Driveitaway Holdings, Inc. 10-Q/A

ITEM 1. FINANCIAL STATEMENTS DRIVEITAWAY HOLDINGS, INC. INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2024 Page Condensed Consolidated Balance Sheets as of June 30, 2024 (Unaudited) and September 30, 2023 (As Restated) F-2 Condensed Consolidated Statements of Operations for the three and nine months ended June 30, 2024 and June 30, 2023 (Unaudited) (As Restated) F-3 Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the nine months ended June 30, 2024 and June 30, 2023 (Unaudited) (As Restated) F-4 Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2024 and June 30, 2023 (Unaudited) (As Restated) F-5 Notes to the Condensed Consolidated Financial Statements (Unaudited) (As Restated) F-6 F- 1 DriveItAway Holdings, Inc. Condensed Consolidated Balance Sheets June 30, September 30, 2024 2023 (Unaudited) (As Restated) Assets Current assets Cash $ 3,422 $ 4,632 Restricted cash — 18,559 Accounts receivable, net 12,533 11,584 Prepaid expenses 1,717 — Total current assets 17,672 34,775 Deferred financing costs, net 406,543 — Fixed assets, net 254,635 184,228 Intangible assets, net 7,731 11,787 Total Assets $ 686,581 $ 230,790 Liabilities and Stockholders’ Deficit Current Liabilities Accounts payable and accrued liabilities $ 841,632 $ 662,345 Accrued interest – related parties 10,784 4,918 Deferred revenue 759 7,233 Customer deposits 1,339 2,234 Due to related parties 25,080 25,080 Current portion of SBA Loan 2,430 2,363 Promissory notes payable, net of debt discount 22,211 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 1,386,628 1,082,654 Convertible notes payable in default 250,000 — Derivative liability 1,398,982 1,317 Total Current Liabilities 4,002,345 1,878,080 SBA Loan - noncurrent 115,008 114,700 Promissory note payable - noncurrent, net of debt discount 15,735 175,720 Promissory notes payable - noncurrent 82,957 16,649 Total Liabilities 4,216,045 2,185,149 Commitments and Contingencies — — Stockholders’ Deficit Preferred stock, $ 0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding — — Common stock, $ 0.0001 par value; 1,000,000,000 shares authorized; 113,301,722 shares issued and 106,551,722 outstanding at June 30, 2024 and September 30, 2023, respectively 11,331 10,656 Additional paid in capital 1,498,332 1,364,007 Treasury stock, at cost - 15,100 shares at June 30, 2024 and September 30, 2023 ( 18,126 ) ( 18,126 ) Accumulated deficit ( 5,021,001 ) ( 3,310,896 ) Total Stockholders’ Deficit ( 3,529,464 ) ( 1,954,359 ) Total Liabilities and Stockholders’ Deficit $ 686,581 $ 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 Nine Months Ended June 30, June 30, 2024 (As Restated) 2023 2024 (As Restated) 2023 Revenues $ 106,871 $ 78,005 $ 296,595 $ 193,088 Cost of Goods Sold 63,043 64,114 228,225 150,664 Gross Profit (Loss) 43,828 13,891 68,370 42,424 Operating Expenses Salaries and payroll taxes 61,520 44,625 195,270 202,125 Professional fees 21,075 55,000 130,624 234,183 General and administrative 44,308 22,481 79,133 60,489 Software development 10,440 13,710 36,570 42,594 Advertising and marketing 1,500 387 4,288 38,838 Total Operating Expenses 138,843 136,203 445,885 578,229 Operating Loss ( 95,015 ) ( 122,312 ) ( 377,515 ) ( 535,805 ) Other Income (Expenses) Gain (loss) on change in fair value of derivative liability 163,586 47,725 ( 345,832 ) 44,529 Amortization debt discount ( 127,477 ) ( 30,576 ) ( 289,528 ) ( 72,551 ) Amortization of deferred financing costs ( 43,456 ) — ( 43,456 ) — Interest expense ( 414,588 ) ( 50,036 ) ( 647,399 ) ( 131,133 ) Interest expense - related parties ( 1,897 ) ( 1,896 ) ( 6,375 ) ( 2,522 ) Total Other Income (Expense) ( 423,832 ) ( 34,783 ) ( 1,332,590 ) ( 161,677 ) Income / (Loss) Before Income Tax ( 518,847 ) ( 157,095 ) ( 1,710,105 ) ( 697,482 ) Provision for income taxes — — — — Net Income (Loss) $ ( 518,847 ) $ ( 157,095 ) $ ( 1,710,105 ) $ ( 697,482 ) Net Income (Loss) Per Common Share Basic and diluted net income (loss) per common share $ ( 0.00 ) $ ( 0.00 ) $ ( 0.02 ) $ ( 0.01 ) Basic and diluted weighted average number of common shares outstanding 112,309,964 106,536,622 109,139,313 106,412,080 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 Nine Months Ended June 30, 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 49,500 — — — 50,000 Net loss — — — — — ( 475,829 ) ( 475,829 ) Balance – March 31, 2024 111,551,722 11,156 1,413,507 ( 15,100 ) ( 18,126 ) ( 4,502,154 ) ( 3,095,617 ) Common stock issued in connection with promissory note 1,000,000 100 69,900 — — — 70,000 Common stock issued for cash 750,000 75 14,925 — — — 15,000 Net income — — — — — ( 518,847 ) ( 518,847 ) Balance – June 30, 2024 (As Restated) 113,301,722 $ 11,331 $ 1,498,332 ( 15,100 ) $ ( 18,126 ) $ ( 5,021,001 ) $ ( 3,529,464 ) For the Nine Months Ended June 30, 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 ) Net income — — — — — ( 157,095 ) ( 157,095 ) Balance - June 30, 2023 106,551,722 $ 10,656 $ 1,305,516 ( 15,100 ) $ ( 18,126 ) $ ( 3,078,241 ) $ ( 1,780,195 ) 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 Nine Months Ended June 30, 2024 (As Restated) 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 1,710,105 ) $ ( 697,482 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation — 15,000 (Gain) loss on change in fair value of derivative liability 345,832 ( 44,529 ) Amortization and depreciation 28,486 27,313 Financing Fee 43,456 — Amortization of debt discount 289,528 72,551 Changes in operating assets and liabilities: Prepaid expenses ( 1,717 ) ( 1,804 ) Due to related party — 25,000 Accounts receivable ( 949 ) ( 8,354 ) Customer deposits ( 895 ) — Deferred revenue ( 6,474 ) 6,051 Accounts payable and accrued liabilities 176,925 237,376 Accrued liabilities- related party 5,866 2,522 Net Cash used in Operating Activities ( 830,047 ) ( 366,356 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of website development — ( 5,833 ) Purchase of vehicles ( 94,837 ) ( 67,039 ) Net Cash used in Investing Activities ( 94,837 ) ( 72,872 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from convertible notes payable and notes payable 941,675 297,482 Proceeds from the sale of common stock for cash 15,000 — Proceeds from promissory notes payable – related parties — 50,000 Proceeds from promissory debt — 12,500 Repayment of promissory notes payable ( 51,560 ) ( 14,443 ) Debt issuance costs — ( 2,637 ) Net Cash provided by Financing Activities 905,115 342,902 Net change in cash and restricted cash ( 19,769 ) ( 96,326 ) Cash and restricted cash, beginning of period 23,191 127,109 Cash and restricted cash, end of period $ 3,422 $ 30,783 Supplemental cash flow information Cash paid for interest $ 8,219 $ 49,539 Cash paid for taxes $ — $ — Non-cash Investing and Financing transactions: Common stock in connection with promissory note $ 120,000 $ 1,509 Recognition of derivative liability as debt discount $ 200,750 $ 48,428 Prepaid expenses reclassified to website development $ — $ 10,498 Debt discount in connection with original issue discount notes $ 28,000 $ 23,500 Deferred offering costs in connection with promissory note $ 449,999 $ — Amortization of deferred offering costs to debt discount $ 43,456 $ — 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 June 30, 2024 Unaudited (As Restated) 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. On April 12, 2024, the Company formed DIA Leasing, LLC, a Florida limited liability company, which is a wholly owned subsidiary. 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 June 30, 2024, the Company had a net loss of $ 1,710,105 and cash used in operating activities of $ 830,047 . As of June 30, 2024, the Company had an accumulated deficit of $ 5,021,001 . 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 June 30, 2024 Unaudited (As Restated) 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 nine months ended June 30, 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., and its wholly owned subsidiary DIA Leasing, LLC collectively referred to as the “Company”. All inter-company balances and transactions are eliminated in consolidation. Restatement to Previously Reported Financial Statements Schedule of Restatement to Previously Reported Financial Statement Impact to the unaudited condensed consolidated balance sheet as of June 30, 2024 As reported Adjustments As restated Deferred financing costs, net $ 445,684 $ ( 39,141 ) $ 406,543 Total assets $ 725,722 $ ( 39,141 ) $ 686,581 Accounts payable and accrued liabilities $ 947,284 $ ( 105,652 ) $ 841,632 Promissory notes payable, net of debt discount 12,835 ( 12,835 ) — Convertible notes payable, net of debt discount 1,426,836 ( 40,208 ) 1,386,628 Derivative liability 1,387,303 11,679 1,398,682 Total current liabilities 4,124,720 ( 122,375 ) 4,002,345 SBA Loan - non current 114,700 308 115,008 Convertible note payable - noncurrent, net 15,735 Promissory notes payable - concurrent 120,112 ( 37,155 ) 82,957 Total liabilities $ 4,359,532 $ ( 143,487 ) $ 4,216,045 Additional paid in capital $ 1,405,174 $ 93,158 $ 1,498,332 Total stockholders’ deficit $ ( 3,633,810 ) $ 104,346 $ ( 3,529,464 ) Impact to the unaudited condensed consolidated statement of operations for the three months ended June 30, 2024 As reported Adjustments As restated Gain (loss) on change in fair value of derivative liability $ 238,379 $ ( 74,793 ) $ 163,586 Amortization debt discount ( 134,346 ) 6,869 ( 127,477 ) Amortization of deferred financing costs — ( 43,456 ) ( 43,456 ) Interest expense ( 505,676 ) 91,088 ( 