Bantec, Inc., Form 10-K, fiscal year ended September 30, 2023

Summary

Bantec, Inc.'s annual report on Form 10-K for its fiscal year ended September 30, filed with the U.S. Securities and Exchange Commission under Commission File Number 000-55789. The cover page puts the market value of voting common stock owned by non-affiliates at approximately $6,900 as of March 31, 2023 and reports 10,276,063 shares of common stock outstanding as of February 2, 2024. A table of contents lists the standard parts of the report, from Item 1 Business and Item 1A Risk Factors onward. The report is signed by Michael Bannon as Chief Executive Officer and Chief Financial Officer, and by directors Michael Bannon and Rodrigo Kuntz Rangel.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED SEPTEMBER 30 , 2023

☐ TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ______ TO _____

COMMISSION FILE NUMBER: 000-55789

BANTEC, INC.

(Exact name of Registrant as specified in its charter)

Delaware | 30-0967943
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)

37 Main Street , Sparta NJ 07871

(Address of principal executive offices)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING
AREA CODE: (203) 220-2296

SECURITIES REGISTERED PURSUANT TO SECTION 12(b)
OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g)
OF THE ACT:

COMMON STOCK, $0.0001 PAR VALUE

(Title of Class)

Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant
(1) has filed all reports required to be filed be Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to
the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act,
indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are
restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers
during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting common
stock held by non-affiliates of the registrant (assuming officers and directors are affiliates) was approximately $ 6,900 as of March 31,
2023, computed on the basis of the closing price on such date.

As of February 2, 2024, there were 10,276,063 shares of the registrant’s Common Stock outstanding.

FORWARD LOOKING STATEMENTS

The Private Securities Litigation Reform Act of
1995 provides a “safe harbor” for forward-looking statements, which are identified by the words “believe,” “expect,”
“anticipate,” “intend,” “plan” and similar expressions. The statements contained herein which are
not based on historical facts are forward-looking statements that involve known and unknown risks and uncertainties that could significantly
affect our actual results, performance or achievements in the future and, accordingly, such actual results, performance or achievements
may materially differ from those expressed or implied in any forward-looking statements made by or on our behalf. These risks and uncertainties
include, but are not limited to, risks associated with our ability to successfully develop and protect our intellectual property, our
ability to raise additional capital to fund future operations and compliance with applicable laws and changes in such laws and the administration
of such laws. These risks are described below and in “Item 1. Business,” “Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” and “Item 7A. Quantitative and Qualitative Disclosures About Market
Risk” included in this Form 10-K. Readers are cautioned not to place undue reliance on these forward-looking statements which speak
only as of the date the statements were made.

TABLE OF CONTENTS

PART I

ITEM 1. BUSINESS

Organizational History

We were formed in Delaware
on June 26, 1972 as OCR Corporation, underwent a series of name changes and businesses and on April 25, 2008 changed our name to Texas
Wyoming Drilling, Inc. On January 26, 2016, we entered into an Equity Exchange Agreement (the “EEA”) whereby we acquired all
of the issued and outstanding membership interests in Drone USA, LLC in exchange for 440 shares of our common stock and 250 shares of
Series A preferred stock, subsequent and pursuant to our completing a 1-for-150 share reverse stock split on all issued and outstanding
common stock which resulted in total issued and outstanding shares of common stock of 6 immediately prior to this issuance. In connection
with the EEA, 1 share of common stock were relinquished and an additional 44 shares of common stock were issued pursuant to a previous
settlement agreement. In connection with the EEA, effective January 26, 2016, we accepted the resignation of Margaret Cadena, the former
Chief Executive Officer and Board member, and Richard Kugelman, Dr. Robert Michet, and Dr. David Durkin, the remaining former officers
and Board members, and appointed Michael Bannon as Chief Executive Officer, President, Chairman and Board member and the former Chief
Financial Officer of Drone USA, LLC, as Secretary, Treasurer, and Board member. Our former CFO resigned as our CFO and as a member of
our Board on July 10, 2017 and Michael Bannon was appointed as CFO. On May 19, 2016, we changed our name to Drone USA, Inc., we changed
our ticker symbol to DRUS, and we completed a 1-for-12 share reverse stock split on all issued and outstanding common stock, with a record
date of May 24, 2016, which resulted in total issued and outstanding shares of common stock of 41 on June 17, 2016 when all round lot
issuances were completed. The Company notified shareholders on May 30, 2018 that it intended to increase the authorized shares from 200,000
to 1,500,000 and change the name to Bantek Inc. On February 24, 2019, the company notified the shareholders that it intended to increase
the authorized shares from 1,500,000,000 to 6,000,000,000 shares. Bantek, Inc. filed a change of name to Bantec, Inc. and to effect a
reverse stock split (of the common stock) of 1 for 1,000 on September 16, 2019, which became effective on February 10, 2020.

On February 14, 2022 the Company’s
shareholders approved an increase in authorized common stock to 12,000,000,000 from 6,000,000,000, which became effective the same day.

All share and per share data
have been retrospectively adjusted for the effects of all reverse splits.

We are currently traded on
the OTC Pink market under the symbol BANT.

On June 1, 2016, we entered
into an agreement with BRVANT Technologic Solutions (“BRVANT”), a company in Brazil that develops and manufactures UAV systems,
embedded systems and simulators for commercial and military customers. We acquired exclusive rights to BRVANT’s UAV technology and
intellectual property relating to its UAV technology. As consideration for the agreement, Dr. Rodrigo Kuntz Rangel, BRVANT’s CEO,
was appointed to the position of Chief Technology Officer (CTO) and issued a stock option grant for 2 shares of common stock in Drone
USA. We have the option to acquire ownership of all outstanding capital stock of BRVANT for additional consideration of $1 million, but
we have not made a decision to make that purchase at this time.

On September 9, 2016, Howco
Distributing Co., (“Howco”) became a wholly owned subsidiary of Bantec, Inc. We acquired all of its issued and outstanding
shares held by Paul Charles (“Chuck”) Joy and Kathryn B. Joy, the founders and officers of Howco, for $3,500,000, a warrant
for 0.50 shares of Bantec, Inc. common stock with an exercise price of $10,000 per share, and earnout consideration, the funds for which
were received from the TCA loan discussed below. We paid $2,600,000 in cash and issued a note to the sellers for $900,000. Howco is a
supplier of spare and replacement parts to the United States Federal Government and commercial customers worldwide with expertise in Defense
Logistics Agency, TACOM, NECO and other Department of Defense acquisition groups. Howco understands the entire contract and administration
management process for Federal Government contracts and supply chain logistics for its Federal Government customers as well as prime contractors
with Federal Government contracts.

For the year ended September 30, 2023 and 2022,
one customer accounted for approximately 85% and 78% of Howco’s total sales, respectively. Howco’s dependence on one significant
customer, is a risk for its ability to maintain or increase its future revenues since the loss of one or both could have significant adverse
financial consequences for Howco and Bantec, Inc.

Growth Strategy

Our parent company intends
to focus on raising capital to fund our expansion into the distribution, manufacturing, service industries. We view acquisitions as our
primary growth vehicle, with an eye on franchising some of these acquisitions. We are looking for companies that will ultimately complement
each other where we can cross sell our customers a wide variety of goods and services. For example, we are looking to purchase a distributor
or manufacturer that will enable us to sell new products to the US government through our subsidiary Howco.

Drone Sales

Through our Drone USA website
(droneusainc.com) and through limited direct selling efforts we offer police, fire, the US government drone programs. Our drone programs
constitute selling our customers drones, drone accessories, accident reconstruction software, drone training, drone services, counter-drone
technology, certificates of authorization (COAs) and Waivers. The competition in this market is relentless and intense. We are evaluating
whether or not we will exit the market. The only way to compete in this market is through a low cost relationship based strategy. We may
look to hire a small sales team to grow the company organically, franchise it or close it down altogether.

Acquisitions

We are looking to acquire
companies in the manufacturing, distributing and/or service industries. We will look for companies we can grow organically or through
franchise efforts. When acquired, we will initially either rebrand as a Bantec labeled company like found in the list below or let them
run and remain as they are like we did with Howco Distributing Co. These are our potential and intended divisions:

Bantec Sanitizing

Currently we are looking to
acquire a commercial cleaning company that we can either rebrand to Bantec Sanitizing or continue on with purchased brand name and ultimately
franchise the newly acquired commercial cleaning company. In our post-covid era, we believe sanitizing offices, hospitals, universities,
and other facilities will remain a priority for businesses looking to ensure healthy workforces.

Howco’s Business

Howco is a premier supplier
of spare and replacement parts to a wide variety of Federal Government agencies, U.S. military prime contractors and commercial customers
worldwide. Founded in 1990 and located in Vancouver, Washington, Howco’s services encompass bid solicitation, contract management,
packaging and logistics for construction, transportation, mining and heavy equipment spare and replacement parts to customers worldwide
utilizing a wide variety of supply chain solutions. Howco was the winner of the 2012 United States’ Department of Defense Logistics
Agency’s Bronze Supplier Award. Howco reported revenues of approximately $2.3 million and $2.3 million, and net (loss) of approximately
($199,000) and ($198,000), for the years ended September 30, 2023 and 2022, respectively.

Howco’s Government Services Contracts

Howco enters into various
types of contracts with our customers, such as Indefinite Delivery, Indefinite Quantity (IDIQ), Cost-Plus-Fixed-Fee (CPFF) Level of Effort
(LOE), Cost-Plus-Fixed-Fee (CPFF) Completion, Cost-reimbursement (CR), Firm-Fixed-Price (FFP), Fixed-Price Incentive (FPI) and Time-and-Materials
(T&M). The majority of Howco’s revenues are derived from FFP contracts.

IDIQ contracts provide for
an indefinite quantity of services or stated limits of supplies for a fixed period. They are used when the customer cannot determine,
above a specified minimum, the precise quantities of supplies or services that the government will require during the contract period.
IDIQs help streamline the contract process and speed service delivery. IDIQ contracts are most often used for service contracts and architect-engineering
services. Awards are usually for base years and option years. The customer places delivery orders (for supplies) or task orders (for services)
against a basic contract for individual requirements. Minimum and maximum quantity limits are specified in the basic contract as either
a number of units (for supplies) or as dollar values (for services).

CPFF LOE contracts will be
issued when the scope of work is defined in general terms requiring only that the contractor devote a specified LOE for a stated time
period. A CPFF completion contract will be issued when the scope of work defines a definite goal or target which leads to an end product
deliverable (e.g., a final report of research accomplishing the goal or target).

CR contracts provide for payment
of allowable incurred costs, to the extent prescribed in the contract. These contracts establish an estimate of total cost for the purpose
of obligating funds and establishing a ceiling that the contractor may not exceed (except at its own risk) without the approval of the
contracting officer and are suitable for use only when uncertainties involved in contract performance do not permit costs to be estimated
with sufficient accuracy to use any type of fixed-price contract.

FFP contract will be issued
when acquiring supplies or services on the basis of definite or detailed specifications and fair and reasonable prices can be established
at the outset.

FPI target delivery contract
will be issued when acquiring supplies or services on the basis of reasonably definite or detailed specifications and cost can be reasonably
predicted at the outset wherein the cost risk will be shared. A firm target cost, target profit, and profit adjustment formula will be
negotiated to provide a fair and reasonable incentive and a ceiling that provides for the contractor to assume an appropriate share of
the risk.

T&M contracts provide
for acquiring supplies or services on the basis of (i) direct labor hours at specified fixed hourly rates that include wages, overhead,
general and administrative expenses, and profit; and (ii) actual cost for materials. A customer may use this contract when it is not possible
at the time of placing the contract to estimate accurately the extent or duration of the work or to anticipate costs with any reasonable
degree of confidence.

Market Size

According to published reports
one-third of the DoD budget request, $247.4 billion, is for procurement and research, development, test, and evaluation (“RDT&E”)
in 2020. The U.S. Government spends a portion of this budget on the shipping of replacement parts annually.

Intellectual Property

We review each of our intellectual
properties and make a determination as to the best means to protect such property, by trademark, by copyright, by patent, by trade secret,
or otherwise. We believe that we have taken appropriate steps to protect our intellectual properties, based on our evaluation of the factors
unique to each such property, but cannot guarantee that this is the case.

Regulatory Matters

The use of unmanned aerial
vehicles for commercial purposes is governed by the Federal Aviation Administration (“FAA”). On August 29, 2016, the new FAA
rules took effect for commercial use of small drones. Under the FAA rules commercial drones must be under 55 pounds and be registered
with the FAA. The rules require a new “remote pilot certificate”, daylight-only operations 30 minutes before official sunrise
and 30 minutes after official sunset, a requirement that all flights travel at a maximum groundspeed of 100 miles per hour remain, below
400 feet or within 400 feet of a structure and yield the right of way to other aircraft. Under the FAA rules, drone pilots must be at
least 16 years old or be supervised by an adult with a remote pilot certificate. The pilot must also maintain “visual line of sight”
with the drone at all times, among other requirements. The new rules also require that any drone-related incident that results in at least
$500 worth of damage or causes serious injury be reported to the FAA within 10 days. The new restrictions can be waived, but pilots will
need to apply directly to the FAA for an exemption and/or a waiver.

Competition

Drone USA LLC

The competition for Drone
USA consists mainly of resellers of drones who sell to law enforcement, fire departments, security companies and the U.S. government.
These competitors primarily are Amazon, Best Buy, Drone Nerds, SYNNEX and other distributors of drones. On the training front our competitors
consist of SMG and other training suppliers.

Howco

The business of supplying
spare and replacement parts to Federal Government agencies, U.S. military prime contractors and commercial customers is very competitive.
Among our U.S. based competitors are JGILS that supplies parts manufactured by Fairbanks Morse/Coltec and other brands, Ohio Cat that
supplies Caterpillar parts, and Kampi Components and Brighton Cromwell, both of which compete with us in several brands.

Bantec Construction & Environmental

In the construction and environmental
industries located in the tristate area there is a tremendous amount of competition. In all three states, we will encounter competition
from both small and large contractors, and from union and non-union contractors. In times of economic downturns, the competition in these
industries becomes extremely intense. As result of economic downturn, companies begin lowering their bids to keep office staffs employed.
The worse the economy gets, the worse the competition gets.

Employees

We have seven full-time employees,
one with Bantec and six are with Howco, along with two part-time employees with Howco. We have no labor union contracts and believe relations
with our employees are satisfactory.

Emerging Growth Company

We are and we will remain
an “emerging growth company” as defined under The Jumpstart Our Business Startups Act (the “JOBS Act”), until
the earliest to occur of (i) the last day of the fiscal year during which our total annual revenues equal or exceed $1 billion (subject
to adjustment for inflation), (ii) the last day of the fiscal year following the fifth anniversary of our initial public offering, (iii)
the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities, or (iv)
the date on which we are deemed a “large accelerated filer” (with at least $700 million in public float) under the Securities
and Exchange Act of 1934, as amended (the “Exchange Act”).

As an “emerging growth
company”, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to
public companies. These provisions include:

● | only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis” disclosure;
● | reduced disclosure about our executive compensation arrangements;
● | no requirement that we hold non-binding advisory votes on executive compensation or golden parachute arrangements; and
● | exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

We have taken advantage of
some of these reduced burdens, and thus the information we provide stockholders may be different from what you might receive from other
public companies in which you hold shares.

In addition, Section 107 of
the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B)
of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the
adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing to
“opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on
the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides
that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Notwithstanding the above,
we are also currently a “smaller reporting company”, meaning that we are not an investment company, an asset-backed issuer,
or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $250 million
and annual revenues of less than $100 million during the most recently completed fiscal year. In the event that we are still considered
a “smaller reporting company”, at such time as we cease being an “emerging growth company”, the disclosure we
will be required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either
an “emerging growth company” or a “smaller reporting company”. Specifically, similar to “emerging growth
companies”, “smaller reporting companies” are able to provide simplified executive compensation disclosures in their
filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act (“SOX”) requiring that independent registered
public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain
other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of
audited financial statements in annual reports.

Item 1A. Risk Factors.

RISKS RELATING TO OUR BUSINESS AND OUR INDUSTRY

We have an extremely limited operating history.

With respect to the manufacturing
and sale of drones, we are currently a start-up company without any current material sales of our drone products. There is no historical
basis to make judgments on the capabilities associated with our enterprise, management and/or employees’ ability to produce a commercial
drone product leading to a profitable company beyond what we have acquired through our purchase of Howco which is in the business of spare
parts and replacement parts.

We will need to raise additional capital.

Given the limited revenues
from sales of our drone products to date, we expect that Bantec, Inc. will need to obtain additional operating capital either through
equity offerings, debt offerings or a combination thereof, in the future. In addition, if, in the future, we are not capable of generating
sufficient revenues from operations and its capital resources are insufficient to meet future requirements, we may have to raise funds
to allow us to continue to commercialize, market and sell our products. We presently have no committed sources of funding and we have
not entered into any agreements or arrangements with respect to our fundraising efforts. We cannot be certain that funding will be available
on acceptable terms or at all. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience
significant dilution. Any debt financing, if available, may involve restrictive covenants that may impact our ability to conduct business.
If we are unable to raise additional capital if required or on acceptable terms, we may have to significantly scale back, delay or discontinue
the development and/or commercialization of our drone products, restrict our operations or obtain funds by entering into agreements on
unattractive terms.

Our financial status raises doubt about
our ability to continue as a going concern.

Our
cash and cash equivalents were $35,443 at September 30, 2023. For the year ended September 30, 2023, the Company incurred a net loss of
$2,225,334 and used cash in operations of $639,392. The working capital deficit, stockholders’ deficit and accumulated deficit was
$7,985,156, $17,256,434 and $37,855,520, respectively, at September 30, 2023. Furthermore, on September 6, 2019, we received a default
notice on our payment obligations under the senior secured credit facility agreement with TCA, defaulted on our note payable – Seller
in September 2017 and have defaulted on other promissory notes and as of September 30, 2023, we have received several demands for payment
of past due amounts for services from several consultants and service providers. These matters raise substantial doubt about our ability
to continue as a going concern for a period of twelve months from the issuance date of our consolidated financial statements included
elsewhere in this report. Our ability to continue as a going concern is dependent upon management’s ability to further implement
its business plan and raise additional capital as needed from the sales of stock or debt. We continue to implement cost-cutting measures,
raise equity, restructure or repay our secured obligations and structure payment plans, if necessary, with vendors and service providers
who are owed money. The accompanying consolidated financial statements elsewhere in this report do not include any adjustments that might
be required should we be unable to continue as a going concern. We continue to incur significant operating losses, and management expects
that significant on-going operating expenditures will be necessary to successfully implement our business plan and develop and market
our products. Implementation of our plans and our ability to continue as a going concern will depend upon our ability to market our drone
technology, continue with sales of equipment spare and replacement parts to the U.S. Government and commercial customers and raise additional
capital.

Management believes that we
have access to capital resources through possible public or private equity offerings, exchange offers, debt financings, corporate collaborations
or other means. On September 29, 2022 our current form S-1 became effective and since then we had issued shares for cash. Cash proceeds
were utilized to reduce debt and fund current and planned operations. In addition, we continue to explore opportunities to strategically
monetize our technology and our services, although there can be no assurance that we will be successful with such plans. We have historically
been able to raise capital through equity and debt offerings, although no assurance can be provided that we will continue to be successful
in the future. Additionally, on November 29, 2023 our recent current form S-1 became effective but we have not raised equity offerings
under this recent S-1 offering. No shares have been issued to date due to the floor price. If we are unable to raise sufficient capital
through 2024 or otherwise, we may be required to severely curtail, or even to cease, our operations.

Most of our management has limited experience
in the drone industry

With the exception of our
CTO, our management has limited experience in aerospace, aviation and unmanned aerial systems manufacturing sectors. While our management
has considerable general management experience, some have specialized knowledge and abilities in the unmanned aerial industry, but none
of the managers have experience managing a business that manufacturers and markets aircrafts. The management will rely on contracted individuals
with the specified skills, qualifications and knowledge related to aircraft manufacturing and marketing, without impacting the overall
budget for compensation.

Potential product liabilities may harm our
operating results.

As a reseller of UAV products,
and with aircrafts and aviation sector companies being scrutinized heavily, we may be subject to FAA mandates and/or regulations, which
could result in potential law suits. Defects in our product may lead to life, health and property risks. Currently, the unmanned aerial
systems industry lacks a formative insurance market. It is possible that our operations could be adversely affected by the costs and disruptions
of responding to such liabilities even if insurance against liabilities is available.

If our proposed marketing efforts are unsuccessful,
we may not earn enough revenue to become profitable .

Our success will depend on
investment in marketing resources and the successful implementation of our marketing plan. Our marketing plan may include attendance at
trade shows and making private demonstrations, advertising and promotional materials and advertising campaigns in print and/or broadcast
media. We cannot give any assurance that our marketing efforts will be successful. If they are not, revenue may not be sufficient to cover
our fixed costs and we may not become profitable.

We may be unable to respond to rapid technological
changes and innovative products.

In a constantly changing and
innovative technology market with frequent new product introductions, enhancement and modifications, we may be forced to implement and
develop new technologies into our products for anticipation of changing customer requirements that may significantly impact costs in order
to retain or enhance our competitive position in existing and new markets.

There is intense competition in our market.

The aerospace and aviation
markets are very saturated and intensely competitive. By entering this sector, our management is aware that failure to compete with direct
market leading companies and new entrants will affect overall business and the product. Therefore, the faster innovative applications
and technologies are implemented to the developed product; the better the pricing and commercial business strategies management will be
able to offer to businesses purchasing drones. Competitive factors in this market are all related to product performance, price, customer
service, training platforms, reputation, sales and marketing effectiveness.

Future acquisitions may be unsuccessful
and may negatively affect operations and financial condition .

The integration of businesses,
personnel, product lines and technologies can be difficult, time consuming and subject to significant risks. Any difficulties could disrupt
our ongoing business, distract our management and employees, increase our expenses and decrease our revenue.

We may be unable to protect our intellectual
property.

Our ability to protect proprietary
technology and operate without infringing the rights of others will allow our UAV business to compete successfully and achieve future
revenue growth. If we are unable to protect proprietary technology or infringe upon the rights of others, it could negatively impact our
operating results.

We will be reliant on information systems,
electronic communication systems, and internal and external data and applications.

Business operations and manufacturing
are dependent on computer hardware, software and communication systems. Information systems are vulnerable and are subject to failures
that could create internal or external events that will affect our business and operations. Management is mindful of these risks since
we have developed a strategy by adopting third party information technology and system practices. Any breach of security could disrupt
our overall UAV business and result in various effects in operations and efficiency. UAVs could encounter increased overhead costs, loss
of important information and data, which may also hinder our reputation.

If we lose our key personnel or are unable
to hire additional personnel, we will have trouble growing our business .

We depend to a large extent
on the abilities of our key management. The loss of any key employee or our inability to attract or retain other qualified employees could
seriously impair our results of operations and financial condition.

Our future success depends
on our ability to attract, retain and motivate highly skilled technical, marketing, management, accounting and administrative personnel.
We plan to hire additional personnel in all areas of our business as we grow. Competition for qualified personnel is intense. As a result,
we may be unable to attract and retain qualified personnel. We may also be unable to retain the employees that we currently employ or
to attract additional technical personnel. The failure to retain and attract the necessary personnel could seriously harm our business,
financial condition and results of operations.

Because our executive officers collectively
own a majority of our outstanding shares, they can elect our directors without regard to other stockholders’ votes.

Our CEO, Michael Bannon, has
majority voting control through his ownership of 250 shares of Series A preferred stock. As a result, he may elect all of our directors,
who in turn elect all executive officers, without regard to the votes of other stockholders. The voting control of Mr. Bannon gives him
the ability to authorize change-in-control transactions, amendments to our certificate of incorporation and other matters that may not
be in the best interests of our minority stockholders. In this regard, Mr. Bannon has absolute control over our management and affairs.

We face a higher risk of failure because
we cannot accurately forecast our future revenues and operating results.

The rapidly changing nature
of the markets in which we compete makes it difficult to accurately forecast our revenues and operating results. Furthermore, we expect
our revenues and operating results to fluctuate in the future due to a number of factors, including the following:

● | the timing of sales of our UAV products;
● | unexpected delays in introducing new UAV products;
● | increased expenses, whether related to sales and marketing, or administration;
● | costs related to anticipated acquisitions of businesses.

Our UAV products may suffer defects.

Products may suffer defects
that may lead to substantial product liability, damage or warranty claims. Given our complex platforms and systems within our product,
errors and defects may be related to flight and/or communications. Such an event could result in significant expenses arising from product
liability, warranty claims, and reduce sales, which could have a material adverse effect on business, financial condition and results
of operations.

Our products are subject to FAA regulations.

Compliance with the new FAA
regulations by businesses interested in using UAVs may negatively affect commercial usage of our UAVs, which will adversely affect our
operations and overall sales.

Since we intend to pursue acquisitions,
investments or other strategic relationships or alliances, this will consume significant resources, may be unsuccessful and could dilute
holders of our common stock.

Acquisitions, investments
and other strategic relationships and alliances, if pursued, may involve significant cash expenditures, debt incurrence, operating losses,
and expenses that could have a material adverse effect on our financial condition and operating results. Acquisitions involve numerous
other risks, including:

● | Diversion of management time and attention from daily operations;
● | Difficulties integrating acquired businesses, technologies and personnel into our business;
● | Inability to obtain required regulatory approvals and/or required financing on favorable terms;
● | Entry into new markets in which we have little previous experience;
● | Potential loss of our key employees, key contractual relationships or key customers of acquired companies; and
● | Assumption of the liabilities and exposure to unforeseen liabilities of acquired companies.

If these types of transactions
are pursued, it may be difficult for us to complete these transactions quickly and to integrate these acquired operations efficiently
into its current business operations. Any acquisitions, investments or other strategic relationships and alliances by us may ultimately
harm our business and financial condition. In addition, future acquisitions may not be as successful as originally anticipated and may
result in impairment charges.

We may be required to record a significant
charge to earnings as we are required to reassess our goodwill or other intangible assets arising from acquisitions.

We are required under U.S.
GAAP to review our intangible assets, including goodwill for impairment when events or changes in circumstances indicate the carrying
value may not be recoverable. Goodwill is required to be tested for impairment annually or more frequently if facts and circumstances
warrant a review. Factors that may be considered a change in circumstances indicating that the carrying value of our amortizable intangible
assets may not be recoverable include a decline in stock price and market capitalization and slower or declining growth rates in our industry.
We may be required to record a significant charge to earnings in our financial statements during the period in which any impairment of
our goodwill or amortizable intangible assets is determined. During the year ended September 30, 2019, the Company determined that the
carrying value of Goodwill and other intangible assets related to the acquisition Howco were impaired and as a result, charges covering
the entire carrying value of those assets was taken into operating results.

Our products may be subject to export regulations;
government agencies may require terms that are disadvantageous to our business.

Our business model contemplates
working with law enforcement and possibly military agencies. Because we may sell our products to these customers, we may need to register
with the U.S. Department of State under its International Trafficking in Arms Regulations (ITAR). If we choose to sell our products overseas,
we may be required to obtain a license from the State Department or face substantial fines or, in an extreme case, a shutdown of our business.
Additionally, government agencies typically require provisions in their contracts that allow them to terminate agreements or change purchasing
terms in their discretion without notice. Such contractual provisions, if exercised by our customers in the future, could have a material
adverse effect on our cash flow and business performance.

Risks Associated with the Construction,
Environmental Cleaning and Sanitizing Industry

Estimating:

We and/or franchisees may
estimate projects incorrectly and ultimately lose money. Depending on the scope and price of the project, this loss could be extensive
(in hundreds of thousands or possibly millions).

Regulations:

In the Environmental Cleaning
and Sanitizing we must comply with federal and state regulations. Federal OSHA/EPA inspectors or state Safety/Environmental inspectors
might visit our projects and possibly find violations and ultimately levy thousands of dollars in fines on us. Being fined could also
damage our reputation with our customers.

Workman’s Compensation

Our employees could potentially
suffer work-related injuries resulting in future increased insurance premiums. An injured employee could potentially sue our customers
via a third-party lawsuits. If that occurs, and depending on our purchase order or contract, our insurance company or our company could
be forced to pay our customer’s settlement costs plus attorneys’ fees.

Theft

By storing equipment and supplies
on project jobsites for long periods of time, we may become a victim of theft.

Collections

We may encounter customers
who refuse to pay us. We will have to hire attorneys and expend a lot of management’s time collecting money from deadbeat customers.

Poor Workmanship

We may poorly perform on a
project and be forced to correct our work ultimately costing us more money than we initially estimated.

Bonding

Larger projects may require
bid and performance bonds. Due to our financial situation, we may find it difficult to find a company that will provide us with the necessary
bonding capacity to bid larger projects.

Economic Downturn

If the northeast economy begins
to go into recession, we may find it difficult to secure enough work to keep our construction businesses going. It appears the economy
is peaking and will ultimately slide into a recession.

Risks Related to Consolidated Operations

Since we have acquired Howco and changed
its focus to higher margin business resulting in sales declines, it is difficult for potential investors to evaluate our future consolidated
business.

We completed the Howco acquisition
on September 9, 2016. Therefore, our limited consistent operating history makes it difficult for potential investors to evaluate our business
or prospective operations and your purchase of our securities. Sales declines due to efforts to increase gross margin also impacted cash
flow which in turn caused liquidity issues. The result has been that some vendors only accept purchase orders on cash on deliver basis.
Therefore, we are subject to the risks inherent in the financing, expenditures, complications and delays inherent in a newly combined
business. These risks are described below under the risk factor titled “Any future acquisitions that we may make could disrupt
our business, cause dilution to our stockholders and harm our business, financial condition or operating results.”

Failure to manage or protect growth may
be detrimental to our business because our infrastructure may not be adequate for expansion.

The Howco acquisition and
any planned acquisition require a substantial expansion of our systems, workforce and facilities. We may fail to adequately manage our
anticipated future growth. The substantial growth in our operations as a result of the Howco and planned acquisitions is expected to place
a significant strain on our administrative, financial and operational resources, and increase demands on our management and on our operational
and administrative systems, controls and other resources. Howco’s growth strategy includes broadening its service and product offerings,
implementing an aggressive marketing plan and employing leading technologies. There can be no assurance that our systems, procedures and
controls will be adequate to support our operations as they expand. We cannot assure you that our existing personnel, systems, procedures
or controls will be adequate to support our operations in the future or that we will be able to successfully implement appropriate measures
consistent with our growth strategy. As part of this growth, we may have to implement new operational and financial systems, procedures
and controls to expand, train and manage our employee base, and maintain close coordination among our staff. We cannot guarantee that
we will be able to do so, or that if we are able to do so, we will be able to effectively integrate them into our existing staff and systems.

To the extent we acquire other
businesses, we will also need to integrate and assimilate new operations, technologies and personnel. The integration of new personnel
will continue to result in some disruption to ongoing operations. The ability to effectively manage growth in a rapidly evolving market
requires effective planning and management processes. We will need to continue to improve operational, financial and managerial controls,
reporting systems and procedures, and will need to continue to expand, train and manage our work force. There can be no assurance that
we would be able to accomplish such an expansion on a timely basis. If we are unable to affect any required expansion and are unable to
perform under contracts on a timely and satisfactory basis, the reputation and eligibility to secure additional contracts in the future
could be damaged. The failure to perform could also result in a contract terminations and significant liability. Any such result would
adversely affect our business and financial condition.

We will need to increase the size of our
organization, and we may experience difficulties in managing growth, which would hurt our financial performance.

In addition to employees hired
from Howco and any other companies which we may acquire, we will need to expand our employee infrastructure for managerial, operational,
financial and other resources at the parent company level. Future growth will impose significant added responsibilities on members of
management, including the need to identify, recruit, maintain and integrate additional employees. Our future financial performance and
our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage any future
growth effectively.

In order to manage our future
growth, we will need to continue to improve our management, operational and financial controls and our reporting systems and procedures.
All of these measures will require significant expenditures and will demand the attention of management. If we do not continue to enhance
our management personnel and our operational and financial systems and controls in response to growth in our business, we could experience
operating inefficiencies that could impair our competitive position and could increase our costs more than we had planned. If we are unable
to manage growth effectively, our business, financial condition and operating results could be adversely affected.

Our business depends on experienced and
skilled personnel, and if we are unable to attract and integrate skilled personnel, it will be more difficult for us to manage our business
and complete contracts.

The success of our business
depends on the skill of our personnel. Accordingly, it is critical that we maintain, and continue to build, a highly experienced management
team and specialized workforce, including sales professionals. Competition for personnel, particularly those with expertise in government
consulting and a security clearance is high, and identifying candidates with the appropriate qualifications can be costly and difficult.
We may not be able to hire the necessary personnel to implement our business strategy given our anticipated hiring needs, or we may need
to provide higher compensation or more training to our personnel than we currently anticipate. In addition, our ability to recruit, hire
and indirectly deploy former employees of the U.S. Government is subject to complex laws and regulations, which may serve as an impediment
to our ability to attract such former employees.

Our business is labor intensive
and our success depends on our ability to attract, retain, train and motivate highly skilled employees, including employees who may become
part of our organization in connection with future acquisitions. The increase in demand for consulting, technology integration and managed
services has further increased the need for employees with specialized skills or significant experience in these areas. Our ability to
expand our operations will be highly dependent on our ability to attract a sufficient number of highly skilled employees and to retain
our employees and the employees of companies that we have acquired. We may not be successful in attracting and retaining enough employees
to achieve our desired expansion or staffing plans. Furthermore, the industry turnover rates for these types of employees are high and
we may not be successful in retaining, training or motivating our employees. Any inability to attract, retain, train and motivate employees
could impair our ability to adequately manage and complete existing projects and to accept new client engagements. Such inability may
also force us to increase our hiring of independent contractors, which may increase our costs and reduce our profitability on client engagements.
We must also devote substantial managerial and financial resources to monitoring and managing our workforce. Our future success will depend
on our ability to manage the levels and related costs of our workforce.

In the event we are unable
to attract, hire and retain the requisite personnel and subcontractors, we may experience delays in completing contracts in accordance
with project schedules and budgets, which may have an adverse effect on our financial results, harm our reputation and cause us to curtail
our pursuit of new contracts. Further, any increase in demand for personnel may result in higher costs, causing us to exceed the budget
on a contract, which in turn may have an adverse effect on our business, financial condition and operating results and harm our relationships
with our customers.

We expect to expand our business, in part,
through future acquisitions, but we may not be able to identify or complete suitable acquisitions, which could harm our financial performance.

Acquisitions are a significant
part of our growth strategy. We continually review, evaluate and consider potential investments and acquisitions. In such evaluations,
we are required to make difficult judgments regarding the value of business opportunities and the risks and cost of potential liabilities.
We plan to use acquisitions of companies or technologies to expand our project skill-sets and capabilities, expand our geographic markets,
add experienced management and increase our product and service offerings. Although we have identified several acquisition considerations,
we may be unable to implement our growth strategy if we cannot reach agreement with acquisition targets on acceptable terms or arrange
required financing for acquisitions on acceptable terms. In addition, the time and effort involved in attempting to identify acquisition
candidates and consummate acquisitions may divert members of our management from the operations of our company.

