SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A -1
Amendment No. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: December 7, 2011
EARN-A-CAR, INC.
(Exact name of Registrant as specified in its charter)
Nevada 333-165301 27-1320213
(State or other jurisdiction (Commission (IRS Employer
of incorporation or organization) File number) Identification No.)
Office 1 The Falls Centre
Corner Great North and Webb
Northmead, Benoni 1522
Republic of South Africa
(Address of principal executive offices) (Zip Code)
(Registrant's Telephone Number, Including Area Code) +27 11 425 1666
Victoria Internet Services, Inc.
2470 East 16th Street
Brooklyn, New York 11235
(Former Address If Changed since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation for the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
ITEM 5.01 CHANGES IN CONTROL OF REGISTRANT.
ITEM 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN
OFFICERS
ITEM 5.06 CHANGE IN SHELL COMPANY STATUS
All share and per share numbers in the narrative portion of this report reflect
a 50 for 1 forward stock split resulting from the filing of a certificate of
amendment to our articles of incorporation on November 14, 2011 which is
reported in Item 3.01 of this report. We have applied to FINRA for the necessary
clearances to effect this forward stock split, but these have not been received.
On December 7, 2011, a simultaneous execution and closing was held under an
Agreement and Plan of Reorganization (the Plan"), by and among Victoria Internet
Services, Inc.(the "Company" "us" "we" ), Leon Golden (our then principal
shareholder) ("Golden") and Earn-A-Car (PTY), LTD., a corporation organized
under the laws of the Republic of South Africa ("EAC") and Depassez Investments
Ltd, a Seychelles corporation ("DPL"), owned by Graeme T. Hardie (our new
principal shareholder) ("Hardie").
Under the Plan DPL acquired 78,500,000 shares of our common stock from Golden
for $150,000 and the balance of Golden's 205,000,000 shares were submitted to
the transfer agent for cancellation and DPI contributed all of the shares of EAC
to the Company so that EAC became a wholly owned subsidiary of the Company and
the business of the Company is now the business of EAC. Mr. Golden also resigned
as an officer and director of the Company and John C Storey ("Storey") and
Hardie were elected our directors and Storey was appointed our CEO and President
with Hardie being appointed our Chairman of the board. Also, Bruce J Dunnington
became CFO of EAC. As a result of the Plan, there was a change in control of the
company, Further, the company has decided to abandon its former business focused
on tax preparation and will in future concentrate solely on the business of EAC.
BUSINESS OF EAC.
EAC was incorporated in South Africa on July 2, 2005, and is primarily engaged
in the business of the rental of vehicles to retail customers on a monthly basis
through its leased premises in Johannesburg in the country of South Africa. On
July 18, 2011, its name was changed from "Easy Cars Rental and Sales (PTY) Ltd."
to "Earn-A-Car (PTY) Ltd.". EAC's business strategy is to enter car rental
agreements that allow the renter to return the car at any time. The key
differentiator to a normal car rental is that it gives customers a cash back
bonus on termination of the rental agreement for each month that the customer is
in good standing with EAC. This cash back along with a significant up-front
administration fee is sufficient cash to allow the customer to buy the car or
similar car of his choice from EAC at the end of approximately 4 years.. EAC's
vehicles are equipped with immobilizing and positioning devices to protect the
company if rental payments are not current. EAC's business model is to rent to
persons whose financial credit would not ordinarily allow them to finance the
purchase of an automobile. Because we are renting automobiles rather than
financing the sale thereof, we are not subject to certain South African
financial regulatory schemes that generally apply to the automobile finance
industry. The business currently owns approximately 450 cars and intends to grow
this number significantly. Rental fees exceed 6% of vehicle carrying value per
month. EAC sources its vehicles from auctions, corporate de-fleeting, private
individuals and motor dealerships. It only buys pre-owned vehicles to avoid the
new car premium (approximately 33%) and often buys 6 year old cars. (There is a
steep reduction in the price of older cars as South African banks will not
finance cars older than 5 years).
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EAC also sells pre-owned vehicles to retail customers through its same stores.
This secondary activity is a result of our need to dispose of our older vehicles
rather than a business activity in its own right and allows us to recoup at
least the carrying value of older vehicles. Profits from this activity are not
material.
EAC has no other businesses.
INDUSTRY OVERVIEW
Vehicle sales in South Africa were as high as 650,000 units in 2006, but have
declined in subsequent years first as a result of high interest rates in late
2008 as a result of general world economic conditions. Management believes that
these factors have led to a pent up demand for new vehicles and this demand is
reflected by the fact that automobile sales grew 11.7% in November 2011 as
compared to November 2010 and were 49,499 units (Source www.automotiveworld.com
parts of this site require a subscription). This represents an annualized rate
of almost 600,000 vehicles.. More importantly to EAC, Nearly 40% of all credit
rated South Africans are blacklisted at credit bureaus and are consequentially
unable to access typical car finance (http://www.iol.co.za/news/south-africa/6-
5m-south-africans-blacklisted-1.391637), This is the market that EAC is designed
to service. We believe that we offer blacklisted car buyers with an opportunity
to own a car that is not ordinarily available for persons with poor credit
history. Currently the business is able to only able to supply 1/70 of its
enquiries derived from marketing costs of approximately $2,000 per month.
OUR BUSINESS MODEL
We rent cars on a basis where the customer may return the car to us at any time
on one calendar month's notice. However, we charge significant administrative
and rental fees at the inception of the rental (about 20% of the cost to
ourselves of the car and a further approximately 6% being the first months
rental in advance). This means that persons that rent cars from us, although
under no legal obligation to do so, will generally be persons that have a
genuine long term interest in acquiring the car. Our cars are equipped so that a
when a customer does not pay the monthly rental we can turn off the car. In our
history of renting out over 400 cars for more than 3 years, we have only lost 3
vehicles, these to professional car thieves, never to a client. Our renters
receive loyalty cash bonuses from us for every competed calendar month that they
rent the car of approximately $40 - $70 per month and this cash loyalty bonus
can be used to purchase the car from us when they cease to rent the car. Along
with their up-front administration fee, they normally have enough loyalty cash
bonus to purchase the car after 4 years depending on the carrying value of the
car (We guarantee that the loyalty bonus and the application of the 20% up front
administration fee to the purchase price will be sufficient for our renter to
purchase the car typically after four years.) . Should they terminate the rental
before this point, EAC first uses the cash bonus to refurbish any damage on the
car beyond fair wear and tear and will then pay the client the remaining bonus
in cash. The up-front administration fee is never refunded. Renters are allowed
to drive 3,500km (about 2,200 miles) a month and subsequently pay an additional
15c a km (25c/mile) on any overage. The customers' credit rating is also
improved while they rent a car from EAC as their payment record is provided to
credit bureaus. Because we are a car rental company and not a bank and merely
rent cars, we believe that we are not subject to the Banks Act or the National
Credit Act and this allows us to keep our rental to own program competitive and
get our vehicles back easily if nonpayment occurs. We believe that our model,
which offers a path to car ownership for persons with compromised credit, has
potential for significant growth however there is no guarantee that our model
will do so. We are currently only able to service a very small fraction of the
enquiries that we receive. This is due to the limited number of vehicles that we
own presently. We currently receive over 2,000 enquires a month for
approximately 20 cars. We would service a greater number of the enquiries we
receive if we had the capital resources to enlarge our rental fleet.
3
We operate our own repair and reconditioning facilities to refurbish our cars
returned to us or pre-owned cars purchased by us prior to renting out. This
allows us to better control the costs of such reconditioning of returned or
purchased cars and believe this allows us significant savings. We have 5
mechanics, an auto-electrician and support staff.
COMPETITION
We compete with other car rental companies, car leasing companies and banks.
However, we believe that our operations, which we believe are not subject to the
Banks Act or the National Credit Act, allow us to operate without direct
competition in the market of persons with less than ideal credit histories who
wish to acquire a car.