4,145,880 ) Interest expense - related parties ( 2,149 ) 252 ( 1,897 ) Net loss $ ( 529,649 ) $ 10,802 $ ( 518,847 ) Net loss per share of common stock: Basic and diluted $ — $ — $ — F- 7 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) Impact to the unaudited condensed consolidated statement of operations for the nine months ended June 30, 2024 As reported Adjustments As restated Gain (loss) on change in fair value of derivative liability $ ( 271,039 ) $ ( 74,793 ) $ ( 345,832 ) Amortization debt discount ( 296,397 ) 6,869 ( 289,528 ) Amortization of deferred financing costs — ( 43,456 ) ( 43,456 ) Interest expense ( 707,693 ) 60,294 ( 647,399 ) Interest expense - related parties ( 6,627 ) 252 ( 6,375 ) Net loss $ ( 1,721,293 ) $ 11,188 $ ( 1,710,105 ) Net loss per share of common stock: Basic and diluted $ ( 0.02 ) $ — $ ( 0.02 ) Impact to the unaudited condensed consolidated statement of changes in stockholders’ equity for the three months ended June 30, 2024 As reported Adjustments As restated Net income $ ( 529,649 ) $ 10,802 $ ( 518,847 ) Additional paid in capital 1,405,174 93,158 1,498,332 Accumulated deficit ( 5,032,189 ) 11,188 ( 5,021,001 ) Total stockholders’ deficit $ ( 3,633,810 ) $ 104,346 $ ( 3,529,464 ) Impact to the unaudited condensed consolidated statement of changes in stockholders’ equity for the nine months ended June 30, 2024 As reported Adjustments As restated Net income $ ( 1,721,293 ) $ 11,188 $ ( 1,710,105 ) Additional paid in capital 1,405,174 93,158 1,498,332 Accumulated deficit ( 5,032,189 ) 11,188 ( 5,021,001 ) Total stockholders’ deficit $ ( 3,633,810 ) $ 104,346 $ ( 3,529,464 ) F- 8 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) Impact to the unaudited condensed consolidated statement of cash flows for the nine months ended June 30, 2024 As reported Adjustments As restated Net loss $ ( 1,721,293 ) $ 11,188 $ ( 1,710,105 ) Adjustments to reconcile net income to cash used in operating activities: Gain (loss) on change in fair value of derivative liability 271,039 ( 616,871 ) ( 345,832 ) Amortization debt discount 296,397 ( 6,869 ) 289,528 Amortization of deferred financing costs — Financing fee 484,197 ( 440,741 ) 43,456 Changes in operating assets and liabilities Accounts payable and accrued liabilities 282,577 ( 105,652 ) 176,925 Net cash used in operating activities ( 362,766 ) ( 447,768 ) ( 830,047 ) Cash flows from financing activities: Proceeds from convertible notes payable and notes payable 659,804 281,871 941,675 Repayment of promissory notes payable ( 87,121 ) 35,561 ( 51,560 ) Net cash provided by financing activities $ 437,834 $ 467,281 $ 905,115 Non-cash investing and financing transactions: Common stock in connection with promissory note $ 26,842 $ 93,158 $ 120,000 Recognition of derivative liability as debt discount $ 200,750 $ ( 200,750 ) $ — Deferred offering costs in connection with promissory note $ 477,500 $ ( 27,501 ) $ 449,999 Amortization of deferred offering costs to debt discount $ 31,816 $ 11,640 $ 43,456 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 June 30, 2024 , and September 30, 2023, the Company had cash of $ 3,422 and $ 4,632 , and restricted cash of $ 0 and $ 18,559 , respectively and did not have any cash equivalents. Restricted Cash 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. During the nine months ended June 30, 2024, the restrictions on the cash were released and the funds were expended. F- 9 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) Accounts Receivable The Company reviews accounts receivable periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. The Company records an allowance for doubtful accounts that is based on historical trends, customer knowledge, any known disputes, and considers the aging of the accounts receivable balances combined with management’s estimate of future potential recoverability. Accounts and receivables are written off against the allowance after all attempts to collect a receivable have failed. The Company believes its allowances for doubtful accounts as of June 30, 2024 and September 30, 2023 are adequate, but actual write-offs could exceed the recorded allowance. As of June 30, 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 June 30, 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 June 30, 2024, the Company did not have leases that qualified as ROU assets. F- 10 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) 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 June 30, 2024 using: June 30, 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 $ 1,398,982 $ — $ — $ 1,398,982 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- 11 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) 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 