Any future acquisitions that we may make
could disrupt our business, cause dilution to our stockholders and harm our business, financial condition or operating results.

If we are successful in consummating
acquisitions, those acquisitions could subject us to a number of risks, including, but not limited to:

● | the purchase price we pay and/or unanticipated costs could significantly deplete our cash reserves or result in dilution to our existing stockholders;
● | we may find that the acquired company or technologies do not improve market position as planned;
● | we may have difficulty integrating the operations and personnel of the acquired company, as the combined operations will place significant demands on the Company’s management, technical, financial and other resources;
● | key personnel and customers of the acquired company may terminate their relationships with the acquired company as a result of the acquisition;

● | we may experience additional financial and accounting challenges and complexities in areas such as tax planning and financial reporting;
● | we may assume or be held liable for risks and liabilities (including environmental-related costs) as a result of our acquisitions, some of which we may not be able to discover during our due diligence or adequately adjust for in our acquisition arrangements;
● | our ongoing business and management’s attention may be disrupted or diverted by transition or integration issues and the complexity of managing geographically or culturally diverse enterprises;
● | we may incur one-time write-offs or restructuring charges in connection with the acquisition;
● | we may acquire goodwill and other intangible assets that are subject to amortization or impairment tests, which could result in future charges to earnings; and
● | we may not be able to realize the cost savings or other financial benefits we anticipated.

We cannot assure you that
we will successfully integrate or profitably manage any acquired business. In addition, we cannot assure you that, following any acquisition,
our continued business will achieve sales levels, profitability, efficiencies or synergies that justify acquisition or that the acquisition
will result in increased earnings for us in any future period. These factors could have a material adverse effect on our business, financial
condition and operating results.

Insurance and contractual protections may
not always cover lost revenue, increased expenses or liquidated damages payments, which could adversely affect our financial results.

Although we maintain insurance
and intend to obtain warranties from suppliers, obligate subcontractors to meet certain performance levels and attempt, where feasible,
to pass risks we cannot control to our customers, the proceeds of such insurance, warranties, performance guarantees or risk sharing arrangements
may not be adequate to cover lost revenue, increased expenses or liquidated damages payments that may be required in the future.

If we are unable to comply with certain
financial and operating restrictions in our credit facilities, we may be limited in our business activities and access to credit or may
default under our credit facilities.

Pursuant to our Credit Agreement
with TCA, now owned by Ekimnel Strategies LLC controlled by Michael Bannon, our CEO, all of our assets, including the assets of Howco,
are secured with our senior lender. Provisions in the Credit Agreement and debt instruments impose restrictions or require prior approval
on our and certain of our subsidiaries’ ability to, among other things:

● | restrictions on incurring obligations for capital expenditures;
● | issue additional capital stock of the Company or any subsidiary of the Company;
● | acquire new companies and merge or consolidate.

These agreements also contain
other customary covenants, including covenants that require us to meet specified financial ratios and financial tests. We may not be able
to comply with these covenants in the future. Our failure to comply with these covenants may result in the declaration of an event of
default and cause us to be unable to borrow under our credit facilities and debt instruments. In addition to preventing additional borrowings
under these agreements, an event of default, if not cured or waived, may result in the acceleration of the maturity of indebtedness outstanding
under these agreements, which would require us to pay all amounts outstanding. If the maturity of our indebtedness is accelerated, we
may not have sufficient funds available for repayment or we may not have the ability to borrow or obtain sufficient funds to replace the
accelerated indebtedness on terms acceptable to us or at all. Our failure to repay our bank indebtedness would result in the bank foreclosing
on all or a portion of our assets and force us to curtail our operations.

We may be subject to damages resulting from
claims that the Company or our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

Upon completion of any acquisitions
by the Company, we may be subject to claims that our acquired companies and their employees may have inadvertently or otherwise used or
disclosed trade secrets or other proprietary information of former employers or competitors. le may be necessary to defend against these
claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction
to management. If we fail in defending such claims, in addition to paying money claims, we may lose valuable intellectual property rights
or personnel. A loss of key research personnel or their work product could hamper or prevent our ability to commercialize certain products,
which could severely harm our business.

The loss of our Chief Executive Officer
(CEO) or other key personnel may adversely affect our operations.

The Company’s success
depends to a significant extent upon the operation, experience, and continued services of certain of its officers, including our CEO,
as well as other key personnel. While our CEO and the executive officers of Howco are all employed under employment contracts, there is
no assurance we will be able to retain their services. The loss of our CEO or several of the other key personnel could have an adverse
effect on the Company. If the CEO or other executive officers were to leave, we would face substantial difficulty in hiring a qualified
successor and could experience a loss in productivity while any successor obtains the necessary training and experience. In addition,
our CEO, CFO and other key personnel do not have prior experience in SEC reporting obligations. Furthermore, we do not maintain “key
person” life insurance on the lives of any executive officer and their death or incapacity would have a material adverse effect
on us. The competition for qualified personnel is intense, and the loss of services of certain key personnel could adversely affect our
business.

Internal system or service failures could
disrupt our business and impair our ability to effectively provide our services and products to our customers, which could damage our
reputation and adversely affect our revenues and profitability.

Any system or service disruptions,
including those caused by ongoing projects to improve our information technology systems and the delivery of services, if not anticipated
and appropriately mitigated, could have a material adverse effect on our business including, among other things, an adverse effect on
our ability to bill our customers for work performed on our contracts, collect the amounts that have been billed and produce accurate
financial statements in a timely manner. We are also subject to systems failures, including network, software or hardware failures, whether
caused by us, third-party service providers, cyber security threats, natural disasters, power shortages, terrorist attacks or other events,
which could cause loss of data and interruptions or delays in our business, cause us to incur remediation costs, subject us to claims
and damage our reputation. In addition, the failure or disruption of our communications or utilities could cause us to interrupt or suspend
our operations or otherwise adversely affect our business. Our property and business interruption insurance may be inadequate to compensate
us for all losses that may occur as a result of any system or operational failure or disruption and, as a result, our future results could
be adversely affected.

Our financial performance could be adversely
affected by decreases in spending on technology products and services by our public sector customers.

Our sales to our public sector
customers are impacted by government spending policies, budget priorities and revenue levels. Although our sales to the federal government
are diversified across multiple agencies and departments, they collectively accounted for approximately 85% of Howco’s net sales
for fiscal 2023. An adverse change in government spending policies (including budget cuts at the federal level resulting from sequestration),
budget priorities or revenue levels could cause our public sector customers to reduce their purchases or to terminate or not renew their
contracts with us, which could adversely affect our business, results of operations or cash flows.

Our business could be adversely affected
by the loss of certain vendor partner relationships and the availability of their products.

We purchase products for resale
from vendor partners, which include OEMs and wholesale distributors. We are authorized by vendor partners to sell all or some of their
products via direct marketing activities. Our authorization with each vendor partner is subject to specific terms and conditions regarding
such things as sales channel restrictions, product return privileges, price protection policies and purchase discounts. In the event we
were to lose one of our significant vendor partners, our business could be adversely affected. As mentioned above a few vendors have put
the Company on a cash on delivery basis.

We expect to enter into joint ventures,
teaming and other arrangements, and these activities involve risks and uncertainties.

We expect to enter into joint
ventures, teaming and other arrangements. These activities involve risks and uncertainties, including the risk of the joint venture or
applicable entity failing to satisfy its obligations, which may result in certain liabilities to us for guarantees and other commitments,
the challenges in achieving strategic objectives and expected benefits of the business arrangement, the risk of conflicts arising between
us and our partners and the difficulty of managing and resolving such conflicts, and the difficulty of managing or otherwise monitoring
such business arrangements.

Our business and operations expose us to
numerous legal and regulatory requirements and any violation of these requirements could harm our business.

We are subject to numerous
federal, state and foreign legal requirements on matters as diverse as data privacy and protection, employment and labor relations, immigration,
taxation, anticorruption, import/export controls, trade restrictions, internal and disclosure control obligations, securities regulation
and anti-competition. Compliance with diverse and changing legal requirements is costly, time-consuming and requires significant resources.
We are also focused on expanding our business in certain identified growth areas, such as health information technology, energy and environment,
which are highly regulated and may expose us to increased compliance risk. Violations of one or more of these diverse legal requirements
in the conduct of our business could result in significant fines and other damages, criminal sanctions against us or our officers, prohibitions
on doing business and damage to our reputation. Violations of these regulations or contractual obligations related to regulatory compliance
in connection with the performance of customer contracts could also result in liability for significant monetary damages, fines and/or
criminal prosecution, unfavorable publicity and other reputational damage, restrictions on our ability to compete for certain work and
allegations by our customers that we have not performed our contractual obligations.

If we do not adequately protect our intellectual
property rights, we may experience a loss of revenue and our operations may be materially harmed.

We registered a patent during
fiscal year 2021 and have contracted an attorney to search any potential infringements. In addition, we rely upon confidentiality agreements
signed by our employees, consultants and third parties to protect our intellectual property. We cannot assure you that we can adequately
protect our intellectual property or successfully prosecute potential infringement of our intellectual property rights. Also, we cannot
assure you that others will not assert rights in, or ownership of, trademarks and other proprietary rights of ours or that we will be
able to successfully resolve these types of conflicts to our satisfaction. Our failure to protect our intellectual property rights may
result in a loss of revenue and could materially adversely affect our operations and financial condition.

Risks Relating to Howco’s Business and
Industry

We depend on the U.S. Government for a substantial
portion of our business and changes in government defense spending could have adverse consequences on our financial position, results
of operations and business.

Approximately 85% of our
U.S. revenues from Howco’s operations in fiscal 2023 have been from and will continue to be from sales and services rendered directly
or indirectly to the U.S. Government. Our revenues from the U.S. Government largely result from contracts awarded to us under various
U.S. Government programs, primarily defense-related programs with the Department of Defense (DoD), as well as a broad range of programs
with the Department of Homeland Security, the intelligence community and other departments and agencies. Cost cutting including through
consolidation and elimination of duplicative organizations and insurance has become a major initiative for DoD. The funding of our programs
is subject to the overall U.S. Government budget and appropriation decisions and processes which are driven by numerous factors, including
geo-political events and macroeconomic conditions. The overall level of U.S. defense spending increased in recent years for numerous reasons,
including increases in funding of operations in Iraq and Afghanistan. However, with the winding down of both wars, defense spending levels
are becoming increasingly difficult to predict and are expected to be affected by numerous factors. Such factors include priorities of
the Administration and the Congress, and the overall health of the U.S. and world economies and the state of governmental finances.

We expect that budgetary constraints
and concerns related to the national debt will continue to place downward pressure on DoD spending levels and that implementation of the
automatic spending cuts without change will reduce, delay or cancel funding for certain of our contracts - particularly those with unobligated
balances - and programs and could adversely impact our operations, financial results and growth prospects.

Significant reduction in defense
spending could have long-term consequences for our size and structure. In addition, reduction in government priorities and requirements
could impact the funding, or the timing of funding, of our programs, which could negatively impact our results of operations and financial
condition. In addition, we are involved in U.S. Government programs, which are classified by the U.S. Government and our ability to discuss
these programs, including any risks and disputes and claims associated with and our performance under such programs, could be limited
due to applicable security restrictions.

The U.S. Government Systems spare parts
business is intensely competitive and we may not be able to win government bids when competing against much larger companies, which could
reduce our revenues and profitability.

Large spare parts contracts
awarded by the U.S. Government are few in number and are awarded through a formal competitive bidding process, including indefinite delivery/indefinite
quantity (“IDIQ”), GSA Schedule and other multi-award contracts. Bids are awarded on the basis of price, compliance with technical
bidding specifications, technical expertise and, in some cases, demonstrated management ability to perform the contract. There can be
no assurance that the Company will win and/or fulfill additional contracts. Moreover, the award of these contracts is subject to protest
procedures and there can be no assurance that the Company will prevail in any ensuing legal protest. Howco’s failure to secure a
significant dollar volume of U.S. Government contracts in the future would adversely affect us.

The U.S. Government spare
parts business is intensely competitive and subject to rapid change. Many of the existing and potential competitors have greater financial,
operating and technological resources than Howco. The competitive environment may require us to make changes in our pricing, services
or marketing. The competitive bidding process involves substantial costs and a number of risks, including significant cost and managerial
time to prepare bids and proposals for contracts that may not be awarded to us, or that may be awarded, but for which we do not receive
meaningful revenues. Accordingly, our success depends on our ability to develop services and products that address changing needs and
to provide people and technology needed to deliver these services and products. To remain competitive, we must consistently provide superior
service, technology and performance on a cost-effective basis to our customers. Our response to competition could cause us to expend significant
financial and other resources, disrupt our operations, strain relationships with partners, any of which could harm our business and/or
financial condition.

Our financial performance is dependent on
our ability to perform on our U.S. Government contracts, which are subject to termination for convenience, which could harm our financial
performance.

Our financial performance
is largely dependent on our performance under our U.S. Government contracts. Government customers have the right to cancel any contract
for its convenience. An unanticipated termination of, or reduced purchases under, one of the Company’s major contracts whether due
to lack of funding, for convenience or otherwise, or the occurrence of delays, cost overruns and product failures could adversely impact
our results of operations and financial condition. If one of our contracts were terminated for convenience, we would generally be entitled
to payments for our allowable costs and would receive some allowance for profit on the work performed. If one of our contracts were terminated
for default, we would generally be entitled to payments for our work that has been accepted by the government. A termination arising out
of our default could expose us to liability and have a negative impact on our ability to obtain future contracts and orders. Furthermore,
on contracts for which we are a subcontractor and not the prime contractor, the U.S. Government could terminate the prime contract for
convenience or otherwise, irrespective of our performance as a subcontractor.

Our failure to comply with a variety of
complex procurement rules and regulations could result in our being liable for penalties, including termination of our U.S. Government
contracts, disqualification from bidding on future U.S. Government contracts and suspension or debarment from U.S. Government contracting
that could adversely affect our financial condition.

We must comply with laws and
regulations relating to the formation, administration and performance of U.S. Government contracts, which affect how we do business with
our customers and may impose added costs on our business. U.S. Government contracts generally are subject to the Federal Acquisition Regulation
(FAR), which sets forth policies, procedures and requirements for the acquisition of goods and services by the U.S. Government, department-specific
regulations that implement or supplement DFAR, such as the DOD’s Defense Federal Acquisition Regulation Supplement (DFARS) and other
applicable laws and regulations. We are also subject to the Truth in Negotiations Act, which requires certification and disclosure of
cost and pricing data in connection with certain contract negotiations; the Procurement Integrity Act, which regulates access to competitor
bid and proposal information and government source selection information, and our ability to provide compensation to certain former government
officials; the Civil False Claims Act, which provides for substantial civil penalties for violations, including for submission of a false
or fraudulent claim to the U.S. Government for payment or approval; the Civil False Claims Act, which provides for substantial civil penalties
for violations, including for submission of a false or fraudulent claim to the U.S. Government for payment or approval; and the U.S. Government
Cost Accounting Standards, which impose accounting requirements that govern our right to reimbursement under certain cost-based U.S. Government
contracts. These regulations impose a broad range of requirements, many of which are unique to government contracting, including various
procurement, import and export, security, contract pricing and cost, contract termination and adjustment, and audit requirements. A contractor’s
failure to comply with these regulations and requirements could result in reductions to the value of contracts, contract modifications
or termination, and the assessment of penalties and fines and lead to suspension or debarment, for cause, from government contracting
or subcontracting for a period of time. In addition, government contractors are also subject to routine audits and investigations by U.S.
Government agencies such as the Defense Contract Audit Agency (DCAA) and Defense Contract Management Agency (DCMA). These agencies review
a contractor’s performance under its contracts, cost structure and compliance with applicable laws, regulations and standards. The
DCAA also reviews the adequacy of and a contractor’s compliance with its internal control systems and policies, including the contractor’s
purchasing, property, estimating, compensation and management information systems. During the term of any suspension or debarment by any
U.S. Government agency, contractors can be prohibited from competing for or being awarded contracts by U.S. Government agencies. The termination
of any of the Company’s significant Government contracts or the imposition of fines, damages, suspensions or debarment would adversely
affect the Company’s business and financial condition.

The U.S. Government may adopt new contract
rules and regulations or revise its procurement practices in a manner adverse to us at any time.

Our industry has experienced,
and we expect it will continue to experience, significant changes to business practices as a result of an increased focus on affordability,
efficiencies, and recovery of costs, among other items. U.S. Government agencies may face restrictions or pressure regarding the type
and amount of services that they may obtain from private contractors. Legislation, regulations and initiatives dealing with procurement
reform, mitigation of potential conflicts of interest and environmental responsibility or sustainability, as well as any resulting shifts
in the buying practices of U.S. Government agencies, such as increased usage of fixed price contracts, multiple award contracts and small
business set-aside contracts, could have adverse effects on government contractors, including us. Any of these changes could impair our
ability to obtain new contracts or renew our existing contracts when those contracts are compared to other contract bids. Any new contracting
requirements or procurement methods could be costly or administratively difficult for us to implement and could adversely affect our future
revenues, profitability and prospects.

We may incur cost overruns as a result of
fixed priced government contracts which would have a negative impact on our operations.

A number of Howco’s
current U.S. Government contracts are multi-award, multi-year IDIQ task order based contracts, which generally provide for fixed price
schedules for products and services, have no pre-set delivery schedules, have very low minimum purchase requirements, are typically competed
among multiple awardees and force us to carry the burden of any cost overruns. Due to their nature, fixed-priced contracts inherently
have more risk than cost reimbursable contracts. If we are unable to control costs or if our initials cost estimates are incorrect, we
can lose money on these contracts. In addition, some of our contracts have provisions relating to cost controls and audit rights, and
if we fail to meet the terms specified in those contracts, we may not realize their full benefits. Lower earnings caused by cost overruns
and cost controls would have a negative impact on our results of operations. The U.S. Government has the right to enter into contracts
with other suppliers, which may be competitive with the Company’s IDIQ contracts. The Company also performs fixed priced contracts
under which the Company agrees to provide specific quantities of products and services over time for a fixed price. Since the price competition
to win both IDIQ and fixed price contracts is intense and the costs of future contract performance cannot be predicted with certainty,
there can be no assurance as to the profits, if any, that the Company will realize over the term of such contracts.

Misconduct of employees, subcontractors,
agents and business partners could cause us to lose existing contracts or customers and adversely affect our ability to obtain new contracts
and customers and could have a significant adverse impact on our business and reputation.

Misconduct could include fraud
or other improper activities such as falsifying time or other records and violations of laws, including the Anti-Kickback Act. Other examples
could include the failure to comply with our policies and procedures or with federal, state or local government procurement regulations,
regulations regarding the use and safeguarding of classified or other protected information, legislation regarding the pricing of labor
and other costs in government contracts, laws and regulations relating to environmental, health or safety matters, bribery of foreign
government officials, import-export control, lobbying or similar activities, and any other applicable laws or regulations. Any data loss
or information security lapses resulting in the compromise of personal information or the improper use or disclosure of sensitive or classified
information could result in claims, remediation costs, regulatory sanctions against us, loss of current and future contracts and serious
harm to our reputation. Although we have implemented policies, procedures and controls to prevent and detect these activities, these precautions
may not prevent all misconduct, and as a result, we could face unknown risks or losses. Our failure to comply with applicable laws or
regulations or misconduct by any of our employees, subcontractors, agents or business partners could damage our reputation and subject
us to fines and penalties, restitution or other damages, loss of security clearance, loss of current and future customer contracts and
suspension or debarment from contracting with federal, state or local government agencies, any of which would adversely affect our business,
reputation and our future results.

We may fail to obtain and maintain necessary
security clearances, which may adversely affect our ability to perform on certain U.S. government contracts and depress our potential
revenues.

Many U.S. government programs
require contractors to have security clearances. Depending on the level of required clearance, security clearances can be difficult and
time-consuming to obtain. If we or our employees are unable to obtain or retain necessary security clearances, we may not be able to win
new business, and our existing clients could terminate their contracts with us or decide not to renew them. To the extent we are not able
to obtain and maintain facility security clearances or engage employees with the required security clearances for a particular contract,
we may not be able to bid on or win new contracts, or effectively rebid on expiring contracts, as well as lose existing contracts, which
may adversely affect our operating results and inhibit the execution of our growth strategy.

Our future revenues and growth prospects
could be adversely affected by our dependence on other contractors.

If other contractors with
whom we have contractual relationships either as a prime contractor or subcontractor eliminate or reduce their work with us, or if the
U.S. Government terminates or reduces these other contractors’ programs, does not award them new contracts or refuses to pay under
a contract our financial and business condition may be adversely affected. Companies that do not have access to U.S. Government contracts
may perform services as our subcontractor and that exposure could enhance such companies’ prospect of securing a future position
as a prime U.S. Government contractor which could increase competition for future contracts and impair our ability to perform on contracts.

We may have disputes with
our subcontractors arising from, among other things, the quality and timeliness of work performed by the subcontractor, customer concerns
about the subcontractor, our failure to extend existing task orders or issue new task orders under a subcontract, our hiring of a subcontractor’s
personnel or the subcontractor’s failure to comply with applicable law. Current uncertain economic conditions heighten the risk
of financial stress of our subcontractors, which could adversely impact their ability to meet their contractual requirements to us. If
any of our subcontractors fail to timely meet their contractual obligations or have regulatory compliance or other problems, our ability
to fulfill our obligations as a prime contractor or higher tier subcontractor may be jeopardized. Significant losses could arise in future
periods and subcontractor performance deficiencies could result in our termination for default. A termination for default could eliminate
a revenue source, expose us to liability and have an adverse effect on our ability to compete for future contracts and task orders, especially
if the customer is an agency of the U.S. Government.

Our international business exposes us to
geo-political and economic factors, regulatory requirements and other risks associated with doing business in foreign countries.

We intend to engage in additional
foreign operations which pose complex management, foreign currency, legal, tax and economic risks, which we may not adequately address.
These risks differ from and potentially may be greater than those associated with our domestic business.

Our international business
is sensitive to changes in the priorities and budgets of international customers and geo-political uncertainties, which may be driven
by changes in threat environments and potentially volatile worldwide economic conditions, various regional and local economic and political
factors, risks and uncertainties, as well as U.S. foreign policy. Our international sales are subject to U.S. laws, regulations and policies,
including the International Traffic in Arms Regulations (ITAR) and the Foreign Corrupt Practices Act (see below) and other export laws
and regulations. Due to the nature of our products, we must first obtain licenses and authorizations from various U.S. Government agencies
before we are permitted to sell our products outside of the U.S. We can give no assurance that we will continue to be successful in obtaining
the necessary licenses or authorizations or that certain sales will not be prevented or delayed. Any significant impairment of our ability
to sell products outside of the U.S. could negatively impact our results of operations and financial condition.

Our international sales are
also subject to local government laws, regulations and procurement policies and practices which may differ from U.S. Government regulations,
including regulations relating to import-export control, investments, exchange controls and repatriation of earnings, as well as to varying
currency, geo-political and economic risks. Our international contracts may include industrial cooperation agreements requiring specific
in-country purchases, manufacturing agreements or financial support obligations, known as offset obligations, and provide for penalties
if we fail to meet such requirements. Our international contracts may also be subject to termination at the customer’s convenience
or for default based on performance, and may be subject to funding risks. We also are exposed to risks associated with using foreign representatives
and consultants for international sales and operations and teaming with international subcontractors, partners and suppliers in connection
with international programs. As a result of these factors, we could experience award and funding delays on international programs and
could incur losses on such programs, which could negatively impact our results of operations and financial condition.

We are also subject to a number
of other risks including:

● | the absence in some jurisdictions of effective laws to protect our intellectual property rights;
● | multiple and possibly overlapping and conflicting tax laws;
● | restrictions on movement of cash;
● | the burdens of complying with a variety of national and local laws;
● | political instability;
● | currency fluctuations;
● | longer payment cycles;
● | restrictions on the import and export of certain technologies;
● | price controls or restrictions on exchange of foreign currencies; and
● | trade barriers.

Our international operations are subject
to special U.S. government laws and regulations, such as the Foreign Corrupt Practices Act, and regulations and procurement policies and
practices, including regulations to import-export control, which may expose us to liability or impair our ability to compete in international
markets.

Our international operations
are subject to the U.S. Foreign Corrupt Practices Act, or the FCPA, and other laws that prohibit improper payments or offers of payments
to foreign governments and their officials and political parties by U.S. and other business entities for the purpose of obtaining or retaining
business. We have operations and deal with governmental customers in countries known to experience corruption, including certain countries
in the Middle East and in the future, the Far East. Our activities in these countries create the risk of unauthorized payments or offers
of payments by one of our employees, consultants or contractors that could be in violation of various laws including the FCPA, even though
these parties are not always subject to our control. We are also subject to import-export control regulations restricting the use and
dissemination of information classified for national security purposes and the export of certain products, services, and technical data,
including requirements regarding any applicable licensing of our employees involved in such work.

As a U.S. defense contractor, we are vulnerable
to security threats and other disruptions that could negatively impact our business.

As a U.S. defense contractor,
we face certain security threats, including threats to our information technology infrastructure, attempts to gain access to our proprietary
or classified information, and threats to physical security. These types of events could disrupt our operations, require significant management
attention and resources, and could negatively impact our reputation among our customers and the public, which could have a negative impact
on our financial condition, results of operations and liquidity. We are continuously exposed to cyber-attacks and other security threats,
including physical break-ins. Any electronic or physical break-in or other security breach or compromise may jeopardize security of information
stored or transmitted through our information technology systems and networks. This could lead to disruptions in mission-critical systems,
unauthorized release of confidential or otherwise protected information and corruption of data. Although we have implemented policies,
procedures and controls to protect against, detect and mitigate these threats, we face advanced and persistent attacks on our information
systems and attempts by others to gain unauthorized access to our information technology systems are becoming more sophisticated. These
attempts include covertly introducing malware to our computers and networks and impersonating authorized users, among others, and may
be perpetrated by well-funded organized crime or state sponsored efforts. We seek to detect and investigate all security incidents and
to prevent their occurrence or recurrence. We continue to invest in and improve our threat protection, detection and mitigation policies,
procedures and controls. In addition, we work with other companies in the industry and government participants on increased awareness
and enhanced protections against cyber security threats. However, because of the evolving nature and sophistication of these security
threats, which can be difficult to detect, there can be no assurance that our policies, procedures and controls have or will detect or
prevent any of these threats and we cannot predict the full impact of any such past or future incident. Although we work cooperatively
with our customers and other business partners to seek to minimize the impacts of cyber and other security threats, we must rely on the
safeguards put in place by those entities. Any remedial costs or other liabilities related to cyber or other security threats may not
be fully insured or indemnified by other means. Occurrence of any of these security threats could expose us to claims, contract terminations
and damages and could adversely affect our reputation, ability to work on sensitive U.S. Government contracts, business operations and
financial results.

Difficult conditions in the global capital
markets and the economy generally may materially adversely affect our business and results of operations.

Our results of operations
are materially affected by conditions in the global capital markets and the economy generally, both in the U.S. and elsewhere around the
world. Weak economic conditions sustained uncertainty about global economic conditions, concerns about future U.S. budgetary cuts, or
a prolonged or further tightening of credit markets could cause our customers and potential customers to postpone or reduce spending on
technology products or services or put downward pressure on prices, which could have an adverse effect on our business, results of operations
or cash flows. In the event of extreme prolonged adverse market events, such as a global credit crisis, we could incur significant losses.

Risks Related to Our Common Stock

We are eligible to be treated as an “emerging
growth company” as defined in the Jumpstart Our Business Startups Act of 2012, and we cannot be certain if the reduced disclosure
requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an “emerging
growth company”, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we continue to be
an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public
companies that are not emerging growth companies, including (1) not being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act of 2002, which we refer to as the Sarbanes-Oxley Act, (2) reduced disclosure obligations regarding
executive compensation in this Form 10-K and our periodic reports and proxy statements and (3) exemptions from the requirements of holding
a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
In addition, as an emerging growth company, we are only required to provide two years of audited financial statements and two years of
selected financial data in this Form 10. We could be an emerging growth company for up to five years, although circumstances could cause
us to lose that status earlier, including if the market value of our common stock held by non-affiliates exceeds $700.0 million as of
any June 30 before that time or if we have total annual gross revenue of $1.0 billion or more during any fiscal year before that time,
in which cases we would no longer be an emerging growth company as of the following December 31 or, if we issue more than $1.0 billion
in non-convertible debt during any three-year period before that time, we would cease to be an emerging growth company immediately. Even
after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” which would
allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the
auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation
in our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may
rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market
for our common stock and our stock price may be more volatile.

Our independent registered
public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting until
the later of our second annual report or the first annual report required to be filed with the Commission following the date we are no
longer an “emerging growth company” as defined in the JOBS “Act. We cannot assure you that there will not be material
weaknesses or significant deficiencies in our internal controls in the future.

Under the JOBS Act, emerging
growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies.
We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be
subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Our directors and executive officers beneficially
own a significant number of shares of our common stock. Their interests may conflict with our outside stockholders, who may be unable
to influence management and exercise control over our business .

As of the date of this Form
10-K, our executive officers and directors beneficially own approximately 1.27% of our shares of common stock and the CEO owns 250 shares
of Series A preferred stock the voting rights for the Series A shares entitles the shareholder to voting rights equal to the number of
common shares outstanding divided by .99 which will always grant the holder a majority voting capability. As a result, our executive officers
and directors may be able to: elect or defeat the election of our directors, amend or prevent amendment to our certificates of incorporation
or bylaws, effect or prevent a merger, sale of assets or other corporate transaction, and control the outcome of any other matter submitted
to the shareholders for vote. Accordingly, our outside stockholders may be unable to influence management and exercise control over our
business.

We do not intend to pay cash dividends to
our stockholders, so you will not receive any return on your investment in our Company prior to selling your interest in the Company.

We have never paid any dividends
to our common stockholders as a public company. We currently intend to retain any future earnings for funding growth and, therefore, do
not expect to pay any cash dividends in the foreseeable future. If we determine that we will pay cash dividends to the holders of our
common stock, we cannot assure that such cash dividends will be paid on a timely basis. The success of your investment in the Company
will likely depend entirely upon any future appreciation. As a result, you will not receive any return on your investment prior to selling
your shares in our Company and, for the other reasons discussed in this “Risk Factors” section, you may not receive any return
on your investment even when you sell your shares in our Company.

Anti-Takeover, Limited Liability and Indemnification
Provisions

Some provisions of our certificate of incorporation
and by-laws may deter takeover attempts, which may inhibit a takeover that stockholders consider favorable and limit the opportunity of
our stockholders to sell their shares at a favorable price.

Under our certificate of incorporation,
our Board of Directors may issue additional shares of common or preferred stock. Our Board of Directors has the ability to authorize “blank
check” preferred stock without future shareholder approval. This makes it possible for our board of directors to issue preferred
stock with voting or other rights or preferences that could impede the success of any attempt to acquire us by means of a merger, tender
offer, proxy contest or otherwise, including a transaction in which our stockholders would receive a premium over the market price for
their shares and/or any other transaction that might otherwise be deemed to be in their best interests, and thereby protects the continuity
of our management and limits an investor’s opportunity to profit by their investment in the Company. Specifically, if in the due
exercise of its fiduciary obligations, the Board of Directors were to determine that a takeover proposal was not in our best interest,
shares could be issued by our Board of Directors without stockholder approval in one or more transactions that might prevent or render
more difficult or costly the completion of the takeover by:

● | diluting the voting or other rights of the proposed acquirer or insurgent stockholder group,
● | putting a substantial voting block in institutional or other hands that might undertake to support the incumbent Board of Directors, or
● | effecting an acquisition that might complicate or preclude the takeover.

Delaware’s Anti-Takeover Law may discourage
acquirers and eliminate a potentially beneficial sale for our stockholders.

We are subject to the provisions
of the Delaware Shareholder Protection Act concerning corporate takeovers. This section prevents many Delaware corporations from engaging
in a business combination with any interested stockholder, under specified circumstances. For these purposes, a business combination includes
a merger or sale of more than 5% of our assets, and an interested stockholder includes a stockholder who owns 10% or more of our outstanding
voting stock, as well as affiliates and associates of these persons. Under these provisions, this type of business combination is prohibited
for three years following the date that the stockholder became an interested stockholder unless:

● | the transaction in which the stockholder became an interested stockholder is approved by the Board of directors prior to the date the interested stockholder attained that status;
● | on consummation of the transaction that resulted in the stockholder’s becoming an interested stockholder, the interested stockholder owned at least 90% of the voting stock of the corporation outstanding at the time the transaction was commenced, excluding those shares owned by persons who are directors and also officers; or
● | on or subsequent to that date, the business combination is approved by the Board of Directors and authorized at an annual or special meeting of stockholders by the affirmative vote of at least a majority of the outstanding voting stock that is not owned by the interested stockholder.

This statute could prohibit
or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire us.

Our indemnification of our officers and
directors may cause us to use corporate resources to the detriment of our stockholders.

Our certificate of incorporation
eliminates the personal liability of our directors for monetary damages arising from a breach of their fiduciary duty as directors to
the fullest extent permitted by Delaware law. This limitation does not affect the availability of equitable remedies, such as injunctive
relief or rescission. Our certificate of incorporation requires us to indemnify our directors and officers to the fullest extent permitted
by Delaware law, including in circumstances in which indemnification is otherwise discretionary under Delaware law.

Under Delaware law, we may
indemnify our directors or officers or other persons who were, are or are threatened to be made a named defendant or respondent in a proceeding
because the person is or was our director, officer, employee or agent, if we determine that the person:

● | conducted himself or herself in good faith, reasonably believed, in the case of conduct in his or her official capacity as our director or officer, that his or her conduct was in our best interests, and, in all other cases, that his or her conduct was at least not opposed to our best interests; and
● | in the case of any criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful.

These persons may be indemnified
against expenses, including attorneys’ fees, judgments, fines, including excise taxes, and amounts paid in settlement, actually
and reasonably incurred, by the person in connection with the proceeding. If the person is found liable to the corporation, no indemnification
will be made unless the court in which the action was brought determines that the person is fairly and reasonably entitled to indemnity
in an amount that the court will establish.

Insofar as indemnification
for liabilities under the Securities Act may be permitted to directors, officers or persons controlling us under the above provisions,
we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.

Our bylaws designate the Court of Chancery
of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our
stockholders’ ability to obtain a favorable judicial forum for disputes with us.

