Driveitaway Holdings, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS DRIVEITAWAY HOLDINGS, INC. INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2023 Page Condensed Consolidated Balance Sheets as of December 31, 2023 (Unaudited) and September 30, 2023 F-2 Condensed Consolidated Statements of Operations for the three months ended December 31, 2023 and 2022 (Unaudited) F-3 Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the three months ended December 31, 2023 and 2022 (Unaudited) F-4 Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2023 and 2022 (Unaudited) F-5 Notes to the Condensed Consolidated Financial Statements (Unaudited) F-6 F- 1 DriveItAway Holdings, Inc. Condensed Consolidated Balance Sheets December 31, September 30, 2023 2023 (Unaudited) Assets Current assets Cash $ 61,167 $ 4,632 Restricted cash — 18,559 Accounts receivable, net 7,532 11,584 Total current assets 68,699 34,775 Fixed assets, net 176,129 184,228 Intangible assets, net 10,415 11,787 Total Assets $ 255,243 $ 230,790 Liabilities and Stockholders’ Deficit Current Liabilities Accounts payable and accrued liabilities $ 794,498 $ 664,707 Accrued interest – related parties 6,812 4,918 Deferred revenue 4,967 7,233 Customer deposits 1,339 2,234 Due to related parties 25,080 25,080 Promissory notes payable, net of debt discount 12,509 27,437 Promissory notes payable, in default 20,000 12,500 Promissory notes payable - related parties, in default 42,500 50,000 Convertible notes payable, net of debt discount 1,312,747 1,082,654 Derivative liability 585,546 1,317 Total Current Liabilities 2,805,998 1,878,080 SBA Loan - noncurrent 114,700 114,700 Convertible note payable - noncurrent, net of debt discount — 175,720 Promissory notes payable - noncurrent 4,333 16,649 Total Liabilities 2,925,031 2,185,149 Commitments and Contingencies — — Stockholders’ Deficit Preferred stock, $ .0001 par value; 10,000,000 shares authorized; no shares issued and outstanding — — Common stock, $ 0.0001 par value; 1,000,000,000 shares authorized; 106,551,722 shares issued and 106,551,722 outstanding at December 31, 2023 and September 30, 2023, respectively 10,656 10,656 Additional paid in capital 1,364,007 1,364,007 Treasury stock, at cost - 15,100 shares at December 31, 2023 and September 30, 2023 ( 18,126 ) ( 18,126 ) Accumulated deficit ( 4,026,325 ) ( 3,310,896 ) Total Stockholders’ Deficit ( 2,669,788 ) ( 1,954,359 ) Total Liabilities and Stockholders’ Deficit $ 255,243 $ 230,790 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. F- 2 DriveItAway Holdings, Inc. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended December 31, 2023 2022 Revenues $ 96,503 $ 48,083 Cost of Goods Sold 85,679 39,872 Gross Profit (Loss) 10,824 8,211 Operating Expenses Salaries and payroll taxes 66,625 81,875 Professional fees 107,015 100,430 General and administrative 20,314 19,430 Software development 11,880 13,358 Advertising and marketing 176 8,551 Total Operating Expenses 206,010 223,644 Operating Loss ( 195,186 ) ( 215,433 ) Other Income (Expenses) Gain (loss) on change in fair value of derivative liability ( 335,277 ) ( 454,655 ) Amortization debt discount ( 35,407 ) ( 13,420 ) Interest expense ( 146,905 ) ( 37,500 ) Interest expense - related parties ( 2,654 ) — Total Other Income (Expense) ( 520,243 ) ( 505,575 ) Loss Before Income Tax ( 715,429 ) ( 721,008 ) Provision for income taxes — — Net Loss $ ( 715,429 ) $ ( 721,008 ) Net Loss Per Common Share Basic and diluted net loss per common share $ ( 0.01 ) $ ( 0.01 ) Basic and diluted weighted average number of common shares outstanding 106,551,722 106,119,657 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. F- 3 DriveItAway Holdings, Inc. Condensed Consolidated Statement of Changes in Stockholders’ Deficit (Unaudited) Additional Total Common Stock Paid in Treasury Stock Accumulated Stockholders’ Shares Amount Capital Shares Amount Deficit Deficit Balance - September 30, 2023 106,551,722 $ 10,656 $ 1,364,007 ( 15,100 ) $ ( 18,126 ) $ ( 3,310,896 ) $ ( 1,954,359 ) Net loss — — — — — ( 715,429 ) ( 715,429 ) Balance - December 31, 2023 106,551,722 $ 10,656 $ 1,364,007 ( 15,100 ) $ ( 18,126 ) $ ( 4,026,325 ) $ ( 2,669,788 ) Additional Total Common Stock Paid in Treasury Stock Accumulated Stockholders’ Shares Amount Capital Shares Amount Deficit Deficit Balance – September 30, 2022 105,301,722 $ 10,531 $ 1,289,132 ( 15,100 ) $ ( 18,126 ) $ ( 2,380,759 ) $ ( 1,099,222 ) Common stock issued in connection with promissory note 1,000,000 100 1,409 — — — 1,509 Stock based compensation 250,000 25 14,975 — — — 15,000 Net loss — — — — — ( 721,008 ) ( 721,008 ) Balance – December 31, 2022 106,551,722 $ 10,656 $ 1,305,516 ( 15,100 ) $ ( 18,126 ) $ ( 3,101,767 ) $ ( 1,803,721 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. F- 4 DriveItAway Holdings, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended December 31, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 715,429 ) $ ( 721,008 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation — 15,000 Loss on change in fair value of derivative liability 335,277 454,655 Amortization and depreciation 9,471 7,653 Amortization of debt discount 35,407 13,420 Financing Fee 98,202 — Changes in operating assets