U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Mark One
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended May 31, 2012
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to ____________
Commission File No. 333 - 165391
EARN-A-CAR, INC.
(Name of small business issuer in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
Office 1 The Falls Centre, Corner Great North and Webb, Northmead,
Benoni 1522, South Africa
(Address of principal executive offices)
+27 011-425-1666
(Issuer's telephone number)
Securities registered pursuant to Name of each exchange on
Section 12(b) of the Act: which registered:
------------------------- -----------------
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.0000001
Indicate by checkmark whether the issuer: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No[ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). YES [X] NO [ ]
Indicate by check mark whether the registrant is a large accelerated filed, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by checkmark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Applicable Only to Issuers Involved in Bankruptcy Proceedings During the
Preceding Five Years. N/A
Indicate by checkmark whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act
of 1934 after the distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
Applicable Only to Corporate Registrants
The number of shares outstanding of each of the issuer's common stock, as of
June 27, 2012 was 112,250,000
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
BALANCE SHEETS (unaudited)
MAY 31, 2012 AND FEBRUARY 29, 2012
May 31, 2012 February 29, 2012
------------ -----------------
ASSETS
Current Assets
Cash and cash equivalents $ 103,005 $ 171,354
Receivables, net 23,097 99,721
------------ ------------
Total Current Assets 126,102 271,075
------------ ------------
Property and equipment, net 15,704 14,242
------------ ------------
Revenue-earning vehicles, net 2,673,766 2,982,060
------------ ------------
Other Assets
Loans to shareholders 0 0
Loan receivable 14,063 15,312
------------ ------------
Total Other Assets 14,063 15,312
------------ ------------
TOTAL ASSETS $ 2,829,635 $ 3,282,689
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts payable $ 202,386 $ 292,447
Accrued expenses 60,757 51,747
Current portion of leases payable 530,881 593,533
Current portion of loans payable 142,639 152,243
------------ ------------
Total Current Liabilities 936,663 1,089,970
------------ ------------
Long-term Debt
Loans from shareholders 0 1,000
Leases payable 633,306 741,582
Loans payable 575,503 726,808
------------ ------------
Total Long-term Debt 1,208,809 1,469,390
------------ ------------
Total Liabilities 2,145,472 2,559,360
------------ ------------
Stockholders' Equity
Common stock, $0.0000001 par value, 250,000,000 shares
authorized, 112,250,000 and 112,250,000 shares issued and
outstanding, respectively 11 11
Additional paid in capital 5,423 5,423
Accumulated other comprehensive (loss) (128,153) (35,278)
Retained earnings 806,882 753,173
------------ ------------
Total Stockholders' Equity 684,163 723,329
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,829,635 $ 3,282,689
============ ============
See accompanying notes to financial statements.
2
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
STATEMENTS OF OPERATIONS (unaudited)
FOR THE THREE MONTHS ENDED MAY 31, 2012 AND MAY 31, 2011
For the three For the three
months ended months ended
May 31, 2012 May 31, 2011
------------ ------------
Revenues
Vehicle rentals $ 656,091 $ 597,031
Other 1,936 15,820
------------ ------------
Total Revenues 658,027 612,851
------------ ------------
Expenses
Direct vehicle and operating 254,877 274,714
Vehicle depreciation and lease charges 174,924 138,810
Selling, general and administrative 110,350 104,463
Interest expense 64,226 36,092
------------ ------------
Total Expenses 604,377 554,078
------------ ------------
Operating Income 53,650 58,773
Other Income
Interest income 0 0
Gain on sale of fixed assets 59
------------ ------------
59 0
Net Income Before Provision for Income Taxes 53,709 58,773
Provision for Income Taxes 0 0
------------ ------------
Net Income $ 53,709 $ 58,773
============ ============
Earnings per Share $ 0.00 0.00
============ ============
Weighted Average Common Shares Outstanding 112,250,000 112,250,000
============ ============
See accompanying notes to financial statements.
3
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS) (unaudited)
FOR THE THREE MONTHS ENDED MAY 31, 2012 AND MAY 31, 2011
For the three For the three
months ended months ended
May 31, 2012 May 31, 2011
------------ ------------
Net Income $ 53,709 $ 58,773
---------- ----------
Foreign Currency Translation
Change in cumulative translation adjustment (92,875) 16,176
---------- ----------
Total $ (92,875) $ 16,176
========== ==========
See accompanying notes to financial statements.
