Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended February 28, 2013
OR
[ ] 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.: 333-165301
Earn-A-Car, Inc.
(Exact name of registrant as specified in its charter)
Nevada 7514 27-1320213
(State or jurisdiction of (Primary Standard Industrial IRS Employer
incorporation or organization) Classification Code Number) Identification Number
Office 1 The Falls Centre
Corner Great North and Webb
Northmead, Benoni 1522
Republic of South Africa
(Address of principal executive offices)
+27 11 425 1666
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value US$0.0000001
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 Website, 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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (s 229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company filer.
See the definitions of "large accelerated filer," "accelerated filer" and
"smaller reporting company" in Rule 12b-2 of the Exchange Act.
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]
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant as of June 11, 2013: US$472,500.
The number of shares of the registrant's common stock outstanding as of June 11,
2013: 112,500,000.
INDEX TO FORM 10-K ANNUAL REPORT
Page
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PART I
Item 1. Business 3
Item 1A. Risk Factors 7
Item 1B. Unresolved Staff Comments 13
Item 2. Properties 13
Item 3. Legal Proceedings 13
Item 4. Mine Safety Disclosures 13
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 13
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 20
Item 8. Financial Statements and Supplementary Data 20
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 20
Item 9A(T). Controls and Procedures 20
Item 9B. Other Information 21
PART III
Item 10. Directors, Executive Officers, and Corporate Governance 22
Item 11. Executive Compensation 24
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 26
Item 13. Certain Relationships and Related Transactions, and Director
Independence 27
Item 14. Principal Accounting Fees and Services 27
PART IV
Item 15. Exhibits and Financial Statement Schedules 28
SIGNATURES 30
2
FORWARD-LOOKING STATEMENTS
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
There are statements in this report that are not historical facts. These
forward-looking statements can be identified by use of terminologies such as
believe, hope, may, anticipate, should, intend, plan, will, expect, estimate,
project, positioned, strategy and similar expressions. You should be aware that
these forward-looking statements are subject to risks and uncertainties that are
beyond our control. For a discussion of these risks, you should read this entire
Report carefully, especially the risks discussed under Risk Factors. Although
management believes that the assumptions underlying the forward looking
statements included in this Report are reasonable, they do not guarantee our
future performance, and actual results could differ from those contemplated by
these forward looking statements. The assumptions used for purposes of the
forward-looking statements specified in the following information represent
estimates of future events and are subject to uncertainty as to possible changes
in economic, legislative, industry, and other circumstances. As a result, the
identification and interpretation of data and other information and their use in
developing and selecting assumptions from and among reasonable alternatives
require the exercise of judgment. To the extent that the assumed events do not
occur, the outcome may vary substantially from anticipated or projected results,
and, accordingly, no opinion is expressed on the achievability of those
forward-looking statements. In the light of these risks and uncertainties, there
can be no assurance that the results and events contemplated by the
forward-looking statements contained in this Report will in fact transpire. You
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of their dates. We do not undertake any obligation to update
or revise any forward-looking statements.
PART I
References to "us", "we" and "our" in this report refer to Earn-A-Car, Inc.,
together with our wholly-owned subsidiaries.
ITEM 1.BUSINESS.
All dollar amounts refer to US dollars unless otherwise indicated.
GENERAL
We were incorporated under the laws of the State of Nevada, U.S. on October 9,
2009. Our registration statement on Form S-1 was filed with the Securities and
Exchange Commission on March 11, 2010 and was ordered effective on June 23,
2010.
PRIOR PROPOSED BUSINESS OPERATIONS
We were engaged in the business of developing an internet based tax preparation
service that would allow our customers to communicate on a real time basis with
our team of tax preparers from the comfort of home or the office. We had not
generated any substantial revenues and the only operation we had engaged in is
the development of a business plan. Our business address was at 2470 East 16th
Street, Brooklyn, NY 11235 and our telephone number was 718- 344-0866.We had
only begun operations in a very limited capacity and it was uncertain when we
would begin full operations. Our plans were forward-looking and there was no
assurance that we would have ever begun operations. We were a development stage
company and have earned very limited revenue from those operations since our
inception on October 9, 2009. It was unlikely that we would be able to achieve
profitability in our prior proposed business and was likely that we would be
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required to cease operations due to the lack of funding. In the interests of our
shareholders, we determined to seek a new line of business. These efforts
resulted in our acquiring our current business.
CURRENT BUSINESS OPERATIONS
On December 7, 2011, a simultaneous execution and closing was held under an
Agreement and Plan of Reorganization (the Plan"), by and among Victoria Internet
Services, Inc.(the "Company" "us" "we" ), Leon Golden (our then principal
shareholder) ("Golden") and Earn-A-Car (PTY), LTD., a corporation organized
under the laws of the Republic of South Africa ("EAC") and Depassez Investments
Ltd, a Seychelles corporation ("DPL"), owned by Graeme T. Hardie (our new
principal shareholder) ("Hardie").
Under the Plan DPL acquired 78,500,000 shares of our common stock from Golden
for US$150,000 and the balance of Golden's 205,000,000 shares were submitted to
the transfer agent for cancellation and DPI contributed all of the shares of EAC
to the Company so that EAC became a wholly owned subsidiary of the Company and
the business of the Company is now the business of EAC. Mr. Golden also resigned
as an officer and director of the Company and John C Storey ("Storey") and
Hardie were elected our directors and Storey was appointed our CEO and President
with Hardie being appointed our Chairman of the board. Also, Bruce J Dunnington
became CFO of EAC. As a result of the Plan, there was a change in control of the
company. Further, the company has decided to abandon its former business focused
on tax preparation and will in future concentrate solely on the business of EAC.
BUSINESS OF EAC
EAC was incorporated in South Africa on July 2, 2005 as Easycars Rental and
Sales (Pty) Ltd. It is primarily engaged in the business of the rental of
vehicles to retail customers on a monthly basis through its leased premises in
Johannesburg in the country of South Africa. On July 18, 2011, its name was
changed to "Earn-A-Car (PTY) Ltd." to better reflect its business model and
differentiate EAC from other car rental companies.
