What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-08 compared with 2023-01-13 · 225 added, 219 removed, 38 unchanged (92% of the section changed)

Management’s Discussion and Analysis of Financial Condition

and Results of Operations

The following discussion and analysis should be

read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Form 10-K.

All information

presented herein is based on the Company’s fiscal year, which ends September 30.

Unless otherwise stated, references to particular

years, quarters, months or periods refer to the Company’s fiscal years ended in September and the associated quarters, months and

periods of those fiscal years.

Note on COVID- 19

The COVID-19 pandemic

is a highly fluid situation and it is not currently possible for us to reasonably estimate the impact it may have on our financial and

operating results.

We will continue to evaluate the impact of the COVID-19 pandemic on our business as we learn more and the impact of

COVID-19 on our industry becomes clearer.

We are complying with health guidelines regarding safety procedures, including, but are not

limited to, social distancing, remote working, and teleconferencing.

The extent of the future impact of the COVID-19 pandemic on our business

is uncertain and difficult to predict.

Adverse global economic and market conditions as a result of COVID-19 could also adversely affect

our business.

If the pandemic continues to cause significant negative impacts to economic conditions, our results of operations, financial

condition and liquidity could be adversely impacted.

The Company 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,

Management’s Discussion and Analysis of Financial Condition and Results of Operations

following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto included

elsewhere in this Form 10-K.

All information presented herein is based on the Company’s fiscal year, which ends September 30.

otherwise stated, references to particular years, quarters, months or periods refer to the Company’s fiscal years ended in September

and the associated quarters, months and periods of those fiscal years.

Company 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.

18, 2022, the name was changed to DriveItAway Holdings, Inc.

6 unchanged sentences

to ownership’ platform to enable entry level consumers to drive and acquire new Electric Vehicles.

RESULTS OF OPERATIONS

For the year ended September 30, 2022, compared

to year ended September 30, 2021

Our operating results for the years ended September

30, 2022 and 2021 are summarized as follows:

September 30,

Cost of revenue

Operating expense

Operating loss

Other expense

OF OPERATIONS

the year ended September 30, 2023, compared to year ended September 30, 2022

operating results for the years ended September 30, 2023 and 2022 are summarized as follows:

Income (expense)

$ (1,475,365 )

Revenues for the year ended September 30, 2022 was

$55,509, as compared to $118,591 for the year ended September 30, 2021, a decrease of $63,082, primarily due to the nation-wide used car

shortage resulting from supply chain disruptions due in part to the COVID-19 pandemic.

In addition, semiconductor chips, one of the main

components that run vehicle electronics, came in short supply, which affected both new and used car markets, causing significantly higher

prices and low inventory.

Operating expenses for the year ended September 30,

2022 were $1,201,767, as compared to $741,899 for the year ended September 30, 2021.

The increase of $459,868 was attributable to an increase

in professional fees of $236,207, salaries and payroll taxes of $204,343, general and administrative expense of $14,306 and selling expenses

of $24,627, reduced by a decrease in software development expenses of $19,615.

Operating loss was $1,185,156 for the year ended September

30, 2022, as compared to $661,140 for the year ended September 30, 2021.

The increase of $524,016 was largely attributable to an increase

in professional fees, salaries, payroll taxes, selling expenses and a decrease in revenues.

Other expenses for year ended September 30, 2022 were

$290,209, as compared to $14,544 for the year ended September 30, 2021.

The increase of $275,665 was attributable to amortization debt

discount of $677,561 and an increase in interest expenses of $58,097, offset by a gain on PPP loan forgiveness of $24,148 and gain on

change in fair value of derivative liability of $435,188.

Liquidity and Capital Resources:

The following table provides selected financial

data about our Company as of September 30,2022 and 2021.

Revenues for the year

ended September 30, 2023 was $307,284, as compared to $55,509 for the year ended September 30, 2022, an increase of $251,775 primarily

due to a $151,464 increase in rental revenue.

Operating expenses for the year

ended September 30, 2023 were $830,976 as compared to $1,201,767 for the year ended September 30, 2022.

