Driveitaway Holdings, Inc. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transitional period from _____________ to ______________ Commission File Number: 000-52883 DRIVEITAWAY HOLDINGS, INC. (Exact name of registrant as specified in its charter) Delaware 20-4456503 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 3401 Market Street , Suite 200/201 , Philadelphia , PA 19104 (Address of principal executive offices) (Zip Code) ( 856 ) 577-2763 (Registrant’s telephone number, including area code) n/a (Former name or former address if changed since last report) Securities registered pursuant to Section 12(b) of the Act: Title of each class: Trading Symbol(s): Name of each exchange on which registered: N/A N/A N/A Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated Filer ☐ Accelerated Filer ☐ Non-accelerated Filer ☒ Small Reporting Company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of May 20, 2024, there were 111,551,722 shares of common stock outstanding. TABLE OF CONTENTS Page PART I – FINANCIAL INFORMATION F-1 Item 1. Financial Statements F-1 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 1 Item 3. Quantitative and Qualitative Disclosures About Market Risk 7 Item 4. Controls and Procedures 8 PART II – OTHER INFORMATION 10 Item 1. Legal Proceedings 10 Item 1A. Risk Factors 10 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 10 Item 3. Defaults Upon Senior Securities 10 Item 4. Mine Safety Disclosures 10 Item 5. Other Information 10 Item 6. Exhibits 11 PART I – FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DRIVEITAWAY HOLDINGS, INC. INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2024 Page Condensed Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and September 30, 2023 F-2 Condensed Consolidated Statements of Operations for the three and six months ended March 31, 2024 and March 31, 2023 (Unaudited) F-3 Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the three and six months ended March 31, 2024 and March 31, 2023 (Unaudited) F-4 Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2024 and March 31, 2023 (Unaudited) F-5 Notes to the Condensed Consolidated Financial Statements (Unaudited) F-6 F- 1 DriveItAway Holdings, Inc. Condensed Consolidated Balance Sheets March 31, September 30, 2024 2023 (Unaudited) Assets Current assets Cash $ 9,215 $ 4,632 Restricted cash 29,622 18,559 Accounts receivable, net 10,347 11,584 Prepaid expenses 2,802 — Total current assets 51,986 34,775 Fixed assets, net 168,163 184,228 Intangible assets, net 9,073 11,787 Total Assets $ 229,222 $ 230,790 Liabilities and Stockholders’ Deficit Current Liabilities Accounts payable and accrued liabilities $ 820,292 $ 664,707 Accrued interest – related parties 8,636 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 27,922 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 1,509,309 1,082,654 Derivative liability 759,687 1,317 Total Current Liabilities 3,219,732 1,878,080 SBA Loan - noncurrent 114,700 114,700 Convertible note payable - noncurrent, net of debt discount — 175,720 Promissory notes payable - noncurrent 13,951 16,649 Total Liabilities 3,348,383 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; 111,551,722 shares issued and 106,551,722 outstanding at March 31, 2024 and September 30, 2023, respectively 11,156 10,656 Additional paid in capital 1,390,349 1,364,007 Treasury stock, at cost - 15,100 shares at March 31, 2024 and September 30, 2023 ( 18,126 ) ( 18,126 ) Accumulated deficit ( 4,502,540 ) ( 3,310,896 ) Total Stockholders’ Deficit ( 3,119,161 ) ( 1,954,359 ) Total Liabilities and Stockholders’ Deficit $ 229,222 $ 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 Six Months Ended March 31, March 31, 2024 2023 2024 2023 Revenues $ 89,307 $ 67,000 $ 185,810 $ 115,083 Cost of Goods Sold 77,076 46,678 162,755 86,550 Gross Profit (Loss) 12,231 20,322 23,055 28,533 Operating Expenses Salaries and payroll taxes 67,750 75,625 134,375 157,500 Professional fees 17,746 78,753 124,761 179,183 General and administrative 29,086 20,206 49,400 39,636 Software development 14,250 15,526 26,130 28,884 Advertising and marketing 1,893 29,900 2,069 38,451 Total Operating Expenses 130,725 220,010 336,735 443,654 Operating Loss ( 118,494 ) ( 199,688 ) ( 313,680 ) ( 415,121 ) Other Income (Expenses) Gain (loss) on change in fair value of derivative liability ( 174,141 ) 451,459 ( 509,418 ) ( 3,196 ) Amortization debt discount ( 126,644 ) ( 28,555 ) ( 162,051 ) ( 41,975 ) Interest expense ( 55,112 ) ( 41,969 ) ( 202,017 ) ( 79,469 ) Interest expense - related parties ( 1,824 ) ( 626 ) ( 4,478 ) ( 626 ) Total Other Income (Expense) ( 357,721 ) 380,309 ( 877,964 ) ( 125,266 ) Loss Before Income Tax ( 476,215 ) 180,621 ( 1,191,644 ) ( 540,387 ) Provision for income taxes — — — — Net Loss $ ( 476,215 ) $ 180,621 $ ( 1,191,644 ) $ ( 540,387 ) Net Loss Per Common Share Basic and diluted