and liabilities: Prepaid website development — ( 10,280 ) Accounts receivable 4,052 ( 4,294 ) Deferred revenue ( 2,266 ) 487 Customer deposits ( 895 ) — Accounts payable and accrued liabilities 129,791 ( 1,508 ) Accrued liabilities- related party 1,894 52,334 Net Cash used in Operating Activities ( 104,496 ) ( 193,541 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of intangible assets — ( 5,833 ) Purchase of fixed assets — ( 67,039 ) Net Cash used in Investing Activities — ( 72,872 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from convertible notes payable 217,222 200,000 Proceeds from promissory notes payable — — Repayment of promissory notes payable ( 28,278 ) ( 566 ) Debt issuance costs ( 46,472 ) ( 20,000 ) Net Cash provided by Financing Activities 142,472 179,434 Net change in cash and restricted cash 37,976 ( 86,979 ) Cash and restricted cash, beginning of period 23,191 127,109 Cash and restricted cash, end of period $ 61,167 $ 40,130 Supplemental cash flow information Cash paid for interest $ 1,698 $ 31,667 Cash paid for taxes $ — $ — Non-cash Investing and Financing transactions: Common stock in connection with promissory note $ — $ 1,509 Recognition of derivative liability as debt discount $ 150,750 $ 23,124 Prepaid expenses reclassified to website development $ — $ 10,498 Reclassification of Promissory notes payable - related parties to Promissory notes payable $ 7,500 $ — The accompanying notes are an integral part of these unaudited condensed consolidated financial statements F- 5 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements December 31, 2023 Unaudited Note 1 – Organization, Description of Business and Going Concern Nature of Organization DriveItAway Holdings, Inc. (“DIA”, “the Company”, “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 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. Going Concern The Company’s financial statements are prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States, applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. During the period ended December 31, 2023, the Company had a net loss of $ 715,429 and cash used in operating activities of $ 104,496 . As of December 31, 2023, the Company had an accumulated deficit of $ 4,026,325 . The Company has not established sufficient revenue to cover its operating costs and will require additional capital to continue its operating plan. The ability of the Company to continue as a going concern depends on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. These factors raise substantial doubt about its ability to continue as a going concern. To continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan to obtain such resources for the Company includes: sales of equity instruments; traditional financing, such as loans; and obtaining capital from management and significant stockholders sufficient to meet its minimum operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing this plan. There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. F- 6 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements December 31, 2023 Unaudited Note 2 - Summary of Significant Accounting Policies 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 three months ended December 31, 2023, 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, 2023, contained in the Company’s Form 10K, as filed on March 8, 2024. 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. Use of Estimates The preparation of consolidated 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 consolidated 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, and 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. Foreign Currency Translation Foreign currency translation is recognized in accordance with ASC 830. The Company’s functional currency is USD, therefore all amounts of revenues received from foreign accounts are translated to the Company’s functional currency (USD) upon receipt and thereby, translation gains and losses are recognized upon receipt. 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 December 31, 2023, and September 30, 2023, the Company had cash of $ 61,167 and $ 4,632 , and restricted cash of $ 0 and $ 18,559 , respectively and did not have any cash equivalents. Restricted Cash As of December 31, 2023 and September 30, 2023, the Company had $ 0 and $ 18,559 in restricted cash that is held by AJB Capital LLC, for funds advanced by them, but are to be used for future payment for professional fees. F- 7 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements December 31, 2023 Unaudited 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 December 31, 2023, and September 30, 2023 are adequate, but actual write-offs could exceed the recorded allowance. As of December 31, 2023, and September 30, 2023 the balances in the allowance for doubtful accounts was $ 0 . Fixed Assets Fixed assets are recorded at cost and depreciated using the straight-line method over the estimated useful lives, currently seven ( 7 ) years. Maintenance and repair costs are charged to expense as incurred. Major improvements, which extend the useful life of the related asset, are capitalized. Upon disposal of a fixed asset, we record a gain or loss based on the difference