EAC's business strategy is to enter car rental agreements that allow the renter
to return the car with one calendar months' notice. The key differentiator to a
normal car rental is that it allows its customers to earn their car by providing
customers with a cash back bonus on termination of the rental agreement for each
month that the customer was in good standing with EAC. This cash back along with
a significant up-front administration fee is calculated to allow EAC to
guarantee sufficient cash to allow the customer to buy the car or a similar car
of his choice from EAC at the end of approximately 4 years. EAC's vehicles are
equipped with immobilizing and positioning devices to protect the company if
rental payments are not current. EAC's business model is to rent to persons
whose financial credit would not ordinarily allow them to finance the purchase
of an automobile.
The business owned 671 vehicles at the end of February, 2013 (February 2012:
435) and intends to grow this number significantly although there are no
guarantees it will be able to do so.
EAC also sells pre-owned vehicles to retail customers through its same stores.
This secondary activity is a result of our need to dispose of our older vehicles
rather than a business activity in its own right.
EAC has no other material revenue earning businesses.
INDUSTRY OVERVIEW
2013 First quarter aggregate Industry new car sales at 113,971 units recorded an
improvement of 3,286 units or 3.0% compared to the 110,685 new cars sold during
the corresponding quarter of 2012. Aggregate Industry commercial vehicle sales
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during the first quarter of 2013 at 49,292 units recorded an increase of 3,304
units or a gain of 7.2% compared to the 45,988 units sold during the
corresponding quarter of 2012.
With the exception of the heavy commercial sector, all sectors registered gains
during the first quarter of 2013 compared to the corresponding quarter in 2012.
(See National Association of Automobile Manufacturers of South Africa. See
http://www.naamsa.co.za/papers/2013_1stquarter/NAAMSA%20QUARTERLY%20REVIEW%20%20
-%20%201ST%20QUARTER%202013.pdf).
More importantly to EAC, Nearly 50% of all credit rated South Africans are
blacklisted at credit bureaus, an increase of nearly 27% over the last 4 years
and are consequentially unable to access typical car finance (See
http://www.ncr.org.za/index.php?option=com_content&view=article&id=42 and the
National Credit Regulator publications 2012 December publications
http://www.ncr.org.za/publications/CBM%20Dec%202012.pdf).
This is the market that EAC is designed to service. We believe that we offer
blacklisted car buyers with an opportunity to own a car that is not ordinarily
available for persons with poor credit history. Currently the business is able
to only able to supply 1/50 of its enquiries derived from marketing costs of
approximately US$5,000 per month. Thus while vehicle sales have gone sideways,
the number of customers in our niche remains substantial.
OUR BUSINESS MODEL
We rent cars on a basis where the customer may return the car to us at any time
on one calendar months' notice. However, we charge significant administrative
and rental fees at the inception of the rental (about 20% of the cost to
ourselves of the car and a further approximately 5%, being the first months
rental, which is payable in advance). This means that persons that rent cars
from us, although under no legal obligation to do so, will generally be persons
that have a genuine long term interest in acquiring the car.
Our cars are equipped with sophisticated vehicle tracking and immobilization
technology so that when a customer does not pay the monthly rental or extras or
does not comply with their contract we can immobilize the car until the arrears
are paid, the contract is complied with or the car collected. In our history of
renting out more than 400 cars for over 4 years, we have only lost 3 vehicles,
these to professional car thieves, never to a client. The technology also allows
us to monitor excessive speeding and harsh braking and confirm or refute some of
the details of any alleged accident as reported by our clients.
What distinguishes us from other car rental companies is that for every
completed calendar month that our customers rent a car from us they partly earn
their car through our cash back per completed month program at a rate of
approximately $40- $70 per month. This cash back amount is calculated by us to
ensure that, when combined with our up-front administration fee, it is
sufficient to equal the estimated carrying value of the vehicle at the end of
the term stipulated in each client's contract (normally 4 years) at which point
we are able to guarantee, through this calculation, sufficient cash to the
client to purchase the car from ourselves at the expected market price at the
end of the client's term. In our experience about 10% of our customers have
taken possession of their cars pursuant to our loyalty scheme. 13 did so this
financial year (Previous financial year: 3).
All of our customers who leave our service have their cash back portion credited
to their account when they exit our services. Should they terminate the rental
before the end of their agreed term EAC first uses the cash bonus to refurbish
any damage on the car beyond fair wear and tear and will then pay the client the
5
remaining bonus in cash. The up-front administration fee is only ever returned
to the customer if the car is purchased by the customer. Else this fee is
retained by EAC. About 200 customers who left our services this calendar year
have benefitted from our cash back program.
Because we rent automobiles to customers rather than financing the purchase
thereof, we believe that we are not subject to certain South African financial
regulatory regimes that generally apply to the automobile finance industry. This
allows us to keep our rental to own program competitive and allows us to get our
vehicles back easily if non-payment occurs.
EAC sources its vehicles from auctions, corporate de-fleeting, private
individuals and motor dealerships. It only buys pre-owned vehicles to avoid the
new car premium (approximately 33%) and often buys 6 year old cars. (There is a
steep reduction in the price of older cars as South African banks will not
finance cars older than 5 years). The estimated cost to EAC to purchase a
pre-owned vehicle is averages approximately $9,000 a car. The business currently
owns 671 cars, almost all of them utilized in the rent to own program and
intends to grow this number significantly although there is no guarantee that it
will be able to do so.
Renters are allowed to drive 3,500km (about 2,200 miles) a month and thereafter
pay an additional 15c a km (25c/mile) on any overage. The customers' credit
rating is also improved while they rent a car from EAC as their payment record
is provided to credit bureaus.
We believe that our model, which offers a path to car ownership for persons with
compromised credit, has potential for significant growth however there is no
guarantee that our model will do so. We are currently only able to service a
very small fraction of the enquiries that we receive. This is due to the limited
number of vehicles that we own presently. We receive about 2,000 queries a
month. We are currently only able to supply about 60 cars a month (40 new and
20+ returned cars) with current resources being 1/30th of these enquiries. We
would service a greater number of the enquiries we receive if we had greater
capital resources to enlarge our rental fleet.
EAC also sells pre-owned vehicles to retail customers through its Benoni
premises. This secondary activity is a result of our need to dispose of our
older vehicles rather than a business activity in its own right and allows us to
recoup at least the carrying value of older vehicles. Profits and revenues from
this activity are not material. EAC currently only holds 3 of its cars for
outright sale in this manner.
We operate our own repair and reconditioning facilities to refurbish our cars
returned to us or pre-owned cars purchased by us prior to renting out. This
allows us to better control the costs of such reconditioning of returned or
purchased cars and believe this allows us significant savings. We have 6
mechanics, an auto-electrician and support staff.
