10-Q: DriveItAway Holdings Reports Q1 Net Income Amidst Going Concern Doubts

DriveItAway Holdings, Inc. reported a net income of $548,868 for the quarter ended December 31, 2025, a 20% increase year-over-year, despite ongoing concerns about its ability to continue as a going concern and significant internal control weaknesses.

Summary

• Net income for the quarter ended December 31, 2025, was $548,868, representing a 20% increase from $456,463 in the same period of 2024.
• Revenues increased by 17% to $282,242 for the quarter ended December 31, 2025, compared to $241,946 in the prior year, primarily due to more vehicles available for rent.
• Gross profit decreased by 15% to $83,894, with the gross profit percentage falling from 41% in 2024 to 30% in 2025.
• Operating loss widened by 12% to $140,277 for the quarter ended December 31, 2025, compared to $125,612 in the prior year.
• Cash used in operating activities significantly increased to $176,881 for the quarter ended December 31, 2025, from $55,686 in the prior year.
• The company's working capital deficiency improved by 11% to $(7,974,944) as of December 31, 2025, from $(8,988,113) as of September 30, 2025.
• Cash balance increased by 125% to $89,743 as of December 31, 2025, from $39,930 as of September 30, 2025.
• Multiple promissory notes and secured convertible notes are in default, including $250,000 and $200,000 in secured convertible notes that matured in June 2024 and November 2024, respectively, and two promissory notes totaling $20,000 that matured in June 2023.
• The company refinanced several convertible notes with AJB Capital Investments, LLC into a new $1,150,000 note on January 22, 2026, maturing July 22, 2026.
• Management identified material weaknesses in internal control over financial reporting, including an inadequate control environment and lack of segregation of duties.
• The company continues to face substantial doubt about its ability to continue as a going concern due to insufficient revenue to cover operating costs and the ongoing need for additional capital.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a highly speculative filing. While the company reported net income and revenue growth, these positives are overshadowed by a declining gross profit margin, increasing operating cash burn, persistent going concern doubts, multiple debt defaults, and critical internal control weaknesses. The reliance on non-cash derivative gains for profitability and the continuous need for capital raises indicate significant underlying financial fragility.

Positives

• Reported net income of $548,868 for the quarter ended December 31, 2025, a 20% increase from $456,463 in the same period last year.
• Revenues increased by 17% to $282,242, driven by increased vehicle availability.
• Cash balance significantly improved by 125% to $89,743 as of December 31, 2025, from $39,930 as of September 30, 2025.
• Working capital deficiency decreased by $1,013,169 (11%) to $(7,974,944) as of December 31, 2025.
• Accumulated deficit reduced by $548,868 to $(9,912,751) as of December 31, 2025.
• Operating expenses remained relatively flat year-over-year, decreasing slightly by $132.
• Successful refinancing of multiple convertible notes with AJB Capital Investments, LLC into a new $1,150,000 note, extending maturity to July 22, 2026, and waiving default provisions on other notes.

Negatives

• Gross profit decreased by 15% to $83,894, and gross profit percentage declined from 41% to 30%.
• Operating loss widened by 12% to $140,277.
• Cash used in operating activities increased significantly to $176,881 from $55,686 in the prior year, indicating a worsening operational cash burn.
• The company has an accumulated deficit of $9,912,751 as of December 31, 2025.
• Several promissory notes and secured convertible notes are in default and have not been repaid, totaling $460,000 in principal for the secured convertible notes and $20,000 for promissory notes.
• Net income is heavily reliant on non-cash gains from derivative liability fair value changes ($981,354) to achieve profitability.
• High interest expense of $149,944 for the quarter.
• Total liabilities remain very high at $8,192,559 as of December 31, 2025, significantly exceeding total assets of $544,929.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to insufficient revenue to cover operating costs and the need for additional capital.
• The company's ability to continue operations and achieve profitability is dependent on obtaining additional financing through equity sales, traditional loans, or capital from management/stockholders, with no assurance of success.
• Multiple promissory notes and secured convertible notes are in default and have not been repaid, which could lead to further financial distress or legal action.
• Material weaknesses in internal control over financial reporting, including an inadequate control environment, lack of risk assessment procedures, no formal information/communication process, no monitoring activities, lack of policies for formal written approval for related party transactions, and insufficient controls to prevent/detect material misstatements or ensure data accuracy.
• The company's net income is heavily influenced by non-cash gains or losses on the change in fair value of derivative liabilities, which are subject to complex and subjective valuation models and can materially affect reported financial results.
• Management's plan to raise capital through 'sales of equity instruments' suggests potential future dilution for existing shareholders.
• Future revenue growth is dependent on a continuing return to historically normal automotive supply and demand levels and greater vehicle availability.

