sixty months, subject to a mutual extension agreed to by the parties.

In connection with the JV Agreement, the Company and Budee agreed to share certain expenses between the Company and Budee, Inc. The Company is also allowed to charge an additional 10% fee on any of these charged back expenses. The Company charged back expenses to Budee totaling $96,610 during the first quarter of 2020. In addition, pursuant to the JV Agreement the Company agreed to pay certain obligations of Budee Inc. of $250,000. As of September 30, 2020, the Company has not paid this amount. As a result of the merger agreement the Company derecognized a non-controlling interest of $656,189 attributable to the Joint Venture in the Statement of Stockholder’s Equity. See Note 4.

NOTE 6 – NOTES PAYABLE

On August 28, 2019, the Company issued a senior convertible note (“Note”) to M2 Equity Partners (“Holder”), pursuant to which the Holder agreed to advance the Company $1,000,000 in three equal installments, with the final installment advanced on October 30, 2019. The Note matures on August 28, 2020 and is the senior obligation of the Company. The Note’s principal balance of $1,000,000 bears interest at a rate of 10% per annum and interest payments are payable on a monthly basis. The funds from this loan were distributed in three parts with $333,333 being issued on August 30, 2019, September 30, 2019 and October 30, 2019. An additional $497,000 was received in excess of the original note as of December 31, 2019. These amounts were subject to the same terms as the original note. An additional $1,140,000 was received in excess of the original note during the first quarter of 2020. The principal of the note was amended on January 31, 2020 to be $2,637,000. This amendment also changed the maturity date of the note to February 14, 2021. Pursuant to the Note, the Holder has the right to convert all or part of the Note to shares of common stock of the Company at a price equivalent to a value of $0.50 per share of common stock on an as-converted basis. As additional consideration for entering into the exchange, the Company issued to the Holder a three-year warrant to purchase 4,500,000 shares of the Company’s common stock at an exercise price of $0.05. The Company also recognized a derivative liability in connection with the note valued at $306,762 as of December 31, 2019 and $178,108 as of September 30, 2020. The derivative occurred due to anti-dilution provisions contained in the conversion feature of the note.

To determine how to account for the modification of the Note, the Company performed a net present value test to compare the old note with the new note discounted at the effective interest rate of the original note. Since the change in the net present value between the two notes exceeded 10% of the value of the original note, the note modification needed to be accounted for as an extinguishment of debt. As part of this the Company recognized a $810,518 loss on the extinguishment of debt for the old note. The loss is due to $1,497,000 from the extinguishment of the note, $311,360 from the extinguishment of the derivative offset by $499,505 from the extinguishment of the debt discount and $2,119,373 from the recognition of the new note. The Company recognized a debt discount on the new note of $528,603 at the date of issuance. The Company recognized $127,978 and $331,072 in amortization on the debt discount during the three and nine months ended September 30, 2020, respectively, leaving a remaining debt discount of $190,575 at September 30, 2020 due to the conversion of the note.

In addition, as an inducement to enter into the Note and to fund each advance thereunder, the Company entered into a security agreement with the Holder executed concurrently with the Note (the “Security Agreement”). Pursuant to the Security Agreement, the Company granted the Holder a first priority security interest in certain assets of the Company (the “Collateral”) for the benefit of the Holder to secure the Company’s obligations under the Note. The occurrence of any event of default under the Note, as well as the Company’s failure to observe or perform its obligations under the Security Agreement and such failure goes uncured for five days after receiving notice, constitutes an event of default under the Security Agreement. If an event of default under the Security Agreement occurs, the Holder is entitled to certain rights, including the right to take possession of the Collateral and the right to operate the business of the Company using the Collateral. The Security Agreement terminates when all payments under the Note have been made in full or upon conversion. Matthew Atkinson, a member of M2 owns approximately 5.98% of the Company’s common stock. The Company will also be required to appoint a member of M2 to the Board of Directors of the Company for the duration of the term of the debt. The Company will also make an appointment to the Company’s Board of Directors and audit committee.

During the year ended December 31, 2019, the Company entered into a loan agreement with Brian Hayek, the Company’s Chief Financial Officer and a member of its board of directors. Pursuant to the Loan Agreement, the Company issued Mr. Hayek a Secured Convertible Note in the principal amount of $188,743 with an interest rate of 10%. As of September 30, 2020, the amount due on this loan was $184,667. The note is convertible into shares of the Company’s equity securities at a price of $0.50 per share or preferred stock designated by the parties in an amount equivalent to a value of $0.50 per share on an as converted basis. The obligation of the Note is an obligation of the Company other than obligations specifically designated otherwise by the Company. In addition, the Company issued Mr. Hayek warrants to purchase 500,000 shares of the Company’s common stock at an exercise price of $0.50 per share which warrants terminate five years after their issuance. As part of this loan the Company recognized the intrinsic value of a beneficial conversion feature and value of warrants issued resulting in a debt discount of $102,111 as of the date of issuance. The Company had a remaining debt discount of $101,831 at December 31, 2019. The Company recognized $25,738 and $76,653 in amortization on the debt discount during the three and nine months ended September 30, 2020, respectively, leaving a remaining debt discount of $25,718 at September 30, 2020.

On December 31, 2019, the Company entered into a loan agreement with Christian Schenk, the Company’s former Chairman and Chief Executive Officer and a member of its board of directors, pursuant to which Mr. Schenk extended a loan to the Company in the amount of $50,000 with an interest rate of 10%. In connection with this loan, the Company issued Mr. Schenk a secured convertible note. The note is convertible into equity of the Company at a price of $0.50 per share of common stock. The note was funded with the proceeds from the settlement of $30,000 in accounts payable to Truck That, LLC and a check from Truck That, LLC in the amount of $20,000 (see Note 9). In addition, the Company issued Mr. Schenk warrants to purchase 150,000 shares of the Company’s common stock at an exercise price of $0.50 per share which warrants terminate five years after their issuance.. As part of this loan the Company recognized the intrinsic value of a beneficial conversion feature and value of warrants issued resulting in a debt discount of $28,585 as of the date of issuance. The Company had a remaining debt discount of $28,507 at December 31, 2019. The Company recognized $7,205 and $21,458 in amortization on the debt discount during the nine months ended September 30, 2020, respectively, leaving a remaining debt discount of $7,048 at September 30, 2020.