COMPETITION
We compete with other car rental companies, car leasing companies and banks.
However, we believe that our operations, which we believe are not subject to the
Banks Act or the National Credit Act, allow us to operate with less direct
competition in our market niche of persons with less than ideal credit histories
who wish to acquire a car.
PROPERTIES
We currently rent our offices and workshop on a month to month basis at a cost
of R24,000 (US$2,900) for our offices and R10,000 (US$1,200) per month for our
repair facility (which we share with an unaffiliated party). We expect to double
this space as we grow if our business continues to grow and we enlarge our fleet
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of rented cars. We believe that suitable additional space is available in the
vicinity of our present facilities at a reasonable cost.
EMPLOYEES
As at year end we have 38 employees of whom 5 are executive, 6 are in sales 17
are clerical and 10 are engaged in automobile repairs. Our employees are not
covered by a collective bargaining agreement and we consider our employee
relations to be good. While we expect our business volumes to increase, we do
not expect to have to increase staff significantly in the near future.
MARKETING
We market through Google on the internet, referrals and word of mouth. Total
advertising expenditure is normally around US$4,000 per month. We also pay
approximately US$60 to any person who provides us with a referral that result in
a Lease. Our company website (www.earnacar.co.za) allows potential clients to
register their interest online after which our sales staff makes contact. Our
sales staff is incentivized with roughly 80% of remuneration being variable
commission.
INSURANCE
We maintain comprehensive insurance on all cars but have an excess of R50,000
(about US$6,000). Our average car is worth US$8,000, so most of our cars are
largely self insured. EAC covers the cost of repairs to its cars where a client
has a bona fide accident. Should the accident be caused, for example, by
speeding or driving under the influence, we attempt to recover the cost of the
damage to our cars from our client and do not return the car to them when it has
been repaired. Should the driver cause damage to another vehicle or individual,
the driver is held responsible in South Africa, not EAC. Consequentially, there
is no need for insurance for third party liability as may be imposed on owners
of cars in accidents potentially in the USA. The costs to EAC of providing their
clients with this comprehensive accident damage warrantee or self-insurance is
less than US$60 per month, less than half what a vehicle insurer would charge.
INTERNET WEBSITE
We maintain a website at http://www.earnacar.co.za/ .
ITEM 1A.RISK FACTORS.
RISK FACTORS
This report includes forward-looking statements about our business and results
of operations that are subject to risks and uncertainties. See "Forward-Looking
Statements," above. Factors that could cause or contribute to such differences
include those discussed below. We have discussed all known material risks below,
however, we may also be subject to additional risks and uncertainties not
presently known to us or that we currently deem immaterial. If any of these
known or unknown risks or uncertainties actually occur, our business could be
harmed substantially.
7
RISKS RELATED TO OUR FINANCIAL CONDITION AND OUR BUSINESS
RISKS RELATED TO THE COSTS OF RUNNING A PUBLIC COMPANY
The costs of running a public company, including hiring additional staff,
professional fees and filing and printing are expected to average around
US$70,000 per year. This will affect our cost structure and the costs of running
the business.
PLANS FOR ADDITIONAL FINANCING
As at February 2013, we had US$682,096 cash on hand. These cash resources are
not sufficient for us to execute our expansion plan which entails an additional
US$7million over the next two years.
On May 29 2012 we announced that we had successfully completed an approximately
US$3.0 Million capital market raise which allowed us to settle the AVIS facility
and other current debt of up to US$1.2 Million and acquire approximately 200
additional cars. This facility has been utilized and we are in the process of
raising further capital. By the end of February we had re-used approximately
$1.2 m in AVIS finance rentals.
At year end we had about $300k of finance facility left with AVIS who are
currently reviewing our facility. We have requested a further $1.7m and expect
to receive at least some of that additional financing shortly.
Earn-a-car is currently finalizing a 3 year $2.2m car finance deal with a
mezzanine debt financier in South Africa. The term sheet has been agreed and the
company hopes to be able to begin securing new cars with the facility in June
2012.
If we are able to demonstrate continued positive results we believe that we will
be able to raise additional capital privately in subsequent periods. For each
US$1,000,000 raised we plan to acquire approximately 125 additional cars.
The board will continually seek additional financing opportunities which it
believes are in the best interests of the Company and its shareholders. If we do
not generate sufficient cash from our intended financing activities and sales,
we will be unable to operate our business at expanded levels which management
believes would benefit shareholders. If we are able to arrange debt or equity
financing it may be on terms that are not beneficial to our shareholders. Any
financing that we do receive may dilute the interests of our current
shareholders. We do not have any agreements with any financing source to obtain
financing on any particular terms.
The Board has decided to constrain senior debt to 75% of total assets and will
endeavor to ensure that senior debt interest will not exceed 40% of EBIT.
IF WE ARE UNABLE TO CONTINUE TO RETAIN THE SERVICES OF JOHN STOREY AND BRUCE
DUNNINGTON OR IF WE ARE UNABLE TO SUCCESSFULLY RECRUIT QUALIFIED MANAGERIAL AND
COMPANY PERSONNEL, WE MAY NOT BE ABLE TO CONTINUE OPERATIONS.
Our success depends to a significant extent upon the continued services of John
Storey our CEO and President and Bruce Dunnington our CFO. The loss of the
services of Mr. Storey could have a material adverse effect on our growth,
revenues, and prospective business. Mr. Storey does not have an employment
agreement with us. We do not have a "key person" life insurance policy on Mr.
Storey.
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Competition for qualified individuals is intense. There can be no assurance that
we will be able to find, attract and retain existing employees or that we will
be able to find, attract and retain qualified personnel on acceptable terms.
IF WE CANNOT EFFECTIVELY MANAGE OUR INTERNAL GROWTH, OUR BUSINESS PROSPECTS,
REVENUES AND PROFIT MARGINS MAY SUFFER.
If we fail to effectively manage our internal growth in a manner that minimizes
strains on our resources, we could experience disruptions in our operations and
ultimately be unable to generate revenues or profits. We expect that we will
need to significantly expand our operations to successfully implement our
business strategy. As we add marketing, sales and build our infrastructure, we
expect that our operating expenses and capital requirements will increase. To
effectively manage our growth, we must continue to expend funds to improve our
operational, financial and management controls, and our reporting systems and
procedures. In addition, we must effectively expand, train and manage our
employee base. If we fail in our efforts to manage our internal growth, our
prospects, revenue and profit margins may suffer.