between the proceeds received and the net book value of the disposed asset. We remove fully depreciated assets from the cost and accumulated depreciation amounts disclosed. Intangible Assets Our intangible assets include website and software development costs. The costs incurred in the preliminary stages of website and software development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental and deemed by management to be significant, are capitalized and amortized on a straight-line basis over their estimated useful lives. Maintenance and enhancement costs, including those costs in the post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the website or software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over the estimated useful lives. Amortization expense related to capitalized website and software development costs is included in operating expenses in our consolidated statements of operations. Capitalized development activities placed in service are amortized over the expected useful lives of those releases, currently estimated at three ( 3 ) years. The estimated useful lives of website and software development activities are reviewed frequently and adjusted as appropriate to reflect upcoming development activities that may include significant upgrades and/or enhancements to the existing functionality. We remove fully amortized website and software development costs from the cost and accumulated amortization amounts disclosed. Construction-in-progress primarily consists of website development costs that are capitalizable, but for which the associated applications have not been placed in service. Leases The Company’s operating lease portfolio for the period ended December 31, 2023 and September 30, 2023, includes the vehicle leases from third parties and the Company’s owned vehicles that are leased to the customers under operating leases. The contracts for these operating leases are short-term in nature with terms less than twelve (12) months. The Company has elected as an accounting policy not to apply the recognition requirements in ASC 2016-02, Leases (“ASC 842”) to short-term leases. The Company recognizes the lease payments for short-term leases on a straight-line basis over the lease term. As of December 31, 2023, the Company did not have leases that qualified as ROU assets. F- 6 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements December 31, 2023 Unaudited 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 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: Level 1 Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 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 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 approximate fair value due to their short-term nature. All financial assets and liabilities are approximate to their fair value. Derivative liabilities are valued at Level 3. Schedule of fair value of financial assets and liabilities Fair Value Measurements at December 31, 2023 using: December 31, 2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Liabilities $ — — — $ — Derivative Liabilities $ 585,546 — — $ 585,546 Fair Value Measurements at September 30, 2023 using: September 30, 2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Liabilities $ — — — $ — Derivative Liabilities $ 1,317 — — $ 1,317 F- 9 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements December 31, 2023 Unaudited Derivative Financial Instruments 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 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. 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 (“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 periods ended December 31, 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. The amount 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 needed. In this case, the driver pays the cost of insurance as a separate payment in the system. This payment is a type of revenue. The 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. F- 10 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements December 31, 2023 Unaudited 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 December 31, 2023 and September 30, 2023 refundable deposits were $ 1,339 and $ 2,234 and deferred revenue was $ 4,967 and $ 7,233 , 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 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. Advertising and Marketing Costs Advertising and marketing costs are expensed as incurred. The Company incurred advertising and marketing costs for the three months ended December 31, 2023 and 2022 of $ 176 and $ 8,551 , respectively. 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 December 31, 2023, and December 31, 2022, the common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive. F- 11 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements December 31, 2023 Unaudited Schedule of anti-dilutive shares December 31, December 31, 2023 2022 Convertible notes 1,750,000 25,687,500 Warrants 7,350,000 1,225,000 9,100,000 26,912,500 Reclassification Certain accounts from prior periods have been reclassified to conform to the current period presentation. Recent Accounting Pronouncements In the period from October 2023 through March 2024 the FASB has not issued any additional accounting standards updates that have a significant impact on the Company. Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures. Note 3 – Related Party Transactions Advances and Repayments In the normal course of business, the Company’s management team or their affiliates will make payments on behalf of the Company or will provide short-term advances to the Company to cover operating expenses. As of December 31, 2023 and September 30, 2023, the Company owed related parties for an unsecured, non-interest-bearing advance, payable on demand, in the amount of $ 25,080 for this activity. On March 1, 2023, the Company entered into three promissory note agreements with three related parties for a total of $ 50,000 with interest bearing at 15 % per annum, maturity date of 120 days from issuance (June 30, 2023) and issuance of 100,000 warrants with exercise price of $ 0.05 that expire on March 1, 2028 ( 5 years). As a result of the Company’s equity environment being tainted the warrants qualified for derivative accounting and were assigned a value of $ 3,068 which was recorded as a derivative liability and debt discount (see Note 8). During the three months ended December 31, 2023 the Company reclassified one of these promissory notes with a value of $ 7,500 from Promissory notes payable – related party to Promissory notes payable due the note holder, a former director, no longer being considered a related party. As of December 31, 2023 and September 30, 2023, the amount due to related parties for Promissory notes payable was $ 42,500 and $ 50,000 , respectively. During the three months ended December 31, 2023 and 2022, the Company recorded related party interest expense of $ 2,654 and $ 0 respectively. As of December 31, 2023 and September 30, 2023, the Company had defaulted on the promissory notes payable with aggregate outstanding principal of $ 42,500 and $ 50,000 respectively, and owed unpaid interest of $ 6,812 and $ 4,918 , respectively. F- 12 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements December 31, 2023 Unaudited Note 4 – Fixed and Intangible Assets The following table summarizes the components of our fixed assets as of the dates presented: Schedule of fixed assets December 31, September 30, 2023 2023 Vehicle costs $ 224,903 $ 224,903 Accumulated depreciation ( 48,774 ) ( 40,675 ) Vehicles, net $ 176,129 $ 184,228 Depreciation expense for the three months ended December 31, 2023, and December 31, 2022, was $ 8,099 and $ 7,199 , respectively. The following table summarizes the components of our intangible assets as of the dates presented: Schedule of intangible assets December 31, September 30, 2023 2023 Website development costs $ 16,331 $ 16,331 Accumulated depreciation ( 5,916 ) ( 4,544 ) Website, net $ 10,415 $ 11,787 Amortization expense for the three months ended December 31, 2023, and 2022, was $ 1,372 and $ 454 , respectively. Note 5 – Equity Authorized The company has authorized 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. F- 13 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements December 31, 2023 Unaudited 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 three months ended December 31, 2023 and 2022 there were no issuances of the Series A Preferred shares. As of December 31, 2023 and September 30, 2023, the Company had no shares of Series A Preferred stock outstanding. Common Stock During the three months ended December 31, 2023, no common stock was issued. During the three months ended December 31, 2022, the Company had the following common stock activity: ● 1,000,000 shares of common stock valued at $ 60,000 for commitment fees in conjunction with the issuance of promissory note of $ 750,000 . ● 250,000 shares of common stock valued at $ 15,000 , for consulting services, based on the fair market value of the shares on the grant date. As of December 31, 2023, and September 30, 2023, the Company had 106,551,722 common shares issued. 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 December 31, 2023, and September 30, 2023 the Company had 15,100 shares of treasury stock valued at $ 18,126 . 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. The transaction led to no explicit limit to the number of shares to be delivered upon future settlement of the conversion options (see Note 8), therefore the equity environment became tainted and the warrants qualified for derivative accounting and were assigned a value of $ 107,283 which was recorded as a derivative liability and debt discount. The warrants expire on February 24, 2027 . F- 14 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements December 31, 2023 Unaudited In June 2022, in conjunction with a private offering and the issuance of secured promissory notes of $ 250,000 (see Note 8), the Company issued 125,000 warrants for $ 0.30 per share. As a result of the Company’s equity environment being tainted the warrants qualified for derivative accounting and were assigned a value of $ 8,136 which was recorded as a derivative liability and debt discount. The warrants expire in June 2027. In November 2022, in conjunction with a private offering and the issuance of secured promissory notes of $ 200,000 , the Company issued 