DWAY 8-K/A
Driveitaway Holdings, Inc. (DWAY)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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| None | None | None |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Explanatory Note
On December 7, 2021, Creative Learning Corporation (the “Company”), DriveItAway, Inc., a Delaware corporation (“DIA”), and the existing shareholders of DIA executed an Agreement and Plan of Share Exchange (the “Share Exchange Agreement”), under which the Company agreed to acquire all of the issued and outstanding common stock of DIA by issuing one share of Series A Convertible Preferred Stock (the “Series A Preferred”) of the Company for each outstanding share of DIA common stock (the “Share Exchange”). On February 24, 2022, closing of the Share Exchange occurred.
On March 15, 2022, the board of directors of Creative Learning Corporation approved an amendment to its certificate of incorporation to change its name to DriveItaway Holdings, Inc (“Holdings”), which was filed with the Delaware Secretary of State on April 18, 2022.
The foregoing description of the Share Exchange is qualified in its entirety by reference to the full text of the Share Exchange Agreement, which was filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on December 14, 2021.
This Current Report on Form 8-K/A amends Item 9.01 of the Current Report on Form 8-K filed by the Company on March 2, 2022 to include the historical financial statements of DIA and the pro forma financial information required by Item 9.01 of Form 8-K, attached hereto as Exhibits 99.1, 99.2 and 99.3. The pro forma financial information included in this Form 8-K/A has been presented for informational purposes only, as required by Form 8-K. It does not purport to represent the actual results of operations that the Company and DIA would have achieved had the companies been combined during the periods presented in the pro forma financial information and is not intended to project the future results of operations that the combined company may achieve as a result of the Company’s acquisition of DIA. Except as described above, all other information in the Company’s Current Report on Form 8-K filed on March 2, 2022 remains unchanged.
Item 9.01 Financial Statements and Exhibits.
| (a) | Financial Statements of Business Acquired. |
1) The audited balance sheets of DIA as of September 30, 2021 and 2020, and the statements of operations, cash flows and changes in stockholders’ equity (deficit) for the years ended September 30, 2021 and 2020, and the notes related thereto, are filed as Exhibit 99.1.
2) The unaudited balance sheet of DIA as of December 31, 2021, and the statements of operations, cash flows and changes in stockholders’ equity (deficit) for the three months ended December 31, 2021, and the notes related thereto, are filed as Exhibit 99.2.
| (b) | Pro Forma Financial Information |
Unaudited pro forma condensed combined statements of income of the Company and DIA for the year ended September 30, 2021 and for the three months ended December 31, 2021, unaudited pro forma condensed combined balance sheets of the Company and DIA as of September 30, 2021 and December 31, 2021, and the notes related thereto are filed as Exhibit 99.3.
| (d) | Exhibits. |
| Exhibit No. | Description |
| 99.1 | Audited financial statements of DIA for the fiscal years ended September 30, 2021 and 2020. |
| 99.2 | Unaudited financial statements of DIA for the three months ended December 31, 2021 and 2020. |
| 99.3 | Unaudited pro forma condensed combined financial statements of the Company and DIA as of December 31, 2021, for the three months ended December 31, 2021 and for the year ended September 30, 2021. |
| 101.INS* | Inline XBRL Instance Document. |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| 101.LAB* | Inline XBRL Taxonomy Extension Labels Linkbase Document. |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| DRIVEITAWAY HOLDINGS, INC. | ||
| Date: | July 8, 2022 | |
| /s/ John Possumato | ||
| John Possumato | ||
| Chief Executive Officer |
EXHIBIT 99.1
| DriveItAway,
Inc. September 2021 and 2020 Audited Financial Statements |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
DriveItAway, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of DriveItAway, Inc. as of September 30, 2021 and 2020 and the related statements of operations, changes in stockholders’ equity (deficit), and cash flows for each of the two years in the period ended September 30, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of DriveItAway, Inc. as of September 30, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended September 30, 2021, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the entity will continue as a going concern. As discussed in Note 2 to the financial statements, the entity has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to DriveItAway, Inc. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. DriveItAway, Inc. is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Fair value of equity instruments
The Company estimates the fair value of their equity instruments based on transactions that are known to them at the time they are determining the grant date fair value of the awards granted. Accordingly, in order to audit management’s estimate there is a significant amount of auditor judgment that is required, as well as a high degree of auditor subjectivity in applying audit procedures.
In order to audit the Company’s fair value of their equity instruments we reviewed managements basis for such, obtained an understanding of the nature of the equity award, and considered all equity transactions that occurred since inception and through the date of our audit report (especially transactions with third parties).
/s/ Mac Accounting Group, LLP
We have served as the Company’s auditor since 2022.
Midvale, Utah
July 8, 2022
PCAOB ID 6258
DriveItAway, Inc.
Balance Sheet
| September 30, | September 30, | |||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Total current assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable | $ | $ | ||||||
| Accrued Liabilities | ||||||||
| Accrued Liabilities – Related Party | ||||||||
| PPP Loan | ||||||||
| SBA Loan | ||||||||
| Convertible Notes Payable - Related Parties | ||||||||
| Total Current Liabilities | ||||||||
| SBA Loan | ||||||||
| Convertible Debt -noncurrent | ||||||||
| Related Party Convertible Notes Payable- noncurrent | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 6) | ||||||||
| Stockholders’ Deficit | ||||||||
| Common stock, $ par value; shares authorized, and shares issued and outstanding, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of the financial statements.
DriveItAway, Inc.
Statements of Operations
| For the year Ended | ||||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| REVENUES | ||||||||
| Insurance Revenue | $ | $ | ||||||
| Rental Revenue | ||||||||
| Initial Fee Revenue | ||||||||
| Miscellaneous Revenue | ||||||||
| Vehicle Owner Share | ( | ) | ( | ) | ||||
| Driver and Dealer Insurance Cost | ( | ) | ( | ) | ||||
| TOTAL REVENUE | ||||||||
| COST OF GOODS SOLD | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES | ||||||||
| Salaries and Payroll Taxes | ||||||||
| General and Administrative | ||||||||
| Software Development | ||||||||
| Selling Expense | ||||||||
| TOTAL OPERATING EXPENSES | ||||||||
| OPERATING LOSS | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Other income | ||||||||
| Interest Expense | ( | ) | ( | ) | ||||
| Interest Expense – Related Party | ( | ) | ( | ) | ||||
| TOTAL OTHER INCOME (EXPENSE) | ( | ) | ||||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ||||
| PROVISION FOR INCOME TAXES | ||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| NET LOSS PER SHARE: | ||||||||
| Basic and diluted weighted average number of common shares outstanding | ||||||||
| Basic and diluted net loss per share | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of the financial statements.
DriveItAway, Inc.
Statement of Changes in Stockholders’ Equity (Deficit)
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid in | Accumulated | Stockholders' | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance - September 30, 2019 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||
| Related party contributions | — | |||||||||||||||||||
| Net Loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance - September 30, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common stock issued for service | ||||||||||||||||||||
| Related party contributions | — | |||||||||||||||||||
| Net Loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance - September 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of the financial statements.
DriveItAway, Inc.
Statements of Cash Flows
| For the year Ended | ||||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Stock based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expense | ||||||||
| Accounts payable | ||||||||
| Accrued liabilities | ||||||||
| Accrued liabilities – related party | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from related party convertible debt | ||||||||
| Proceeds from Convertible Debt | ||||||||
| Proceeds from PPP Loan | ||||||||
| Proceeds from SBA Loan | ||||||||
| Proceeds from contributions from related parties | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
The accompanying notes are an integral part of the financial statements.
DriveItAway, Inc.
Notes to Financial Statements
September 30, 2021 and 2020
(1) Nature of Organization and Summary of Significant Accounting Policies
Nature of Organization
DriveItAway, Inc. (“DIA” or the “Company”) was formed in Delaware on March 26, 2018. DIA is the first national dealer focused mobility platform that enables car dealers to sell more vehicles in a seamless way through eCommerce, with its exclusive “Pay as You Go” app-based subscription program. DIA provides a comprehensive turn-key, 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.