On July 28, 2020, the Company entered into a convertible promissory note with a principal of $1,050,000. The note accrues interest at a rate of 8% per annum. The note converts to the Company’s common stock at a rate of $0.50 per share. This note has an original issuance discount of $50,000. The proceeds of the note will be paid out in two tranches, the first for $787,500 upon the execution of the note and the second for $262,500 30 days after the original funding. Each tranche will be due 12 months from the date of the funding. The Company can prepay the note as follows: if the note is outstanding for less than 90 days than 105% of the principal will be paid, at 91-120 day 110% of the principal will be paid, at 121-180 days 115% of the principal will be paid, and at 181-365 days 120% of the principal will be paid. So long as this note is outstanding, upon any issuance by the Company or any of its subsidiaries of any convertible debt security (whether such debt begins with a convertible feature or such feature is added at a later date) with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the holder in this Note, then the Company shall notify the holder of such additional or more favorable term and such term, at the holder's option, shall become a part of this note and its supporting documentation. The types of terms contained in the other security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, terms addressing maturity, conversion look back periods, interest rates, original issue discount percentages and warrant coverage. As part of the note the Company will issue 100,000 shares of the Company’s common stock to the note holder. The Company recorded a debt discount based on the relative fair value of the shares of $47,619. The Company notes the agreement included certain make-whole provisions related to the issuance of these shares which resulted in a liability. The Company did not record the liability as it was determined to be trivial. The Company also recognized a debt discount resulting from the intrinsic value of a beneficial conversion feature of $123,214. The Company recognized $27,681 in amortization on the debt discount during the three and nine months ended September 30, 2020, respectively, leaving a remaining unamortized debt discount of $143,152 at September 30, 2020.

NOTE 7 – 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 nine months ended September 30, 2020, the Company issued 4,384,000 shares of common stock for cash of $2,018,000, 188,000 shares issued for the settlement of accounts payable, 10,628,611 shares issued for the exercise of warrant, 450,000 shares issued for the exercise of options, 100,000 share issued with notes payable, 5,000,000 shares issued related to legal settlement (See Note 8), and 1,873,565 shares issued for conversion of interest and penalties on notes payable (See Note 6). 12,000,000 shares were issued relating to the merger with Budee (See Note 4).

On August 6, 2020, the Company filed an S-1. With this S-1 the Company is making an offering of up to 10,000,000 shares of common stock.

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 has been designated and none are issued and outstanding as of September 30, 2020 and December 31, 2019.

Warrants

There were 25,128,272 warrants outstanding as of September 30, 2020. The fair value of each stock warrant granted was estimated using the Black-Scholes valuation model with the assumptions as follows:

Exercise price	$	0.04 - $0.50
Expected dividend yield		0	%
Risk free interest rate		0.18% - 1.71	%
Expected life in years		3-7
Expected volatility		133% - 152	%
Estimated fair value of stock on measurement date	$	0.44 – $0.73

There were 29,243,750 warrants outstanding as of December 31, 2019. The fair value of each stock warrant granted was estimated using the Black-Scholes valuation model with the assumptions as follows:

Exercise price	$	0.10 - $0.50
Expected dividend yield		0	%
Risk free interest rate		1.42% - 2.66	%
Expected life in years		3-7
Expected volatility		134% - 158	%
Estimated fair value of stock on measurement date	$	0.50

The Company uses the latest common stock sale price as the fair value of stock on grant date rather than the market value of the stock as the Company believes this is a more accurate valuation of the Company’s common stock due to the lack of sufficient volume and trading history on the Company’s common stock on the OTC Markets.

A summary of warrant issuances are as follows:

	Number			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
Warrants
Outstanding January 1, 2019		9,131,250			0.19		3.83
Granted		27,658,000			0.44		4.29
Forfeited		(7,545,500	)		0.34		4.48
Outstanding December 31, 2019		29,243,750		$	0.39		4.10
Granted		13,484,522			0.27		3.58
Exercised		(17,600,000	)		0.24		2.91
Outstanding September 30, 2020		25,128,272		$	0.42		3.77

Nonvested Warrants	Shares
Nonvested at January 1, 2019		-
Granted		27,658,000
Vested		(19,762,500	)
Forfeited		(7,545,500	)
Nonvested at December 31, 2019		350,000
Granted		13,484,522
Vested		(13,236,605	)
Nonvested at September 30, 2020		597,917

During the first quarter of 2020, the Company issued warrants to purchase an aggregate of 5,335,000 shares of common stock of the Company at an exercise price of $0.05 or $0.50 per share. The warrants may be exercised on a cashless basis and have a term of three, five, or seven years. 375,000 warrants were issued for consulting services, 4,500,000 warrants in connection with notes issued to M2, and 460,000 warrants in connection with stock sold.

During the second quarter of 2020, the Company issued warrants to purchase an aggregate of 2,216,000 shares of common stock of the Company at an exercise price of $0.55 or $0.50 per share. The warrants may be exercised on a cashless basis and have a term of three, or five years. 986,000 warrants were issued for consulting services, 120,000 warrants issued for the settlement of accounts payable, and 1,110,000 warrants in connection with stock sold.

During the third quarter of 2020, the Company issued warrants to purchase an aggregate of 5,933,522 shares of common stock of the Company at an exercise price of $0.04, $0.50 or $0.57 per share. The warrants may be exercised on a cashless basis and have a term of three, five, or seven years. 208,000 warrants were issued for services, 3,105,522 were issued in connection with a note, and 2,620,000 warrants in connection with stock sold.

The Company recognized a stock compensation expense of $2,501,803 and $5,510,766 for the nine months ended September 30, 2020 and 2019, related to warrants.

The Company recognized a stock compensation expense of $1,873,565 and $4,890,181 for the three months ended September 30, 2020 and 2019, respectively, related to warrants.

Options

There were 6,611,434 options outstanding as of September 30, 2020. The fair value of each stock option granted was estimated using the Black-Scholes valuation model with the assumptions as follows:

Exercise price	$	0.59 – 0.75
Expected dividend yield		0	%
Risk free interest rate		0.25-0.77	%
Expected life in years		3
Expected volatility		150-152	%
Estimated fair value of stock on grant date	$	0.40-0.61

There were 7,879,933 options outstanding as of December 31, 2019. The fair value of each stock option granted was estimated using the Black-Scholes valuation model with the assumptions as follows:

Exercise price	$	0.10 - $0.50
Expected dividend yield		0	%
Risk free interest rate		1.49% -2.63	%
Expected life in years		7
Expected volatility		153% - 157	%
Estimated fair value of stock on grant date	$	0.50

A summary of options issuances are as follows:

	Number			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Weighted Average Grant Date Fair Value
Options
Outstanding January 1, 2019		4,854,692			0.04		3.00		0.19
Granted		6,210,022			0.16		5.13		0.24
Forfeited		(3,184,781	)		0.19		3.53		0.19
Outstanding December 31, 2019		7,879,933		$	0.14		4.74	$	0.24
Granted		142,500			0.79		3.52		0.56
Exercised		(450,000	)		0.10		5.66		0.20
Forfeited		(960,999	)		0.97		14.41		0.24
Outstanding September 30, 2020		6,611,434		$	0.13		4.10	$	0.22

Nonvested Shares	Shares
Nonvested at January 1, 2019		3,641,019
Granted		6,210,022
Vested		(2,840,194	)
Forfeited		(3,184,781	)
Nonvested at December 31, 2019		3,826,066
Granted		142,500
Vested		(947,490	)
Forfeited		(960,999	)
Nonvested at September 30, 2020		2,060,077

During the first quarter of 2020, the Company issued stock options to purchase an aggregate of 112,500 shares of common stock of the Company at an exercise price of $0.59 per share. The options expire in three years from the grant date.