WE MAY BE SUBJECT TO ADDITIONAL GOVERNMENTAL REGULATION.
We offer cars on a proprietary rent to buy program which our South African
attorneys have advised us is not subject to regulation under the Banks Act or
the National Credit Act. We believe this affords us substantial savings and is
beneficial to our shareholders. If a court or government agency were to find
that we were subject to these laws, it could substantially impair our financial
results and our share value would likely suffer. We cannot assure you that such
adverse findings will not be made in the future.
WE ARE TO ESTABLISH AND MAINTAIN REQUIRED DISCLOSURE CONTROLS AND PROCEDURES AND
INTERNAL CONTROLS OVER FINANCIAL REPORTING AND TO MEET THE PUBLIC REPORTING AND
THE FINANCIAL REQUIREMENTS FOR OUR BUSINESS.
Our management has a legal and fiduciary duty to establish and maintain
disclosure controls and control procedures in compliance with the securities
laws, including the requirements mandated by the Sarbanes-Oxley Act of 2002. The
standards that must be met for management to assess the internal control over
financial reporting as effective are new and complex, and require significant
documentation, testing and possible remediation to meet the detailed standards.
Because we have limited resources, we may encounter problems or delays in
completing activities necessary to make an assessment of our internal control
over financial reporting, and disclosure controls and procedures. In addition,
the attestation process by our independent registered public accounting firm is
new and we may encounter problems or delays in completing the implementation of
any requested improvements and receiving an attestation of our assessment by our
independent registered public accounting firm. If we cannot assess our internal
control over financial reporting as effective or provide adequate disclosure
controls or implement sufficient control procedures, or our independent
registered public accounting firm is is not expressly reporting on our internal
controls and the lack of such report on such assessment, may cause investor
confidence and share value may be negatively impacted. We currently do not have
a sufficient number of management employees to establish adequate controls and
procedures.
OUR OFFICERS HAVE NO EXPERIENCE IN MANAGING A PUBLIC COMPANY.
Our present officers have no previous experience in managing a United States
public company and we do not have a sufficient number of employees to segregate
9
responsibilities and may be unable to afford increasing our staff or engaging
outside consultants or professionals to overcome our lack of employees. During
the course of our testing, we may identify other deficiencies that we may not be
able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act
for compliance with the requirements of Section 404. In addition, if we fail to
achieve and maintain the adequacy of our internal controls, as such standards
are modified, supplemented or amended from time to time, we may not be able to
ensure that we can conclude on an ongoing basis that we have effective internal
controls over financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those
related to revenue recognition, are necessary for us to produce reliable
financial reports and are important to help prevent financial fraud. If we
cannot provide reliable financial reports or prevent fraud, our business and
operating results could be harmed, investors could lose confidence in our
reported financial information, and the trading price of our common stock, if a
market ever develops, could drop significantly.
CONTROL BY MANAGEMENT
Our company is effectively controlled by management, specifically Graeme Hardie
our Chairman of the Board, who owns 78.750,000 shares or 70% of our 112,500,000
issued and outstanding shares of common stock as of December 9, 2011.
Accordingly, he will be able to elect our board of directors and control our
corporate affairs for the foreseeable future.
RISKS RELATED TO COMMON STOCK
THE LARGE NUMBER OF SHARES ELIGIBLE FOR IMMEDIATE AND FUTURE SALES MAY DEPRESS
THE PRICE OF OUR STOCK.
As of February 28, 2013 we had 112,500,000 shares of common stock outstanding.
33,750,000 are "free trading" and may serve to overhang the market and depress
the price of our common stock.
ADDITIONAL FINANCING MAY DILUTE THE HOLDINGS OF OUR CURRENT SHAREHOLDERS.
In order to provide capital for the operation of the business, we may enter into
additional financing arrangements. These arrangements may involve the issuance
of new shares of common stock, debt securities that are convertible into common
stock or warrants for the purchase of common stock. Any of these items could
result in a material increase in the number of shares of common stock
outstanding, which would in turn result in a dilution of the ownership interests
of existing common shareholders. In addition, these new securities could contain
provisions, such as priorities on distributions and voting rights, which could
affect the value of our existing common stock.
THERE IS CURRENTLY A LIMITED PUBLIC MARKET FOR OUR COMMON STOCK. FAILURE TO
DEVELOP OR MAINTAIN A TRADING MARKET COULD NEGATIVELY AFFECT ITS VALUE AND MAKE
IT DIFFICULT OR IMPOSSIBLE FOR YOU TO SELL YOUR SHARES.
Our common stock trades on the FINRA OTCQB under the Symbol EACR. There has been
a limited public market for our common stock and an active public market for our
common stock may not develop. Failure to develop or maintain an active trading
market could make it difficult for you to sell your shares or recover any part
of your investment in us. Even if a market for our common stock does develop,
the market price of our common stock may be highly volatile. In addition to the
10
uncertainties relating to future operating performance and the profitability of
operations, factors such as variations in interim financial results or various,
as yet unpredictable, factors, many of which are beyond our control, may have a
negative effect on the market price of our common stock.
RISKS RELATED TO OUR SECURITIES
IF A LIQUID MARKET FOR OUR COMMON STOCK DOES NOT DEVELOP, SHAREHOLDERS MAY BE
UNABLE TO SELL THEIR SHARES.
There is currently no liquid market for our common stock and no certainty that a
liquid market will develop. While our common stock is quoted for trading on the
OTC Bulletin Board, EACR, there has been limited trading of our common stock.
Furthermore, we have initiated the process to have our stock become eligible for
DTC deposit. Unless this is concluded successfully, of which we can give no
assurance, broker dealers may be reluctant to accept our stock for deposit. This
will further inhibit the development of a trading market. If a liquid market is
not developed for our shares, it will be difficult for shareholders to sell
their stock.
WE DO NOT INTEND TO PAY DIVIDENDS AND THERE WILL BE LESS WAYS IN WHICH YOU CAN
MAKE A GAIN ON ANY INVESTMENT IN OUR COMPANY.
We have never paid any cash dividends and currently do not intend to pay any
dividends for the foreseeable future. To the extent that we require additional
funding currently not provided for in our financing plan, our funding sources
may likely prohibit the payment of a dividend.
