DRIVEN DELIVERIES, INC. 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 theSEC onMay 22, 2020 , and in other reports filed by us with theSEC .
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 theState of Delaware onJuly 22, 2013 under the nameDigital Commerce Solutions, Inc. and changed our name toResults-Based Outsourcing, Inc. onSeptember 5, 2014 . OnAugust 29, 2018 ,Driven Deliveries, Inc. , aNevada 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, inCalifornia . 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. OnSeptember 6, 2018 , we amended our Certificate of Incorporation to (i) changed our name toDriven 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
In
InJuly 2019 , we entered into an Asset Purchase Agreement withMountain High Recreation, Inc. , in which the Company acquired certain assets fromMountain High Recreation, Inc.
In
InFebruary 2020 , we completed an acquisition ofBudee, Inc which allowed us to consolidate all of theBudee, Inc. revenue, expand our delivery operations, and unify our operations and technology into a single, scalable, and supportable platform and infrastructure.
On
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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.
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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 itwould work for our operations. Throughout the first quarter of 2020, the Company continued to execute on its growth plans within theState 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 midMarch 2020 the Company's retail divisions saw major increases in demand resulting from the shelter-in-place orders issued across theState of California . Sales effectively doubled during the second half ofMarch 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 theEl Dorado County and the suburbs ofSacramento . Recent developments OnFebruary 27, 2020 the Company completed its acquisition ofBudee, Inc. which allowed us to consolidate all of theBudee, Inc. revenue, expand our delivery operations, and unify our operations and technology into a single, scalable, and supportable platform and infrastructure. OnMarch 20, 2020 , GovernorGavin Newsom and theCalifornia Bureau of Cannabis Control identified cannabis companies as "essential" in theState 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 six months endedJune 30, 2020 , show a net loss of$7,466,991 . 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. 30 Results of Operations
Results of Operations for the Three and Six Months Ended
Revenue
During the six months endedJune 30, 2020 , the Company recorded revenue in the amount of$7,867,753 . The revenue for the period endedJune 30, 2020 was comprised of product sales of$7,848,238 , and dispensary delivery income of$19,515 . This left the Company with a gross profit of$417,298 for the six months endedJune 30, 2020 . The Company had revenue of$46,407 during the six months endedJune 30, 2019 . The revenue for the period endedJune 30, 2019 was comprised of dispensary cost reimbursements of$63,346 offsetting the dispensary delivery income of$34,343 and product sales of$62,607 . The change in revenue between the three months endedJune 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 onJune 24 2019 , the acquisition of Budee onFebruary 27, 2020 . The Company's dispensary-to-consumer delivery service was discontinued onMarch 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 endedJune 30, 2020 , the Company recorded revenue in the amount of$5,672,305 . The revenue for the period endedJune 30, 2020 was comprised of product sales of$5,626,541 . This left the Company with a negative gross profit of$73,763 for the three months endedJune 30, 2020 . The Company had revenue of$65,824 during the three months endedJune 30, 2019 . The revenue for the period endedJune 30, 2019 was comprised of dispensary cost reimbursements of$28,559 offsetting the dispensary delivery income of$18,973 and product sales of$62,607 . The change in revenue between the three months endedJune 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 ofGanjarunner, Inc. FromJanuary 1, 2019 throughJune 24, 2019 Ganjarunner, Inc. operated independently of DRVD. OnJune 24, 2019 DRVD acquiredGanjarunner Inc. and the results of operations fromJanuary 1, 2019 toJune 23, 2019 is not included in the Company's financial reporting. However, revenue fromJune 24, 2019 forward is included in the Company's financial. OnJuly 10, 2019 DRVD acquired the certain assets of Mountain High Recreation. The asset purchase was designed to addMountain 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 ofGanjarunner, Inc. OnOctober 3, 2019 we entered into a joint venture withBudee, Inc. to re-establish theSouthern California operations of Budee out of ourLos Angeles facility. OnFebruary 27, 2020 DRVD acquiredBudee, Inc and the revenue fromBudee, Inc. fromFebruary 28, 2020 forward is included in this report. With the acquisition ofBudee, Inc. the joint venture withBudee, Inc. was ended onFebruary 27, 2020 . The Company has combinedGanjarunner, Inc. , the assets of Mountain High Recreation, andBudee, 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 theCalifornia 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. 31 Gross Profit During the six months endedJune 30, 2020 , we incurred gross profit of$417,298 . This is due to revenue of$7,867,753 and Cost of Sales - Product Costs of$3,597,269 and Cost of Sales - Fulfilment Costs of$3,853,186 for a total Cost of Goods Sold of$7,450,455 .