During the second quarter of 2020, the Company issued no stock options.

During the third quarter of 2020, the Company issued stock options to purchase an aggregate of 30,000 shares of common stock of the Company at an exercise price of $0.75 per share. The options expire in three years from the grant date.

The Company recognized a stock compensation expense of $311,312 and $470,394 respectively for the nine months ended September 30, 2020 and 2019, related to stock options.

The Company recognized a stock compensation expense of $67,797 and $118,065 respectively for the three months ended September 30, 2020 and 2019, related to stock options.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Carla Baumgartner, Chris Haas, and Eric Steele (“Plaintiff”) filed a Complaint against Driven Deliveries, Inc. (“Driven”), and Brian Hayek and Christian Schenk, individually, on November 26, 2019 in San Diego County Superior Court, Case No. 37-2019-00063208. In June 2019, Driven entered into a Merger Agreement with Ganjarunner, Inc. (“Ganjarunner”), whereby Driven acquired Ganjarunner. Plaintiffs, the former owners of Ganjarunner, allege in their First Amended Complaint causes of action for Breach of the Merger Agreement, Fraudulent Inducement, Fraudulent Concealment, Negligent Misrepresentation, Breach of Fiduciary Duty, Violation of Corporate Code § 25401, Conversion, Unfair Competition, and Violation of Penal Code §496. On February 18, 2020, Driven filed a Demurrer to Plaintiffs’ First Amended Complaint challenging seven of Plaintiffs’ nine causes of action. The hearing on the demurrer, original set for May 1, 2020, has been continued indefinitely due to Court closures. The Company intends to vigorously defend against this action. See Note 10 for settlement details.

On July 13, 2020 the Company reached a settlement agreement with Carla Baumgartner, Chris Haas, and Eric Steele who filed a Complaint against Driven Deliveries, Inc., and Brian Hayek and Christian Schenk, individually, on November 26, 2019 in San Diego County Superior Court, Case No. 37-2019-00063208. As part of the settlement agreement Driven shall issue and deliver 5,000,000 shares of restricted common stock of Driven (DRVD) to Plaintiffs, thereby nullifying the Amendment and the Warrants issued as part of the Amendment. Additionally, cash consideration is due to the Plaintiffs on the following schedule: 1) One Hundred Seventy-Five Thousand Dollars ($175,000) immediately upon the signing of the agreement (“Effective Date”); 2) Eighty-Five Thousand Dollars ($85,000) within fourteen (14) days following the Effective Date 3) One Hundred Seventy-Five Thousand Dollars ($175,000) within thirty (30) days following the Effective Date; 4) Seventy-Five Thousand Dollars ($75,000) within sixty (60) days following the Effective Date; and 5) Three Hundred Thousand Dollars ($300,000) on or before July 1, 2021. The 5,000,000 shares issued were valued at $2,750,000 with this expense being recognized during the three months ended September 30, 2020. As of September 30, 2020, the outstanding balance on this settlement is $300,000.

In February 2020, Irth Communications, LLC filed a complaint in the Superior Court of California, County of Los Angeles, against the Company. The complaint alleges that pursuant to a services agreement the Company issued Irth 500,000 shares of its common stock but the Company breached this agreement because according to the complaint, the Company has refused to authorized its transfer agent to remove the restrictive legend on the Shares. Among other remedies, Irth seeks at least $1,130,000 in compensatory damages, attorneys’ fees, and injunctive relief. The Company is reviewing the Complaint and intends to defend itself vigorously.

On January 3, 2020, the Company entered into a consulting agreement. As part of this agreement the Company will pay the Consultant $10,000 upon signing of the agreement and an additional $15,000 30 days and 60 days after the signing of the agreement. The Company will also issue 80,000 warrants to purchase the shares of the Company’s common stock at an exercise price of $0.50 per share and a term of seven years. On June 3, 2020 this agreement was amended to issue cashless warrant for an 200,000 in lieu of the 80,000 previous warrants with a cashless exercise price of $0.50 and the payment schedule was updated to $10,000.00 on January 1, 2020; $5,000.00 on February 1, 2020; $15,000.00 on March 1, 2020; $10,000.00 on April 1, 2020; $10,000.00 on May 1, 2020; and $11,500.00 June 1, 2020

On April 23, 2020, the Company entered into a consulting agreement for investor relation services. As part of this agreement the Company will pay a monthly fee of $8,000. This monthly fee will also increase by 5% every 12 months of service.

On March 1, 2020 the Company entered into a consulting agreement. As part of this agreement the Company will issue the consultant a warrant for 250,000 shares of DRVD stock with a cashless exercise feature at an exercise price of $.50 per share and a 3 year expiration period.

NOTE 9 – RELATED PARTY TRANSACTIONS

On August 28, 2019, the Company issued a senior convertible note (“Note”) to M2 Equity Partners (“Holder”), pursuant to which the Holder agreed to advance the Company $1,000,000. The principal of the note was amended on January 31, 2020 to be $2,637,000. As additional consideration, the Company issued to the Holder a three-year warrant to purchase 4,500,000 shares of the Company’s common stock at an exercise price of $0.05. The Company also recognized a derivative liability in connection with the note valued at $306,762 as of December 31, 2019 and $623,032 as of September 30, 2020. M2 is a related party due to the terms of the note giving them a seat on the board of directors of the Company. As of September 30, 2020, there was $2,637,000 outstanding on the note. There was an interest expense of $62,855 and $171,947 related to this note during the three and nine months ended September 30, 2020, respectively. There is a total accrued interest of $0 as of September 30, 2020. The interest on this note was converted to share of common stock on September 22, 2020. See Note 6.