Corporate Actions
On November 23, 2021 the Company’s Board of Directors approved the increase in authorized common stock to and reduced the par value to $ per share. The amendment was effective on November 24, 2021, the date it was filed with the Delaware Secretary of State.
On November 24, 2021, the Company’s board
of directors set the record date for a
All references to shares of our common stock in these audited financial statements refer to the number of shares of common stock after giving retrospective effect to the forward stock split (unless otherwise indicated) and authorized capital changes.
Basis of Presentation
The Company’s financial statements are presented on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Fiscal year
The Company operates on a September 30 fiscal year-end.
Use of Estimates
The preparation of financial statements in accordance with generally accepted accounting principles 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 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, 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.
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 September 30,
2021 and 2020 the Company had cash of $
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 September 30, 2021 and 2020 are adequate, but actual write-offs could exceed the recorded
allowance. During the year ended September 30, 2021, and 2020 the balances in the allowance for doubtful accounts was $
Revenue Recognition
The Company’s revenue is recognized in accordance with Accounting Standards Codification(“ASC”) 606, Revenue from Contracts with Customers, for all periods presented. The Company, through its DriveItAway online/app-based platform, operates in the retail automotive industry. The Company assists subprime and deep subprime candidates, with little or no down payment, in purchasing the used vehicle of his/her choice by first starting in an app based, turnkey rental, through participating franchise and independent car dealers. During the years ended September 30, 2021 and 2020, the Company derived its rental revenue from contract revenue share for rentals between participating franchise and independent car dealers and individual car rental customers (“customers”). In conjunction with the rental revenue, the Company generates revenue by providing driver and vehicle insurance through a third party, included in the rental contract with each customer.
The Company’s performance obligation for rental revenue is to provide an application to track car rental arrangements and to collect cash from car rental customers and remit those payments to participating franchise and independent car dealers, net of the Company’s revenue share. The car rental arrangements are over a fixed contracted period; therefore, the Company recognizes revenue ratably during the contract term. The Company’s performance obligation for insurance revenue is to collect insurance fees from the customer and provide the third-party provider payment for the insurance provided to the customer. The insurance is offered over a fixed contracted period; therefore, the Company recognizes revenue ratably during the contract term.
Rental and insurance transactions are prepaid at the beginning of the rental cycle (typically a one-week rental that has an automatic renewal) with an automatic charge to the customer’s credit card on file through the DIA system. The DIA system then distributes the vehicle owner share (typically 85% of rental revenue) to the vehicle owner’s bank account from the Stripe Account. This amount is shown as a deduction to Revenues (“Vehicle Owner Share”) on the Company’s Statements of Operations. The net amount is then transferred from the Company’s Stripe Account to the DIA operating bank account. DIA also distributes insurance amounts due to the third-party insurance provider on a monthly basis. This amount is shown as a deduction to revenues (“Driver & Dealer Insurance Cost”) on the Company’s Statements of Operations.
DIA also generate miscellaneous revenue in a number of ways. At the end of the rental term, the DIA software system checks for any excess usage and charges, based on the terms of the rental contract, and will automatically charge a customer’s credit card. These charges are recognized when the credit card charge goes through and recorded as miscellaneous revenue on the Company’s Statements of Operations. Additional miscellaneous revenue represents amounts earned on telematics equipment and telematics software services related to each rental vehicle used to track excess usage and charges. DIA performance obligation is to provide the equipment to the vehicle owner for self-installation and allow access to the software throughout the rental term. The Company recognizes revenue when the equipment is delivered to the vehicle owner. Miscellaneous revenue associated with use of the telematics software is recognized on a monthly basis as it is a monthly service.
The Company’s Cost of Goods sold consists of credit card fees incurred from the cash collections and cash remittance process, as a significant portion of its performance obligation is to collect and remit payments through its credit card processors.
Software Development
Software Development costs are expensed as incurred.
Advertising Cost
Advertising costs are expensed as incurred.
During the years ended September 30, 2021 and 2020, the Company recorded advertising expense of $
The Company recognizes compensation expense for all restricted stock awards and stock options. The fair value of restricted stock awards is measured using the grant date fair value of our stock, as determined by the Board of Directors. The fair value of stock options is estimated at the grant date using the Black-Scholes option-pricing model, and the portion that is ultimately expected to vest is recognized as compensation cost over the requisite service period. We have elected to recognize compensation expense for all options with graded vesting on a straight-line basis over the vesting period of the entire option. The determination of fair value using the Black-Scholes pricing model is affected by our stock value as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility and the risk-free interest rate.
Income Taxes
The provision for income taxes and deferred income taxes are determined using the asset and liability method. Deferred tax assets and liabilities are determined based on temporary differences between the financial carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the temporary differences are expected to reverse. On a periodic basis, the Company assesses the probability that its net deferred tax assets, if any, will be recovered. If after evaluating all of the positive and negative evidence, a conclusion is made that it is more likely than not that some portion or all of the net deferred tax assets will not be recovered, a valuation allowance is provided by a charge to tax expense to reserve the portion of the deferred tax assets which are not expected to be realized.
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 and stock option. For the years ended September 30, 2021 and 2020, the common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive.
Recent accounting pronouncements
The Company has reviewed all newly issued accounting pronouncements, including those that are not yet effective, and all have been deemed either immaterial or not applicable.
(2) Going Concern
During the current year, the Company had a
net loss of $
Management plans include converting the convertible
notes into the Company’s common stock in addition to raising equity or convertible debt capital . Subsequent to September
30, 2021, the Company converted all it is convertible notes into common stock, completed a share exchange under which it was acquired
by a Creative Learning Corporation, a public company, and through Creative Learning Corporation, borrowed $
The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
(3) Related Party Transactions
Related Party Convertible Notes Payable
On September 13, 2019, the Company issued a
Convertible Promissory Note to Driveitaway, LLC, a company controlled by John Possumato, the Company’s CEO, for $
During the years ended September 30, 2021 and
2020, the Company recorded interest expense of $
(4) Equity
As at September 30, 2021 and 2020, the Company’s
had shares of common stock authorized, with a par value of $ per share. During the years ended September 30, 2021
and 2020 the Company received related party contributions of $
Common Stock Issuances
During the year ended September 30, 2021, the
Company issued shares valued at $
Stock Options
On June 12, 2020, the Company’s Board of Directors and its shareholders approved its 2020 Equity Compensation Plan (“Equity Plan”). The Equity Plan permits the Company to issue awards or options to the employees, directors, consultants and advisors who provide services to the Company or a subsidiary. Pursuant to the Equity Plan, shares of the Company’s common stock are reserved for issuance. The Equity Plan allows the Company’s board or a committee of the board to issue grants of incentive stock options, nonqualified stock options, stock awards, stock units, stock appreciation rights and other equity-based awards.
On June 15, 2020, the Company’s Board of Directors issued stock options to each of John Possumato and Adam Potash, the Company’s chief executive officer and chief operating officer, respectively. The options have an exercise price of $ per share. Each of the options vest pursuant to the following schedule: shares on June 15, 2021, and shares on July 1, 2021, and the first day of each calendar month thereafter, until fully vested.
The Company
uses the Black-Scholes option pricing model to estimate the fair value and compensation cost associated with stock options issued
under the Equity Plan, which requires the consideration of the volatility of the Company’s stock price, the weighted-average
risk-free interest rate and the weighted-average expected life of the options. Forfeitures are included when they are incurred.
