Driveitaway Holdings, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS. DRIVEITAWAY HOLDINGS, INC. (FKA CREATIVE LEARNING CORPORATION) INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 2022 Page Condensed Consolidated Balance Sheets (Unaudited) F-2 Condensed Consolidated Statements of Operations (Unaudited) F-3 Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (Unaudited) F-4 Condensed Consolidated Statements of Cash Flows (Unaudited) F-6 Notes to Condensed Consolidated Financial Statements (Unaudited) F-7 F- 1 DriveItAway Holdings, Inc. (fka Creative Learning Corporation) Condensed Consolidated Balance Sheets (Unaudited) June 30, September 30, 2022 2021 Assets Current assets Cash $ 389,664 $ 9,774 Accounts receivable, net 6,096 21,455 Total current assets 395,760 31,229 Goodwill 1,557,106 — Vehicles, net of accumulated depreciation of $ 4,645 121,761 — Total Assets $ 2,074,627 $ 31,229 Liabilities and Stockholders’ Equity (Deficit) Current Liabilities Accounts payable $ 109,187 $ 132,696 Accrued liabilities 16,710 29,386 SBA Loan 11,183 6,128 PPP Loan — 23,750 Due to related party 726 7,268 Convertible notes payable - related parties — 30,000 Convertible note payable 612,212 — Total Current Liabilities 750,018 229,228 SBA Loan - noncurrent 103,517 72,372 Convertible note payable - noncurrent 242,296 150,000 Convertible notes payable - related party - noncurrent — 65,000 Total Liabilities 1,095,831 516,600 Commitments and Contingencies (Note 9) 460,000 — Stockholders’ Equity (Deficit) Preferred stock, $ .0001 par value; 10,000,000 shares authorized; 0 and 2,300,000 shares issued and outstanding at June 30, 2022 and September 30, 2021, respectively — 230 Common stock, $ 0.0001 par value; 1,000,000,000 shares authorized; 105,301,722 shares issued and 105,286,622 outstanding at June 30, 2022 and 0 shares issued and outstanding as of September 30, 2021, respectively 10,531 — Additional paid in capital 3,166,951 419,793 Treasury stock, at cost - 15,100 and 0 shares at June 30, 2022 and September 30, 2021, respectively ( 18,126 ) — Accumulated deficit ( 2,640,560 ) ( 905,394 ) Total Stockholders’ Equity (Deficit) 518,796 ( 485,371 ) Total Liabilities and Stockholders’ Equity (Deficit) $ 2,074,627 $ 31,229 The accompanying notes are an integral part of the condensed consolidated financial statements. F- 2 DriveItAway Holdings, Inc. (fka Creative Learning Corporation) Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended Nine Months Ended June 30, June 30, 2022 2021 2022 2021 REVENUES Insurance revenue $ 5,922 $ 68,067 $ 44,692 $ 204,295 Rental revenue 15,711 139,925 80,008 469,250 Initial fee revenue — 1,809 4,126 22,173 Miscellaneous Revenue 2,727 3,073 7,454 10,419 Vehicle owner share ( 11,424 ) ( 122,065 ) ( 74,313 ) ( 417,950 ) Driver and dealer insurance cost ( 5,852 ) ( 58,974 ) ( 33,237 ) ( 194,987 ) TOTAL REVENUES 7,084 31,835 28,730 93,200 COST OF GOODS SOLD 10,694 9,859 21,789 30,214 GROSS PROFIT (LOSS) ( 3,610 ) 21,976 6,941 62,986 OPERATING EXPENSES Salaries and payroll taxes 104,525 46,500 294,600 147,551 Professional fees 175,460 173,077 541,857 231,554 General and administrative 24,851 13,331 54,697 44,570 Software development 16,442 18,868 45,827 66,540 Selling expense 9,266 432 14,155 2,812 TOTAL OPERATING EXPENSES 330,544 252,208 951,136 493,027 OPERATING LOSS ( 334,154 ) ( 230,232 ) ( 944,195 ) ( 430,041 ) OTHER INCOME (EXPENSE) Loss on contingency liability ( 60,000 ) — ( 460,000 ) — Gain on PPP loan forgiveness — — 24,148 — Amortization debt discount ( 228,182 ) — ( 315,865 ) — Interest expense ( 20,030 ) ( 3,752 ) ( 36,970 ) ( 5,338 ) Interest expense - related parties — ( 1,421 ) ( 2,296 ) ( 3,943 ) Interest income 7 — 12 — TOTAL OTHER EXPENSE ( 308,205 ) ( 5,173 ) ( 790,971 ) ( 9,281 ) LOSS BEFORE INCOME TAXES ( 642,359 ) ( 235,405 ) ( 1,735,166 ) ( 439,322 ) Provision for income taxes — — — — NET LOSS $ ( 642,359 ) $ ( 235,405 ) $ ( 1,735,166 ) $ ( 439,322 ) NET LOSS PER SHARE: Basic and diluted net loss per share $ ( 0.01 ) $ — $ ( 0.06 ) $ — Basic and diluted weighted average number of common shares outstanding 87,135,481 — 31,381,342 — The accompanying notes are an integral part of the condensed consolidated financial statements. F- 3 DriveItAway Holdings, Inc. (fka Creative Learning Corporation) Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit) For the Three and Nine Months Ended June 30, 2022 (Unaudited) Series A Additional Total Stockholders’ Preferred Stock Common Stock Paid in Treasury Stock Accumulated Equity Shares Amount Shares Amount Capital Shares Amount Deficit (Deficit) Balance - September 30, 2021 2,300,000 $ 230 — $ — $ 419,793 — $ — $ ( 905,394 ) $ ( 485,371 ) Stock based compensation — — — — 173,077 — — — 173,077 Net loss — — — — — — — ( 251,721 ) ( 251,721 ) Balance - December 31, 2021 2,300,000 230 — — 592,870 — — ( 1,157,115 ) ( 564,015 ) Stock based compensation — — — — 115,384 — — — 115,384 Preferred stock issued for conversion of debt- related party 52,284 5 — — 104,559 — — — 104,564 Preferred stock issued for conversion of debt 129,809 13 — — 288,445 — — — 288,458 Preferred stock issued for exercise of stock option - related party 112,500 11 — — 84,364 — — — 84,375 Reorganization — — 13,716,041 1,372 1,737,621 ( 15,100 ) ( 18,126 ) — 1,720,867 Common stock and warrant issued in connection with promissory note — — 4,000,000 400 344,296 — — — 344,696 Net loss — — — — — — ( 841,086 ) ( 841,086 ) Balance - March 31, 2022 2,594,593 259 17,716,041 1,772 3,267,539 ( 15,100 ) ( 18,126 ) ( 1,998,201 ) 1,253,243 Conversion of preferred stock to common stock ( 2,594,593 ) ( 259 ) 88,085,681 8,809 ( 8,550 ) — — — — Cancellation of common shares against note receivable — — ( 500,000 ) ( 50 ) ( 99,950 ) — — — ( 100,000 ) Debt discount recorded for warrants issued in connection with convertible notes — — — — 