Attached files
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 August 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 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
August 31, 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)
AUGUST 31, 2012 AND FEBRUARY 29, 2012
August 31, February 29,
2012 2012
---------- ----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,063,690 $ 171,354
Receivables, net 188,984 99,721
---------- ----------
TOTAL CURRENT ASSETS 1,252,674 271,075
---------- ----------
Property and equipment, net 23,915 14,242
---------- ----------
Revenue-earning vehicles, net 3,893,515 2,982,060
---------- ----------
OTHER ASSETS
Loans to shareholders 0 0
Loan receivable 14,319 15,312
---------- ----------
TOTAL OTHER ASSETS 14,319 15,312
---------- ----------
TOTAL ASSETS $5,184,423 $3,282,689
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 313,137 $ 292,447
Accrued expenses 49,023 51,747
Current portion of leases payable 234,561 593,533
Current portion of loans payable 658,241 152,243
---------- ----------
TOTAL CURRENT LIABILITIES 1,254,962 1,089,970
---------- ----------
LONG-TERM DEBT
Loans from shareholders 0 1,000
Leases payable 243,878 741,582
Loans payable 2,684,101 726,808
---------- ----------
TOTAL LONG-TERM DEBT 2,927,979 1,469,390
---------- ----------
TOTAL LIABILITIES 4,182,941 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) (144,472) (35,278)
Retained earnings 1,140,520 753,173
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 1,001,482 723,329
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,184,423 $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 SIX MONTHS ENDED AUGUST 31, 2012 AND AUGUST 31, 2011
For the For the For the For the
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
August 31, August 31, August 31, August 31,
2012 2011 2012 2011
------------ ------------ ------------ ------------
REVENUES
Vehicle rentals $ 1,097,212 $ 632,729 $ 1,753,362 $ 1,229,760
Other 1,452 (9,220) 3,388 6,600
------------ ------------ ------------ ------------
TOTAL REVENUES 1,098,664 623,509 1,756,750 1,236,360
------------ ------------ ------------ ------------
EXPENSES
Direct vehicle and operating 440,631 235,150 695,508 509,864
Vehicle depreciation and lease charges 205,753 157,743 380,677 296,553
Selling, general and administrative 28,658 94,063 139,008 198,525
Interest expense 109,719 41,520 173,945 77,612
------------ ------------ ------------ ------------
TOTAL EXPENSES 784,761 528,476 1,389,138 1,082,554
------------ ------------ ------------ ------------
Operating Income 313,903 95,033 367,612 153,806
OTHER INCOME
Interest income 18,888 1 18,888 1
Gain on asset disposal 847 0 847 0
------------ ------------ ------------ ------------
Net Income Before Provision for Income Taxes 333,638 95,034 387,347 153,807
Provision for Income Taxes 0 0 0 0
------------ ------------ ------------ ------------
Net Income $ 333,638 $ 95,034 $ 387,347 $ 153,807
============ ============ ============ ============
Earnings per Share $ 0.00 $0.00 $ 0.00 $ 0.00
============ ============ ============ ============
Weighted Average Common Shares
Outstanding 112,250,000 112,250,000 112,250,000 112,250,000
============ ============ ============ ============
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 AND SIX MONTHS ENDED AUGUST 31, 2012 AND AUGUST 31, 2011
For the For the For the For the
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
August 31, August 31, August 31, August 31,
2012 2011 2012 2011
---------- ---------- ---------- ----------
NET INCOME $ 333,638 $ 95,034 $ 387,347 $ 153,807
---------- ---------- ---------- ----------
FOREIGN CURRENCY TRANSLATION
Change incumulative translation adjustment (16,319) (12,436) (109,194) 3,740
---------- ---------- ---------- ----------
TOTAL $ (16,319) $ (12,436) $ (109,194) $ 3,740
========== ========== ========== ==========
See accompanying notes to financial statements.
4
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
STATEMENT OF STOCKHOLDERS' EQUITY (unaudited)
AS OF AUGUST 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)
(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 -- -- -- (109,194) -- (109,194)
Net income -- -- -- -- 387,347 387,347
----------- ------- ------- ---------- ---------- ----------
Balance, August 31, 2012 112,250,000 $ 11 $ 5,423 $ (144,472) $1,140,520 $1,001,482
=========== ======= ======= ========== ========== ==========
See accompanying notes to financial statements.