Under the provisions of our
amended and restated bylaws (“bylaws”), unless we consent in writing to the selection of an alternative forum, the Court of
Chancery of the State of Delaware will be the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf
of us; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees
or agents to us or our stockholders; (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware
General Corporation Law or our amended certificate of incorporation or bylaws; or (iv) any action asserting a claim against us governed
by the internal affairs doctrine. By becoming a stockholder in our company, you will be deemed to have notice of and have consented to
the provisions of our bylaws related to choice of forum. The choice of forum provision in our bylaws may limit our stockholders’
ability to obtain a favorable judicial forum for disputes with us.

The obligations associated with being a
public company require significant resources and management attention, which may divert from our business operations.

We are subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and The Sarbanes-Oxley Act of 2002,
or the Sarbanes-Oxley Act. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and
financial condition, proxy statement, and other information. The Sarbanes-Oxley Act requires, among other things, that we establish and
maintain effective internal controls and procedures for financial reporting. Our Chief Executive Officer and Chief Financial Officer will
need to certify that our disclosure controls and procedures are effective in ensuring that material information we are required to disclose
in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms. We may need to hire additional financial reporting, internal controls and other financial personnel
in order to develop and implement appropriate internal controls and reporting procedures. As a result, we will incur significant legal,
accounting and other expenses. Furthermore, the need to establish the corporate infrastructure demanded of a public company may divert
management’s attention from implementing our growth strategy, which could prevent us from improving our business, results of operations
and financial condition. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting
and accounting systems to meet our reporting obligations as a public company. However, the measures we take may not be sufficient to satisfy
our obligations as a public company. In addition, we cannot predict or estimate the amount of additional costs we may incur in order to
comply with these requirements. We anticipate that these costs will materially increase our selling, general and administrative expenses.

Section 404 of the Sarbanes-Oxley
Act requires annual management assessments of the effectiveness of our internal control over financial reporting. In connection with the
implementation of the necessary procedures and practices related to internal control over financial reporting, we may identify deficiencies.
If we are unable to comply with the internal controls requirements of the Sarbanes-Oxley Act of 2002, then we may not be able to obtain
the independent account and certifications required by that act, which may preclude us from keeping our filings with the SEC current,
and interfere with the ability of investors to trade our securities and our shares to continue to be quoted on the OTCQB or our ability
to list our shares on any national securities exchange.

If we fail to establish and maintain an
effective system of internal controls, we may not be able to report our financial results accurately or prevent fraud. Any inability to
report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our common
stock.

Effective internal controls
are necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent
fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business
and reputation with investors may be harmed. With each prospective acquisition we may make we will conduct whatever due diligence is necessary
or prudent to assure us that the acquisition target can comply with the internal controls’ requirements of the Sarbanes-Oxley Act.
Notwithstanding our diligence, certain internal controls deficiencies may not be detected. As a result, any internal control deficiencies
may adversely affect our financial condition, results of operations and access to capital. We have not performed an in-depth analysis
to determine if historical undiscovered failures of internal controls exist, and may in the future discover areas of our internal controls
that need improvement.

Public company compliance may make it more
difficult to attract and retain officers and directors.

The Sarbanes-Oxley Act and
rules implemented by the SEC have required changes in corporate governance practices of public companies. As a public company, these rules
and regulations increase our compliance costs and make certain activities more time consuming and costly. As a public company, these rules
and regulations may make it more difficult and expensive for us to maintain our director and officer liability insurance and we may be
required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a
result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers,
and to maintain insurance at reasonable rates, or at all.

Our stock price may be volatile.

The market price of our common
stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our
control, including the following:

● | our ability to execute our business plan and complete prospective acquisitions;
● | changes in our industry;
● | competitive pricing pressures;
● | our ability to obtain working capital financing;
● | additions or departures of key personnel;
● | limited “public float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock;
● | sales of our common stock;

● | operating results that fall below expectations;
● | regulatory developments;
● | economic and other external factors;
● | period-to-period fluctuations in our financial results;
● | our inability to develop or acquire new or needed technologies;
● | the public’s response to press releases or other public announcements by us or third parties, including filings with the SEC;
● | changes in financial estimates or ratings by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our common stock;
● | the development and sustainability of an active trading market for our common stock; and
● | any future sales of our common stock by our officers, directors and significant stockholders.

In addition, the securities
markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of
particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

Our shares of common stock are thinly traded,
the price may not reflect our value, and there can be no assurance that there will be an active market for our shares of common stock
either now or in the future.

Our shares of common stock
are thinly traded, our common stock is available to be traded and is held by a small number of holders, and the price may not reflect
our actual or perceived value. There can be no assurance that there will be an active market for our shares of common stock either now
or in the future. The market liquidity will be dependent on the perception of our operating business, among other things. We will take
certain steps including utilizing investor awareness campaigns and firms, press releases, road shows and conferences to increase awareness
of our business. Any steps that we might take to bring us to the awareness of investors may require that we compensate consultants with
cash and/or stock. There can be no assurance that there will be any awareness generated or the results of any efforts will result in any
impact on our trading volume. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects
the value of the business, and trading may be at an inflated price relative to the performance of the Company due to, among other things,
the availability of sellers of our shares.

If an active market should
develop, the price may be highly volatile. Because there is currently a low price for our shares of common stock, many brokerage firms
or clearing firms are not willing to effect transactions in the securities or accept our shares for deposit in an account. Many lending
institutions will not permit the use of low-priced shares of common stock as collateral for any loans. Furthermore, our securities are
currently traded on the OTCQB where it is more difficult (1) to obtain accurate quotations, (2) to obtain coverage for significant news
events because major wire services generally do not publish press releases about these companies, and (3) to obtain needed capital.

Our common stock may be deemed a “penny
stock,” which would make it more difficult for our investors to sell their shares.

Our common stock is currently
subject to the “penny stock” rules adopted under Section 15(g) of the Exchange Act. The penny stock rules generally apply
to companies whose common stock is not listed on The Nasdaq Stock Market or another national securities exchange and trades at less than
$4.00 per share, other than companies that have had average revenues of at least $6,000,000 for the last three years or that have tangible
net worth of at least $5,000,000 ($2,000,000 if the company has been operating for three or more years). These rules require, among other
things, that brokers who trade penny stock to persons other than “established customers” complete certain documentation, make
suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk
disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of
the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in these securities
is limited. If we remain subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if
any, for our securities. If our securities are subject to the penny stock rules, investors will find it more difficult to dispose of our
securities.

Offers or availability for sale of a substantial
number of shares of our common stock may cause the price of our common stock to decline.

If our stockholders sell substantial
amounts of our common stock in the public market upon the expiration of any statutory holding period under Rule 144, or shares issued
upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang”
and, in anticipation of which, the market price of our common stock could fall. The existence of an overhang, whether or not sales have
occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related
securities in the future at a time and price that we deem reasonable or appropriate.

Our Form S-1 filings disclose
the dilutive effect of the Company’s stock sales under various offerings.

Sales of substantial amounts
of our common stock in the public market, or the perception that these sales could occur, could adversely affect the price of our common
stock and impair our ability to raise capital through the sale of shares.

Because we became public by means of a reverse
merger, we may not be able to attract the attention of major brokerage firms.

There may be risks associated
with us having become public through a “reverse merger.” Securities analysts of major brokerage firms may not provide coverage
of us since there is no incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage
firms will, in the future, want to conduct any offerings on our behalf.

Any substantial sale of stock by existing
shareholders could depress the market value of our stock, thereby devaluing the market price and causing investors to risk losing all
or part of their investment.

Stockholders, including our
directors and officers hold a large number of our outstanding shares. We can make no prediction as to the effect, if any, that sales of
shares, or the availability of shares for future sale, will have on the prevailing market price of our shares of common stock. Sales of
substantial amounts of shares in the public market, or the perception that such sales could occur, could depress prevailing market prices
for the shares. Such sales may also make it more difficult for us to sell equity securities or equity-related securities in the future
at a time and price which it deems appropriate.

Our issuance of preferred stock in the future
may adversely affect the rights of our common stockholders .

Our certificate of incorporation
permits us to issue up to 5,000,000 shares of preferred stock with such rights and preferences as the Board of Directors may designate.
As a result, our Board of Directors may authorize a series of preferred stock that would grant to preferred stockholders’ preferential
rights to our assets upon liquidation; the right to receive dividends before dividends become payable to our common stockholders; the
right to redemption of the preferred stock prior to the redemption of our common stock; and super-voting rights to our preferred stockholders.
To the extent that we designate and issue such a class or series of preferred stock, the rights of our common stockholders may be impaired.

Risks Related to Our IP

Our Success May Depend on Our Ability to
Obtain and Protect the Proprietary Information on Which We Base Our UAV Products.

As we acquire companies with
intellectual property (“IP”) that is important to the development of our UAV products, we will need to:

● | obtain valid and enforceable patents;
● | protect trade secrets; and
● | operate without infringing upon the proprietary rights of others.

We will be able to protect
our proprietary technology from unauthorized use by third parties only to the extent that such proprietary rights are covered by valid
and enforceable patents or are effectively maintained as trade secrets. Any non-confidential disclosure to or misappropriation by third
parties of our confidential or proprietary information could enable competitors to quickly duplicate or surpass our technological achievements,
thus eroding our competitive position in our market.

The patent application process,
also known as patent prosecution, is expensive and time-consuming, and we and our current or future licensors and licensees may not be
able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also
possible that we or our current licensors, or any future licensors or licensees, will fail to identify patentable aspects of inventions
made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Therefore,
these and any of our patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our
business. It is possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise
in the future, for example with respect to proper priority claims or inventorship. If we or our current licensors or licensees, or any
future licensors or licensees, fail to establish, maintain or protect such patents and other intellectual property rights, such rights
may be reduced or eliminated. If our current licensors or licensees, or any future licensors or licensees, are not fully cooperative or
disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised. If there
are material defects in the form or preparation of our patents or patent applications, such patents or applications may be invalid and
unenforceable. Any of these outcomes could impair our ability to prevent competition from third parties, which may harm our business.

The patent applications that
we may own or license may fail to result in issued patents in the United States or in other countries. Even if patents do issue on such
patent applications, third parties may challenge the validity, enforceability or scope thereof, which may result in such patents being
narrowed, invalidated or held unenforceable. For example, U.S. patents can be challenged by any person before the new USPTO Patent Trial
and Appeals Board at any time within the one-year period following that person’s receipt of an allegation of infringement of the
patents. Patents granted by the European Patent Office may be similarly opposed by any person within nine months from the publication
of the grant. Similar proceedings are available in other jurisdictions, and in the United States, Europe and other jurisdictions third
parties can raise questions of validity with a patent office even before a patent is granted. Furthermore, even if they are unchallenged,
our patents and patent applications may not adequately protect our intellectual property or prevent others from designing around our claims.
If the breadth or strength of protection provided by the patents and patent applications we hold or pursue with respect to our product
candidates is successfully challenged, then our ability to commercialize such product candidates could be negatively affected, and we
may face unexpected competition that could harm our business. Further, if we encounter delays in our clinical trials, the period of time
during which we or our collaborators could market our product candidates under patent protection would be reduced.

The degree of future protection
of our proprietary rights is uncertain. Patent protection may be unavailable or severely limited in some cases and may not adequately
protect our rights or permit us to gain or keep our competitive advantage. For example:

● | we might not have been the first to invent or the first to file the inventions covered by each of our pending patent applications and issued patents;
● | others may be able to make, use, sell, offer to sell or import products that are similar to our products or product candidates but that are not covered by the claims of our patents; others may independently develop similar or alternative technologies or duplicate any of our technologies;
● | the proprietary rights of others may have an adverse effect on our business;
● | any proprietary rights we do obtain may not encompass commercially viable products, may not provide us with any competitive advantages or may be challenged by third parties;
● | any patents we obtain or our in-licensed issued patents may not be valid or enforceable; or
● | we may not develop additional technologies or products that are patentable or suitable to maintain as trade secrets.

If we or our current licensors
or licensees, or any future licensors or licensees, fail to prosecute, maintain and enforce patent protection for our product candidates,
our ability to develop and commercialize our product candidates could be harmed and we might not be able to prevent competitors from making,
using and selling competing products. This failure to properly protect the intellectual property rights relating to our product candidates
could harm our business, financial condition and operating results. Moreover, our competitors may independently develop equivalent knowledge,
methods and know-how.

Even where laws provide protection,
costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and the outcome
of such litigation would be uncertain. If we or one of our collaborators were to initiate legal proceedings against a third party to enforce
a patent covering the product candidate, the defendant could assert an affirmative defense or counterclaim that our patent is not infringed,
invalid and/or unenforceable. In patent litigation in the United States, defendant defenses and counterclaims alleging non-infringement,
invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several
statutory requirements, including lack of novelty, anticipation or obviousness, and lack of written description, definiteness or enablement.
Patents may be unenforceable if someone connected with prosecution of the patent withheld material information from the USPTO, or made
a misleading statement, during prosecution. The outcomes of proceedings involving assertions of invalidity and unenforceability are unpredictable.
It is possible that prior art of which we and the patent examiner were unaware during prosecution exists, which would render our patents
invalid. Moreover, it is also possible that prior art may exist that we are aware of, but that we do not believe are relevant to our current
or future patents, that could nevertheless be determined to render our patents invalid. If a defendant were to prevail on a legal assertion
of invalidity and/or unenforceability of our patents covering one of our product candidates, we would lose at least part, and perhaps
all, of the patent protection on such product candidate. Such a loss of patent protection would harm our business. Moreover, our competitors
could counterclaim in any suit to enforce our patents that we infringe their intellectual property. Furthermore, some of our competitors
have substantially greater intellectual property portfolios, and resources, than we do.

Our ability to stop third
parties from using our technology or making, using, selling, offering to sell or importing our products is dependent upon the extent to
which we have rights under valid and enforceable patents that cover these activities. If any patent we currently or in the future may
own or license is deemed not infringed, invalid or unenforceable, it could impact our commercial success. We cannot predict the breadth
of claims that may be issued from any patent applications we currently or may in the future own or license from third parties.

To the extent that consultants
or key employees apply technological information independently developed by them or by others to our product candidates, disputes may
arise as to who has the proprietary rights to such information and product candidates, and certain of such disputes may not be resolved
in our favor. Consultants and key employees that work with our confidential and proprietary technologies are required to assign all intellectual
property rights in their inventions and discoveries created during the scope of their work to our company. However, these consultants
or key employees may terminate their relationship with us, and we cannot preclude them indefinitely from dealing with our competitors.

If we are unable to prevent disclosure of
our trade secrets or other confidential information to third parties, our competitive position may be impaired.

We also may rely on trade
secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable. Our ability to stop
third parties from obtaining the information or know-how necessary to make, use, sell, offer to sell or import our products or practice
our technology is dependent in part upon the extent to which we prevent disclosure of the trade secrets that cover these activities. Trade
secret rights can be lost through disclosure to third parties. Although we use reasonable efforts to protect our trade secrets, our employees,
consultants, contractors, outside scientific collaborators and other advisors may unintentionally or willfully disclose our trade secrets
to third parties, resulting in loss of trade secret protection. Moreover, our competitors may independently develop equivalent knowledge,
methods and know-how, which would not constitute a violation of our trade secret rights. Enforcing a claim that a third party is engaged
in the unlawful use of our trade secrets is expensive, difficult and time consuming, and the outcome is unpredictable. In addition, recognition
of rights in trade secrets and a willingness to enforce trade secrets differs in certain jurisdictions.

If we are sued for infringing intellectual
property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in that litigation could harm our business.

Our commercial success depends
significantly on our ability to operate without infringing, violating or misappropriating the patents and other proprietary rights of
third parties. Our own technologies we acquire or develop may infringe, violate or misappropriate the patents or other proprietary rights
of third parties, or we may be subject to third-party claims of such infringement. Numerous U.S. and foreign issued patents and pending
patent applications owned by third parties, exist in the fields in which we are developing our product candidates. Because some patent
applications may be maintained in secrecy until the patents are issued, because publication of patent applications is often delayed, and
because publications in the scientific literature often lag behind actual discoveries, we cannot be certain that we were the first to
invent the technology or that others have not filed patent applications for technology covered by our pending applications. We may not
be aware of patents that have already issued that a third party might assert are infringed by our product candidates. It is also possible
that patents of which we are aware, but which we do not believe are relevant to our product candidates, could nevertheless be found to
be infringed by our product candidates. Moreover, we may face patent infringement claims from non-practicing entities that have no relevant
product revenue and against whom our own patent portfolio may thus have no deterrent effect. In the future, we may agree to indemnify
our manufacturing partners against certain intellectual property claims brought by third parties.

Intellectual property litigation
involves many risks and uncertainties, and there is no assurance that we will prevail in any lawsuit brought against us. Third parties
making claims against us for infringement, violation or misappropriation of their intellectual property rights may seek and obtain injunctive
or other equitable relief, which could effectively block our ability to further develop and commercialize our product candidates. Further,
if a patent infringement suit were brought against us, we could be forced to stop or delay research, development, manufacturing or sales
of the product or product candidate that is the subject of the suit. Defense of these claims, regardless of their merit, would cause us
to incur substantial expenses and, would be a substantial diversion of resources from our business. In the event of a successful claim
of any such infringement, violation or misappropriation, we may need to obtain licenses from such third parties and we and our partners
may be prevented from pursuing product development or commercialization and/or may be required to pay damages. We cannot be certain that
any licenses required under such patents or proprietary rights would be made available to us, or that any offer to license would be made
available to us on commercially reasonable terms. If we cannot obtain such licenses, we and our collaborators may be restricted or prevented
from manufacturing and selling products employing our technology. These adverse results, if they occur, could adversely affect our business,
results of operations and prospects, and the value of our shares.

We may become involved in lawsuits to protect
or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.

The defense and prosecution
of contractual or intellectual property lawsuits, USPTO interference or derivation proceedings, European Patent Office oppositions and
related legal and administrative proceedings in the United States, Europe and other countries, involve complex legal and factual questions.
As a result, such proceedings may be costly and time-consuming to pursue and their outcome is uncertain.

Litigation may be necessary
to:

● | protect and enforce our patents and any future patents issuing on our patent applications;
● | enforce or clarify the terms of the licenses we have granted or may be granted in the future;
● | protect and enforce trade secrets, know-how and other proprietary rights that we own or have licensed, or may license in the future; or
● | determine the enforceability, scope and validity of the proprietary rights of third parties and defend against alleged patent infringement.

Competitors may infringe our
intellectual property. As a result, we may be required to file infringement claims to stop third-party infringement or unauthorized use.
This can be expensive, particularly for a company of our size, and time-consuming. In addition, in an infringement proceeding, a court
may decide that a patent of ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology at
issue on the grounds that our patent claims do not cover its technology or that the factors necessary to grant an injunction against an
infringer are not satisfied. An adverse determination of any litigation or other proceedings could put one or more of our patents at risk
of being invalidated, interpreted narrowly, or amended such that they do not cover our product candidates. Moreover, such adverse determinations
could put our patent applications at risk of not issuing, or issuing with limited and potentially inadequate scope to cover our product
candidates or to prevent others from marketing similar products.

Interference, derivation or
other proceedings brought at the USPTO, may be necessary to determine the priority or patentability of inventions with respect to our
patent applications or those of our licensors or potential collaborators. Litigation or USPTO proceedings brought by us may fail or may
be invoked against us by third parties. Even if we are successful, domestic or foreign litigation or USPTO or foreign patent office proceedings
may result in substantial costs and distraction to our management. We may not be able, alone or with our licensors or potential collaborators,
to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as
in the United States.

Furthermore, because of the
substantial amount of discovery required in connection with intellectual property litigation or other proceedings, there is a risk that
some of our confidential information could be compromised by disclosure during this type of litigation or other proceedings. In addition,
during the course of this kind of litigation or proceedings, there could be public announcements of the results of hearings, motions or
other interim proceedings or developments or public access to related documents. If investors perceive these results to be negative, the
market price for our common stock could be significantly harmed.

Some of our competitors may
be able to sustain the costs of patent-related disputes, including patent litigation, more effectively than we can because they have substantially
greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material
adverse effect on our ability to raise the funds necessary to continue our operations.

We may not be able to enforce our intellectual
property rights throughout the world.

Filing, prosecuting and defending
patents on our product candidates in all countries throughout the world would be prohibitively expensive. The requirements for patentability
may differ in certain countries, particularly in developing countries. Moreover, our ability to protect and enforce our intellectual property
rights may be adversely affected by unforeseen changes in foreign intellectual property laws. Additionally, laws of some countries outside
of the United States do not afford intellectual property protection to the same extent as the laws of the United States. Many companies
have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal
systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property
rights. This could make it difficult for us to stop the infringement of our patents or the misappropriation of our other intellectual
property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to
third parties. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United
States. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products
and, further, may export otherwise infringing products to territories where we have patent protection, if our ability to enforce our patents
to stop infringing activities is inadequate. These products may compete with our products, and our patents or other intellectual property
rights may not be effective or sufficient to prevent them from competing.

Proceedings to enforce our
patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and resources
from other aspects of our business. Furthermore, while we intend to protect our intellectual property rights in major markets for our
products, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market
our products. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate.

Risks Related to Our S-1 Offering.

GHS INVESTMENTS, LLC WILL PAY LESS THAN THE THEN-PREVAILING
MARKET PRICE FOR OUR COMMON STOCK.

The
common stock to be issued to GHS Investments, LLC (“GHS”) pursuant to the Equity Financing Agreement dated October 5,
2023 will be purchased at a 80% discount to the (“Market Price”, which is the lowest closing trading price (the closing
trading price as reported by Bloomberg LP) of the common stock for any single trading day during the ten consecutive trading days
immediately following the date of our notice to GHS of our election to put shares pursuant to the Equity Financing Agreement (the
“Pricing Period”). GHS has a financial incentive to sell our common stock immediately upon receiving the shares to
realize the profit equal to the difference between the discounted price and the market price. If GHS sells the shares, the
price of our common stock could decrease. If our stock price decreases, GHS may have a further incentive to sell the shares of
our common stock that it holds. These sales may have a further impact on our stock price. Following an up-list to the NASDAQ
or equivalent national exchange, the Purchase Price shall be ninety percent (90%) of the lowest volume weighted average price
(“VWAP”) during the relevant Pricing Period, subject to a floor price of $0.0135 per share, below which the Company
shall not deliver a Put.

Future issuances of common shares may
be adversely affected by the Equity Line.

The
market price of our common stock could decline as a result of issuances and sales by us, including pursuant to the Equity Line under the
Equity Financing Agreement, or sales by our existing shareholders, of common stock, or the perception that these issuances and sales could
occur. Sales by our shareholders might also make it more difficult for us to issue and sell common stock at a time and price that we deem
appropriate. It is likely that the sale of shares by GHS will depress the market price of our common stock.

Draw downs under the Equity Financing
Agreement may cause dilution to existing shareholders.

Under
the terms of the Purchase Agreement, GHS has committed to purchase up to $10,000,000 worth of shares of our common stock. From time to
time during the term of the Purchase Agreement, and at our sole discretion, we can present GHS with a Put Notice requiring GHS to purchase
shares of our common stock. The purchase price (the “Purchase Price”) to be paid by GHS will be 80% of the Market Price. Following
an up-list to the NASDAQ or equivalent national exchange, the Purchase Price shall be ninety percent (90%) of the lowest volume weighted
average price (“VWAP”) during the relevant Pricing Period, subject to a floor price of $0.0135 per share, below which the
Company shall not deliver a Put. provided that the number of shares to be purchased by GHS may not exceed the number of shares that,
when added to the number of shares of our common stock then beneficially owned by GHS, would exceed 4.99% of our shares of common stock
outstanding. As a result, our existing shareholders will experience immediate dilution upon the purchase of any of the shares by GHS.
The issue and sale of the shares under the Purchase Agreement may also have an adverse effect on the market price of the common shares.
GHS may resell some, if not all, of the shares that we issue to it under the Purchase Agreement and such sales could cause the market
price of the common stock to decline significantly. To the extent of any such decline, any subsequent puts would require us to issue and
sell a greater number of shares to GHS in exchange for each dollar of the put amount. Under these circumstances, the existing shareholders
of our company will experience greater dilution. The effect of this dilution may, in turn, cause the price of our common stock to decrease
further, both because of the downward pressure on the stock price that would be caused by a large number of sales of our shares into the
public market by GHS, and because our existing stockholders may disagree with a decision to sell shares to GHS at a time when our stock
price is low, and may in response decide to sell additional shares, further decreasing our stock price. If we draw down amounts under
the Equity Line when our share price is decreasing, we will need to issue more shares to raise the same amount of funding.

There is no guarantee that we will satisfy
the conditions to the Equity Financing Agreement.

Although the Purchase Agreement provides that we can require GHS to
purchase, at our discretion, up to $10,000,000 worth of shares of our common stock in the aggregate, there can be no assurances given
that we will be able to satisfy the closing conditions applicable for each put. Further, there are limitations on the number of shares
in that each draw down amount is limited to the lowest closing bid price during the Pricing Period, subject to the floor. In addition,
the number of shares to be purchased by GHS may not exceed the number of shares that, when added to the number of shares of our common
stock then beneficially owned by GHS, would exceed 4.99% of our shares of common stock outstanding. Other conditions include requiring
that the registration statement remains effective at all times during the term of the Purchase Agreement, that there is no material adverse
change to our business on the date of delivery of a Put Notice and that our common stock continues to trade of the OTC Markets. If we
fail to satisfy the applicable closing conditions, we will not be able to sell the put shares to GHS. No shares have been issued to date
due to the floor price.

There is no guarantee that we will be
able to fully utilize the Equity Line.

There
are limitations on the number of put shares that may be sold in each put. The number of put shares that GHS shall be obligated to purchase
in a given put shall not exceed the number of shares that, when added to the number of shares of our common stock then beneficially owned
by GHS, would exceed 4.99% of our shares of common stock outstanding. Thus, our ability to access the bulk of the funds available under
the Purchase Agreement depends in part on GHS’s resale of stock purchased from us in prior puts. If with regard to a particular
put, the share volume limitation is reached, we will not be able to sell the proposed put shares to GHS. Accordingly, the Equity Line
may not be available at any given time to satisfy our funding needs.

Sales of put shares under the Purchase
Agreement could result in the possibility of short sales.

Although
GHS has agreed not to enter into any “short sale” (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act),
of our common stock, the sale after delivery of a put notice of such number of shares of common stock reasonably expected to be purchased
under a put notice is not deemed a “short sale.” Accordingly, GHS may enter into sales or other arrangements it deems appropriate
with respect to shares of our common stock after it receives a put notice under the Purchase Agreement so long as such sales or arrangements
do not involve more than the number of put shares expected to be purchased under the applicable put notice. Any downward pressure on the
market price of our common stock due to the issue and sale of common stock under the Equity Line could encourage short sales. If the market
price of our common stock decreases during the put period it will reduce the amount paid by GHS for the put shares. In a short sale, a
prospective seller borrows common shares from a shareholder or broker and sells the borrowed common shares. The prospective seller hopes
that the common share market price will decline, at which time the seller can purchase common shares at a lower price for delivery back
to the lender. The seller profits when the common share market price declines because it is purchasing common shares at a price lower
than the sale price of the borrowed common shares. Such sales could place downward pressure on the market price of the common stock by
increasing the number of common shares being sold, which could further contribute to any decline of the market price of the common shares.

There is uncertainty as to number of
subscription shares and the amount GHS will pay for the put shares.

The
actual number of shares we will issue in any particular put or in total under the Purchase Agreement is uncertain. Subject to certain
limitations in the Purchase Agreement, we have the discretion to give a put notice at any time throughout the term. The number of shares
we must issue after giving a put notice will fluctuate based on the market price of the common shares during the put pricing period.
GHS will receive more shares if the market price of our common stock declines. Since the price per share of each put share will fluctuate
based on the market price of our common stock during the put pricing period, the actual amount GHS will pay for the put shares included
in any particular put will decrease if the market price of our common stock declines subject to floor limitations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Bantec, Inc.

Our headquarters is located
at 37 Main Street, Sparta, NJ 07871

Howco

Howco has its principal office and warehouse at 6025 East 18th St,
Vancouver, WA 98661. Howco entered into a lease on April 28, 2009 that was extended on May 15, 2017 to June 1, 2020 and as noted below
on April 16, 2023 to May 31, 2026 for approximately 7,500 square feet for its office and warehouse. The lease provides for initial monthly
rent of approximately $5,154 per month with annual rent escalations. The lease required monthly payments including base rent plus CAM
with annual increases.

On April 16, 2023, Howco renewed its office and
warehouse lease for an additional three years. The initial year (commencing on June 1, 2023) monthly lease payment is $4,542, in years
two and three the monthly lease payments are $4,679 and $4,819 respectively. Monthly common charges at $1,481 for the first year, subject
to change in years two and three.

ITEM 3. LEGAL PROCEEDINGS

From
time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. Other
than described herein, neither the Company, nor its officers or directors are involved in, or the subject of, any pending legal proceedings
or governmental actions the outcome of which, in management’s opinion, would be material to our financial condition or results of
operations.

On
February 6, 2018, the Company sent a letter to the previous owners of Howco Distributing Co. (“Howco”) alleging that they
made certain financial misrepresentations under the terms of the Stock Purchase Agreement by which the Company acquired control of Howco
during 2016. The Company claimed that the previous owners took excessive amounts of cash from the business prior to the close of the merger.
On March 13, 2018, the Company filed a lawsuit against the previous owners by issuing a summons. On April 12, 2018, the Company received
the Defendants’ answer. On July 22, 2019, the Company sought and was granted a dismissal without prejudice of the lawsuit filed
against the previous owners of Howco. A company representative and the previous owners have been in contact. An informal oral agreement
with the Seller was made whereby the Company had been paying the previous owners $3,000 per month. The Company is no longer paying the
previous owner $3,000 a month. A company representative informed the previous owner that the Company will resume the $3,000 payment as
soon as it is able to do so.

In
connection with the merger in fiscal 2016, with Texas Wyoming Drilling, Inc., a vendor has a claim for unpaid bills of approximately $75,000
against the Company. The Company and its legal counsel believe the Company is not liable for the claim pursuant to its indemnification
clause in the merger agreement.

In
the suit Drone USA, Inc and Michael Bannon (plaintiffs) vs the former Chief Financial Officer or CFO, the plaintiffs sought to compel
the former CFO to meet his obligations under an agreement guaranteeing payments to another former executive. The former CFO filed a cross-claim
against the plaintiffs for past due salary. The employment agreement with the former CFO allowed salary payments to be paid in cash or
stock. During the year ended September 30, 2021, the Company issued 36,821 shares of its common stock for the past due salary and claims
that this payment moots the former CFO’s claim for past due salary. During the year ended September 30, 2022, the Company began
the process to cancel the shares issued and reclassified the amount to equity and a previously recorded liability for $119,670. The former
CFO filed a motion for summary judgement which was denied, then filed an appeal to that order. The appellate court reversed the lower
court’s decision. The Company settled the lawsuit for $90,000. Three equal payments of $30,000 were required to be made. The May
2023, June 2023 and July 2023 payments of $90,000 were made.

On
April 10, 2019, a former service provider filed a complaint with three charges with the Superior Court Judicial District of New Haven,
CT seeking payment for professional services. The Company has previously recognized expenses of $218,637, which remain unpaid in accounts
payable. On May 2, 2023, the Company reached a settlement agreement with a former vendor which had a pending legal action against the
Company concerning services rendered having outstanding amounts owed of $219,613. The Company agreed to pay a total of $110,000 in total,
consisting of a cash payment of $25,000 and a note payable of $85,000 (having a 3% annual interest). The Company will pay $2,472 for 36
months .

On
December 30, 2020, a Howco vendor filed a lawsuit seeking payment of past due invoices totaling $276,430 and finance charges of $40,212.
The Company has recorded the liability for the invoices in the normal course of business. Management at Howco as well as an intermediary
consultant structured a repayment plan with this vendor and other vendors as well.

Settlements

On
November 13, 2018, the Company and a vendor agreed to settle $161,700 in past due professional fees for a convertible note in the amount
of $90,000. The note bears interest at 5% and matures in July 2019, and has a fixed discount conversion feature. The note is past due
and remains unconverted at September 30, 2023 and 2022; however there is no default interest or penalty associated with the default. The
difference between the settlement amount and the recorded amount in accounts payable of $71,700 was recognized as a gain on debt extinguishment
upon receipt of the waiver and release from the vendor in 2018.

On
June 23, 2023, Howco entered into a settlement agreement with Crane Machinery Inc. (CMI). Howco agreed to pay $16,500 with an initial
settlement of $2,000, to be followed by five monthly installments of $2,900, until paid in full.

As
of September 30, 2023, the Company has received demand for payment of past due amounts for services by several consultants and service
providers.

During the year ended
September 30, 2023, the Company did an evaluation of certain unsecured, previously accrued payables to various third parties and the jurisdiction(s)
such amounts arose from, selected amounts were written off in accordance with ASC 405-20-40-1 as the statute of limitations had expired
on the payables and the Company recorded a gain of $531,231 as a result of the extinguishments as reflected in the accompanying statements
of operations.

ITEM 4. MINE SAFETY DISCLOSURES

None.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is quoted
on the OTCPink under the trading symbol “BANT”.

The following table sets forth
the quarterly high and low sales price per share of our common stock for the periods indicated. The prices represent inter-dealer quotations,
which do not include retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

QUARTER ENDED | HIGH | LOW
September 30, 2022 | $ | 0.30 | $ | 0.20
June 30, 2022 | $ | 0.50 | $ | 0.40
March 31, 2022 | $ | 0.70 | $ | 0.60
December 31, 2021 | $ | 1.30 | $ | 1.10
September 30, 2023 | $ | 0.10 | $ | 0.001
June 30, 2023 | $ | 0.20 | $ | 0.001
March 31, 2023 | $ | 0.20 | $ | 0.001
December 31, 2022 | $ | 0.40 | $ | 0.001

Holders

As of January 31, 2024, there
were 10,276,063 shares of common stock outstanding, which were held by approximately 314 record holders.

As of the date of this Form
10-K, we have no present commitments to issue shares of our capital stock to any 5% holder, director or nominee, other than pursuant to
the exercise of outstanding options as more fully set forth elsewhere in this Form 10-K.

Dividends

We have never paid cash dividends
on any of our capital stock and we currently intend to retain our future earnings, if any, to fund the development and growth of our business.
We do not intend to pay cash dividends to holders of our common stock in the foreseeable future.

Securities Authorized for Issuance under Equity
Compensation Plans

The following table sets forth
information regarding our equity compensation plans as of September 30, 2023. There are no equity compensation plans that have not been
approved by our security holders.

Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights ($) | Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by security holders | 16 | $ | 220,000 | 84

Issuance of Unregistered Securities

Since June 30, 2023, the Company
issued the following unregistered securities:

Shares Issued for Conversion of Series B Preferred
Stock

Between August 2023 to September 2023, the Company issued 2,309,360
shares of common stock to JP Carey Limited Partners, LP for the conversion of 15,500 Series B Preferred Stock and $3,639 accrued dividends.