4
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
STATEMENT OF STOCKHOLDERS' EQUITY (unaudited)
AS OF MAY 31, 2012
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 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
(Loss) on currency translation -- -- -- (29,486) -- (29,486)
Reorganization adjustment 233,749,500 (35) 5,409 -- -- 5,374
Cancellation of stock-former
CEO (121,500,000) (14) 14 -- -- --
Net income -- -- -- -- 315,406 315,406
----------- ------- ------- ---------- --------- ---------
Balance, February 29, 2012 112,250,000 11 5,423 (35,278) 753,173 723,329
(Loss) on currency translation -- -- -- (92,875) -- (92,875)
Net income -- -- -- -- 53,709 53,709
----------- ------- ------- ---------- --------- ---------
Balance, May 31, 2012 112,250,000 $ 11 $ 5,423 $ (128,153) $ 806,882 $ 684,163
=========== ======= ======= ========== ========= =========
See accompanying notes to financial statements.
5
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MAY 31, 2012 AND MAY 31, 2011
For the three For the three
months ended months ended
May 31, 2012 May 31, 2011
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 53,709 $ 58,773
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Change in cumulative translation adjustment (92,875) 16,176
Depreciation 174,924 138,810
Net (income) loss from disposition of revenue-earning vehicles (59) 20,237
Change in Assets and Liabilities:
(Increase) decrease in receivables 76,624 38,961
Increase (decrease) in accounts payables (90,061) (20,361)
Increase (decrease) in accrued expenses 9,010 877
---------- ----------
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 131,272 253,473
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Revenue-earning vehicles:
Purchases (188,405) (272,190)
Proceeds from sales 321,834 0
Property, equipment and software:
Purchases (1,463) (1,563)
Proceeds from sales 0 0
Loans extended 1,249 (218)
---------- ----------
CASH FLOWS PROVIDED USED) BY INVESTING ACTIVITIES 133,215 (273,971)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock 0 0
Additional paid in capital, due to merger 0 0
Proceeds from (Payments on) leases payable (net) (170,928) 101,728
Proceeds from (Payments on) loans payable (net) (160,908) 43,527
Proceeds from (Payments on) shareholder loans (net) (1,000) (132,456)
---------- ----------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES (332,836) 12,799
---------- ----------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (68,349) (7,699)
Cash, beginning of period 171,354 69,480
---------- ----------
Cash, end of period $ 103,005 $ 61,781
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 64,226 $ 36,092
========== ==========
Cash paid for income taxes $ 0 $ 0
========== ==========
See accompanying notes to financial statements.
6
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2012
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - Earn-A-Car, Inc. (formerly 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.
On February 10, 2012 the Company filed an amendment with the Secretary of State
for Nevada to gain permission to change its name from Victoria Internet
Services, Inc. to Earn-A-Car, Inc. In conjunction with the name change the
Company also filed to have a new symbol on the Over The Counter Bulletin Board
(OTCBB). As of March 8, 2012 the Company no longer is listed with the symbol
VRIS, and is now listed on the OTCBB as EACR.
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.
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 May 31, 2012 and February 29, 2012 the Company had $103,005
and $171,354 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. As of May 31, 2012 and February 29,
2012 the Company had $0 and $264,189 in impaired receivables, respectively. The
allowance for these impaired receivables was $164,295 for fiscal year ended
February 29, 2012.
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.
7
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2012
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
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.
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 three months ended May 31, 2012 and May 31, 2011, the Company incurred
advertising expense of $4,822 and $2,755, 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.
8
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2012
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
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 May 31, 2012. Earnings per share and weighted average
shares outstanding as of May 31, 2011 have been adjusted in these financial
statements to reflect the November 14, 2011 stock split.
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:
May 31, 2012 February 29, 2012
------------ -----------------
Revenue-earning vehicles $ 3,879,794 $ 4,028,709
Less accumulated depreciation (1,206,028) (1,046,649)
----------- -----------
$ 2,673,766 $ 2,982,060
=========== ===========
Rent expense for vehicles leased under operating leases was $0 and $0 for the
three months ending May 31, 2012 and May 31, 2011, 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:
May 31, 2012 February 29, 2012
------------ -----------------
Computer equipment $ 18,853 $ 17,757
Computer software 5,061 5,649
----------- -----------
23,914 23,406
Less accumulated depreciation (8,210) (9,164)
----------- -----------
$ 15,704 $ 14,242
=========== ===========
During the three months ended May 31, 2012 and 2011, the Company recorded no
provisions for the impairment of assets.
9
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2012
4. LOANS RECEIVABLE
At May 31, 2012 and February 29, 2012, the Company has no loans receivable from
shareholders.