net loss per common share $ ( 0.00 ) $ ( 0.00 ) $ ( 0.01 ) $ ( 0.01 ) Basic and diluted weighted average number of common shares outstanding 108,584,689 106,536,622 107,562,651 106,349,809 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) For the Three and Six Months Ended March 31, 2024 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 ) Common stock issued in connection with promissory note 5,000,000 500 26,342 — — — 26,842 Net loss — — — — — ( 476,215 ) ( 476,215 ) Balance – March 31, 2024 111,551,722 $ 11,156 $ 1,390,349 ( 15,100 ) $ ( 18,126 ) $ ( 4,502,540 ) $ ( 3,119,161 ) For the Three and Six Months Ended March 31, 2023 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 ) Net income — — — — — 180,621 180,621 Balance - March 31, 2023 106,551,722 $ 10,656 $ 1,305,516 ( 15,100 ) $ ( 18,126 ) $ ( 2,921,146 ) $ ( 1,623,100 ) 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 Six Months Ended March 31, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 1,191,644 ) $ ( 540,387 ) 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 509,418 3,196 Amortization and depreciation 18,779 17,835 Financing fee 98,202 — Amortization of debt discount 162,051 41,975 Changes in operating assets and liabilities: Prepaid expenses ( 2,802 ) ( 14,470 ) Due to related party — 25,000 Accounts receivable 1,237 ( 7,257 ) Customer deposits ( 895 ) — Deferred revenue ( 2,266 ) 4,268 Accounts payable and accrued liabilities 155,585 119,536 Accrued liabilities- related party 3,718 626 Net Cash used in Operating Activities ( 248,617 ) ( 334,678 ) 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 357,222 285,000 Proceeds from promissory notes payable – related parties — 50,000 Proceeds from promissory notes payable 57,474 — Discount on notes payable — 12,500 Repayment of promissory notes payable ( 59,988 ) ( 1,648 ) Debt issuance costs ( 90,445 ) ( 23,500 ) Net Cash provided by Financing Activities 264,263 322,352 Net change in cash and restricted cash 15,646 ( 85,198 ) Cash and restricted cash, beginning of period 23,191 127,109 Cash and restricted cash, end of period $ 38,837 $ 41,911 Supplemental cash flow information Cash paid for interest $ 3,414 $ 45,385 Cash paid for taxes $ — $ — Non-cash Investing and Financing transactions: Common stock in connection with promissory note $ 26,842 $ 1,509 Recognition of derivative liability as debt discount $ 150,750 $ 48,428 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 March 31, 2024 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 March 31, 2024, the Company had a net loss of $ 1,191,644 and cash used in operating activities of $ 248,617 . As of March 31, 2024, the Company had an accumulated deficit of $ 4,502,540 . 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 March 31, 2024 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 six months ended March 31, 2024 , 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 March 31, 2024 , and September 30, 2023, the Company had cash of $ 9,215 and $ 4,632 , and restricted cash of $ 29,622 and $ 18,559 , respectively and did not have any cash equivalents. Restricted Cash As of March 31, 2024, the Company had $ 29,622 in restricted cash that is held by AJB Capital LLC, for funds advanced by them, but are to be used for future payment to third party payees. As of September 30, 2023, the Company had $ 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 March 31, 2024 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 March 31, 2024 and September 30, 2023 are adequate, but actual write-offs could exceed the recorded allowance. As of March 31, 2024 , 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 March 31, 2024 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 March 31, 2024 , the Company did not have leases that qualified as ROU assets. F- 8 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements March 31, 2024 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 March 31, 2024 using: March 31, 2024 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Liabilities $ — $ — $ — $ — Derivative Liabilities $ 759,687 $ — $ — $ 759,687 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 March 31, 2024 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 March 31, 2024 and 2023, 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 March 31, 2024 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 March 31, 2024 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 six months ended March 31, 2024 and 2023 of $ 2,069 and $ 38,451 , 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 March 31, 2024 and 2023, the common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive. Schedule of anti-dilutive shares March 31, March 31, 2024 2023 Convertible notes 1,750,000 25,687,500 Warrants 7,350,000 1,225,000 9,100,000 26,912,500 F- 11 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements March 31, 2024 Unaudited 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 April 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 March 31, 2024 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 . 