OUR ARTICLES OF INCORPORATION PROVIDE FOR INDEMNIFICATION OF OFFICERS AND
DIRECTORS AT OUR EXPENSE AND LIMIT THEIR LIABILITY WHICH MAY RESULT IN A MAJOR
COST TO US AND HURT THE INTERESTS OF OUR SHAREHOLDERS BECAUSE CORPORATE
RESOURCES MAY BE EXPENDED FOR THE BENEFIT OF OFFICERS AND/OR DIRECTORS.
Our Articles of Incorporation and applicable Nevada law provide for the
indemnification of our directors, officers, employees, and agents, under certain
circumstances, against attorney's fees and other expenses incurred by them in
any litigation to which they become a party arising from their association with
or activities on our behalf. We will also bear the expenses of such litigation
or any of our directors, officers, employees, or agents, upon such person's
promise to repay us, therefore, if it is ultimately determined that any such
person should not have been entitled to indemnification this indemnification
policy could result in substantial expenditures by us, which we will be unable
to recoup.
We have been advised that, in the opinion of the SEC, indemnification for
liabilities arising under federal securities laws is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against these types of liabilities, other
than the payment by us of expenses incurred or paid by a director, officer or
controlling person in the successful defense of any action, suit or proceeding,
is asserted by a director, officer or controlling person in connection with our
securities we will (unless in the opinion of our counsel, the matter has been
settled by controlling precedent) submit to a court of appropriate jurisdiction,
the question whether indemnification by us is against public policy as expressed
in the Securities Act and will be governed by the final adjudication of such
issue. The legal process relating to this matter if it were to occur is likely
to be very costly and may result in us receiving negative publicity, either of
which factors is are likely to materially reduce the market and price for our
shares, if such a market ever develops.
11
RISKS RELATING TO OUR COMMON STOCK
LIMITATIONS UPON BROKER-DEALERS EFFECTING TRANSACTIONS IN "PENNY STOCKS"
Trading in our common stock is subject to material limitations as a consequence
of regulations which limits the activities of broker-dealers effecting
transactions in "penny stocks." Pursuant to Rule 3a51-1 under the Exchange Act,
our common stock is a "penny stock" because it (i) is not listed on any national
securities exchange or The NASDAQ Stock Market(TM), (ii) has a market price of
less than US$5.00 per share, and (iii) its issuer (the Company) has net tangible
assets less than US$2,000,000 (if the issuer has been in business for at least
three (3) years) or US$5,000,000 (if the issuer has been in business for less
than three (3) years).
Rule 15g-9 promulgated under the Exchange Act imposes limitations upon trading
activities on "penny stocks", which makes selling our common stock more
difficult compared to selling securities which are not "penny stocks." Rule
15a-9 restricts the solicitation of sales of "penny stocks" by broker-dealers
unless the broker first (i) obtains from the purchaser information concerning
his financial situation, investment experience and investment objectives, (ii)
reasonably determines that the purchaser has sufficient knowledge and experience
in financial matters that the person is capable of evaluating the risks of
investing in "penny stocks", and (iii) delivers and receives back from the
purchaser a manually signed written statement acknowledging the purchaser's
investment experience and financial sophistication.
Rules 15g-2 through 15g-6 promulgated under the Exchange Act require
broker-dealers who engage in transactions in "penny stocks" first to provide
their customers with a series of disclosures and documents, including (i) a
standardized risk disclosure document identifying the risks inherent in
investing in "penny stocks", (ii) all compensation received by the broker-dealer
in connection with the transaction, (iii) current quotation prices and other
relevant market data, and (iv) monthly account statements reflecting the fair
market value of the securities.
There can be no assurance that any broker-dealer which initiates quotations for
the Common Stock will continue to do so, and the loss of any such broker-dealer
likely would have a material adverse effect on the market price of our common
stock.
SHARES ELIGIBLE FOR FUTURE SALE
The sale of a substantial number of shares of our common stock, or the
perception that such sales could occur, could adversely affect prevailing market
prices for our common stock. In addition, any such sale or perception could make
it more difficult for us to sell equity, or equity-related securities in the
future at a time and price that we deem appropriate. If and when this
registration statement becomes effective and we become subject to the reporting
requirements of the Exchange Act, we might elect to adopt a stock option plan
and file a registration statement under the Securities Act registering the
shares of common stock reserved for issuance thereunder. Following the
effectiveness of any such registration statement, the shares of common stock
issued under such plan, other than shares held by affiliates, if any, would be
immediately eligible for resale in the public market without restriction.
The sales of shares of our common stock which are not registered under the
Securities Act, known as "restricted" shares, typically are affected under Rule
144. As of March 31, 2012 we had outstanding an aggregate of 78,750,000 shares
of restricted common stock. All of our shares of common stock, except those
issued in the last six months, might be sold under Rule 144. No prediction can
be made as to the effect, if any, that future sales of "restricted" shares of
our common stock, or the availability of such shares for future sale, will have
on the market price of our common stock or our ability to raise capital through
an offering of our equity securities.
12
NO DIVIDENDS
We have never paid any dividends on our common stock and we do not intend to pay
any dividends in the foreseeable future.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None
ITEM 2.PROPERTIES.
We currently rent our offices and workshop on a month to month basis at a cost
of R24,000 (US$2,900) for our offices and R10,000 (US$1,200) per month for our
repair facility. We expect to double this space as we grow if our business
continues to grow and we enlarge our fleet of rented cars. We believe that
suitable additional space is available in the vicinity of our present facilities
at a reasonable cost.
ITEM 3. LEGAL PROCEEDINGS.
We currently have no legal proceedings pending nor have any legal proceeding
been threatened against us or any of our officers, directors or control persons
of which we are aware.
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND ISSUER PURCHASES OF EQUITY
SECURITIES.
MARKET INFORMATION
Our common stock has been included in the FINRA OTCQB under the symbol "VRIS"
since January 4, 2011 and under the symbol "EACR" since March 8, 2012. We are
not aware of any trades or quotations prior to January 2012. During the quarter
ended February 28, 2013, our shares traded at prices ranging from US$0.014 to
$0.075
REPORTS TO SHAREHOLDERS
We plan to furnish our shareholders with an annual report for each fiscal year
ended February 28 containing financial statements audited by our independent
certified public accountants starting in 2015. Additionally, we may, in our sole
discretion, issue unaudited quarterly or other interim reports to our
shareholders when we deem appropriate. We intend to maintain compliance with the
periodic reporting requirements of the Securities Exchange Act of 1934.