At May 31, 2012 and February 29, 2012, the Company has a receivable due under a
settlement agreement with a former employee with a balance of $14,063 and
$15,312, respectively. This loan is to be repaid with interest of 10% in 48
equal installments of about $425; the payments began in March, 2011.
5. DEBT AND OTHER OBLIGATIONS
Debt and other obligations consist of the following:
May 31, 2012 February 29, 2012
------------ -----------------
Loan payable - individual - unsecured, interest bearing, $ 23,782 $ 26,546
no fixed repayment terms
Loan payable - individual - unsecured, interest bearing,
no fixed repayment terms 59,454 66,366
Loan payable - individual - unsecured, interest bearing,
no fixed repayment terms 79,074 90,257
Loan payable - individual - unsecured, interest bearing,
no fixed repayment terms 91,720 104,373
Loan payable - other - unsecured, interest bearing, no
fixed repayment terms 181,009 252,488
Loan payable - Jay & Jayendra (Pty) Ltd. Secured by
company vehicles, bearing an interest rate of the prime
rate, payable within 12 months. 112,963 159,278
Loan payable - other - unsecured, 2% per month interest,
repayable within 60 days after year end, subject to
default immediate repayment stipulation 113,269 119,458
Loan payable - other - unsecured, interest bearing, no
fixed repayment terms 56,871 60,285
---------- ----------
Total $ 718,142 $ 879,051
Current portion of loans payable 142,639 152,243
---------- ----------
Long-term portion of loans payable $ 575,503 $ 726,808
========== ==========
10
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2012
5. DEBT AND OTHER OBLIGATIONS (CONTINUED)
Expected maturities of debt and other obligations outstanding at May 31, 2012
are as follows:
Loan Amounts Lease Amounts Total
------------ ------------- -----
Year ending February 28, 2013 $ 142,639 $ 530,881 $ 673,520
Year ending February 28, 2014 -- 392,128 392,128
Year ending February 28, 2015 -- 223,743 223,743
Year ending February 28, 2016 -- 17,435 17,435
Year ending February 28, 2017 -- -- --
Thereafter 575,503 -- 575,503
---------- ---------- ----------
Total $ 718,142 $1,164,187 $1,882,329
========== ========== ==========
Installment sales and lease contracts are secured by installment sales and
finance lease agreements over revenue generating vehicles, having 2012 carrying
values of $489,852 and 1,455,325 respectively. These installment sales and lease
contracts are repayable in monthly installments for 2012 of $13,835 and $52,539
respectively.
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
2012 nor 2011 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.
On January 19, 2012 the Company cancelled 121,500,000 shares of common stock
that were held by Leon Golden, the former owner of Victoria Internet Services,
Inc.
As of May 31, 2012 and February 29, 2012 there were 112,250,000 and 112,250,000
common shares outstanding, respectively.
The Company is authorized to issue 20,000,000 preferred shares of stock. As of
May 31, 2012 and February 29, 2012 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:
May 31, 2012 May 31, 2011
------------ ------------
Operating leases:
Premises $ 7,747 $ 6,616
Motor vehicles -- 7,103
-------- --------
$ 7,747 $ 13,719
======== ========
11
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2012
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:
May 31, 2013 $30,988
May 31, 2014 $30,988
May 31, 2015 $30,988
May 31, 2016 $30,988
May 31, 2017 $30,988
At May 31, 2012, 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:
May 31, 2012 February 29, 2012
------------ -----------------
Loans payable to shareholders:
G. Hardie $ 0 $ 1,000
---------- ----------
Total loans payable to related parties $ 0 $ 1,000
========== ==========
Loans receivable from shareholders
None $ 0 $ 0
Compensation paid to directors
G. Hardie 3,333 0
---------- ----------
$ 3,333 $ 0
========== ==========
10. SUBSEQUENT EVENTS
The Company has analyzed its operations subsequent to May 31, 2012 through the
date these financial statements were issued, and has determined that it does not
have any material subsequent events to disclose.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
MANAGEMENTS DISCUSSION AND ANALYSIS
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains "forward-looking" statements as such
term is defined in the Private Securities Litigation Reform Act of 1995 and
information relating to the Company that is based on the beliefs of the
Company's management as well as assumptions made by and information currently
available to the Company's management. When used in this report, the words
"anticipate," "believe," "estimate," "expect" and "intend" and words or phrases
of similar import, as they relate to the Company or Company management, are
intended to identify forward-looking statements. Such statements reflect the
current risks, uncertainties and assumptions related to certain factors
including, without limitations, competitive factors, general economic
conditions, customer relations, relationships with vendors, the interest rate
environment, governmental regulation and supervision, seasonality, distribution
networks, product introductions and acceptance, technological change, changes in
industry practices, onetime events and other factors described herein and in
other filings made by the Company with the Securities and Exchange Commission.