100,000 warrants for $ 0.30 per share. As a result of the Company’s equity environment being tainted the warrants qualified for derivative accounting and were assigned a value of $ 4,074 which was recorded as a derivative liability and debt discount. The warrants expire in November 2027. In February 2023, in conjunction with a promissory note amendment which was recognized as debt extinguishment, 2,000,000 warrants with exercise price of $ 0.05 were issued that expire on February 24, 2027 ( 4 year), which replaced the original 1,000,000 warrants issued with an exercise price of $ 0.30 previously issued with the original promissory note. As a result of the Company’s equity environment being tainted the warrants qualified for derivative accounting and were assigned a value of $ 21,469 which was recorded as a derivative liability and debt discount. In March 2023, 125,000 warrants with an exercise price of $ 0.05 were issued that expire on March 1, 2028 ( 5 year). As a result of the Company’s equity environment being tainted the warrants qualified for derivative accounting and were assigned a value of $ 3,837 which was recorded as a derivative liability and debt discount. In December 2023, in conjunction with the issuance of a promissory note of $ 195,000 , the Company issued warrants to purchase 5,000,000 shares of Company’s common stock for nominal exercise price of $ 0.00001 per share. The warrant is exercisable at any time on or after December 15, 2023 and until the warrant is exercised in full. 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. As a result of the Company’s equity environment being tainted the warrants qualified for derivative accounting and were assigned a value of $ 248,952 which was recorded as a derivative liability. The note was discounted to a principal balance of $ 0 and a debt discount of $ 195,000 was recorded at inception. The difference between the fair value of the warrants and the net proceeds received was recognized as interest expense. All derivative liabilities recognized for the warrants issued 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 (see Note 8). A summary of warrant activity during the three months ended December 31, 2023, is as follows: Schedule of warrant activity Warrants Weighted-Average Weighted-Average Outstanding Exercise Price Life (years) Balance as of September 30, 2023 2,350,000 $ 0.07 3.51 Issuance 5,000,000 * * Exercised — $ — Expired — $ — Balance as of December 31, 2023 7,350,000 $ 0.02 *5,000,000 warrants issued on December 15, 2023 do not have an expiration date. The intrinsic value of the warrants as of December 31, 2023, is $ 234,950 . All of the outstanding warrants are exercisable as of December 31, 2023. F- 15 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements December 31, 2023 Unaudited Note 6 – Notes Payable 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 requires payments starting 30 months from the initial funding date and matures on June 7, 2050 . During the three months ended December 31, 2023, and 2022, the Company recorded interest expense of $ 1,084 and $ 1,074 , respectively, on the SBA Loan and as of December 31, 2023, and September 30, 2023, the accrued interest on the SBA Loan was $ 6,166 and $ 6,780 , respectively. As of December 31, 2023, and September 30, 2023 the outstanding principal of SBA Loan was $ 114,700 . The following represents the future aggregate maturities of the Company’s SBA Loan as of December 31, 2023, for each of the five (5) succeeding years and thereafter as follows: Schedule of future aggregate maturities Fiscal year ending September 30, Amount 2024 (remaining) $ — 2025 — 2026 571 2027 2,431 2028 2,431 Thereafter 109,267 Total $ 114,700 Promissory Notes Payable, in Default On March 1, 2023, the Company entered into a promissory note agreement with an investor for amount of $ 12,500 with interest bearing at 15 % per annum, maturity date of 120 days from issuance and issuance of 25,000 warrants with exercise price of $ 0.05 that expire on March 1, 2028 (5 year). As a result of the Company’s equity environment being tainted the warrants qualified for derivative accounting and were assigned a value of $ 767 which was recorded as a derivative liability and debt discount (see Note 8). During the three months ended December 31, 2023 and 2022, the Company recorded interest expense of $ 639 and $ 0 , respectively. As of December 31, 2023, and September 30, 2023, the accrued interest on the promissory note was $ 1,908 and $ 1,269 . As of December 31, 2023, and September 30, 2023 the outstanding principal of Promissory Notes Payable was $ 12,500 . As of December 31, 2023, the Company had defaulted on the promissory note payable. During the three months ended December 31, 2023, the Company reclassified a promissory note entered on March 1, 2023 with a value of $ 7,500 , with interest bearing 15 % per annum, maturity date 120 days from issuance (June 30, 2023) and issuance of 15,000 warrants with exercise price of $ 0.05 that expire on March 1, 2028 (5 year), from Promissory notes payable – related party to Promissory notes payable due the note holder, a former director, no longer being considered a related party. As a result of the Company’s equity