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 November 30, 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 NA
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
January 8, 2013 was 112,250,000
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
BALANCE SHEETS (unaudited)
NOVEMBER 30, 2012 AND FEBRUARY 29, 2012
November 30, February 29,
2012 2012
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents $ 791,103 $ 171,354
Receivables, net 591,533 99,721
------------ ------------
Total Current Assets 1,382,636 271,075
------------ ------------
Property and equipment, net 27,368 14,242
------------ ------------
Revenue-earning vehicles, net 4,408,459 2,982,060
------------ ------------
Other Assets
Loans to shareholders 0 0
Loan receivable 18,032 15,312
------------ ------------
Total Other Assets 18,032 15,312
------------ ------------
TOTAL ASSETS $ 5,836,495 $ 3,282,689
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts payable $ 329,326 $ 292,447
Accrued expenses 17,100 51,747
Current portion of leases payable 453,116 593,533
Current portion of loans payable 710,736 152,243
------------ ------------
Total Current Liabilities 1,510,278 1,089,970
------------ ------------
Long-term Debt
Loans from shareholders 0 1,000
Leases payable 762,324 741,582
Loans payable 2,361,753 726,808
------------ ------------
Total Long-term Debt 3,124,077 1,469,390
------------ ------------
Total Liabilities 4,634,355 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) (201,296) (35,278)
Retained earnings 1,398,002 753,173
------------ ------------
Total Stockholders' Equity 1,202,140 723,329
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,836,495 $ 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 AND NINE MONTHS ENDED NOVEMBER 30, 2012 AND 2011
For the For the For the For the
three months three months nine months nine months
ended ended ended ended
November 30, November 30, November 30, November 30,
2012 2011 2012 2011
------------ ------------ ------------ ------------
Revenues
Vehicle rentals $ 1,049,340 $ 640,583 $ 2,802,702 $ 1,870,343
Other 2,076 1,979 5,464 8,579
------------ ------------ ------------ ------------
Total Revenues 1,051,416 642,562 2,808,166 1,878,922
------------ ------------ ------------ ------------
Expenses
Direct vehicle and operating 277,377 203,293 972,885 713,157
Vehicle depreciation and lease charges 284,613 155,913 665,290 452,466
Selling, general and administrative 142,857 107,486 355,374 306,011
Interest expense 85,411 58,587 185,847 136,199
------------ ------------ ------------ ------------
Total Expenses 790,258 525,279 2,179,296 1,607,833
------------ ------------ ------------ ------------
Operating Income 261,158 117,283 628,770 271,089
------------ ------------ ------------ ------------
Other Income (Expense)
Interest income 2,380 47 21,268 48
Gain / (loss) from asset disposal (6,056) 0 (5,209) 0
------------ ------------ ------------ ------------
Total other income (expense) (3,676) 47 16,059 48
------------ ------------ ------------ ------------
Net Income Before Provision for
Income Taxes 257,482 117,330 644,829 271,137
Provision for Income Taxes 0 0 0 0
------------ ------------ ------------ ------------
Net Income $ 257,482 $ 117,330 $ 644,829 $ 271,137
============ ============ ============ ============
Earnings per Share $ 0.00 $ 0.00 $ 0.01 $ 0.01
============ ============ ============ ============
Weighted Average Common Shares
Outstanding 112,250,000 44,951,923 112,250,000 18,003,000
============ ============ ============ ============
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 AND NINE MONTHS ENDED NOVEMBER 30, 2012 AND NOVEMBER 30, 2011
For the For the For the For the
three months three months nine months nine months
ended ended ended ended
November 30, November 30, November 30, November 30,
2012 2011 2012 2011
---------- ---------- ---------- ----------
Net Income $ 257,482 $ 117,330 $ 644,829 $ 271,137
---------- ---------- ---------- ----------
Foreign Currency Translation
Change in cumulative translation
adjustment (56,824) (98,358) (166,018) (94,618)
---------- ---------- ---------- ----------
Total $ (56,824) $ (98,358) $ (166,018) $ (94,618)
========== ========== ========== ==========
See accompanying notes to financial statements.
4
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
STATEMENT OF STOCKHOLDERS' EQUITY (unaudited)
AS OF NOVEMBER 30, 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)
(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 -- -- -- (166,018) -- (166,018)
Net income -- -- -- -- 644,829 644,829
----------- ------- ------- ---------- ---------- ----------
Balance, November 30, 2012 112,250,000 $ 11 $ 5,423 $ (201,296) $1,398,002 $1,202,140
=========== ======= ======= ========== ========== ==========
See accompanying notes to financial statements.