Based upon changing conditions, should any one or more of these risks or
uncertainties materialize, or should any underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated, expected or intended. The Company does not intend to update
these forward-looking statements.
RESULTS OF OPERATIONS
OVERVIEW
Our plan of operation for 2013 is to continue to expand our business to meet
demand for our services. In June 2012 we completed a US$3m capital market raise
which has permitted repayment of approximately US$1,2m in existing debt, freeing
it up to be reused in the future and allow us to increase the number of vehicles
under rental by at least 200 cars, with a further 200 from our revolving
facilities. Management believes that the resulting increase in rental and other
income from the increase in our fleet size should be realized over the next 2
quarters.
QUARTER ENDED MAY 31, 2012 V. QUARTER ENDED MAY 31, 2011
Revenues increased from $597,031 in Q1 of FY 2012 to $656,150 in Q1 of FY 2013
an increase of $59,119 or 10 %. Our operating expenses went from $554,078 in Q1
of FY 2012 to $604,377 in Q1 of FY 2013 an increase of $50,299 or 9%. Expenses
rose largely as a consequence of the reorganisation and becoming a public
company and not operational costs. As a result of increases in expense exceeding
increases in revenue, net income declined from $58,773 in Q1 of FY 2012 to
$53,709 in Q1 of FY 2013. With the additional credit facility raised management
believes that EAC will be able to grow revenue at a greater pace in the two next
quarters as the new funding is utilised and the new vehicles are rented out. Our
internal operating data for June 2012 confirms this belief.
LIQUIDITY AND CAPITAL RESOURCES
We had total current assets of $126,102 at May 31, 2012. The bulk of our assets
are $2,673,766 in revenue earning vehicles. We believe that our business will
grow substantially over the next two quarters as a result of the completion of
the credit facility of USD$ 3m and an increase in the limit on the AVIS
13
revolving facility to USD$ 1,600,000. Management believes this should increase
revenues and profits. Management does not expect to have to dilute the
112,500,000 issued shares in the near future. Instead we intend to continue to
make use of asset based financing to grow our fleet of rental cars.
CRITICAL ACCOUNTING POLICIES
Financial Reporting Release No. 60 of the SEC encourages all companies to
include a discussion of critical accounting policies or methods used in the
preparation of the financial statements. There are no current revenue generating
activities that give rise to significant assumptions or estimates. Our financial
statements filed as part of our Current Report on Form 8-K, dated December 7,
2011, include a summary of the significant accounting policies and methods used
in the preparation of our financial statements.
OFF-BALANCE SHEET ARRANGEMENTS
We have never entered into any off-balance sheet financing arrangements and have
not formed any special purpose entities. We have not guaranteed any debt or
commitments of other entities or entered into any options on non-financial
assets.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information called for by this item is not required as we are a smaller
reporting company.
ITEM 4T. 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 Principal Executive Officer and
Principal 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.
As of May 31, 2012, we carried out an evaluation, under the supervision and with
the participation of our management, including our Principal Financial Officer
of the effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934. Based upon that evaluation, our Principal Financial
Officer concluded that our disclosure controls and procedures are effective in
enabling us to record, process, summarize and report information required to be
included in our periodic SEC filings within the required time period.
(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
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affect, our internal control over financial reporting. We continue to rely on
the members of the Board of Directors to provide assurance that our entity-level
controls remain effective and we believe our process-level controls remain
effective.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently a party to any legal proceedings.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following documents are filed as part of this Report.
Exhibit
Number Exhibit Description
------ -------------------
31.1 Certification of the Chief Executive Officer pursuant to Rule
13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
31.2 Certification of the Chief Financial Officer pursuant to Rule
13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
32.1 Certifications of the Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
32.2 Certifications of the Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
101 Interactive Data Files pursuant to Rule 405 of Regulation S-T.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: July 13, 2012
Earn-A-Car, Inc.
By: /s/ John C Storey
-----------------------------------------------------
John C Storey
Chief Executive Officer (Principal Executive Officer)
By: /s/ Bruce J Dunnington
-----------------------------------------------------
Bruce J Dunnington
Chief Financial Officer
(Principal Financial and Accounting Officer)
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