10-Q/A: DriveItAway Holdings Restates Q3 2024 Financials Due to Accounting Errors

DriveItAway Holdings restated its unaudited condensed consolidated interim financial statements for the quarter ended June 30, 2024, due to misstatements related to common stock valuation, deferred financing costs, and derivative liabilities.

Summary

• DriveItAway Holdings, Inc. is filing an amendment to its Q3 2024 report to restate its financial statements.
• The restatement is due to errors identified during the preparation of the audited financial statements for the year ended September 30, 2024.
• The errors include the incorrect valuation of common stock issued as a commitment fee, miscalculation of amortization of deferred financing costs, and incorrect assumptions used to calculate derivative liabilities.
• These errors resulted in misstatements of deferred financing costs, notes payable, derivative liability, additional paid-in capital, and accumulated deficit as of June 30, 2024.
• The errors also led to misstatements of gain on change in fair value of derivative liability, amortization of debt discount, amortization of deferred financing costs, interest expense, and net loss for the three and nine months ended June 30, 2024.
• The company's management concluded that the previously reported material weaknesses in internal control over financial reporting contributed to these errors.
• The company is working on a remediation plan to address these weaknesses.
• The only changes to the Q3 10-Q are those related to the matters described above.

Sentiment

Score: 3

Explanation: The document indicates negative sentiment due to the restatement of financials, identification of material weaknesses in internal controls, and a going concern warning. However, there are some positives such as increased revenues and decreased operating expenses.

Positives

• Revenues for the three months ended June 30, 2024, increased $28,866 from $78,005 for the period ending June 30, 2023, to $106,871 for the period ending June 30, 2024.
• Revenues for the nine months ended June 30, 2024, increased $103,507 from $193,088 for the period ending June 30, 2023, to $296,595 for the period ending June 30, 2024.
• Operating expenses for the nine months ended June 30, 2024, decreased $132,344 as compared to the nine months ended June 30, 2023.
• Loss from operations was $95,015 for the three months ended June 30, 2024, as compared to a loss from operations of $122,312 for the three months ended June 30, 2023.
• Loss from operations was $377,515 for the nine months ended June 30, 2024, as compared to $535,805 for the nine months ended June 30, 2023.

Negatives

• The company is restating its Q3 2024 financial statements due to accounting errors.
• The errors involve common stock valuation, deferred financing costs, and derivative liabilities.
• Management identified material weaknesses in internal control over financial reporting that contributed to the errors.
• As of June 30, 2024, our working capital deficiency increased $2,122,809 as compared to September 30, 2023.
• Other expenses for the nine months ended June 30, 2024, were $1,332,590, as compared to $161,677 for the nine months ended June 30, 2023.
• As of June 30, 2024, the Company had a net loss of $ 1,710,105 , accumulated deficit of $ 5,021,001 and did not have sufficient cash on hand to cover expenses for the next twelve (12) months.

Risks

• The company's ability to continue as a going concern is dependent on obtaining adequate capital.
• There is no assurance that the company will be able to obtain sufficient additional funds when needed.
• Profitability will ultimately depend upon the level of revenues received from business operations, and there is no assurance that the company will attain profitability.
• The company identified material weaknesses in its internal control over financial reporting.
• The company is currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations.

Future Outlook

The company anticipates that, in 2024 automotive supply and demand will see a continuing return to more historically normal levels which should translate into greater vehicle availability for vehicles on our platform, leading to a further increase in revenues.

Management Comments

• Management believes that despite our material weaknesses, our consolidated financial statements for the quarter ended June 30, 2024 are fairly stated, in all material respects, in accordance with GAAP.

Industry Context

The company operates in the automotive rental industry, assisting subprime and deep subprime candidates to rent/lease vehicles on a short-term basis through its online/app-based platform.

Legal Proceedings

• The company is currently not involved in any litigation that it believes could have a material adverse effect on its financial condition or results of operations.

Related Party Transactions

• 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.
• 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.

Stakeholder Impact

• The restatement of financial statements may impact investor confidence.
• The identified material weaknesses in internal control over financial reporting may raise concerns among stakeholders.
• The company's ability to continue as a going concern is dependent on obtaining adequate capital, which may impact stakeholders.

Next Steps

• The company is implementing a remediation plan to address the identified material weaknesses in internal control over financial reporting.

Key Dates

Keywords

restatement, financial statements, internal control, derivative liability, deferred financing costs, common stock, DriveItAway