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 six months ended March 31, 2024 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 March 31, 2024 and September 30, 2023, the amount due to related parties for Promissory notes payable was $ 42,500 and $ 50,000 , respectively. During the six months ended March 31, 2024 and 2023, the Company recorded related party interest expense of $ 4,478 and $ 626 respectively. As of March 31, 2024 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 $ 8,636 and $ 4,918 , respectively. F- 12 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements March 31, 2024 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 March 31, September 30, 2024 2023 Vehicle costs $ 224,903 $ 224,903 Accumulated depreciation ( 56,740 ) ( 40,675 ) Vehicles, net $ 168,163 $ 184,228 Depreciation expense for the six months ended March 31, 2024 and 2023, was $ 16,064 and $ 16,065 , respectively. The following table summarizes the components of our intangible assets as of the dates presented: Schedule of intangible assets March 31, September 30, 2024 2023 Website development costs $ 16,331 $ 16,331 Accumulated depreciation ( 7,258 ) ( 4,544 ) Website, net $ 9,073 $ 11,787 Amortization expense for the six months ended March 31, 2024 and 2023, was $ 2,714 and $ 1,815 , 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 March 31, 2024 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 six months ended March 31, 2024 and 2023 there were no issuances of the Series A Preferred shares. As of March 31, 2024 and September 30, 2023, the Company had no shares of Series A Preferred stock outstanding. Common Stock During the six months ended March 31, 2024, the Company issued 5,000,000 shares of common stock valued at $ 26,842 for commitment fees in conjunction with the issuance of a promissory note of $ 140,000 . During the six months ended March 31, 2023, the Company had the following common stock activity: ● 1,000,000 shares of common stock valued at $ 1,509 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 March 31, 2024, and September 30, 2023, the Company had 111,551,722 and 106,551,722 common shares issued, respectively. Treasury stock The Company records treasury stock at cost. Treasury stock is comprised of shares of common stock purchased by the Company in the secondary market. As of March 31, 2024, 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 March 31, 2024 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 six months ended March 31, 2024, 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 0.00001 * Exercised — $ — Expired — $ — Balance as of March 31, 2024 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 March 31, 2024, is $ 173,799 . All of the outstanding warrants are exercisable as of March 31, 2024. F- 15 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements March 31, 2024 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 six months ended March 31, 2024 and 2023, the Company recorded interest expense of $ 2,157 and $ 2,134 , respectively, on the SBA Loan and as of March 31, 2024 and September 30, 2023, the accrued interest on the SBA Loan was $ 5,523 and $ 6,780 , respectively. As of March 31, 2024 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 March 31, 2024 , 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 six months ended March 31, 2024 and 2023, the Company recorded interest expense of $ 1,271 and $ 156 , respectively. As of March 31, 2024 and September 30, 2023, the accrued interest on the promissory note was $ 2,540 and $ 1,269 , respectively. As of March 31, 2024 and September 30, 2023 the outstanding principal of Promissory Notes Payable was $ 12,500 . As of March 31, 2024, the Company had defaulted on the promissory note payable. During the six months ended March 31, 2024 , 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 six months ended March 31, 2024 and 2023 , the Company recorded interest expense of $ 763 and $ 94 , respectively. As of March 31, 2024 and September 30, 2023, the accrued interest on the promissory note was $ 1,525 and $ 761 , respectively. As of March 31, 2024 and September 30, 2023, the total outstanding principal of the promissory note payable was $ 7,500 . As of March 31, 2024, 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 from a lender. Under the terms of the agreement, the lender will withhold 20% of the Company’s daily funds arising from sales through the May 2023 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 March 31, 2024, 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 March 31, 2024 Unaudited On August 15, 2023 the Company executed a second note payable with the same lender 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 six months ended March 31, 2024, the Company amortized the full $ 6,206 of the debt discount and made repayments of $ 53,132 , and rolled $ 6,856 of the notes principal still due into a third note (see below), therefore the loan was considered paid in full as of March 31, 2024 . On February 22, 2024, the Company executed a third note payable with the same lender with a face amount of $ 57,474 . 