Any changes in these assumptions may materially affect the estimated fair value of the share-based award. The weighted-average
assumptions used in the Black-Scholes option-pricing model for the year ended September 30, 2020 was a risk-free interest
rate of consistent with the expected term of the options, expected volatility of based on the historical actual volatility
of a group of similar public companies, dividend yield of -0- as the Company has no history of paying dividends and the weighted-average
expected life of
(5) Income Taxes
The components of the deferred tax assets at September 30, 2021 and 2020 were as follows:
| 2021 | 2020 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss | $ | $ | ||||||
| Total gross deferred tax asset | ||||||||
| Gross net deferred tax asset | ||||||||
| Less: Valuation allowances | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
The Company has recorded various deferred tax assets and liabilities as reflected above. In assessing the ability to realize the deferred tax assets, management considers, whether it is more likely than not, that some portion, or all of the deferred tax assets and liabilities will be realized. The ultimate realization is dependent on generating sufficient taxable income in future years. The valuation allowance is equal to 100% of the net deferred tax asset. Given recurring losses, the Company cannot conclude that it is more likely than not that such assets will be realized, therefore a full valuation allowance has been recorded.
The components of the provisions for income taxes for the fiscal years ended September 30, 2021 and 2020 are as follows:
| 2021 | 2020 | |||||||
| Current: | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Total | ||||||||
| Deferred: | ||||||||
| Additional deferred tax related to book tax differences | ||||||||
| Valuation allowance | ||||||||
| Total tax provision | $ | $ |
A reconciliation of the provisions for income taxes for the fiscal years ended September 2021 and 2020 as compared to statutory rates is as follows:
| 2021 | 2020 | |||||||||||||||
| Amount | % | Amount | % | |||||||||||||
| Provision at statutory rates | $ | ( | ) | % | $ | ( | ) | % | ||||||||
| State income tax, net of federal benefit | ( | ) | % | ( | ) | % | ||||||||||
| Non-Deductible items | ||||||||||||||||
| Penalties | ||||||||||||||||
| Meals & Entertainment | % | % | ||||||||||||||
| Temporary Differences | ||||||||||||||||
| Stock-based compensation | % | % | ||||||||||||||
| Other tax differences | % | % | ||||||||||||||
| Valuation Allowance on deferred tax assets | ( | %) | ( | %) | ||||||||||||
| Total income tax provision | $ | % | $ | % | ||||||||||||
(6) Commitments and Contingencies
Litigation
The Company is subject to litigation claims arising in the ordinary course of business. The Company believes that it has adequately accrued for legal matters in accordance with the requirements of GAAP. The Company records litigation accruals for legal matters which are both probable and estimable and for related legal costs as incurred. The Company does not reduce these liabilities for potential insurance or third-party recoveries. As of September 30, 2021 there were no outstanding legal matters.
(7) Notes Payable
PPP Loan
On April 28, 2020, the Company was granted
a loan (the “PPP Loan”) from First Bank of the Lake in aggregate amount of $
SBA Loan
On June 3, 2020 the Company entered into
an SBA Loan for $
Convertible Debt
On April 1, 2021, the Company borrowed $
The Convertible Note automatically converts
into preferred stock of the Company in the event the Company raises at least $
(8) Subsequent Events
On November 23, 2021, the Company’s board of directors and shareholders approved an amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares to common stock to . The amendment was effective on November 24, 2021, the date it was filed with the Delaware Secretary of State.
On November 24, 2021, the Company’s board
of directors set the record date for a
These audited financial statements have been retrospectively adjusted to take into account the Forward Stock Split (unless otherwise indicated) and authorized capital changes.
On December 7, 2021, the Company, Creative Learning Corporation (“CLC”), a Delaware corporation (“DIA”), and the existing shareholders of DIA executed an Agreement and Plan of Share Exchange (the “Share Exchange Agreement”), under which the CLC would acquire all of the issued and outstanding common stock of DIA by issuing one share of Series A Convertible Preferred Stock of CLC (the “Series A Preferred”) of the Company for each outstanding share of DIA common stock (the “Share Exchange”). A total of Series A Convertible Preferred shares were issued or reserved for issuance to certain noteholders of DIA upon the conversion of their notes. On February 24, 2022, the Company and its existing shareholders entered into an Assignment of Shares of DIA common stock with CLC, and the closing of the Share Exchange occurred. In addition, each share of Series A Preferred is entitled to dividends and voting rights on an “as converted” basis with the common stockholders.
At the closing of the Share Exchange, the Company’s Equity Plan was terminated.
At the closing of the Share Exchange, Messrs. Possumato and Potash each agreed to exercise stock options issued to them, which was the number of stock options which had vested as of the date the Share Exchange Agreement was executed. The balance of the stock options issued to Messrs. Possumato and Potash were cancelled. The stock options had an exercise price of $ per share. In lieu of paying the exercise price in cash, the exercise price was recorded as compensation expense of $ to each of Messrs. Possumato and Potash.
At the closing of the Share Exchange, the holders of the related party notes totaling $ agreed to convert their notes into DIA common stock at a conversion price of $ per share, which shares were automatically converted into shares of Series A Convertible Preferred Shares of CLC at the closing.
At the closing of the Share Exchange, the vesting conditions for shares (post-split) issued to a consultant were waived by the Company.
In December 2021, the Paycheck Protection Program
Loan granted from First Bank of the Lake in the aggregate amount of $
Upon closing of the Share Exchange, all of the existing members of CLC’s board of directors (the “Board”) of the Company resigned, except that Rod Whiton’s resignation will not be effective until ten days after an information statement pursuant to Rule 14f-1 is mailed to shareholders. John Possumato, Adam Potash and Paul Patrizio were appointed to CLC’s Board, provided that the appointments of Messrs. Potash and Patrizio will not be effective until ten days after an information statement pursuant to Rule 14f-1 is mailed to shareholders. Upon closing of the Share Exchange, Christopher Rego and Rod Whiton resigned as officers, and John Possumato was appointed chief executive officer and Adam Potash was appointed chief operating officer. Mike Elkin agreed to remain as chief financial officer of the Company.
Subsequent to September 30, 2021, the Company
issued an aggregate of five convertible notes to five investors, each for $
In March 2022, the holders of all of the convertible notes issued to unrelated investors agreed to convert their notes of $ into shares of common stock of the Company, which was automatically converted into shares of Series A Preferred Stock of CLC in accordance with the Share Exchange Agreement.
The Company has evaluated all subsequent events through July 8, 2022 the financial statements were available to be issued.
EXHIBIT 99.2
DriveItAway, Inc.
Balance Sheets
(Unaudited)
| December 31, | September 30, | |||||||
| 2021 | 2021 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | 6,066 | $ | 9,774 | ||||
| Accounts receivable | 18,977 | 21,455 | ||||||
| Total current assets | 25,043 | 31,229 | ||||||
| Total Assets | $ | 25,043 | $ | 31,229 | ||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable | $ | 104,330 | $ | 150,821 | ||||
| Accrued Liabilities | 16,323 | 11,261 | ||||||
| Accrued Liabilities – Related Party | 8,705 | 7,268 | ||||||
| PPP Loan | — | 23,750 | ||||||
| SBA Loan | 7,679 | 6,128 | ||||||
| Convertible Notes Payable - Related Parties | 95,000 | 30,000 | ||||||
| Convertible Debt | 250,000 | — | ||||||
| Total Current Liabilities | 482,037 | 229,228 | ||||||
| SBA Loan | 107,021 | 72,372 | ||||||
| Convertible Debt -noncurrent | — | 150,000 | ||||||
| Related Party Convertible Notes Payable- noncurrent | — | 65,000 | ||||||
| Total Liabilities | 589,058 | 516,600 | ||||||
| Commitments and Contingencies | — | — | ||||||
| Stockholders’ Deficit | ||||||||
| Common stock, $0.0001 par value; 10,000,000 shares authorized, 2,300,000 shares issued and outstanding | 230 | 230 | ||||||
| Additional paid in capital | 592,870 | 419,793 | ||||||
| Accumulated Deficit | (1,157,115 | ) | (905,394 | ) | ||||
| Total Stockholders’ Deficit | (564,015 | ) | (485,371 | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | 25,043 | $ | 31,229 | ||||
The accompanying notes are an integral part of the unaudited financial statements.
DriveItAway, Inc.