PROPERTIES
We currently rent our offices and workshop on a month to month basis at a cost
of R24,000 ($3,200) for our offices and R10,000 ($1,325) per month for our
repair facility (which we share with an unaffiliated party). We expect to double
this space as we grow if our business continues to grow and we enlarge our fleet
of rented cars. We believe that suitable additional space is available in the
vicinity of our present facilities at a reasonable cost.
EMPLOYEES
As of December 11, 2011, we have 26 employees of whom 4 are executive, 4 are in
sales 8 are clerical and 10 are engaged in automobile repairs. Our employees are
(are not) covered by a collective bargaining agreement and we consider our
employee relations to be good. While we expect our business volumes to increase,
we do not expect to have to increase staff significantly in the near future.
MARKETING
We market through Google on the internet, referrals and word of mouth. Total
advertising expenditure is normally around $2,000 per month. We also pay
approximately $50 to any person who provides us with a referral that results in
a Lease. Our company website (www.earnacar.co.za) allows potential clients to
register their interest online after which our sales staff make contact. Our
sales staff are incentivized with roughly 80% of remuneration being variable
commission.
INSURANCE
We maintain comprehensive insurance on all cars but have an excess of R50,000
(about $6,500). Our average car is worth $8,600, so most of our cars are self
insured. EAC covers the cost of repairs to its cars where a client has a bona
fide accident. Should the accident be caused, for example, by speeding or
driving under the influence, we attempt to recover the cost of the damage to our
cars from our client and do not return the car to them when it has been
repaired. Should the driver cause damage to another vehicle or individual, the
driver is held responsible in South Africa, not EAC. Consequentially, there is
no need for insurance for third party liability as may be imposed on owners of
cars in accidents potentially in the USA. The costs to EAC of providing their
clients with this comprehensive accident damage warrantee or self-insurance are
less than $50 per month, less than half what a vehicle insurer would charge.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The following table sets forth the name, age and position of each of our
directors and executive officers.
Name Age Position
---- --- --------
Graeme Thomas Hardie 67 Chairman of the Board, Director (less than 1 year)
John Clifford Storey 50 President and CEO for the Company; Director, (less
than 1 year)
Bruce Dunnington 50 CFO for the Company; (less than 1 year)
The following is a brief description of the principal occupation and recent
business experience of each of our directors and executive officers:
DR GRAEME HARDIE: CHAIRMAN
Dr Graeme Hardie has held the position of Chairman of Earn-A-Car Inc. since
December 2011. Dr. Hardie is currently self-employed as a businessman and
Architect. Dr. Hardie has been Chairman of the Board of Directors since the
company's plan of reorganization in December of 2011. He became a director at
the same time.
JOHN STOREY: PRESIDENT & CEO
John Storey has held the position of President and CEO since December of 2011,
the month the company entered into plan of reorganisation and merger with
Earn-A-Car (Pty) Ltd, the South African Vehicle Rental Company. Prior to that,
Mr. Storey was the Managing Director of m Cubed Capital, a South African listed
company. He became a director in December 2011.
John Storey is a South African Chartered Accountant and Member of South African
Chartered Institute of Accountants, Chartered member of the Institute of Bankers
in South Africa, has a Master of Business Administration and Institute of
Marketing Management Diploma
BRUCE DUNNINGTON: CFO
Bruce Dunnington has held the position of CFO of Earn-A-Car Inc. since December
of 2011. Prior to that, Mr. Dunnington was the Managing Director of Automated
Outsourcing Services Limited (South African company) a large, high volume
administrator.
5
Bruce Dunnington holds the following professional certifications; South African
Chartered Accountant and Member of South Africa Institute of Chartered
Accountants, Fellow member of the Chartered Institute of Management Accountants
COMPENSATION OF DIRECTORS
The Board of Directors may compensate directors for their services as such. The
Board of Directors may also provide for the payment of all travel and
out-of-pocket expenses in connection with Directors' attendance at Board
meetings. Each board member serves for a one-year term until elections are held
at each annual meeting.
Beginning December 1, 2011 The Chairman of Board of Directors shall be paid
$8,000 per year.
Directors are elected at the Company's annual meeting of Stockholders and serve
for one year until the next annual Stockholders' meeting or until their
successors are elected and qualified. Officers are elected by the Board of
Directors and their terms of office are, except to the extent governed by
employment contract, at the discretion of the Board. The Company may reimburse
all Directors for their expenses in connection with their activities as
directors of the Company.
FAMILY RELATIONSHIPS
There are no family relationships amongst our management and directors, except
that Graeme Hardie is John Storey's uncle.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
To the best of our knowledge, during the past five years, none of the following
occurred with respect to a present or former director or executive officer of
the Company: (1) any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer either at the time
of the bankruptcy or within two years prior to that time; (2) any conviction in
a criminal proceeding or being subject to a pending criminal proceeding
(excluding traffic violations and other minor offenses); (3) being subject to
any order, judgment or decree, not subsequently reversed, suspended or vacated,
of any court of any competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting his involvement in any type
of business, securities or banking activities; and (4) being found by a court of
competent jurisdiction (in a civil action), the Commission or the commodities
futures trading commission to have violated a Federal or state securities or
commodities law, and the judgment has not been reversed, suspended or vacated.
DIRECTOR INDEPENDENCE
We are not subject to listing requirements of any national securities exchange
or national securities association and, as a result, we are not at this time
required to have our board comprised of a majority of "independent directors."
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COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Not applicable.
CODE OF ETHICS
The Company has adopted a Code of Ethics that applies to its principal executive
officer, principal financial officer or controller or persons performing similar
functions. Such Code of Ethics is filed as Exhibit 14.1 hereto.
EXECUTIVE OFFICER COMPENSATION
The following Summary Compensation Table shows the compensation awarded to or
earned by our Chief Executive Officer and other most highly compensated
executive officers for fiscal 2011. The persons listed in the following Summary
Compensation Table are referred to herein as the "Named Executive Officers."
SUMMARY COMPENSATION TABLE
Change in
Pension
Value and
Non-Equity Nonqualified
Name and Incentive Deferred
Principal Stock Option Plan Compensation All Other
Position Year Salary($) Bonus($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Total($)
-------- ---- --------- -------- --------- --------- --------------- ----------- --------------- --------
-
John Storey 2011 [1] 0 0 0 0 0 0 0
President
& CEO
Bruce
Dunnington 2011 [1] 0 0 0 0 0 0 0
CFO
----------
[1] The officers of the company are currently considered "at-will" employees.
The company has no compensation agreements with these officers; however
simple compensation arrangements have been made and summarized as follows:
7
John Storey is currently under an arrangement to receive no compensation as
President and CEO of the company. No other compensation arrangements have been
made with Mr. Storey at this time. Mr. Storey is currently retained as a
consultant, and acting President &CEO for the company. He has waived further
compensation at this time.
Bruce Dunnington is currently under an arrangement to receive no compensation as
CFO of the company. No other compensation arrangements have been made with Mr.
Dunnington at this time. Mr. Dunnington is currently retained as a consultant,
and acting CFO for the company. He has waived further compensation at this time.
The President and CFO of the company have forgone salaries to an undetermined
later date defined as some point in the future when the company is in better
financial position to afford salary payments. The major shareholder (not EAC)
has agreed to personally incentivise the President and CFO when the company
meets certain milestones. This is expected to be agreed before the end of the
next accounting period and will include options underwritten by the major
shareholder (i.e. at no dilution or cost to other shareholders) and a modest
salary from the Earn-a-Car (Pty) Ltd in South Africa. Compensation for any
directors of EAC will not exceed the current $2,000 a quarter.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
None.
OPTION EXERCISES AND STOCK VESTED TABLE
None.
PENSION BENEFITS TABLE
None.
NONQUALIFIED DEFERRED COMPENSATION TABLE
None.
ALL OTHER COMPENSATION TABLE
None.