June 30, 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- 12 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) 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 June 30, 2024 and September 30, 2023 refundable deposits were $ 1,339 and $ 2,234 and deferred revenue was $ 759 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 nine months ended June 30, 2024 and 2023 of $ 4,288 and $ 38,838 , 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. Potential shares of common stock consist of shares issuable upon the conversion of outstanding convertible debt and warrants. For the periods ended June 30, 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 computation of anti-dilutive June 30, June 30, 2024 2023 Convertible notes 2,250,000 2,250,000 Warrants 22,350,000 2,350,000 24,600,000 4,600,000 F- 13 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) 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 August 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 June 30, 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 nine months ended June 30, 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 June 30, 2024 and September 30, 2023, the amount due to related parties for Promissory notes payable was $ 42,500 and $ 50,000 , respectively. During the nine months ended June 30, 2024 and 2023, the Company recorded related party interest expense of $ 6,365 and $ 2,522 respectively. As of June 30, 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 $ 10,784 and $ 4,918 , respectively. F- 14 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) 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 June 30, September 30, 2024 2023 Vehicle costs $ 319,740 $ 224,903 Accumulated depreciation ( 65,105 ) ( 40,675 ) Vehicles, net $ 254,635 $ 184,228 Vehicles with a net book value of $ 94,437 are pledged as collateral on a line of credit with an investor. Depreciation expense for the nine months ended June 30, 2024 and 2023, was $ 24,430 and $ 24,141 , respectively. During the nine months ended June 30, 2024 and 2023, the Company purchased vehicles of $ 94,837 and $ 67,039 , respectively. The following table summarizes the components of our intangible assets as of the dates presented: Schedule of intangible assets June 30, September 30, 2024 2023 Website development costs $ 16,331 $ 16,331 Accumulated depreciation ( 8,600 ) ( 4,544 ) Website, net $ 7,731 $ 11,787 Amortization expense for the nine months ended June 30, 2024 and 2023, was $ 4,056 and $ 3,172 , respectively. During the nine months ended June 30, 2024 and 2023, the Company incurred website development costs of $ 0 and $ 16,331 , 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- 15 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) Liquidation Preference : The Series A Preferred Stock is entitled to receive, prior to any distribution to any junior class of securities, an amount equal to $0.01 per share as a liquidation preference before any distribution may be made to the holders of any junior security, including the Common Stock. Voting Rights : Each holder of Series A Preferred Stock shall vote with holders of the Common Stock upon any matter submitted to a vote of shareholders, in which event it shall have the number of votes equal to the number of shares of Common Stock into which such share of Series A Preferred Stock would be convertible on the record date for the vote or consent of shareholders. Each holder of Series A Preferred Stock shall also be entitled to one vote per share on each submitted to a class vote of the holders of Series A Preferred Stock. Voluntary Conversion Rights : Each share of Series A Preferred Stock is convertible into 33.94971 shares of Common Stock at the option of the holder thereof. Mandatory Conversion Right : The Company has the right to convert each share of Series A Preferred Stock into 33.94971 shares of Common Stock at any time that there are less than 200,000 shares of Series A Preferred Stock outstanding. During the nine months ended June 30, 2024 and 2023 there were no issuances of the Series A Preferred shares. As of June 30, 2024 and September 30, 2023, the Company had no shares of Series A Preferred stock outstanding. Common Stock During the nine months ended June 30, 2024, the Company: ● issued 5,000,000 shares of common stock valued at $ 50,000 for commitment fees in conjunction with the issuance of a promissory note of $ 140,000 ● issued 1,000,000 shares of common stock valued at $ 70,000 for commitment fees in conjunction with the issuance of a promissory note in the amount of $ 63,000 ● issued 750,000 shares of common stock to a private investor for gross proceeds of $ 15,000 During the nine months ended June 30, 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 