Statements of Operations
(Unaudited)
| For the Three Months Ended | ||||||||
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| REVENUES | ||||||||
| Insurance Revenue | $ | 23,883 | $ | 63,229 | ||||
| Rental Revenue | 34,498 | 153,573 | ||||||
| Initial Fee Revenue | 4,126 | 9,075 | ||||||
| Miscellaneous Revenue | 2,900 | 5,866 | ||||||
| Vehicle Owner Share | (38,790 | ) | (142,258 | ) | ||||
| Driver and Dealer Insurance Cost | (16,000 | ) | (65,094 | ) | ||||
| TOTAL REVENUES | 10,617 | 24,391 | ||||||
| COST OF GOODS SOLD | 5,686 | 9,593 | ||||||
| GROSS PROFIT | 4,931 | 14,798 | ||||||
| OPERATING EXPENSES | ||||||||
| Salaries and Payroll Taxes | 70,125 | 60,473 | ||||||
| General and Administrative | 185,599 | 16,778 | ||||||
| Software Development | 15,679 | 32,134 | ||||||
| Selling Expense | 2,501 | 2,254 | ||||||
| TOTAL OPERATING EXPENSES | 273,904 | 111,639 | ||||||
| OPERATING LOSS | (268,973 | ) | (96,841 | ) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Gain on PPP Loan Forgiveness | 24,148 | — | ||||||
| Interest Expense | (5,459 | ) | (802 | ) | ||||
| Interest Expense – Related Party | (1,437 | ) | (1,116 | ) | ||||
| TOTAL OTHER EXPENSE | 17,252 | (1,918 | ) | |||||
| LOSS BEFORE INCOME TAXES | (251,721 | ) | (98,759 | ) | ||||
| PROVISION FOR INCOME TAXES | — | — | ||||||
| NET LOSS | $ | (251,721 | ) | $ | (98,759 | ) | ||
| NET LOSS PER SHARE: | ||||||||
| Basic and diluted weighted average number of common shares outstanding | 2,300,000 | 2,000,000 | ||||||
| Basic and diluted net loss per share | $ | (0.11 | ) | $ | (0.05 | ) | ||
The accompanying notes are an integral part of the unaudited financial statements.
DriveItAway, Inc.
Statement of Changes in Stockholders’ Deficit
(Unaudited)
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid in | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance - September 30, 2021 | 2,300,000 | $ | 230 | $ | 419,793 | $ | (905,394 | ) | $ | (485,371 | ) | |||||||||
| Stock based compensation | — | — | 173,077 | — | 173,077 | |||||||||||||||
| Net loss | — | — | — | (251,721 | ) | (251,721 | ) | |||||||||||||
| Balance - December 31, 2021 | 2,300,000 | $ | 230 | $ | 592,870 | $ | (1,157,115 | ) | $ | (564,015 | ) | |||||||||
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid in | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance - September 30, 2020 | 2,000,000 | $ | 200 | $ | 10,410 | $ | (229,710 | ) | $ | (219,100 | ) | |||||||||
| Net loss | — | — | — | (98,759 | ) | (98,759 | ) | |||||||||||||
| Balance - December 31, 2020 | 2,000,000 | $ | 200 | $ | 10,410 | $ | (328,469 | ) | $ | (317,859 | ) | |||||||||
The accompanying notes are an integral part of the unaudited financial statements.
DriveItAway, Inc.
Statements of Cash Flows
(Unaudited)
| For the Three Months Ended | ||||||||
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (251,721 | ) | $ | (98,759 | ) | ||
| Adjustments to reconcile net loss to cash generated by operating activities: | ||||||||
| Gain on PPP Loan Forgiveness | (24,148 | ) | — | |||||
| Stock based compensation | 173,077 | — | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 2,478 | (2,762 | ) | |||||
| Accounts payable | (46,491 | ) | 37,283 | |||||
| Accrued liabilities | 5,460 | 1,518 | ||||||
| Accrued liabilities – related party | 1,437 | 1,116 | ||||||
| Net cash used in operating activities | (139,908 | ) | (61,604 | ) | ||||
| Cash flows from investing activities | — | — | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from Related Party Convertible Debt | — | 65,000 | ||||||
| Proceeds from Convertible Debt | 100,000 | — | ||||||
| Proceeds from the SBA Loan | 36,200 | — | ||||||
| Net cash provided by financing activities | 136,200 | 65,000 | ||||||
| Net change in cash | (3,708 | ) | 3,396 | |||||
| Cash at beginning of period | 9,774 | 28,975 | ||||||
| Cash at end of period | $ | 6,066 | $ | 32,371 | ||||
| Supplemental cash flow information: | ||||||||
| Cash paid for interest | $ | — | $ | — | ||||
| Cash paid for income taxes | $ | — | $ | — | ||||
The accompanying notes are an integral part of the unaudited financial statements.
DriveItAway, Inc.
Notes to Unaudited Financial Statements
December 31, 2021
Note 1 - Nature of Organization and Summary of Significant Accounting Policies
Nature of Organization
DriveItAway, Inc. (“DIA” or the “Company”) was formed in Delaware on March 26, 2018. DIA is the first national dealer focused mobility platform that enables car dealers to sell more vehicles in a seamless way through eCommerce, with its exclusive “Pay as You Go” app-based subscription program. DIA provides a comprehensive turn-key, 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.
Corporate Actions
On November 23, 2021 the Company’s Board of Directors approved the increase in authorized common stock to 10,000,000 and reduced the par value to $0.0001 per share. The amendment was effective on November 24, 2021, the date it was filed with the Delaware Secretary of State.
On November 24, 2021, the Company’s board of directors set the record date for a 1,000 for 1 forward stock split to be the close of business on November 24, 2021. The forward stock split was previously approved in June 2020 but not implemented because the Company did not have sufficient authorized shares at the time. As a result of the forward stock split, the Company’s 2020 Equity Compensation Plan, and all outstanding options, warrants and convertible securities were proportionally adjusted.
All references to shares of our common stock in these audited financial statements refer to the number of shares of common stock after giving retrospective effect to the forward stock split (unless otherwise indicated) and authorized capital changes.
Basis of Presentation
The Company’s financial statements are presented on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Fiscal year
The Company operates on a September 30 fiscal year-end.
Use of Estimates
The preparation of financial statements in accordance with generally accepted accounting principles 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 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, 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.
Cash and Cash Equivalents
The Company considers all highly liquid securities with original maturities of three months or less when acquired, to be cash equivalents. As of December 31, 2021 and September 30, 2021, the Company had $6,066 and $9,774 in cash, respectively. The Company had no cash equivalents at December 31, 2021 and September 30, 2021.
Accounts Receivable
The Company reviews accounts receivable periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. The Company records an allowance for doubtful accounts that is based on historical trends, customer knowledge, any known disputes, and considers the aging of the accounts receivable balances combined with management’s estimate of future potential recoverability. Accounts and receivables are written off against the allowance after all attempts to collect a receivable have failed. The Company believes its allowances for doubtful accounts as of December 31, 2021 and September 30, 2021 are adequate, but actual write-offs could exceed the recorded allowance. As of December 31, 2021, and September 30, 2021, the balances in the allowance for doubtful accounts was $0.
Revenue Recognition
The Company’s revenue is recognized in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, for all periods presented. The Company, through its DriveItAway online/app-based platform, operates in the retail automotive industry. The Company assists subprime and deep subprime candidates, with little or no down payment, in purchasing the used vehicle of his/her choice by first starting in an app based, turnkey rental, through participating franchise and independent car dealers. During the three months ended December 31, 2021, the Company derived its rental revenue from contract revenue share for rentals between participating franchise and independent car dealers and individual car rental customers (“customers”). In conjunction with the rental revenue, the Company generates revenue by providing driver and vehicle insurance through a third party, included in the rental contract with each customer.
The Company’s performance obligation for rental revenue is to provide an application to track car rental arrangements and to collect cash from car rental customers and remit those payments to participating franchise and independent car dealers, net of the Company’s revenue share. The car rental arrangements are over a fixed contracted period; therefore, the Company recognizes revenue ratably during the contract term. The Company’s performance obligation for insurance revenue is to collect insurance fees from the customer and provide the third-party provider payment for the insurance provided to the customer. The insurance is offered over a fixed contracted period; therefore the Company recognizes revenue ratably during the contract term.