5
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
STATEMENTS OF CASH FLOWS (unaudited)
FOR THE NINE MONTHS ENDED NOVEMBER 30, 2012 AND NOVEMBER 30, 2011
For the For the
nine months nine months
ended ended
November 30, November 30,
2012 2011
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income and other comprehensive income $ 644,829 $ 271,137
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Change in cumulative translation adjustment (166,018) (94,618)
Depreciation 665,290 452,466
Net (Gain) losses from disposition of revenue-earning vehicles 5,209 17,569
Change in Assets and Liabilities:
(Increase) decrease in receivables (491,812) (2,330)
Increase (decrease) in accounts payables 36,879 (46,554)
Increase (decrease) in accrued expenses (34,647) (844)
------------ ------------
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 659,730 596,826
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Revenue-earning vehicles:
Purchases (2,137,593) (610,280)
Proceeds from sales 40,695 0
Property, equipment and software:
Purchases (13,126) (1,108)
Loans (extended) collected (2,720) (175,344)
------------ ------------
CASH FLOWS PROVIDED USED) BY INVESTING ACTIVITIES (2,112,744) (786,732)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (Payments on) leases payable (net) (119,675) 471,943
Proceeds from (Payments on) loans payable (net) 2,193,438 (89,022)
Proceeds from (Payments on) shareholder loans (net) (1,000) (97,879)
------------ ------------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES 2,072,763 285,042
------------ ------------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS 619,749 95,136
Cash, beginning of period 171,354 69,480
------------ ------------
Cash, end of period $ 791,103 $ 164,616
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 185,847 $ 136,199
============ ============
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
NOVEMBER 30, 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.".
Earn-A-Car Assets (Pty) LTD. - The wholly owned subsidiary was incorporated in
South Africa on August 8, 2011 under the name Civiwize (Pty) Ltd. Currently
the name is in the process of being changed to Earn-A-Car Assets (Pty) Ltd. This
company operates as the holding company for all vehicles purchased using
specific bank funding and will lease those vehicles solely to the parent
company.
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 November 30, 2012 and February 29, 2012 the Company had
$791,103 and $171,354 in cash and cash equivalents, respectively.
7
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2012
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
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 at November 30, 2012 and February
29, 2012 the Company had $228,627 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.
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.
8
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2012
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Revenue Recognition - Revenues from vehicle rentals are recognized as earned on
a daily basis under the related rental contracts with customers. We also charge
upfront administrative fees, which are non-refundable and fully earned at
inception of the rental period, and which are recorded as income at the start of
the rental period which is month to month.
Advertising Costs - Advertising costs are primarily expensed as incurred. During
the nine months ended November 30, 2012 and November 30, 2011, the Company
incurred advertising expense of $66,802 and $9,714, 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, 2012. Earnings per share and weighted
average shares outstanding as of November 30, 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:
November 30, February 29,
2012 2012
------------ ------------
Revenue-earning vehicles $ 5,675,646 $ 4,028,709
Less accumulated depreciation (1,267,187) (1,046,649)
------------ ------------
$ 4,408,459 $ 2,982,060
============ ============
Rent expense for vehicles leased under operating leases was $0 and $0 for the
nine months ending November 30, 2012 and November 30, 2011, respectively, and is
included in vehicle depreciation and lease charges, net.
9
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2012
3. PROPERTY AND EQUIPMENT
Major classes of property and equipment consist of the following:
November 30, February 29,
2012 2012
------------ ------------
Computer equipment $ 30,379 $ 17,757
Computer software 4,840 5,649
------------ ------------
35,219 23,406
Less accumulated depreciation (7,851) (9,164)
------------ ------------
$ 27,368 $ 14,242
============ ============
During the nine months ended November 30, 2012 and 2011, the Company recorded no
provisions for the impairment of assets.
4. LOANS RECEIVABLE
At November 30, 2012 and February 29, 2012, the Company has a receivable due
under a settlement agreement with a former employee with a balance of $18,032
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.