PERQUISITES TABLE
None.
8
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
None.
LONG-TERM INCENTIVE PLAN AWARDS
We do not have any long-term incentive plans that provide compensation intended
to serve as incentive for performance to occur over a period longer than one
fiscal year, whether such performance is measured by reference to our financial
performance, our stock price, or any other measure.
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership of
our common stock as of December 9, 2011 by (i) any person or group with more
than 5% of any class of voting securities, (ii) each director, (iii) our chief
executive officer and each other executive officer whose cash compensation for
the most recent fiscal year exceeded $100,000 and (iv) all such executive
officers and directors as a group. Unless otherwise specified, the address of
each of the persons set forth below is in care of the Company, Office 1 The
Falls Centre, Corner Great North and Webb, Northmead, Benoni 1522, Union of
South Africa. Except as indicated in the footnotes to this table and subject to
applicable community property laws, the persons named in the table to our
knowledge have sole voting and investment power with respect to all shares of
securities shown as beneficially owned by them.
Name and Address of Amount and Nature of Percent
Beneficial Owner Office Beneficial Owner of Class
---------------- ------ ---------------- --------
John Storey Director, CEO, 0 0%
President
Graeme Hardie Chairman of the 78,750,000(1) 70.0%(1)
210 Rutgers Place Board and a
Nutley, New Jersey 07110 Director,
Secretary, Treasurer
Bruce Dunnington COO 0 0%
Depassez Investments Ltd -- 78,750,000(1) 70.0%(1)
All Officers and Directors 78,750,000(1) 70.0%(1)
as a group (3 Persons)
----------
(1) Depassez Investments Ltd is a Seychelles corporation and holds these
shares. Mr. Hardie owns all of the shares of Depassez Investments Ltd and
accordingly, is the indirect owner of these shares.
9
The Company does not have any change of control or retirement arrangements with
its executive officers.
CHANGES IN CONTROL
We know of no contractual arrangements which may at a subsequent date result in
a further change of control in the Company.
MANAGEMENTS DISCUSSION AND ANALYSIS
FY ended February 28, 2011 v. FY ended February 28, 2011
Revenues increased modestly from $2,033,805 in FY 2010 to $2,137,606 in FY 2011
or by $103,801 or 5% as our ability to expand our operations was limited by
capital constraints. We adopted various operating efficiencies which allowed us
to reduce our expenses from $1,767,834 in FY 2010 to $1,737,041 in FY 2011, a
decrease of $30,793 or approximately 1.6%. As a result of increased revenue and
decreased expenses, net income increased from $266,416 in FY 2010 to $400,720 in
FY 2011 or by $134,304 or 50.4%. If we are to grow, we must increase our level
of operations in terms of automobiles rented as well as our marketing effort.
This may cause periodic fluctuations in our results.
Q2 FY ending February 2, 2012 v. Q2 FY ended February 28, 2011
Revenues increased from $504,189 in Q2 of FY 2011 to $632,729 in Q2 of FY 2012
or by $119,320 or 23.7% as our ability to expand was enhanced by our increased
investment capital and we expanded our marketing effort. We continued to benefit
from various operating efficiencies, however, we also strove to increase our
overall level of operations. As a result, our operating expenses rose from
$253,909 in Q2 of FY 2011 to $528,476 in Q2 of FY 2012 or $174,567 or 49.3%. As
a result of increases in expense exceeding increases in revenue, net income
declined from $150,280 in Q2 of FY 2011 to $95,033 in Q2 of FY 2012. As we
continue to seek to expand our operations, we anticipate continued fluctuations
in our results. We make a gross profit of approximately $250 per car per rented
car per month. Management do not expect overheads to increase significantly
should the fleet increase.
LIQUIDITY AND CAPITAL RESOURCES
We had total current assets of $192,999 at August 31, 2011. While this is
sufficient for our current needs, this is not sufficient to expand our
operations and meet demand. The bulk of our assets are $2,597,691 in revenue
earning vehicles. While we could continue to operate at present levels without a
capital infusion, we have become a public company in the United States in an
effort to access capital markets to expand our current operations in the
Johannesburg area. We are working on the assumption that we will be able to
raise additional capital to allow our planned expansion. We are planning to
raise approximately $3.5m in asset based finance over the next 3 months . This
would enable us to settle some expensive debt of up to $1,5m and acquire
approximately 400 additional cars. If we are able to demonstrate continued
positive results we believe that we will be able to raise additional capital
privately in subsequent periods. For each $1m raised we are able to acquire
approximately 125 additional cars. We have no present commitments to raise any
capital and there is no assurance that we will be able to do so on acceptable
terms.
10
RISK FACTORS
This report includes forward-looking statements about our business and results
of operations that are subject to risks and uncertainties. See "Forward-Looking
Statements," above. Factors that could cause or contribute to such differences
include those discussed below. We have discussed all known material risks below,
however, we may also be subject to additional risks and uncertainties not
presently known to us or that we currently deem immaterial. If any of these
known or unknown risks or uncertainties actually occur, our business could be
harmed substantially.
RISKS RELATED TO OUR FINANCIAL CONDITION AND OUR BUSINESS
RISKS RELATED TO THE COSTS OF RUNNING A PUBLIC COMPANY
The costs of running a public company, including hiring additional staff,
professional fees and filing and printing are expected to average around $70,000
per year This will affect our cost structure and the costs of running the
business.
RISKS CONCERNING RELATED PARTY LOANS
There were $144,302 in loans to management at our reporting date. As of the date
of this filing all of these loans have been repaid. In addition, all loans from
related parties to EAC have also been repaid.
PLANS FOR ADDITIONAL FINANCING.
As at August 31, 2011, we had $120,822 cash on hand. These cash resources are
not sufficient for us to execute our expansion plan which entails an additional
$7million over the next two years. We have recently negotiated a credit line of
$2million for asset based finance on favorable terms. The board will continually
seek additional financing opportunities which it believes are in the best
interests of the Company and its shareholders. If we do not generate sufficient
cash from our intended financing activities and sales, we will be unable to
operate our business at expanded levels which management believes would benefit
shareholders. If we are able to arrange debt or equity financing it may be on
terms that are not beneficial to our shareholders. Any financing that we do
receive may dilute the interests of our current shareholders. We do not have any
agreements with any financing source to obtain financing on any particular
terms.
We are planning to raise approximately $3.5m in asset based finance over the
next 3 months. This would enable us to settle some expensive debt of up to $1,5m
and acquire approximately 400 additional cars. If we are able to demonstrate
continued positive results we believe that we will be able to raise additional
capital privately in subsequent periods. For each $1,000,000 raised we plan to
acquire approximately 125 additional cars. We have no present commitments to
raise any capital and there is no assurance that we will be able to do so on
acceptable terms.
IF WE ARE UNABLE TO CONTINUE TO RETAIN THE SERVICES OF JOHN STOREY OR IF WE ARE
UNABLE TO SUCCESSFULLY RECRUIT QUALIFIED MANAGERIAL AND COMPANY PERSONNEL, WE
MAY NOT BE ABLE TO CONTINUE OPERATIONS.
Our success depends to a significant extent upon the continued services of John
Storey our CEO and President. The loss of the services of Mr. Storey could have
a material adverse effect on our growth, revenues, and prospective business. Mr.
Storey does not have an employment agreement with us. We do not have a "key
person" life insurance policy on Mr. Storey.
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In order to successfully implement and manage our business plan, we will be
dependent upon, among other things, successfully recruiting qualified managerial
and company personnel having experience in car rental operations. Competition
for qualified individuals is intense. There can be no assurance that we will be
able to find, attract and retain existing employees or that we will be able to
find, attract and retain qualified personnel on acceptable terms.