7,912 — — — 7,912 Net loss — — — — — — ( 642,359 ) ( 642,359 ) Balance - June 30, 2022 — $ — 105,301,722 $ 10,531 $ 3,166,951 ( 15,100 ) $ ( 18,126 ) $ ( 2,640,560 ) $ 518,796 The accompanying notes are an integral part of the condensed consolidated financial statements. F- 4 DriveItAway Holdings, Inc. (fka Creative Learning Corporation) Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit) For the Three and Nine Months Ended June 30, 2021 (Unaudited) Series A Additional Total Stockholders’ Preferred Stock Common Stock Paid in Accumulated Equity Shares Amount Shares Amount Capital Deficit (Deficit) Balance - September 30, 2020 2,000,000 $ 200 — $ — $ 10,410 — — $ ( 229,710 ) $ ( 219,100 ) Net loss — — — — — — — ( 98,759 ) ( 98,759 ) Balance - December 31, 2020 2,000,000 200 — — 10,410 — — ( 328,469 ) ( 317,859 ) Stock-based compensation 300,000 30 — — 57,663 — 57,693 Net loss — — — — — — ( 105,158 ) ( 105,158 ) Balance - March 31, 2021 2,300,000 230 — — 68,073 — ( 433,627 ) ( 365,324 ) Stock based compensation — — — — 173,077 — 173,077 Related party contributions — — — — 5,566 — 5,566 Net loss — — — — — — ( 235,405 ) ( 235,405 ) Balance - June 30, 2021 2,300,000 $ 230 — $ — $ 246,716 — — $ ( 669,032 ) $ ( 422,086 ) The accompanying notes are an integral part of the condensed consolidated financial statements. F- 5 DriveItAway Holdings, Inc. (fka Creative Learning Corporation) Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended June 30, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 1,735,166 ) $ ( 439,322 ) Adjustments to reconcile net loss to net cash used in operating activities: Gain on PPP Loan Forgiveness ( 24,148 ) — Stock-based compensation expense 372,836 230,770 Depreciation 4,645 Loss on contingency liability 460,000 — Amortization of debt discount 315,865 — Changes in operating assets and liabilities: Due to related party 3,022 3,943 Accounts receivable 15,359 4,278 Accounts payable ( 23,508 ) ( 2,460 ) Accrued liabilities ( 5,420 ) 32,054 Net Cash used in Operating Activities ( 616,515 ) ( 170,737 ) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of subsidiary 70,361 — Purchase of vehicles ( 126,406 ) — Net Cash used in Investing Activities ( 56,045 ) — CASH FLOWS FROM FINANCING ACTIVITIES: Proceed from related party — 65,000 Proceeds from convertible debt 1,016,250 150,000 Proceeds from the SBA Loan 36,200 — Proceeds from contributions from related parties — 5,566 Net Cash provided by Financing Activities 1,052,450 220,566 Net change in cash 379,890 49,829 Cash, beginning of period 9,774 28,975 Cash, end of period $ 389,664 $ 78,804 Supplemental cash flow information Cash paid for interest $ 19,792 $ — Non-cash Investing and Financing transactions: Preferred stock issued for conversion of debt -related party $ 104,564 $ — Preferred stock issued for conversion of debt $ 288,458 $ — Common stock and warrant issued in connection with promissory note $ 344,696 $ — Debt discount recorded for warrants issued in connection with convertible notes $ 7,912 $ — Conversion of preferred stock to common stock $ 8,809 $ — Cancellation of common shares against note receivable $ 100,000 $ — The accompanying notes are an integral part of the condensed consolidated financial statements. F- 6 DriveItAway Holdings, Inc. (fka Creative Learning Corporation) Notes to the Condensed Consolidated Financial Statements June 30, 2022 (Unaudited) Note 1 - Nature of Organization and Summary of Significant Accounting Policies Nature of Organization DriveItAway Holdings, Inc. (“DIA Holdings”, “we” or “us”) was formed in Delaware on March 8, 2006 as B2 Health, Inc. On July 2, 2010, the Company acquired BFK Franchise Company, LLC (“BFK”), a Nevada limited liability company, and concurrently changed its name to Creative Learning Corporation. On February 24, 2022, the Company acquired DriveItAway, Inc., and on March 18, 2022, disposed of BFK and its other subsidiaries involved in the learning business. On April 18, 2022, the name was changed to DriveItAway Holdings, Inc. DIA Holdings is a national dealer focused mobility platform that enables car dealers to sell more vehicles in a seamless way through eCommerce, with its exclusive “Pay as You Go” app-based subscription program. DIA provides a comprehensive turnkey, solutions driven program with proprietary mobile technology and driver app, insurance coverages and training to get dealerships up and running quickly and profitably in emerging online sales opportunities. The company is planning to soon expand its easy and transparent consumer app ‘subscription to ownership’ platform to enable entry level consumers to drive and acquire new Electric Vehicles. For further information, please see www.driveitaway.com . Share Exchange and Reorganization On February 24, 2022 (the “Effective Date”), the Company, DriveItAway, Inc., and the existing shareholders of DriveItAway, Inc. (“DIA”) executed an Agreement and Plan of Share Exchange, under which the Company acquired all of the issued and outstanding common stock of DIA by issuing one share of Series A Convertible Preferred Stock (the “Series A Preferred”) of the Company for each outstanding share of DIA common stock (the “Share Exchange”). At the closing, the Company agreed to issue one share of Series A Preferred for each share of DIA common stock that was subsequently issued in conversion of certain outstanding convertible notes of DIA, provided that the holders converted their notes prior to December 31, 2022. All of the holders of the convertible notes of DIA agreed to convert their notes in March 2022 and were issued one share of Series A Preferred in exchange for the DIA common stock they acquired as a result of the conversion. A total of 2,594,593 shares of Series A Preferred were issued in exchange for all of the outstanding shares of DIA, including DIA shares issued