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 $ 57,474 (including fixed fees of $ 5,974 or approximately 10% of the note amount). The Company received net proceeds of $ 44,644 after paying off the August 15, 2023 note and rolling $ 6,856 of its balance into the February 22, 2024 note and recording the $ 5,974 of fixed fees as a debt discount. During the six months ended March 31, 2024, the Company amortized $ 414 of the debt discount and made repayments of $ 10,041 . This resulted in a debt discount balance of $ 5,560 and a principal balance of $ 47,433 , for a net notes payable balance of $ 41,873 as of March 31, 2024. The following represents the future aggregate maturities as of March 31, 2024 of the Company’s Promissory Notes Payable: Schedule of future aggregate maturities Fiscal year ending September 30, Amount 2024 (remaining) 16,741 2025 30,692 Total $ 47,433 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 March 31, 2024 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 March 31, 2024 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. 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, totaling $ 10,000 . 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 paid to 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. During the six months ended March 31, 2023, the Company recorded interest expense of $ 46,888 , additional debt discount of $ 26,478 , amortization of debt discount of $ 13,387 , a loss on change in fair value of derivative liability of $ 2,791 for the guarantee and warrants and repaid $ 31,042 of interest. During the six months ended March 31, 2024, the Company recorded interest expense of $ 60,832 , additional debt discount of $ 262,064 , amortization of debt discount of $ 125,326 , and a loss on change in fair value of derivative liability of $ 414,351 for the guarantee and warrants. As of March 31, 2024 and September 30, 2023, the derivative liability was $ 664,240 and $ 663 for the guarantee and warrants, the debt discount recorded on the note was $ 136,738 and $ 0 , the note payable principal was $ 1,217,222 and $ 860,000 , and the Company owed accrued interest of $ 129,394 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 six months ended March 31, 2024 and the AJB note was not convertible as of March 31, 2024. 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 March 31, 2024 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 six months ended March 31, 2023 , the Company recorded interest expense of $ 30,291 , paid interest of $ 13,125 and amortization of debt discount of $ 27,637 . During the six months ended March 31, 2024 , the Company recorded interest expense of $ 34,313 , paid interest of $ 0 and amortization of debt discount of $ 30,451 . As of March 31, 2024 and September 30, 2023, the debt discount recorded on the notes was $ 21,175 and $ 51,626 , respectively, resulting in a net note payable balance of $ 428,825 and $ 398,374 , respectively. As of March 31, 2024 and September 30, 2023, the Company owed accrued interest of $ 97,375 and $ 63,063 , respectively. The following represents the future aggregate maturities of the Company’s Convertible Notes Payable as of March 31, 2024 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 340,000 Total $ 1,667,222 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 March 31, 2024 . 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 six months ended March 31, 2024 , and year ended September 30, 2023: F- 20 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements March 31, 2024 Unaudited Schedule of assumptions used Six months ended Year Ended March 31, September 30, 2024 2023 Expected term 0.21 - 3.92 years * 0.68 - 5.01 years Expected average volatility 188 % - 413 % 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 March 31, 2024, 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 $ 262,307 Warrants issued February 24, 2022 56,978 Embedded conversion feature in Note issued June 3, 2022 10,315 Warrants issued June 3, 2022 2,851 Embedded conversion feature in Note issued June 16, 2022 18,306 Warrants issued June 16, 2022 4,281 Embedded conversion feature in Note issued November 15, 2022 46,852 Warrants issued November 15, 2022 5,708 Warrants issued on February 10, 2023 56,978 Warrants issued on March 1, 2023 7,134 Warrants issued on December 15, 2023 287,977 Derivative liability balance - March 31, 2024 $ 759,687 