In December 2023, the Company
issued 932,727 shares of common stock to JP Carey Limited Partners, LP for the conversion of 2,850 Series B Preferred Stock and $855 accrued
dividends.

Convertible Notes Issued

On September 6, 2023,
the Company entered into the Securities Purchase Agreement with 1800 Diagonal Lending LLC, pursuant to which the Company issued a
promissory note to the Lender in the principal amount of $49,000, including a debt issuance cost of $5,000. The conversion price
shall be a variable conversion price equal to 65% of the average of the two lowest closing price per share of the common stock
during the fifteen trading day period ending on the latest complete trading day prior to the conversion date, provided, however,
that the Lender and its affiliates may not beneficially own more than 4.99% of the Company’s outstanding shares of common
stock upon the conversion of the September 6, 2023 Note. The Company has accounted for the convertible promissory note as stock
settled debt under ASC 480 and recorded debt premium of $26,385.

On December 11, 2023, the
Company entered into the Securities Purchase Agreement with 1800 Diagonal Lending LLC (the “Lender”), pursuant to which the
Company issued a promissory note to the Lender in the principal amount of $40,000, including a debt issuance cost of $5,000 to be amortized
over the term of this note. The note matures on December 11, 2024 and bears interest at 12% per annum. The conversion price shall be a
variable conversion price equal to 65% of the average of the two lowest closing price per share of the common stock during the fifteen
trading day period ending on the latest complete trading day prior to the conversion date, provided, however, that the Lender and its
affiliates may not beneficially own more than 4.99% of the Company’s outstanding shares of common stock upon the conversion of the
December 11, 2023 note. The Company has accounted for the convertible promissory note as stock settled debt under ASC 480 and recorded
debt premium of $21,538.

From December 1, 2023
until February 1, 2024, the Company issued a $6,000 convertible notes every month to the law firm for fees incurred, each note
having six-month term to maturity and 10% annual interest. The notes are convertible into shares of common stock at a fixed discount
of 70% of the lowest bid price in the 10 trading days immediately preceding the notice of conversion from the lender. The notes have
cross default provisions. The Company has accounted for the convertible promissory notes as stock settled debt under ASC 480 and
recorded debt premiums equal to the face value of the notes with a charge to interest expense. The principal amount of these notes
will be charged to professional fees during the month the notes were issued. The Company has accounted for the convertible
promissory note as stock settled debt under ASC 480 and recorded debt premium of $7,714.

Other Notes Issued

On July 17, 2023, the
Company entered into the Securities Purchase Agreement (the “Agreement”) with 1800 Diagonal Lending LLC (“Lender”),
pursuant to which the Company issued a promissory note (the “Note”) to the Lender in the principal amount of $90,400, including
an original issue discount of $10,400 and legal fees of $5,000.

On October 26, 2023, the Company
entered into the Securities Purchase Agreement with 1800 Diagonal Lending LLC (“Lender”), pursuant to which the Company issued
a promissory note to the Lender in the principal amount of $90,400, including an original issue discount of $10,400 and legal fees of
$5,000.

Equity Financing Agreement with GHS Investments,
LLC

On October 5, 2023, the Company
entered into an Equity Financing Agreement (the “Equity Financing Agreement”) with GHS Investments, LLC, a Nevada limited
liability company (“GHS”). Under the terms of the Equity Financing Agreement, GHS will purchase, at the Company’s
election, up to $10,000,000 of the Company’s registered common stock (the “Shares”).

During the term of the Equity
Financing Agreement, the Company may at any time deliver a “put notice” to GHS thereby requiring GHS to purchase a certain
dollar amount of the Shares. Simultaneous with the delivery of such Shares, GHS shall deliver payment for the Shares. Subject to certain
restrictions, the purchase price for the Shares shall be equal to 80% of the Market Price during the Pricing Period as such capitalized
terms are defined in the Agreement. Following an up-list to the NASDAQ or an equivalent national exchange by the Company, the Purchase
price shall mean ninety percent (90%) of the lowest volume weighted average price (“VWAP”) during the relevant Pricing Period,
subject to a floor of $0.0135 per share, below which the Company shall not deliver a Put.

The number of Shares sold
to GHS shall not exceed the number of such shares that, when aggregated with all other shares of common stock of the Company then beneficially
owned by GHS, would result in GHS owning more than 4.99% of all of the Company’s common stock then outstanding. Additionally, GHS
may not execute any short sales of the Company’s common stock. Further, the Company has the right, but never the obligation to draw
down.

The Equity Financing Agreement
shall terminate (i) on the date on which GHS shall have purchased Shares pursuant to the Equity Financing Agreement for an aggregate Purchase
Price of $10,000,000, or (ii) on the date occurring 24 months from the date on which the Equity Financing Agreement was executed and delivered
by the Company and GHS.

As a condition for the execution of the Equity Financing Agreement
by GHS, the Company is obligated to issue $20,000 worth of shares to GHS (“Commitment Shares”). These shares have not been
issued as of the date of filing of this report.

Registration Rights Agreement with GHS Investments,
LLC

In addition, on October 5,
2023, the Company and GHS entered into a Registration Rights Agreement (the “Registration Agreement”). Under the terms of
the Registration Agreement the Company agreed to file a registration statement with the Securities and Exchange Commission with respect
to the Shares within 30 days of October 5, 2023. The Company is obligated to keep such registration statement effective until (i) three
months after the last closing of a sale of Shares under the Purchase Agreement, (ii) the date when GHS may sell all the Shares under Rule
144 without volume limitations, or (iii) the date GHS no longer owns any of the Shares.

The issuances of the above
securities were made in reliance upon exemptions from registration available under Section 3(a)(10) of the Securities Act, among others,
as transactions not involving a public offering. This exemption was claimed on the basis that these transactions did not involve any public
offering and the purchasers in each offering were accredited or sophisticated and had sufficient access to the kind of information registration
would provide. In each case, appropriate investment representations were obtained and certificates representing the securities were issued
with restrictive legends.

ITEM 6. [RESERVED]

Not Applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statement Notice

Certain statements made in
this Annual Report on Form 10-K are “forward-looking statements” (within the meaning of the Private Securities Litigation
Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown
risks, uncertainties and other factors that may cause actual results, performance or achievements of Bantec, Inc. and Subsidiaries (“we”,
“us”, “our” or the “Company”) to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. The Company’s plans and objectives are based, in part, on assumptions involving the
continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic,
competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many
of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements
included in this Annual Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that
the objectives and plans of the Company will be achieved.

Overview

Bantec, Inc. is a product
and service company targeting the U.S. Government, state governments, municipalities, hospitals, universities, manufacturers and other
building owners. Bantec also provides product procurement, distribution, and logistics services through its wholly-owned subsidiary, Howco
Distributing Co., (“Howco”) (collectively, the “Company”) to the United States Department of Defense and Defense
Logistics Agency. The Company established Bantec Sanitizing in fiscal 2021, which offers sanitizing products and equipment through its
new store bantec.store. The Company has operations based in Sparta, New Jersey and Vancouver, Washington. The Company continues to
seek strategic acquisitions and partnerships that offer us an opportunity to grow sales and profit.

Liquidity and Capital Resources

As of September 30, 2023 we
had $367,108 in current assets, including $35,443 in cash, compared to $703,917 in current assets, including $186,386 in cash, at September
30, 2022. Current liabilities at September 30, 2023 totaled $8,352,264 compared to $16,504,500 at September 30, 2022. The decrease in
current assets from September 30, 2022 to September 30, 2023 is primarily due to decreases in: cash of $150,943, and accounts receivable
of $281,342. The decrease in current liabilities from September 30, 2022 to September 30, 2023, of approximately $8,152,000, is primarily
due to the decreases in: convertible notes of approximately $7,036,000, and accrued expenses and interest of approximately $1,564,000.
While we have revenues from UAV sales as of this date, no significant UAV revenues are anticipated until we have implemented our full
plan of operations, specifically, initiating sales campaigns for our UAV internet and social media platforms. We must raise cash to implement
our strategy to grow and expand per our business plan. We anticipate over the next 12 months the cost of being a reporting public company
will be approximately $278,000.

We intend to complete our equity financing
and refinance or restructure certain existing liabilities. Once this is completed, and we implement our sales and marketing plan to sell
UAV products, we anticipate minimal long-term liquidity needs which we expect to meet through equity financing or short-term borrowings.

Additionally, we will have
to meet all the financial disclosure and reporting requirements associated with being a publicly reporting company. Our management will
have to spend additional time on policies and procedures to make sure it is compliant with various regulatory requirements, especially
that of Section 404 of the Sarbanes-Oxley Act of 2002. This additional corporate governance time required of management could limit the
amount of time management has to implement the business plan and may impede the speed of its operations.

The following is a summary
of the Company’s cash flows provided by (used in) operating, investing and financing activities:

Year Ended September 30, 2023 | Year Ended September 30, 2022
Net Cash Used in Operating Activities | $ | (639,392 | ) | $ | (1,644,132 | )
Net Cash Used in Investing Activities | $ | (1,542 | ) | $ | -
Net Cash Provided by Financing Activities | $ | 489,991 | $ | 844,565
Net (Decrease) Increase in Cash | $ | (150,943 | ) | $ | (799,567 | )

During the year ended September
30, 2023, net cash used in operating activities of $639,392, is largely the result of net losses of $2,225,334, gain on debt extinguishment
and settlement of approximately $156,000, and gain on forgiveness of accounts payable of approximately $531,000 partially offset by non-cash
charges for premiums on stock settled debt of approximately $182,000, debt discount amortization of $292,000, fees notes issued of $156,000,
bad debt expense of $29,000 and increase from changes in assets and liabilities of $1,594,000 primarily due to increase in accounts payable
and accrued expenses of $1,555,000.

During the year ended September
30, 2022, net cash used in operating activities of $1,644,132, is largely the result of net losses of $2,673,346, partially offset by
net gain on debt extinguishment of $370,075 and increases in current liabilities $590,000.

During the year ended September
30, 2023, net cash used in investing activities of $1,542 which relates to purchase of equipment as compared to $0 during the year
ended September 30, 2022.

During the year ended September
30, 2023, cash provided by financing activities of $489,991 is largely the result of common stock sales for cash of approximately $99,000,
loan advances from related parties of $230,000, net proceeds from loans and notes payable of $376,000, net proceeds from convertible
notes of $44,000, and proceeds from line of credit of $35,000 partially offset by repayments of various debts including loans and other
financing arrangements at Howco for a total of approximately $153,000, and repayments on notes payable- related party of $139,000.

During the year ended September
30, 2022, cash provided by financing activities is largely the result of stock sales for cash of approximately $700,000 and cash received
from issuance of convertible notes totaling $101,000, and other financing of $390,000 offset by repayments of various debts including
fee notes and other financing arrangements at Howco having a net repayment of approximately $346,000.

Results of Operations

Year Ended September 30, 2023 and 2022

We generated sales of approximately
$2,324,000 and $2,466,000 for the years ended September 30, 2023 and 2022, respectively. For the years ended September 30, 2023 and 2022,
we reported cost of goods sold of approximately $1,945,000 and $2,048,000, respectively. The decrease in sales and cost of sales is related
to decreased sales of drones. Gross margins were 16% and 17% for the years ended September 30, 2023 and 2022, respectively.

For the years ended September
30, 2023 and 2022, we reported selling, general, and administrative expenses of approximately $1,885,000 as compared to $2,180,000, a
decrease of approximately $295,000 or 14%. For the years ended September 30, 2023 and 2022, selling, general, and administrative expenses
consisted of the following:

For the Year September 30, 2023 (Approximate amounts) | For the Year September 30, 2022 (Approximate amounts)
Compensation and related benefits | $ | 881,000 | $ | 1,082,000
Professional fees | 716,000 | 822,000
Other selling, general and administrative expenses | 288,000 | 276,000
Total selling, general and administrative expenses | $ | 1,885,000 | $ | 2,180,000

The decrease in selling, general,
and administrative costs for the year 2023 period as compared to the year 2022 period was primarily attributable to decreases: in compensation
of approximately $201,000 or 19%, professional services expenses of approximately $106,000 or 13% due to cost cutting measures we implemented
during fiscal 2023 and offset by a slight increase in other selling, general and administrative expense of approximately $12,000 or 4%.

For the years ended September
30, 2023 and 2022, depreciation expense amounted to approximately $1,000 and $0, respectively, amortization of intangibles amounted to
$0 and $8,931, respectively. The related intangible asset was determined to be impaired and was written off in fiscal 2022. Depreciation,
amortization and the impairment write-off are included in operating expenses in the consolidated statement of operations.

For the years ended September
30, 2023 and 2022, other expense amounted to approximately $718,000 and $866,000, respectively, a decrease of approximately $148,000.
The decrease was primarily attributable to higher interest costs of approximately $185,000 and decrease in gain of debt extinguishment
and settlements of approximately $214,000 offset by increase in gain on forgiveness of accounts payable of approximately $531,000 which
was deemed forgiven by management due to statute of limitations and fair market value changes of derivative of approximately $9,000.

As a result, we reported net
loss of $2,225,334 and $2,673,346 for the years ended September 30, 2023 and 2022, respectively.

The Company has incurred dividend
charges from Series B and C preferred stock of $145,983, for the year ended September 30, 2023. The dividends to be paid are included
in temporary equity and the mandatorily redeemable preferred stock as presented on the balance sheet. For the year 2022, the dividends
recorded $584,072 which relates to the temporary equity.

As a result, we reported a
net loss available to common stockholders of $2,371,317 or $0.36 per common share, and $3,257,418 or $0.95 per common share, for the years
ended September 30, 2023 and 2022, respectively.

Going Concern

The accompanying consolidated
financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the recoverability of
assets and the satisfaction of liabilities in the normal course of business. For the year ended September 30, 2023, the Company has incurred
a net loss of $2,225,334 and used cash in operations of $639,392. The working capital deficit, stockholders’ deficit and accumulated
deficit was $7,985,156, $17,256,434 and $37,855,520, respectively, at September 30, 2023. On September 6, 2019, the Company received a
default notice on its payment obligations under the senior secured credit facility agreement which was previously in default. The Company
also defaulted on its Note Payable – Seller in September 2017 and has since defaulted on other promissory notes. As of September
30, 2023, the Company has received demands for payment of past due amounts from several consultants and service providers. It is the management’s
opinion that these matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve
months from the issuance date of this report. The ability of the Company to continue as a going concern is dependent upon the management’s
ability to further implement its business plan and raise additional capital as needed from the sales of stock or debt. The Company has
continued to implement cost-cutting measures and restructuring or setting up payment plans with vendors and service providers and plans
to raise equity through a private placement, and restructure or repay its obligations. The accompanying consolidated financial statements
do not include any adjustments that might be required should the Company be unable to continue as a going concern. However, additional
funding may not be available to the Company on acceptable terms, or at all. Any failure to raise capital as and when needed could have
a negative impact on the Company’s ability to pursue its business plans and strategies, and the Company would likely be forced to
delay, reduce, or terminate some or all of its activities, all of which could have a material adverse effect on the Company’s business,
results of operations and financial condition.

Off-Balance Sheet Arrangements

We do not have any off-balance
sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Critical Accounting Policies and Significant
Accounting Estimates

Our consolidated financial
statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied
on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
periods.

We regularly evaluate the
accounting policies and estimates that we use to prepare our consolidated financial statements. In general, management’s estimates
are based on historical experience, and on various other assumptions that are believed to be reasonable under the facts and circumstances.
Actual results could differ from those estimates made by management.

The preparation of consolidated
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent liabilities at the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates
include the allowance for bad debt on accounts receivable, reserves on inventory, valuation of intangible assets for impairment analysis,
valuation of the lease liability and related right-of-use asset, valuation of stock-based compensation, the valuation of derivative liabilities,
valuation of redeemable preferred stock and the valuation allowance on deferred tax assets.

We have identified the accounting
policies below as critical to our business operations.

Accounts Receivable

Trade receivables are
recorded at net realizable value consisting of the carrying amount less the allowance for credit losses, as needed. Factors used
to establish an allowance include the credit quality of the customer and whether the balance is significant. The Company may also
use the direct write-off method to account for uncollectible accounts that are not received. Using the direct write-off method,
trade receivable balances are written off to bad debt expense when an account balance is deemed to be uncollectible. The Company
maintains an allowance for credit losses primarily for estimated losses resulting from the inability or failure of individual
customers to make required payments. The Company maintains an allowance under Accounting Standards Codification (“ASC”)
326 based on historical losses, changes in payment history, customer-specific information, current economic conditions, and
reasonable and supportable forecasts of future economic conditions. The allowance under ASC 326 is updated as additional losses are
incurred or information becomes available related to the customer or economic conditions.

Long-Lived Assets

Long-lived assets are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment is determined
by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from use of
the assets and their ultimate disposition. In instances where impairment is determined to exist, the Company writes down the asset to
its fair value based on the present value of estimated future cash flows.

Revenue Recognition

The Company follows Accounting
Standards Codification (“ASC”) 606, Revenue From Contracts With Customers, which has a five-step process: a) Determine whether
a contract exists; b) Identify the performance obligations; c) Determine the transaction price; d) Allocate the transaction price; and
e) Recognize revenue when (or as) performance obligations are satisfied.

The Company sells a variety
of products to government entities. The purchase order received specifies each item and its manufacturer; the Company only needs to fulfill
the performance obligation by shipping the specified items. No other performance obligations exist under the terms of the contracts. The
Company recognizes revenue for the agreed upon sales price when the product is shipped to the customer, which satisfies the performance
obligation.

The Company through its subsidiary
Howco entered into contracts to package products for a third-party company servicing the same government customer base. The contracts
were on job lot basis as shipped to Howco for packaging. The customer was billed upon completion of each job lot at which time revenue
was recognized.

The Company sells drones and
related products manufactured by third parties to various parties, primarily local government entities. The Company also offers technical
services related to drone utilization and performs other services. Contracts for drone related products and services sales will be evaluated
using the five-step process outline above. There have been no material sales for drone products or other services for which full compliance
with performance obligations has not been met. Upon significant sales for drone products and services and insulation jackets, the Company
will disaggregate sales by these lines of business and within the lines of business to the extent that the product or service has different
revenue recognition characteristics.

The Company began sales of
sanitizing products and services during fiscal year 2022. Revenue for this line of business is recognized upon shipment and delivery of
training services (as applicable).

Stock-Based Compensation

Stock-based compensation is
accounted for based on the requirements of ASC 718 – “Compensation –Stock Compensation ”, which requires
recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments
over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period).
The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date
fair value of the award. The Company utilizes the Black-Scholes option pricing model and uses the simplified method to determine expected
term because of lack of sufficient exercise history. Additionally, effective October 1, 2016, the Company adopted the Accounting
Standards Update No. 2016-09 (“ASU 2016-09” ), Improvements to Employee Share-Based Payment Accounting . Among other
changes, ASU 2016-09 permits the election of an accounting policy for forfeitures of share-based payment awards, either to recognize forfeitures
as they occur or estimate forfeitures over the vesting period of the award. The Company has elected to recognize forfeitures as they occur
and the cumulative impact of this change did not have any effect on the Company’s consolidated financial statements and related
disclosures.

As of October 1, 2018, the
Company has early adopted ASU 2018-7 Compensation-Stock Compensation which conforms the accounting for non-employees to the accounting
treatment for employees. The new standard replaces using a fair value as of each reporting date with use of the calculated fair value
as of the grant date. The implementation of the standard provides for the use of the fair market value as of the adoption date, rather
than using the value as of the original grant date. Therefore, the values calculated and reported at September 30, 2018 become a proxy
for the grant date value. The Company utilizes the Black-Scholes option pricing model and uses the simplified method to determine expected
term because of lack of sufficient exercise history. There was no cumulative effect on the adoption date.

Convertible Notes with Fixed Rate Conversion
Options

The Company may enter into
convertible notes, some of which contain, predominantly, fixed rate conversion features, whereby the outstanding principal and accrued
interest may be converted by the holder, into common shares at a fixed discount to the market price of the common stock at the time of
conversion. This results in a fair value of the convertible note being equal to a fixed monetary amount. The Company records the convertible
note liability at its fixed monetary amount by measuring and recording a premium, as applicable, on the Note date with a charge to interest
expense in accordance with ASC 480 – “Distinguishing Liabilities from Equity”.

Net Loss Per Share

Lease Accounting

In February 2016, the FASB
issued ASU No. 2016-02, Leases , which requires lessees to report on their balance sheets a right-of-use asset and a lease
liability in connection with most lease agreements classified as operating leases under the prior guidance (ASC Topic 840). Under the
new guidance, codified as ASC Topic 842, the lease liability must be measured initially based on the present value of future lease payments,
subject to certain conditions. The right-of-use asset must be measured initially based on the amount of the liability, plus certain initial
direct costs. The new guidance further requires that leases be classified at inception as either (a) operating leases or (b) finance leases.
For operating leases, periodic expense generally is flat (straight-line) throughout the life of the lease. For finance leases, periodic
expense declines over the life of the lease. The new standard, as amended, provides an option for entities to use the cumulative-effect
transition method. As permitted, the Company adopted ASC Topic 842 effective June 1, 2020. The adoption of ASC Topic 842 did not have
a material impact on the Company’s consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK

Not Applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA

The
following consolidated financial statements of Bantec, Inc. are included in this Annual Report on Form 10-K:

Page
FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB Firm ID 106 ) | F-2
Consolidated Balance Sheets – As of September 30, 2023 and 2022 | F-3
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended September 30, 2023 and 2022 | F-4
Consolidated Statements of Changes in Stockholders’ Deficit for the Years Ended September 30, 2023 and 2022 | F-5
Consolidated Statements of Cash Flows for the Years Ended September 30, 2023 and 2022 | F-6
Notes to Consolidated Financial Statements | F-7

F- 1

Report
of Independent Registered Public Accounting Firm

To
the Stockholders and the Board of Directors of:

Bantec,
Inc.

Opinion
on the Financial Statements

We
have audited the accompanying consolidated balance sheets of Bantec, Inc. and Subsidiaries (the “Company”) as of September
30, 2023 and 2022, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’
deficit, and cash flows, for each of the two years in the period ended September 30, 2023, and the related notes (collectively referred
to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in
all material respects, the consolidated financial position of the Company as of September 30, 2023 and 2022, and the consolidated results
of its operations and its cash flows for each of the two years in the period ended September 30, 2023, in conformity with accounting
principles generally accepted in the United States of America.

Going
Concern

The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 2 to the consolidated financial statements, the Company has a net loss and cash used in operations of $2,225,334 and $639,392
respectively, in fiscal 2023, and has a working capital deficit, stockholders’ deficit and accumulated deficit of $7,985,156, $17,256,434
and $37,855,520, respectively at September 30, 2023. These matters raise substantial doubt about the Company’s ability to continue
as a going concern. Management’s Plan in regard to these matters is also described in Note 2. The consolidated financial statements
do not include any adjustments that might result from the outcome of this uncertainty.

Basis
for Opinion

These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated 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 the Company
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 audits to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of 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 Company’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 consolidated 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 consolidated 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 consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.

Critical
Audit Matters

The
critical audit matters are matters arising from the current period audit of the consolidated 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 consolidated
financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical
audit matters.

/s/
Salberg & Company, P.A.

SALBERG
& COMPANY, P.A.

We
have served as the Company’s auditor since 2017.

Boca
Raton, Florida

February
5, 2024

2295
NW Corporate Blvd., Suite 240 ● Boca Raton, FL 33431

Phone:
(561) 995-8270 ● Toll Free: (866) CPA-8500 ● Fax: (561) 995-1920

www.salbergco.com
● info@salbergco.com

Member
National Association of Certified Valuation Analysts ● Registered with the PCAOB

Member
CPAConnect with Affiliated Offices Worldwide ● Member Center for Public Company Audit Firms

F- 2

BANTEC,
INC. AND SUBSIDIARIES

CONSOLIDATED
BALANCE SHEETS

September 30, 2023 | September 30, 2022
ASSETS
CURRENT ASSETS:
Cash | $ | 35,443 | $ | 186,386
Accounts receivable, net | 138,609 | 419,951
Inventory | 178,056 | 92,917
Prepaid expenses and other current assets | 15,000 | 4,663
TOTAL CURRENT ASSETS | 367,108 | 703,917
Property and equipment, net | 1,542 | 1,461
Right of use asset | 127,276 | 33,568
TOTAL ASSETS | $ | 495,926 | $ | 738,946
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Accounts payable | $ | 2,215,246 | $ | 2,730,309
Accrued expenses and interest | 3,530,406 | 5,094,394
Convertible notes, net of debt discount and premiums | 386,180 | 7,422,326
Line of credit | 35,000 | -
Note payable – seller | 834,000 | 837,000
Current portion notes and loans payable – net of discounts | 863,852 | 217,897
Notes payable – related party | 105,062 | 13,537
Mandatorily redeemable Preferred Stock Series C - $ 1.50 stated value, 1,000,000 shares designated and authorized, 224,000 and none issued and outstanding at September 30, 2023 and 2022, respectively | 340,572 | -
Settlement payable | - | 154,562
Lease liability - current portion | 41,946 | 34,475
TOTAL CURRENT LIABILITIES | 8,352,264 | 16,504,500
LONG-TERM LIABILITIES:
Lease liability - long-term portion | 85,880 | -
Note payable including accrued interest – related party - long-term portion | 8,700,254 | -
Notes and loans payable – net of current portion | 150,000 | 127,539
TOTAL LONG-TERM LIABILITIES | 8,936,134 | 127,539
TOTAL LIABILITIES | $ | 17,288,398 | $ | 16,632,039
Temporary Equity – Convertible Preferred Stock Series B - $ 1.50 stated value, 1,000,000 shares designated and authorized, 208,500 and 448,000 issued and outstanding at September 30, 2023 and 2022, respectively | 463,962 | 685,440
Commitments and Contingencies (See Note 15)
STOCKHOLDERS’ DEFICIT:
Preferred stock - $ 0.0001 par value, 5,000,000 shares authorized, Series A preferred stock – 250 shares designated, issued and outstanding at September 30, 2023 and 2022, respectively | $ | - | $ | -
Common stock - $ 0.0001 par value, 12,000,000,000 shares authorized, 9,306,954 and 4,407,321 shares issued and outstanding at September 30, 2023 and 2022, respectively | 930 | 441
Additional paid-in capital | 20,598,156 | 19,051,212
Accumulated deficit | ( 37,855,520 | ) | ( 35,630,186 | )
TOTAL STOCKHOLDERS’ DEFICIT | ( 17,256,434 | ) | ( 16,578,533 | )
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 495,926 | $ | 738,946

The
accompanying consolidated notes are an integral part of these consolidated financial statements.

F- 3

BANTEC,
INC. AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Years ended September 30,
2023 | 2022
Sales | $ | 2,324,307 | $ | 2,466,198
Cost of Goods Sold | 1,944,770 | 2,048,173
Gross Profit | 379,537 | 418,025
OPERATING EXPENSES
Selling, general, and administrative expenses | 1,885,081 | 2,180,288
Intangible impairment | - | 35,719
Depreciation and amortization | 1,461 | 8,931
TOTAL OPERATING EXPENSES | 1,886,542 | 2,224,938
LOSS FROM OPERATIONS | ( 1,507,005 | ) | ( 1,806,913 | )
OTHER INCOME (EXPENSE)
Other expense | - | ( 7,068 | )
Interest and financing costs | ( 1,406,007 | ) | ( 1,220,730 | )
Loss on change in fair market value of derivative | - | ( 8,710 | )
Gain on extinguishment of accounts payable | 531,231 | -
Gains on debt extinguishment and settlements, net | 156,447 | 370,075
TOTAL OTHER EXPENSE, NET | ( 718,329 | ) | ( 866,433 | )
LOSS BEFORE TAXES | ( 2,225,334 | ) | ( 2,673,346 | )
Provision for Income tax | - | -
NET LOSS | $ | ( 2,225,334 | ) | $ | ( 2,673,346 | )
Dividends Attributable to Series B and C Preferred Stock | ( 145,983 | ) | ( 584,072 | )
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS | $ | ( 2,371,317 | ) | $ | ( 3,257,418 | )
BASIC AND DILUTED NET LOSS PER SHARE AVAILABLE TO COMMON STOCKHOLDERS | $ | ( 0.36 | ) | $ | ( 0.95 | )
BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING | 6,602,104 | 3,424,570

The
accompanying consolidated notes are an integral part of these consolidated financial statements.

F- 4

BANTEC,
INC. AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THE YEARS ENDED SEPTEMBER 30, 2023 AND 2022

Series A | Additional | Total
Preferred Stock | Common Stock | Paid-in | Accumulated | Stockholders’
No. of Shares | Value | No. of Shares | Value | Capital | Deficit | Deficit
Balance at September 30, 2021 | 250 | $ | - | 2,470,511 | $ | 247 | $ | 18,160,515 | $ | ( 32,956,840 | ) | $ | ( 14,796,078 | )
Share option expense | - | - | - | - | 69,108 | - | 69,108
Cancellation of common stock issued for settlement | - | - | ( 36,821 | ) | ( 4 | ) | ( 119,666 | ) | - | ( 119,670 | )
Shares issued for cash | - | - | 849,313 | 85 | 699,504 | - | 699,589
Shares issued for conversions of notes and accrued interest including premiums reclassified | - | - | 1,124,318 | 113 | 625,436 | - | 625,549
Relative fair value of warrants issued with debt | - | - | - | - | 200,387 | - | 200,387
Deemed dividend to adjust temporary equity to redemption value | - | - | - | - | ( 570,632 | ) | - | ( 570,632 | )
Preferred Stock Series B dividend | - | - | - | - | ( 13,440 | ) | - | ( 13,440 | )
Net loss for the year ended September 30, 2022 | - | - | - | - | - | ( 2,673,346 | ) | ( 2,673,346 | )
Balance at September 30, 2022 | 250 | $ | - | 4,407,321 | $ | 441 | $ | 19,051,212 | $ | ( 35,630,186 | ) | $ | ( 16,578,533 | )
Series A | Additional | Total
Preferred Stock | Common Stock | Paid-in | Accumulated | Stockholders’
No. of Shares | Value | No. of Shares | Value | Capital | Deficit | Deficit
Balance at September 30, 2022 | 250 | $ | - | 4,407,321 | $ | 441 | $ | 19,051,212 | $ | ( 35,630,186 | ) | $ | ( 16,578,533 | )
Shares issued for cash | - | - | 496,667 | 49 | 99,284 | - | 99,333
Shares issued for conversion of notes and reclassification of debt premiums | - | - | 2,090,007 | 209 | 203,884 | - | 204,093
Preferred Stock Series B and C dividend | - | - | - | - | ( 145,983 | ) | - | ( 145,983 | )
Contributed capital related to the assumption of convertible note by a related party | - | - | - | - | 1,363,100 | - | 1,363,100
Shares issued for conversion of Series B preferred shares and dividends | - | - | 2,309,360 | 231 | 26,659 | - | 26,890
Fractional shares issued from reverse split | - | - | 3,599 | - | - | - | -
Net loss for the year ended September 30, 2023 | - | - | - | - | - | ( 2,225,334 | ) | ( 2,225,334 | )
Balance at September 30, 2023 | 250 | $ | - | 9,306,954 | $ | 930 | $ | 20,598,156 | $ | ( 37,855,520 | ) | $ | ( 17,256,434 | )

The
accompanying consolidated notes are an integral part of these consolidated financial statements.

F- 5

BANTEC,
INC. AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF CASH FLOWS

Years ended September 30,
2023 | 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss | $ | ( 2,225,334 | ) | $ | ( 2,673,346 | )
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Amortization of debt discounts | 292,404 | 157,446
Accretion of premium on convertible notes | 182,385 | 258,557
Bad debt expense | 29,472 | -
Depreciation and intangibles amortization | 1,461 | 8,931
Share-based compensation expense | - | 69,108
Share issued for conversion fees | 18,705 | 9,884
Fee notes issued to service providers | 156,000 | 196,000
Gains on debt extinguishment and settlements | ( 156,447 | ) | ( 370,075 | )
Loss on derivative, change in fair market value | - | 8,710
Gain on extinguishment of accounts payable | ( 531,231 | ) | -
Write-off of impaired intangible | - | 35,719
Non-cash rent expense | ( 357 | ) | ( 336 | )
Changes in Assets and Liabilities:
Accounts receivable | 251,870 | ( 291,565 | )
Inventory | ( 85,140 | ) | ( 31,080 | )
Prepaid expenses and other assets | 4,663 | 24,219
Accounts payable and accrued expenses | 1,555,271 | 961,654
Settlement payable | ( 133,114 | ) | ( 7,958 | )
NET CASH USED IN OPERATING ACTIVITIES | ( 639,392 | ) | ( 1,644,132 | )
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment | ( 1,542 | ) | -
NET CASH USED IN INVESTING ACTIVITIES | ( 1,542 | ) | -
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of shares | 99,333 | 699,589
Proceeds from line of credit | 35,000 | -
Net proceeds from loans and notes payable | 375,750 | 390,000
Repayments of loans and notes payable | ( 152,617 | ) | ( 232,763 | )
Net proceeds from convertible notes payable | 44,000 | 101,250
Repayments of convertible notes | - | ( 122,766 | )
Net proceeds from notes payable, related party | 230,132 | 125,000
Repayments on notes payable, related party | ( 138,607 | ) | ( 110,860 | )
Repayments on note payable - seller | ( 3,000 | ) | -
Repayments of line of credit | - | ( 4,885 | )
NET CASH PROVIDED BY FINANCING ACTIVITIES | 489,991 | 844,565
NET DECREASE IN CASH | ( 150,943 | ) | ( 799,567 | )
CASH AT BEGINNING OF YEAR | 186,386 | 985,953
CASH AT END OF YEAR | $ | 35,443 | $ | 186,386
Supplemental Disclosure of Cash Flow Information
Cash paid for:
Interest | $ | 30,059 | $ | 37,551
Income Tax | $ | - | $ | -
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Issuance of common stock for conversion of convertible notes and accrued interest | $ | 95,388 | $ | 393,245
Issuance of common stock for conversion of Series B preferred stock and dividends | $ | 26,890 | $ | -
Reclassification of debt premium upon conversion of convertible debt | $ | 90,000 | $ | 222,420
Debt discount | $ | 80,650 | $ | 65,500
Right-of-use asset and lease liability pursuant to ASC 842 | $ | 140,561 | $ | -
Value of Series C preferred stock in connection with an Exchange Agreement | $ | 336,000 | $ | -
Assignment of convertible note including accrued interest by related party | $ | 8,819,069 | $ | -
Deemed dividend to adjust temporary equity to redemption value | $ | - | $ | 570,632
Issuance of convertible preferred stock charged to debt discounts | $ | - | $ | 101,368
Dividends on convertible preferred stock | $ | 145,983 | $ | 13,440
Warrants for common stock issued | $ | - | $ | 200,387
Cancellation of common stock for potential legal settlement | $ | - | $ | ( 119,670 | )
Issuance of convertible note for accounts payable | $ | - | $ | 4,000
Issuance of convertible note for prepaid legal expense | $ | 15,000 | $ | -
Exchange of convertible notes into non-convertible notes | $ | 135,000 | $ | -

The
accompanying consolidated notes are an integral part of these consolidated financial statements.