environment being tainted the warrants qualified for derivative accounting and were assigned a value of $ 460 which was recorded as a derivative liability and debt discount (see Note 8). During the three months ended December 31, 2023 and 2022, the Company recorded interest expense of $ 384 and $ 0 , respectively. As of December 31, 2023, and September 30, 2023, the accrued interest on the promissory note was $ 1,145 and $ 761 . As of December 31, 2023, and September 30, 2023, the total outstanding principal of the promissory note payable was $ 7,500 . As of December 31, 2023, the Company had defaulted on the promissory note payable. Promissory Notes Payable On May 1, 2023 the Company executed a note payable with a face amount of $ 35,982 . Under the terms of the agreement, the lender will withhold 20% of the Company’s daily funds arising from sales through the lender’s payment processing services until the Company has repaid the $ 35,982 (including fixed fees of $ 3,682 or approximately 10% of the note amount). The Company received net proceeds of $ 32,300 and the $ 3,685 of fixed fees were recorded as debt discount. As of December 31, 2023, the Company had amortized the full $ 3,682 of debt discount, had made repayments of $ 27,752 , and rolled $ 8,230 of the notes principal still due into a second note (see below), therefore the loan was considered paid in full. F- 16 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements December 31, 2023 Unaudited On August 15, 2023 the Company executed a second note payable with the same lender from the May 1, 2023 note, with a face amount of $ 64,206 . Under the terms of the agreement, the lender will withhold 20% of the Company’s daily funds arising from sales through the lender’s payment processing services until the Company has repaid the $ 64,206 (including fixed fees of $ 6,206 or approximately 10% of the note amount). The Company received net proceeds of $ 49,770 after paying off the May 1, 2023 note and rolling $ 8,230 of its balance into the August 15, 2023 note and recording the $ 6,206 of fixed fees as a debt discount. During the three months ended December 31, 2023, the Company amortized $ 1,034 of the debt discount and made repayments of $ 28,278 . This resulted in a debt discount balance of $ 4,827 and a principal balance of $ 21,669 , for a net notes payable balance of $ 16,842 as of December 31, 2023. The following represents the future aggregate maturities as of December 31, 2023 of the Company’s Promissory Notes Payable: Schedule of future aggregate maturities Fiscal year ending September 30, Amount 2024 (remaining) 13,002 2025 8,667 Total $ 21,669 Note 7 – Convertible Notes Payable AJB Capital Investments, LLC Note Effective February 24, 2022, 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 $ 33,750 in 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. The maturity date of the AJB Note was extended to February 24, 2023 . The AJB Note bears interest at 10 % per annum for the original note’s period and 12% per annum for extension period which was started from August 24, 2022, and it is payable on the first of each month beginning April 1, 2022. 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. F- 17 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements December 31, 2023 Unaudited Also pursuant to the SPA, the Company was to pay 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”) which were issued at note inception. 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 . On issuance of the note, the Company determined that the guarantee on the commitment fee was a make-whole provision and an embedded derivative within the host instrument. The guarantee was bifurcated from the host instrument and recorded as a derivative liability valued at $ 384,287 using a Black-Scholes option pricing model (see Note 9). 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 $ 107,283 that was recorded as derivative liability (see Notes 5 and 9). 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. After recording the derivative liabilities associated with the SPA, the Company allocated the net proceeds to the 4,000,000 common shares issued and the note itself based on their relative fair market values, resulting in the common shares being assigned a value of $ 65,274 (see Note 5). The allocation of the financing costs of $ 108,750 , the derivative for the guarantee of $ 384,287 , the derivative for the warrant of $ 107,283 , and issuance of the 4,000,000 Commitment Fee shares of $ 65,274 , to the debt component resulted in a $ 665,594 debt discount that is being amortized to interest expense over the term of the AJB Note. On October 31, 2022, the Company amended the AJB Note to issue 1,000,000 additional Commitment Fee Shares, recognizing the value of the shares and a debt discount of $ 60,000 . On February 10, 2023, the Company entered into second amendment with AJB by increasing the original principal of the note by $ 85,000 , which increased the restricted cash balance to be used for payments for professional services, replacing the original 1,000,000 warrants with an exercise price of $ 0.30 with 2,000,000 warrants with an exercise price of $ 0.05 and extending the maturity date of the note