Rental and insurance transactions are prepaid at the beginning of the rental cycle (typically a one-week rental that has an automatic renewal) with an automatic charge to the customer’s credit card on file through the DIA system. The DIA system then distributes the vehicle owner share (typically 85% of rental revenue) to the vehicle owner’s bank account from the Stripe Account. This amount is shown as a deduction to Revenues (“Vehicle Owner Share”) on the Company’s Statements of Operations. The net amount is then transferred from the Company’s Stripe Account to the DIA operating bank account. DIA also distributes insurance amounts due to the third-party insurance provider on a monthly basis. This amount is shown as a deduction to revenues (“Driver & Dealer Insurance Cost”) on the Company’s Statements of Operations.
DIA also generate miscellaneous revenue in a number of ways. At the end of the rental term, the DIA software system checks for any excess usage and charges, based on the terms of the rental contract, and will automatically charge a customer’s credit card. These charges are recognized when the credit card charge goes through and recorded as miscellaneous revenue on the Company’s Statements of Operations. Additional miscellaneous revenue represents amounts earned on telematics equipment and telematics software services related to each rental vehicle used to track excess usage and charges. DIA performance obligation is to provide the equipment to the vehicle owner for self-installation and allow access to the software throughout the rental term. The Company recognizes revenue when the equipment is delivered to the vehicle owner. Miscellaneous revenue associated with use of the telematics software is recognized on a monthly basis as it is a monthly service.
The Company’s Cost of Goods sold consists of credit card fees incurred from the cash collections and cash remittance process, as a significant portion of its performance obligation is to collect and remit payments through its credit card processors.
Software Development
Software Development costs are expensed as incurred.
Advertising Cost
Advertising costs are expensed as incurred. During the three months ended December 31, 2021 and 2020, the Company recorded advertising expense of $2,340 and $2,215, respectively.
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.
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 and stock option. For the three months ended December 31, 2021 and 2020, the common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive.
Recent accounting pronouncements
The Company has reviewed all newly issued accounting pronouncements, including those that are not yet effective, and all have been deemed either immaterial or not applicable.
Note 2. Going Concern
During the current period, the Company had a net loss of $251,721 and did not have sufficient cash on hand to cover expenses for the next 12 months. Although the Company had net cash provided by financing activities of approximately $136,200, they reported net cash used in operating activities of approximately $139,908, therefore had a decrease in cash of approximately $3,708 during the three months ended December 31,2021. These factors, among others, raise substantial doubt about the entities ability to continue as a going concern.
Management plans include converting both the Convertible Debt and Related Party Convertible Notes to the Company’s Common Stock in addition to raising equity capital.
The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 3. Related Party Transactions
Related Party Convertible Notes Payable
On September 13, 2019, the Company issued a Convertible Promissory Note to Driveitaway, LLC, a company controlled by John Possumato, the Company’s CEO, for $30,000, with a maturity date of September 13, 2022. On October 13 and October 14, 2020, the Company issued Convertible Promissory Notes to Driveitaway, LLC and Adam Potash, the Company’s COO, for $25,000 each, which mature on October 13 and 14, 2022, respectively. On December 24, 2020, the Company issued a Convertible Promissory Note to Adam Potash, for $15,000, which matures on December 24, 2022. Each of the notes bear interest at a rate of 6% per annum. The notes automatically convert into preferred stock of the Company in the event the Company raises at least $1,000,000 by the issuance of preferred stock prior to the maturity dates of the notes (a “Qualified Financing”). In the event the Company enters into a financing that is not a Qualified Financing prior to the maturity dates of the notes, the holders have the right to convert their notes into the class and series of equity securities offered in the non-Qualified Financing at the offer price thereof. In the event the Company effects a change of control, the holders have the option of converting their notes into common stock in order to participate in the change of control or accelerating the maturity date and receiving cash at the time of the change of control.
During the three months ended December 31, 2021, the Company recorded interest expense of $1,437 on the notes and that amount is recorded as accrued interest as of December 31, 2021.
Note 4. Equity
On November 23, 2021, the Company’s board of directors and shareholders approved an amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares to common stock to 10,000,000. The amendment was effective on November 24, 2021, the date it was filed with the Delaware Secretary of State.
On November 24, 2021, the Company’s board of directors set the record date for a 1,000 for 1 forward stock split to be the close of business on November 24, 2021. The forward stock split was previously approved in June 2020 but not implemented because the Company did not have sufficient authorized shares at the time. As a result of the forward stock split, the Company’s 2020 Equity Compensation Plan, and all outstanding options, warrants and convertible securities were proportionally adjusted.
The Company has 10,000,000 authorized common shares with par value of $0.0001 per share.
During the year ended September 30, 2021, the Company issued 300,000 shares valued at $692,308 to a consulting firm pursuant to a one year consulting agreement. Stock-based compensation expense for the three months ended December 31, 2021 was $173,077, and is included in general and administrative expense and the remaining $115,384 was to be recognized over the balance of the agreements.
As of December 31, 2021 and September 30, 2021, the Company has 2,300,000 shares issued and outstanding.
Stock Options
On June 12, 2020, the Company’s Board of Directors and its shareholders approved its 2020 Equity Compensation Plan (“Equity Plan”). The Equity Plan permits the Company to issue awards or options to the employees, directors, consultants and advisors who provide services to the Company or a subsidiary. Pursuant to the Equity Plan, 400,000 shares of the Company’s common stock are reserved for issuance. The Equity Plan allows the Company’s board or a committee of the board to issue grants of incentive stock options, nonqualified stock options, stock awards, stock units, stock appreciation rights and other equity-based awards. The Company did not issue any stock options under the Equity Plan during the quarter ended December 31, 2021.
As of December 31, 2021, the Company had 300,000 stock options outstanding under the Equity Plan, of which 112,500 had vested as of December 31, 2021.
Note 5. Notes Payable
PPP Loan
On April 28, 2020, the Company was granted a loan (the “Loan”) from First Bank of the Lake in aggregate amount of $23,750, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The Loan, which was in the form of a Note dated May 9, 2020 issued by the Company, matures on May 8, 2022 and bears interest at a rate of 1% per annum, payable monthly commencing on October 23, 2020. The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties. Funds from the Loan may only be used for payroll costs, cost used to continue group health care benefits, mortgage payments, rent, utilities and interest on other debt obligations incurred before February 15, 2020. The Company used the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. In December 2021, the PPP Loan of $23,750 and accrued interest of $398 were forgiven and recognized as other income. During the three months ended December 31,2021, the Company recorded interest expense of $59.
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 matures on May 31, 2050. During the three months ended December 31,2021, the Company recorded interest expense of $1,114, on the SBA Loan and as of December 31, 2021 the accrued interest on the SBA Loan was $4,958.
Convertible Debt
On April 1, 2021, the Company borrowed $150,000 in Convertible Notes from Knightsgate Ventures II, LP, a third-party lender at a rate of 8%. The loan matures on December 31, 2022. During the year ended September 30, 2021 the Company recorded interest expense of $5,983 on the note and that amount is recorded as accrued interest as of September 30, 2021.
The Convertible Note automatically converts into preferred stock of the Company in the event the Company raises at least $2,000,000 by the issuance of preferred stock prior to the maturity date of the Convertible Note (a “Qualified Financing”), in which case the conversion price is equal to the lesser of (i) 90% of the price paid by investors in the Qualified Financing or (ii) the price obtained by dividing $6,000,000 by the Company’s fully diluted shares outstanding immediately prior to conversion (the “Cap Price”). In the event the Company has not entered into a Qualified Financing prior to the maturity date, the Convertible Note is convertible at the option of the holder into common stock on the Maturity Date at a price per share equal to the Cap Price. In the event the Company effects a change of control, the holder has the option of converting the Convertible Note into common stock at a price per share equal to the Cap Price or accelerating the maturity date and receiving cash at the time of the change of control.