IF WE CANNOT EFFECTIVELY MANAGE OUR INTERNAL GROWTH, OUR BUSINESS PROSPECTS,
REVENUES AND PROFIT MARGINS MAY SUFFER. If we fail to effectively manage our
internal growth in a manner that minimizes strains on our resources, we could
experience disruptions in our operations and ultimately be unable to generate
revenues or profits. We expect that we will need to significantly expand our
operations to successfully implement our business strategy. As we add marketing,
sales and build our infrastructure, we expect that our operating expenses and
capital requirements will increase. To effectively manage our growth, we must
continue to expend funds to improve our operational, financial and management
controls, and our reporting systems and procedures. In addition, we must
effectively expand, train and manage our employee base. If we fail in our
efforts to manage our internal growth, our prospects, revenue and profit margins
may suffer.
WE MAY BE SUBJECT TO ADDITIONAL GOVERNMENTAL REGULATION.
We offer cars on a proprietary rent to buy program which our South African
attorneys have advised us is not subject to regulation under the Banks Act or
the National Credit Act. We believe this affords us substantial savings and is
beneficial to our shareholders. If a court or government agency were to find
that we were subject to these laws, it could substantially impair our financial
results and our share value would likely suffer. We cannot assure you that such
adverse findings will not be made in the future.
WE ARE TO ESTABLISH AND MAINTAIN REQUIRED DISCLOSURE CONTROLS AND PROCEDURES AND
INTERNAL CONTROLS OVER FINANCIAL REPORTING AND TO MEET THE PUBLIC REPORTING AND
THE FINANCIAL REQUIREMENTS FOR OUR BUSINESS.
Our management has a legal and fiduciary duty to establish and maintain
disclosure controls and control procedures in compliance with the securities
laws, including the requirements mandated by the Sarbanes-Oxley Act of 2002. The
standards that must be met for management to assess the internal control over
financial reporting as effective are new and complex, and require significant
documentation, testing and possible remediation to meet the detailed standards.
Because we have limited resources, we may encounter problems or delays in
completing activities necessary to make an assessment of our internal control
over financial reporting, and disclosure controls and procedures. In addition,
the attestation process by our independent registered public accounting firm is
new and we may encounter problems or delays in completing the implementation of
any requested improvements and receiving an attestation of our assessment by our
independent registered public accounting firm. If we cannot assess our internal
control over financial reporting as effective or provide adequate disclosure
controls or implement sufficient control procedures, or our independent
registered public accounting firm is is not expressly reporting on our internal
controls and the lack of such report on such assessment, may cause investor
confidence and share value may be negatively impacted. We currently do not have
a sufficient number of management employees to establish adequate controls and
procedures.
OUR OFFICERS HAVE NO EXPERIENCE IN MANAGING A PUBLIC COMPANY.
Our present officers have no previous experience in managing a United States
public company and we do not have a sufficient number of employees to segregate
12
responsibilities and may be unable to afford increasing our staff or engaging
outside consultants or professionals to overcome our lack of employees. During
the course of our testing, we may identify other deficiencies that we may not be
able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act
for compliance with the requirements of Section 404. In addition, if we fail to
achieve and maintain the adequacy of our internal controls, as such standards
are modified, supplemented or amended from time to time, we may not be able to
ensure that we can conclude on an ongoing basis that we have effective internal
controls over financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those
related to revenue recognition, are necessary for us to produce reliable
financial reports and are important to help prevent financial fraud. If we
cannot provide reliable financial reports or prevent fraud, our business and
operating results could be harmed, investors could lose confidence in our
reported financial information, and the trading price of our common stock, if a
market ever develops, could drop significantly.
CONTROL BY MANAGEMENT
Our company is effectively controlled by management, specifically Hardie our
Chairman of the Board, who owns 78.750,000 shares or 70% of our 112,500,000
issued and outstanding shares of common stock as of December 9, 2011.
Accordingly, he will be able to elect our board of directors and control our
corporate affairs for the foreseeable future.
RISKS RELATED TO COMMON STOCK
THE LARGE NUMBER OF SHARES ELIGIBLE FOR IMMEDIATE AND FUTURE SALES MAY DEPRESS
THE PRICE OF OUR STOCK. As of December 9, 2011 we had 112,500,000 shares of
common stock outstanding. 33,750,00 shares are "free trading" and may serve to
overhang the market and depress the price of our common stock.
ADDITIONAL FINANCINGS MAY DILUTE THE HOLDINGS OF OUR CURRENT SHAREHOLDERS. In
order to provide capital for the operation of the business, we may enter into
additional financing arrangements. These arrangements may involve the issuance
of new shares of common stock, debt securities that are convertible into common
stock or warrants for the purchase of common stock. Any of these items could
result in a material increase in the number of shares of common stock
outstanding, which would in turn result in a dilution of the ownership interests
of existing common shareholders. In addition, these new securities could contain
provisions, such as priorities on distributions and voting rights, which could
affect the value of our existing common stock.
THERE IS CURRENTLY A LIMITED PUBLIC MARKET FOR OUR COMMON STOCK. FAILURE TO
DEVELOP OR MAINTAIN A TRADING MARKET COULD NEGATIVELY AFFECT ITS VALUE AND MAKE
IT DIFFICULT OR IMPOSSIBLE FOR YOU TO SELL YOUR SHARES.
Our common stock trades on the OTCBB under the Symbol VRIS. There has been a
limited public market for our common stock and an active public market for our
common stock may not develop. Failure to develop or maintain an active trading
market could make it difficult for you to sell your shares or recover any part
of your investment in us. Even if a market for our common stock does develop,
the market price of our common stock may be highly volatile. In addition to the
13
uncertainties relating to future operating performance and the profitability of
operations, factors such as variations in interim financial results or various,
as yet unpredictable, factors, many of which are beyond our control, may have a
negative effect on the market price of our common stock.
CONTROLS AND PROCEDURES
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Securities Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, as ours are designed to do, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
(B) CHANGES IN INTERNAL CONTROLS
There were no changes in our internal controls and procedures in internal
control over financial reporting that occurred during the period covered by this
report that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
NO DIVIDENDS
We never have paid any dividends on our common stock and we do not intend to pay
any dividends in the foreseeable future.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
Financial Statements for the years ended February 28, 2011 and 2010
Financial Statements for the six months ended August 31, 2011 and 2010
(unaudited)
(b) Pro-Forma Financial Information Pro Forma Financial Statements
(c) Exhibits
10.1 Agreement and Plan of Reorganization, by and among VICTORIA
INTERNET SERVICES, INC., a Nevada corporation, Leon Golden and
Earn-A-Car (PTY), LTD., a corporation organized under the laws of
the Republic of South Africa. (Previously Filed)
14.1 Code of Ethics (Filed Herewith)
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Earn-A-Car, Inc.
By: /s/ John Storey, CEO
-----------------------------------
John Storey, CEO
Dated: April 30, 2012
15
VICTORIA INTERNET SERVICES, INC.
FINANCIAL STATEMENTS
NOVEMBER 30, 2011
CONTENTS
Balance Sheets as of November 30, 2011 and February 28, 2011 (Unaudited) F-1
Statements of Operations for the three and nine months ended
November 30, 2011 and 2010 (Unaudited) F-2
Statements of Other Comprehensive Income (Loss)
for the three and nine months ended November 30, 2011 and 2010 (Unaudited) F-3
Statement of Stockholders' Equity as of November 30, 2011 (Unaudited) F-4
Statements of Cash Flows for the nine months ended
November 30, 2011 and 2010 (Unaudited) F-5
Notes to the Financial Statements F-6
VICTORIA INTERNET SERVICES, INC.