June 30, 2024, and September 30, 2023, the Company had 113,301,722 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 June 30, 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- 16 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) 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. In May 2024, in conjunction with the issuance of a promissory note of $ 63,000 , 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 May 28, 2024 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 $ 348,500 which was recorded as a derivative liability. The note was discounted to a principal balance of $ 0 and a debt discount of $ 63,000 was recorded at inception. The difference between the fair value of the warrants and the net proceeds received was recognized as interest expense. F- 17 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) In May 2024, in conjunction with the issuance of a line of credit of $ 2,000,000 , 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 May 1, 2024 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 $ 180,000 which was recorded as a derivative liability. The assigned value of the warrants along with $ 7,500 of loan fees and a 2% (or $40,000) required broker fee was initially recorded as deferred financing costs and will be recorded as a discount to the note pro rata to draws made on the Promissory Note. Discounts will be amortized over the repayment term of the draw. In June 2024, in conjunction with the issuance of a line of credit of $ 250,000 , 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 June 14, 2024 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 $ 337,500 which was recorded as a derivative liability. As the assigned value of the warrants plus a $ 25,000 original issue discount and $ 12,500 of loan fees exceeded the face value of the note, the face value of the note was initially recorded as deferred financing costs and will be recorded as a discount to the note pro rata to draws made on the Promissory Note. Discounts will be amortized over the repayment term of the draw. The difference between the fair value of the warrants and the face value of the note was recorded 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 nine months ended June 30, 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 20,000,000 0.00001 * Exercised — $ — Expired — $ — Balance as of June 30, 2024 22,350,000 $ 0.01 * *20,000,000 warrants issued during the nine months ended June 30, 2024 do not have an expiration date. The intrinsic value of the warrants as of June 30, 2024, is $ 200 . All of the outstanding warrants are exercisable as of June 30, 2024. F- 18 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) 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 nine months ended June 30, 2024 and 2023, the Company recorded interest expense of $ 3,271 and $ 3,188 , respectively, on the SBA Loan and as of June 30, 2024 and September 30, 2023, the accrued interest on the SBA Loan was $ 4,899 and $ 6,780 , respectively. As of June 30, 2024 and September 30, 2023 the outstanding principal of SBA Loan was $ 117,438 . The following represents the future aggregate maturities of the Company’s SBA Loan as of June 30, 2024 , for each of the five (5) succeeding years and thereafter as follows: Schedule of future aggregate maturities X` Fiscal year ending September 30, Amount 2024 (remaining) $ — 2025 — 2026 571 2027 2,430 2028 2,431 Thereafter 109,575 Total $ 117,438 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 nine months ended June 30, 2024 and 2023, the Company recorded interest expense of $ 1,875 and $ 313 , respectively. As of June 30, 2024 and September 30, 2023, the accrued interest on the promissory note was $ 2,984 and $ 1,109 , respectively. As of June 30, 2024 and September 30, 2023 the outstanding principal of Promissory Notes Payable was $ 12,500 . As of June 30, 2024, the Company had defaulted on the promissory note payable. During the nine months ended June 30, 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 nine months ended June 30, 2024 and 2023 , the Company recorded interest expense of $ 1,125 and $ 378 , respectively. As of June 30, 2024 and September 30, 2023, the accrued interest on the promissory note was $ 1,791 and $ 666 , respectively. As of June 30, 2024 and September 30, 2023, the total outstanding principal of the promissory note payable was $ 7,500 . As of June 30, 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 June 30, 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- 19 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) 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 nine months ended June 30, 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 June 30, 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 