HOLDERS
As of June 8, 2013, we had 75 shareholders of record and 112,500,000 common
shares issued and outstanding. The number of holders includes the shareholders
for whom shares are held in a "nominee" or "street" name.
13
DIVIDEND POLICY
We have not declared or paid any dividends on our common stock to date. We
anticipate that any future earnings will be retained as working capital and used
for business purposes. Accordingly, it is unlikely that we will declare or pay
any such dividends in the foreseeable future.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
None
RECENT SALES OF UNREGISTERED SECURITIES
None
ITEM 6. SELECTED FINANCIAL DATA.
Because the Company is a smaller reporting company, it does not need to provide
the information required by this Item 6.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND REULTS
OF OPERATIONS.
OVERVIEW
We caution you that reliance on any forward-looking statement involves risks and
uncertainties, and that although we believe the assumptions on which our
forward-looking statements are based are reasonable, any of those assumptions
could prove to be inaccurate, and as a result, the forward-looking statements
based on those assumptions could be incorrect. In light of these and other
uncertainties, you should not conclude that we will necessarily achieve any
plans and objectives or projected financial results referred to in any of the
forward-looking statements. We do not undertake to release the results of any
revisions of these forward-looking statements to reflect future events or
circumstances. Some of the factors that may cause actual results, developments
and business decisions to differ materially from those contemplated by such
forward-looking statements include the following:
* our ability to raise additional capital and secure additional
financing;
* anticipated trends in our financial condition and results of
operations;
* our ability to hire and retain key employees;
BACKGROUND
Prior to December 7, 2011 we were in the business of developing and internet
based tax preparation service. After December 7, 2011, we were in the business
of renting cars with a program for their purchase by their lessees. New
management considers the rent to purchase of automobiles to be a more promising
operation for our shareholders. The discussion below relates solely to our
current operation.
FY ENDED 2/28/13 V. FY ENDED 2/29/12
REVENUES increased to US$3,498,352 in FY ended 2/28/13 from US$2,197,978 in the
previous year, an increase of US$1,300,374 or 59.16%. Management believes that
this rate of increase reflects the underlying demand for our services in the
market, and the utilization of the funding raised. Revenues principally consist
of gross vehicle rental fees and are related to the number and value of the
vehicles being rented. The accounting policy for revenue was changed in 2013 to
comply with US GAAP, The upfront non-refundable administration fee now been
deferred over the average rental period. Simultaneously the company deferred
direct, incremental selling costs related to the rental over the same average
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rental period. The deferred income for 2013 is US$569,876 (2012: U$324,449. The
deferred incremental costs for 2103 are $67,283. (2012:US$75,571).
EXPENSES increased to US$3,001,825 in FY ended 2/28/13 compared to US$2,138,866
in FY ended 2/29/12, an increase of US$862,959 or 40.34%. Selling, general and
administrative expenses increased from US$537,333 in FY ended 2/29/12 to
US$949,260 in FY ended 2/28/13, an increase of US$411,927 or 76.66%. This
increase in costs is as result of the increase in the size of the fleet and
management believes they have sufficient capacity to significantly grow the
fleet without increasing these costs substantially.
A change in estimate on the residual value of motor vehicles reduced the amount
of depreciation for the year as compared to the previous year. The depreciation
for 2013 was USD$511,799. The change in estimate did not have a material impact
on the 2012 year end and the depreciation amount was unchanged at USD$516,119.
The reason for the change in estimate was that the second hand vehicle market in
South Africa has strengthened and the values of second hand vehicles had
increased. In addition the company has been purchasing newer second hand models
which have a longer life.
Interest expense increased to $US406,680 in FY ended 2/28/13 compared to
US$218,903 in FY ended 2/29/2012. Interest increased as result of the
utilization of the funding raised.
NET INCOME
Net Income increased from US$60,792 in FY ended 2/29/12 to US$524,559 in FY
ended 2/28/13. As we expand our vehicle rental fleet, increased revenues may be
counterbalanced by the fact that vehicle depreciation is greatest in the early
years of the lease.
Our 2013 accounts include a change in accounting policy necessitated due to the
difference between our subsidiary reporting and US GAAP. The accounting policy
for revenue recognition was changed. The upfront non-refundable administration
fee has now been deferred over the average rental period of client contracts
rather than taken in full. Simultaneously the company defers direct, incremental
selling costs related to the rental over the same average rental period.
The net effect was to defer income of $502,593 into future years. Had this
deferral not been made, current year earnings would have been US$778,274 and EPS
US$0.007.
PLAN OF OPERATION AND LIQUIDITY
Our plan of operation for 2013 is to continue to expand our business to meet
demand. We are currently in discussions that could realize $3.8m in new long
term car finance debt. Should we raise the full quantum we will be able to grow
our fleet by approximately 450 cars.
The board will continually seek additional financing opportunities which it
believes are in the best interests of the Company and its shareholders. If we do
not generate sufficient cash from our intended financing activities and sales,
we will be unable to operate our business at expanded levels which management
believes would benefit shareholders. If we are able to arrange debt or equity
financing it may be on terms that are not beneficial to our shareholders. Any
financing that we do receive may dilute the interests of our current
shareholders. Other than the AVIS US$0.3m which is available on a revolving
basis and the term sheet for $2.2m (final contracts outstanding), we do not have
any agreements with any financing source to obtain financing on any particular
terms.
15
The Board has decided to constrain senior debt to 75% of total assets and will
ensure that senior debt interest will not exceed 40% of EBIT.
We had cash and cash equivalents of US$682,096 as of February 28, 2013. We have
funded and will continue to fund our activities primarily through car rental
receipts and credit facilities.
SEASONALITY AND INFLATION
We do not believe that our business will be seasonal to any material extent.
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 material revenue
generating activities that give rise to significant assumptions or estimates.
Our most critical accounting policies as follows:
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reporting amounts of revenues and
expenses during the reporting period.
The Company's significant estimates and assumptions include the fair value of
financial instruments; the carrying value, recoverability and impairment, if
any, of long-lived assets, including the values assigned to and the estimated
useful lives of oil and gas properties; income tax rate, income tax provision,
deferred tax assets and valuation allowance of deferred tax assets; foreign
currency exchange rate and the assumption that the Company will continue as a
going concern. Those significant accounting estimates or assumptions bear the
risk of change due to the fact that there are uncertainties attached to those
estimates or assumptions, and certain estimates or assumptions are difficult to
measure or value.