The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities during the six months ended March 31, 2024: 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 509,418 Derivative liability balance - March 31, 2024 $ 759,687 Note 9 – Subsequent Events On March 1, 2024, DIA Leasing, LLC. (the “Borrower”), a direct wholly owned subsidiary of DriveitAway Holdings, Inc. (“DWAY”), closed a $ 2,000,000 line of credit facility (the “Credit Facility”) with an investor (the “Lender”). In connection with the Credit Facility, a credit agreement, promissory note, security agreement and several related ancillary agreements were entered into by the parties. Credit Agreement Pursuant to the Credit Agreement dated May 1, 2024 (the “Credit Agreement”), among the Borrower and the Lender, the Lender agreed to make revolving loans (the “Loans”) to the Borrower and to issue letters of credit on behalf of the Borrower. The Lender committed to provide up to $ 250,000 of Loans and up to $ 2,000,000 of letters of credit. The Borrower must use the letters of credit and the proceeds of Loans only for the purchase of motor vehicles to be used in the course of the Borrower’s business. As of the date hereof, there are no Loans or letters of credit outstanding under the Credit Agreement. The Borrower will pay a commitment fee to the Lender equal to 2.0 % of the available commitments. DWAY is a guarantor on the Loans. Promissory Note Pursuant to the Promissory Note (the “Note”) dated May 1, 2024, Borrower promises to pay Lender the principal sum of Two Million Dollars and 00/100 ($2,000,000.00), or so much thereof as may be disbursed to, or for the benefit of the Borrower, for the sole purpose of purchasing new motor vehicles for use in Borrower’s business. Disbursements shall be at the sole discretion of the Lender. The unpaid principal of this line of credit shall bear simple interest at the rate of fifteen percent (15%) per annum. Interest shall be calculated based on the principal balance as may be adjusted from time to time to reflect additional advances. Each advance of principal shall be called a “Draw”. Each Draw shall be in an amount no greater than Two Hundred Fifty Thousand Dollars and 00/100 ($250,000.00). The eight Draws may be taken at any time over the 180 days following execution of the Note. Each Draw will be paid over a period of eighteen (18) months from the date that the funds for each Draw are disbursed to Borrower. During the first three (3) months after disbursement, Borrower shall make payments of interest only on the funds disbursed. From month four (4) through month seventeen (17), Borrower shall make payments of principal and interest based on an amortization of forty-eight (48) months. On month eighteen (18) all outstanding principal and unpaid interest shall be paid in full. All payments are due on first day of the month following disbursement. The Borrower shall be in default of this Note on the occurrence of any of the following events: (i) the Borrower shall fail to meet its obligation to make the required principal or interest payments hereunder or any term contained in the Loan Documents. (ii) the Borrower shall be dissolved or liquidated; (iii) the Borrower shall make an assignment for the benefit of creditors or shall be unable to, or shall admit in writing their inability to pay their debts as they become due; (iv) the Borrower shall commence any case, proceeding, or other action under any existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of debtors, or any such action shall be commenced against the undersigned; (v) the Borrower shall suffer a receiver to be appointed for it or for any of its property or shall suffer a garnishment, attachment, levy or execution. Upon default of this Note, Lender may declare the entire amount due and owing hereunder to be immediately due and payable. Security Agreement Pursuant to a Security Agreement dated May 1, 2024, all vehicles purchased shall be titled in the name of Borrower, and Borrower consents to a lien in favor of Lender on the title to each vehicle purchased. Lender shall only be required to release the lien on each vehicle once Lender has received payment in full of all principal, interest, and any other sums due on the Draw through which the vehicle was purchased. Warrant As further consideration for the credit facility, DWAY issued Lender a prefunded warrant (the “Warrant”) for the purchase of up to 5,000,000 shares of DWAY’s common stock. On May 21, 2024, AJB advanced $ 27,440 to a vendor on behalf of the Company. F- 21 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS Special Note Regarding Forward-Looking Information The following discussion and analysis of the results of operations and financial condition of DriveItAway Holdings, Inc., and its wholly owned subsidiary, DriveItAway, Inc., should be read in conjunction with the financial statements of the Company. and the notes to those financial statements that are included elsewhere in this Form 10-Q. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us”, “we”, “our” and similar terms refer to the Company. This Quarterly Report contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Quarterly Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. Except as required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise. U.S. Dollars are denoted herein by “USD,” “$” and “dollars”. Overview DIA is the first 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 to expand its easy and transparent consumer app ‘subscription to ownership’ platform to enable entry level consumers to drive and acquire new electric vehicles. RESULTS OF OPERATIONS For the three months ended March 31, 2024, compared to the three months ended March 31, 2023 Our operating results for the three months ended March 31, 2024 and 2023 are summarized as follows: Three months ended March 31, 2024 2023 Change % Revenues $ 89,307 $ 67,000 $ 22,307 33 % Cost of revenue 77,076 46,678 30,398 65 % Gross Profit 12,231 20,322 (8,091 ) (40 )% Gross Profit Percentage 14 % 30 % Operating expense 130,725 220,010 (89,285 ) (41 )% Operating loss (118,494 ) (199,688 ) (81,194 ) (41 )% Other (income) / expense 357,721 (380,309 ) (738,030 ) (194 )% Net loss $ (476,215 ) $ 180,621 $ (656,836 ) (364 )% Revenues for the three months ended March 31, 2024, increased $22,307 from $67,000 for the period ending March 31, 2023, to $89,307 for the period ending March 31, 2024. This was due to a $28,155 increase in rental revenue and $15,272 increase in insurance revenue, offset by an increase of $21,120 in insurance lender payback costs. 1 We anticipate that, in 2024 automotive supply and demand will see a continuing return to more historically normal levels which should translate into greater vehicle availability for vehicles on our platform, leading to a further increase in revenues. Cost of revenue for the three months ended March 31, 2024, increased $30,398, from $46,678 for the period ending March 31, 2023, to $77,076 for the period ending March 31, 2024. This was primarily due to DIA fleet payments which increased alongside an increase in revenue. Operating expenses for the three months ended March 31, 2024, decreased $89,285 as compared to the three months ended March 31, 2023. The decrease was primarily attributable to decreases in salaries and payroll taxes of $7,875, professional fees of $61,007, software development of $1,276 and advertising and marketing expenses of $28,007, offset by an increase in general and administrative of $8,880. Loss from operations was $118,494 for the three months ended March 31, 2024, as compared to $199,688 for the three months ended March 31, 2023. The decrease of $81,194 was largely attributable to the change in operating expenses of $89,285 and an decrease in gross profit of $8,091. Other expenses for the three months ended March 31, 2024, were $357,721, as compared to net other income of $380,309 for the three months ended March 31, 2023. The decrease of $738,030 is primarily attributable to increases in interest expense of $14,341, a change in fair value of derivative liabilities of $625,600, and in amortization of debt discount of $98,089. For the six months ended March 31, 2024, compared to the six months ended March 31, 2023 Our operating results for the six months ended March 31, 2024 and 2023 are summarized as follows: Six months ended March 31, 2024 2023 Change % Revenues $ 185,810 $ 115,083 $ 70,727 61 % Cost of revenue 162,755 86,550 76,205 88 % Gross Profit 23,055 28,533 (5,478 ) (19 )% Gross Profit Percentage 12 % 25 % Operating expense 336,735 443,654 106,919 24 % Operating loss (313,680 ) (415,121 ) (101,441 ) (24 )% Other expense 877,964 125,266 752,698 601 % Net loss $ (1,191,644 ) $ (540,387 ) $ 651,257 121 % Revenues for the six months ended March 31, 2024, increased $70,727 from $115,083 for the period ending March 31, 2023, to $185,810 for the period ending March 31, 2024. This was due to a $97,985 increase in rental revenue and $24,486 increase in insurance revenue, offset by an increase of $51,743 in insurance lender payback costs. We anticipate that, in 2024 automotive supply and demand will see a continuing return to more historically normal levels which should translate into greater vehicle availability for vehicles on our platform, leading to a further increase in revenues. Cost of revenue for the six months ended March 31, 2024, increased $76,205, from $86,550 for the period ending March 31, 2023, to $162,755 for the period ending March 31, 2024. This was primarily due to DIA fleet payments which increased alongside an increase in revenue. Operating expenses for the six months ended March 31, 2024, decreased $106,919 as compared to the six months ended March 31, 2023. The decrease was primarily attributable to a decrease in salaries and payroll taxes of $23,125, professional fees of $54,422, software development costs of $2,754 and advertising and marketing expenses of $36,382, offset by an increase in general and administrative expenses of $9,764. 