nine months ended June 30, 2024, the Company amortized $ 1,409 of the debt discount and made repayments of $ 37,174 . This resulted in a debt discount balance of $ 4,565 and a principal balance of $ 20,300 , for a net notes payable balance of $ 15,735 as of June 30, 2024. The following represents the future aggregate maturities as of June 30, 2024 of the Company’s Promissory Notes Payable: Schedule of future aggregate maturities Fiscal year ending September 30, Amount 2024 (remaining) 8,583 2025 7,152 Total $ 15,735 Credit Agreement On March 1, 2024, DIA Leasing, LLC. (the “Borrower”), a direct wholly owned subsidiary of DriveitAway Holdings, Inc. (“DIA”), 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. Pursuant to the Credit Agreement dated May 1, 2024 (the “Credit Agreement”), among the Borrower and the Lender, the Lender agreed to make advances of principal (the “draws”) to the Borrower and to issue letters of credit on behalf of the Borrower. The Lender committed to provide up to $ 250,000 for each draw and up to $ 2,000,000 of letters of credit. The Borrower must use the letters of credit and the proceeds of the draws 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’s broker equal to 2.0 % of the available commitments. DIA is a guarantor on the draws. 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. F- 20 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) 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. As of June 30, 2024, the Company has drawn $ 77,766 on the Promissory Note and $ 47,500 in deferred offering costs for broker and legal fees, and recognized $ 1,918 in interest expense during the nine months ended June 30, 2024. The amount of interest accrued on the Promissory note was $ 3,089 as of June 30, 2024. The Company also recorded a discount of $ 47,500 in conjunction with the draws taken on the Promissory Note. During the nine months ended June 30, 2024, the Company amortized $ 5,191 of debt discount. This resulted in a debt discount balance of $ 42,309 and a principal balance of $ 125,266 , for a net promissory notes payable balance of $ 82,957 as of June 30, 2024. 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. The net book value of the vehicles that serve as collateral on this obligation is $ 94,437 . The gross value of the pledged vehicles is less than the gross borrowings on the Promissory Note. Warrant As further consideration for the credit facility, DIA issued Lender a prefunded warrant (the “Warrant”) for the purchase of up to 5,000,000 shares of DIA’s common stock. The fair market value of the Warrant was $ 180,000 the date of grant, which was recorded as a derivative liability. The assigned value of the warrants along with $ 7,500 of loan fees and a 2% (or $40,000) required broker fee was initially recorded as deferred financing costs and will be recorded as a discount to the note pro rata to draws made on the Promissory Note. During the nine months ended June 30, 2024, the Company amortized $9,061 of the deferred financing cost related to the Warrant. Note 7 – Convertible Notes Payable AJB Capital Investments, LLC Notes 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 25, 2025 . 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- 21 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) 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 8). 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 . Subsequent to period end the maturity date of the note was extended to February 25, 2025. 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 February 25, 2025 . 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- 22 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) 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 February 25, 2025 . 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. On May 28, 2024, the Company entered into another SPA with AJB, and issued a promissory note in the amount of $ 63,000 (the “May 2024 AJB Note”) to AJB in a private transaction for a purchase price of $ 56,700 (after giving effect to a 10% original issue discount). In connection with the sale of the AJB Note, the Company also paid certain fees and due diligence costs of AJB and brokerage fees, totaling $ 6,700 . After payment of the fees and costs, the net proceeds to the Company were $ 50,000 , which will be used for working capital and other general corporate purposes. F- 23 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) The maturity date of the AJB Note is February 25, 2025 . 