BALANCE SHEETS (UNAUDITED)
NOVEMBER 30, 2011 AND FEBRUARY 28, 2011
November 30, 2011 February 28, 2011
----------------- -----------------
ASSETS
Current Assets
Cash and cash equivalents $ 164,616 $ 69,480
Receivables, net 41,291 38,961
----------- -----------
Total Current Assets 205,907 108,441
----------- -----------
Property and equipment, net 10,715 9,607
----------- -----------
Revenue-earning vehicles, net 2,504,076 2,363,832
----------- -----------
Other Assets
Loans to shareholders 191,719 13,169
Loan receivable 13,477 16,682
----------- -----------
Total Other Assets 205,196 29,851
----------- -----------
TOTAL ASSETS $ 2,925,894 $ 2,511,731
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts payable $ 173,848 $ 220,402
Accrued expenses 20,188 21,032
Current portion of leases payable 452,169 398,908
Current portion of loans payable 329,911 201,162
----------- -----------
Total Current Liabilities 976,116 841,504
----------- -----------
Long-term Debt
Loans from - shareholders 0 97,878
Leases payable 660,156 241,474
Loans payable 681,068 898,840
----------- -----------
Total Long-term Debt 1,341,224 1,238,192
----------- -----------
Total Liabilities 2,317,340 2,079,696
----------- -----------
Stockholders' Equity
Common stock, $0.0000001 par value, 250,000,000
shares authorized, 233,750,000 shares issued and
outstanding 25 60
Additional paid in capital 35 0
Accumulated other comprehensive (loss) (100,410) (5,792)
Retained earnings 708,904 437,767
----------- -----------
Total Stockholders' Equity 608,554 432,035
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,925,894 $ 2,511,731
=========== ===========
See accompanying notes to financial statements.
F-1
VICTORIA INTERNET SERVICES, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2011 AND 2010
For the three For the three For the nine For the nine
months ended months ended months ended months ended
November 30, November 30, November 30, November 30,
2011 2010 2011 2010
------------ ------------ ------------ ------------
Revenues
Vehicle rentals $ 640,583 $ 580,236 $ 1,870,343 $ 1,617,886
Other 1,979 3,588 8,579 9,872
----------- ----------- ----------- -----------
Total Revenues 642,562 583,824 1,878,922 1,627,758
----------- ----------- ----------- -----------
Expenses
Direct vehicle and operating 203,293 308,172 713,157 753,351
Vehicle depreciation and lease charges 155,913 51,699 452,466 103,699
Selling, general and administrative 107,486 73,386 306,011 216,639
Interest expense 58,587 29,296 136,199 82,288
----------- ----------- ----------- -----------
Total Expenses 525,279 462,553 1,607,833 1,155,977
----------- ----------- ----------- -----------
Operating Income 117,283 121,271 271,089 471,781
Other Income
Interest income 47 20 48 113
----------- ----------- ----------- -----------
Net Income Before Provision for
Income Taxes 117,330 121,291 271,137 471,894
Provision for Income Taxes 0 0 0 0
----------- ----------- ----------- -----------
Net Income $ 117,330 $ 121,291 $ 271,137 $ 471,894
=========== =========== =========== ===========
Earnings per Share $ 0.00 $ 242.58 $ 0.01 $ 943.79
=========== =========== =========== ===========
Weighted Average Common Shares
Outstanding 44,951,923 500 18,003,000 500
=========== =========== =========== ===========
See accompanying notes to financial statements.
F-2
VICTORIA INTERNET SERVICES, INC.
STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2011 AND 2010
For the three For the three For the nine For the nine
months ended months ended months ended months ended
November 30, November 30, November 30, November 30,
2011 2010 2011 2010
---------- ---------- ---------- ----------
Net Income $ 117,330 $ 121,291 $ 271,137 $ 471,894
---------- ---------- ---------- ----------
Foreign Currency Translation
Change in cumulative translation
adjustment (98,358) (202,497) (94,618) (365,558)
---------- ---------- ---------- ----------
Total $ (98,358) $ (202,497) $ (94,618) $ (365,558)
========== ========== ========== ==========
See accompanying notes to financial statements.
F-3
VICTORIA INTERNET SERVICES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
AS OF NOVEMBER 30, 2011
Accumulated
Common stock Other Retained
-------------------- Paid in Comprehensive Earnings
Shares Amount Capital Income (Loss) (Deficit) Total
------ ------ ------- ------------- --------- -----
Balance February 28, 2009 100 $ 10 $ -- $ 29,931 $(229,369) $(199,428)
Gain (loss) on currency
translation -- -- -- (41,796) -- (41,796)
Net earnings -- -- -- -- 266,416 266,416
----------- ------- ------- ---------- --------- ---------
Balance February 28, 2010 100 10 -- (11,865) 37,047 25,192
Common stock issued for
cash at par 400 50 -- -- -- 50
Gain (loss) on currency
translation -- -- -- 6,073 -- 6,073
Net earnings -- -- -- -- 400,720 400,720
----------- ------- ------- ---------- --------- ---------
Balance, February 28, 2011 500 60 -- (5,792) 437,767 432,035
Gain (loss) on currency
translation -- -- -- (94,618) -- (94,618)
Reorganization adjustment 233,749,500 (35) 35 -- -- --
Net earnings -- -- -- -- 271,137 271,137
----------- ------- ------- ---------- --------- ---------
Balance, November 30, 2011 233,750,000 $ 25 $ 35 $ (100,410) $ 708,904 $ 608,554
=========== ======= ======= ========== ========= =========
See accompanying notes to financial statements.
F-4
VICTORIA INTERNET SERVICES, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED NOVEMBER 30, 2011 AND 2010
For the nine For the nine
months ended months ended
November 30, November 30,
2011 2010
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income and other comprehensive income $ 271,137 $ 471,894
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided by Operating Activities:
Change in cumulative translation adjustment (94,618) (365,558)
Depreciation 452,466 103,699
Net losses from disposition of revenue-earning vehicles 17,569 0
Change in Assets and Liabilities:
(Increase) decrease in receivables (2,330) 65,501
Increase (decrease) in accounts payables (46,554) (125,859)
Increase (decrease) in accrued expenses (844) 1,195
--------- ---------
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 596,826 150,872
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Revenue-earning vehicles:
Purchases (610,280) (51,207)
Proceeds from sales 0 0
Property, equipment and software:
Purchases (1,108) (8,646)
Proceeds from sales 0 0
Loans extended (175,344) 0
--------- ---------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES (786,732) (59,853)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock 0 50
Proceeds from (Payments on) leases payable (net) 471,943 326,166
Proceeds from (Payments on) loans payable (net) (89,022) (265,963)
Proceeds from (Payments on) shareholder loans (net) (97,879) (112,202)
--------- ---------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES 285,042 (51,949)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 95,136 39,070
Cash, beginning of period 69,480 31,274
--------- ---------
Cash, end of period $ 164,616 $ 70,344
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 136,199 $ 82,288
========= =========
Cash paid for income taxes $ 0 $ 0
========= =========
See accompanying notes to financial statements.
F-5
VICTORIA INTERNET SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2011
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - Victoria Internet Services, Inc. was incorporated in the
State of Nevada on October 9, 2009. The company was organized to operate as an
online tax preparation service in the North American market. On December 7,
2011, prior to commencing those operations, the company has opted to change its
business focus to the daily rental of vehicles in the South African market.
On December 7, 2011, a simultaneous execution and closing was held under an
Agreement and Plan of Reorganization (the Plan"), by and among Victoria Internet
Services, Inc. (the "Company" "us" "we" ), Leon Golden (our then principal
shareholder) ("Golden") and Earn-A-Car (PTY), LTD., a corporation organized
under the laws of the Republic of South Africa ("EAC") and Depassez Investments
Ltd, a Seychelles corporation ("DPL"), owned by Graeme Hardie (our new principal
shareholder) ("Hardie").
Under the Plan DPL acquired 78,500,000 shares of our common stock from Golden
for $150,000 and the balance of Golden's 205,000,000 shares were submitted to
the transfer agent for cancellation and DPI contributed all of the shares of EAC
to the Company so that EAC became a wholly owned subsidiary of the Company and
the business of the Company is now the business of EAC. Mr. Golden also resigned
as an officer and director of the Company and John Storey ("Storey") and Hardie
were elected as directors and Storey was appointed CEO and President with Hardie
being appointed Chairman of the board.