to May 24, 2023 . The Company determined the extension of cash and modification to other terms met the conditions of a debt extinguishment; therefore, the Company recorded a loss on extinguishment of debt for the total amount of $ 36,313 included in other income (expenses) within the accompanying statement of operation. On September 27, 2023, the Company entered into second amendment with AJB by increasing the original principal of the note by $ 25,000 which increased the restricted cash balance to be used for payments for professional services. On November 28, 2023, the Company entered into a third amendment with AJB Capital Investments, LLC by increasing the original principal of note with amount of $ 22,222 in which the Company received $ 20,000 in cash (after giving effect to a 10% original issue discount) for payment to vendors. Effective December 15, 2023, 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 $ 195,000 (the “AJB Note”) to AJB in a private transaction for a purchase price of $ 165,750 (after giving effect to a 15% 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. After payment of the fees and costs, the net proceeds to the Company were $ 150,750 , which will be used for working capital and other general corporate purposes. The maturity date of the AJB Note is June 14, 2024 . 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. F- 18 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements December 31, 2023 Unaudited 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 15% 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. On December 15, 2023, in conjunction with the issuance of this promissory note of $ 195,000 , the Company also issued to AJB common stock purchase warrants (the “ December 2023 warrants”) to purchase 5,000,000 shares of the Company’s common stock for a nominal exercise price of $ 0.00001 per share. The December 2023 warrants may be exercised at any time on or after December 15, 2023 and until the warrant is exercised in full. 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. As a result of the Company’s equity environment being tainted the warrants qualified for derivative accounting and were assigned a value of $ 248,952 which was recorded as a derivative liability, with corresponding amounts of $ 150,750 was allocated to debt discount and the difference between the fair value of the December 2023 warrants and the net proceeds received of $ 98,202 was recognized as interest expense. During the three months ended December 31, 2022, the Company recorded interest expense of $ 23,000 , additional debt discount of $ 1,509 , amortization of debt discount of $ 794 , a gain on change of derivative liability of $ 352,627 for the guarantee and warrants and repaid $ 23,542 of interest. During the three months ended December 31, 2023, the Company recorded interest expense of $ 27,460 , additional debt discount of $ 197,222 , amortization of debt discount of $ 19,070 , and a loss on change in fair value of derivative liability of $ 252,194 for the guarantee and warrants. As of December 31, 2023 and September 30, 2023, the derivative liability was $ 502,083 and $ 663 for the guarantee and warrants, the debt discount recorded on the note was $ 178,152 and $ 0 , the note payable principal was $ 1,077,222 and $ 860,000 , and the Company owed accrued interest of $ 96,022 and $ 68,562 . Effective February 14, 2023, the Company went into default on the AJB Note, however the lender waived all default provisions through January 24, 2024 therefore no default interest or penalties were incurred during the three months ended December 31, 2023 and the AJB note was not convertible as of December 31, 2023. 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. Each Secured Convertible Note bears interest at 15 % per annum, matures 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 liens on four 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. F- 19 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements December 31, 2023 Unaudited During June 2022, the Company sold a total of $ 250,000 worth of Units to U.S. Escrow Services Corporation and Kevin Leach, two accredited investors, which resulted in the issuance of two secured promissory notes with an aggregate principal amount of $ 250,000 for cash proceeds of $ 230,000 (net of an original issuance discount of $ 20,000 ), and the issuance of 125,000 warrants (see Note 5). The $ 20,000 was recorded as a debt discount and the conversion option embedded in the notes was bifurcated and accounted for as a derivative liability resulting in the Company recording a debt discount and derivative liability of $ 50,491 . As a result of the Company’s equity environment being tainted the warrants qualified for derivative accounting and were assigned a value of $ 8,136 which was recorded as a derivative liability (see Note 8) and debt discount. The total debt discount of $ 78,627 is being amortized to interest expense over the term of the Note. During November 2022, the Company sold a total of $ 200,000 worth of Units to Cestone Family Foundation and Michele and Agnese Cestone Foundation, two accredited investors, which resulted in the issuance of two secured promissory notes with an