Management bases its estimates on historical experience and on various
assumptions that are believed to be reasonable in relation to the financial
statements taken as a whole under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources.
Management regularly evaluates the key factors and assumptions used to develop
the estimates utilizing currently available information, changes in facts and
circumstances, historical experience and reasonable assumptions. After such
evaluations, and if deemed appropriate, those estimates are adjusted
accordingly. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards
Codification for disclosures about fair value of its financial instruments and
has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification
("Paragraph 820-10-35-37") to measure the fair value of its financial
instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards
Codification establishes a framework for measuring fair value in generally
accepted accounting principles (GAAP), and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value
measurements and related disclosures, paragraph 820-10-35-37 of the FASB
Accounting Standards Codification establishes a fair value hierarchy which
prioritizes the inputs to valuation techniques used to measure fair value into
three (3) broad levels. The fair value hierarchy gives the highest priority to
16
quoted prices (unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. The three (3) levels of fair
value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting
Standards Codification are described below:
Level 1 Quoted market prices available in active markets for identical assets or
liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in
Level 1, which are either directly or indirectly observable as of the
reporting date.
Level 3 Pricing inputs that are generally observable inputs and not corroborated
by market data.
Financial assets are considered Level 3 when their fair values are determined
using pricing models, discounted cash flow methodologies or similar techniques
and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices
(unadjusted) in active markets for identical assets or liabilities and the
lowest priority to unobservable inputs. If the inputs used to measure the
financial assets and liabilities fall within more than one level described
above, the categorization is based on the lowest level input that is significant
to the fair value measurement of the instrument.
The carrying amounts of the Company's financial assets and liabilities, such as
cash, receivables, and accounts payable and accrued expenses, approximate their
fair values because of the short maturity of these instruments.
Transactions involving related parties cannot be presumed to be carried out on
an arm's-length basis, as the requisite conditions of competitive, free-market
dealings may not exist. Representations about transactions with related parties,
if made, shall not imply that the related party transactions were consummated on
terms equivalent to those that prevail in arm's-length transactions unless such
representations can be substantiated.
It is not, however, practical to determine the fair value of advances from
stockholders due to their related party nature.
RELATED PARTIES
The Company follows subtopic 850-10 of the FASB Accounting Standards
Codification for the identification of related parties and disclosure of related
party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the
Company; b) entities for which investments in their equity securities would be
required, absent the election of the fair value option under the Fair Value
Option Subsection of section 825-10-15, to be accounted for by the equity method
by the investing entity; c) trusts for the benefit of employees, such as pension
and profit-sharing trusts that are managed by or under the trusteeship of
management; d) principal owners of the Company; e) management of the Company; f)
other parties with which the Company may deal if one party controls or can
significantly influence the management or operating policies of the other to an
extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests; and g. other parties that can significantly
influence the management or operating policies of the transacting parties or
that have an ownership interest in one of the transacting parties and can
significantly influence the other to an extent that one or more of the
transacting parties might be prevented from fully pursuing its own separate
interests.
17
The financial statements shall include disclosures of material related party
transactions, other than compensation arrangements, expense allowances, and
other similar items in the ordinary course of business. However, disclosure of
transactions that are eliminated in the preparation of consolidated or combined
financial statements is not required in those statements. The disclosures shall
include: a) the nature of the relationship(s) involved b) description of the
transactions, including transactions to which no amounts or nominal amounts were
ascribed, for each of the periods for which income statements are presented, and
such other information deemed necessary to an understanding of the effects of
the transactions on the financial statements; c) the dollar amounts of
transactions for each of the periods for which income statements are presented
and the effects of any change in the method of establishing the terms from that
used in the preceding period; and d) amounts due from or to related parties as
of the date of each balance sheet presented and, if not otherwise apparent, the
terms and manner of settlement.
REVENUE RECOGNITION
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards
Codification for revenue recognition. The Company recognizes revenue when it is
realized or realizable and earned. The Company considers revenue realized or
realizable and earned when all of the following criteria are met: (i) persuasive
evidence of an arrangement exists, (ii) the product has been shipped or the
services have been rendered to the customer, (iii) the sales price is fixed or
determinable, and (iv) collectability is reasonably assured.
Revenues from vehicle rentals are recognized as earned on a daily basis under
the related rental contracts with customers. The upfront administration fee is
non-refundable. However the company defers its upfront administration fee income
received at the inception of the rental contract over the average rental period.
Simultaneously the company defers direct, incremental selling costs related to
the rental of the vehicle over the same average rental period. This is a change
in accounting policy and the new basis has been used to calculate revenue in
2013. The 2012 numbers have been restated to reflect the new policy.
FOREIGN CURRENCY TRANSACTIONS
The Company applies the guidelines as set out in Section 830-20-35 of the FASB
Accounting Standards Codification ("Section 830-20-35") for foreign currency
transactions. Pursuant to Section 830-20-35 of the FASB Accounting Standards
Codification, foreign currency transactions are transactions denominated in
currencies other than U.S. Dollar, the Company's reporting currency or the South
African Rand, the Company's South African operating subsidiary's functional
currency. Foreign currency transactions may produce receivables or payables that
are fixed in terms of the amount of foreign currency that will be received or
paid. A change in exchange rates between the functional currency and the
currency in which a transaction is denominated increases or decreases the
expected amount of functional currency cash flows upon settlement of the
transaction. That increase or decrease in expected functional currency cash
flows is a foreign currency transaction gain or loss that generally shall be
included in determining net income for the period in which the exchange rate
changes. Likewise, a transaction gain or loss (measured from the transaction
date or the most recent intervening balance sheet date, whichever is later)
realized upon settlement of a foreign currency transaction generally shall be
included in determining net income for the period in which the transaction is
settled. The exceptions to this requirement for inclusion in net income of
transaction gains and losses pertain to certain intercompany transactions and to
transactions that are designated as, and effective as, economic hedges of net
investments and foreign currency commitments. Pursuant to Section 830-20-25 of
the FASB Accounting Standards Codification, the following shall apply to all
foreign currency transactions of an enterprise and its investees: (a) at the
date the transaction is recognized, each asset, liability, revenue, expense,
gain, or loss arising from the transaction shall be measured and recorded in the
functional currency of the recording entity by use of the exchange rate in
effect at that date as defined in section 830-10-20 of the FASB Accounting
18
Standards Codification; and (b) at each balance sheet date, recorded balances
that are denominated in currencies other than the functional currency or
reporting currency of the recording entity shall be adjusted to reflect the
current exchange rate.