at closing or shortly thereafter as a result of the exercise or conversion of all outstanding options or convertible notes issued by DIA. Recapitalization For financial accounting purposes, this transaction was treated as a reverse acquisition by DIA and resulted in a recapitalization with DIA being the accounting acquirer and DIA, Inc. as the acquired company. The consummation of this reverse acquisition resulted in a change of control. Accordingly, the historical financial statements prior to the acquisition are those of the accounting acquirer, DIA and have been prepared to give retroactive effect to the reverse acquisition completed on February 24, 2022, and represent the operations of DIA. The consolidated financial statements after the acquisition date, February 24, 2022, include the balance sheets of both companies at fair value, the historical results of DIA and the results of the Company from the acquisition date. All share and per share information in the accompanying consolidated financial statements and footnotes has been retroactively restated to reflect the recapitalization. F- 7 Basis of Presentation The Company prepares its financial statements in accordance with rules and regulations of the Securities and Exchange Commission (“SEC”) and Generally Accepted Accounting Principles (“GAAP”) in the United States of America. The accompanying interim financial statements have been prepared in accordance with GAAP for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the Company’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended June 30, 2022, are not necessarily indicative of the results for the full year. While management of the Company believes that the disclosures presented herein are adequate and not misleading, these interim financial statements should be read in conjunction with the audited financial statements and the footnotes thereto for the year ended September 30, 2021, contained in the Company’s Form 8-K/A, exhibit 99.1, as filed on February 24, 2022. Basis of Consolidation The consolidated financial statements include the accounts of DriveItAway Holdings Inc. and its wholly owned subsidiary DriveItAway, Inc., collectively referred to as the “Company”. All inter-company balances and transactions are eliminated in consolidation. Fiscal year The Company operates on a September 30 fiscal year-end. Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. The significant estimates and assumptions made by management include allowance for doubtful accounts, allowance for deferred tax assets, fair value of equity instruments. Actual results could differ from those estimates as the current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. Cash and Cash Equivalents The Company considers all highly liquid securities with original maturities of three months or less when acquired, to be cash equivalents. As of June 30, 2022 and September 30, 2021 the Company had cash of $ 389,664 and $ 9,774 , respectively and did not have cash equivalents. Accounts Receivable The Company reviews accounts receivable periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. The Company records an allowance for doubtful accounts that is based on historical trends, customer knowledge, any known disputes, and considers the aging of the accounts receivable balances combined with management’s estimate of future potential recoverability. Accounts and receivables are written off against the allowance after all attempts to collect a receivable have failed. The Company believes its allowances for doubtful accounts as of June 30, 2022 and September 30, 2021 are adequate, but actual write-offs could exceed the recorded allowance. As of June 30, 2022 and September 30, 2021 the balances in the allowance for doubtful accounts was $ 0 . Property and Equipment Property and equipment, consisting of vehicle are stated at cost. Depreciation expense is recognized over the assets’ estimated useful lives of five years using the straight-line method. Major additions and improvements are capitalized as additions to the property and equipment accounts, while replacements, maintenance and repairs that do not improve or extend the life of the respective assets, are expensed as incurred. Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts. F- 8 Revenue Recognition The Company’s revenue is recognized in accordance with Accounting Standards Codification(“ASC”) 606, Revenue from Contracts with Customers, for all periods presented. The Company, through its DriveItAway online/app-based platform, operates in the retail automotive industry. The Company assists subprime and deep subprime candidates, with little or no down payment, in purchasing the used vehicle of his/her choice by first starting in an app based, turnkey rental, through participating franchise and independent car dealers. During the period ended June 30, 2022 and 2021, the Company derived its rental revenue from contract revenue share for rentals between participating franchise and independent car dealers and individual car rental customers (“customers”). In conjunction with the rental revenue, the Company generates revenue by providing driver and vehicle insurance through a third party, included in the rental contract with each customer. The Company’s performance obligation for rental revenue is to provide an application to track car rental arrangements and to collect cash from car rental customers and remit those payments to participating franchise and independent car dealers, net of the Company’s revenue share. The car rental arrangements are over a fixed contracted period; therefore, the Company recognizes revenue ratably during the contract term. The Company’s performance obligation for insurance revenue is to collect insurance fees from the customer and provide the third-party provider payment for the insurance