During the six months ended
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
Six months Six months
ended ended
June 30, June 30,
Gross Profit 2020 2019
Revenue $ 7,867,753 $ 46,407
Cost of Sales - Product Costs 3,597,269 29,700
Cost of Sales - Fulfilment Costs and Other 3,853,186 18,694
Total Cost of Goods Sold $ 7,450,455 $ 48,394
Gross Profit $ 417,298 $ (1,987 ) During the three months endedJune 30, 2020 , we incurred gross profit loss of ($73,763 ). This is due to revenue of$5,972,305 and Cost of Sales - Product Costs of$2,485,730 and Cost of Sales - Fulfilment Costs of$3,260,338 for a total Cost of Goods Sold of$5,746,068 . During the three months endedJune 30, 2019 , we incurred gross profit of$17,340 . This is due to revenue of$65,824 and Cost of Sales - Product Costs of$29,700 and Cost of Sales - Fulfilment Costs of$18,694 for a total Cost of Goods Sold of$48,394 . Three months Three months ended ended June 30, June 30, Gross Profit 2020 2019 Revenue$ 5,972,305 $ 65,824 Cost of Sales - Product Costs 2,485,730 29,700 Cost of Sales - Fulfilment Costs and Other 3,260,338 18,694 Total Cost of Goods Sold$ 5,746,068 $ 48,394 Gross Profit$ (73,763 ) $ 17,340 Operating Expenses
During the six months ended
During the six months ended
During the three months endedJune 30, 2020 , we incurred a loss from operations of$3,123,512 . This is due to professional fees of$396,563 , compensation of$1,435,698 including stock-based compensation of$971,633 , general and administrative of$936,871 and sales and marketing of$280,617 . During the three months endedJune 30, 2019 , we incurred a loss from operations of$1,570,224 . This is due to professional fees of$341,133 , compensation of$959,470 including stock-based compensation of$623,939 , general and administrative of$234,568 and sales and marketing of$52,503 . 32 The cost to operationally integrate and the inefficiencies created by having multiple redundant personnel, drivers, routes, vehicles, software, and marketing were higher than forecasted. By the middle of Q4 of 2019 and into Q1 of 2020 we worked to remove redundancies and operational overhead to streamline processes and the Company did not start to realize the savings and efficiencies until the last month of Q1 2020. The cost of being public created significant additional professional services fees for both legal, audit, and accounting services to support not only the Company but also the acquisition targets. Compensation The Company's compensation for the six monthsJune 30, 2020 and 2019 are as follows: Six months ended Six months ended June 30, June 30, Compensation Type 2020 2019 Salary and Wages$ 1,714,001 $ 525,020 Stock Option and Warrant Compensation 1,080,701 971,633 Total Compensation$ 2,794,702 $ 1,496,653 The Company's compensation for the three monthsJune 30, 2020 and 2019 are as follows: Three months ended Three months ended June 30, June 30, Compensation Type 2020 2019 Salary and Wages $ 752,897 $ 623,939
Stock Option and Warrant Compensation 682,801
335,531 Total Compensation $ 1,435,698 $ 959,470
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
Other Expenses During the six months endedJune 30, 2020 , the Company incurred interest expense of$586,793 which was comprised of an accrued interest expense of$118,601 and a debt discount of$364,227 , a loss on the sale of fixed assets of$11,970 , a loss on the extinguishment of debt of$810,518 , and a loss on the change in the fair value of derivative liabilities of$348,394 .