2 Loss from operations was $313,680 for the six months ended March 31, 2024, as compared to $415,121 for the six months ended March 31, 2023. The decrease of $101,441 was largely attributable to the decrease in professional fees of $54,422. Other expenses for the six months ended March 31, 2024, were $877,964, as compared to $125,266 for the six months ended March 31, 2023. The increase of $752,698 is primarily attributable to increases in loss on change in fair value of derivative liabilities of $506,222, interest expense of $126,400, and in amortization of debt discount of $120,076. Liquidity and Capital Resources: The following table provides selected financial data about our Company as of March 31, 2024, and September 30, 2023. Working Capital March 31, September 30, 2024 2023 Change % Cash $ 9,215 $ 4,632 $ 4,583 99 % Current assets, net of restricted cash $ 22,364 $ 16,216 $ 6,148 38 % Current liabilities 3,219,732 1,878,080 1,341,652 71 % Working capital (deficiency) $ (3,197,368 ) $ (1,861,864 ) $ (1,335,504 ) 72 % As of March 31, 2024, our working capital deficiency increased $1,335,504 as compared to September 30, 2023. This was primarily attributable to a $785,370 increase in derivative liabilities, a $426,655 increase in convertible notes payable, and a $155,585 increase in accounts payable and accrued liabilities. Cash Flow Data: Six months ended March 31, 2024 2023 Change Cash provided by (used in) operating activities $ (248,617 ) $ (334,678 ) $ 86,061 Cash provided by (used in) investing activities $ — $ (72,872 ) $ 72,872 Cash provided by (used in) financing activities $ 264,263 $ 322,352 $ (58,089 ) Net Change in Cash and Restricted Cash $ 15,646 $ (85,198 ) $ 100,844 Cash Flows from Operating Activities During the six months ended March 31, 2024, we did not generate positive cash flows from operating activities. For the six months ended March 31, 2024, net cash flows used in operating activities was $248,617, consisting of a net loss of $1,191,644, reduced by a loss on change in fair value of derivative liability of $509,418, amortization debt discount of $162,051, depreciation and amortization of $18,779, a financing fee of $98,202, and a change in operating assets and liabilities of $154,577. 3 During the six months ended March 31, 2023, we did not generate positive cash flows from operating activities. For the six months ended March 31, 2023, net cash flows used in operating activities was $334,678, consisting of a net loss of $540,387, reduced by a loss on change in derivative liability of $3,196, stock-based compensation expenses of $15,000, amortization debt discount of $41,975, depreciation and amortization of $17,836, a change in operating assets and liabilities of $127,703. Cash Flows from Investing Activities During the six months ended March 31, 2024, the Company did not use or generate any cash from investing activities. During the six months ended March 31, 2023, the Company used cash for the purchased two vehicles for $67,039 and website development costs of $5,833. Cash Flows from Financing Activities During the six months ended March 31, 2024, the Company generated $357,222 from the issuance of convertible notes and $57,474 from the issuance of promissory notes which was partially offset by $59,988 for repayment of promissory notes and payment for debt issuance costs of $90,445. During the six months ended March 31, 2023, the Company generated $285,000 from the issuance of convertible notes, $50,000 from the issuance of promissory notes - related parties, $12,500 from issuance of promissory notes which was partially offset by $1,648 for repayment of promissory notes and payment of debt issuance coasts of $23,500. Going Concern As of March 31, 2024, the Company had a net loss of $1,191,644, accumulated deficit of $4,502,540 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 ensuing twelve months. 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. Critical Accounting Policies and Estimates 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. We believe our most critical accounting policies and estimates relate to the following: ● Revenue Recognition ● Stock-Based Compensation ● Income Taxes ● Financial Instruments ● Derivative Financial Instruments While our estimates and assumptions are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions. For a discussion of the Company’s significant accounting policies, refer to Note 2 of Notes to the Consolidated Financial Statements. 4 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 March 31, 2024 and 2023, 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. 