provided to the customer. The insurance is offered over a fixed contracted period; therefore, the Company recognizes revenue ratably during the contract term. Rental and insurance transactions are prepaid at the beginning of the rental cycle (typically a one-week rental that has an automatic renewal) with an automatic charge to the customer’s credit card on file through the DIA system. The DIA system then distributes the vehicle owner share (typically 85% of rental revenue) to the vehicle owner’s bank account from the Stripe Account. This amount is shown as a deduction to Revenues (“Vehicle Owner Share”) on the Company’s Statements of Operations. The net amount is then transferred from the Company’s Stripe Account to the DIA operating bank account. DIA also distributes insurance amounts due to the third - party insurance provider on a monthly basis. This amount is shown as a deduction to revenues (“Driver & Dealer Insurance Cost”) on the Company’s Statements of Operations. DIA also generates miscellaneous revenue in a number of ways. At the end of the rental term, the DIA software system checks for any excess usage and charges, based on the terms of the rental contract, and will automatically charge a customer’s credit card. These charges are recognized when the credit card charge goes through and recorded as miscellaneous revenue on the Company’s Statements of Operations. Additional miscellaneous revenue represents amounts earned on telematics equipment and telematics software services related to each rental vehicle used to track excess usage and charges. DIA performance obligation is to provide the equipment to the vehicle owner for self-installation and allow access to the software throughout the rental term. The Company recognizes revenue when the equipment is delivered to the vehicle owner. Miscellaneous revenue associated with use of the telematics software is recognized on a monthly basis. The Company’s Cost of Goods sold consists of credit card fees incurred from the cash collections and cash remittance process, as a significant portion of its performance obligation is to collect and remit payments through its credit card processors. Stock-Based Compensation The Company recognizes compensation expense for all restricted stock awards and stock options. The fair value of restricted stock awards is measured using the grant date fair value of our stock, as determined by the Board of Directors. The fair value of stock options is estimated at the grant date using the Black-Scholes option-pricing model, and the portion that is ultimately expected to vest is recognized as compensation cost over the requisite service period. We have elected to recognize compensation expense for all options with graded vesting on a straight-line basis over the vesting period of the entire option. The determination of fair value using the Black-Scholes pricing model is affected by our stock value as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility and the risk-free interest rate. F- 9 Income Taxes The provision for income taxes and deferred income taxes are determined using the asset and liability method. Deferred tax assets and liabilities are determined based on temporary differences between the financial carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the temporary differences are expected to reverse. On a periodic basis, the Company assesses the probability that its net deferred tax assets, if any, will be recovered. If after evaluating all of the positive and negative evidence, a conclusion is made that it is more likely than not that some portion or all of the net deferred tax assets will not be recovered, a valuation allowance is provided by a charge to tax expense to reserve the portion of the deferred tax assets which are not expected to be realized. Net Loss per Share of Common Stock The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted earnings per share of common stock are computed by dividing net earnings by the weighted average number of shares and potential shares outstanding during the period. Potential shares of common stock consist of shares issuable upon the conversion of outstanding convertible debt, preferred stock, warrants and stock option. For the periods ended June 30, 2022 and 2021, the common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive. For the nine months ended June 30, 2022, and 2021, respectively, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result was anti-dilutive. Schedule of anti dilutive securities excluded from computation of earnings per share June 30, June 30, 2022 2021 Series A Convertible Preferred Stock — 78,084,333 Convertible notes 1,250,000 17,207 Convertible notes-related party — 72,368 Warrants 1,538,571 — Stock options — 300,000 2,788,571 78,473,908 Reclassification Certain accounts from prior periods have been reclassified to conform to the current period presentation. Recent Accounting Pronouncements In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging—Contracts in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. On October 1, 2021, the Company adopted this standard on its consolidated financial statements. The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its consolidated financial statements. F- 10 Note 2 – Going Concern During the nine months ended June 30, 2022, the Company had a net loss of $ 1,735,166 and did not have sufficient cash on hand to cover expenses for the next twelve (12) months. The reported net cash used in operating activities was $ 616,515 during the nine months ended June 30, 2022, which was offset by an increase in cash of $ 1,052,450 during the period ended June 30, 2022 from financings and $ 70,361 from the acquisition of a subsidiary. These factors, among others, raise substantial doubt about the entities ability to continue as a going concern. Management plans include converting its convertible debt into the Company’s common stock in addition to raising equity capital. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. Note 3 – Related Party Transactions Related Party Convertible Notes Payable On September 13, 2019, the Company issued a Convertible Promissory Note to Driveitaway, LLC, a company controlled by John Possumato, the Company’s CEO, for $ 30,000 , with a maturity date of September 13, 2022. On October 13 and October 14, 2020, the Company issued Convertible Promissory Notes to Driveitaway, LLC and Adam Potash, the Company’s COO, for $ 25,000 each, which mature on October 13 and 14, 2022, respectively. On December 24, 2020, the Company issued a Convertible Promissory Note to Adam Potash, for $ 15,000 , which matures on December 24, 2022 . Each of the notes bear interest at a rate of 6 % per annum. The notes automatically convert into preferred stock of DIA in the event DIA raises at least $ 1,000,000 by the issuance of preferred stock prior to the maturity dates of the notes (a “Qualified Financing”). In the event DIA enters into a financing that is not a Qualified Financing prior to the maturity dates of the notes, the holders have the right to convert their notes into the class and series of equity securities offered in the non-Qualified Financing at the offer price thereof. In the event DIA effects a change of control, the holders have the option of converting their notes into common stock in order to participate in the change of control or accelerating the maturity date and receiving cash at the time of the change of control. During the nine months ended June 30, 2022 and 2021, the Company recorded interest expense of $ 2,296 and $ 3,943 , respectively. At the closing of the Share Exchange on February 24, 2022, the holders of the related party Convertible Promissory Notes agreed to convert all of the principal and interest of $ 104,564 due under the notes into 52,284 shares of DIA common stock, which was automatically converted into 52,284 shares of Series A Preferred (see Note 7). Note 4 – Goodwill The following table summarizes the consideration paid for DriveItAway Holdings, Inc and the amounts of the assets acquired, and liabilities assumed at the acquisition date of February 24, 2022: Schedule of assets acquired and liabilities assumed Consideration: Convertible Preferred A stock $ 1,720,867 Assets acquired and liabilities assumed: Cash 70,361 Note receivable 100,000 Accounts payable and accrued liabilities ( 6,600 ) Total Goodwill $ 1,557,106 Note 5 - Note Receivable A note receivable of $ 100,000 was issued to DriveItAway Holdings in consideration for the sale of certain subsidiaries as a part of its recapitalization. The note receivable was unsecured, due on April 20, 2022 and was to incur interest at 15 % per annum, provided that the payor has the right to satisfy the note in full by the return of 500,000 shares of the Company’s common stock for cancellation. In May 2022, the payor under the note receivable satisfied the note in full by returning 500,000 shares of the Company’s common stock for cancellation (see Note 7). F- 11 Note 6 – Vehicles During the nine months ended June 30, 2022, the Company purchased 3 vehicles for $ 126,406 and recorded depreciation of $ 4,645 . Note 7 – Equity Authorized On April 18, 2022, the Company filed Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to authorize one billion ( 1,000,000,000 ) shares of common stock having a par value of $ 0.0001 per share, and ten million ( 10,000,000 ) shares of preferred stock having a par value of $ 0.0001 per share. All or any part of the capital stock may be issued by the Corporation from time to time and for such consideration and on such terms as may be determined and fixed by the Board of Directors, without action of the stockholders, as provided by law, unless the Board of Directors deems it advisable to obtain the advice of the stockholders. Series A Preferred Stock The Company has authorized one series of preferred stock, which is known as the Series A Convertible Preferred Stock (the “ Series A Preferred ”). The Board has authorized the issuance of 5,000,000 shares of Series A Preferred. The Series A Preferred Stock has the following rights and preferences: Dividends : The Series A Preferred Stock is entitled to receive non-cumulative dividends equal to the amount of dividends that the holder of such share would have received if such share of Series A Preferred Stock were converted into shares of Common Stock immediately prior to the record date of the dividend declared on the Common Stock. Liquidation Preference : The Series A Preferred Stock is entitled to receive, prior to any distribution to any junior class of securities, an amount equal to $0.01 per share as a liquidation preference before any distribution may be made to the holders of any junior security, including the Common Stock. Voting Rights : Each holder of Series A Preferred Stock shall vote with holders of the Common Stock upon any matter submitted to a vote of shareholders, in which event it shall have the number of votes equal to the number of shares of Common Stock into which such share of Series A Preferred Stock would be convertible on the record date for the vote or consent of shareholders. Each holder of Series A Preferred Stock shall also be entitled to one vote per share on each submitted to a class vote of the holders of Series A Preferred Stock. Voluntary Conversion Rights : Each share of Series A Preferred Stock is convertible into 33.94971 shares of Common Stock at the option of the holder thereof. Mandatory Conversion Right : The Company has the right to convert each share of Series A Preferred Stock into 33.94971 shares of Common Stock at any time that there are less than 200,000 shares of Series A Preferred Stock