EARN-A-CAR (PTY) LTD - The wholly owned subsidiary was incorporated in South
Africa on July 2, 2005, and is primarily engaged in the business of the daily
rental of vehicles to business and leisure customers through company-owned
stores in the country of South Africa. On July 18, 2011, its name was changed
from "EasyCars Rental and Sales (PTY) Ltd." to "Earn-A-Car (PTY) Ltd.".
BASIS OF PRESENTATION- The accompanying financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America and are presented in U.S. Dollars. In the opinion of management, all
adjustments necessary in order for the financial statements to be not misleading
have been reflected herein. The Company has selected a February 28 year end.
These interim financial statements should be read in conjunction with the
audited financial statements of the Company for the fiscal year ended February
28, 2011. The results of operations for the three and nine months ended November
30, 2011 may not be indicative of the results that may be expected for the full
year.
ESTIMATES - The preparation of the Company's consolidated financial statements
in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the
reported amounts and disclosures in the consolidated financial statements.
Actual results could differ materially from those estimates.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash on hand and
on deposit, including highly liquid investments with initial maturities of three
months or less. At November 30, 2011 and February 28, 2011 the Company had
$164,616 and $69,480 in cash and cash equivalents, respectively.
ALLOWANCE FOR DOUBTFUL ACCOUNTS - An allowance for doubtful accounts is
generally established during the period in which receivables are recorded. The
allowance is maintained at a level deemed appropriate based on loss experience
and other factors affecting collectability.
FINANCING ISSUE COSTS - Financing issue costs related to vehicle debt are
deferred and amortized to interest expense over the term of the related debt
using the effective interest method.
RECEIVABLES AND PAYABLES- Trade receivables and payables are measured at initial
recognition at fair value, and are subsequently measured using the effective
interest rate method of valuation. Appropriate allowances for estimated
uncollectible receivable balances are recognized in profit or loss when there is
evidence of impairment.
F-6
VICTORIA INTERNET SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2011
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
REVENUE-EARNING VEHICLES AND RELATED VEHICLE DEPRECIATION EXPENSE -
Revenue-earning vehicles are stated at cost, net of related discounts.
The Company must estimate what the residual values of these vehicles will be at
the expected time of disposal to determine monthly depreciation rates. The
estimation of residual values requires the Company to make assumptions regarding
the age and mileage of the car at the time of disposal, as well as the general
used vehicle auction market. The Company evaluates estimated residual values
periodically, and adjusts depreciation rates accordingly, on a prospective
basis.
Differences between actual residual values and those estimated by the Company
result in a gain or loss on disposal and are recorded as an adjustment to
depreciation expense. Actual timing of disposal either shorter or longer than
the life used for depreciation purposes could result in a loss or gain on sale.
Generally, the average holding term for vehicles is approximately 7 years.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost and are
depreciated using principally the straight-line method over the estimated useful
lives of the related assets. Estimated useful lives generally range from ten to
thirty years for buildings and improvements and two to seven years for furniture
and equipment. Leasehold improvements are amortized over the estimated useful
lives of the related assets or leases, whichever is shorter. The average useful
lives of fixed assets are as follows:
Motor vehicles 6 years
Computer equipment 3 years
Computer software 2 years
Leased assets - motor vehicles 6 years
LONG-LIVED ASSETS - The Company reviews the value of long-lived assets,
including software, for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable based upon
estimated future cash flows and records an impairment charge, equaling the
excess of the carrying value over the estimated fair value, if the carrying
value exceeds estimated future cash flows.
FOREIGN CURRENCY TRANSLATION - The Company's functional currency is the South
African Rand, the translation into US dollars is the presentation bases of these
financial statements. Foreign assets and liabilities are translated using the
exchange rate in effect at the balance sheet date, and results of operations are
translated using an average rate for the period. Translation adjustments are
accumulated and reported as a component of accumulated other comprehensive
income or loss.
REVENUE RECOGNITION - Revenues from vehicle rentals are recognized as earned on
a daily basis under the related rental contracts with customers.
ADVERTISING COSTS - Advertising costs are primarily expensed as incurred. During
the nine months ended November 30, 2011 and 2010, the Company incurred
advertising expense of $9,714 and $7,454, respectively.
INCOME TAXES - The Company has provided for income taxes on its separate taxable
income or loss and other tax attributes. Deferred income taxes are provided for
the temporary differences between the financial reporting basis and the tax
basis of the Company's assets and liabilities. The Company has no tax liability
in the United States.
EARNINGS PER SHARE - Basic earnings per share ("EPS") is computed by dividing
net income (loss) by the weighted average number of common shares outstanding
during the period. Diluted EPS is based on the combined weighted average number
of common shares and common share equivalents outstanding which include, where
appropriate, the assumed exercise of options. There were no such common stock
equivalents outstanding at November 30, 2011.
F-7
VICTORIA INTERNET SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2011
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
OTHER COMPREHENSIVE INCOME (LOSS) - Comprehensive income (loss) consists of net
income (loss) and other gains and losses affecting stockholder's equity that,
under GAAP, are excluded from net income (loss), including foreign currency
translation adjustments, gains and losses related to certain derivative
contracts, and gains or losses, prior service costs or credits, and transition
assets or obligations associated with pension or other postretirement benefits
that have not been recognized as components of net periodic benefit cost.
STOCK-BASED COMPENSATION- Stock-based compensation is accounted for at fair
value in accordance with SFAS No. 123 and 123 (R) (ASC 718). To date, the
Company has not adopted a stock option plan and has not granted any stock
options.
NEW ACCOUNTING STANDARDS - The Company does not expect the adoption of recently
issued accounting pronouncements to have a significant impact on the Company's
results of operations, financial position or cash flow.
2. REVENUE-EARNING VEHICLES
Revenue-earning vehicles consist of the following:
November 30, 2011 February 28, 2011
----------------- -----------------
Revenue-earning vehicles $ 3,420,868 $ 3,081,754
Less accumulated depreciation (916,792) (717,922)
----------- -----------
$ 2,504,076 $ 2,363,832
=========== ===========
Rent expense for vehicles leased under operating leases was $0 and $0 for the
nine months ending November 30, 2011 and 2010, respectively, and is included in
vehicle depreciation and lease charges, net.
3. PROPERTY AND EQUIPMENT
Major classes of property and equipment consist of the following:
November 30, 2011 February 28, 2011
----------------- -----------------
Computer equipment $ 10,038 $ 9,385
Computer software 3,236 3,192
----------- -----------
13,274 12,577
Less accumulated depreciation (2,559) (2,970)
----------- -----------
$ 10,715 $ 9,607
=========== ===========
During 2011 and 2010, the Company recorded no provisions for the impairment of
assets.
F-8
VICTORIA INTERNET SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2011
4. LOANS RECEIVABLE
At November 30, 2011, the Company has loans receivable from shareholders of
$138,770 to Cobalt Capital, $30,551 to M. Du Plessis, and $22,398 to G.
Yannakopoulos. At February 28, 2011, the Company has a loan receivable from a
shareholder of $13,169 from M. Du Plessis. These are short-term loans expected
to be collected within 90 days.
At November 30, 2011 and February 28, 2011, the Company has a receivable due
under a settlement agreement with a former employee with a balance of $13,477
and $16,682, respectively. This loan is to be repaid with interest of 10% in 48
equal installments of about $425 beginning in March, 2011.
5. DEBT AND OTHER OBLIGATIONS
Debt and other obligations consist of the following:
November 30, 2011 February 28, 2011
----------------- -----------------
Loan payable - individual - unsecured, interest bearing, $ 23,953 $ 27,804
no fixed repayment terms
Loan payable - individual - unsecured, interest bearing,
no fixed repayment terms 59,885 69,510
Loan payable - individual - unsecured, interest bearing,
no fixed repayment terms 82,043 95,229
Loan payable - individual - unsecured, interest bearing,
no fixed repayment terms 94,780 110,013
Loan payable - other - unsecured, interest bearing, no
fixed repayment terms 577,010 596,284
Loan payable - Jay & Jayendra (Pty) Ltd. Secured by 143,725 166,824
company vehicles, bearing an interest rate of the prime
rate, payable within 12 months. Guaranteed by a related
party, Cobalt Capital (Pty) Ltd.