During the three months ended
During the six months ended
During the three months ended
The increase in other income of$1,748,672 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 six months endedJune 30, 2020 , our net loss was$7,466,991 as compared to net loss of$2,523,222 for the prior periodJune 30, 2019 . The increase in net loss of$4,943,769 was related primarily to the Company pivoting to a new business model and the cost of integrating acquisitions and the gain on the extinguishment of debt.
For the three months ended
Full Year 2019 Pro Forma Income with
The results on this report do not provide a complete picture of the Company's performance had theBudee, Inc. acquisition taken place at the beginning of 2020. OnFebruary 27, 2020 , the Company acquiredBudee Inc. , and only the revenue fromFebruary 28, 2020 forward is included in the financial statements in this report. The following presents the unaudited Pro-forma combined results of operations of the Company with theBudee, Inc. The 2 entities were combined onJanuary 1, 2019 . Six Months Six Months June 30, June 30, 2020 2019 Gross Revenue$ 8,550,118 $ 6,337,388 Gross Profit$ 1,099,663 $ 5,121,530 Net loss$ (7,319,946 ) $ (793,475 ) Net loss per share, basic and diluted$ (0.13 ) $
(0.02 ) Weighted average number of shares outstanding 55,819,112 46,179,458
33
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 ofJanuary 1, 2019 .
Liquidity and Capital Resources
We are a startup and anticipate that we will incur operating losses for the foreseeable future. As ofJune 30, 2020 , we had cash of$123,788 and working capital deficit of$11,507,823 . 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 ofJune 30, 2020 , we had a working capital deficit of$11,507,823 as compared to$4,011,527 as ofDecember 31, 2019 . There was an increase in working capital deficit of$7,496,296 . Cash used in operating activities was$1,975,759 for the six months endedJune 30, 2020 and$1,621,435 for the prior period endedJune 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 increase in stock based compensation, an increase in amortization of debt discount, and an increase in inventory. Cash used in investing activities during the six months endedJune 30, 2020 and 2019 was$199,322 and$67,251 , respectively. The decrease in investing activities was due to cash acquired in the acquisition and a decrease in the purchase of fixed assets.
Cash provided by financing activities during the six months endedJune 30, 2020 and 2019 was$2,032,000 and$2,038,022 , respectively. The decrease is a result of an increase in the proceeds from loan payables offset by a decrease in the sale of common stock. 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 six months endedJune 30, 2020 , incurred a net loss of$7,466,991 , which was primarily associated with an increase in operating expenses, we had a working capital deficit of$11,507,823 , and a shareholders' equity of$2,844,496 . 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 endedDecember 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 ofDriven Deliveries, Inc , and its wholly owned subsidiaries,Ganjarunner, Inc. ,Global Wellness, LLC , andBudee, Inc. All significant intercompany balances and transactions have been eliminated in the consolidated condensed financial statements. 34 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.
The Company's stock based compensation expense was$1,080,701 and$971,633 for the six months endedJune 30, 2020 and 2019, respectively. The Company's stock based compensation expense was$752,897 and$623,939 for the three months endedJune 30, 2020 and 2019, respectively. 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 ofJanuary 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:
1) 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.
2) 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.
3) 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.
35
4) 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.
5) 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 for Revenue for Revenue for Revenue for
the three the three the six months the six
months ended months ended ended months ended
June 30, June 30, June 30, June 30,
Revenue Type 2020 2019 2020 2019
Delivery Income $ - 18,973 27,043 34,343Dispensary Cost Reimbursements - (28,559
) (7,528 ) (63,346 ) Delivery Income, net - (9,586 ) 19,515 (29,003 ) Product Sales 5,672,305 75,410 7,848,238 75,410 Total$ 5,672,305 65,824 7,867,753 46,407
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