The decrease of $370,791 was

primarily attributable to a $299,088 decrease in professional fees and a $90,475 reduction in salaries and payroll taxes.

Operating loss was $762,455

for the year ended September 30, 2023, as compared to $1,185,156 for the year ended September 30, 2022.

The decrease of $422,701 was

largely attributable to a decrease in professional fees, salaries, and payroll taxes and a large increase in rental revenue.

Other income (expenses) for

year ended September 30, 2023 were ($167,682), as compared to ($290,209) for the year ended September 30, 2022.

The increase of $122,527

was attributable to an increase in amortization debt discount of $555,282, partially offset by decreases in gain (loss) on change in

fair value of derivative liability, gain on PPP loan forgiveness, and interest expense of $265,465, $24,148, and $103,549, respectively.

Liquidity and Capital

The following table provides

selected financial data about our Company as of September 30, 2023 and 2022.

Working Capital

1 unchanged sentence

September 30,

Current assets

Current assets, net of restricted cash

Current liabilities

Working capital (deficiency)

As of September 30, 2022, and September 30, 2021,

our total current assets were $143,689 and $31,229 which were comprised of $127,109 and $9,774 in cash, $6,082 and $21,455 in accounts

receivable and $10,498 and $0 in prepaid expenses, respectively.

As of September 30, 2022, our current liabilities

were $1,100,139 which were comprised of $198,065 in accounts payable, $29,044 in accrued liabilities, $5,840 in SBA loan, $2,101 in deferred

revenue, $750,000 in convertible notes payable, $115,009 in derivative liability and $80 in due to related party.

As of September 30,

2021, our current liabilities were $229,228 which were comprised of $132,696 in accounts payable, $29,386 in accrued liabilities, $29,878

in SBA and PPP loans, $7,268 in due to related party and $30,000 in convertible note-related parties.

$ (1,861,864 )

As of September 30, 2023, and September

our working capital deficiency was $956,450 and $197,999, respectively.

30, 2022, our total current assets net of restricted cash were $16,216 and $143,689 which were comprised of $4,632 and $127,109 in cash,

$11,584 and $6,082 in accounts receivable and $0 and $10,498 in prepaid expenses, respectively.

As of September 30, 2023, our

current liabilities were $1,861,080 which were comprised of $664,707 in accounts payable and accrued liabilities, $4,918 in accrued interest

– related party, $7,233 in deferred revenue, $2,234 in customer deposits, $25,080 in due to related party, $27,437 in promissory

notes payable, $12,500 in promissory notes payable in default, $50,000 in promissory notes payable – related parties, $1,082,654

in convertible notes payable, and $1,317 in derivative liability.

As of September 30, 2022, our current liabilities were $1,094,299 which

were comprised of $227,109 in accounts payable and accrued liabilities, $2,101 in deferred revenue, $750,000 in convertible notes payable,

$115,009 in derivative liability and $80 in due to related party.

As of September 30, 2023, and

September 30, 2022, our working capital deficiency was $1,861,864 and $950,610, respectively.

Cash Flow Data:

1 unchanged sentence

Cash used in operating activities

Cash used in investing activities

Cash provided by (used in) investing activities

Cash provided by financing activities

Net Change in Cash for period

Net Change in Cash and Restricted Cash

Cash Flows from Operating Activities

During the year ended September 30, 2022, we

did not generate positive cash flows from operating activities.

For the year ended September 30, 2022, net cash flows used in operating

activities was $827,611, consisting of a net loss of $1,475,365, reduced by stock-based compensation expenses of $288,461, amortization

debt discount of $677,561, depreciation of $8,436, a change in operating assets and liabilities of $132,632 and increased by gain

on PPP loan forgiveness of $24,148 and gain on change in fair value of derivative liability of $435,188.

During the nine months ended September 30, 2021, we

did not generate positive cash flows from operating activities.

For the year end September 30, 2021, net cash flows used in operating

activities was $239,767, consisting of a net loss of $675,684, reduced by an increase in stock -based compensation expenses of $403,847

and a change in operating assets and liabilities of $32,070.