aggregate principal amount of $ 200,000 for cash proceeds of $ 180,000 (net of an original issuance discount of $ 20,000 ), and the issuance of 100,000 warrants (see Note 6). The $ 20,000 was recorded as a debt discount and the conversion option embedded in the notes was bifurcated and accounted for as a derivative liability resulting in the Company recording a debt discount and derivative liability of $ 19,330 . As a result of the Company’s equity environment being tainted the warrants qualified for derivative accounting and were assigned a value of $ 7,254 which was recorded as a derivative liability (see Note 9) and debt discount). The total debt discount of $ 43,124 is being amortized to interest expense over the term of the Note. During the three months ended December 31, 2022, the Company recorded interest expense of $ 13,614 , and amortization of debt discount of $ 12,627 . During the three months ended December 31, 2023, the Company recorded interest expense of $ 17,250 , paid interest of $ 0 and amortization of debt discount of $ 15,302 . As of December 31, 2023, and September 30, 2023, the debt discount recorded on the notes was $ 36,324 and $ 51,626 , resulting in a net note payable balance of $ 413,677 and $ 398,374 , respectively. As of December 31, 2023, and September 30, 2023, the Company owed accrued interest of $ 80,313 and $ 63,063 , respectively. The following represents the future aggregate maturities of the Company’s Convertible Notes Payable as of December 31, 2023 for each of the five (5) succeeding years and thereafter as follows: Schedule of future aggregate maturities Fiscal year ending September 30, Amount 2024 (remaining) $ 1,327,222 2025 200,000 Total $ 1,527,222 Note 8 – Derivative Liabilities Certain features and instruments issued as part of the Company’s debt financing arrangements qualified for derivative accounting under ASC 815, Derivatives and Hedging, as the number of common shares that are to be issued under the arrangements are indeterminate, therefore the Company’s equity environment is tainted. ASC 815 requires that we record the fair market value of the derivative liabilities at inception and at the end of each reporting period and recognize any change in the fair market value as other income or expense item. The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair values at inception and as of December 31, 2023. 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. The following assumptions were used in the Black-Scholes model during the three months ended December 31, 2023, and year ended September 30, 2023: F- 20 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements December 31, 2023 Unaudited Schedule of assumptions used Three months ended Year Ended December 31, September 30, 2023 2023 Expected term 0.42 – 4.17 years * 0.68 - 5.01 years Expected average volatility 188 % - 372 % 111 % - 372 % Expected dividend yield — — Risk-free interest rate 3.60 % - 4.60 % 3.93 % - 5.03 % * 5,000,000 warrants issued on December 15, 2023 do not have an expiration date. As of December 31, 2023, the estimated fair values of the liabilities measured on a recurring basis are as follows (level 3): Schedule of estimated fair values of the liabilities Commitment fee guarantee issued February 24, 2022 $ 179,754 Warrants issued February 24, 2022 43,419 Embedded conversion feature in Note issued June 3, 2022 13,397 Warrants issued June 3, 2022 1,956 Embedded conversion feature in Note issued June 16, 2022 21,807 Warrants issued June 16, 2022 2,946 Embedded conversion feature in Note issued November 15, 2022 33,684 Warrants issued November 15, 2022 4,096 Warrants issued on February 10, 2023 43,959 Warrants issued on March 1, 2023 5,577 Warrants issued on December 15, 2023 234,951 Derivative liability balance - December 31, 2023 $ 585,546 The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities during the three months ended December 31, 2023: Schedule of changes in fair value of derivative liability Derivative liability balance - September 30, 2023 $ 1,317 Addition of new derivatives recognized as debt discounts 248,952 Loss on change in fair value of the derivative 335,277 Derivative liability balance - December 31, 2023 $ 585,546 Note 9 – Subsequent Events Management has evaluated subsequent events through the date these financial statements were available to be issued. Please note the following matters deemed to be subsequent events. Effective February 23, 2024, 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 $ 140,000 (the “AJB Note”) to AJB in a private transaction for a purchase price of $ 112,000 (after giving effect to a 20% 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. After payment of the fees and costs, the net proceeds to the Company were $ 102,000 , which will be used for working capital and other general corporate purposes. The maturity date of the AJB Note is November 23, 2024 . The AJB Note bears interest at 12 % 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. Also pursuant to the SPA, the Company was to pay AJB a commitment fee of $ 50,000 , payable in the form of 5,000,000 unregistered shares of the Company’s common stock (the “Commitment Fee Shares”) which were issued at note inception. F- 21