F- 6

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

NOTE
1 - NATURE OF OPERATIONS

Bantec,
Inc. is a company providing products and services (“Bantec” or the “Company”), targeting the U.S. Government,
state governments, municipalities, hospitals, universities, manufacturers and other building owners. Bantec provides product procurement,
distribution, and logistics services through its wholly-owned subsidiary, Howco Distributing Co. (“Howco”) to the U.S. Department
of Defense and Defense Logistics Agency. The Company established Bantec Sanitizing, LLC in fiscal 2021, which offers sanitizing products
and equipment through its online store – bantec.store. The Company has operations based in Sparta, New Jersey and Vancouver,
Washington. Howco operates in Vancouver, Washington and all other operations are in Sparta, New Jersey. The Company continues to seek
strategic acquisitions and partnerships that would offer it an opportunity to grow sales and profit.

On
July 11, 2023, the Company filed a certificate of amendment to its certificate of incorporation, as amended, to effect a one-for-one
thousand (1:1,000) Reverse Stock Split (the “Reverse Stock Split”). Proportional adjustments for the Reverse Stock Split
were made to the Company’s outstanding stock options, warrants and equity incentive plans. All share and per-share data and amounts
have been retroactively adjusted as of the earliest period presented in the consolidated financial statements to reflect the Reverse
Stock Split.

NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GOING
CONCERN

Basis
of Presentation and Principles of Consolidation

The Company prepares its consolidated financial statements in accordance
with U.S. generally accepted accounting principles (“GAAP”). The accompanying consolidated financial statements include the
accounts of Bantec Inc. and its wholly-owned subsidiaries, Drone USA, LLC, Bantec Construction, LLC, Bantec Sanitizing, LLC, Bantec Logistics
LLC, Bantec Environmental Corp, and Howco. Bantec Construction, LLC, Bantec Logistics LLC, Bantec Environmental Corp and Bantec Sanitizing,
LLC are in start-up stages with minor revenues and cash expenditures. All significant intercompany accounts and transactions have been
eliminated in consolidation.

Going
Concern

The
accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates
the recoverability of assets and the satisfaction of liabilities in the normal course of business. For the year ended September 30, 2023,
the Company has incurred a net loss of $ 2,225,334 and used cash in operations of $ 639,392 . The working capital deficit, stockholders’
deficit and accumulated deficit was $ 7,985,156 , $ 17,256,434 , and $ 37,855,520 , respectively, at September 30, 2023. On September 6, 2019,
the Company received a default notice on its payment obligations under the senior secured credit facility agreement which was previously
in default (see Note 10). The Company also defaulted on its Note Payable – Seller in September 2017 and has since defaulted on
other promissory notes. As of September 30, 2023, the Company has received demands for payment of past due amounts from several consultants
and service providers. It is the management’s opinion that these matters raise substantial doubt about the Company’s ability
to continue as a going concern for a period of twelve months from the issuance date of this report. The ability of the Company to continue
as a going concern is dependent upon the management’s ability to further implement its business plan and raise additional capital
as needed from the sales of stock or debt. The Company has continued to implement cost-cutting measures and restructuring or setting
up payment plans with vendors and service providers and plans to raise equity through a private placement, and restructure or repay its
obligations. The accompanying consolidated financial statements do not include any adjustments that might be required should the Company
be unable to continue as a going concern. However, additional funding may not be available to the Company on acceptable terms, or at
all. Any failure to raise capital as and when needed could have a negative impact on the Company’s ability to pursue its business
plans and strategies, and the Company would likely be forced to delay, reduce, or terminate some or all of its activities, all of which
could have a material adverse effect on the Company’s business, results of operations and financial condition.

Use
of Estimates

The
preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant
estimates include the allowance for bad debt on accounts receivable, reserves on inventory, valuation of intangible assets for impairment
analysis, valuation of the lease liability and related right-of-use asset, valuation of stock-based compensation, valuation of redeemable
preferred stock, valuation of derivative liabilities, and the valuation allowance on deferred tax assets.

F- 7

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

Fair
Value Measurements

The
Company follows the FASB Fair Value Measurements standard, as it applies to its financial instruments on a recurring basis. This
standard defines fair value, outlines a framework for measuring fair value, and details the required disclosures about fair value measurements.

Fair
value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between
market participants at the measurement date. The standard establishes a hierarchy in determining the fair value of an asset or liability.
The fair value hierarchy has three levels of inputs, both observable and unobservable. Level 1 inputs include quoted market prices for
identical assets or liabilities in an active market that the Company has the ability to access at the measurement date. Level 2 inputs
are market data, other than Level 1, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for
similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated
by market data. Level 3 inputs are unobservable and corroborated by little or no market data. The standard requires the utilization of
the lowest possible level of input to determine fair value and carrying amounts of current liabilities approximate fair value due to
their short-term nature.

The
estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and
accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these
instruments.

The
Company’s non-financial assets, such as ROU assets, and property and equipment, are adjusted to fair value only when an impairment
is recognized. Such fair value measurements are based predominantly on Level 3 inputs .

A
roll-forward of the level 3 valuation financial instruments is as follows:

Derivative Liabilities
Balance at September 30, 2021 | $ | 125,693
Change in fair market value of warrant | 8,710
Surrender of warrants | ( 134,403 | )
Balance at September 30, 2022 | $ | -

Cash
and Cash Equivalents

Cash
equivalents consist of liquid investments with maturities of three months or less at the time of purchase. There are no cash equivalents
at the balance sheet dates.

Accounts
Receivable

Trade
receivables are recorded at net realizable value consisting of the carrying amount less the allowance for credit losses, as
needed. Factors used to establish an allowance include the credit quality of the customer and whether the balance is significant.
The Company may also use the direct write-off method to account for uncollectible accounts that are not received. Using the direct
write-off method, trade receivable balances are written off to bad debt expense when an account balance is deemed to be
uncollectible. The Company maintains an allowance for credit losses primarily for estimated losses resulting from the inability or
failure of individual customers to make required payments. The Company maintains an allowance under Accounting Standards
Codification (“ASC”) 326 based on historical losses, changes in payment history, customer-specific information, current
economic conditions, and reasonable and supportable forecasts of future economic conditions. The allowance under ASC 326 is updated
as additional losses are incurred or information becomes available related to the customer or economic conditions. As of September
30, 2023 and 2022, the allowance for credit losses was $ 29,472 and $0 , respectively.

Inventory

Inventory
consists of finished goods, which are purchased directly from manufacturers. The Company utilizes a just-in-time type of inventory system
where products are ordered from the vendor only when the Company has received sales order from its customers. Inventory is stated at
the lower of cost and net realizable value on a first-in, first-out basis.

Property
& Equipment

Property
and equipment are stated at cost and depreciated over their estimated useful lives. Maintenance and repairs are charged to expense as
incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting
gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of
these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. The Company depreciates
these demonstration units over a period of 3 years. Depreciation expense was $ 1,461 and $0 in year ended September 30, 2023 and 2022,
respectively.

F- 8

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

Goodwill
and Intangible Assets

The
Company acquired a patent for a new product during the year ended September 30, 2021. The Company capitalized acquisition and related
legal fees related to the patent totaling $ 44,650 . The capitalized amount will be amortized over five years . Impairment will be tested
annually or as indicators of impairment are available. (see Note 5)

Long-Lived
Assets

Long-lived
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
Impairment is determined by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected
to result from use of the assets and their ultimate disposition. In instances where impairment is determined to exist, the Company writes
down the asset to its fair value based on the present value of estimated future cash flows.

Deferred
Financing Costs

All
unamortized deferred financing costs related to the Company’s borrowings are presented in the consolidated balance sheets as a
direct deduction from the related debt. Amortization of these costs is reported as interest and financing costs included in the consolidated
statement of operations.

Revenue
Recognition

The
Company follows ASC 606, Revenue From Contracts With Customers, which has a five-step process: a) Determine whether a contract exists;
b) Identify the performance obligations; c) Determine the transaction price; d) Allocate the transaction price; and e) Recognize revenue
when (or as) performance obligations are satisfied.

The
Company sells a variety of products to government entities. The purchase order received specifies each item and its manufacturer; the
Company only needs to fulfill the performance obligation by shipping the specified items. No other performance obligations exist under
the terms of the contracts. The Company recognizes revenue for the agreed upon sales price when the product is shipped to the customer,
which satisfies the performance obligation.

The
Company through its subsidiary Howco enters into contracts to package products for a third-party company servicing the same government
customer base. The contracts are based on the job lot as shipped to Howco for packaging. The customer is billed upon completion of each
job lot at which time revenue is recognized.

The
Company sells drones and related products manufactured by third parties to various parties, primarily local government entities. Contracts
for drone related products and services sales will be evaluated using the five-step process outline above. There have been no material
sales for drone products or other services for which full compliance with performance obligations has not been met. Upon significant
sales for drone products, the Company will disaggregate sales by these lines of business and within the lines of business to the extent
that the product or service has different revenue recognition characteristics.

The
Company began sales of sanitizing products and services during the year ended September 30, 2022. Revenue for this line of business is
recognized upon shipment and delivery of training services (as applicable).

Stock-based
compensation

Stock-based
compensation is accounted for based on the requirements of ASC 718 – “Compensation–Stock Compensation ”,
which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award
of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively,
the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award
based on the grant-date fair value of the award. The Company utilizes the Black-Scholes option pricing model and uses the simplified
method to determine expected term because of lack of sufficient exercise history. Additionally, effective October 1, 2016, the Company
adopted the Accounting Standards Update No. 2016-09 (“ASU 2016-09” ), Improvements to Employee Share-Based Payment Accounting .
Among other changes, ASU 2016-09 permits the election of an accounting policy for forfeitures of share-based payment awards, either to
recognize forfeitures as they occur or estimate forfeitures over the vesting period of the award. The Company has elected to recognize
forfeitures as they occur and the cumulative impact of this change did not have any effect on the Company’s consolidated financial
statements and related disclosures.

F- 9

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

As
of October 1, 2018, the Company has early adopted ASU 2018-7 Compensation-Stock Compensation which conforms the accounting for non-employees
to the accounting treatment for employees. The new standard replaces using a fair value as of each reporting date with use of the calculated
fair value as of the grant date. The implementation of the standard provides for the use of the fair market value as of the adoption
date, rather than using the value as of the original grant date. Therefore, the values calculated and reported at September 30, 2018
become a proxy for the grant date value. The Company utilizes the Black-Scholes option pricing model and uses the simplified method to
determine expected term because of lack of sufficient exercise history. There was no cumulative effect on the adoption date.

Shipping
and Handling Costs

The
Company has included freight-out as a component of cost of sales, which amounted to $ 52,248 and $ 61,032 for the year ended September
30, 2023 and 2022, respectively.

Convertible
Notes with Fixed Rate Conversion Options

The
Company may enter into convertible notes, some of which contain, predominantly, fixed rate conversion features, whereby the outstanding
principal and accrued interest may be converted by the holder, into common shares at a fixed discount to the market price of the common
stock at the time of conversion. This results in a fair value of the convertible note being equal to a fixed monetary amount. The Company
records the convertible note liability at its fixed monetary amount by measuring and recording a premium, as applicable, on the Note
date with a charge to interest expense in accordance with ASC 480 - “Distinguishing Liabilities from Equity”.

Derivative
Liabilities

The
Company has certain financial instruments that are derivatives or contain embedded derivatives. The Company evaluates all its financial
instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately
accounted for in accordance with ASC 810-10-05-4 and 815-40. This accounting treatment requires that the carrying amount of any
derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value
is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either other
income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion,
repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss
on extinguishment.

Lease
Accounting

In
February 2016, the FASB issued ASU No. 2016-02, Leases , which requires lessees to report on their balance sheets a right-of-use
asset and a lease liability in connection with most lease agreements classified as operating leases under the prior guidance (ASC Topic
840). Under the new guidance, codified as ASC Topic 842, the lease liability must be measured initially based on the present value of
future lease payments, subject to certain conditions. The right-of-use asset must be measured initially based on the amount of the liability,
plus certain initial direct costs. The new guidance further requires that leases be classified at inception as either (a) operating leases
or (b) finance leases. For operating leases, periodic expense generally is flat (straight-line) throughout the life of the lease. For
finance leases, periodic expense declines over the life of the lease. The new standard, as amended, provides an option for entities to
use the cumulative-effect transition method. As permitted, the Company adopted ASC Topic 842 effective June 1, 2020. The adoption of
ASC Topic 842 did not have a material impact on the Company’s consolidated financial statements.

In
2020, the Company’s subsidiary renewed the lease for the warehouse and office facility in Vancouver, Washington through May 30,
2023, and accounted for it under ASC 842. The Company signed the seventh amendment to the lease on May 2, 2023 extending the lease end
date to May 31, 2026 with two additional option years. The corporate office is an annual arrangement which provides for a single office
in a shared office environment and is exempt from ASC 842 treatment. The Company recognized a lease liability of $ 140,561 and the related
right-of-use asset for the same amount in fiscal 2023 and will amortize both over the life of the lease.

Income
Taxes

The
Company’s current provision for income taxes is based upon its estimated taxable income in each of the jurisdictions in which it
operates, after considering the impact on taxable income of temporary differences resulting from different treatment of items for tax
and financial reporting purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and any
operating loss or tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the year in which those temporary differences are expected to be recovered or settled. The ultimate realization
of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become
deductible. Should management determine that it is more likely than not that some portion of the deferred tax assets will not be realized,
a valuation allowance against the deferred tax assets would be established in the period such determination was made. The Company follows
the accounting for uncertainty in income taxes guidance, which clarifies the accounting and disclosures for uncertainty in income taxes
recognized in the Company’s financial statements and prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition
and measurement of a tax position taken or expected to be taken in a tax return.

F- 10

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

The
Company currently has no federal or state tax examinations in progress. As of September 30, 2023, the Company’s tax returns for
the tax years 2022, 2021 and 2020 remain subject to audit, primarily by the Internal Revenue Service.

The
Company did not have material unrecognized tax benefits as of September 30, 2023 and does not expect this to change significantly over
the next 12 months. The Company will recognize interest and penalties accrued on any unrecognized tax benefits as a component of the
provision for income taxes.

Net
Loss Per Share

Basic
loss per share is calculated by dividing the loss attributable to stockholders by the weighted-average number of shares outstanding for
the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the earnings (loss) of
the Company. Diluted loss per share is computed by dividing the loss available to stockholders by the weighted average number of shares
outstanding for the period and dilutive potential shares outstanding unless such dilutive potential shares would result in anti-dilution.
It should be noted that contractually the limitations on the third-party notes (and the related warrants) limit the number of shares
converted to either 4.99 % or 9.99 % of the then outstanding shares. The Company’s CEO and Chairman of the Board of Directors holds
all issued and outstanding shares of Series A Preferred Stock, which confers upon him a majority vote in all Company matters including
authorization of additional shares of common stock or reverse stock split. As of September 30, 2023 and 2022, potentially dilutive securities
consisted of the following:

September 30, 2023 | September 30, 2022
Stock options | 16 | 16
Warrants | 2,240,000 | 2,240,000
Series B Preferred Stock | 46,396,197 | 4,480,000
Third party convertible debt | 16,329,524 | 31,756,035
Total | 64,965,737 | 38,476,051

Segment
Reporting

The
Company uses “the management approach” in determining reportable operating segments. The management approach considers the
internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing
performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker
is the chief executive officer of the Company, who reviews operating results to make decisions about allocating resources and assessing
performance for the entire Company. For the year ended September 30, 2023, the Company had three operating segments. Howco generated
99.83% of the consolidated sales which are primarily from department of defense. Drone LLC generated less than 0.17% of sales primarily
due to state and municipal government purchases of drones and accessories. Bantec Sanitizing Inc. had no contribution to consolidated
sales of its sanitizing products for the year ended September 30, 2023. Howco had 92% of the consolidated tangible assets, Drone had
no allocated assets and Bantec Sanitizing Inc. had 3% of consolidated assets and the parent company had 5% of the consolidated tangible
assets as of September 30, 2023 and additionally, there are no formal cost allocations to Howco or the other subsidiaries.

Management
decisions about allocation of working capital and other assets are based on sales, inventory and operating costs, with no formal processes
in place.

Recent
Accounting Pronouncements

The
Company has reviewed the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)
accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods.
We have carefully considered the new pronouncements that alter previous generally accepted accounting principles and do not believe that
any new or modified principles will have a material impact on the Company’s reported financial position or operations in the near
term. The applicability of any standard is subject to the formal review of the Company’s financial management.

F- 11

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

In
August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt – Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40), which eliminates the beneficial
conversion and cash conversion accounting models for convertible instruments, amends the accounting for certain contracts in an entity’s
own equity that are currently accounted for as derivatives because of specific settlement provisions, and modifies how particular convertible
instruments and certain contracts that may be settled in cash or shares impact the diluted EPS calculation. The standard is effective
for annual periods beginning after December 15, 2023 for smaller reporting companies, and interim periods within those reporting periods.
Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those
reporting periods. The Company is currently assessing the impact the new guidance will have on its consolidated financial statements.

In
March 2022, the FASB issued ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326)”, which is intended to address
issues identified during the post-implementation review of ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments”. The amendment, among other things, eliminates the accounting guidance for troubled
debt restructurings by creditors in Subtopic 310-40, “Receivables - Troubled Debt Restructurings by Creditors”, while enhancing
disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.
The new guidance is effective for interim and annual periods beginning after December 15, 2022. This adoption did not have a material
effect to the Company.

The
Company does not believe that any other recently issued but not yet effective accounting pronouncements, if adopted, would have a material
effect on the accompanying consolidated financial statements.

NOTE
3 - ACCOUNTS RECEIVABLE, NET

The
Company’s accounts receivable at September 30, 2023 and 2022 was as follow:

September 30, 2023 | September 30, 2022
Accounts receivable | $ | 168,081 | $ | 419,951
Reserve for doubtful accounts | ( 29,472 | ) | -
$ | 138,609 | $ | 419,951

Bad
debt expense was $ 29,472 and $0 for the years ended September 30, 2023 and 2022, respectively.

NOTE
4 - INVENTORY

At
September 30, 2023 and 2022, inventory consisted of finished goods and was valued at $ 178,056 and $ 92,917 , respectively. No inventory
reserve was deemed necessary at September 30, 2023 and 2022.

NOTE
5 - INTANGIBLE ASSETS

The
Company acquired a patent for a new product during the year ended September 30, 2021. The Company capitalized acquisition and related
legal fees in fiscal 2021 related to the patent totaling $ 44,650 . During the year ended September 30, 2022, amortization amounted to
$ 8,931 , however the net carrying value of the patent of $ 35,719 , was determined to be impaired in 2022 and charged to operating expenses.

NOTE
6 - LINE OF CREDIT - BANK

The
Company has a revolving line of credit with a financial institution, which balance is due on demand and principal payments are due monthly
at 1/60 th of the outstanding principal balance. This revolving line of credit is in the amount of $ 50,000 and is personally
guaranteed by the Company’s Chief Executive Officer (“CEO”). The line bears interest at a fluctuating rate equal to
the prime rate plus 4.25 %, which at September 30, 2023 and September 30, 2022 was 12.75 % and 10.5 %, respectively. As of September 30,
2023 and 2022, respectively, the balance of the line of credit was $ 35,000 and $0 , with $ 15,000 , available at September 30, 2023.

F- 12

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

NOTE
7 - SETTLEMENTS

On
July 20, 2018, the Company entered into a settlement agreement with a collection agent for American Express relating to $ 127,056 of past
due charges. The agreement provided for initial payment of $ 12,706 , monthly payments of $ 6,500 and final payment on January 27, 2020
of $ 3,850 . Under the terms of the agreement, this debt was in default. On June 27, 2022, the Company entered into an agreement for the
balance and the other losses were $ 7,042 for collection fees. Under the agreement established $ 5,000 per month is being paid by the Company.
The amount due at September 30, 2023 and 2022, was $0 and $ 34,892 , respectively.

During
the year ended September 30, 2022, $ 119,670 was accrued in recognition of an appeals court ruling that certain obligations be settled
in cash (see Note 15). On February 14, 2023, the former CFO received a judgement of $ 130,400 relating to compensation. The Company paid
$ 2,222 as of March 31, 2023. On May 3, 2023, the Company and the former CFO executed an agreement to settle the judgement amount plus
potential obligations for legal fees incurred by the former CFO for a total amount of $ 90,000 to be paid in three equal installments
beginning May 4, 2023, June 3, 2023 and July 3, 2023. The May 2023, June 2023 and July 2023 payments of $ 90,000 were made. The amount
due at September 30, 2023 and 2022, was $0 , and $ 119,670 , respectively.

The
total amounts due at September 30, 2023 and 2022, was $0 , and $ 154,562 , respectively.

NOTE
8 - NOTE PAYABLE – SELLER

In
connection with the acquisition of Howco in September 2016, the Company issued a note payable in the amount of $ 900,000 to the sellers
of Howco. The note matured on September 9, 2017 and bears interest at 5.50 % per annum. The note requires payment of unpaid principal
and interest upon maturity. The note is secured by all assets of Howco and subordinated to the Senior Secured Credit Facility discussed
below. The note is currently in default and the default interest rate is 8 % per annum. At September 30, 2023 and 2022, the principal
and accrued interest on this note amounted to $ 834,000 , $ 477,093 and $ 837,000 , and $ 409,063 , respectively (see Note 15).

NOTE
9 - PROMISSORY NOTES PAYABLE – RELATED PARTY OFFICER AND HIS AFFILIATES

The
outstanding balance of notes issued to the Company’s chief executive officer and his affiliates consisted of the following at September
30, 2023 and 2022:

September 30, 2023 | September 30, 2022
Principal | $ | 8,805,316 | $ | 13,537
Less: Current portion | ( 105,062 | ) | ( 13,537 | )
Long term portion (including accrued interest – long term) | $ | 8,700,254 | $ | -

Promissory
Notes Payable – Current portion

On
January 1, 2023, Bantec, Inc., Bantec Sanitizing LLC and Howco each executed line of credit agreements with an entity controlled by the
Company’s CEO. Each agreement has the same terms: advances up to $ 100,000 , maturity is one year, a ten percent advance fee and
daily interest at 0.07 % (approximately 26 % annually) on the net balance due. The Company will charge the advance fees to interest expense.

As
of September 30, 2023:

(i) | Bantec, Inc. borrowed $ 133,000 and repaid $ 68,258 , leaving an outstanding balance of $ 64,742 , fees and interest charged totaled $ 4,576 .
(ii) | Bantec Sanitizing LLC borrowed $ 14,562 and repaid $ 14,562 , leaving an outstanding balance of $ 0 , fees and interest charged totaled $ 1,664 .
(iii) | Howco
borrowed $ 75,000 and repaid $ 42,250 , including $ 7,570 of fees and interest, leaving an outstanding balance of $ 40,320 . Howco was making
weekly payments of $ 3,250 .

On
January 25, 2022 a promissory note was issued to the CEO by Howco for $ 75,000 having weekly payments of $ 3,870 for twenty-five weeks,
which include a total of $ 21,750 of interest. The principal at September 30, 2022 was $ 0 and interest of $ 18,945 , was charged to interest
expense. The note was repaid early therefore the interest charged was less than under the original agreement.

On
April 25, 2022, a promissory note was issued to the CEO by Howco for $ 50,000 having weekly payments of $ 1,570 for fifty weeks, which
includes a total of $ 28,500 of interest. The principal at September 30, 2023 and 2022 was $ 0 and $ 13,537 . Interest of $ 10,783 was charged
to interest expense during year ended September 30, 2022 prior to repayment. The note was repaid faster than the original payment terms,
and therefore the interest was lower than the original agreement terms.

F- 13

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

Promissory
Notes Payable – Long term

On
April 12, 2023, the receiver for TCA Global Credit Master Fund, LP (“TCA”) sold and assigned to Ekimnel Strategies, LLC,
a Delaware limited liability company (“Ekimnel”), and Ekimnel purchased and assumed, all of TCA’s rights and obligations
as a lender under that certain Senior Secured Credit Facility Agreement (the “Agreement”) (see Note 10). Ekimnel is a company
controlled by Michael Bannon, the Company’s Chief Executive Officer.

On
August 12, 2023, the Company, as the Borrower, and the Company’s subsidiaries: Drone USA, LLC and Howco Distributing Co., as Corporate
Guarantors, and Michael Bannon, as a Validity Guarantor (collectively, “Credit Parties”), entered into an Amendment (the
“Amendment”) to the Agreement with Ekimnel, as the Lender, pursuant to which the Company issued the Second Replacement Promissory
Note (the “Note”) to Ekimnel in the principal amount of $ 8,676,957 . The Note was issued in substitution for and to supersede
the First Replacement Promissory Convertible Note A and the First Replacement Promissory Convertible Note B, previously issued by the
Company, as amended from time to time (collectively “Replacement Notes”). Capitalized terms used but not defined herein shall
have the meanings ascribed to them in the Amendment or the Agreement.

Pursuant
to the Amendment, the Lender and the Credit Parties:

(i) | combined
and consolidated both the Replacement Notes into the Note;
(ii) | extended
the Maturity Date of the Note to August 12, 2047;
(iii) | lowered
the interest rate on the Note to 2.0 % per year, with (a) the principal and interest payments starting on August 12, 2026, and (ii) for
the period commencing on August 12, 2023 and ending on August 11, 2026, interest due on the Note being added to the outstanding principal
amount of the Note;
(iv) | removed
the Lender’s right to convert the Company’s obligations under the Note into shares of common stock of the Company; and
(v) | made
certain conforming changes to the terms of the Agreement.

Due to the related party nature of the transaction, the Company recorded a total of
$ 1,363,100 to additional paid in capital as a result of the debt extinguishment in connection with the assumption of the Senior Secured
Debt by Ekimnel, a related party, and removal of the put premium on the convertible debt. At September 30, 2023, the principal and accrued
interest – long-term on this note amounted to $ 8,676,957 and $ 23,297 , respectively.

NOTE
10 - CONVERTIBLE NOTES PAYABLE AND ADVISORY FEE LIABILITIES

The
senior secured credit facility note balance and convertible debt balances consisted of the following at September 30, 2023 and 2022:

September 30, | September 30,
2023 | 2022
Principal | $ | 211,019 | $ | 5,978,891
Premiums | 179,833 | 1,443,435
Less: debt discount | ( 4,672 | ) | -
$ | 386,180 | $ | 7,442,326

For
the years ended September 30, 2023 and 2022, amortization of debt discount on the above convertible notes amounted to $ 328 and $ 21,940 ,
respectively.

Senior
Secured Credit Facility Note - Default

On
September 13, 2016, the Company entered into a senior secured credit facility note with an investment fund for the acquisition of Howco.
The Company can borrow up to $ 6,500,000 , subject to lender approval, with an initial convertible promissory note at closing of $ 3,500,000 (the “Note”). The Note bore interest at a rate of 18 % per annum, required monthly payments of $ 52,500 , which was interest
only, starting on October 13, 2016 through February 13, 2017, and monthly payments, including interest and principal, of $ 298,341 starting
on March 13, 2017 through maturity on March 13, 2018. In the event of default, the Note balance will bear interest at 25 % per annum.
In connection with this Agreement, the Company was obligated to pay additional advisory fees of $ 850,000 payable in the form of cash
or common stock in accordance with the terms of the Agreement. The Company was also required to reserve 7 shares of common stock related
to this transaction. The reserved shares will be released upon the satisfaction of the loan.

F- 14

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

As
of September 30, 2023 and 2022, the Company had issued 1 share of common stock in satisfaction of the $ 850,000 advisory fee in accordance
with the terms of the agreement, such shares being issued in September 2016. The proceeds from the sale of the 1 share were to be applied
to the $ 850,000 advisory fee due. Based upon the value of the shares, at the time the lender sells the shares, the Company may be required
to redeem unsold shares for the difference between the $ 850,000 and the lender’s sales proceeds. Accordingly, the $ 850,000 was
reflected as a current liability through December 31, 2017. In January 2018, in connection with a settlement agreement (see below), the
accrued advisory fee was reclassified to the principal balance of the replacement Convertible Note. Through the date of the settlement
agreement and through September 30, 2023 and 2022, the lender had not reported any proceeds from the sale of these shares (see below).
Prior to the settlement agreement in January 2018, notwithstanding anything contained in the Agreement to the contrary, in the event
the Lender has not realized net proceeds from the sale of Advisory Fee Shares equal to at least the Advisory Fee by the earlier to occur
of: (A) September 13, 2017; (B) the occurrence of an Event of Default; or (C) the Maturity Date, then at any time thereafter, the Lender
shall have the right, upon written notice to the Borrower, to require that the Borrower redeem all Advisory Fee Shares then in Lender’s
possession for cash equal to the Advisory Fee, less any cash proceeds received by the Lender from any previous sales of Advisory Fee
Shares, if any within five (5) Business Days from the date the Lender delivers such redemption notice to the Borrower.

The
Note was only convertible upon default or mutual agreement by both parties at a conversion rate of 85 % of the lowest of the daily volume
weighted average price of the Company’s common stock during the 5 business days immediately prior to the conversion date. At any
time and from time to time while this Note was outstanding, but only upon: (i) the occurrence of an Event of Default under any of the
Loan Documents; or (ii) mutual agreement between the Company and the Holder, this Note may be, at the sole option of the Holder, convertible
into shares of the Company’s common stock, in accordance with the terms and conditions of the Note. Upon liquidation by the Holder
of Conversion Shares issued pursuant to a conversion notice, provided that the Holder realizes a net amount from such liquidation equal
to less than the conversion amount specified in the relevant conversion notice, the Company shall issue to the Holder additional shares
of the Company’s common stock equal to: (i) the Conversion Amount specified in the relevant conversion notice; minus (ii)
the realized amount, as evidenced by a reconciliation statement from the Holder (a “Sale Reconciliation”) showing the realized
amount from the sale of the Conversion Shares; divided by (iii) the average volume weighted average price of the Company’s
common stock during the five business days immediately prior to the date upon which the Holder delivers notice (the “Make-Whole
Notice”) to the Company that such additional shares are requested by the Holder.

Once
a default occurs, the Note and the $ 850,000 advisory fee payable will be accounted for as stock settled debt at its fixed monetary value.
On March 13, 2017, the Company defaulted on the monthly principal and interest payment of $ 298,341 . Due to this default, as of June 30,
2017, the Company has accounted for the embedded conversion option as stock settled debt and recorded a debt premium of $ 617,647 with
a charge to interest expense, and the interest rate increased to 25 % (default rate).

On
March 28, 2017, the Company entered into an additional agreement with the above senior secured credit facility lender to receive a range
of advisory services for a total of $ 1,200,000 with no definitive terms or length of service which was expensed in fiscal 2017 and had
been recorded as an accrued liability – advisory fees through December 31, 2017. In connection with the settlement agreement discussed
below, in January 2018, the advisory services fees payable were reclassified to the principal balance of the replacement Convertible
Note.

On
January 3, 2018, the Company entered into a settlement agreement (the “Settlement Agreement”) and replacement note agreements
with the investment fund related to a senior secured credit facility note dated September 13, 2016. On the effective date of the Settlement
Agreement, all amounts owed to the investment fund aggregated $ 5,788,642 and consisted of a convertible promissory note of $ 3,500,000 ,
accrued interest payable of $ 238,642 , and accrued advisory fees payable of $ 2,050,000 . On the effective date of the Settlement Agreement,
the amount due of $ 5,788,642 was split and apportioned into two separate replacement notes (“Replacement Note A” and Note
B”). Replacement Note A had a principal amount of $ 1,000,000 and Replacement Note B had a principal balance of $ 4,788,642 , both
of which remained secured by the original security, pledge and guarantee agreements; and other applicable loan documents, and bear interest
at 18 % per annum. The default was not waived by this settlement agreement. The Company originally recorded a premium on stock settled
debt of $ 617,647 on the $ 3,500,000 , and subsequent to the settlement agreement recorded an additional premium on stock settled debt of
$ 403,878 on the additional $ 2,288,642 for accrued interest and advisory fees payable that were capitalized as note principal. The interest
rate was amended to 12 % effective June 12, 2018.

F- 15

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

The
Credit Agreement was amended such that the maturity date was extended to January 13, 2019 (the “Extended Maturity Date”)
for replacement Note B, while the Note A maturity date remained at March 13, 2018 but was due as of March 2017 due to the principal and
interest payment default discussed above. Notwithstanding anything contained in this Agreement to the contrary, all obligations owing
by the Company and all other Credit Parties under the Credit Agreement, First Replacement Note B, and all other Loan Documents shall
be paid in full by the Extended Maturity Date as follows: $ 52,500 per month from January 13, 2018 to December 13, 2018 and the remaining
principal and accrued interest on January 13, 2019. Interest payments made since the amendment have totaled $ 323,440 and are therefore
not in accord with that amendment. However, TCA had received payments under the 3(a) (10) settlement (below) totaling $ 308,100 during
the year ended September 30, 2018, and another $ 270,320 , during the year ended September 30, 2019. The principal balance was $ 4,788,642 at September 30, 2018.

On
October 30, 2018, TCA, the Company’s senior lender, amended its credit facility which had been restructured in January 2018 when
fees for advisory and other matters along with accrued but unpaid interest were capitalized and separated into two notes, Note A having
$ 1,000,000 principal and Note B having $ 4,788,642 both having the same maturity terms, interest rates and conversion rights. Under this
amendment total amounts outstanding under the notes along with accrued interest of $ 537,643 had been capitalized with the principal amount
due of $ 6,018,192 , $ 5,326,285 for Note B and $ 691,907 for Note A. The restated note had the same conversion price discount and therefore
continued to be stock settled debt under ASC 480, an additional $ 94,878 was charged to interest with a credit to debt premium. The restated
note accrued interest on the principal balance at 12 % per annum, included amortization to the new maturity date of December 15, 2020.
The amortization payments credited toward the principal amount and accrued interest vary and included payments made under the 3(a)(10)
settlement agreement with a third party related to Note A. Economically the total principal and accrued interest outstanding remained
unchanged as reported in the consolidated balance sheet. All other terms including conversion rights and a make-whole provision in the
case of a conversion shortfall remained the same as stated in the footnotes above.

On
September 6, 2019, the Company received a default notice on its payment obligations under the senior secured credit facility agreement
from TCA. The Company had proposed a number of solutions including refinancing the debt with other parties. The default was declared
due to non-payment of monthly scheduled amortization (principal and interest). TCA holds security interests in all assets of the Company
including its subsidiary Howco (see below).

On
January 30, 2018, pursuant to the Liability Purchase Term Sheet, the TCA Replacement Note A in the principal amount of $ 1,000,000 was
acquired by Livingston Asset Management LLC (“Livingston”) from the original lender. Principal of Replacement Note A is due
to Livingston with all then accrued but unpaid interest due to the original lender. In accordance with the terms of the Settlement Agreement,
the Court was advised of the Company’s intention to rely upon the exception to registration set forth in Section 3(a)(l0) of the
Securities Act to support the issuance of its common shares and the Court held a fairness hearing regarding the issuance on March 12,
2018. Following entry of an Order by the Court which occurred on March 12, 2018, in settlement of the claims, the Company issued and
delivered to Livingston shares of its common stock (the “Settlement Shares”) in one or more tranches as necessary, and subject
to adjustment and ownership limitations as set forth in the Settlement Agreement, sufficient to generate proceeds such that the aggregate
Remittance Amount equals the Claim Amount. The Company issued free trading shares of its common stock under section 3(a) (10) of the
Securities Act to Livingston in the amount of such judgment in a series of tranches so that Livingston will not own more than 9.99 % of
the Company’s outstanding shares per tranche. The parties reasonably estimate that the fair market value of the Settlement Shares
to be received by Livingston is equal to approximately $ 1,666,667 which was based on a discount of 40 %.

In
the year ended September 30, 2023 and 2022, there were no 3(a)(10) issuances. As of September 30, 2023, there have been seventeen issuances
under Section 3(a) (10) of the Securities Act totaling 1,375 shares; 1,273 , in 2019, and 102 , in 2018, which have been recorded at par
value with an equal charge to additional paid-in capital. On November 17, 2019, 195 of the shares issued under Section 3(a)(10) were
cancelled at the request of Livingston. The value originally recorded as a liability remained in the convertible note balance, until
these shares have been sold and reported to the Company by the lender as part of the Make-Whole provision at which time the proceeds
value of such shares were reclassified to additional paid-in capital. During the years ended September 30, 2018 and September 30, 2019,
proceeds of $ 308,100 and $ 270,320 , respectively were remitted to TCA by Livingston and applied to reduce the liability with corresponding
credits to additional paid in capital. $ 180,618 of debt premium was credited to additional paid in capital in conjunction with the payments
to TCA. At September 30, 2022, the balance, of $ 421,587 along with related debt premium of $ 281,054 were included in convertible notes
payable on the balance sheet.

At
September 30, 2022, the principal of the Note B portion was $ 5,326,285 and accrued interest was $ 2,377,557 and the Note A principal subject
to the 3(a) (10) court order was $ 421,587 as noted above.

On
April 12, 2023, Ekimnel Strategies LLC, 100 % owned by Michael Bannon, Bantec’s Chairman, CEO and CFO, purchased and assumed, all
of TCA’s rights and obligations as a lender under the Senior Secured Credit Facility Agreement dated May 31, 2016 and effective
September 13, 2016 and all subsequent documents from the Receiver for TCA Global Credit Master Fund, LP. On August 12, 2023, the Company,
as the Borrower, and the Company’s subsidiaries: Drone USA, LLC and Howco Distributing Co., as Corporate Guarantors, and Michael
Bannon, as a Validity Guarantor, entered into an Amendment to the Agreement with Ekimnel, as the Lender, pursuant to which the Company
issued the Second Replacement Promissory Note to Ekimnel in the principal amount of $ 8,676,957 which became a non-convertible note (see
Note 9 for terms of the Promissory Note). Consequently, the Company recorded a total of $ 1,363,100 to additional paid in capital as a
result of the debt extinguishment in connection with the assumption of the Senior Secured Debt by Ekimnel and removal of the put premium
on the convertible debt.

F- 16

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

At
September 30, 2023, the principal balance and accrued interest from this convertible note was $ 0 , after the assumption by Ekimnel (see
Note 8). During the year ended September 30, 2023, the Company has not paid interest or principal and Livingston Asset Management (under
the 3(a)(10) settlement) has not made any payments to TCA.

Other
Convertible Notes

Scottsdale
Capital Advisors

On
March 7, 2018, the Company entered into a placement agent and advisory agreement with Scottsdale Capital Advisors in connection with
the Livingston liability purchase term sheet executed on November 15, 2017. The placement agent services fee amounted to $15,000 payable
to Scottsdale Capital Advisors in the form of a convertible note. The note matures six months from the date of issuance and accrues interest
at the rate of 10% per annum. The $15,000 note is convertible into shares of the Company’s common stock at a discount of 30% of
the low closing bid price for the twenty trading days prior to the conversion and is not subject to any registration rights. The Company
has accounted for the convertible promissory note as stock settled debt under ASC 480 and recorded a debt premium of $6,429 with a charge
to interest expense. The note has not been converted and the principal balance is $ 15,000 , at September 30, 2023 and 2022 with $ 9,277 ,
and $ 7,777 , of accrued interest, respectively. As the note has matured it is in default. Under the terms of the note no default interest
or penalties accrue.

Livingston
Asset Management LLC

Under
the terms of the July 1, 2021 amendment to the consulting and services agreement with Livingston Asset Management, LLC, Livingston is
to receive $ 15,000 , per month in convertible promissory notes. On July 1, 2021 the Company issued a $ 15,000 convertible note bearing
interest of 10 % per annum which matures in nine months. The notes issued are convertible into shares of common stock at a discount of 50 % of the lowest closing bid price during the twenty trading days prior to conversion. The notes having a conversion feature are treated
as stock settled debt under ASC 480 and a debt premium of $ 15,000 is recognized as interest expense on note issuance date. At September
30, 2021, the accrued interest was $ 378 . At September 30, 2022 the accrued interest was $ 0 . See below (March 7, 2022, redemption).

August
1, 2021, the Company issued a $ 15,000 convertible promissory note to Livingston. The convertible note bears interest of 10 % per annum
which matures in nine months. The notes issued are convertible into shares of common stock at a discount of 50 % of the lowest closing
bid price during the twenty trading days prior to conversion. The notes having a conversion feature are treated as stock settled debt
under ASC 480 and a debt premium of $ 15,000 is recognized as interest expense on note issuance date. At September 30, 2021, the accrued
interest was $ 251 . At September 30, 2022 the accrued interest was $ 0 . See below (March 7, 2022, redemption).

September
1, 2021, the Company issued a $ 15,000 convertible promissory note to Livingston. The convertible note bears interest of 10 % per annum
and matures in nine months. The notes issued are convertible into shares of common stock at a discount of 50 % of the lowest closing bid
price during the twenty trading days prior to conversion. The notes having a conversion feature are treated as stock settled debt under
ASC 480 and a debt premium of $ 15,000 is recognized as interest expense on note issuance date. At September 30, 2021, the accrued interest
was $ 123 . At September 30, 2022 the accrued interest was $ 0 . See below (March 7, 2022, redemption).

On
October 1, 2021, the Company issued a convertible promissory note to Livingston Asset Management LLC for $ 15,000 in principal for services.
The convertible note bears interest of 10 % per annum and matures in nine months. The note issued is convertible into shares of common
stock at a discount of 50 % of the lowest closing bid price during the twenty trading days prior to conversion. The note has a conversion
feature and is treated as stock settled debt under ASC 480 and a debt premium of $ 15,000 is recognized as interest expense on note issuance
date. At September 30, 2022 the accrued interest was $ 0 . See below (March 7, 2022, redemption).

On
November 1, 2021, the Company issued a convertible promissory note to Livingston Asset Management LLC for $ 15,000 in principal for services.
The convertible note bears interest of 10 % per annum and matures in nine months. The note issued is convertible into shares of common
stock at a discount of 50 % of the lowest closing bid price during the twenty trading days prior to conversion. The note has a conversion
feature and is treated as stock settled debt under ASC 480 and a debt premium of $ 15,000 is recognized as interest expense on note issuance
date. At September 30, 2022 the accrued interest was $ 0 . See below (March 7, 2022, redemption).

On
March 7, 2022, the Company redeemed five fee notes issued to Livingston Asset Management LLC (from July 1, 2021 through November 1, 2021
notes) for $ 85,000 cash. Principal, penalty and accrued interest of $ 75,000 , $ 7,612 and $ 2,388 was recognized along with gain on debt
extinguishment of $ 67,388 during the year ended September 30, 2022. The penalty was recorded against the gain.

F- 17

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

Frondeur
Partners LLC

On
December 1, 2021, the Company terminated its agreement with Livingston Asset Management and entered into a consulting and services arrangement
with Frondeur Partners LLC which has no stipulated term. The arrangement provides for financial management services including accounting
and related periodic reporting among other advisory services. Under the agreement, the Company was obligated to issue to Frondeur Partners
LLC convertible notes having principal of $ 15,000 , interest of 10 % per annum, maturity of seven months. The notes were convertible into
shares of common stock at a discount of 50 % to the lowest bid price in the twenty trading days immediately preceding the notice of conversion.

On
December 1, 2021, the Company issued a convertible promissory note to Frondeur Partners LLC for $ 15,000 in principal for services (service
agreement replacing agreement with Livingston Asset Management LLC). The convertible note bears interest of 10 % per annum and matures
in nine months. The note issued is convertible into shares of common stock at a discount of 50 % of the lowest closing bid price during
the thirty trading days prior to conversion. The note has a conversion feature and is treated as stock settled debt under ASC 480 and
a debt premium of $ 15,000 is recognized as interest expense on note issuance date. During the year ended September 30, 2022 the principal
and accrued interest of $ 748 , were converted to common stock. Premium of $ 15,000 was reclassified to additional paid in capital.

On
January 1, 2022, the Company issued a convertible promissory note to Frondeur Partners LLC for $ 15,000 in principal for services (service
agreement replacing agreement with Livingston Asset Management LLC). The convertible note bears interest of 10 % per annum and matures
in nine months. The note issued is convertible into shares of common stock at a discount of 50 % of the lowest closing bid price during
the thirty trading days prior to conversion. The note has a conversion feature and is treated as stock settled debt under ASC 480 and
a debt premium of $ 15,000 is recognized as interest expense on note issuance date. During the year ended September 30, 2022 the principal
and accrued interest of $ 744 , were converted to common stock. Premium of $ 15,000 was reclassified to additional paid in capital.

On
February 1, 2022, the Company issued a convertible promissory note to Frondeur Partners LLC for $ 15,000 in principal for services (service
agreement replacing agreement with Livingston Asset Management LLC). The convertible note bears interest of 10 % per annum and matures
in nine months. The note issued is convertible into shares of common stock at a discount of 50 % of the lowest closing bid price during
the thirty trading days prior to conversion. The note has a conversion feature and is treated as stock settled debt under ASC 480 and
a debt premium of $ 15,000 is recognized as interest expense on note issuance date. During the year ended September 30, 2022 the principal
and accrued interest of $ 777 , were converted to common stock. Premium of $ 15,000 was reclassified to additional paid in capital.

Between
March 1, 2022 and September 1, 2022, the Company issued convertible promissory notes to Frondeur Partners LLC for an aggregate principal
amount of $ 105,000 for services (service agreement replacing agreement with Livingston Asset Management LLC). The convertible notes bore
interest of 10 % per annum and matures in nine months. The notes issued were convertible into shares of common stock at a discount of 50 % of the lowest closing bid price during the thirty trading days prior to conversion. The notes had conversion features and were treated
as stock settled debt under ASC 480 and a total debt premium of $ 105,000 were recognized as interest expense on note issuance dates.
At September 30, 2022 the accrued interest was $ 3,265 . Between October 3, 2022 and March 2023, the Company issued an aggregate of 2,090,007 shares of common stock in conversion of Frondeur Partners LLC, convertible note payables dated from March 1, 2022 to August 1, 2022,
all principal of $ 90,000 and accrued interest of $ 5,388 (including conversion fees of $ 18,705 ) were converted. Premium of $ 90,000 was
reclassified to additional paid in capital.

Between
October 1, 2022 to May 1, 2023, the Company issued convertible promissory notes to Frondeur Partners LLC for an aggregate amount of $ 120,000 in principal for services (service agreement replacing agreement with Livingston Asset Management LLC). The convertible notes bear interest
ranging from 10 % to 12 % per annum and matures in nine months. The notes issued were convertible into shares of common stock at a discount
of 50 % of the lowest closing bid price during the thirty trading days prior to conversion. The notes had conversion features and were
treated as stock settled debt under ASC 480 and a total debt premium of $ 120,000 is recognized as interest expense on the note issuance
dates.

On
July 10, 2023, the Company and Frondeur Partners LLC., signed an Omnibus Amendment to Promissory Notes dated between October 2022 and
May 2023 eliminating conversion rights in each note. All other terms remain the same. Accordingly, at September 30, 2023, the Company
reclassified the principal balance of convertible notes of $ 135,000 into notes payable (see Note 11) and recognized the remaining related
debt put premium of $ 135,000 as gain on debt extinguishment and settlements in the accompanying consolidated statements of operations
during the year ended September 30, 2023.

The
principal balance for the Frondeur notes was $ 0 and $ 105,000 at September 30, 2023 and 2022, respectively, as detailed above. Accrued
interest for these convertible notes totaled $ 0 and $ 3,631 at September 30, 2023 and 2022, respectively also detailed above.

F- 18

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

Convertible
notes for legal services

From
May 1, 2022 until June 1, 2023, the Company issued a $ 4,000 convertible notes every month to the law firm for fees incurred, each note
having six-month term to maturity and 10 % annual interest. The notes are convertible into shares of common stock at a fixed discount
of 50 % of the lowest bid price in the 30 trading days immediately preceding the notice of conversion from the lender. The notes have
cross default provisions. The Company has accounted for the convertible promissory notes as stock settled debt under ASC 480 and recorded
debt premiums equal to the face value of the notes with a charge to interest expense. The notes principal amount were charged to professional
fees during the month the notes were issued.

The
principal balances owed to the law firm under the agreement as of September 30, 2023 and 2022 were $ 56,000 , and $ 20,000 respectively
and accrued interest was $ 4,866 and $ 563 as of September 30, 2023 and 2022, respectively.

Convertible
note issued to a vendor

On
November 13, 2018, the Company issued a convertible promissory note for $ 90,000 to a vendor in settlement of approximately $ 161,700 of
past due amounts due for services. The note bears interest at 5 %, matured on June 30, 2019 and is convertible into the Company’s
common stock at 50 % of the lowest closing bid price during the 20 trading days immediately preceding the notice of conversion. The note
matured on June 30, 2019 , there is no default penalty or interest rate increase associated with the note, nor are there any cross-default
provisions in the note. The Company has accounted for the convertible promissory note as stock settled debt under ASC 480 and recorded
debt premium $ 90,000 with a charge to interest expense for the notes. At September 30, 2023 and 2022 the principal, and premium were
both $ 90,000 . At September 30, 2023 and 2022 accrued interest was $ 46,961 and $ 36,614 , respectively (see Note 15).

1800
Diagonal Lending LLC

On
September 6, 2023, the Company entered into the Securities Purchase Agreement with 1800 Diagonal Lending LLC (the “Lender”),
pursuant to which the Company issued a promissory note to the Lender in the principal amount of $ 49,000 , including a debt issuance cost
of $ 5,000 to be amortized over the term of this note. The note matures on September 6, 2024 and bears interest at 10 % per annum. The
conversion price shall be a variable conversion price equal to 65 % of the average of the two lowest closing price per share of the common
stock during the fifteen trading day period ending on the latest complete trading day prior to the conversion date, provided, however,
that the Lender and its affiliates may not beneficially own more than 4.99 % of the Company’s outstanding shares of common stock
upon the conversion of the September 6, 2023 note. The Company has accounted for the convertible promissory note as stock settled debt
under ASC 480 and recorded debt premium $ 26,385 with a charge to interest expense for the note. At September 30, 2023, principal balance
and accrued interest was $ 49,000 and $ 322 , respectively.

NOTE
11 - NOTES AND LOANS PAYABLE

The
notes balance consisted of the following at September 30, 2023 and 2022

September 30, 2023 | September 30, 2022
Principal loans and notes | $ | 1,077,013 | $ | 615,500
Discounts | ( 63,161 | ) | ( 270,064 | )
Total | 1,013,852 | 345,436
Less Current portion | ( 863,852 | ) | ( 217,897 | )
Non-current | $ | 150,000 | $ | 127,539

For the years ended September 30, 2023 and 2022, amortization of debt
discount on the above notes amounted to $ 292,076 and $ 135,506 , respectively.

Small
Business Administration

On
June 17, 2020, the Company through Howco, entered into a loan directly with the Small Business Administration for $ 150,000 . The loan
term is thirty years and begins amortization one year from the date of promissory note to be issued upon funding. Amortization payments
are $ 731 per month and include interest and principal of 3.75 % from the date of funding. The loan is secured by the assets of Howco.
As of September 30, 2023 and 2022, the principal balance and accrued interest on this note amounted to $ 150,000 , $ 13,621 and $ 150,000 ,
$ 13,099 , respectively. During the year ended September 30, 2023, the Company paid accrued interest of $ 4,386 . As of September 30, 2023
and 2022, $ 0 , and $ 22,461 respectively, is classified as current.

F- 19

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

Notes
payable to service vendor

During
the year ended September 30, 2021, the Company issued seven notes payable totaling $ 17,500 . The notes were issued for monthly fees ($ 2,500 )
for a service vendor and are issued the first day of the month and each has one year maturity and does not bear interest. The service
arrangement was terminated in April 2021, with $ 17,500 owed as of September 30, 2023 and 2022.

Trillium
Partners, LP

On
July 1, 2022, the Company entered into a Securities Purchase Agreement with Trillium Partners, LP (“Trillium”). Under the
terms of the SPA, Trillium agreed to advance funds under a merchant financing arrangement, treated as a loan. The loan principal is $ 224,000 ,
including legal fees of $ 5,000 and OID of $ 24,000 , the Company received cash of $ 195,000 . Loan bears interest of 12 % per annum and matured
on June 30, 2023. The Company agreed to issue 224,000 shares of the Company’s Series B Preferred Stock, and a Warrant to purchase 1,120,000 shares of common stock as consideration for the advance agreement. The Series B Preferred Stock met the criteria for treatment
as temporary equity and debt discount of $ 50,684 was recognized. The Warrant caused a recognition of $ 100,194 in debt discount. Total
debt discount recognized was $ 179,878 , to be amortized over the term of the loan, $ 44,846 was recognized as interest expense as of September
30, 2022 from amortization of discounts. The Company defaulted on the weekly payment terms of the note; however, the note holder granted
a limited waiver of the default. Under the waiver amendment (see Note 12), the default interest rate still applies and now the note accrues
interest of 22 % and the payments are due upon the notes maturity. Total accrued interest at September 30, 2023 and 2022 was $ 43,994 and
$ 10,923 , respectively. On October 25, 2022, the Company repaid $ 50,000 of the July merchant financing arrangement. The payment was applied
to the Trillium LP notes’ accrued interest and principal bringing its principal balance to $ 183,259 , at September 30, 2023.

JP
Carey Limited Partners, LP

On
July 1, 2022, the Company entered into a Securities Purchase Agreement with JP Carey Limited Partners, LP (“JPC”). Under
the terms of the SPA, JPC agreed to advance funds under a merchant financing arrangement, treated as a loan. The loan principal is $ 224,000 ,
including legal fees of $ 5,000 and OID of $ 24,000 , the Company received cash of $ 195,000 . Loan bears interest of 12 % per annum and matured
on June 30, 2023. The Company agreed to issue 224,000 shares of the Company’s Series B Preferred Stock, and a Warrant to purchase 1,120,000 shares of common stock as consideration for the advance agreement. The Series B Preferred Stock met the criteria for treatment
as temporary equity and debt discount of $ 50,684 was recognized. The Warrant caused a recognition of $ 100,194 in debt discount. Total
debt discount recognized was $ 179,878 , to be amortized over the term of the loan, $ 44,845 was recognized as interest expense as of September
30, 2022 from amortization of discounts. The Company defaulted on the weekly payment terms of the note; however, the note holder granted
a limited waiver of the default. Under the waiver amendment (see Note 12), the default interest rate still applies and now the note accrues
interest of 22 %, and the payments are due upon the notes maturity. Total accrued interest at September 30, 2023 and 2022 was $ 60,202 and $ 10,923 , respectively. As of September 30, 2023 and 2022, the principal balance amounted to $ 224,000 for both periods.

Itria
Ventures LLC

On
April 28, 2023, Howco executed a sale of receivables agreement with Itria Ventures LLC (“Itria”), Itria funded $ 125,000 ,
which included fees of $ 6,750 withheld for a net payment to Howco of $ 118,250 . Itria will withdraw weekly repayments of $ 3,255.21 for
48 weeks. The total repayments is $ 156,250 , including interest totaling $ 31,250 . The Company recognized a total of $ 38,000 of debt discount
related to this agreement to be amortized over the term of the receivable agreement.

On
September 14, 2023, Howco executed a sale of receivables agreement with Itria Ventures LLC, Itria funded $ 75,000 , which included fees
of $ 3,500 withheld for a net payment to Howco of $ 71,500 . Itria will withdraw weekly repayments of $ 1,953 for 48 weeks. The total repayments
is $ 93,750 , including interest totaling $ 18,750 . The Company recognized a total of $ 22,250 of debt discount related to this agreement
to be amortized over the term of the receivable agreement.

During
the year ended September 30, 2023, the Company repaid $ 72,265 . As of September 30, 2023, the total loan balance to Itria amounted to
$ 177,810 , net of unamortized debt discount of $ 42,050 .

1800
Diagonal Lending LLC

On
July 17, 2023, the Company entered into the Securities Purchase Agreement (the “Agreement”) with 1800 Diagonal Lending LLC
(“Lender”), pursuant to which the Company issued a promissory note (the “Note”) to the Lender in the principal
amount of $ 90,400 , including an original issue discount of $ 10,400 and legal fees of $ 5,000 . The Agreement contains certain customary
representations, warranties, and covenants made by the Company.

F- 20

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

Under
the Note, the Company is required to make ten payments of $ 10,305.60 , which includes a one-time interest charge of 14 % ($ 12,565 ). The
first payment is due on August 30, 2023, with nine subsequent payments due each month thereafter. The Note is not secured by any collateral.
The Note matures on May 15, 2024 and contains customary events of default. Upon the occurrence and during the continuation of any such
event of default, the Note will become immediately due and payable, and the Company is obligated to pay to the Lender an amount equal
to 150 % times the sum of (w) the then outstanding principal amount of the Note plus (x) accrued and unpaid interest on the unpaid principal
amount of the Note to the date of payment plus (y) default interest at 22 % per annum on the amounts referred to in clauses (w) and/or
(x) plus (z) any amounts owed to the Lender pursuant to Article IV of the Note (amounts set forth in clauses (w), (x), (y) and (z) are
collectively referred to as the “Default Amount”). If the Company fails to pay the Default Amount within five (5) business
days of the Lender’s written notice that such amount is due and payable, then the Lender has the right to convert the balance owed
pursuant to the Note, including the Default Amount, into shares of common stock of the Company (“Common Stock”) at a variable
conversion price equal to 61 % of the lowest closing price pe share of Common Stock during the ten trading day period ending on the latest
complete trading day prior to the conversion date, provided that the Lender and its affiliates may not own greater than 4.99 % of the
Company’s outstanding shares of Common Stock, as set forth in the Note. The Company received funding under the Note on July 24,
2023. The Company used the proceeds from the Note for general working capital purposes. During the year ended September 30, 2023, the
Company repaid $ 20,611 . As of September 30, 2023, the note balance amounted to $ 72,921 , net of unamortized debt discount of $ 11,588 .

Promissory
note for legal services

On
September 14, 2023, the Company issued a $ 15,000 promissory note to a law firm for fees to be incurred for the preparation of the Company’s
registration statement which was completed in November 2023. The maturity date of this note is March 15, 2024 and bears 10 % interest
per annum. The principal balance and accrued interest owed to the law firm under the agreement as of September 30, 2023 were $ 15,000 ,
and $ 66 respectively.

Default
on Notes and Loans

On
July 26, 2023, the Company received a demand and default letter from Trillium Partners L.P. The letter references a document titled “Securities
Purchase Agreement” dated July 2022. In the demand letter, Trillium is looking for immediate payment of $ 275,710 . On August 4,
2023, the Company received a demand notification revising the demand amount to $ 214,563 with $ 183,259 in principal and $ 31,304.33 in
interest and for JP Carey, a total of $ 270,947.95 with $ 224,000 in principal and $ 46,947.95 in accrued interest. In addition, the demand
notification included outstanding fee notes for Frondeur Partners LLC, a total of $ 135,000 in principal and $ 7,903 of accrued interest.
According to the demand notification, as of September 30, 2023, three notes, dated from October 1, 2022 to December 1, 2022, matured.
A company representative is in talks with Trillium and the Company is looking to resolve the matter amicably.

NOTE
12 - SERIES B AND SERIES C PREFERRED STOCK

Temporary
Equity – Convertible Series B Preferred Stock

On
July 1, 2022, the Company’s Board of Directors designated as Series B Preferred Stock and authorized 1,000,000 shares which will
not be subject to increase without the consent of the holders (each a “Holder” and collectively, the “Holders”)
of a majority of the outstanding shares of Series B Preferred Stock. The designations, powers, preferences, rights and restrictions granted
or imposed upon the Series B Preferred Stock are as set forth in the Certificate of Designation filed in the State of Delaware. Each
share of Series B Preferred Stock shall have an initial stated value of $ 1.00 (the “Stated Value”). The Series B Preferred
Stock will, with respect to dividend rights and rights upon liquidation, winding-up or dissolution, rank: (a) senior with respect to
dividends and right of liquidation with the Company’s common stock and (b) junior with respect to dividends and right of liquidation
to all existing and future indebtedness of the Company and existing and outstanding preferred stock of the Company.

Series
B Preferred Stock shall have no right to vote on any matters requiring shareholder approval or any matters on which the shareholders
are permitted to vote, with the exception to matters that would change the number or features of the Series B Preferred Stock.

Each
share of Series B Preferred Stock will carry an annual dividend in the amount of twelve percent ( 12 %) of the Stated Value (the “Divided
Rate”), which shall be cumulative, payable solely upon redemption, liquidation or conversion. Upon the occurrence of an Event of
Default, the Dividend Rate shall automatically increase to twenty two percent ( 22 %).

Upon
any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or upon any Deemed Liquidation Event, after
payment or provision for payment of debts and other liabilities of the Company, and after payment or provision for any liquidation preference
payable to the holders of any Preferred Stock ranking senior upon liquidation to the Series B Preferred Stock, if any, but prior to any
distribution or payment made to the holders of Common Stock or the holders of any Preferred Stock ranking junior upon liquidation to
the Series B Preferred Stock by reason of their ownership thereof, the Holders will be entitled to be paid out of the assets of the Company
available for distribution to its stockholders an amount with respect to each share of Series B Preferred Stock equal to (i) the Stated
Value plus (ii) any accrued but unpaid dividends, the Default Adjustment, if applicable, Failure to Deliver Fees, if any, (the amounts
in this clause (ii) collectively, the “Adjustment Amount”).

F- 21

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

Conversion
Right. At any time following the date which is one hundred eighty (180) days after the Issuance Date, the Holder shall have the right
at any time, to convert all or any part of the outstanding Series B Preferred Stock into fully paid and non-assessable shares of Common
Stock. The Holders of the Series B Preferred Stock are limited to holding no more than 9.99 % of the Common Stock.

Conversion
Price. The conversion price (the “Conversion Price”) shall equal the Fixed Conversion Price (subject to equitable adjustments
by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization,
reclassifications, extraordinary distributions and similar events). The “Fixed Conversion Price” shall mean $ 0.20 . Notwithstanding
anything contained herein to the contrary in the Event of Default, the Conversion Price shall be the lower of the Fixed Conversion Price
and the Variable Conversion Price. The “Variable Conversion Price” shall mean 50 % multiplied by the Market Price (as defined
herein) (representing a discount rate of 50 %). “Market Price” means the lowest bid price for the Common Stock during the
twenty (20) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.

The
Company will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide
for the issuance of Common Stock upon the full conversion of this Series B Preferred Stock issued. The Company is required at all times
to have authorized and reserved four times the number of shares that would be issuable upon full conversion of the Series B Preferred,
at any time the Company does not maintain the required Reserved Amount, the Company shall be put on notice by the Holder, and shall have
five (5) days to cure its deficiency, after which time, such failure will be deemed an Event of Default hereunder.

During
July 2022, the Company issued 448,000 shares of the Series B Preferred Stock in conjunction with a debt financing with two investors
(See Note 11). The Company determined that under ASC 480, the Series B Preferred Stock should be treated as Temporary Equity and that
it needed to apply the SAB topic 3c (SEC guidance) as well. Upon issuance of the shares, the Company allocated a relative value of $ 101,368 to the Preferred Stock. Upon issuance, the Company recorded an aggregate value of $ 461,440 , with $ 360,072 charged to additional paid
in capital including the dividends due of $ 13,440 at September 30, 2022.

The
Company breached its covenants in the Convertible Series B Preferred Stock in July 2022. The breached covenant defines as an event of
default as any breach of a material covenant or material terms or conditions contained in the Certificate of Designations or in any purchase
agreement, subscription agreement or other agreement with any Holder (of the Convertible Series B Preferred Stock). As a result of this
event of default, the Stated Value of the preferred stock increased to $ 1.50 per share and the conversion price became the “the
lower of the Fixed Conversion Price ($ 0.2 ) or 50 % of the lowest closing bid price of the Company’s stock in the twenty days prior
to a conversion”. The Preferred Stock’s redemption value was increased by another $ 224,000 as a result of the default and
dividends are now accruing at 22 %.

On
April 18, 2023, the Company and the Holder of 224,000 Series B Preferred Stock (the “Holder”) entered into an Exchange Agreement
whereby the Holder exchanged (the “Exchange”) 224,000 Series B Preferred Stock of the Company for 224,000 Series C Preferred
Stock of the Company which shall have the rights and preferences in the Certificate of Designation of the Series C Preferred Stock as
discussed below and for no other consideration (see below).

Between
August 2023 to September 2023, the Company issued 2,309,360 shares of common stock to JP Carey Limited Partners, LP for the conversion
of 15,500 Series B Preferred Stock and $ 3,640 accrued dividends.

At
September 30, 2023, there remains 208,500 outstanding Convertible Series B Preferred Stock with stated value of $ 1.50 and would convert
into 46,396,197 common shares. During the years ended September 30, 2023 and 2022, the Company charged $ 141,411 and $ 13,440 , respectively,
to additional paid in capital for the dividend of the preferred shares. At September 30, 2023 and 2022, the Series B Preferred Stock
redemption value amounted to $ 463,962 (including dividends of $ 151,211 ) and $ 685,440 (including dividends of $ 13,440 ), respectively.

Mandatory
Redeemable Series C Preferred Stock

Certificate
of Designation of Series C 3% Preferred Stock

On
April 25, 2023, the Company filed a Certificate of Designation for Series C Preferred Stock with the Delaware Secretary of State, designating 1,000,000 shares of preferred stock as Series C Preferred Stock. Each share of Series C Preferred Stock has a par value of $ 0.0001 per
share and a stated value of $ 1.00 (the “Stated Value”). The Series C Preferred Stock shall have no right to vote on any matters
requiring shareholder approval or any matters on which the shareholders are permitted to vote.

F- 22

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

Each
share of Series C Preferred Stock is entitled to an annual dividend equal to 3 % of the stated value which shall be cumulative, payable
solely upon redemption, liquidation or conversion. Upon the occurrence of an event of default, the dividend rate shall automatically
increase to 18 %.

Upon
any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary or upon any deemed liquidation event, after
payment or provision for payment of debts and other liabilities of the Company and after payment or provision for any liquidation preference
payable to the holders of any preferred stock ranking senior upon liquidation to the Series C Preferred Stock, if any, but prior to any
distribution or payment made to the holders of common stock or the holders of the preferred stock ranking junior upon liquidation to
the Series C Preferred Stock, the holders will be entitled to be paid out of the assets of the Company available for distribution an
amount equal to the stated value plus any accrued but unpaid dividends, default adjustment, if applicable, and any other fees (collectively
the “Adjustment Amount”).

The
Holder shall have no right at any time to convert all or any part of the outstanding Series C Preferred Stock into shares of common stock.

Mandatory
Redemption by the Company . On the date which is the earlier of: (i) December 31, 2023; and (ii) upon the occurrence of an Event of
Default (i) or (ii), the Mandatory Redemption Date the Company shall redeem all of the shares of Series C Preferred Stock of the Holders.
Within five (5) days of the Mandatory Redemption Date, the Company shall make payment to each Holder of an amount in cash, or kind, equal
to (i) the total number of Series C Preferred Stock held by the applicable Holder, multiplied by (ii) the then current Stated Value (including
but not limited to the addition of any accrued, unpaid dividends and the Default Adjustment, if applicable) (the “Mandatory Redemption
Amount”). The value of any payment in kind shall be as agreed between the Company and the Holder.

Upon
the occurrence and during the continuation of any Event of Default (other than as set forth in Section 8ai of the amendment which is
the failure to redeem), the Stated Value shall immediately be increased to $ 1.50 per share of Series C Preferred Stock; and upon the
occurrence and during the continuation of any Event of Default specified in Section 8ai which is the failure to redeem, the Stated Value
shall immediately be increased to $ 2.00 per share of Series C Preferred Stock (the amounts referred to herein shall be referred to collectively
as the “Default Adjustment”). In the event of a Default Adjustment, the Company shall immediately, upon the demand of the
Majority Holders, redeem the issued and outstanding Series C Preferred Stock and pay to the Holders the amount which is equal to (i)
the number of shares of Series C Preferred Stock held by such Holders multiplied by (ii) the Stated Value plus any Adjustment Amount.
Upon any Event of Default set forth in Section 8(A)(ix), provided that there is no other default, no Default Adjustment shall occur;
however, the Company shall immediately, upon the demand of the Majority Holders, redeem the issued and outstanding Series C Preferred
Stock and pay to the Holders the amount which is equal to (i) the number of shares of Series C Preferred Stock held by such Holders multiplied
by (ii) the Stated Value plus any Adjustment Amount.

ASC
480, Distinguishing Liabilities from Equity, defines mandatorily redeemable financial instruments as any financial instruments
issued in the form of shares that have an unconditional obligation requiring the issuer to redeem the instrument by transferring its
assets at a specified or determinable date (or dates) or upon an event that is certain to occur. A mandatorily redeemable financial instrument
shall be classified as a liability unless the redemption is required to occur only upon the liquidation or termination of the reporting
entity. Under ASC 480, mandatorily redeemable financial instruments shall be measured initially at fair value. Due to the mandatory redemption
feature, ASC 480 requires that these Series C Preferred Stock be classified as a liability rather than as a component of equity, with
preferred annual returns being accrued and recorded as interest expense.

As
a result of the Exchange of 224,000 shares of Convertible Series B Preferred Stock for Series C Preferred Stock on April 18, 2023 (see
above), there were 224,000 shares of Series C Preferred Stock issued and outstanding as of September 30, 2023. The Series C preferred
shares are mandatorily redeemable by the Company and are therefore classified as a liability for $ 336,000 (based on the $ 1.50 stated
value). There was no gain or loss recognized in connection with the Exchange Agreement. At September 30, 2023, the Series C Preferred
Stock redemption value amounted to $ 340,572 (including dividends of $ 4,572 ).

NOTE
13 - STOCKHOLDERS’ DEFICIT

Preferred
Stock

As
of September 30, 2023, the Company is authorized to issue 5,000,000 shares of $ 0.0001 par value preferred stock, with designations, voting,
and other rights and preferences to be determined by the Board of Directors of which 2,999,750 remain available for designation and issuance.

As
of September 30, 2023 and 2022, the Company has designated 250 shares of $ 0.0001 par value Series A preferred stock, of which 250 shares
are issued and outstanding. These preferred shares have voting rights per shareholder equal to the total number of issued and outstanding
shares of common stock divided by 0.99 .

F- 23

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

See
Note 12, regarding the issuance of Series B and Series C Preferred Stock and the related designations.

Common
Stock

As
of September 30, 2023 and 2022, there were 9,306,954 and 4,407,321 , shares outstanding, respectively.

Reverse
Stock Split

On
July 11, 2023, the Company filed a certificate of amendment to its certificate of incorporation, as amended, to effect a one-for-one
thousand (1:1,000) Reverse Stock Split, effective as of July 17, 2023. Proportional adjustments for the Reverse Stock Split were made
to the Company’s outstanding stock options, warrants and equity incentive plans. All share and per-share data and amounts have
been retroactively adjusted as of the earliest period presented in the consolidated financial statements to reflect the Reverse Stock
Split.

Stock
Incentive Plan

The
Company established its 2016 Stock Incentive Plan (the “Plan”) that permits the granting of incentive stock options and other
common stock awards. The maximum number of shares available under the Plan is 100 shares. The Plan is open to all employees, officers,
directors, and non-employees of the Company. Options granted under the Plan will terminate and may no longer be exercised (i) immediately
upon termination of an employee or consultant for cause or (ii) one year after termination of employment, but not later than the remaining
term of the option. As of September 30, 2023, 84 awards remain available for grant under the Plan.

S-1
Offerings

On
January 20, 2022, the Company filed a Post-Effective Amendment to its Form S-1 filed on June 9, 2021, deregistering all unissued shares
of common stock from that offering.

On
January 21, 2022, the Company submitted a registration statement filed on Form S-1. The Company requested accelerated status and the
registration statement became effective on January 24, 2022. The offering provides for the issuance of up to 1,800,000 shares of common
stock at a price of $ .60 , under subscriptions. The Company will use the proceeds for working capital and may seek to expand the business
through investment. On February 1, 2022 the Form S-1 offering was made effective.

Since
September 30, 2021, the Company issued 100,000 shares of common stock under the June 9, 2021 S-1 offering and received $ 250,000 .

Since
February 2, 2022, Trillium Partners LP subscribed to 749,313 shares of common stock under the new S-1 for cash payments of $ 449,589 .

On
September 16, 2022, the Company filed a registration statement on Form S-1. The registration statement became effective on September
29, 2022. The offering provided for the issuance of up to 5,000,000 shares of common stock at a price of $ 0.20 , under subscriptions.
The Company used the proceeds for working capital.

During
the year ended September 30, 2023, the Company issued 496,667 shares of common stock under the September 16, 2022 S-1 offering and received
$ 99,333 .

Shares
Issued for Conversion of Convertible Notes

In
total 1,124,318 shares of common stock were issued upon conversion of convertible notes and accrued interest during the year ended September
30, 2022 as follows:

On
November 4, 2021, Geneva Roth Remark Holdings Inc. converted principal of $ 58,500 and accrued interest of $ 2,925 from its convertible
note dated May 3, 2021 into 40,950 shares of common stock at contracted prices. Following the conversions, the balance of principal and
accrued interest was $ 0 .

On
December 17, 2021, Geneva Roth Remark Holdings Inc. converted principal of $ 58,500 and accrued interest of $ 2,925 from its convertible
note dated June 14, 2021 into 81,900 shares of common stock at contracted prices. Following the conversions, the balance of principal
and accrued interest was $ 0 .

On
January 21, 2022, Geneva Roth Remark Holdings Inc. converted principal of $ 53,750 and accrued interest of $ 2,688 from its convertible
note dated July 19, 2021 into 78,385 shares of common stock at contracted prices. Following the conversions, the balance of principal
and accrued interest was $ 0 .

F- 24

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

On
March 22, 2022 and March 25, 2022, Geneva Roth Remark Holdings Inc. converted principal of $ 50,000 and accrued interest of $ 2,500 from
its convertible note dated September 17, 2021 into 159,091 shares of common stock at contracted prices. Following the conversions, the
balance of principal and accrued interest was $ 0 .

On
May 18, 2022 and May 25, 2022 1800 Diagonal Lending LLC (f/k/a Sixth Street Lending LLC, fully converted principal and accrued interest
of $ 55,000 and $ 2,750 from the convertible note dated November 12, 2021 into 197,640 shares of common stock.

On
June 6, 2022, Frondeur Partners LLC fully converted principal and accrued interest of $ 15,000 and $ 747 from the convertible note dated
December 1, 2021 into 95,215 shares of common stock.

On
July 12, 2022, Frondeur Partners LLC fully converted principal and accrued interest of $ 15,000 and $ 744 from the convertible note dated
January 1, 2022 into 126,926 shares of common stock.

On
July 14, 2022 and July 18, 2022 1800 Diagonal Lending LLC (f/k/a Sixth Street Lending LLC, fully converted principal and accrued interest
of $ 53,750 and $ 2,688 from the convertible note dated November 12, 2021 into 217,067 shares of common stock.

On
September 23, 2022, Frondeur Partners LLC fully converted principal and accrued interest of $ 15,000 and $ 777 from the convertible note
dated February 1, 2022 into 127,145 shares of common stock.

Approximately
$ 222,000 of put premiums (related to the Stock Settled Debt treatment of the conversions listed above) was reclassified to additional
paid in capital in fiscal 2022.

In
total 2,090,007 shares of common stock were issued upon conversion of convertible notes and accrued interest during the year ended September
30, 2023 as follows:

On
October 3, 2022, the Company issued 191,827 shares of common stock in conversion of Frondeur Partners LLC, convertible note payable dated
March 1, 2022, all principal of $ 15,000 and accrued interest of $ 888 were converted.

On
November 17, 2022, the Company issued 384,804 shares of common stock in conversion of Frondeur Partners LLC, convertible note payable
dated April 1, 2022, all principal of $ 15,000 and accrued interest of $ 945 were converted.

On
December 1, 2022, the Company issued 383,489 shares of common stock in conversion of Frondeur Partners LLC, convertible note payable
dated May 1, 2022, all principal of $ 15,000 and accrued interest of $ 879 were converted.

On
January 11, 2023, the Company issued 384,311 shares of common stock in conversion of Frondeur Partners LLC, convertible note payable
dated June 1, 2022, all principal of $ 15,000 and accrued interest of $ 921 were converted.

On
February 1, 2023, the Company issued 372,911 shares of common stock in conversion of Frondeur Partners LLC, convertible note payable
dated July 1, 2022, all principal of $ 15,000 and accrued interest of $ 884 were converted.

On
March 1, 2023, the Company issued 372,665 shares of common stock in conversion of Frondeur Partners LLC, convertible note payable dated
August 1, 2022, all principal of $ 15,000 and accrued interest of $ 871 were converted.

$ 90,000 of put premiums (related to the Stock Settled Debt treatment of the conversions listed above) was reclassified to additional paid in
capital during the year ended September 30, 2023.

Shares
Issued in Potential Settlement of Legal Matter

On
September 30, 2021, the Company issued 36,821 common shares to a former officer in potential settlement of a claim for compensation due
plus accrued interest. The shares were valued at $ 119,670 , with $ 92,723 related to salary due and $ 26,947 was charged to interest expense.
At September 30, 2021, $ 119,670 was recognized as a deferred charge presented as other assets on the consolidated balance sheet. During
the year ended September 30, 2022, the shares were cancelled (see Note 7).

All
shares issued to employees and non-employees are valued at the quoted trading prices on the respective grant dates.

F- 25

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

Stock
Options

The
Company recognizes compensation cost for unvested stock-based incentive awards on a straight-line basis over the requisite service period.

There
were no options granted under the 2016 Stock Incentive Plan for the years ended September 30, 2023 and 2022.

For
the years ended September 30, 2023 and 2022, the Company recorded $ 0 and $ 69,108 of compensation and consulting expense related to stock
options, respectively. Total unrecognized compensation was $ 0 , at September 30, 2023 and 2022.

For
the years ended September 30, 2023 and 2022, a summary of the Company’s stock options activity is as follows:

Number of Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (Years) | Weighted- Average Grant-Date Fair Value | Aggregate Intrinsic Value
Outstanding at September 30, 2021 | 17 | 230,000.00 | 3.71 | - | -
Forfeited | ( 1 | )
Outstanding at September 30, 2022 | 16 | 220,000.00 | 1.97 | - | -
Forfeited | (- | ) | - | - | -
Outstanding and Exercisable at September 30, 2023 | 16 | 220,000.00 | 0.97 | - | -

All
options were issued at an options price equal to the market price of the shares on the date of the grant.

Warrants

On
July 1, 2022, the “Company entered into separate Securities Purchase Agreements with Trillium Partners, LP (“Trillium”)
and with JP Carey Limited Partners, LP (“JPC”). Under the terms of each SPA, Trillium and JPC each agreed to advance funds
under a merchant financing arrangement, treated as loans. Warrants for the purchase of 1,120,000 shares of Common Stock were issued as
consideration for the advance agreement. In total 2,240,000 warrants were issued and a relative value for the bundled transaction of
$ 200,387 , was charged to debt discount (amortized to interest expense over the term of the related loans), additional paid in capital
was credited for the same amount.

The
Warrants are exercisable at $ 0.20 for a term of 7 years, permit the Holder thereof to elect a cashless exercise, are subject to adjustment
according to certain anti-dilution provisions, and carry no voting rights.

For
the years ended September 30, 2023 and 2022, a summary of the Company’s warrant activity is as follows:

Number of Warrants | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (Years) | Weighted- Average Grant-Date Fair Value | Aggregate Intrinsic Value
Outstanding and exercisable at September 30, 2021 | 42,777 | $ | 1.12 | 1.11 | - | $ | 93,255
Anti-dilution adjustment | 356,479 | - | - | - | -
Surrender of warrants | ( 399,256 | ) | - | - | - | -
Issuance of warrants | 2,240,000 | $ | 0.20 | 6.75 | $ | 0.20 | $ | 448,000
Outstanding and exercisable at September 30, 2022 | 2,240,000 | $ | 0.20 | 6.5 | $ | 0.20 | $ | 224,000
Outstanding and exercisable at September Outstanding and exercisable at September 30, 2023 | 2,240,000 | $ | 0.20 | 5.5 | $ | 0.20 | $ | -

There
were no new warrants issued during the year ended September 30, 2023.

F- 26

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

NOTE
14 - RELATED PARTY TRANSACTIONS

On
October 1, 2016, the Company entered into employment agreements with the Company’s President and CEO which provides for annual
base compensation of $ 370,000 for a period of three years, which can, at the Company’s election, be paid in cash or Common Stock
or deferred if insufficient cash is available, and provides for other benefits, including a discretionary bonus and equity provision
for the equivalent of 12 months’ base salary, and an additional one-time severance payment of $ 2,500,000 upon termination under
certain circumstances, as defined in the agreement. On September 16, 2019, this employment agreement was modified for a period of five
years to provide an annual salary of $ 624,000 along with the aforementioned benefits including education reimbursement. The Company recognized
expenses of $ 624,000 for the year ended September 30, 2023 and 2022 for the CEO’s base compensation.

The
Company had certain promissory notes payable to related parties (see Note 9).

NOTE
15 - COMMITMENTS AND CONTINGENCIES

Contingencies

Legal
Matters

On
February 6, 2018, the Company sent a letter to the previous owners of Howco Distributing Co. (“Howco”) alleging that they
made certain financial misrepresentations under the terms of the Stock Purchase Agreement by which the Company acquired control of Howco
during 2016. The Company claimed that the previous owners took excessive amounts of cash from the business prior to the close of the
merger. On March 13, 2018, the Company filed a lawsuit against the previous owners by issuing a summons. On April 12, 2018, the Company
received the Defendants’ answer. On July 22, 2019, the Company sought and was granted a dismissal without prejudice of the lawsuit
filed against the previous owners of Howco. A company representative and the previous owners have been in contact. An informal oral agreement
with the Seller was made whereby the Company had been paying the previous owners $3,000 per month. The Company is no longer paying the
previous owner $ 3,000 a month. A company representative informed the previous owner that the Company will resume the $ 3,000 payment as
soon as it is able to do so (see Note 8).

In
connection with the merger in fiscal 2016, with Texas Wyoming Drilling, Inc., a vendor has a claim for unpaid bills of approximately
$ 75,000 against the Company. The Company and its legal counsel believe the Company is not liable for the claim pursuant to its indemnification
clause in the merger agreement.

In
the suit Drone USA, Inc and Michael Bannon (plaintiffs) vs the former Chief Financial Officer or CFO, the plaintiffs sought to compel
the former CFO to meet his obligations under an agreement guaranteeing payments to another former executive. The former CFO filed a cross-claim
against the plaintiffs for past due salary. The employment agreement with the former CFO allowed salary payments to be paid in cash or
stock. During the year ended September 30, 2021, the Company issued 36,821 shares of its common stock for the past due salary and claims
that this payment moots the former CFO’s claim for past due salary. During the year ended September 30, 2022, the Company began
the process to cancel the shares issued and reclassified the amount to equity and a previously recorded liability for $ 119,670 . The former
CFO filed a motion for summary judgement which was denied, then filed an appeal to that order. The appellate court reversed the lower
court’s decision. The Company settled the lawsuit for $ 90,000 . Three equal payments of $ 30,000 were required to be made. The May
2023, June 2023 and July 2023 payments of $ 90,000 were made. (see Note 7).

On
April 10, 2019, a former service provider filed a complaint with three charges with the Superior Court Judicial District of New Haven,
CT seeking payment for professional services. The Company has previously recognized expenses of $ 218,637 , which remain unpaid in accounts
payable. On May 2, 2023, the Company reached a settlement agreement with a former vendor which had a pending legal action against the
Company concerning services rendered having outstanding amounts owed of $ 219,613 . The Company agreed to pay a total of $ 110,000 in total,
consisting of a cash payment of $ 25,000 and a note payable of $ 85,000 (having a 3 % annual interest). The Company will pay $ 2,472 for
36 months .

On
December 30, 2020, a Howco vendor filed a lawsuit seeking payment of past due invoices totaling $ 276,430 and finance charges of $ 40,212 .
The Company has recorded the liability for the invoices in the normal course of business. Management at Howco as well as an intermediary
consultant structured a repayment plan with this vendor and other vendors as well.

F- 27

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

Settlements

On
November 13, 2018, the Company and a vendor agreed to settle $ 161,700 in past due professional fees for a convertible note in the amount
of $ 90,000 . The note bears interest at 5 % and matures in July 2019, and has a fixed discount conversion feature. The note is past due
and remains unconverted at September 30, 2023 and 2022; however there is no default interest or penalty associated with the default.
The difference between the settlement amount and the recorded amount in accounts payable of $ 71,700 was recognized as a gain on debt
extinguishment upon receipt of the waiver and release from the vendor in 2018.

On
June 23, 2023, Howco entered into a settlement agreement with Crane Machinery Inc. (CMI). Howco agreed to pay $ 16,500 with an initial
settlement of $ 2,000 , to be followed by five monthly installments of $ 2,900 , until paid in full.

As
of September 30, 2023, the Company has received demand for payment of past due amounts for services by several consultants and service
providers.

During the year ended September 30, 2023, the
Company did an evaluation of certain unsecured, previously accrued payables to various third parties and the related jurisdiction(s)
such amounts arose from, selected amounts were written off in accordance with ASC 405-20-40-1 - Extinguishment of Liabilities as the statute of limitations had expired on the payables and the Company recorded a gain of $ 531,231 as a result of the extinguishments
as reflected in the accompanying statements of operations.

Commitments

Lease
Obligations

On
April 16, 2020 the Company’s subsidiary Howco renewed its office and warehouse lease in Vancouver, WA for a term commencing on
June 1, 2020 extending through June 1, 2023 at an initial monthly rent of approximately $ 5,154 . The lease required monthly payments including
base rent plus CAM with annual increases.

On
April 16, 2023, Howco renewed its office and warehouse lease for an additional three years. The initial year (commencing on June 1, 2023)
monthly lease payment is $ 4,542 , in years two and three the monthly lease payments are $ 4,679 and $ 4,819 respectively. Monthly common
charges at $ 1,481 for the first year, subject to change in years two and three.

The
Company recognized a right-of-use asset of and a lease liability of $ 140,561 , which represents the fair value of the lease payments calculated
as present value of the minimum lease payments using a discount rate of 12 % on date of the lease renewal in accordance with ASC 842.
The asset and liability will be amortized as monthly payments are made and lease expense will be recognized on a straight-line basis
over the term of the lease.

Right
of use asset (ROU) is summarized below:

September 30, 2023 | September 30, 2022
Operating lease at inception | $ | 140,561 | $ | 156,554
Less accumulated reduction | ( 13,285 | ) | ( 122,986 | )
Balance ROU asset | $ | 127,276 | $ | 33,568

Operating
lease liability related to the ROU asset is summarized below:

Operating lease liabilities at inception | $ | 140,561 | $ | 156,554
Reduction of lease liabilities | ( 12,735 | ) | ( 122,079 | )
Total lease liabilities | $ | 127,826 | $ | 34,475
Less: current portion | ( 41,946 | ) | -
Lease liabilities, non-current | $ | 85,880 | $ | -

F- 28

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

Non-cancellable
operating lease total future payments are summarized below:

Total minimum operating lease payments | $ | 150,298 | $ | 42,929
Less discount to fair value | ( 22,472 | ) | ( 8,454 | )
Total lease liability | $ | 127,826 | $ | 34,475

Future
minimum lease payments under non-cancellable operating leases at September 30, 2023 are as follows:

Years ending September 30, | Amount
2024 | $ | 55,049
2025 | 56,701
2026 | 38,548
Total minimum non-cancelable operating lease payments | $ | 150,298

The
weighted average remaining lease term for the operating lease is 2.67 years as of September 30, 2023.

In
December 2019, the Company relocated its primary office to 195 Paterson Avenue, Little Falls, New Jersey, under a one-year lease with
a renewal option having monthly payments of $ 500 . On June 1, 2023, the Company moved its address from 195 Paterson Avenue Little Falls,
NJ to 37 Main Street Sparta, NJ. Following subsequent renewals the current rent is $ 700 , per month as of September 30, 2023.

For
the years ended September 30, 2023 and 2022, rent expense for all leases amounted to $ 76,117 and $ 73,346 , respectively.

Notice
of Default

On
September 6, 2019, the Company received a notice of default under its senior secured credit facility with TCA, for non-payment of amounts
due among other matters. Left uncured the default remedies include seizure of operating assets such as the Company’s subsidiary.
Additionally, the default may trigger cross default provisions under other agreements with other creditors. On April 12, 2023, the receiver
for TCA sold and assigned to Ekimnel Strategies, LLC, a Delaware limited liability company, and Ekimnel purchased and assumed, all of
TCA’s rights and obligations as a lender under that certain Senior Secured Credit Facility Agreement (see Note 9).

NOTE
16 - CONCENTRATIONS

Concentration
of Credit Risk

The
Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits of $ 250,000 .
At September 30, 2023, cash in a bank did not exceed the federally insured limits. The Company has not experienced any losses in such
accounts through September 30, 2023.

Economic
Concentrations

With
respect to customer concentration, one customer accounted for approximately 85 % of total sales for the year ended September 30, 2023.
One customer accounted for approximately 73 % of total sales for the year ended September 30, 2022.

With
respect to accounts receivable concentration, two customers accounted for 88 % and 10 % of total accounts receivable at September 30, 2023.
Three customers accounted for approximately 50 %, 23 %, and 15 %, of total accounts receivable at September 30, 2022.

F- 29

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

With
respect to supplier concentrations, two suppliers accounted for approximately 15 % and 10 % of total purchases for the year ended September
30, 2023. Two suppliers accounted for approximately 17 % and 13 %, of total purchases for the year ended September 30, 2022.

With respect to Howco accounts payable concentration,
three suppliers accounted for approximately 11 %, 18 % and 20 % of total accounts payable at September 30, 2023. With respect to Howco accounts
payable concentration, three suppliers accounted for approximately 27 %, 24 %, and 13 % of total accounts payable at September 30, 2022.

Foreign
sales were $ 4,509 and $ 0 for the years ended September 30, 2023 and 2022, respectively.

NOTE
17 - INCOME TAXES

The
Company recognizes deferred tax assets and liabilities for the tax effects of differences between the financial statement and tax basis
of assets and liabilities. A valuation allowance is established to reduce the deferred tax assets if it is more likely than not that
a deferred tax asset will not be realized.

As
of September 30, 2023, the Company has net operating loss carryforwards of approximately $ 19,264,000 to reduce future taxable income.
Of the $ 19,264,000 , approximately $ 14,604,000 can be used through 2039, and $ 4,660,000 may be carried forward indefinitely. A valuation
allowance for the entire amount of deferred tax assets has been established as of September 30, 2023 and 2022.

A
reconciliation of the provision for income taxes at the federal statutory rates of 21 % to the Company’s provision for income tax
is as follows:

Year Ended September 30, 2023 | Year Ended September 30, 2022
U.S. Federal (tax benefit) provision at statutory rate | $ | ( 467,320 | ) | $ | ( 561,403 | )
State (tax benefit) income taxes, net of federal benefit | ( 188,041 | ) | ( 225,898 | )
Permanent differences | ( 64,035 | ) | ( 40,511 | )
True up | 28,151 | 78,612
Changes in valuation allowance | 691,245 | 749,200
Total | $ | - | $ | -

Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The following table presents the significant components of the Company’s
deferred tax assets and liabilities for the periods presented:

September 30, 2023 | September 30, 2022
Deferred Tax Assets
Stock-based compensation | $ | 873,096 | $ | 873,096
Accrued salary – unpaid | 992,450 | 827,377
Net operating losses | 5,673,374 | 5,147,202
Total deferred tax assets | 7,538,920 | 6,847,675
Valuation allowance | ( 7,538,920 | ) | ( 6,847,675 | )
Net deferred tax assets | $ | - | $ | -

The
Company determines its valuation allowance on deferred tax assets by considering both positive and negative evidence in order to ascertain
whether it is more likely than not that deferred tax assets will be realized. Realization of deferred tax assets is dependent upon the
generation of future taxable income, if any, the timing and amount of which are uncertain. Due to the history of losses the Company has
generated in the past, the Company believes that it is not more likely than not that all of the deferred tax assets in the U.S. can be
realized as of September 30, 2023 and 2022, accordingly, the Company has recorded a full valuation allowance on its U.S. deferred tax
assets.

The
Company files income tax returns in the United States on federal basis and various states. The Company is not currently under any international
or any United States federal, state and local income tax examinations for any taxable years. All of the Company’s net operating
losses are subject to tax authority adjustment upon examination.

F- 30

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

NOTE
18 - SUBSEQUENT EVENTS

Promissory
Note Issued

On
October 26, 2023, the Company entered into the Securities Purchase Agreement (the “Agreement”) with 1800 Diagonal Lending
LLC (“Lender”), pursuant to which the Company issued a promissory note (the “Note”) to the Lender in the principal
amount of $ 90,400 , including an original issue discount of $ 10,400 and legal fees of $ 5,000 . The Agreement contains certain customary
representations, warranties, and covenants made by the Company.

Under
the Note, the Company is required to make ten payments of $ 10,305.60 , which includes a one-time interest charge of 14 % ($ 12,565 ).
The first payment is due on November 30, 2023, with nine subsequent payments due each month thereafter. The Note is not secured by
any collateral. The Note matures on August 30, 2024 and contains customary events of default. Upon the occurrence and during the
continuation of any such event of default, the Note will become immediately due and payable, and the Company is obligated to pay to
the Lender an amount equal to 150 % times the sum of (w) the then outstanding principal amount of the Note plus (x) accrued and
unpaid interest on the unpaid principal amount of the Note to the date of payment plus (y) default interest at 22 % per annum on the
amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Lender pursuant to Article IV of the Note (amounts
set forth in clauses (w), (x), (y) and (z) are collectively referred to as the “Default Amount”). If the Company fails
to pay the Default Amount within five (5) business days of the Lender’s written notice that such amount is due and payable,
then the Lender has the right to convert the balance owed pursuant to the Note, including the Default Amount, into shares of common
stock of the Company (“Common Stock”) at a variable conversion price equal to 61 % of the lowest closing price pe share
of Common Stock during the ten trading day period ending on the latest complete trading day prior to the conversion date, provided
that the Lender and its affiliates may not own greater than 4.99 % of the Company’s outstanding shares of Common Stock, as set
forth in the Note. The Company received funding under the Note on October 26, 2023. The Company intends to use the proceeds from the
Note for general working capital purposes. The Company paid the required monthly payments starting on November 20, 2023.

Convertible
Note Issued

On
December 11, 2023, the Company entered into the Securities Purchase Agreement with 1800 Diagonal Lending LLC (the “Lender”),
pursuant to which the Company issued a promissory note to the Lender in the principal amount of $ 40,000 , including a debt issuance cost
of $ 5,000 to be amortized over the term of this note. The note matures on December 11, 2024 and bears interest at 12 % per annum. The
conversion price shall be a variable conversion price equal to 65 % of the average of the two lowest closing price per share of the common
stock during the fifteen trading day period ending on the latest complete trading day prior to the conversion date, provided, however,
that the Lender and its affiliates may not beneficially own more than 4.99 % of the Company’s outstanding shares of common stock
upon the conversion of the December 11, 2023 note. The Company has accounted for the convertible promissory note as stock settled debt
under ASC 480 and recorded debt premium of $ 21,538 .

Convertible
Notes for Legal Services

From December 1, 2023 until February 1, 2024, the Company issued a
$ 6,000 convertible notes every month to the law firm for fees incurred, each note having six-month term to maturity and 10 % annual interest
compounded monthly. The notes are convertible into shares of common stock at a fixed discount of 70 % of the lowest bid price in the 10
trading days immediately preceding the notice of conversion from the lender. The notes have cross default provisions. The Company has
accounted for the convertible promissory notes as stock settled debt under ASC 480 and recorded debt premiums equal to the face value
of the notes with a charge to interest expense. The principal amount of these notes will be charged to professional fees during the month
the notes were issued. The Company has accounted for the convertible promissory note as stock settled debt under ASC 480 and recorded
debt premium of $ 7,714 .

Conversion
of Series B Preferred Stock into Common Stock

In
December 2023, the Company issued 932,727 shares of common stock to JP Carey Limited Partners, LP for the conversion of 2,850 Series
B Preferred Stock and $ 855 accrued dividends.

Equity
Financing Agreement with GHS Investments, LLC

On
October 5, 2023, the Company entered into an Equity Financing Agreement (the “Equity Financing Agreement”) with GHS Investments,
LLC, a Nevada limited liability company (“GHS”). Under the terms of the Equity Financing Agreement, GHS will purchase,
at the Company’s election, up to $ 10,000,000 of the Company’s registered common stock (the “Shares”).

F- 31

BANTEC,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

September
30, 2023 and 2022

During
the term of the Equity Financing Agreement, the Company may at any time deliver a “put notice” to GHS thereby requiring GHS
to purchase a certain dollar amount of the Shares. Simultaneous with the delivery of such Shares, GHS shall deliver payment for the Shares.
Subject to certain restrictions, the purchase price for the Shares shall be equal to 80 % of the Market Price during the Pricing Period
as such capitalized terms are defined in the Agreement. Following an up-list to the NASDAQ or an equivalent national exchange by the
Company, the Purchase price shall mean ninety percent ( 90 %) of the lowest volume weighted average price (“VWAP”) during the
relevant Pricing Period, subject to a floor of $ 0.0135 per share, below which the Company shall not deliver a Put.

The
number of Shares sold to GHS shall not exceed the number of such shares that, when aggregated with all other shares of common stock of
the Company then beneficially owned by GHS, would result in GHS owning more than 4.99 % of all of the Company’s common stock then
outstanding. Additionally, GHS may not execute any short sales of the Company’s common stock. Further, the Company has the right,
but never the obligation to draw down. No shares have been issued as of the date of this report.

The
Equity Financing Agreement shall terminate (i) on the date on which GHS shall have purchased Shares pursuant to the Equity Financing
Agreement for an aggregate Purchase Price of $ 10,000,000 , or (ii) on the date occurring 24 months from the date on which the Equity Financing
Agreement was executed and delivered by the Company and GHS.

As a condition for the execution of the Equity
Financing Agreement by GHS, the Company is obligated to issue $ 20,000 worth of shares to GHS (“Commitment Shares”). These
shares have not been issued as of the date of filing of this report.

Registration
Rights Agreement with GHS Investments, LLC

In
addition, on October 5, 2023, the Company and GHS entered into a Registration Rights Agreement (the “Registration Agreement”).
Under the terms of the Registration Agreement the Company agreed to file a registration statement with the Securities and Exchange Commission
with respect to the Shares within 30 days of October 5, 2023. The Company is obligated to keep such registration statement effective
until (i) three months after the last closing of a sale of Shares under the Purchase Agreement, (ii) the date when GHS may sell all the
Shares under Rule 144 without volume limitations, or (iii) the date GHS no longer owns any of the Shares.

Sale
of Future Receipts Agreements

On October 24, 2023, the Company’s subsidiary, Howco, executed
a sale of future receipt agreement with Samson MCA LLC (“Samson”). Under the agreement, the Company sold $ 136,000 in future
receipt or receivables for a purchase amount of $ 100,000 . The principal amount is payable in weekly installments of $ 3,400 until such
time that the obligation is fully satisfied for approximately 10 months. The Company received $ 96,875 (net of origination fee of $ 3,000 which will be amortized over term of this agreement and $ 125 processing fee). The Company has the option to repurchase the receipts it
sold to Samson during the first month to the sixth month from the date of this agreement ranging from $ 118,000 to $ 127,000 .

On January 10, 2024, the Company’s subsidiary, Howco, executed
a sale of future receipt agreement with Samson MCA LLC. Under the agreement, the Company sold $ 173,750 in future receipt or receivables
for a purchase amount of $ 125,000 . The principal amount is payable in weekly installments of $ 8,687.50 until such time that the obligation
is fully satisfied for approximately 5 months. The Company received $ 121,225 (net of origination fee of $ 3,750 which will be amortized
over term of this agreement and $ 125 processing fee). The Company has the option to repurchase the receipts it sold to Samson during the
first month to the sixth month from the date of this agreement ranging from $ 147,500 to $ 158,750 .

F- 32

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
INDEPENDENT CERTIFYING ACCOUNTANT ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not Applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under the supervision and
with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer the Company
conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures, as defined in Rule 13a−15(e)
and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this
annual report. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded as of September
30, 2023 that the Company’s disclosure controls and procedures were not effective such that the information required to be disclosed
in the Company’s United States Securities and Exchange Commission (the “SEC”) reports is recorded, processed, summarized
and reported within the time periods specified in the SEC rules and forms, and is accumulated and communicated to the Company’s
management, including its Chief Executive Officer and Chief Financial Officer, currently the same person to allow timely decisions regarding
required disclosure.

Management’s Annual Report on Internal
Control over Financial Reporting

Based on its evaluation under
the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission as of September 30, 2023, the Company’s management, with the participation of its Chief Executive Officer and Chief Financial
Officer, concluded that its internal control over financial reporting were not effective as of September 30, 2023.

This annual report does not
include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the
Dodd-Frank Wall Street Reform and Consumer Protection Act, which permanently exempts non-accelerated filers from complying with Section
404(b) of the Sarbanes-Oxley Act of 2002.

Attached as exhibits to this
Form 10-K are certifications of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”),
which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
This “Controls and Procedures” section includes information concerning the controls and controls evaluation referred to in
the certifications.

Material Weakness Identified

Since the resignation of our
former CFO in July 2017 we do not have a qualified in-house financial accounting expert to maintain our parent company and consolidation
level books and records. To remediate this situation, we have engaged outsourced accountants. Currently there is no staff with knowledge
of Generally Accepted Accounting Procedures on site at Howco and the Howco books and reports are reviewed by the outsourced accounting
firm. Monitoring controls should be improved.

Changes in Internal Control over Financial
Reporting

There have been no changes
in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including
the CEO/CFO, does not expect that the Disclosure Controls or our internal control over financial reporting will prevent or detect all
errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance
that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems,
no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues
and instances of fraud, if any, within our Company have been detected.

These inherent limitations
include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override
of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections
of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because
of changes in conditions of deterioration in the degree of compliance with policies or procedures.

ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE

Our number of directors is
established at three, divided into three classes, designated as Class I, Class II and Class III. The terms of the Class I directors were
extended for three years each at the 2021 annual meeting of stockholders, the Class II directors expire at the 2022 annual meeting of
stockholders, and the term of the Class III directors will expire at the 2023 annual meeting of stockholders. A plurality of the votes
of the shares of the registrant’s common stock present in person or represented by proxy at the annual meeting and entitled to vote
on the election of directors are required to elect the directors. The Board members have three-year terms and in the absence of a vote
at an annual meeting of stockholders, they continue for successive three-year terms until they are replaced or resign.

The following table sets forth
certain information about our executive officers, key employees and directors as of December 31, 2023.

Michael Bannon is President,
Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors, positions he has held since January 26, 2016.
Since 1994 he served as President of Abatement Industries Group, Inc., a company involved in performing asbestos, lead, mold, and PCB
remediation services in commercial and Industrial buildings. Michael Bannon was also a founder and partner in Thermaxx LLC. Thermaxx manufactures
insulation jackets for mechanical systems. Michael is no longer President of Abatement Industries Group, Inc or a partner in Thermaxx
LLC. Michael graduated from the University of Connecticut with a B.A. degree in 1993, received an M.B.A. degree from the University of
New Haven in 1998, received an M.A. degree in Organizational Psychology in 2003 from the University of New Haven and became a Harvard
Business School graduate in March 2011 when he completed Harvard Business School’s Owner President Program. Michael earned a Master
of Laws in 2023 from Seton Hall Law School with concentrations in corporate and finance law. We believe that Mr. Bannon is qualified to
serve on our Board of Directors based upon his having successfully managed prior companies and his educational background in business.

Rodrigo Kuntz Rangel became a member of the Board on April 3, 2017 and has been our CTO since June 2016. Dr. Rangel has served as Scientific Director of IBRV,
the BRVANT Institute of Technology, a non-profit Institute since August 2013. Since February 2009 Dr. Rangel has served and continues
to serve as CEO of BRVANT Technologic Solutions, a Brazilian company that specializes in development of UAV, UGV and USV systems. From
2002 to 2009 he was Product Development Engineer at Embraer SA, working with the development of avionics, electronic and software systems
for military and civil aircraft. Dr. Rangel has specialized in aircraft manufacture engineering through his research activities with the
Embraer Engineering Specialization Program. Dr. Rangel also studied computer, robotics, lasers and virtual reality systems applied to
flight simulators at the Institute for Advanced Studies (IEAv) as a São Paulo State Foundation for Research Support (FAPESP) scholar.
Dr. Rangel received a B.S. degree in Computer Engineering, M.S. and PhD degrees in Computer and Electronics Engineering from the Technological
Institute of Aeronautics in Sao Jose dos Campos, Brazil.

Board Composition and Election of Directors

Our board of directors is
currently authorized to have five members, and consists of, two members following the resignation on June 2, 2021 of Matt Wiles. In accordance
with the terms of our current certificate of incorporation and by-laws, the term of office of each director expires at our annual meeting
of stockholders or until their successors are duly elected and qualified.

Director Independence

There are no family relationships
among any of our directors or executive officers.

Board Committees

Our board of directors does
not have a separate, standing audit committee or a nominating or governance committee. The full board of directors performs the function
of an audit and other committees.

There are no family relationships
among any of our directors, executive officers, or advisors.

Nominating Procedures

During the fiscal year ended
September 30, 2023, there were no material changes to the procedures by which security holders may recommend nominees to the Company’s
Board of Directors.

Directors’ Fees

No compensation has been paid
to any individual for services rendered as a director.

Compliance with Section 16(a) of the Securities
Exchange Act

Not Applicable

Code of Conduct and Ethics

We have adopted a Code of
Conduct and Ethics for all officers and directors which is disclosed on the Company’s website. There have been no waivers to any
of the Code of Conduct and Ethics provisions nor any amendments made to the Code of Conduct and Ethics during the year ended September
30, 2023.

ITEM 11. EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Overview

Compensation Philosophy

This section discusses the
principles underlying our policies and decisions with respect to the compensation of our executive officers and what we believe are the
most important factors relevant to an analysis of these policies and decisions. This section also describes the material elements of compensation
awarded to, earned by or paid to each of our named executive officers as of September 30, 2023. Our “named executive officers”
for 2023 are Michael Bannon and Dr. Rodrigo Kuntz Rangel. The compensation of each of our other current executive officers is based on
individual terms approved by our board of directors. Our board of directors made changes to current executive compensation as outlined
below.

We commenced operations on
July 20, 2015. Rodrigo Kuntz Rangel, our Chief Technology Officer appointed in 2016, does not currently receive, and has not historically
received, any monetary compensation from us for his service. However, we may in the future determine to compensate him for his service
as chief technology officer.

On October 1, 2016, the Company
entered into an employment agreement with the company’s President and CEO, Michael Bannon, that provides for annual base compensation
of $370,000 for a period of three years, which can, at the Company’s election, be paid in cash or shares of our common stock or
deferred if insufficient cash is available, and provides for other benefits, including a discretionary bonus and equity, a provision for
the equivalent of 12 months’ base salary, and an additional one-time severance payment of $2,500,000 upon termination under certain
circumstances, as defined in his employment agreement. On September 16, 2019, Michael Bannon’s employment agreement was modified
to provide salary of $624,000, and an annual bonus of 3% of net income. At the Company’s discretion, salary and bonus may be paid
in cash or stock and payment may be deferred.

Our compensation committee
will oversee these compensation policies and, together with our board of directors, will periodically evaluate the need for revisions
to ensure our compensation program is competitive with the companies with which we compete for executive talent.

Objectives and Philosophy of Our Executive
Compensation Program

The primary objectives of
the board of directors in designing our executive compensation program are to:

● | attract, retain and motivate experienced and talented executives;
● | ensure executive compensation is aligned with our corporate strategies, research and development programs and business goals;
● | recognize the individual contributions of executives while fostering a shared commitment among executives by aligning their individual goals with our corporate goals;
● | promote the achievement of key strategic, development and operational performance measures by linking compensation to the achievement of measurable corporate and individual performance goals; and
● | align the interests of our executives with our stockholders by rewarding performance that leads to the creation of stockholder value.

Each of our named executive
officers was hired by us before our board of directors established a formal executive compensation program. To achieve these objectives
in the future, we expect that our board of directors and compensation committee will evaluate our executive compensation program with
the goal of setting and maintaining compensation at levels that are justifiable based on each executive’s level of experience, performance
and responsibility and that the board believes are competitive with those of other companies in our industry and our region that compete
with us for executive talent. In addition, we expect that our executive compensation program will tie a substantial portion of each executive’s
overall compensation to key strategic, financial and operational goals. We have provided, and expect to continue to provide, a portion
of our executive compensation in the form of stock options and restricted stock that vest over time, which we believe helps to retain
our executives and aligns their interests with those of our stockholders by allowing them to participate in the longer-term success of
the Company as reflected in stock price appreciation.

Use of Compensation Consultants and Market
Benchmarking

For purposes of determining
total compensation and the primary components of compensation for our executive officers in 2023 we did not retain the services of a compensation
consultant or use survey information or compensation data to engage in benchmarking. In the future, we expect that our compensation committee
will consider publicly available compensation data for national and regional companies in the drone industry to help guide its executive
compensation decisions at the time of hiring and for subsequent adjustments in compensation. Even if we retain the services of an independent
compensation consultant to provide additional comparative data on executive compensation practices in our industry and to advise on our
executive compensation program generally, our board of directors and future compensation committee will ultimately make their own decisions
about these matters.

Beginning with fiscal year
2021, our annual cash bonus program is based upon net profit. As specified in the executive contracts of Michael Bannon, the CEO, and
Matthew Wiles, the former COO, they were to receive three and two percent of the net profit respectively. The board can elect to give
discretionary bonuses based on the increase in stock price or the successful acquisition and integration of a company into the Bantec
corporate family.

Stock-Based Awards

Our equity award program is
the primary vehicle for offering long-term incentives to our executives. While we do not have any equity ownership guidelines for our
executives, we believe that equity grants provide our executives with a strong link to our long-term performance create an ownership culture
and help to align the interests of our executives and our stockholders. In addition, the vesting feature of our equity awards contributes
to executive retention by providing an incentive for our executives to remain in our employ during the vesting period. Currently, our
executives are eligible to participate in our 2016 stock incentive plan, which we refer to as the 2016 Plan, and all equity awards granted
in 2017 (no awards were granted in fiscal years 2023 and 2022) were pursuant to the 2016 Plan. Under our 2016 Plan, executives are eligible
to receive grants of stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights and other stock-based
equity awards at the discretion of our board of directors.

Our employee equity awards
have typically been in the form of stock options. Because our executives’ profit from stock options only if our stock price increases
relative to the stock option’s exercise price, we believe stock options provide meaningful incentives for our executives to achieve
increases in the value of our stock over time. While we currently expect to continue to use stock options as the primary form of equity
awards that we grant, we may in the future use alternative forms of equity awards, such as restricted stock and restricted stock units.
To date, we have generally used equity awards to compensate our executive officers in the form of initial grants in connection with the
commencement of employment. In the future, we also generally plan to grant equity awards on an annual basis to our executive officers.
We may also make additional discretionary grants, typically in connection with the promotion of an employee, to reward an employee, for
retention purposes or in other circumstances recommended by management.

In general, the equity awards
that we have granted to our executive’s vest in equal annual amounts over a period of two to five years. Vesting ceases upon termination
of employment and exercise rights ceases immediately upon termination for cause or 12 months if termination is not for cause. Prior to
the exercise of a stock option, the holder has no rights as a stockholder with respect to the shares subject to such option, including
voting rights or the right to receive dividends or dividend equivalents.

We have granted, and going
forward expect to grant, stock options with exercise prices that are set at no less than the fair value of shares of our common stock
on the date of grant as determined by our board of directors.

Benefits and Other Compensation

We believe that establishing
competitive benefit packages for our employees is an important factor in attracting and retaining highly qualified personnel. We expect
to maintain broad-based benefits that are provided to all employees, including health and dental insurance, and 401(k) and profit-sharing
plans for our Howco employees. All of our executives will be eligible to participate in all of our employee benefit plans, in each case
on the same basis as other employees.

In certain circumstances,
we may award cash signing bonuses or may reimburse relocation expenses when executives first join us. Whether a signing bonus is paid
or relocation expenses are reimbursed, and the amount of either such benefit, is determined by our board of directors on a case-by-case
basis based on the specific hiring circumstances and the recommendation of our chief executive officer.

Severance and Change in Control Benefits

Pursuant to agreements we
have entered into with certain of our executives, these executives are entitled to specified benefits in the event of the termination
of their employment under specified circumstances, including termination following a change in control of our company. Please refer to
“Employment Agreements” for a more detailed discussion of these benefits.

We believe providing these
benefits help us compete for executive talent. Based on the substantial business experience of the members of our board of directors,
we believe that our severance and change in control benefits are generally in line with severance packages offered to executives by companies
at comparable stages of development in our industry and related industries.

Risk Considerations in Our Compensation Program

Our board of directors is
evaluating the philosophy and standards on which our compensation plans will be implemented across our company. It is our belief that
our compensation programs do not, and in the future will not, encourage inappropriate actions or risk taking by our executive officers.
We do not believe that any risks arising from our employee compensation policies and practices are reasonably likely to have a material
adverse effect on our company. In addition, we do not believe that the mix and design of the components of our executive compensation
program will encourage management to assume excessive risks. We believe that our current business process and planning cycle fosters the
behaviors and controls that would mitigate the potential for adverse risk caused by the action of our executives. We believe that the
following aspects of our executive compensation program that we plan to implement will mitigate the potential for adverse risk caused
by the action of our executives:

● | annual establishment of corporate and individual objectives for our performance-based cash bonus programs for our executive officers, which we expect to be consistent with our annual operating and strategic plans, designed to achieve the proper risk/reward balance and not require excessive risk taking to achieve;
● | the mix between fixed and variable, annual and long-term and cash and equity compensation, which we expect to be designed to encourage strategies and actions that balance the company’s short-term and long-term best interests; and
● | equity incentive awards that vest over a period of time, which we believe will encourage executives to take a long-term view of our business.

Tax and Accounting Considerations

Section 162(m) of the
Internal Revenue Code of 1986, as amended, or the Code, generally disallows a tax deduction for compensation in excess of $1,000,000 per
person paid to a publicly traded company’s chief executive officer and three other most highly paid officers, other than the chief
financial officer. Qualifying performance-based compensation is not subject to the deduction limitation if specified requirements are
met. We will periodically review the potential consequences of Section 162(m); however, the board of directors may, in its judgment,
authorize compensation payments that do not comply with the exemptions in Section 162(m) when it believes that such payments are
appropriate to attract and retain executive talent and are in the best interests of our stockholders.

We account for equity compensation
paid to our employees in accordance with Financial Accounting Standards Board, or FASB, Accounting Standard Codification Topic 718, Compensation—Stock Compensation , or ASC 718, which requires us to measure and recognize compensation expense in our
consolidated financial statements for all share-based payments based on an estimate of their fair value over the service period of the
award. We record cash compensation as an expense at the time the obligation is accrued.

Summary Compensation Table

The following table sets forth
the total compensation awarded to, earned by or paid to our named executive officers during the fiscal years ended September 30, 2023
and 2022.

SUMMARY COMPENSATION TABLE

Name and Principal Occupation | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards (1) | Non- Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($)(3) | Total ($)
M. Bannon | 2023 | $ | 624,000 | $ | - | $ | - | - | $ | - | $ | - | $ | 50,482 | $ | 674,482
M. Bannon | 2022 | $ | 624,000 | $ | - | $ | - | - | $ | - | $ | - | $ | 42,445 | $ | 666,445
R. Kuntz Rangel(2) | 2023 | $ | - | $ | - | $ | - | - | $ | - | $ | - | $ | - | $ | -
R. Kuntz Rangel(2) | 2022 | $ | - | $ | - | $ | - | - | $ | - | $ | - | $ | - | $ | -
(1) | The amounts in the “Option Awards” column reflect the aggregate grant date fair value of stock options granted during the year computed in accordance with the provisions of ASC 718, excluding the impact of estimated forfeitures related to service-based vesting conditions (which in our case were none).
(2) | Rodrigo Kuntz Rangel did not receive any compensation from us for his service as our Chief Technology Officer in 2023 and 2022.
(3) | All other compensation includes payments for Company leased vehicle, medical insurance, and tuition fee for the CEO.

Grants of Plan-Based Awards in 2023 and 2022

No options were granted in
2023 or 2022.

Outstanding Equity Awards at September 30,
2023

The following table sets
forth information regarding outstanding equity awards held by our named executive officers as of September 30, 2023.

Employment Agreements

On October 1, 2016, we entered
into a three-year employment agreement with Michael Bannon as President and CEO of Drone USA. Under the terms of the employment agreement,
Mr. Bannon’s compensation is $370,000 per annum which can at the Company’s election be paid in cash or our common stock or
deferred if insufficient cash is available. He is entitled to a bonus based on a compensation plan to be agreed to between him and our
Board. If the employment agreement is terminated by Drone USA for Cause (as defined in the employment agreement), or if Mr. Bannon resigns
without Good Reason (as defined therein), Mr. Bannon shall only receive his compensation earned through the termination date. If the employment
agreement is terminated by Drone USA without Cause or if Mr. Bannon terminates his employment for Good Reason, or upon a Change in Control
(as defined), Mr. Bannon shall also be entitled to a one-time severance payment of $2,500,000, the greater of (i) 12 months’ salary
or (ii) the remainder of his salary for the term of the employment agreement, acceleration of all non-vested equity in the Company to
vest on the date of termination and payment by Drone USA for all healthcare and life insurance coverage through the end of the term of
his Employment Agreement. On September 16, 2019, Michael Bannon’s employment agreement was modified to extend the term for an additional
five years, provide salary of $624,000, and an annual bonus of 3% of net income. At the Company’s discretion, salary and bonus may
be paid in cash or stock and payment may be deferred.

Nonqualified Deferred Compensation

We do not maintain any nonqualified
deferred compensation plans.

Defined Contribution Plan

In August 2016, Bantec, Inc.
established a qualified 401(k) defined contribution plan with a discretionary employer match provision. All employees who are at least
twenty-one years of age are eligible to participate in the plan. The plan allows participants to defer up to 90% of their annual compensation,
up to statutory limits. There were $0 of employer contributions for the years ended September 30, 2023, and 2022.

Howco is the sponsor of a
qualified 401(k) plan with a safe harbor provision. All employees are eligible to enter the plan within one year of the commencement of
employment. Employer contributions charged to expenses for the years ended September 30, 2023 and 2022 were $4,250 and $5,541, respectively.

On April 13, 2018, Howco Distributing
announced to its employees a Company-wide profit-sharing program. In fiscal year 2018, Howco Distributing, distributed approximately ten-percent
of the Company’s net income. The employee profit is equal to their annual salary divided by the Company’s total annual payroll
and multiplied by 10% of net income for the fiscal year. During the years ended September 30, 2023 and 2022 there was no profit and therefore
no distribution under the plan.

Stock Option and Other Employee Benefit Plans

The purpose of the 2016 Plan
is to advance the interests of our stockholders by enhancing our ability to attract, retain and motivate persons who are expected to make
important contributions and by providing such persons with equity ownership opportunities and performance-based incentives that are intended
to better align the interests of such persons with those of our stockholders.

2016 Stock Incentive Plan

History . On June 7,
2016, the Board of Directors approved and on June 8, 2016, the stockholders approved the 2016 Stock Incentive Plan (the “ 2016
Plan ”) under which employees, officers, directors and consultants are eligible to receive grants of stock options, stock
appreciation rights (“SAR”), restricted or unrestricted stock awards, restricted stock units, performance awards, other stock-based
awards, or any combination of the foregoing. The Plan authorizes up to 100 shares of our common stock for stock-based awards.

Administration . The
2016 Plan is administered by the Board of Directors or the committee or committees as may be appointed by the Board of Directors from
time to time (the “ Administrator ”). The Administrator determines the persons who are to receive awards, the
types of awards to be granted, the number of shares subject to each such award and the terms and conditions of such awards. The Administrator
also has the authority to interpret the provisions of the 2016 Plan and of any awards granted there under and to modify awards granted
under the 2016 Plan. The Administrator may not, however, reduce the price of options or stock appreciation rights issued under the 2016
Plan without prior approval of the Company’s shareholders.

Eligibility. The 2016 Plan
provides that awards may be granted to employees, officers, directors and consultants of the Company or of any parent, subsidiary or other
affiliate of the Company as the Administrator may determine. A person may be granted more than one award under the 2016 Plan.

Shares that are subject to
issuance upon exercise of an option under the 2016 Plan but cease to be subject to such option for any reason (other than exercise of
such option), and shares that are subject to an award granted under the 2016 Plan but are forfeited or repurchased by the Company at the
original issue price, or that are subject to an award that terminates without shares being issued, will again be available for grant and
issuance under the 2016 Plan.

Terms of Options and Stock
Appreciation Rights . The Administrator determines many of the terms and conditions of each option and SAR granted under the 2016 Plan,
including whether the option is to be an incentive stock option or a non-qualified stock option, whether the SAR is a related SAR or a
freestanding SAR, the number of shares subject to each option or SAR, and the exercise price of the option and the periods during which
the option or SAR may be exercised. Each option and SAR is evidenced by a grant agreement in such form as the Administrator approves and
is subject to the following conditions (as described in further detail in the 2016 Plan):

(a) Vesting and Exercisability:
Options, restricted shares and SARs become vested and exercisable, as applicable, within such periods, or upon such events, as determined
by the Administrator in its discretion and as set forth in the related grant agreement. The term of each option is also set by the Administrator.
However, a related SAR will be exercisable at the time or times, and only to the extent, that the option is exercisable and will not be
transferable except to the extent that the option is transferable. A freestanding SAR will be exercisable as determined by the Administrator
but in no event after 10 years from the date of grant.

(b) Exercise Price: Each grant
agreement states the related option exercise price, which, in the case of SARs, may not be less than 100% of the fair market value of
the Company’s shares of common stock on the date of the grant. The exercise price of an incentive stock option granted to a 10%
stockholder may not be less than 110% of the fair market value of shares of the Company’s common stock on the date of grant.

(c) Method of Exercise: The
option exercise price is typically payable in cash, common stock or a combination of cash of common stock, as determined by the Administrator,
but may also be payable, at the discretion of the Administrator, in a number of other forms of consideration.

(d) Recapitalization; Change
of Control: The number of shares subject to any award, and the number of shares issuable under the 2016 Plan, are subject to proportionate
adjustment in the event of a stock dividend, spin-off, split-up, recapitalization, merger, consolidation, business combination or exchange
of shares and the like. Except as otherwise provided in any written agreement between the participant and the Company in effect when a
change in control occurs, in the event an acquiring company does not assume plan awards (i) all outstanding options and SARs shall become
fully vested and exercisable; (ii) for performance-based awards, all performance goals or performance criteria shall be deemed achieved
at target levels and all other terms and conditions met, with award payout prorated for the portion of the performance period completed
as of the change in control and payment to occur within 45 days of the change in control; (iii) all restrictions and conditional applicable
to any restricted stock award shall lapse; (iv) all restrictions and conditions applicable to any restricted stock units shall lapse and
payment shall be made within 45 days of the change in control; and (v) all other awards shall be delivered or paid within 45 days of the
change in control.

(e) Other Provisions: The
option grant and exercise agreements authorized under the 2016 Plan, which may be different for each option, may contain such other provisions
as the Administrator deems advisable, including without limitation, (i) restrictions upon the exercise of the option and (ii) a right
of repurchase in favor of the Company to repurchase unvested shares held by an optionee upon termination of the optionee’s employment
at the original purchase price.

Amendment and Termination
of the 2016 Plan . The Administrator, to the extent permitted by law, and with respect to any shares at the time not subject to awards,
may suspend or discontinue the 2016 Plan or amend the 2016 Plan in any respect; provided that the Administrator may not, without approval
of the stockholders, amend the 2016 Plan in a manner that requires stockholder approval.

2023 Director Compensation

We currently do not have a
formal non-employee director compensation policy. However, we do reimburse our non-employee directors for their reasonable expenses incurred
in connection with attending our board of directors and committee meetings, and we may in the future grant stock options and pay cash
compensation to some or all of our non-employee directors. Other than reimbursement of out-of-pocket expenses as described above, we did
not provide any cash or equity compensation to our non-employee directors during the year ended September 30, 2023.

Limitation of Liability and Indemnification

Our certificate of incorporation
provides that we are authorized to provide indemnification and advancement of expenses to our directors, officers and other agents to
the fullest extent permitted by Delaware General Corporation Law.

In addition, our certificate
of incorporation limits the personal liability of directors for breach of fiduciary duty to the maximum extent permitted by the Delaware
General Corporation Law and provides that no director will have personal liability to us or to our stockholders for monetary damages for
breach of fiduciary duty or other duty as a director. However, these provisions do not eliminate or limit the liability of any of our
directors for:

● | any breach of the director’s duty of loyalty to us or our stockholders;
● | acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
● | voting or assenting to unlawful payments of dividends, stock repurchases or other distributions; or
● | any transaction from which the director derived an improper personal benefit.

Any amendment to or repeal
of these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission or claim that occurred
or arose prior to such amendment or repeal. If the Delaware General Corporation Law is amended to provide for further limitations on the
personal liability of directors of corporations, then the personal liability of our directors will be further limited to the greatest
extent permitted by the Delaware General Corporation Law.

Our certificate of incorporation
also provides that we must indemnify our directors and officers and we must advance expenses, including attorneys’ fees, to our
directors and officers in connection with legal proceedings, subject to very limited exceptions.

We maintain a general liability
insurance policy that covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their
capacities as directors or officers.

Certain of our non-employee
directors may, through their relationships with their employers, be insured or indemnified against certain liabilities incurred in their
capacity as members of our board of directors.

Compensation Committee Interlocks and Insider
Participation

None of our officers currently
serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that
has one or more officers serving as a member of our board of directors.

Change of Control

Not applicable.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth,
as of December 31, 2023, certain information concerning the beneficial ownership of our capital stock, including our common stock, and
stock options as converted into common stock basis, by:

● | each stockholder known by us to own beneficially 5% or more of any class of our outstanding stock;
● | each director;
● | each named executive officer;
● | all of our executive officers and directors as a group; and
● | each person or group of affiliated persons, who is known by us to beneficially own more than 5% of any class of our outstanding stock.

The column entitled “Percentage
of Class” is based on 10,276,063 shares of common stock outstanding as of December 31, 2023. Beneficial ownership is determined
in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to our common stock. Shares
of our common stock subject to options that are currently exercisable or exercisable within 60 days of December 31, 2023, are considered
outstanding and beneficially owned by the person holding the options for the purpose of calculating the percentage ownership of that person
but not for the purpose of calculating the percentage ownership of any other person. Except as otherwise noted, we believe the persons
and entities in this table have sole voting and investing power with respect to all of the shares of our common stock beneficially owned
by them, subject to community property laws, where applicable.

Michael Bannon has voting
control through his ownership of 250 shares of Series A preferred stock. Each share of Series A preferred stock entitles the holder to
vote on all matters submitted to a vote of our shareholders with each shareholder casting a vote equal to the quotient of the sum of all
outstanding shares of common stock divided by 0.99, which based on, 10,276,063 shares issued and outstanding equates to voting rights
equal to 10,379,862 shares of common stock.

Name and Address 1 | Amount and Nature of Beneficial Ownership | Percentage of Class
Michael Bannon (2) | 130,367 | 1.27 | %
Dr. Rodrigo Kuntz Rangel (3) | 4 | 0.00001 | %
All Officers and Directors as a Group | 130,371 | 1.27 | %
(1) | Unless otherwise indicated, the address of such individual is c/o the Company.
(2) | Michael Bannon has voting control through his ownership of 250 shares of Series A preferred stock voting on an as-converted basis. This chart reflects only the issued and outstanding shares of our common stock.
(3) | Represents shares issuable upon the exercise of stock options to purchase shares of our common stock that are exercisable within 60 days of December 31, 2023.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Related Person Transactions

We have engaged in the following transactions with our directors, executive
officers, holders of more than 5% of our voting securities, and affiliates or immediately family members of our directors, executive officers
and holders of more than 5% of our voting securities, and our co-founders. We believe that all of these transactions were on terms as
favorable as could have been obtained from unrelated third parties. The following transactions occurred during the year ended September
30, 2023 and 2022:

Other Notes Payable

On January 25, 2022 a promissory
note was issued to the CEO by Howco for $75,000 having weekly payments of $3,870 for twenty-five weeks, which include a total of $21,750
of interest. The principal at September 30, 2022 was $0 and interest of $18,945, was charged to interest expense. The note was repaid
early therefore the interest charged was less than under the pre-amendment agreement.

On April 25, 2022, a promissory
note was issued to the CEO by Howco for $50,000 having weekly payments of $1,570 for fifty weeks, which includes a total of $28,500 of
interest. The principal at September 30, 2023 and 2022 was $0 and $13,537. Interest of $4,713 was charged to interest expense during year
ended September 30, 2022 prior to repayment. The note was repaid faster than the original payment terms, and therefore the interest was
lower than the original agreement terms.

On January 1, 2023, Bantec,
Inc., Bantec Sanitizing LLC and Howco each executed line of credit agreements with an entity controlled by the Company’s CEO. Each
agreement has the same terms: advances up to $100,000, maturity is one year, a ten percent advance fee and daily interest at 0.07% (approximately
26% annually) on the net balance due. The Company will charge the advance fees to interest expense.

As of September 30, 2023:

(i) | Bantec,
Inc. borrowed $133,000 and repaid $68,258, leaving an outstanding balance of $64,742, fees and interest charged totaled $4,576.
(ii) | Bantec
Sanitizing LLC borrowed $15,562 and repaid $15,562, leaving an outstanding balance of $0, fees and interest charged totaled $1,664.
(iii) | Howco
borrowed $75,000 and repaid $42,250, including $7,570 of fees and interest, leaving an outstanding balance of $40,320. Howco was making
weekly payments of $3,250.

On April 12, 2023,
the receiver for TCA Global Credit Master Fund, LP (“TCA”) sold and assigned to Ekimnel Strategies, LLC, a Delaware limited
liability company (“Ekimnel”), and Ekimnel purchased and assumed, all of TCA’s rights and obligations as a lender under
that certain Senior Secured Credit Facility Agreement (the “Agreement”) (see Note 10). Ekimnel is a company controlled by
Michael Bannon, the Company’s Chief Executive Officer.

On August 12, 2023, the Company,
as the Borrower, and the Company’s subsidiaries: Drone USA, LLC and Howco Distributing Co., as Corporate Guarantors, and Michael
Bannon, as a Validity Guarantor (collectively, “Credit Parties”), entered into an Amendment (the “Amendment”)
to the Agreement with Ekimnel, as the Lender, pursuant to which the Company issued the Second Replacement Promissory Note (the “Note”)
to Ekimnel in the principal amount of $8,676,957. The Note was issued in substitution for and to supersede the First Replacement Promissory
Convertible Note A and the First Replacement Promissory Convertible Note B, previously issued by the Company, as amended from time to
time (collectively “Replacement Notes”). Capitalized terms used but not defined herein shall have the meanings ascribed to
them in the Amendment or the Agreement.

Pursuant to the Amendment, the Lender and the Credit Parties:

(i) | combined and consolidated both the Replacement Notes into the Note;
(ii) | extended the Maturity Date of the Note to August 12, 2047;
(iii) | lowered the interest rate on the Note to 2.0% per year, with (a) the principal and interest payments starting on August 12, 2026, and (ii) for the period commencing on August 12, 2023 and ending on August 11, 2026, interest due on the Note being added to the outstanding principal amount of the Note;
(iv) | removed the Lender’s right to convert the Company’s obligations under the Note into shares of common stock of the Company; and
(v) | made certain conforming changes to the terms of the Agreement.

At September 30, 2023, the principal and accrued
interest – long-term on this note amounted to $8,676,957 and $23,297, respectively.

Director Independence

We are not subject to any
independence standards of a national securities exchange or national securities association dealer quotation system. Our Board of
Directors has determined that to be considered independent, an outside director may not have a direct or indirect material relationship
with the company. A material relationship is one which impairs or inhibits/ or has the potential to impair or inhibit a director’s
exercise of critical and disinterested judgment on behalf of the company and its stockholders. To determine whether a material relationship
exists, the Board consults with the company’s counsel. This ensures that the Board’s determinations are consistent with:

1. | All relevant securities and other laws; and
2. | Recent relevant cases and regulations regarding the definition of (independent director/business judgment) including those set forth in the listing standards of the New York Stock Exchange as in effect from time to time.

Based on the foregoing criteria,
the Board of Directors has determined that there are no current members of the Board of Directors that are independent.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table provides
information about the fees billed to us for professional services rendered by Salberg & Company P.A. during fiscal years 2023 and
2022:

2023 | 2022
Audit Fees | $ | 84,500 | $ | 77,100
Audit-Related Fees | 10,000 | 8,900
Tax Fees | - | -
All Other Fees | - | -
Total | $ | 94,500 | $ | 86,000

Audit Fees. Audit fees consist
of fees for the audit of our annual financial statements or services that are normally provided in connection with statutory and regulatory
annual and quarterly filings or engagements.

Audit-Related Fees. Audit-related
fees consist of fees for assurance and related services, including audits of companies acquired, that are reasonably related to the performance
of the audit or review of our financial statements and are not reported as Audit Fees.

Tax Fees. Tax fees consist
of fees for tax compliance services, tax advice and tax planning. During fiscal years 2023 and 2022, no services were provided in this
category.

All Other Fees. Any other
fees not included in Audit Fees, Audit-Related Fees or Tax Fees.

Pre-Approval Policies and
Procedures.

Our Board of Directors pre-approved
all services to be provided by Salberg & Company P.A.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(1) | Financial Statements. See Index to Consolidated Financial Statements, which appears on page F-1 hereof. The financial statements listed in the accompanying Index to Consolidated Financial Statements are filed herewith in response to this Item.
(2) | all other schedules have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
(3) | List of Exhibits (see Exhibit Index)

EXHIBIT INDEX

Exhibit | Description
3.1 | Certificate of Incorporation of BANTEK, INC. (f/k/a BANTEK, INC.) (incorporated by reference herein to Exhibit 3.1 to the Company’s Form 10 filed with the SEC on May 8, 2017).
3.2 | Amended and Restated Bylaws BANTEK, INC. (f/k/a BANTEK, INC.) (incorporated by reference herein to Exhibit 3.2 to the Company’s Form 10 filed with the SEC on May 8, 2017).
3.3 | Certificate of Amendment to the Certificate of Incorporation filed April 27, 2016 (incorporated by reference herein to Exhibit 3.3 to the Company’s Form 10 filed with the SEC on May 8, 2017).
4.1 | Specimen Stock Certificate evidencing the shares of Common Stock (incorporated by reference herein to Exhibit 4.1 to the Company’s Form 10 filed with the SEC on May 8, 2017).
10.1 | BANTEK, INC. (f/k/a BANTEK, INC.) 2016 Stock Incentive Plan (incorporated by reference herein to Exhibit 10.1 to the Company’s Form 10 filed with the SEC on May 8, 2017).
10.2 | Senior Secured Revolving Credit Facility Agreement (the “Credit Facility”) with TCA Global Credit Master Fund, L.P., dated September 13, 2016 (incorporated by reference herein to Exhibit 10.2 to the Company’s Form 10 filed with the SEC on May 8, 2017).
10.3 | Stock Purchase Agreement among Paul Charles Joy II, Trustee of the Paul C. Joy and Kathryn B. Joy Trust-Fund B, Kathryn Blake Joy, Trustee of the Paul C. Joy and Kathryn B. Joy Trust-Fund C, Howco Distributing Co. and Drone USA, LLC, dated August 4, 2016 (incorporated by reference herein to Exhibit 10.3 to the Company’s Form 10 filed with the SEC on May 8, 2017).
10.4 | Joint Venture Agreement dated June 1, 2016 between BANTEK, INC. (f/k/a DRONE USA, INC.) and BRVANT (incorporated by reference herein to Exhibit 10.4 to the Company’s Form 10 filed with the SEC on May 8, 2017).
10.5 | Howco Lease Agreement dated April 28, 2009., as amended (incorporated by reference herein to Exhibit 10.8 to the Company’s Form 10 filed with the SEC on May 8, 2017).
10.6 | TCA Engagement Agreement dated March 28, 2017 (incorporated by reference herein to Exhibit 10.9 to the Company’s Form 10 filed with the SEC on May 8, 2017).
10.7 | INTENTIONALLY LEFT BLANK
10.8 | INTENTIONALLY LEFT BLANK
10.9 | Employment Agreement dated July 1, 2016 between Michael Bannon and BANTEK, INC. (f/k/a BANTEK, INC.) (incorporated by reference herein to Exhibit 10.14 to the Company’s Form 10 filed with the SEC on May 8, 2017).
10.10 | Employment Agreement dated March 29, 2017 between Matthew Wiles and Howco Distributing Co. (incorporated by reference herein to Exhibit 10.17 to the Company’s Form 10 filed with the SEC on May 8, 2017).
10.11 | INTENTIONALLY LEFT BLANK

10.12 | Equity Exchange Agreement dated January 26, 2016 between Texas Wyoming Drilling, Inc., Drone USA, LLC, the members of Drone USA, LLC and Margaret Cadena (incorporated by reference herein to Exhibit 10.21 to the Company’s Amendment to the Form 10 filed with the SEC on June 27, 2017).
10.13 | INTENTIONALLY LEFT BLANK
10.14 | Securities Purchase Agreement dated October 25, 2017 between BANTEK, INC. (f/k/a BANTEK, INC.) and Crown Bridge Partners, LLC ((incorporated by reference herein to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 15, 2017).
10.15 | Convertible Promissory Note dated October 25, 2017 Issued by BANTEK, INC. (f/k/a BANTEK, INC.) to Crown Bridge Partners, LLC (incorporated by reference herein to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on November 15, 2017).
21.1 | Subsidiaries (incorporated by reference herein to Exhibit 21 to the Company’s Form 10 filed with the SEC on May 8, 2017).
31.1 | Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002; *
31.2 | Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002; *
32.1 | Certification of Chief Executive Officer and Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
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 Label Linkbase Document.
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
* | Indicates
management contract or compensatory plan

SIGNATURES

Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on February 5 , 2024.

Bantec, Inc.
By: | /s/ Michael Bannon
Name: | Michael Bannon
Title: | Chief Executive Officer / Chief Financial Officer (Principal Executive Officer) (Principal Financial Officer)
/s/ Michael Bannon
Director
/s/ Rodrigo Kuntz Rangel
Director

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