Future Outlook

The company anticipates a continuing return to more historically normal levels of automotive supply and demand in 2025, which is expected to translate into greater vehicle availability for its platform and a further increase in revenues. It also plans to expand its consumer app subscription to ownership platform to enable entry-level consumers to drive and acquire new Electric Vehicles. Management intends to raise additional funds through sales of equity instruments, traditional financing, and obtaining capital from management and significant stockholders to fund operations.

Management Comments

• "We anticipate that, in 2025 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."
• "Managements plan to obtain such resources for the Company includes: sales of equity instruments; traditional financing, such as loans; and obtaining capital from management and significant stockholders sufficient to meet its minimum operating expenses."
• "Management believes that despite our material weaknesses, our condensed consolidated financial statements for the quarter ended December 31, 2025 are fairly stated, in all material respects, in accordance with GAAP."

Industry Context

StockSavvy.ai notes that the automotive rental and subscription market, particularly for subprime and deep subprime candidates, presents both opportunities and challenges. The company's focus on expanding into Electric Vehicles (EVs) aligns with broader industry trends towards electrification and new mobility solutions. However, the capital-intensive nature of vehicle acquisition and fleet management, coupled with the risks associated with subprime lending, requires robust financial backing and operational efficiency. The reported increase in revenue due to more vehicle availability suggests a positive response to market demand, but the decline in gross profit percentage indicates potential pricing pressures or increased operational costs within a competitive landscape.

Comparison to Industry Standards

• StockSavvy.ai notes that the company's gross profit margin of 30% is significantly lower than established car rental companies like Enterprise Holdings (private, but industry estimates often place gross margins higher) or publicly traded peers like Avis Budget Group (CAR) or Hertz (HTZ), which typically aim for higher margins, often above 50% for rental revenue, depending on fleet utilization and pricing strategies.
• The substantial working capital deficiency and reliance on derivative gains for net income are not typical for healthy, established companies in the automotive or mobility sector, which usually demonstrate positive operating cash flows and strong balance sheets.
• The repeated defaults on promissory and convertible notes, even with subsequent refinancing, indicate a higher financial risk profile compared to industry leaders who maintain strong credit ratings and access to conventional, lower-cost financing.
• The identified material weaknesses in internal controls are a significant deviation from best practices in corporate governance and financial reporting, which are critical for investor confidence in any publicly traded company, especially when compared to larger, more mature industry players.

Corporate Governance

Legal Proceedings

• Currently not involved in any litigation that is believed to have a material adverse effect on financial condition or results of operations.

Related Party Transactions

• Owed related parties for an unsecured, non-interest-bearing advance of $26,380 as of December 31, 2025.
• Promissory notes payable to related parties, in default, totaled $21,250 as of December 31, 2025.
• During the three months ended December 31, 2025, recorded related party interest expense of $1,222.
• Issued 1,250,000 shares of common stock to a related party in satisfaction of a $21,250 note payable and $3,750 of accrued interest, totaling $25,000.

Stakeholder Impact

• Shareholders: Potential for significant dilution from future equity raises and warrant exercises. The going concern warning and internal control weaknesses pose substantial risks to investment value.
• Creditors: Multiple debt instruments are in default, indicating high credit risk. While some notes were refinanced, the underlying financial instability remains a concern.
• Customers: The company's ability to expand its platform and offer new EV subscription services depends on its financial stability and access to capital, which could impact service continuity or expansion plans.
• Employees: The company's going concern status and need for additional capital could create uncertainty regarding job security and future growth opportunities.

Next Steps

• Obtain additional capital through sales of equity instruments, traditional financing, or capital from management and significant stockholders.
• Expand the consumer app subscription to ownership platform to enable entry-level consumers to drive and acquire new Electric Vehicles.
• Address the identified material weaknesses in internal control over financial reporting.
• The new $1,150,000 convertible promissory note with AJB Capital Investments, LLC matures on July 22, 2026.
• The original AJB Note ($750,000 principal) has a maturity date extended to February 28, 2026.

Key Dates

Recommendation

The company's financial position is highly precarious, marked by a persistent going concern warning, significant accumulated deficit, and increasing cash burn from operations. While net income was reported, it was heavily influenced by non-cash derivative gains, masking operational losses and declining gross margins. The numerous debt defaults and critical internal control weaknesses indicate severe governance and financial management issues. Despite recent refinancing efforts, the fundamental challenges of generating sufficient revenue to cover costs and securing sustainable financing remain unaddressed, making the stock a high-risk investment with significant downside potential.

Keywords

DriveItAway Holdings, DIA, 10-Q, Quarterly Report, Financial Results, Automotive Rental, Pay-As-You-Go, Subscription Program, Electric Vehicles, EV, Going Concern, Debt Default, Convertible Notes, Derivative Liability, Internal Controls, Capital Raise, SEC Filing, Financial Performance, Mobility Platform, Car Dealers