5
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
STATEMENTS OF CASH FLOWS (unaudited)
FOR THE SIX MONTHS ENDED AUGUST 31, 2012 AND AUGUST 31, 2011
For the For the
Six Months Six Months
Ended Ended
August 31, August 31,
2012 2011
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 387,347 $ 153,807
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Change in cumulative translation adjustment (109,194) 3,740
Depreciation 380,677 296,553
Net losses from disposition of revenue-earning vehicles (847) 20,076
Change in Assets and Liabilities:
(Increase) decrease in receivables (89,263) (33,216)
Increase (decrease) in accounts payables 20,690 16,422
Increase (decrease) in accrued expenses (2,724) (21,032)
------------ ------------
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 586,686 436,350
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Revenue-earning vehicles:
Purchases (1,333,720) (550,489)
Proceeds from sales 42,435 0
Property, equipment and software:
Purchases (9,673) (2,728)
Proceeds from sales 0 0
Loans (extended) collected 993 (130,285)
------------ ------------
CASH FLOWS PROVIDED USED) BY INVESTING ACTIVITIES (1,299,965) (683,502)
------------ ------------
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) (856,676) 375,095
Proceeds from (Payments on) loans payable (net) 2,463,291 21,278
Proceeds from (Payments on) shareholder loans (net) (1,000) (97,879)
------------ ------------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES 1,605,615 298,494
------------ ------------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS 892,336 51,342
Cash, beginning of period 171,354 69,480
------------ ------------
Cash, end of period $ 1,063,690 $ 120,822
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 64,226 $ 77,612
============ ============
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
AUGUST 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.".
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 August 31, 2012 and February 29, 2012 the Company had
$1,063,690 and $171,354 in cash and cash equivalents, respectively.
7
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 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 of August 31, 2012 and February
29, 2012 the Company had $14,218 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
AUGUST 31, 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.
ADVERTISING COSTS - Advertising costs are primarily expensed as incurred. During
the three months ended August 31, 2012 and August 31, 2011, the Company incurred
advertising expense of $34,615 and $5,801, 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 August 31, 2012. Earnings per share and weighted
average shares outstanding as of August 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:
August 31, 2012 February 29, 2012
--------------- -----------------
Revenue-earning vehicles $ 5,124,198 $ 4,028,709
Less accumulated depreciation (1,230,683) (1,046,649)
----------- -----------
$ 3,893,515 $ 2,982,060
=========== ===========
Rent expense for vehicles leased under operating leases was $0 and $8,144 for
the six months ending August 31, 2012 and August 31, 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
AUGUST 31, 2012
3. PROPERTY AND EQUIPMENT
Major classes of property and equipment consist of the following:
August 31, 2012 February 29, 2012
--------------- -----------------
Computer equipment $ 27,059 $ 17,757
Computer software 5,043 5,649
-------- --------
32,102 23,406
Less accumulated depreciation (8,187) (9,164)
-------- --------
$ 23,915 $ 14,242
======== ========
During the six months ended August 31, 2012 and 2011, the Company recorded no
provisions for the impairment of assets.