During the three months ended December 31, 2021 the Company recorded interest expense of $3,025 on the note and that amount is recorded as accrued interest as of December 31, 2021.
During the three months ended December 31, 2021, the Company issued an aggregate of four convertible notes to four investors, each for $25,000. The notes bear interest at a rate of 8% per annum, mature on December 31, 2022, and are convertible into the Company’s common stock on the same basis that is described for the Convertible Note issued to Knightsgate Ventures II, LP on April 1, 2021, as described above. During the three months ended December 31, 2021 the Company recorded interest expense of $1,320 on the note and that amount is recorded as accrued interest as of December 31, 2021.
Note 6. Subsequent Events
On December 7, 2021, the Company, Creative Learning Corporation (“CLC”), a Delaware corporation (“DIA”), and the existing shareholders of DIA executed an Agreement and Plan of Share Exchange (the “Share Exchange Agreement”), under which the CLC would acquire all of the issued and outstanding common stock of DIA by issuing one share of Series A Convertible Preferred Stock (the “Series A Preferred”) of the Company for each outstanding share of DIA common stock (the “Share Exchange”). A total of 2,592,791 Series A Convertible Preferred shares were issued. On February 24, 2022, the Company and its existing shareholders entered into an Assignment of Shares of DIA common stock with CLC, and the closing of the Share Exchange occurred. Each share of Series A Preferred is convertible into 33.94971 shares of common stock of CLC, which entitles the holders thereof to 85% of the CLC’s common stock upon a conversion of all shares of Series A Preferred, determined on a fully-diluted basis, but prior to any shares issued or issuable as a result of the Financing. In addition, each share of Series A Preferred is entitled to dividends and voting rights on an “as converted” basis with the common stockholders.
At the closing of the Share Exchange, the Company’s Equity Plan was terminated.
At the closing of the Share Exchange, Messrs. Possumato and Potash each agreed to exercise 56,250 stock options issued to them, which was the number of stock options which had vested as of the date the Share Exchange Agreement was executed. The balance of the stock options issued to Messrs. Possumato and Potash were cancelled. The stock options had an exercise price of $0.75 per share. In lieu of paying the exercise price in cash, the exercise price was recorded as compensation expense of $42,188 to each of Messrs. Possumato and Potash.
At the closing of the Share Exchange, the holders of the related party notes totaling $95,000 agreed to convert their notes into DIA common stock at a conversion price of $2.00 per share, which shares were automatically converted into 50,482 shares of Series A Convertible Preferred Shares of CLC at the closing.
At the closing of the Share Exchange, the vesting conditions for 300,000 shares (post-split) issued to a consultant were waived by the Company.
Upon closing of the Share Exchange, all of the existing members of CLC’s board of directors (the “Board”) of the Company resigned, except that Rod Whiton’s resignation will not be effective until ten days after an information statement pursuant to Rule 14f-1 is mailed to shareholders. John Possumato, Adam Potash and Paul Patrizio were appointed to CLC’s Board, provided that the appointments of Messrs. Potash and Patrizio will not be effective until ten days after an information statement pursuant to Rule 14f-1 is mailed to shareholders. Upon closing of the Share Exchange, Christopher Rego and Rod Whiton resigned as officers, and John Possumato was appointed chief executive officer and Adam Potash was appointed chief operating officer. Mike Elkin agreed to remain as chief financial officer of the Company.
On February 8, 2022, the Company issued one convertible note to an investor, for amount of $25,000. The note bears interest at a rate of 8% per annum, mature on December 31, 2022, and is convertible into the Company’s common stock on the same basis that is described for the Convertible Debt, see Note 5.
In February and March 2022, all of the convertible notes issued to unrelated investors agreed to convert their notes of $275,000 into 129,809 shares of common stock of the Company, which was automatically converted into shares of Series A Preferred Stock of CLC in accordance with the Share Exchange Agreement.
The Company has evaluated all subsequent events through July 8, 2022 the financial statements were available to be issued.
EXHIBIT 99.3
DRIVEITAWAY HOLDINGS, INC.
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (Unaudited)
Summary of Transaction
On December 7, 2021, Creative Learning Corporation (the “Company”), DriveItAway, Inc., a Delaware corporation (“DIA”), and the existing shareholders of DIA executed an Agreement and Plan of Share Exchange (the “Share Exchange Agreement”), under which the Company agreed to acquire all of the issued and outstanding common stock of DIA by issuing one share of Series A Convertible Preferred Stock (the “Series A Preferred”) of the Company for each outstanding share of DIA common stock (the “Share Exchange”). On February 24, 2022, closing of the Share Exchange occurred.
The foregoing description of the Share Exchange is qualified in its entirety by reference to the full text of the Share Exchange Agreement, which was filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on December 14, 2021.
Pro Forma Information
The unaudited pro forma condensed combined statements of income for the fiscal year ended September 30, 2021 and the three months ended December 31, 2021 combine the historical consolidated statements of income of the Company and DIA, giving effect to the Share Exchange as if it had occurred on October 1, 2020 and October 1, 2021, respectively. The unaudited pro forma condensed combined balance sheets as of September 30, 2021 and December 31, 2021 combine the historical consolidated balance sheets of the Company and DIA, giving effect to the Share Exchange as if it had occurred on October 1, 2020 and October 1, 2021, respectively .
The unaudited pro forma condensed combined financial information (“pro forma information”) is based on, and should be read in conjunction with, the following historical consolidated financial statements and accompanying notes:
| ● | audited consolidated financial statements of the Company as of and for the years ended September 30, 2021 and 2020, and the related notes included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2021; | |
| ● | audited financial statements of DIA as of and for the years ended September 30, 2021 and 2020, and the related notes included in the Company’s Current Report on Form 8-K filed herewith; | |
| ● | unaudited consolidated financial statements of the Company as of and for the three months ended December 31, 2021, and the related notes included in the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2021; | |
| ● | unaudited financial statements of DIA as of and for the three months ended December 31, 2021, and the related notes filed herewith; |
The Company and DIA have September 30 fiscal year-ends.
The historical financial information has been adjusted in the pro forma information to give effect to pro forma events that are directly attributable to the Share Exchange, factually supportable, and with respect to the unaudited pro forma condensed combined statements of income, expected to have a continuing impact on the combined results of operations of more than one year.
The pro forma information has been prepared using the acquisition method of accounting in accordance with accounting principles generally accepted in the United States of America. The acquisition method of accounting is dependent upon certain valuations that are provisional and subject to change. The pro forma adjustments are based on the assumptions and information available at the time of the filing of this Form 8-K/A. The Company will finalize the acquisition accounting within the required measurement period.
The integration-related costs will continue to be expensed as incurred in the appropriate accounting periods following completion of the Share Exchange. For a detailed discussion of these risk factors, please refer to the risk, uncertainties and other factors described in the Company’s filings with the Securities and Exchange Commission. There were no material transactions between the Company and DIA during the periods presented in the pro forma information.
The pro forma information should be read in conjunction with the accompanying notes to the pro forma information. The pro forma information is not necessarily indicative of what the financial position or results of operations would have been had the Share Exchange occurred as of the dates indicated nor does it project the future financial position or operating results of the combined company.