During the year ended December 31, 2019, the Company entered into a loan agreement with the Company’s CFO, Brian Hayek, the Company’s Chairman and Chief Executive Officer and a member of the Company’s board of directors. Pursuant to the Loan Agreement, the Company issued Mr. Hayek a Secured Convertible, pursuant to which Mr. Hayek extended a loan to the Company in the amount of $188,743 with an interest rate of 10%. As of September 30, 2020, the amount due on this loan was $184,667. There was an interest expense of $4,655 and $13,863 related to this note during the three and nine months ended September 30, 2020, respectively. There is a total accrued interest of $19,015 as of September 30, 2020.

On December 31, 2019, the Company entered into a loan agreement with Christian Schenk, the Company’s Chairman and Chief Executive Officer and a member of the Company’s board of directors, pursuant to which Mr. Schenk extended a loan to the Company in the amount of $50,000 with an interest rate of 10%. As of September 30, 2020, the amount due on this loan was $50,000. There was an interest expense of $1,260 and $3,753 related to this note during the three and nine months ended September 30, 2020, respectively. There is a total accrued interest of $3,767 as of September 30, 2020.

On March 25, 2020, the board of directors of the Company appointed Christopher DeSousa as a member of the Board, with such appointment to take effect immediately. In connection with his appointment, the Board approved a grant of an option to purchase 112,500 shares of the Company’s common stock at an exercise price of $0.59 per share. These options vest quarterly over one year and expire in three years from the grant date. In addition, Mr. DeSousa shall receive an option to purchase 28,125 shares of Common Stock at the exercise price of $0.59 for each quarter he serves on the Board.

On July 6, 2020, Chris DeSousa resigned as a Director of Driven Deliveries, Inc., effective immediately. Mr. DeSousa’s resignation was not the result of any dispute or disagreement with Company or the Company’s board of Directors on any matter relating to the operations, policies or practices of the Company.

On August 7, 2020, Salvador Villanueva, the Company’s President, was appointed to the Company’s board of directors and interim CEO.

On July 19, 2020, the Company issued a promissory note for $500,000 to a related party. The related party is a company whose CEO is also a board member of the Company. (See Note 10).

NOTE 10 – NOTES RECEIVABLE

On July 19, 2020, the Company issued a promissory note for $500,000 to a related party. The related party is a company whose CEO is also a board member of the Company. The effective date of the note is June 19, 2020. This note will accrue 6% interest and a default interest rate of 8%. This note will be issued in three tranches with $200,000 being 10 days after the execution of the note, $200,000 being issued 30 days after the note and $100,000 being issued 45 days after the note. The Company had $2,466 and $2,466 interest income from the note for the three and nine months ended September 30, 2020, respectively.

NOTE 11 – SUBSEQUENT EVENTS

On October 5, 2020, Driven Deliveries, Inc. (the “Company”) entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) among Stem Holdings, Inc., a Nevada corporation (“Parent”) Stem Driven Acquisition, Inc., a Nevada corporation (“Acquisition Sub”) and the Company.

Pursuant to the Merger Agreement, on the Effective Date (as defined in the Merger Agreement), Acquisition Sub shall be merged (the “Merger”) with and into the Company and shall become a wholly-owned subsidiary of Parent. As of the closing of the Merger, all of the Company’s outstanding shares shall be cancelled and converted into the shares of the Parent on a pro-rata basis at a ratio of one share of the Parent for every one share of the Company. Immediately prior to the closing of the Merger the Parent will issue to each holder of warrants, options or convertible debentures to purchase the Company’s shares, warrants, options and convertible debentures that are equal in value and on the same terms as the respective holder’s Company warrants, options and debentures. Additionally, certain outstanding debt of the Company will be converted into shares of the Company’s common stock in accordance with the Merger Agreement. Adam Berk, is the Parent’s Chief Executive Officer and President as well as a member of its board of directors. Mr. Berk is a member of the Company’s board of directors. Mr. Berk abstained from voting on the approval of the Merger during the Company’s board meeting at which the Merger was voted on.

The Closing of the Merger is subject to customary closing conditions including (but not limited to):

(i) The Merger being approved by the Company’s shareholders, the shareholders of Acquisition Sub, and the board of directors by the Parent;

(ii) The listing of the Consideration Shares shall have been approved by the Canadian Securities Exchange;

(iii) Any required third-party consents shall have been received; and

(iv) The Company shall have obtained executed waivers from Salvador Villanueva, III, Jeanette Villanueva and Lisa Chow pursuant to which such parties waive their respective rights to re- purchase all of the assets of Budee, Inc. under the Agreement and Plan of Merger among the Company, Budee Acquisition, Inc. and Budee Inc., dated February 27, 2020.

Either the Company or the Parent may terminate the Merger Agreement if the Merger has not been consummated by December 31, 2020.

The foregoing description of the Merger Agreement does not purport to be complete, and is qualified in its entirety by reference to the full text of the Merger Agreement, a copy of which is filed as Exhibit 2.1 to this filing.

On October 4, 2020 Christian Schenk resigned as the Company’s Chief Executive Officer and as the Chairman and as a member of the Company’s board of Directors.

On October 4, 2020, Salvador Villanueva, who is currently serving as the Company’s President, was appointed the Company’s Interim Chief Executive Officer. Mr. Villanueva will continue to serve as the Company’s President.

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 May 22, 2020, 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 incorporated in the State of Delaware on July 22, 2013 under the name Digital Commerce Solutions, Inc. and changed our name to Results-Based Outsourcing, Inc. on September 5, 2014. 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 stock. 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.

On September 6, 2018, we amended our Certificate of Incorporation to (i) changed our name to Driven Deliveries, Inc., (ii) increase the number of our authorized shares to 215,000,000, comprised of 200,000,000 shares of common stock, par value $0.0001 per share and 15,000,000 shares of “blank check” preferred stock, par value $0.0001 per share (the “Preferred Stock”) and (iii) to effect a forward split such that 12.35 shares of Common Stock were issued for every one (1) share of Common Stock issued and outstanding immediately prior to the amendment.

On January 24th, 2019 we changed our ticker symbol to DRVD.

In June 2019, we completed our acquisition of Ganjarunner, Inc. and Global Wellness, LLC, which are engaged in the business of providing delivery services of legal cannabis products to consumers.

In July 2019, we entered into an Asset Purchase Agreement with Mountain High Recreation, Inc., in which the Company acquired certain assets from Mountain High Recreation, Inc.

In September 2019, we entered into a Joint Venture with Budee, Inc. to expand our operations and engage in the business of providing delivery services of legal cannabis products to the consumer.

In February 2020, we completed an acquisition of Budee, Inc which allowed us to consolidate all of the Budee, Inc. revenue, expand our delivery operations, and unify our operations and technology into a single, scalable, and supportable platform and infrastructure.

On April 9, 2020 our common stock became quoted on the OTCQB under the symbol DRVD.