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 in the form of 1,000,000 unregistered shares of the Company’s common stock (the “Commitment Fee Shares”) which were issued at note inception. The Company also issued to AJB common stock purchase warrants (the “May 2024 warrants”) to purchase 5,000,000 shares of the Company’s common stock for a nominal exercise price of $0.00001 per share. The May 2024 warrants may be exercised at any time on or after May 28, 2024 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 $ 348,500 which was recorded as a derivative liability. The note was discounted to a principal balance of $ 0 and a debt discount of $ 63,000 was recorded at inception. The difference between the fair value of the warrants and the net proceeds received of $ 298,500 was recognized as interest expense. On June 14, 2024, the Company entered into another SPA with AJB, and issued a promissory note with a face amount of $ 250,000 (the “June 2024 AJB Note”) to AJB in a private transaction for a purchase price of $ 225,000 (after giving effect to a 10% original issue discount). In connection with the sale of the AJB Note, the Company also paid certain fees and due diligence costs of AJB and brokerage fees, totaling $ 12,500 . The Company may draw on the June 2024 AJB Note as automobiles for the rental fleet are purchased, up to a maximum amount of $ 212,500 . As a result, the Company accounted for this note as a line of credit. The maturity date of the AJB Note is February 25, 2025 . The AJB Note bears interest at 15 % per year, and principal and accrued interest is due on the maturity date. The Company may prepay the AJB Note at any time without penalty. The note is convertible into Common Stock of the Company at any time that the note is in default provided that at no time may the note be convertible into an amount of common stock that would result in the holder having beneficial ownership of more than 9.99% 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 shall equal $0.01 per share, subject to adjustments. 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. F- 24 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) Also pursuant to the SPA, the Company paid to AJB a commitment fee in the form of a warrant to purchase 5,000,000 unregistered shares of the Company’s common stock for nominal exercise price of $ 0.00001 per share. The warrant is exercisable at any time on or after June 14, 2024 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 $ 337,500 which was recorded as a derivative liability. As the assigned value of the warrants plus a $ 25,000 original issue discount and $ 12,500 of loan fees exceeded the face value of the note, the face value of the note was initially recorded as deferred financing costs and will be recorded as a discount to the note pro rata to draws made on the Promissory Note. Discounts will be amortized over the repayment term of the draw. The difference between the fair value of the warrants and the face value of the note of $ 87,500 was recorded as interest expense. During the nine months ended June 30, 2023, the Company recorded interest expense of $ 72,217 , additional debt discount of $ 26,478 , amortization of debt discount of $ 25,902 , a loss on change in fair value of derivative liability of $( 272,161 ) for the guarantee and warrants and repaid $ 31,042 of interest. During the nine months ended June 30, 2024, the Company recorded interest expense of $ 587,415 , additional debt discount of $ 362,564 , amortization of debt discount of $ 233,483 , and a loss on change in fair value of derivative liability of $ 97,829 for the guarantee and warrants. As of June 30, 2024 and September 30, 2023, the derivative liability was $ 1,044,059 and $ 663 for the guarantee and warrants, the debt discount recorded on the note was $ 120,183 and $ 0 , the note payable principal was $ 1,337,064 and $ 860,000 , and the Company owed accrued interest of $ 171,775 and $ 68,562 . Effective February 14, 2023, the Company went into default on the AJB Note, however the lender waived all default provisions through February 25, 2025 therefore no default interest or penalties were incurred during the nine months ended June 30, 2024 and the AJB note was not convertible as of June 30, 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- 25 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) 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. Effective June 3, 2024 and June 16, 2024, these two secured promissory notes went into default, respectively. 