4. LOANS RECEIVABLE
At August 31, 2012 and February 29, 2012, the Company has a receivable due under
a settlement agreement with a former employee with a balance of $14,319 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
AUGUST 31, 2012
5. DEBT AND OTHER OBLIGATIONS
Debt and other obligations consist of the following:
August 31, 2012 February 29, 2012
--------------- -----------------
Loan payable - individual - unsecured, interest bearing, $ 23,716 $ 26,546
no fixed repayment terms
Loan payable - individual - unsecured, interest bearing,
no fixed repayment terms 11,858 --
Loan payable - individual - unsecured, interest bearing,
no fixed repayment terms 59,289 66,366
Loan payable - individual - unsecured, interest bearing,
no fixed repayment terms 65,218 90,257
Loan payable - individual - unsecured, interest bearing,
no fixed repayment terms 77,531 104,373
Loan payable - other - unsecured, interest bearing, no
fixed repayment terms 83,504 252,488
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 2,964,439 --
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 56,787 60,285
---------- ----------
Total $3,342,342 $ 879,051
---------- ----------
Current portion of loans payable 658,241 152,243
---------- ----------
Long-term portion of loans payable $2,684,101 $ 726,808
========== ==========
11
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2012
5. DEBT AND OTHER OBLIGATIONS (CONTINUED)
Expected maturities of debt and other obligations outstanding at August 31, 2012
are as follows:
Loan Amounts Lease Amounts Total
------------ ------------- -----
Year ending August 31, 2013 $ 658,241 $ 234,561 $ 892,802
Year ending August 31, 2014 987,362 161,735 1,149,097
Year ending August 31, 2015 987,362 68,975 1,056,337
Year ending August 31, 2016 263,954 13,168 277,122
Year ending August 31, 2017 -- -- --
Thereafter 445,423 -- --
---------- ---------- ----------
Total $3,342,342 $ 478,439 $3,375,358
========== ========== ==========
Installment sales and lease contracts are secured by installment sales and
finance lease agreements over revenue generating vehicles, having 2012 carrying
values of $419,505 and 1,263,394 respectively. These installment sales and lease
contracts are repayable in monthly installments for 2012 of $17,422 and $4,502
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 August 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
August 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:
August 31, 2012 August 31, 2011
--------------- ---------------
Operating leases:
Premises $28,507 $ 6,487
Motor vehicles -- 6,965
------- -------
$28,507 $13,452
======= =======
12
EARN-A-CAR, INC.
(Formerly Victoria Internet Services, Inc.)
NOTES TO FINANCIAL STATEMENTS
AUGUST 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:
August 31, 2013 $28,507
August 31, 2014 $28,507
August 31, 2015 $28,507
August 31, 2016 $28,507
August 31, 2017 $28,507
At August 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:
August 31, 2012 February 29, 2012
--------------- -----------------
Loans payable to shareholders:
G. Hardie $ 0 $1,000
------ ------
Total loans payable to related parties $ 0 $1,000
====== ======
Compensation paid to directors
G. Hardie $4,000 $ 0
------ ------
$4,000 $ 0
====== ======
10. SUBSEQUENT EVENTS
The Company has analyzed its operations subsequent to August 31, 2012 through
the date these financial statements were issued, and has determined that it does
not have any material subsequent events to disclose.
13
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. Following our successful fund raise, we have purchased
an additional 133 vehicles in this quarter. The fleet size at the end of the
quarter was 577 vehicles (2012 05: 444) of which 449 were rented out (2012 05:
377). The additional vehicles has substantially increased our annuity and
revenues and has increased NIAT by nearly 6 times confirming our ROI's.
Management believe the increase in fleet size will increase income over the next
few quarters and expect to increase the fleet my at least another 100 cars by
year-end.
Our current funding lines as previously announced will allow us to continue to
grow revenue in the next quarter as further vehicles are purchased and rented
out.
QUARTER ENDED AUGUST 31, 2012 V. QUARTER ENDED AUGUST 31, 2011
Revenues increased from $1,229,760 in Q2 of FY 2012 to $1,753,362 in Q2 of FY
2013 an increase of $523,602 or 42 %. Our operating expenses went from
$1,082,554 in Q2 of FY 2012 to $1,389,138 in Q2 of FY 2013 an increase of
$306,584 or 28%. Expenses rose largely as a consequence of the direct costs
related to the purchasing of vehicles. Net income increased from $153,806 in Q2
of FY 2012 to $387,347 in Q2 of FY 2013. We expect the growth in costs to slow
significantly next quarter as most of the costs necessary to manage our new
growth trajectory are now in place.
14
LIQUIDITY AND CAPITAL RESOURCES
We had total current assets of $1,252,674 at August 31, 2012. The bulk of our
assets are $3,893,515 in revenue earning vehicles. We have utilised most of the
credit facility of USD$ 3m. We will now begin to use the AVIS revolving facility
to USD$ 1,600,000. Management believes this will increase revenues and profits
as the new cars get rented out. 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. We will be
looking to raise further debt of approximately $8m for more cars for the 2013
calendar year. The funders we have approached have expressed their interest and
we are confident that we can reach this target but there are no guarantees.
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.
15
As of August 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
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.
16
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.
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 October 15, 2012.
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)
1