Driven Overview

Driven is in stock and on-time! Founded by experienced technology, cannabis, and logistics executives, Driven is one of the first licensed, United States Exchange-traded, online cannabis retailer that is capable of servicing 92% of California’s adult population in less than 90 minutes. We aim to delight our customers with the best cannabis delivery experience in the industry. Utilizing our own shipping hubs, drivers, and proprietary technology, we delight our customers with a cannabis delivery experience that is comparable to some of the largest eCommerce retailers in the United States. Driven provides 2 different service levels to our customers. An “Express” delivery with a limited product selection that remains unsold in the Driver’s vehicle usually delivered within 90 minutes or less, and a “Next Day” scheduled delivery from the larger selection of 500+ products from a Driven fulfillment center. Currently, customers are able to place online orders from our 2 core brands, Budee and Ganjarunner. Additionally, we are participants in the growing cannabis ecosystem by providing Brands the ability to transact with their customers using our technology and platform.

From humble beginnings less than 3 years ago, Driven Deliveries has grown into a company completing hundreds of thousands of deliveries per year with a customer base of over 200,000 legal cannabis consumers. Driven’s initial business was our “Dispensary to Consumer” program, where Driven would provide the vehicle, logistics, and infrastructure to complete deliveries on behalf of orders processed by our partner dispensaries. The revenue from this model consisted of charging a commission to the dispensary based on the amount of the delivered order and miles traveled. However, due to changes in regulations, and despite continued technological innovation and investment, the “Dispensary to Consumer” business was ended in Q1 2020 to support our direct to consumer business.

In the first quarter of 2019 Driven began its transformation in fundamental strategy by switching its core focus from “Dispensary to Consumer” to “Direct to Consumer”. The executive team at Driven determined that in order to compete and be successful in California, Driven had to directly service the customer and own the customer’s experience. Neither of these was possible in the “Dispensary to Consumer” model. As such Driven set out to build its own infrastructure to be able to transact and deliver directly to the cannabis consumer. The executive team began the process of buying and building this infrastructure.

In February 2019, Driven entered into a 2-year Operating Agreement within the joint venture CA City Supply, LLC in an attempt to gain exposure in a new area and create a location for operations out of California City, CA. Under Driven management, CA City Supply was selected as 1 of 3 licensee applicants to receive a non-storefront retail & delivery license in April of 2019. Unfortunately, all members of the LLC have opted out of the Operating Agreement early and Driven has withdrawn from ownership due to changes in local regulations.

In June 2019, the Company acquired Ganjarunner, Inc, an online retailer based out of Sacramento with a small operation in Los Angeles that focused on “Next Day” delivery from a fulfillment center. In addition to a functioning delivery operation, Ganjarunner also came with a substantial amount of data and intelligence on the cannabis consumers they had been servicing with cannabis delivery for 5 plus years. Ganjarunner was focused on a more sophisticated consumer with its target audiences falling between 30 and 55 years of age and professionally employed who wanted specific products and brands and were willing to wait for them to be delivered the next day. Ganjarunner used a heavily modified commercially available eCommerce solution (WooCommerce) to complete the next day deliveries throughout the state of California.

Simultaneously, the Company worked to find an online retailer specializing in the “Express” cannabis delivery market. To continue planned growth in California, Driven acquired certain assets of Mountain High Recreation to include the brand & talent in July 2019. The “Express” cannabis consumer is markedly different from the “Next Day” cannabis consumer as “Express” customers are typically not brand conscious and are looking for “cheap weed fast.” Thus, an express provider is able to complete its deliveries faster but also at a lower price point and lower order total.

In August 2019, with the Ganjarunner acquisition and the Mountain High asset purchases complete, we began to combine Express deliveries with Next Day using a single technology and operations infrastructure. With this combination, cannabis consumers are given a higher level of service as they can choose Express or Next Day delivery while shopping online. Additionally, the Company sees increased operational efficiencies as a single driver can complete both types of deliveries.

In early September 2019, Driven entered into a Joint Venture with Budee, Inc. a large on-demand retailer based out of Oakland, California. Budee, Inc had been operating in the cannabis delivery space in California since 2015. Focusing exclusively on growing and streamlining its Express cannabis delivery operations, Budee became increasingly frustrated with the ability for commercial software to support the express delivery model that was compliant with state regulations. As such, Budee developed its own proprietary Budee Inventory Management System, eCommerce system, Driver application, and back-office system. The proprietary software combined with a relentless focus on margin improvement allowed Budee to scale throughout California. During the integration of Ganjarunner and Mountain High, plus the combination of the Express and Next Day delivery options, Driven executive management was arriving at the same conclusion that Budee had arrived at: custom software and infrastructure would be required to scale. By establishing a joint venture with Budee, we were able to take advantage of reviewing the software platform and determining if it would work for our operations.

Throughout the first quarter of 2020, the Company continued to execute on its growth plans within the State of California. Significant improvements were seen in the financial performance of the online retail businesses Ganjarunner and Budee. Driven by the addition of over 13,000 new consumers to the platform, more than 18 new cannabis brands were added to the menu and continued development of the delivery network across the State. Fueling these accomplishments were improvements to the majority of the marketing metrics including new customer cost of acquisition (COA), existing customer retention, customer ratings, menu reviews, as well as continued automation of the Company’s marketing segments which contributed to the success.

In mid March 2020 the Company’s retail divisions saw major increases in demand resulting from the shelter-in-place orders issued across the State of California. Sales effectively doubled during the second half of March 2020. The technology and marketing infrastructure that was developed internally then implemented made it possible for Driven to capture the increased business while maintaining existing operating costs.

In April of 2020 the Company launched is Brand Budee program. This program extends the Driven’s cannabis delivery network to partner brands who can now sell their legal cannabis products directly to their consumers on their own website. The solution brings the same online shopping experience for both cannabis brands selling their products and cannabis consumers looking for delivery. At the close of this quarter, our Brand Budee program had converted 2,355 new customers and generated 2,516 orders.

In June of 2020 the company executed an agreement with Stem Holdings, Inc. (OTCQB: STMH CSE: STEM) a leading vertically-integrated cannabis cultivation, processing, extraction, retail, and distribution provider to collaborate on e-commerce and distribution. This pilot launched Driven’s Delivery as a Service model with Stem Holdings’ full-service medical dispensary, Foothill Health & Wellness, which services the El Dorado County and the suburbs of Sacramento.

Recent developments

On February 27, 2020 the Company completed its acquisition of Budee, Inc. which allowed us to consolidate all of the Budee, Inc. revenue, expand our delivery operations, and unify our operations and technology into a single, scalable, and supportable platform and infrastructure.