During the year ended September

30, 2023, the company did not generate positive cash flows from operating activities.

For the year ended September 30, 2023, net cash

flows used in operating activities was $445,105 consisting of a net loss of $930,137, reduced by stock-based compensation expenses of

$15,000, amortization debt discount of $122,279, depreciation of $36,783, a loss on debt extinguishment of $36,313, a change in operating

assets and liabilities of $444,380, and gain on change in fair value of derivative liability of $169,723.

During the year ended September

30, 2022, we did not generate positive cash flows from operating activities.

For the year ended September 30, 2022, net cash flows used

in operating activities was $827,611, consisting of a net loss of $1,475,365, reduced by stock-based compensation expenses of $288,461,

amortization debt discount of $677,561, depreciation of $8,436, a change in operating assets and liabilities of $132,632 and increased

by a gain on PPP loan forgiveness of $24,148 and a gain on change in fair value of derivative liability of $435,188.

Cash Flows from Investing Activities

During the year ended September 30, 2022, the Company

generated cash of $70,360 from the acquisition of a subsidiary and purchased three vehicles for $157,864.

The Company did not use any funds for investing activities

During the year ended September

30, 2023, purchased two vehicles for $67,039 and developed a website for a total of $5,833.

During the year ended September

30, 2022, the Company generated cash of $70,360 from the acquisition of a subsidiary and purchased three vehicles for $157,864.

Cash Flows from Financing Activities

During the year ended September 30, 2022, the Company

generated $1,125,000 from the issuance of convertible notes and $36,200 from an SBA loan, offset by $128,750 of debt issuance costs.

During the year ended September 30, 2021, the Company

generated $150,000 from issuance of convertible notes, $65,000 from related party convertible debt and $5,566 contribution from related

party as additional paid-in-capital.

During the year ended September

30, 2023, the Company generated $310,000 from the issuance of convertible notes, $104,458 from the promissory notes, $50,000 from related

party notes payable, and $26,460 from related party advances.

These proceeds were partially offset by repayments on related party advances,

promissory notes payable, and payments for debt issuance costs of $1,460, $42,011, and $33,388, respectively.

During the year ended September

30, 2022, the Company generated $1,125,000 from the issuance of convertible notes and $36,200 from an SBA loan, offset by $128,750 of

debt issuance costs.

Going Concern

As of September 30, 2022, the Company had a net loss

of $1,475,365, accumulated deficit of $2,380,759 and did not have sufficient cash on hand to cover expenses for the next twelve (12) months.

The Company intends to convert its convertible debt into common stock and to fund operations through equity financing arrangements, which

may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending September 30, 2023.

The ability of our Company to emerge from the development

stage is dependent upon, among other things, obtaining additional financing to continue operations, and development of our business plan.

In response to these requirements, management intends to raise additional funds through public or private placement offerings.

These factors,

among others, raise substantial doubt about the Company’s ability to continue as a going concern.

The accompanying financial statements

do not include any adjustments that might result from the outcome of this uncertainty.

As of September 30, 2023, the

Company had a net loss of $930,137 accumulated deficit of $3,310,896 and did not have sufficient cash on hand to cover expenses for the

next twelve (12) months.

The Company intends to convert its convertible debt into common stock and to fund operations through equity

financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the

year ending September 30, 2024.

The ability of our Company to

emerge from the development stage is dependent upon, among other things, obtaining additional financing to continue operations, and development

of our business plan.

In response to these requirements, management intends to raise additional funds through public or private placement

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Critical Accounting Policies and

Our consolidated financial

statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), which require

management to make estimates, judgments and assumptions that affect the amounts reported in our consolidated financial statements and

accompanying notes.

Our consolidated financial statements

are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), which require management

to make estimates, judgments and assumptions that affect the amounts reported in our consolidated financial statements and accompanying

We believe our most critical accounting policies and estimates relate to the following:

1 unchanged sentence

● Stock-Based Compensation

● Income Taxes

● Financial Instruments

6 unchanged sentences

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 years ended September 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

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

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

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.