Loan payable - other - unsecured, interest bearing, no
fixed repayment terms 29,583 34,338
---------- ----------
Total $1,010,979 $1,100,002
Current portion of loans payable 329,911 201,162
---------- ----------
Long-term portion of loans payable $ 681,068 $ 898,840
========== ==========
F-9
VICTORIA INTERNET SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2011
5. DEBT AND OTHER OBLIGATIONS (CONTINUED)
Expected maturities of debt and other obligations outstanding at November 30,
2011 are as follows:
Loan Amounts Lease Amounts Total
------------ ------------- ----------
Year ending November 30, 2012 $ 329,911 $ 452,169 $ 782,080
Year ending November 30, 2013 -- 351,938 351,938
Year ending November 30, 2014 -- 245,860 245,860
Year ending November 30, 2015 -- 62,357 62,357
Year ending November 30, 2016 -- -- --
Thereafter 681,068 -- 681,068
---------- ---------- ----------
Total $1,010,979 $1,112,324 $2,123,303
========== ========== ==========
6. PROVISION FOR INCOME TAXES
The Company has no obligation for any federal or state income taxes in the
United States. Further, no provision has been made for taxes in South Africa for
2011 nor 2010 because the taxable losses and loss carryovers exceed the income
in those years.
7. EQUITY
On November 14, 2011 the Company filed a certificate of amendment to the
articles of incorporation which caused a 50 for 1 forward common stock split and
an increase in authorized common shares to 250,000,000. As of November 30, 2011
and February 28, 2011 there were 233,750,000 and 500 common shares outstanding,
respectively.
The Company is authorized to issue 20,000,000 preferred shares of stock. As of
November 30, 2011 and February 28, 2011 there were no (0) shares outstanding.
8. COMMITMENTS AND CONTINGENCIES OPERATING LEASES
The Company operates from various leased premises under operating leases with
terms up to 5 years. Some of the leases contain renewal options. No contingent
rent is payable.
Expenses incurred under operating leases for the period were as follows:
November 30,
--------------------------------
2011 2010
-------- --------
Operating leases:
Premises $ 6,487 $ 6,688
Motor vehicles 6,965 6,723
-------- --------
$ 13,452 $ 13,411
======== ========
F-10
VICTORIA INTERNET SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2011
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum rentals and fees under non-cancelable operating leases for the 12
month periods are presented in the following table:
November 30, 2012 $ 62,748
November 30, 2013 $ 62,748
November 30, 2014 $ 62,748
November 30, 2015 $ 62,748
November 30, 2016 $ 62,748
At November 30, 2011, the Company had no outstanding vehicle purchase
commitments over the next twelve months.
9. RELATED PARTY TRANSACTIONS
The Company engages in activities with parties who hold ownership in the
Company. The Company borrows funds from related parties and pays consulting fees
to related parties. The related party transactions are as follows:
November 30, February 28,
2011 2011
-------- --------
Loans payable to shareholders:
Cobalt Capital (Pty) Ltd. $ 0 $ 26,174
G. Yannakopoulos 0 71,704
-------- --------
Total loans payable to related parties $ 0 $ 97,878
======== ========
Loans receivable from shareholders
Cobalt Capital (Pty) Ltd. $138,771 $ 0
M. DuPlessis 30,551 13,169
G. Yannakopoulos 22,397 0
-------- --------
Total loans receivable from related parties $191,719 $ 13,169
======== ========
Consulting fees paid to related party
Cobalt Capital (Pty) Ltd. $ 0 $ 0
======== ========
10. SUBSEQUENT EVENTS
On December 7, 2011, a simultaneous execution and closing was held under an
Agreement and Plan of Reorganization (the Plan"), by and among Victoria Internet
Services, Inc. (the "Company" "us" "we" ), Leon Golden (our then principal
shareholder) ("Golden") and Earn-A-Car (PTY), LTD., a corporation organized
under the laws of the Republic of South Africa ("EAC") and Depassez Investments
Ltd, a Seychelles corporation ("DPL"), owned by Graeme Hardie (our new principal
shareholder) ("Hardie").
F-11
VICTORIA INTERNET SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2011
10. SUBSEQUENT EVENTS (CONTINUED)
Under the Plan DPL acquired 78,500,000 shares of our common stock from Golden
for $150,000 and the balance of Golden's 205,000,000 shares were submitted to
the transfer agent for cancellation and DPI contributed all of the shares of EAC
to the Company so that EAC became a wholly owned subsidiary of the Company and
the business of the Company is now the business of EAC. Mr. Golden also resigned
as an officer and director of the Company and John Storey ("Storey") and Hardie
were elected as directors and Storey was appointed CEO and President with Hardie
being appointed Chairman of the board.
The Company has analyzed its operations subsequent to November 30, 2011 through
January 12, 2012, the date these financial statements were issued, and has
determined that it does not have any material subsequent events to disclose.
F-12
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.
On October 12, 2011, Victoria Internet Services, Inc. ("the Company") executed a
letter of intent with Earn-A-Car (PTY) LTD, a South African corporation ("EAC").
The LOI contemplates, among other things, the Company acquiring all of the
issued and outstanding shares of Earn-a-Car from its shareholders, in exchange
for 78,750,000 of the outstanding common shares of the Company and the
cancellation of 121,250,000 of the outstanding shares of common stock.
The following unaudited pro forma combined balance sheets and income statements
are based on historical financial statements of the companies. The unaudited pro
forma combined financial statements are provided for information purposes only.
The pro forma financial statements are not necessarily indicative of what the
financial position or results of operations actually would have been had the
acquisition been completed at the dates indicated below. In addition, the
unaudited pro forma combined financial statements do not purport to project the
future financial position or operating results of the combined company. The
unaudited pro forma combined financial information has been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission. For pro forma purposes:
* The unaudited Pro Forma Combined Balance Sheets as of February 28, 2011 and
December 31, 2010 combines the historical balance sheets of the companies
as of the years ended February 28, 2011 and December 31, 2010, giving
effect to the acquisitions/mergers as if they had occurred at the beginning
of the most recent year ended.
* The unaudited Pro Forma Combined Statements of Operations for the years
ended February 28, 2011 and December 31, 2010 combines the historical
income statements of the companies for the indicated period, giving effect
to the acquisitions/mergers as if they had at the beginning of the most
recent year ended.
* The unaudited Pro Forma Combined Balance Sheets as of February 28, 2010 and
December 31, 2009 combines the historical balance sheets of the companies
as of the years ended February 28, 2010 and December 31, 2009, giving
effect to the acquisitions/mergers as if they had occurred at the beginning
of the most recent year ended.
* The unaudited Pro Forma Combined Statements of Operations for the years
ended February 28, 2010 and December 31, 2009 combines the historical
income statements of the companies for the indicated period, giving effect
to the acquisitions/mergers as if they had at the beginning of the most
recent year ended.
These unaudited pro forma combined financial statements and accompanying notes
should be read in conjunction with the separate audited financial statements of
Victoria Internet Services, Inc. and Earn-A-Car (PTY) LTD as of and for the
years ended February 28, 2011 and 2010 and December 31, 2010 and 2009,
respectively.
VICTORIA INTERNET SERVICES, INC.