On March 20, 2020, Governor Gavin Newsom and the California Bureau of Cannabis Control identified cannabis companies as “essential” in the State of California and as such we continued to operate through the shelter in place order due to the COVID-19 pandemic.

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 nine months ended September 30, 2020, show a net loss of $14,769,942. 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.

Results of Operations

Results of Operations for the Three and Nine Months Ended September 30, 2020 compared to Three and Nine Months Ended September 30, 2019.

Revenue

During the nine months ended September 30, 2020, the Company recorded revenue in the amount of $13,847,628. The revenue for the period ended September 30, 2020 was comprised of product sales of $13,828,113, and dispensary delivery income of $19,515. This left the Company with a negative gross profit of $1,573,025 for the nine months ended September 30, 2020. The Company had revenue of $1,259,070 during the nine months ended September 30, 2019. The revenue for the period ended September 30, 2019 was comprised of dispensary cost reimbursements of $99,353 offsetting the dispensary delivery income of $87,869 and product sales of $1,270,554. The change in revenue between the nine months ended September 30, 2020, and 2019 resulted from the Company’s pivot to the a direct to consumer cannabis retail business delivery service through the acquisition of Ganjarunner on June 24 2019, the acquisition of Budee on February 27, 2020. The Company’s dispensary-to-consumer delivery service was discontinued on March 31, 2020. Higher sales volume was also driven by organic growth initiatives as the Company expanded its marketing initiatives, which led to increases in the number of orders completed order.

During the three months ended September 30, 2020, the Company recorded revenue in the amount of $5,979,875. The revenue for the period ended September 30, 2020 was comprised of product sales of $5,979,875. This left the Company with a negative gross profit of $1,990,323 for the three months ended September 30, 2020. The Company had revenue of $1,212,663 during the three months ended September 30, 2019. The revenue for the period ended September 30, 2019 was comprised of dispensary cost reimbursements of $36,007 offsetting the dispensary delivery income of $53,496 and product sales of $1,198,663. The change in revenue between the three months ended September 30, 2020, and 2019 resulted from the Company expanding its operations and acquisition of Ganjarunner in 2019, the acquisition of Budee in 2020, and the Company’s pivot to the a direct to consumer delivery service and the acquisition of other cannabis delivery services.

Our primary source of revenue in Q1 and Q2 of 2019 was from the dispensary to consumer delivery service. However, during Q3 and Q4 of 2019 the Company transitioned to delivery of cannabis products directly to consumers with the acquisition of Ganjarunner, Inc. From January 1, 2019 through June 24, 2019 Ganjarunner, Inc. operated independently of DRVD. On June 24, 2019 DRVD acquired Ganjarunner Inc. and the results of operations from January 1, 2019 to June 23, 2019 is not included in the Company’s financial reporting. However, revenue from June 24, 2019 forward is included in the Company’s financial.

On July 10, 2019 DRVD acquired the certain assets of Mountain High Recreation. The asset purchase was designed to add Mountain High Recreation’s Express delivery on top of Ganjarunner’s Next Day delivery service. Since MHR was an asset purchase, its post asset purchase revenues are included in this report as a part of Ganjarunner, Inc. On October 3, 2019 we entered into a joint venture with Budee, Inc. to re-establish the Southern California operations of Budee out of our Los Angeles facility.

On February 27, 2020 DRVD acquired Budee, Inc and the revenue from Budee, Inc. from February 28, 2020 forward is included in this report. With the acquisition of Budee, Inc. the joint venture with Budee, Inc. was ended on February 27, 2020.

The Company has combined Ganjarunner, Inc., the assets of Mountain High Recreation, and Budee, Inc into a single operating entity responsible for all of the Company’s direct to consumer cannabis delivery operations. The operational and technology integrations of these separate entities was more difficult than expected. In addition to the ordinary challenges of implementing standard operating procedures, uniform accounting processes, and standardizing and building technology platforms, we also had to navigate extremely complex rules and regulations guiding the sale of cannabis from the California Bureau of Cannabis Control. We learned that customers are sensitive to not only front-end technology interfaces but also operational and delivery hiccups. The entirety of the first quarter was dedicated to integrating these companies and putting the proper infrastructure in place.

Gross Profit

During the nine months ended September 30, 2020, we incurred a negative gross profit of $1,573,025. This is due to revenue of $13,847,628 and Cost of Sales – Product Costs of $6,195,462 and Cost of Sales – Fulfilment Costs and other of $9,225,191 for a total Cost of Goods Sold of $15,420,653.

During the nine months ended September 30, 2019, we incurred a gross profit loss of $654,901. This is due to revenue of $1,259,070 and Cost of Sales – Product Costs of $458,239 and Cost of Sales – Fulfilment Costs of $145,930 for a total Cost of Goods Sold of $604,169.

Product costs: Product costs include the purchase price of products sold, which include direct and indirect labor costs, rent, and depreciation expenses, and inbound shipping and handling costs for inventory.

Fulfillment costs and other: includes the costs of outbound shipping and handling and other costs related to delivering products to the customer.

The Company’s Gross Profit for September 30, 2020 and 2019 are as follows:

Gross Profit	Nine months ended September 30, 2020			Nine months ended September 30, 2019
Revenue	$	13,847,628		$	1,259,070
Cost of Sales – Product Costs		6,195,462			458,239
Cost of Sales – Fulfilment Costs and Other		9,572,191			145,930
Total Cost of Goods Sold	$	15,420,653		$	604,169
Gross Profit	$	(1,573,025	)	$	654,901

During the three months ended September 30, 2020, we incurred a gross profit loss of $1,990,232. This is due to revenue of $5,979,875 and Cost of Sales – Product Costs of $2,598,193 and Cost of Sales – Fulfilment Costs of $5,372,005 for a total Cost of Goods Sold of $7,970,198.

During the three months ended September 30, 2019, we incurred gross profit of $656,888. This is due to revenue of $1,212,663 and Cost of Sales – Product Costs of $458,239 and Cost of Sales – Fulfilment Costs of $97,536 for a total Cost of Goods Sold of $555,775.

Gross Profit	Three months ended September 30, 2020			Three months ended September 30, 2019
Revenue	$	5,979,875		$	1,212,663
Cost of Sales – Product Costs		2,598,193			458,239
Cost of Sales – Fulfilment Costs and Other		5,372,005			97,536
Total Cost of Goods Sold	$	7,970,198		$	555,775
Gross Profit	$	(1,990,323	)	$	656,888

Operating Expenses

During the nine months ended September 30, 2020, we incurred a loss from operations of $13,537,845. This is due to professional fees of $1,261,084, compensation of $5,643,563 including stock-based compensation of $3,022,063, general and administrative of $4,243,070 and sales and marketing of $817,103.