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 (“platform”), operates in the automotive

rental industry.

The Company assists subprime and deep subprime candidates to rent/lease vehicles on a short-term basis, generally on

a weekly or, in some cases monthly, basis under a Pay-As You-Go program.

Through its platform the Company will track vehicle values and

reduce vehicle pricing through the customers usage payments to show drivers a vehicle purchase price should they be interested in buying

the vehicle, at which time the customer would procure financing if the Company determined they wanted to sell the vehicle at the listed

purchase price.

During the years ended September

30, 2023, and 2022, the Company derived its revenue from signed contracts for vehicle rentals between the Company, other leasing companies,

or car dealerships and individual car rental customers (“customers”).

Customers book a vehicle through

the Company’s platform, starting first with a rental contract with the vehicle.

When the customer books the vehicle, per the terms

of the individual rental agreements, the customer shall pay a stated rental rate, a stated insurance amount, an initial non-refundable

fee, and, in some cases, a refundable deposit.

At the end of the usage cycle, the system calculates miles driven and if the customer

has driven more than the prorated, included amount, they pay extra usage/mileage fees.

In instances when a customer pays late, they pay

a late fee and in cases of incurring charges for tolls they pay for the toll costs incurred.

Additionally, contracts may be extended

(a new contract is signed) at which time the credit card on file for the customer will be charged at the beginning of the contract extension

period for rental rate and insurance amount for the new extension period.

Vehicles available in the platform

can be owned or leased by the Company or made available through arrangements with independent car dealerships (“dealerships”).

For vehicles owned or leased by the Company, the Company’s performance obligation for rental revenue is to provide customers with

a vehicle and an application to track vehicle rental arrangements.

For vehicles made available through dealerships the Company’s

performance obligation for rental revenue is to provide an application to track vehicle rental arrangements and to collect cash from

customers and remit those amounts to dealerships net of the Company’s revenue share.

The vehicle rental arrangements are over a

fixed contracted period;

therefore, the Company recognizes rental revenue ratably over the contract term.

Costs related to rental revenue

include depreciation for Company owned vehicles and monthly lease payments when the vehicles are leased from a leasing company.

of revenue transferred to dealerships is treated as contra-revenue because the Company acts as an agent in these transactions resulting

in only the Company’s revenue share being recognized.

The Pay-As-You-Go program manages

or includes insurance.

Fleet insurance is sometimes provided where the Company has a fleet policy and the driver is added to it when

In this case, the driver pays the cost of insurance as a separate payment in the system.

This payment is a type of revenue.

Company pays the insurance company providing the coverage.

This is a cost of goods sold.

The Company also allows for drivers to bring

their own insurance.

The Company works with associated insurance brokers to write a policy for the customer for that vehicle and a separate

finance company that pays for the policy in full.

The Company acts as trustee in collecting installments and transferring them to the

finance company.

Collected payments are treated as a revenue and transfers to the finance company are treated as contra-revenue because

the Company acts as an agent in these transactions.

Lastly, in markets where the Company cannot support this program, drivers are allowed

to bring their own insurance and pay it directly themselves with no involvement of the Company.

No revenue is collected or recognized

in this instance.

Because any insurance revenue is collected at contract inception and covers the fixed contract period the Company recognizes

insurance revenue ratably over the contract term.

Initial non-refundable fees are

recognized when payment is received as the Company has no obligation to provide additional services at that point.

Miscellaneous charges

for extra mileage, late fees, or toll charges calculated and charged to the customer credit card at the end of the usage cycle are recognized

when the credit card charge goes through.

Refundable deposits are recorded on the balance sheet until deposits are returned to customers

or applied to their account for fees incurred.

Deferred revenue includes rental and insurance amounts that are paid for contracts that

overlap a reporting date and relate to usages after that date.

As of September 30, 2023 and 2022 refundable deposits were $2,234 and

$0 and deferred revenue was $7,233 and $2,101, respectively.