10
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2012
5. DEBT AND OTHER OBLIGATIONS
Debt and other obligations consist of the following:
November 30, February 29,
2012 2012
---------- ----------
Loan payable - individual - unsecured, interest bearing, $ 22,744 $ 26,546
no fixed repayment terms
Loan payable - individual - unsecured, interest bearing,
no fixed repayment terms 11,372 --
Loan payable - individual - unsecured, interest bearing,
no fixed repayment terms 56,859 66,366
Loan payable - individual - unsecured, interest bearing,
no fixed repayment terms 43,781 90,257
Loan payable - individual - unsecured, interest bearing,
no fixed repayment terms 71,795 104,373
Loan payable - other - unsecured, interest bearing, no
fixed repayment terms 204,317 252,488
Loan payable - bank- Secured by company vehicles, bearing
an interest rate of JIBAR plus 5% per annum,
payable in quarterly installments beginning 9/30/12 2,606,034 --
Loan payable - Jay & Jayendra (Pty) Ltd. Secured by
company vehicles, bearing an interest rate of the prime
rate, payable within 12 months -- 159,278
Loan payable - other - unsecured, 2% per month interest,
repayable within 60 days after year end, subject to
default immediate repayment stipulation -- 119,458
Loan payable - other - unsecured, interest bearing, no
fixed repayment terms 28,087 60,285
Loan payable- other- from EAC Inc per trial balance PBC 27,500 0
---------- ----------
Total $3,072,489 $ 879,051
Current portion of loans payable 710,736 152,243
---------- ----------
Long-term portion of loans payable $2,361,753 $ 726,808
========== ==========
11
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2012
5. DEBT AND OTHER OBLIGATIONS (continued)
Expected maturities of debt and other obligations outstanding at November 30,
2012 are as follows:
Loan Amounts Lease Amounts Total
------------ ------------- ----------
Year ending November 30, 2013 $ 710,736 $ 453,116 $1,163,852
Year ending November 30, 2014 975,147 362,987 1,338,134
Year ending November 30, 2015 947,648 291,215 1,238,863
Year ending November 30, 2016 -- 108,122 108,122
Year ending November 30, 2017 -- -- --
Thereafter 438,958 -- 438,958
---------- ---------- ----------
Total $3,072,489 $1,215,440 $4,287,929
========== ========== ==========
Installment sales and lease contracts are secured by installment sales and
finance lease agreements over revenue generating vehicles, having 2012 carrying
values of $1,961,559 and $370,640 respectively. These installment sales and
lease contracts are repayable in monthly installments for 2012 of $16,704 and
$1,115 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,
which has a corporate income tax rate of 28%, for the years ended February 29,
2012 and February 28, 2011 because the taxable losses and loss carryovers exceed
the income in those years. At February 29, 2012 and February 28, 2011,
respectively, the Company had net losses of approximately $379,175 and $431,567
available in South Africa that can be carried forward to offset future taxable
income. Due to the uncertainty of future taxable income, the Company has
recorded a valuation allowance of 100% of the deferred tax asset, so that our
deferred tax asset at both November 30, 2012 and February 29, 2012 was $0.
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 November 30, 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
November 30, 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.
12
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2012
Expenses incurred under operating leases for the period were as follows:
November 30, February 29,
2012 2012
-------- --------
Operating leases:
Premises $ 45,108 $ 6,487
Motor vehicles -- 6,965
-------- --------
$ 45,108 $ 13,452
======== ========
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, 2013 $65,633
November 30, 2014 $65.633
November 30, 2015 $65,633
November 30, 2016 $65,633
November 30, 2017 $65,633
At November 30, 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:
November 30, February 29,
2012 2012
-------- --------
Loans payable to shareholders:
Cobalt Capital (Pty) Ltd. $ 0 $ 0
G. Yannakopoulos 0 0
G. Hardie 0 1,000
-------- --------
Total loans payable to related parties $ 0 $ 1,000
======== ========
Loans receivable from shareholders
Cobalt Capital (Pty) Ltd. $ 0 $ 0
M. DuPlessis 0 0
G. Yannakopoulos 0 0
-------- --------
Total loans receivable from related parties $ 0 $ 0
======== ========
Compensation paid to directors
M. DuPlessis 0 52,482
G. Yannakopoulos 0 52,482
-------- --------
$ 0 $104,964
======== ========
13
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2012
10. SUBSEQUENT EVENTS
The Company has analyzed its operations subsequent to November 30, 2012 through
the date these financial statements were issued, and has determined that it does
not have any material subsequent events to disclose.
14
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. We have purchased an additional 81 vehicles in the last
quarter and the fleet size at the end of the quarter was 636 vehicles (2012 08:
577) of which 553 were rented out (2012 08:460). The additional vehicles have
substantially increased our annuity and revenues. Management believe the
increase in fleet size will increase income over the next few quarters and
expect to continue to regularly increase the fleet through 2013.
QUARTER ENDED NOVEMBER 30, 2012 V. QUARTER ENDED NOVEMBER 30, 2011
Revenues increased from $642,562 in Q3 of FY 2012 to $1,051,416 in Q3 of FY 2013
an increase of $408,854 or 64 %. Our operating expenses went from $525,279 in Q3
of FY 2012 to $790,258 in Q2 of FY 2013 an increase of $264,979 or 50%. Expenses
rose largely as a consequence of the direct costs related to the purchasing of
vehicles and the additional depreciation on vehicles due to the increased fleet
size. Net income increased from $117,330 in Q3 of FY 2012 to $257,482 in Q3 of
FY 2013. The company will seek additional funding in last quarter of 2013, to
enable the company to continue to grow in the next year.
LIQUIDITY AND CAPITAL RESOURCES
We had total current assets of $1,382,636 at November 30, 2012. The bulk of our
assets are $4,408,459 in revenue earning vehicles. We believe that our business
will continue to grow over the next quarters as a result of additional fund
raising over the last quarter of 2012 and in the beginning of 2013.
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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 November 30, 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
Not Applicable.
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 on January 11, 2013.
Earn-A-Car, Inc.
By: /s/ John 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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