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DRIVEITAWAY HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2021
| Pro Forma | ||||||||||||||||||||
| Company | DIA | Adjustments | Notes | As Adjusted | ||||||||||||||||
| Assets | ||||||||||||||||||||
| Cash and Restricted Cash | $ | 281,989 | $ | 6,066 | $ | — | $ | 288,055 | ||||||||||||
| Receivables, net | 52,579 | 18,977 | — | 71,556 | ||||||||||||||||
| Prepaid Commission Expense | 155,517 | — | — | 155,517 | ||||||||||||||||
| Marketing Fund | 25,054 | — | — | 25,054 | ||||||||||||||||
| Notes Receivable, net | 5,847 | — | — | 5,847 | ||||||||||||||||
| Total Current Assets | 520,986 | 25,043 | — | 546,029 | ||||||||||||||||
| Security deposit | 4,867 | — | — | 4,867 | ||||||||||||||||
| Intangibles | 154,000 | — | — | 154,000 | ||||||||||||||||
| Right of Use Asset | 96,376 | — | — | 96,376 | ||||||||||||||||
| Prepaid Commission – net of current | 229,670 | — | — | 229,670 | ||||||||||||||||
| Property and equipment, net | 7,543 | — | — | 7,543 | ||||||||||||||||
| Total Assets | $ | 1,013,442 | $ | 25,043 | $ | — | $ | 1,038,485 | ||||||||||||
| Liabilities | ||||||||||||||||||||
| Accounts Payable | $ | 57,862 | $ | 104,330 | $ | — | $ | 162,192 | ||||||||||||
| SBA Loan - PPP | 119,980 | 7,679 | — | 127,659 | ||||||||||||||||
| Deferred Revenue | 708,172 | — | — | 708,172 | ||||||||||||||||
| Related Party Convertible Notes Payable | — | 95,000 | — | 95,000 | ||||||||||||||||
| Convertible Debt | — | 250,000 | — | 250,000 | ||||||||||||||||
| Lease liability | 101,219 | — | — | 101,219 | ||||||||||||||||
| Accrued Liabilities | 327,003 | 16,323 | — | 343,326 | ||||||||||||||||
| Accrued Liabilities - related party | — | 8,705 | — | 8,705 | ||||||||||||||||
| Total Current Liabilities | 1,314,236 | 482,037 | — | 1,796,273 | ||||||||||||||||
| SBA Loan | — | 107,021 | — | 107,021 | ||||||||||||||||
| Deferred Revenue – net of current | 1,110,401 | — | — | 1,110,401 | ||||||||||||||||
| Total liabilities | 2,424,637 | 589,058 | — | 3,013,695 | ||||||||||||||||
| Stockholders’ Deficit) | ||||||||||||||||||||
| Preferred stock, $.0001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding, 2,592,791 shares issued and outstanding as adjusted | — | — | 259 | 259 | ||||||||||||||||
| Common Stock, $.0001 par value; 50,000,000 shares authorized 13,716,041 shares issued and 13,700,941 shares outstanding as of December 31, 2021; | 1,369 | 230 | (230 | ) | (a) | 1,369 | ||||||||||||||
| Additional Paid-in Capital | 3,066,745 | 592,870 | (1,157,144 | ) | (a) | 2,502,471 | ||||||||||||||
| Treasury Stock | (18,126 | ) | — | — | (18,126 | ) | ||||||||||||||
| Accumulated Deficit | (4,461,183 | ) | (1,157,115 | ) | 1,157,115 | (a) | (4,461,183 | ) | ||||||||||||
| Total stockholders’ deficit | (1,411,195 | ) | (564,015 | ) | — | (1,975,210 | ) | |||||||||||||
| Total Liabilities and Stockholders’ Deficit | $ | 1,013,442 | $ | 25,043 | $ | — | $ | 1,038,485 | ||||||||||||
See accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Statements .
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DRIVEITAWAY HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 2021
| Pro Forma | ||||||||||||||||||||
| Company | DIA | Adjustment | Notes | As Adjusted | ||||||||||||||||
| Operating Revenues | ||||||||||||||||||||
| Royalty Fees | $ | 189,147 | $ | — | $ | — | $ | 189,147 | ||||||||||||
| Initial Franchise Fees | 150,905 | — | — | 150,905 | ||||||||||||||||
| Technology Fees | 33,938 | — | — | 33,938 | ||||||||||||||||
| Insurance Revenue | — | 23,883 | — | 23,883 | ||||||||||||||||
| Rental Revenue | — | 34,498 | — | 34,498 | ||||||||||||||||
| Initial Fee Revenue | — | 4,126 | — | 4,126 | ||||||||||||||||
| Miscellaneous Revenue | — | 2,900 | — | 2,900 | ||||||||||||||||
| Vehicle Own Share | — | (38,790 | ) | — | (38,790 | ) | ||||||||||||||
| Driver and Dealer Insurance Cost | — | (16,000 | ) | — | (16,000 | ) | ||||||||||||||
| Total operating revenues | 373,990 | 10,617 | — | 384,607 | ||||||||||||||||
| Cost of Goods Sold | — | 5,686 | — | 5,686 | ||||||||||||||||
| Gross Profit | 373,990 | 4,931 | — | 378,921 | ||||||||||||||||
| Operating Expenses | ||||||||||||||||||||
| Salaries, payroll taxes and compensation | 134,780 | 70,125 | — | 204,905 | ||||||||||||||||
| Professional, legal and consulting | 67,543 | — | — | 67,543 | ||||||||||||||||
| Loss on Legal Settlements | 41,302 | — | — | 41,302 | ||||||||||||||||
| Bad Debt Expense | 6,161 | — | — | 6,161 | ||||||||||||||||
| Other General and Administrative | 80,408 | 185,599 | — | 266,007 | ||||||||||||||||
| Depreciation and Amortization | 27,321 | — | — | 27,321 | ||||||||||||||||
| General Advertising | 28,544 | — | — | 28,544 | ||||||||||||||||
| Software Development | — | 15,679 | — | 15,679 | ||||||||||||||||
| Selling Expenses | — | 2,501 | 2,501 | |||||||||||||||||
| Total operating expenses | 386,059 | 273,904 | — | 659,963 | ||||||||||||||||
| Operating Loss | (12,069 | ) | (268,973 | ) | — | (281,042 | ) | |||||||||||||
| Other Income (Expenses) | ||||||||||||||||||||
| Other Income (Expenses), net | (303 | ) | 17,252 | — | 16,949 | |||||||||||||||
| Net Loss | $ | (12,372 | ) | $ | (251,721 | ) | $ | — | $ | (264,093 | ) | |||||||||
| Net loss per Share | ||||||||||||||||||||
| Basic | $ | (0.00 | ) | $ | (0.11 | ) | $ | (0.02 | ) | |||||||||||
| Diluted | $ | (0.00 | ) | $ | (0.11 | ) | $ | (0.02 | ) | |||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||
| Basic | 13,175,838 | 2,300,000 | (2,300,000 | ) | (a) | 13,175,838 | ||||||||||||||
| Diluted | 13,415,151 | 2,300,000 | (2,300,000 | ) | (a) | 13,415,151 | ||||||||||||||
See accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Statements.