outstanding. During the nine months ended June 30, 2021, the Company issued 300,000 shares of DIA common stock which was automatically converted into 300,000 shares of Series A Preferred at the closing of the Share Exchange on February 24, 2022. The shares were issued to a consulting firm pursuant to one year consulting agreement and valued at $ 692,308 . Stock-based compensation expense related to this issuance for the nine months ended June 30, 2022 and 2021 was $ 288,461 and $ 230,770 , respectively, and was included in general and administrative expense . During the nine months ended June 30, 2022, the Company issued 294,593 shares of DIA common stock which was automatically converted into 294,593 shares of Series A Preferred at the closing of the Share Exchange on February 24, 2022. The preferred stock is reflected retroactively for all periods presented. F- 12 ● 52,284 shares issued for conversion of debt – related party and accrued interest of $ 104,564 ● 129,809 shares issued for conversion of debt and accrued interest of $ 288,458 ● 112,500 shares issued for exercise of stock option - related party as stock-based compensation to related parties On April 20, 2022, holders of 2,464,784 shares of Series A Preferred agreed to convert their Series A Preferred into common stock, which resulted in the issuance of 83,678,702 shares of common stock. On the same date, the board of directors approved a resolution to exercise the Company’s right to mandatorily convert the remaining 129,809 shares of Series A Preferred into common stock, which resulted in the issuance of an additional 4,406,979 shares of common stock. As of June 30, 2022 and September 30, 2021, the Company had 0 and 2,300,000 shares of Series A Preferred stock outstanding, respectively. Common Stock Issuances On February 24, 2022, the Company recognized the equity of DIA Holdings as part of the reorganization which resulted in the Company recognizing the issuance of 13,716,041 shares of common stock and 15,100 shares of treasury stock, at a value of $ 1,720,867 (see Note 4). On February 24, 2022, the Company issued 4,000,000 shares of common stock valued at $ 316,324 for commitment fees in conjunction with the issuance of promissory note of $ 750,000 (see Note 9). On April 20, 2022, the Company issued 88,085,681 shares of common stock as a result of the conversion of all outstanding shares of Series A Preferred Stock. In May 2022, 500,000 shares were returned for cancellation, to satisfy a note receivable in the amount of $ 100,000 (see Note 5). As of June 30, 2022 and September 30, 2021, the Company had 105,301,722 and 0 common shares issued, respectively. Treasury stock The Company records treasury stock at cost. Treasury stock is comprised of shares of common stock purchased by the Company in the secondary market. As of June 30, 2022 and September 30, 2021, the Company had 15,100 and 0 shares of treasury stock, respectively. Stock Options On June 12, 2020, DIA’s Board of Directors and its shareholders approved its 2020 Equity Compensation Plan (“Equity Plan”). The Equity Plan permits DIA to issue awards or options to the employees, directors, consultants and advisors who provide services to the Company or a subsidiary. Pursuant to the Equity Plan, 400,000 shares of DIA’s common stock were reserved for issuance. The Equity Plan allows DIA’s board or a committee of the board to issue grants of incentive stock options, nonqualified stock options, stock awards, stock units, stock appreciation rights and other equity-based awards. As of December 31, 2021, DIA had 300,000 stock options outstanding under the Equity Plan to Messrs. Possumato, CEO, and Potash, COO in equal amounts, of which 112,500 had vested as of December 31, 2021. At the closing of the Share Exchange, Messrs. Possumato and Potash each agreed to exercise the 56,250 vested stock options issued to them, which was the number of stock options which had vested as of the date the Share Exchange Agreement was executed. The options were converted into 112,500 shares of DIA common stock, which was automatically converted into 112,500 shares of Series A Preferred. The balance of the stock options issued to Messrs. Possumato and Potash were cancelled. The stock options had an exercise price of $ 0.75 per share. In lieu of paying the exercise price in cash, the exercise price was recorded as compensation expense of $ 42,188 to each of Messrs. Possumato and Potash. F- 13 Also, at the closing of the Share Exchange, DIA’s board cancelled the Equity Plan and all outstanding options were cancelled. Accordingly, as of June 30, 2022 the Company had no options outstanding. Warrants On February 24, 2022, in conjunction with the issuance of a promissory note of $ 750,000 , the Company issued 1,000,000 warrants for $ 0.30 per share, which were assigned a value of $ 28,372 , and recorded to additional paid in capital. The warrants expire on February 24, 2027. In June 2022, in conjunction with a private offering and the issuance of secured promissory notes of $ 250,000 (see Note 9), the Company issued 125,000 warrants for $ 0.30 per share, which were assigned a value of $ 7,912 , and recorded to additional paid in capital. The warrants expire in June 2027. The warrants were valued using the Black-Scholes pricing model. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. For the nine months ended June 30, 2022, the estimated fair values of the warrants were measured using the following inputs: Schedule of assumptions used in valuing the stock options and warrants June 30, 2022 Stock price at time of issuance $ 0.092 – 0.10 Exercise price $ 0.30 Expected term 5 years Expected average volatility 116 – 120 % Expected dividend yield — Risk-free interest rate 1.84 – 3.35 % A summary of activity during the nine months ended June 30, 2022 is as follows: Summary of common stock warrants activity Warrants Weighted-Average Weighted-Average Outstanding Exercise Price Life (years) Balance as of October 1, 2021 — $ — — Issuance 1,125,000 $ 0.30 5.00 Warrants assumed from DIA Holdings 1,882,793 $ 0.29 0.24 Exercised — $ — — Expired ( 1,764,000 ) $ 0.30 — Balance as of June 30, 2022 1,243,793 $ 0.29 4.27 1,882,793 warrants outstanding in the Company prior to February 24, 2022, reflect the warrants as assumed in the reorganization. The intrinsic value of the warrants as of June 30, 2022, is $ 0 . All of the outstanding warrants are exercisable as of June 30, 2022. F- 14 Note 8 – Notes Payable PPP Loan On April 28, 2020, the Company was granted a loan (the “Loan”) from First Bank of the Lake in aggregate amount of $ 23,750 , pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The Loan, which was in the form of a Note dated May 9, 2020 issued by the Company, matures on May 8, 2022 and bears interest at a rate of 1 % per annum, payable monthly commencing on October 23, 2020. The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties. Funds from the Loan may only be used for payroll costs, cost used to continue group health care benefits, mortgage payments, rent, utilities and interest on other debt obligations incurred before February 15, 2020. The Company used the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. In December 2021, the PPP Loan of $ 23,750 and accrued interest of $ 398 were forgiven and recognized as other income. During the nine months ended June 30, 2022, the Company recorded interest expense of $ 59 . SBA Loan On June 3, 2020, the Company entered into a SBA Loan for $ 78,500 at a rate of 3.75 %. On August 12, 2021 the loan increased to $ 114,700 and the Company obtained $ 36,200 on October 8, 2021. The SBA Loan matures on May 31, 2050 . During the nine months ended June 30, 2022, the Company recorded interest expense of $ 3,187 on the SBA Loan and as of June 30, 2022 the accrued interest on the SBA Loan was $ 7,091 . Note 9 – Convertible Notes Payable Secured Convertible Notes In June 2022, the Company’s board of directors approved an offering of up to 10 Units at $ 50,000 per Unit in a private offering. Each Unit consists of a Secured Convertible Note with an original principal balance of $ 50,000 and one warrant to purchase Common Stock for every $ 2 invested in the offering. The warrants have an exercise price of $ 0.30 per share and expire five ( 5 ) years from the date of issuance (see Note 7). Each Secured Convertible Note bears interest at 15 % per annum, matures 2 two years after the date of issuance, and is convertible at the option of the holder into common stock at $ 0.20 per share. Pursuant to a security agreement between the Company and investors in the Unit offering, and the subscription agreements executed by the Company and the investors, the Secured Convertible Notes are secured by lien on two existing electric vehicles that were owned by the Company at the time of the commencement of the offering, and eight additional electric vehicles that will be purchased with the proceeds of the offering, assuming all 10 Units are sold in the offering. The Company also granted subscribers in the Unit offering piggyback registration rights with respect to any shares of common stock issuable upon conversion of the Secured Convertible Notes or upon exercise of the warrants issued in the Unit offering. During June 2022, the Company sold a total of $ 250,000 of Units to two accredited investors, which resulted in the issuance of two secured promissory notes with an aggregate principal amount of $ 250,000 , and the issuance of 125,000 warrants. The allocation of the warrant to the debt component resulted in a $ 7,912 debt discount that is being amortized to interest expense over the term of the Note. During the nine months ended June 30, 2022, the Company recorded interest expense of $ 2,000 , and amortization of debt discount of $ 207 . As of June 30, 2022, the debt discount recorded on the note was $ 7,704 , resulting in a note payable balance of $ 242,296 . AJB Capital Investments, LLC Note Effective February 24, 2022, Creative Learning Corporation (the “ Company ”) entered into a Securities Purchase Agreement (the “SPA”) with AJB Capital Investments, LLC (“AJB”), and issued a Promissory Note in the principal amount of $ 750,000 (the “AJB Note”) to AJB in a private transaction for a purchase price of $ 675,000 (after giving effect to a 10% original issue discount). In connection with the sale of the AJB Note, the Company also paid certain fees and due diligence costs of AJB and brokerage fees to J.H. Darbie & Co., a registered broker-dealer. After payment of the fees and costs, the net proceeds to the Company were $ 641,250 , which will be used for working capital and other general corporate purposes. F- 15 The maturity date of the AJB Note was extended to February 24, 2023 . The AJB Note bears interest at 10 % per year, and principal and accrued interest is due on the maturity date. The Company may prepay the AJB Note at any time without penalty. The note is convertible into Common Stock of the Company at any time that the note is in default, provided that at no time may the note be convertible into an amount of common stock that would result in the holder having beneficial ownership of more than 4.99% of the outstanding shares of common stock, as determined in accordance with Section 13(d) under the Securities Exchange Act of 1934 (the “Exchange Act”). The conversion price equals the lowest trading price during either the 20 days trading days prior to the date of conversion or the 20 trading days prior to the date of issuance of the note (which was $0.14 per share). The conversion is subject to reduction in the following situations: (i) a 10% discount will apply anytime a conversion occurs when the