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 nine months ended June 30, 2023, the Company recorded interest expense of $ 47,354 , paid interest of $ 13,125 and amortization of debt discount of $ 42,814 . As of June 30, 2023, the debt discount recorded on the notes was $ 66,970 , resulting in a note payable balance of $ 38,303 . As of June 30, 2023, the Company owed accrued interest of $ 45,812 , respectively. During the nine months ended June 30, 2024, the Company recorded interest expense of $ 50,625 , paid interest of $ 3,125 and amortization of debt discount of $ 43,584 . As of June 30, 2024 and September 30, 2023, the debt discount recorded on the notes was $ 8,042 and $ 51,626 , respectively, resulting in a net note payable balance of $ 441,958 and $ 398,374 , respectively. As of June 30, 2024 and September 30, 2023, the Company owed accrued interest of $ 110,563 and $ 63,063 , respectively. The following represents the future aggregate maturities of the Company’s Convertible Notes Payable as of June 30, 2024 and September 30, 2024 for each of the five (5) succeeding years and thereafter as follows: Schedule of future aggregate maturities Fiscal year ending: June 30, September 30, Amount Amount 2024 (remaining) $ 1,386,628 $ 1,082,654 2025 15,735 175,720 Total $ 1,402,363 $ 1,258,374 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 June 30, 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 June 30, 2024 , and year ended September 30, 2023: F- 26 DriveItAway Holdings, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 Unaudited (As Restated) Schedule of assumptions used Nine months ended Year Ended June 30, September 30, 2024 2023 Expected term 0.01 - 3.67 years * 0.68 - 5.01 years Expected average volatility 188 % - 408 % 111 % - 372 % Expected dividend yield — — Risk-free interest rate 3.60 % - 4.33 % % 3.93 % - 5.03 % * 20,000,000 warrants issued during the nine months ended June 30, 2024 do not have an expiration date. The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities during the nine months ended June 30, 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 1,743,497 Loss on change in fair value of the derivative 345,832 Derivative liability balance - June 30, 2024 $ 1,398,982 Note 9 – Subsequent Events Common Stock In July 2024, the Company issued 400,000 shares of its common stock to four accredited investors for $ 8,000 in gross proceeds. On November 25, 2024, the Company issued 250,000 shares of its common stock to an accredited investor for $ 5,000 in gross proceeds. Promissory Note Payable On July 3, 2024, the Company executed a fourth note payable with a lender with a face amount of $ 88,800 . 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 $ 88,800 (including fixed fees of $ 8,800 or approximately 10% of the note amount). The Company received net proceeds of $ 60,737 after paying off the February 22, 2024 note and rolling $ 19,263 of its balance into the July 3, 2024 note and recording the $ 8,800 of fixed fees as a debt discount. On November 19, 2024, the Company entered into a loan agreement with an existing note holder for a promissory note with a face value of $ 77,700 and an original issue discount of $ 7,614 . The loan is due on May 20, 2026. Sale of Warrant On July 12, 2024, the Company sold a warrant to purchase 5,000,000 shares of the Company’s common stock at an exercise price of $ 0.00001 to an investor for $ 50,000 . The warrant has no expiration date. The investor has the option of funding the Company with two additional tranches of $ 50,000 . The second tranche of $ 50,000 is due within 60 days of the first funding date of July 12, 2024. On August 19, 2024, the Company received the funding for the second tranche and issued to the investor a cash warrant to purchase up to 666,666 shares of Common Stock at an exercise price of $0.08 per share. The warrant has no expiration date. At any time 90 days after the second tranche funding date the investor may invest an additional $ 50,000 and the Company will issue to the investor a pre-funded warrant to purchase up to 2,500,000 shares of Common Stock in the and a cash warrant to purchase up to 333,333 shares of Common Stock at an exercise price of $ 0.08 per share. The warrant does not have an expiration date. Auto Purchases and Line of Credit Draws In July and August 2024, the Company purchased 16 vehicles at a cost of $ 401,771 . In conjunction with these vehicle purchases, the Company borrowed $ 321,417 under the Credit Facility and $ 80,354 under the June 2024 AJB Note, for a total $ 401,771 in total borrowings. On October 24, 2024, the Company entered into an agreement with Free2Move North America, Inc. (Free2Move) to become an operator of Free2Moves vehicle network. Free2Move, owned by the vehicle manufacturer Stellantis, has a fleet lease program designed for companies like DriveItAway, that operate subscription rental vehicle services, with preferred fleet lease terms, for both interest carrying costs and residual value, for all Stellantis (Jeep, Dodge, Ram, Chrysler, Alfa Romeo) vehicles. To date, the Company has two vehicles on the Free2Move program on a pilot, and anticipates having many more Free2Move lease vehicles in the future. F- 27