EARN-A-CAR (PTY) LTD
TABLE OF CONTENTS
Pro Forma Combined Balance Sheets (Unaudited) as of February 28, 2011
and December 31, 2010 3
Pro Forma Combined Statements of Operations (Unaudited) for the years
ended February 28, 2011 and December 31, 2010 4
Pro Forma Combined Balance Sheets (Unaudited) as of February 28, 2010
and December 31, 2009 5
Pro Forma Combined Statements of Operations (Unaudited) for the years
ended February 28, 2010 and December 31, 2009 6
Notes to the Pro Forma Adjustments 7
2
VICTORIA INTERNET SERVICES, INC.
EARN-A-CAR (PTY) LTD
PRO FORMA COMBINED BALANCE SHEETS (UNAUDITED)
FEBRUARY 28, 2011 AND DECEMBER 31, 2010
Victoria
Earn-A-Car Internet
(PTY) Ltd. Services, Inc.
February 28, December 31, Pro Forma
2011 2010 Adjustments Total
------------ ------------ ----------- ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 69,480 $ 68 $ 69,548
Receivables, net 38,961 0 38,961
------------ ------------ ------------
TOTAL CURRENT ASSETS 108,441 68 108,509
------------ ------------ ------------
Property and equipment, net 9,607 0 9,607
------------ ------------ ------------
Revenue-earning vehicles, net 2,363,832 0 2,363,832
------------ ------------ ------------
OTHER ASSETS
Loans receivable - shareholders 13,169 0 13,169
Loan receivable 16,682 0 16,682
------------ ------------ ------------
TOTAL OTHER ASSETS 29,851 0 29,851
------------ ------------ ------------
TOTAL ASSETS $ 2,511,731 $ 68 $ 2,511,799
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 220,402 $ 0 $ 220,402
Accrued expenses 21,032 6,590 27,622
Loan from shareholder 0 9,163 9,163
Current portion of leases payable 398,908 0 398,908
Current portion of loans payable 201,162 0 201,162
------------ ------------ ------------
TOTAL CURRENT LIABILITIES 841,504 15,753 857,257
------------ ------------ ------------
LONG-TERM DEBT
Loans payable - shareholders 97,878 0 97,878
Leases payable 241,474 0 241,474
Loans payable 898,840 0 898,840
------------ ------------ ------------
TOTAL LONG-TERM DEBT 1,238,192 0 1,238,192
------------ ------------ ------------
TOTAL LIABILITIES 2,079,696 15,753 2,095,449
------------ ------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT)
a(60)
Common stock 60 1 b(0) 1
` a60
Paid in capital 0 26,749 b0 26,809
Accumulated other comprehensive loss (5,792) 0 (5,792)
Retained earnings (Accumulated deficit) 437,767 (42,435) 395,332
------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 432,035 (15,685) 416,350
------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 2,511,731 $ 68 $ 2,511,799
============ ============ ============
See accompanying notes to the Pro Forma adjustments.
3
VICTORIA INTERNET SERVICES, INC.
EARN-A-CAR (PTY) LTD
PRO FORMA COMBINED STATEMENTS OF OPERATIONS (UNAUDITED)
YEARS ENDED FEBRUARY 28, 2011 AND DECEMBER 31, 2010
Victoria
Earn-A-Car Internet
(PTY) Ltd. Services, Inc.
February 28, December 31, Pro Forma
2011 2010 Adjustments Total
---------- ----------- ----------- -----------
GROSS REVENUES $2,137,606 $ 0 $ 2,137,606
OPERATING EXPENSES 1,737,041 29,922 1,766,963
---------- ------------ ------------
OPERATING INCOME (LOSS) 400,565 (29,922) 370,643
OTHER INCOME (EXPENSE) 155 0 155
---------- ------------ ------------
NET INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 400,720 (29,922) 370,798
PROVISION FOR INCOME TAXES 0 0 0
---------- ------------ ------------
NET INCOME (LOSS) $ 400,720 $ (29,922) $ 370,798
========== ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 300 209,770,550 209,770,550
========== ============ ============
NET INCOME (LOSS) PER SHARE $ 1,335.73 $ (0.00) $ (0.00)
========== ============ ============
See accompanying notes to the Pro Forma Adjustments.
4
VICTORIA INTERNET SERVICES, INC.
EARN-A-CAR (PTY) LTD
PRO FORMA COMBINED BALANCE SHEETS (UNAUDITED)
FEBRUARY 28, 2010 AND DECEMBER 31, 2009
Victoria
Earn-A-Car Internet
(PTY) Ltd. Services, Inc.
February 28, December 31, Pro Forma
2010 2009 Adjustments Total
---------- ---------- ----------- ----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 31,274 $ 13,900 $ 45,174
Receivables, net 55,346 0 55,346
---------- ---------- ----------
TOTAL CURRENT ASSETS 86,620 13,900 100,520
---------- ---------- ----------
Property and equipment, net 1,665 0 1,665
---------- ---------- ----------
Revenue-earning vehicles, net 2,188,884 0 2,188,884
---------- ---------- ----------
OTHER ASSETS
Loans receivable - shareholders 0 0 0
Loan receivable 0 0 0
---------- ---------- ----------
TOTAL OTHER ASSETS 0 0 0
---------- ---------- ----------
TOTAL ASSETS $2,277,169 $ 13,900 $2,291,069
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 292,784 $ 0 $ 292,784
Accrued expenses 15,406 6,000 21,406
Loan from shareholder 0 413 413
Current portion of leases payable 352,311 0 352,311
Current portion of loans payable 0 0 0
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 660,501 6,413 666,914
---------- ---------- ----------
LONG-TERM DEBT
Loans payable - shareholders 332,099 0 332,099
Leases payable 341,033 0 341,033
Loans payable 918,344 0 918,344
---------- ---------- ----------
TOTAL LONG-TERM DEBT 1,591,476 0 1,591,476
---------- ---------- ----------
TOTAL LIABILITIES 2,251,977 6,413 2,258,390
---------- ---------- ----------
STOCKHOLDERS' EQUITY (DEFICIT)
a(10)
Common stock 10 1 b(0) 1
a10
Paid in capital 0 19,999 b0 20,009
Accumulated other comprehensive loss (11,865) 0 (11,865)
Retained earnings (Accumulated deficit) 37,047 (12,513) 24,534
---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 25,192 7,487 32,679
---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $2,277,169 $ 13,900 $2,291,069
========== ========== ==========
See accompanying notes to the Pro Forma adjustments.
5
VICTORIA INTERNET SERVICES, INC.
EARN-A-CAR (PTY) LTD
PRO FORMA COMBINED STATEMENTS OF OPERATIONS (UNAUDITED)
YEARS ENDED FEBRUARY 28, 2010 AND DECEMBER 31, 2009
Victoria
Earn-A-Car Internet
(PTY) Ltd. Services, Inc.
February 28, December 31, Pro Forma
2010 2009 Adjustments Total
---------- ---------- ----------- ----------
GROSS REVENUES $2,033,811 $ 400 $ 2,034,211
OPERATING EXPENSES 1,767,834 12,913 1,780,747
---------- ----------- -----------
OPERATING INCOME (LOSS) 265,977 (12,513) 253,464
OTHER INCOME (EXPENSE) 439 0 439
---------- ----------- -----------
NET INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 266,416 (12,513) 253,903
PROVISION FOR INCOME TAXES 0 0 0
---------- ----------- -----------
NET INCOME (LOSS) $ 266,416 $ (12,513) $ 253,903
========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 100 91,566,250 91,566,250
========== =========== ===========
NET INCOME (LOSS) PER SHARE $ 2,664.16 $ (0.00) $ (0.00)
========== =========== ===========
See accompanying notes to the Pro Forma adjustments.
6
VICTORIA INTERNET SERVICES, INC.
EARN-A-CAR (PTY) LTD
NOTES TO THE PRO FORMA ADJUSTMENTS (UNAUDITED)
(a) Exchange of 78,750,000 shares of common stock of Victoria Internet Services,
Inc. for 100% of the issued and outstanding shares of Earn-A-Car (PTY) LTD.
(b) Cancellation of 121,250,000 shares of common stock of Victoria Internet
Services, Inc.
7