company is not eligible to deliver the shares by DWAC; (ii) a 15% discount will apply whenever the shares are “chilled” for deposit into the DTC system; (iii) a 15% discount will apply if the Company’s common stock ceases to be registered under Section 12 of the Exchange Act; (iv) a 15% discount will apply if the note cannot be converted into free trading shares 181 days after its issue date; (v) in the event any other party has the right to convert debt into Common Stock at a greater discount to market than under the note, then the holder has the right to utilize such discount in determining the conversion price; or (vi) if the Company issues any shares of Common Stock for less than the conversion price in effect on the date of issuance, including any options, warrants or securities convertible into Common Stock at price less than the conversion price, then the conversion price shall be automatically reduced to the amount of consideration received by the company for such shares, except for any issuance that is an exempt issuance. Also pursuant to the SPA, the Company paid AJB a commitment fee of $ 800,000 , payable in the form of 4,000,000 unregistered shares of the Company’s common stock (the “Commitment Fee Shares”). If, after the sixth month anniversary of closing and before the thirty-sixth month anniversary of closing, AJB has been unable to sell the Commitment Fee Shares for $ 800,000 , then the Company may be required to issue additional shares or pay cash in the amount of the shortfall. However, if the Company pays the AJB Note off on or before its maturity date, then the Company may redeem 2,000,000 of the Commitment Fee Shares for one dollar and the amount of the commitment fee will be reduced to $ 400,000 . The Company calculated and recorded a contingent liability for the Commitment Fee Shares, based on the closing stock price on reporting date. On issuance of the note, the Company valued the 4,000,000 Commitment Fee Shares of common stock at $316,324 and recorded this as additional paid in capital. Pursuant to the SPA, the Company also issued to AJB common stock purchase warrants (the “warrants”) to purchase 1,000,000 shares of the Company’s common stock for $ 0.30 per share, which was assigned a value of $ 28,372 that was recorded as additional paid in capital. The warrants expire on February 24, 2027 . The warrants also include various covenants of the Company for the benefit of the warrant holder and includes a beneficial ownership limitation on the holder that, in certain circumstances, may serve to restrict the holder’s right to exercise the warrants. The allocation of financing costs, issuance of the Commitment Fee shares, and the warrant to the debt component resulted in a $ 453,446 debt discount that is being amortized to interest expense over the term of the AJB Note. During the nine months ended June 30, 2022, the Company recorded interest expense of $ 26,250 , amortization of debt discount of $ 315,658 , and a loss on contingency liability of $ 460,000 for the Commitment Fee Shares. As of June 30, 2022, the contingent liability balance was $ 460,000 and the debt discount recorded on the note was $ 137,788 , resulting in a note payable balance of $ 612,212 . Knightsgate Ventures II, LP Note On April 1, 2021, DIA borrowed $ 150,000 in Convertible Notes from Knightsgate Ventures II, LP, a third-party lender at a rate of 8 %. The loan matures on December 31, 2022 . During the year ended September 30, 2021 the Company recorded interest expense of $ 5,983 on the note and that amount is recorded as accrued interest as of September 30, 2021. F- 16 The Convertible Note automatically converts into preferred stock of DIA in the event DIA raised at least $ 2,000,000 by the issuance of preferred stock prior to the maturity date of the Convertible Note (a “Qualified Financing”), in which case the conversion price is equal to the lesser of (i) 90% of the price paid by investors in the Qualified Financing or (ii) the price obtained by dividing $6,000,000 by the Company’s fully diluted shares outstanding immediately prior to conversion (the “Cap Price”). In the event DIA had not entered into a Qualified Financing prior to the maturity date, the Convertible Note is convertible at the option of the holder into DIA common stock on the Maturity Date at a price per share equal to the Cap Price. In the event DIA effects a change of control, the holder has the option of converting the Convertible Note into DIA’s common stock at a price per share equal to the Cap Price or accelerating the maturity date and receiving cash at the time of the change of control. During the nine months ended June 30, 2022, the Company recorded interest expense of $ 4,833 . Individual Investor Notes During the nine months ended June 30, 2022, DIA issued an aggregate of five convertible notes to five investors, each for $ 25,000 . The notes bear interest at a rate of 8 % per annum, mature on December 31, 2022 , and are convertible into DIA’s common stock on the same basis that is described for the Convertible Note issued to Knightsgate Ventures II, LP on April 1, 2021, as described above. During the nine months ended June 30, 2022 the Company recorded interest expense of $ 2,641 on the notes. In March 2022, the holders of all of the convertible notes issued to unrelated investors agreed to convert their notes of $ 275,000 and accrued interest of $ 13,458 into 129,809 shares of DIA’s common stock, each of which was automatically converted into one share of Series A Preferred of the Company Holdings in accordance with the Share Exchange Agreement (see Note 7). Note 10 – Subsequent Events Management has evaluated subsequent events through the date these financial statements were available to be issued. Based on our evaluation no material events have occurred that require disclosure. F- 17