In addition to the costs associated

with rental revenue and insurance revenue, within the Cost of Goods Sold account the Company also records 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

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

follows ASC 820, “Fair Value Measurements and Disclosures”, which defines fair value as the exchange price that would

be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset

or liability in an orderly transaction between market participants on the measurement date.

ASC 820 also establishes a fair value

hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent

sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the

best information available in the circumstances (unobservable inputs).

The fair value hierarchy consists of three broad levels,

which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and

the lowest priority to unobservable inputs (Level 3).

The three levels of the fair value hierarchy are described below:

1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability

such as quoted prices for similar assets or liabilities in active markets;

quoted prices for identical assets or liabilities in

markets with insufficient volume or infrequent transactions (less active markets);

or model-derived valuations in which significant

inputs are observable or can be derived principally from, or corroborated by, observable market data.

3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to

the measurement of the fair value of the assets or liabilities.

amounts shown of the Company’s financial instruments including cash, accounts receivable, prepaid expense, accounts

payable, and accrued liabilities approximate fair value due to their short-term nature.

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.

Fair Value Measurements

The Company follows ASC 820,

“Fair Value Measurements and Disclosures”, which defines fair value as the exchange price that would be received for an asset

or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly

transaction between market participants on the measurement date.

ASC 820 also establishes a fair value hierarchy that distinguishes between

(1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s

own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active

markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels of the

fair value hierarchy are described below:

Level 1 applies to assets or

liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 applies to assets or

liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices

for similar assets or liabilities in active markets;

quoted prices for identical assets or liabilities in markets with insufficient volume

or infrequent transactions (less active markets);

or model-derived valuations in which significant inputs are observable or can be derived

principally from, or corroborated by, observable market data.

Level 3 applies to assets or

liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair

value of the assets or liabilities.

The carrying amounts shown of

the Company’s financial instruments including cash, accounts receivable, prepaid expense, accounts payable, and accrued liabilities

are approximate fair value due to their short-term nature.

Derivative Financial Instruments

The fair value of an embedded conversion option that

is convertible into a variable amount of shares and warrants that include price protection reset provision features are deemed to be “down-round

protection” and, therefore, do not meet the scope exception for treatment as a derivative under ASC 815 “Derivatives and Hedging”,

since “down-round protection” is not an input into the calculation of the fair value of the conversion option and warrants

and cannot be considered “indexed to the Company’s own stock” which is a requirement for the scope exception as outlined

under ASC 815.

The accounting treatment of derivative financial instruments

requires that the Company record embedded conversion options and warrants at their fair values as of the inception date of the agreement

and at fair value as of each subsequent balance sheet date.

Any change in fair value is recorded as non-operating, non-cash income or

expense for each reporting period at each balance sheet date.

The Company reassesses the classification of its derivative instruments

at each balance sheet date.

If the classification changes as a result of events during the period, the contract is reclassified as of

the date of the event that caused the reclassification.

The Black-Scholes option valuation model was used

to estimate the fair value of the embedded conversion options and warrants.

The 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 our common

stock, equal to the weighted average life of the options.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Quantitative and Qualitative

Disclosures about Market Risk

As a smaller reporting company, we are not required to provide the information

required by this Item.

The Company accounts for their

derivative financial instruments in accordance with ASC 815 “Derivatives and Hedging” therefore any embedded conversion options

and warrants accounted for as derivatives are to be recorded at their fair values as of the inception date of the agreement and at fair

value as of each subsequent balance sheet date.

Any change in fair value is recorded as non-operating, non-cash income or expense for

each reporting period at each balance sheet date.

The Company reassesses the classification of its derivative instruments at each balance

If the classification changes as a result of events during the period, the contract is reclassified as of the date of the

event that caused the reclassification.

The Black-Scholes option valuation model was used to estimate the fair

value of the embedded conversion options and warrants.

The 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 our common stock, equal

to the weighted average life of the options.

Off-Balance Sheet

We have no off-balance sheet

arrangements.

and Qualitative Disclosures about Market Risk

As a smaller reporting company,

we are not required to provide the information required by this Item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis