ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Nov. 30, 2013 |
ACCOUNTING POLICIES | ' |
Nature of Business | ' |
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Nature of Business - Earn-A-Car, Inc. (formerly Victoria Internet Services, |
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Inc.) was incorporated in the State of Nevada on October 9, 2009. The company |
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was organized to operate as an online tax preparation service in the North |
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American market. On December 7, 2011, prior to commencing those operations, the |
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company has opted to change its business focus to the daily rental of vehicles |
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in the South African market. |
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On December 7, 2011, a simultaneous execution and closing was held under an |
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Agreement and Plan of Reorganization (the Plan"), by and among Victoria Internet |
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Services, Inc. (the "Company" "us" "we" ), Leon Golden (our then principal |
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shareholder) ("Golden") and Earn-A-Car (PTY), LTD., a corporation organized |
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under the laws of the Republic of South Africa ("EAC") and Depassez Investments |
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Ltd, a Seychelles corporation ("DPL"), owned by Graeme Hardie (our new principal |
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shareholder) ("Hardie"). |
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Under the Plan DPL acquired 78,500,000 shares of our common stock from Golden |
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for $150,000 and the balance of Golden's 205,000,000 shares were submitted to |
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the transfer agent for cancellation and DPI contributed all of the shares of EAC |
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to the Company so that EAC became a wholly owned subsidiary of the Company and |
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the business of the Company is now the business of EAC. Mr. Golden also resigned |
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as an officer and director of the Company and John Storey ("Storey") and Hardie |
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were elected as directors and Storey was appointed CEO and President with Hardie |
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being appointed Chairman of the board. |
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On February 10, 2012 the Company filed an amendment with the Secretary of State |
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for Nevada to gain permission to change its name from Victoria Internet |
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Services, Inc. to Earn-A-Car, Inc. In conjunction with the name change the |
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Company also filed to have a new symbol on the Over The Counter Bulletin Board |
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(OTCBB). As of March 8, 2012 the Company no longer is listed with the symbol |
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VRIS, and is now listed on the OTCBB as EACR. |
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Earn-A-Car (Pty) Ltd - The wholly owned subsidiary was incorporated in South |
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Africa on July 2, 2005, and is primarily engaged in the business of the daily |
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rental of vehicles to business and leisure customers through company-owned |
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stores in the country of South Africa. On July 18, 2011, its name was changed |
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from "EasyCars Rental and Sales (PTY) Ltd." to "Earn-A-Car (PTY) Ltd.". |
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Earn-A-Car Assets 1 Pty. Ltd. - the wholly owned subsidiary Earn-A-Car (Pty) |
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Ltd. purchased a wholly owned subsidiary in June 2012, the name of this |
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purchased entity is Earn-A-Car Assets 1 Pty. Ltd. The function of this entity is |
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to hold title to vehicles that are purchased through financing which requires |
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specific assets to be held as collateral for those loans. All of the assets and |
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liabilities of this entity are consolidated and included in the presented |
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financial statements according to generally accepted accounting principles of |
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the United States. |
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Basis of Presentation | ' |
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Basis of Presentation- The accompanying financial statements have been prepared |
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in accordance with accounting principles generally accepted in the United States |
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of America and are presented in U.S. Dollars. In the opinion of management, all |
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adjustments necessary in order for the financial statements to be not misleading |
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have been reflected herein. The Company has selected a February 28 year end. |
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Estimates | ' |
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Estimates - The preparation of the Company's consolidated financial statements |
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in conformity with accounting principles generally accepted in the United States |
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of America requires management to make estimates and assumptions that affect the |
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reported amounts and disclosures in the consolidated financial statements. |
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Actual results could differ materially from those estimates. |
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Cash and Cash Equivalents Policy | ' |
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Cash and Cash Equivalents - Cash and cash equivalents include cash on hand and |
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on deposit, including highly liquid investments with initial maturities of three |
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months or less. At November 30, 2013 and February 28, 2013 the Company had |
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$134,360 and $682,096 cash and cash equivalents, respectively. |
Allowance for Doubtful Accounts Policy | ' |
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Allowance for Doubtful Accounts - An allowance for doubtful accounts is |
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generally established during the period in which receivables are recorded. The |
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allowance is maintained at a level deemed appropriate based on loss experience |
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and other factors affecting collectability. As of November 30, 2013 and February |
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28, 2013 the Company had $44,004 and $7,444 in impaired receivables, |
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respectively. The allowance for these impaired receivables was $12,235 and |
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$14,359 for periods ending November 30, 2013 and February 28, 2013 respectively. |
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Financing Issue Costs | ' |
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Financing Issue Costs - Financing issue costs related to vehicle debt are |
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deferred and amortized to interest expense over the term of the related debt |
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using the effective interest method. |
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Receivables and Payables | ' |
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Receivables and Payables- Trade receivables and payables are measured at initial |
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recognition at fair value, and are subsequently measured using the effective |
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interest rate method of valuation. Appropriate allowances for estimated |
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uncollectible receivable balances are recognized in profit or loss when there is |
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evidence of impairment. Payables includes all accrued cash back liability to |
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clients as adjusted as required for the Company to meet its cash back obligation |
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to its clients. The amount is determined at contract inception and is the |
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approximate amount required to generate a lump sum at end of cash back period |
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sufficient to match the future carrying value of the car at the end of this |
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period. Cash back is accrued for monthly and the accrual is adjusted for |
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regularly as required to ensure no shortfall occurs at the end of the period. |
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Revenue-Earning Vehicles and Related Vehicle Depreciation Expense | ' |
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Revenue-Earning Vehicles and Related Vehicle Depreciation Expense - |
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Revenue-earning vehicles are stated at cost, net of related discounts. |
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The Company must estimate what the residual values of these vehicles will be at |
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the expected time of disposal to determine monthly depreciation rates. The |
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estimation of residual values requires the Company to make assumptions regarding |
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the age and mileage of the car at the time of disposal, as well as the general |
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used vehicle auction market. The Company evaluates estimated residual values |
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periodically, and adjusts depreciation rates accordingly, on a prospective |
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basis. |
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Differences between actual residual values and those estimated by the Company |
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result in a gain or loss on disposal and are recorded as an adjustment to |
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depreciation expense. Actual timing of disposal either shorter or longer than |
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the life used for depreciation purposes could result in a loss or gain on sale. |
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Generally, the average holding term for vehicles is approximately 7 years. |
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Property and Equipment Policy | ' |
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Property and Equipment - Property and equipment are recorded at cost and are |
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depreciated using principally the straight-line method over the estimated useful |
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lives of the related assets. Estimated useful lives generally range from ten to |
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thirty years for buildings and improvements and two to seven years for furniture |
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and equipment. Leasehold improvements are amortized over the estimated useful |
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lives of the related assets or leases, whichever is shorter. The average useful |
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lives of fixed assets are as follows: |
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Motor vehicles 6 years |
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Computer equipment 3 years |
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Computer software 2 years |
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Leased assets - motor vehicles 6 years |
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Long-Lived Assets Policy | ' |
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Long-Lived Assets - The Company reviews the value of long-lived assets, |
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including software, for impairment whenever events or changes in circumstances |
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indicate that the carrying amount of an asset may not be recoverable based upon |
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estimated future cash flows and records an impairment charge, equaling the |
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excess of the carrying value over the estimated fair value, if the carrying |
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value exceeds estimated future cash flows. |
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Foreign Currency Translation Policy | ' |
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Foreign Currency Translation - The Company's functional currency is the South |
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African Rand, however the translation into US dollars is the presentation bases |
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of these financial statements. Foreign assets and liabilities are translated |
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into US$ using the exchange rate in effect at the balance sheet date, and |
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results of operations are translated using an average rate for the period. |
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Translation adjustments are accumulated and reported as a component of |
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accumulated other comprehensive income or loss. |
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Revenue Recognition | ' |
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Revenue Recognition - Revenues from vehicle rentals are recognized as earned on |
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a daily basis under the related rental contracts with customers. The upfront |
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administration fee is non-refundable. However the company defers its upfront |
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administration fee income received at the inception of the rental contract over |
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the average rental period. Simultaneously the company defers direct, incremental |
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selling costs related to the rental of the vehicle over the same average rental |
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period. This is a change in accounting policy and the new basis has been used to |
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calculate revenue in 2013. The 2012 numbers have been restated to reflect the |
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new policy. See Note 11. |
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Advertising Costs Policy | ' |
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Advertising Costs - Advertising costs are primarily expensed as incurred. During |
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the nine months ended November 30, 2013 and November 30, 2012, the Company |
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incurred advertising expense of $10,486 and $66,802, respectively. |
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Income Taxes Policy | ' |
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Income Taxes - The Company has provided for income taxes on its separate taxable |
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income or loss and other tax attributes. Deferred income taxes are provided for |
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the temporary differences between the financial reporting basis and the tax |
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basis of the Company's assets and liabilities. The Company has no tax liability |
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in the United States. |
Earnings Per Share Policy | ' |
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Earnings Per Share - Basic earnings per share ("EPS") is computed by dividing |
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net income (loss) by the weighted average number of common shares outstanding |
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during the period. Diluted EPS is based on the combined weighted average number |
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of common shares and common share equivalents outstanding which include, where |
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appropriate, the assumed exercise of options. There were no such common stock |
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equivalents outstanding at November 30, 2013. |
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Other Comprehensive Income (Loss) Policy | ' |
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Other Comprehensive Income (Loss) - Comprehensive income (loss) consists of net |
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income (loss) and other gains and losses affecting stockholder's equity that, |
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under GAAP, are excluded from net income (loss), including foreign currency |
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translation adjustments, gains and losses related to certain derivative |
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contracts, and gains or losses, prior service costs or credits, and transition |
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assets or obligations associated with pension or other postretirement benefits |
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that have not been recognized as components of net periodic benefit cost. |
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Stock-Based Compensation Policy | ' |
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Stock-Based Compensation - Stock-based compensation is accounted for at fair |
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value in accordance with SFAS No. 123 and 123R (ASC 718). To date, the Company |
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has not adopted a stock option plan and has not granted any stock options. |
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New Accounting Standards Policy | ' |
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New Accounting Standards - The Company does not expect the adoption of recently |
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issued accounting pronouncements to have a significant impact on the Company's |
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results of operations, financial position or cash flow. |
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