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DRIVEITAWAY HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2021
| Pro Forma | ||||||||||||||||||||
| Company | DIA | Adjustment | Notes | As Adjusted | ||||||||||||||||
| Operating Revenues | ||||||||||||||||||||
| Royalty Fees | $ | 773,592 | $ | — | $ | — | $ | 773,592 | ||||||||||||
| Initial Franchise Fees | 1,257,217 | — | — | 1,257,217 | ||||||||||||||||
| Technology Fees | 143,614 | — | — | 143,614 | ||||||||||||||||
| Merchandise Sales | 20,771 | — | — | 20,771 | ||||||||||||||||
| Insurance Revenue | — | 252,341 | — | 252,341 | ||||||||||||||||
| Rental Revenue | — | 535,928 | — | 535,928 | ||||||||||||||||
| Initial Fee Revenue | — | 25,181 | — | 25,181 | ||||||||||||||||
| Miscellaneous Revenue | — | 11,859 | — | 11,859 | ||||||||||||||||
| Vehicle Own Share | — | (481,215 | ) | — | (481,215 | ) | ||||||||||||||
| Driver and Dealer Insurance Cost | (225,503 | ) | (225,503 | ) | ||||||||||||||||
| Total operating revenues | 2,195,194 | 118,591 | — | 2,313,785 | ||||||||||||||||
| Cost of Goods Sold | — | 37,832 | — | 37,832 | ||||||||||||||||
| Gross Profit | 2,195,194 | 80,759 | — | 2,275,953 | ||||||||||||||||
| Operating Expenses | ||||||||||||||||||||
| Salaries, payroll taxes and compensation | 452,258 | 183,757 | — | 636,015 | ||||||||||||||||
| Professional, legal and consulting | 423,631 | — | — | 423,631 | ||||||||||||||||
| Loss on Legal Settlements | 290,000 | — | — | 290,000 | ||||||||||||||||
| Bad Debt Expense | (48,621 | ) | — | — | (48,621 | ) | ||||||||||||||
| Other General and Administrative | 293,831 | 467,729 | — | 761,560 | ||||||||||||||||
| Franchise commissions | 298,389 | — | — | 298,389 | ||||||||||||||||
| Depreciation and Amortization | 114,543 | — | — | 114,543 | ||||||||||||||||
| General Advertising | 45,997 | — | — | 45,997 | ||||||||||||||||
| Software Development | — | 81,157 | — | 81,157 | ||||||||||||||||
| Selling Expenses | — | 9,256 | 9,256 | |||||||||||||||||
| Total operating expenses | 1,870,028 | 741,899 | — | 2,611,927 | ||||||||||||||||
| Operating Income (Loss) | 325,166 | (661,140 | ) | — | (335,974 | ) | ||||||||||||||
| Other Income (Expenses) | ||||||||||||||||||||
| Other Expenses, net | (264 | ) | (14,544 | ) | — | (14,808 | ) | |||||||||||||
| Net Income (Loss) | $ | 324,902 | $ | (675,684 | ) | $ | — | $ | (350,782 | ) | ||||||||||
| Earnings (Loss) per Share | ||||||||||||||||||||
| Basic | $ | 0.02 | $ | (0.31 | ) | $ | (0.03 | ) | ||||||||||||
| Diluted | $ | 0.02 | $ | (0.31 | ) | $ | (0.03 | ) | ||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||
| Basic | 13,278,388 | 2,175,068 | (2,175,068 | ) | (a) | 13,278,388 | ||||||||||||||
| Diluted | 13,503,269 | 2,175,068 | (2,175,068 | ) | (a) | 13,503,269 | ||||||||||||||
See accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Statements.
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DRIVEITAWAY HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1 – Description of Transaction
On December 7, 2021, Company, DriveItAway, Inc., a Delaware corporation (“DIA”), and the existing shareholders of DIA executed an Agreement and Plan of Share Exchange (the “Share Exchange Agreement”), under which the Company would acquire all of the issued and outstanding common stock of DIA by issuing one share of Series A Convertible Preferred Stock (the “Series A Preferred”) of the Company for each outstanding share of DIA common stock (the “Share Exchange”). On February 24, 2022, closing of the Share Exchange occurred.
Each share of Series A Preferred is convertible into 33.94971 shares of common stock of the Company, which entitles the holders thereof to 85% of the Company’s common stock upon a conversion of all shares of Series A Preferred, determined on a fully-diluted basis, but prior to any shares issued or issuable as a result of any capital raising transaction occurring at or following the closing. In addition, each share of Series A Preferred is entitled to dividends and voting rights on an “as converted” basis with the common stockholders.
Upon closing of the Share Exchange, all of the existing members of the board of directors (the “Board”) of the Company resigned, except that Rod Whiton’s resignation was not effective until ten days after an information statement pursuant to Rule 14f-1 was mailed to shareholders. John Possumato, Adam Potash and Paul Patrizio were appointed to the Company’s Board, provided that the appointments of Messrs. Potash and Patrizio were not effective until ten days after an information statement pursuant to Rule 14f-1 was mailed to shareholders. Upon closing of the Share Exchange, Christopher Rego and Rod Whiton resigned as officers, and John Possumato was appointed chief executive officer and Adam Potash was appointed chief operating officer. Mike Elkin agreed to remain as chief financial officer of the Company.
DIA is the first national dealer focused mobility platform that enables car dealers to sell more vehicles in a seamless way through eCommerce, with its exclusive “Pay as You Go” app-based subscription program. DIA provides a comprehensive turn-key, solutions driven program with proprietary mobile technology and driver app, insurance coverages and training to get dealerships up and running quickly and profitably in emerging online sales opportunities. The company is planning to soon to expand its easy and transparent consumer app ‘subscription to ownership’ platform to enable entry level consumers to drive and acquire new Electric Vehicles. For further information, please see www.driveitaway.com.
The foregoing description of the Share Exchange does not purport to be complete and is qualified in its entirety by reference to the full text of the Share Exchange Agreement, which was filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on December 14, 2021.
Note 2 – Basis of Presentation
Pro Forma Presentation
The unaudited pro forma condensed combined financial information (“pro forma information”) has been prepared in accordance with Article 11, Pro Forma Financial Information, under Regulation S-X of the Securities and Exchange Act of 1934 (the “Exchange Act”), and is for informational purposes only. Certain reclassifications have been made to the historical statements of DIA to conform to the Company’s presentation, which are discussed in more detail in Note 5 – Reclassifications.
The unaudited pro forma condensed combined balance sheets as of September 30, 2021 and December 31, 2021 combine the historical consolidated balance sheets of the Company and DIA, giving effect to the Share Exchange as if it had occurred on October 1, 2020 and September 30, 2021, respectively. The unaudited pro forma condensed combined statements of income for the fiscal year ended September 30, 2021 and the three months ended December 31, 2021 combine the historical consolidated statements of income of the Company and DIA, giving effect to the Share Exchange as if it had occurred on October 1, 2020 and October 1, 2021, respectively.
The historical consolidated financial information has been adjusted in the pro forma information to give effect to pro forma events that are directly attributable to the Share Exchange, factually supportable, and with respect to the unaudited pro forma condensed combined statements of income, expected to have a continuing impact on the results of operations of the combined company of more than one year.
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The pro forma information has been prepared using the acquisition method of accounting in accordance with accounting principles generally accepted in the United States of America. Under the acquisition method of accounting, the Share Exchange is accounted for by recognizing the acquired assets, including separately identifiable intangible assets, and assumed liabilities at their acquisition-date fair values. Any excess of the purchase consideration over the acquisition-date fair values of these identifiable assets and liabilities is recognized as goodwill. The pro forma adjustments are based upon the assumptions and information available at the time of the preparation of this Form 8-K/A and may be subject to change. The Company will finalize the acquisition accounting within the required measurement period. Differences between these estimates of fair value and the final acquisition accounting may occur, and those differences could have a material impact on the pro forma information and the combined company’s future results of operations and financial position. At the time of the filing of this Form 8-K/A, the Company does not expect material changes to the assets acquired or liabilities assumed, with the exception of deferred tax assets and liabilities which were valued using preliminary assumptions.
The unaudited pro forma condensed combined statements of income do not reflect any potential cost savings or synergies that may be realized as a result of the Share Exchange and also do not reflect any integration-related costs to achieve those potential cost savings or synergies. Integration-related costs will continue to be expensed as incurred in the appropriate accounting periods following completion of the Share Exchange. Although the Company projects that cost savings and synergies will result from the Share Exchange, there can be no assurance that they will be achieved and such potential cost savings or synergies are subject to risks, uncertainties and other factors. For a detailed discussion of these risk factors, please refer to the risk, uncertainties and other factors described in the Company’s filings with the Securities and Exchange Commission. There were no material transactions between the Company and DIA during the periods presented in the pro forma information.
Accounting policies
The Company has completed the review of DIA’s detailed accounting policies and concluded that the differences between the accounting policies of the two companies are not material. The accounting policies used in the presentation of the pro forma information are those disclosed in the Company’s audited consolidated financial statements for the fiscal year ended September 30, 2021. Certain reclassifications of amounts contained in DIA’s historical financial statements have been made to conform to this presentation.
| Recapitalization |
The unaudited pro forma condensed balance sheets present what-if scenarios as if the Company and DIA had merged at the end of September 30, 2020. The adjusted shown in the equity section of the condensed balance sheets includes the Company’s eliminate the equity section of DIA in consolidation.
Note 3 – Pro Forma Adjustments
The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed combined financial information:
| a) | To adjust for the share exchange and elimination of DIA’s equity. |
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