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 March 31, 2024 and September 30, 2023 refundable deposits were $1,339 and $2,234 and deferred revenue was $4,967 and $7,233, respectively. 5 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. 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. 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. 6 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. All financial assets and liabilities are approximate to their fair value. Derivative liabilities are valued at Level 3. Fair Value Measurements as of March 31, 2024 using: March 31, 2024 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Liabilities $ — $ — $ — $ — Derivative Liabilities $ 759,687 $ — $ — $ 759,687 Fair Value Measurements as of 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 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. 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item. 7 ITEM 4. CONTROLS AND PROCEDURES. (a) Evaluation of Disclosure Controls and Procedures Our Principal Executive Officer and Principal Financial Officer conducted an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on this evaluation, our Principal Executive Officer and Principal Financial Officer concluded that in light of the material weaknesses described below, our disclosure controls and procedures were not effective as of March 31, 2024. See material weaknesses discussed below in Management’s Annual Report on Internal Control over Financial Reporting. (b) Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our internal control over financial reporting is a process designed under the supervision of our Principal Executive Officer and Principal Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditure are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As of March 31, 2024, we conducted an evaluation of the effectiveness of our internal control over financial reporting. Our management concluded that our internal controls over financial reporting were not effective as of March 31, 2024, due to the following identified material weaknesses: ● Our control environment is inadequate. We have no risk assessment procedures, no formal information or communication process, and no monitoring activities in place. Additionally, we lack policies that require formal written approval for related party transactions. ● We have not established and/or maintained adequately designed internal controls in order to prevent or detect and correct material misstatements to the financial statements. We do not have controls in place to prevent individuals from manipulating financial data or entering inaccurate data into the accounting software, and there are no controls over the financial reporting close process. Additionally, we lack segregation of duties and review procedures to ensure our financial data is accurate. 8 Management believes that despite our material weaknesses, our consolidated financial statements for the quarter ended March 31, 2024 are fairly stated, in all material respects, in accordance with GAAP. (c) Changes in Internal Control Over Financial Reporting During the quarter ended March 31, 2024, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Inherent Limitations Over Internal Controls Management, including our Principal Executive Officer and Principal Financial Officer, does not expect that disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are no resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgements in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. 9 PART II – OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect. ITEM 1A. RISK FACTORS We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ITEM 5. OTHER INFORMATION During the quarter ended March 31, 2024, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements. 10 ITEM 6. EXHIBITS Incorporated by Reference Filed or Furnished Exhibit Number Exhibit Description Form Exhibit Filing Date Herewith 31.1 Certification of Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 x 31.2 Certification of Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 x 32.1* Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. x 32.2* Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 x 101 Inline XBRL Document Set for the condensed consolidated financial statements and accompanying notes in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q. x 104 Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set. x * In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are furnished and not filed. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DRIVEITAWAY HOLDINGS, INC. Date: May 21, 2024 By: /s/ John Possumato John Possumato, Chief Executive Officer (Principal Executive Officer) Date: May 21, 2024 By: /s/ Steven M. Plumb Steven M. Plumb, CPA, Chief Financial Officer (Principal Financial and Accounting Officer) 12