During the nine months ended September 30, 2019, we incurred a loss from operations of $8,689,587. This is due to professional fees of $805,605, compensation of $7,188,496 including stock-based compensation of $5,979,629, general and administrative of $1,122,968 and sales and marketing of $227,419.

During the three months ended September 30, 2020, we incurred a loss from operations of $7,828,528. This is due to professional fees of $413,906, compensation of $2,848,861 including stock-based compensation of $1,941,362, general and administrative of $2,219,705 and sales and marketing of $355,733.

During the three months ended September 30, 2019, we incurred a loss from operations of $6,175,368. This is due to professional fees of $296,735, compensation of $5,691,843 including stock-based compensation of $5,007,996, general and administrative of $709,536 and sales and marketing of $134,142.

The cost to operationally integrate and the inefficiencies created by having multiple redundant personnel, drivers, routes, vehicles, software, and marketing were higher than forecasted. By the middle of Q4 of 2019 and into Q1 of 2020 we worked to remove redundancies and operational overhead to streamline processes and the Company did not start to realize the savings and efficiencies until the last month of Q1 2020. The cost of being public created significant additional professional services fees for both legal, audit, and accounting services to support not only the Company but also the acquisition targets.

Compensation

The Company’s compensation for the nine months September 30, 2020 and 2019 are as follows:

Compensation Type	Nine months ended September 30, 2020		Nine months ended September 30, 2019
Salary and Wages	$	2,621,500	$	1,208,867
Stock Option and Warrant Compensation		3,022,063		5,979,629
Total Compensation	$	5,643,563	$	7,188,496

The Company’s compensation for the three months September 30, 2020 and 2019 are as follows:

Compensation Type	Three months ended September 30, 2020		Three months ended September 30, 2019
Salary and Wages	$	907,499	$	683,847
Stock Option and Warrant Compensation		1,941,362		5,007,996
Total Compensation	$	2,848,861	$	5,691,843

These amounts only include compensation found in the compensation line item on the statement of operations and does not include compensation recorded to cost of sales.

The increase in salaries and wages from September 30, 2019 to September 30, 2020 was due to the merges with Ganjarunner and Budee.

Other Expenses

During the nine months ended September 30, 2020, the Company incurred interest expense of $755,056 which was comprised of an accrued interest expense of $206,304 and a debt discount of $548,752, a loss on the sale of fixed assets of $11,970, a loss on the extinguishment of debt of $810,518, and a gain on the change in the fair value of derivative liabilities of $345,897.

During the three months ended September 30, 2020, the Company incurred interest expense of $168,253 which was comprised of an accrued interest expense of $64,145 and a debt discount of $180,277, and a gain on the change in the fair value of derivative liabilities of $694,291.

During the nine months ended September 30, 2019, the Company incurred interest expense of $63,176, a gain on the sale of fixed assets of $25,582, a gain on extinguishment of debt of $521,387, and a loss on the change in the fair value of derivative liabilities of $807,250.

During the three months ended September 30, 2019, the Company incurred interest expense of $53,318, a gain on the sale of fixed assets of $23,727, a gain on extinguishment of debt of $521,387, and a loss on the change in the fair value of derivative liabilities of $807,250.

The decrease in other income of $908,190 was the result of interest and the amortization of debt discount on the Company’s notes payable, the extinguishment of debt, and derivative expense related to a note payable.

Net Loss

For the nine months ended September 30, 2020, our net loss was $14,769,492 as compared to net loss of $9,182,210 for the prior period September 30, 2019. The increase in net loss of $5,587,282 was related primarily to the Company pivoting to a new business model and the cost of integrating acquisitions and the gain on the extinguishment of debt.

For the three months ended September 30, 2020, our net loss was $7,302,500 as compared to net loss of $6,658,988 for the prior period September 30, 2019. The increase in net loss of $643,512 was related primarily to the Company pivoting to a new business model and the cost of integrating acquisitions.

Full Year 2019 Pro Forma Income with Budee, Inc. and Ganjarunner, Inc Acquisitions

The results on this report do not provide a complete picture of the Company’s performance had the Budee, Inc. acquisition taken place at the beginning of 2020. On February 27, 2020, the Company acquired Budee Inc., and only the revenue from February 28, 2020 forward is included in the financial statements in this report.

The following presents the unaudited pro-forma combined results of operations of the Company with the Budee, Inc. The 2 entities were combined on January 1, 2019.

	Nine Months			Nine Months
	September 30, 2020			September 30, 2019
Gross Revenue	$	14,529,993		$	6,223,725
Gross Profit	$	(1,237,660	)	$	4,944,064
Net loss	$	(14,304,770	)	$	(7,402,688	)
Net loss per share, basic and diluted	$	(0.23	)	$	(0.15	)
Weighted average number of shares outstanding		61,263,796			48,886,493

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 or to project potential operating results as of any future date or for any future periods. These are meant to show what would have been attained had the acquisitions been completed as of January 1, 2019.

Liquidity and Capital Resources

We are a startup and anticipate that we will incur operating losses for the foreseeable future. As of September 30, 2020, we had cash of $511,318 and working capital deficit of $13,045,455. Based on its current forecast and budget, management believes that its cash resources will not be sufficient to fund its operations through the end of 2020. 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.

As of September 30, 2020, we had a working capital deficit of $13,045,455 as compared to $4,011,527 as of December 31, 2019. There was an increase in working capital deficit of $9,033,928.

Cash used in operating activities was $3,214,229 for the nine months ended September 30, 2020 and $2,325,344 for the prior period ended September 30, 2019. The increase in cash used in operating activities was due to an increase in net loss, an increase in accounts payable and accrued expenses, gain on extinguishment of debt, and decrease in stock-based compensation, an increase in amortization of debt discount, and an increase in inventory.

Cash used in investing activities during the nine months ended September 30, 2020 and 2019 was $199,322 and $587,449, respectively. The increase in investing activities was due to cash acquired in the acquisition, a decrease in the purchase of fixed assets, a decrease in the acquisition of intangible assets, and the decrease in contingent liabilities.

Cash provided by financing activities during the nine months ended September 30, 2020 and 2019 was $3,658,000 and $3,261,355, respectively. The increase is a result of an increase in the proceeds from loan payables offset by a decrease in the sale of common stock and proceeds from loan receivables.

Our ability to continue as a going concern is dependent upon raising capital through financing transactions and future revenue. Our capital needs have primarily been met from the proceeds of private placements of our security, as we currently have not generated a net income.

The condensed consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying condensed financial statements do not reflect any adjustments that might result if we are unable to continue as a going concern. During the nine months ended September 30, 2020, incurred a net loss of $14,769,492, which was primarily associated with an increase in operating expenses, we had a working capital deficit of $13,045,455, and a shareholders’ equity of $1,561,971. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2019, expressed substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern ultimately is dependent on our ability to generate revenue, which is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies and, ultimately, achieve profitable operations. We have historically obtained funds from our shareholders through the sale of our securities. Management believes that we will be able to continue to raise funds through the sale of our securities to existing and new investors. Management believes that funding from existing and prospective new investors and future revenue will provide the additional cash needed to meet our obligations as they become due, and will allow the development of our core business 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.

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

Principles of consolidation

The consolidated condensed financial statements include the accounts of Driven Deliveries, Inc, and its wholly owned subsidiaries, Ganjarunner, Inc., Global Wellness, LLC, and Budee, Inc. All significant intercompany balances and transactions have been eliminated in the consolidated condensed financial statements.

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 expenses related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock-based compensation expenses 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.

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.

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. 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:

Identify the contract with a customer

Identify the performance obligations in the contract

The Company sells its products directly to consumers. In this case these sales represent a performance obligation with the sales and any necessary deliveries of those products.

Determine the transaction price

Allocate the transaction price to performance obligations in the contract

For the goods that the Company sells directly to customers, the transaction price is allocated between the cost of the goods and any delivery fees that may be incurred to deliver to the customer.

Recognize revenue when or as the Company satisfies a performance obligation

For the sales of the Company’s own goods the performance obligation is complete once the customer has received their product.

Disaggregation of Revenue

The following table depicts the disaggregation of revenue according to revenue type.

Revenue Type	Revenue for the three months ended September 30, 2020		Revenue for the three months ended September 30, 2019			Revenue for the nine months ended September 30, 2020			Revenue for the nine months ended September 30, 2019
Delivery Income	$	-	$	53,496		$	27,043		$	87,869
Dispensary Cost Reimbursements		-		(36,007	)		(7,528	)		(99,353	)
Delivery Income, net		-		17,489			19,515			(11,484	)
Product Sales		5,979,875		1,195,174			13,828,113			1,270,554
Total	$	5,979,875	$	1,212,663		$	13,847,628		$	1,259,070

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were ineffective to ensure that information required to be disclosed in reports filed under the Exchange Act, is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

This was due to the following material weaknesses which are indicative of many small companies with limited staff:

(1) lack of a functioning audit committee, (2) lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; and (3) inadequate segregation of duties consistent with control objectives. The aforementioned material weaknesses were identified by our Principal Executive and Financial Officers in connection with the review of our financial statements as of December 31, 2019. At this time, management has decided that given the risks associated with this lack of segregation of duties, the potential benefit of adding additional personnel to clearly segregate duties does not justify the expenses associated with such benefit. Management will periodically review this matter and may make modifications, including adding additional personnel, it determines appropriate. In addition, we believe that our financial statements presented in this quarterly report on Form 10-Q fairly present, in all material respects, our financial position, results of operations, and cash flows for all periods presented herein.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our fiscal first quarter ended September 30, 2020, which were identified in conjunction with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, 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

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results except as set forth below:

On July 13, 2020 the Company reached a settlement agreement with the Plaintiff. As part of the settlement agreement the Company shall issue and deliver to the Plaintiffs 5,000,000 shares of the Company’s restricted common stock Plaintiffs, and the warrants issued to the Plaintiffs shall be null and void. Additionally cash consideration is due to the Plaintiffs on the following schedule: 1) One Hundred Seventy-Five Thousand Dollars ($175,000) immediately upon the signing of the agreement (“Effective Date”); 2) Eighty-Five Thousand Dollars ($85,000) within fourteen (14) days following the Effective Date 3) One Hundred Seventy-Five Thousand Dollars ($175,000) within thirty (30) days following the Effective Date; 4) Seventy-Five Thousand Dollars ($75,000) within sixty (60) days following the Effective Date; and 5) Three Hundred Thousand Dollars ($300,000) on or before July 1, 2021.

In February 2020 Irth Communications, LLC filed a complaint in the Superior Court of California, County of Los Angeles, against the Company. The complaint alleges that pursuant to a services agreement the Company issued Irth 500,000 shares of its common stock to Irth but the Company breached this agreement because according to the complaint, the Company has refused to authorize its transfer agent to remove the restrictive legend on the Shares. Among other remedies, Irth seeks at least $1,130,000 in compensatory damages, attorneys’ fees, and injunctive relief. The Company is reviewing the Complaint and intends to defend itself vigorously.

Prior to the closure of its merger with Driven, Budee, Inc. was the party defendant in an action brought by a former employee under California’s Private Attorney General Act (“PAGA”) in relation to various labor claims. Under the terms of the merger agreement, Driven and Budee had contemplated and accounted for various possible outcomes of the PAGA matter with built-in limitations on any possible exposure to Driven if the merger were to close before resolution of the PAGA action, including indemnification from in the event that any assumed liabilities under the merger crossed a certain threshold.

As matters progressed, the PAGA action was resolved by settlement in October of 2019, prior to the closing of the merger between Budee and Driven. The gross settlement amount is $600,000.00. Following settlement being reached, the parties agreed to stipulate to an amendment whereby the matter would be converted to a class action, thus significantly expanding settlement coverage. The parties have finalized the settlement and class documents and the plan of administration and these documents are due to be submitted to the Court in May, 2020 for preliminary approval. It is anticipated that following preliminary approval, settlement notices and administration will take a number of months to complete, prior to final approval being entered.

At no time has Driven been a party to this litigation, nor is it anticipated that for any reason it will become one.

Item 1A. Risk Factors

Smaller reporting companies are not required to provide the information required by this item.

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

For the nine months ended September 30, 2020, the Company sold a total of 2,017,561 shares of its common stock to 24 accredited investors, for an aggregate purchase price of $2,018,000.

The securities 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.

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.

Exhibit No.		Description
31.1*		Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Executive Officer
31.2*		Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Financial Officer
32.1*		Section 1350 Certification of Chief Executive Officer
32.2*		Section 1350 Certification of Chief Financial Officer
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

(*) – Filed herewith.

(**) – Furnished herewith.

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 23, 2020	Driven Deliveries, Inc.

	By:	/s/ Salvador Villanueva
		Salvador Villanueva
		President and Interim Chief Executive Officer
		(Principal Executive Officer)

By:	/s/ Brian Hayek
	Brian Hayek
	Chief Financial Officer, Treasurer, Secretary
	(Principal Financial Officer)

Driven Deliveries, Inc. 10-Q