INCOME TAX PROVISION
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.
UNCERTAIN TAX POSITIONS
The Company did not take any uncertain tax positions and had no adjustments to
its income tax liabilities or benefits pursuant to the provisions of Section
740-10-25 for the year ended February 2013 or 2012.
FOREIGN CURRENCY TRANSLATION
The Company's functional currency is the South African Rand, however the
translation into US dollars is the presentation bases of these financial
statements. Foreign assets and liabilities are translated into US$ 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.
COMPREHENSIVE INCOME (LOSS)
The Company applies section 220-10-45 of the FASB Accounting Standards
Codification. This statement establishes rules for the reporting of
comprehensive income and its components. Comprehensive income (loss), for the
Company, consists of net income (loss) and foreign currency translation
adjustments and is presented in the Company's Consolidated Statements of
Operations and Comprehensive Income (Loss) and Stockholders' Equity.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed pursuant to section 260-10-45 of
the FASB Accounting Standards Codification. Basic net income (loss) per common
share is computed by dividing net income (loss) by the weighted average number
of shares of common stock outstanding during the period. Diluted net income
(loss) per common share is computed by dividing net income (loss) by the
weighted average number of shares of common stock and potentially outstanding
shares of common stock during the period to reflect the potential dilution that
could occur from common shares issuable through contingent shares issuance
arrangement, stock options or warrants.
There were no potentially outstanding dilutive shares for the year ended
February 28, 2013 or February 29, 2012.
19
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our financial statements for the years ended February 28, 2013 and February 29,
2012, and the reports thereon of Silberstein Ungar, PLLC, are included following
the signature page.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A(T). CONTROLS AND PROCEDURES.
DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e)
under the Exchange Act) that are designed to ensure that information that would
be required to be disclosed in Exchange Act reports is recorded, processed,
summarized and reported within the time period specified in the SEC's rules and
forms, and that such information is accumulated and communicated to our
management, including to our chief executive officer and chief financial
officer, as appropriate, to allow timely decisions regarding required
disclosure.
As required by Rule 13a-15 under the Exchange Act, our management, including
John Storey, our chief executive officer and Bruce Dunnington our chief
financial officer, evaluated the effectiveness of the design and operation of
our disclosure controls and procedures as of February 28, 2013. Based on that
evaluation, Messrs. Storey and Dunnington concluded that as of February 28,
2013, and as of the date that the evaluation of the effectiveness of our
disclosure controls and procedures was completed, our disclosure controls and
procedures were not effective to satisfy the objectives for which they are
intended.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Section 404 of the Sarbanes-Oxley Act of 2002 requires that management document
and test the Company's internal control over financial reporting and include in
this Annual Report on Form 10-K a report on management's assessment of the
effectiveness of our internal control over financial reporting.
This annual report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit us to provide only management's report in this
annual report.
20
MANAGEMENT'S REMEDIATION INITIATIVES
In an effort to remediate the identified material weaknesses and other
deficiencies and enhance our internal controls, we have initiated, or plan to
initiate, the following series of measures:
We will increase our personnel resources and technical accounting expertise
within the accounting function when funds are available to us. First, we will
undertake to segregate duties consistent with control objectives of having
separate individuals perform (i) the initiation of transactions, (ii) the
recording of transactions and (iii) the custody of assets. Second, we will
create additional positions to focus on financial reporting and standardizing
and documenting our accounting procedures with the goal of increasing the
effectiveness of the internal controls in preventing and detecting misstatements
of accounting information. Third, we plan to appoint one or more outside
directors to our board of directors who shall be appointed to an audit committee
resulting in a fully functioning audit committee who will undertake the
oversight in the establishment and monitoring of required internal controls and
procedures such as reviewing and approving estimates and assumptions made by
management when funds are available to us.
Management believes that the appointment of one or more outside directors, who
shall be appointed to a fully functioning audit committee, will remedy the lack
of a functioning audit committee and a lack of a majority of outside directors
on our Board.
We anticipate that these initiatives will be at least partially, if not fully,
implemented by February 28, 2014. Additionally, we plan to test our updated
controls and remediate our deficiencies by February 28, 2014.
ITEM 9B. OTHER INFORMATION.
We do not have any information that was required to be reported on Form 8-K
during the fourth quarter.
21
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The following table sets forth the name, age and position of each of our
directors and executive officers.
Name Age Position
---- --- --------
Graeme Thomas Hardie 68 Chairman of the Board, Director (since
November 2011)
John Clifford Storey 51 President and CEO for the Company; Director,
(since November 2011)
Bruce Dunnington 51 CFO for the Company; (since November 2011)
The following is a brief description of the principal occupation and recent
business experience of each of our directors and executive officers:
DR GRAEME HARDIE: CHAIRMAN
Dr Graeme Hardie has held the position of Chairman of Earn-A-Car Inc. since
December 2011. Dr. Hardie is currently self-employed as a businessman and
Architect. Dr. Hardie has been Chairman of the Board of Directors since the
company's plan of reorganization in December of 2011. He became a director at
the same time.
JOHN STOREY: PRESIDENT & CEO
John Storey has held the position of President and CEO since December of 2011,
the month the company entered into plan of reorganization and merger with
Earn-A-Car (Pty) Ltd, the South African Vehicle Rental Company. Prior to that,
Mr. Storey was the Managing Director of m Cubed Capital, a South African listed
company. He became a director in December 2011.
John Storey is a South African Chartered Accountant and Member of South African
Chartered Institute of Accountants, Chartered member of the Institute of Bankers
in South Africa, has a Master of Business Administration and Institute of
Marketing Management Diploma
BRUCE DUNNINGTON: CFO
Bruce Dunnington has held the position of CFO of Earn-A-Car Inc. since December
of 2011. Prior to that, Mr. Dunnington was the Managing Director of Automated
Outsourcing Services Limited (South African company) a large, high volume
administrator.
Bruce Dunnington holds the following professional certifications; South African
Chartered Accountant and Member of South Africa Institute of Chartered
Accountants, Fellow member of the Chartered Institute of Management Accountants
22
COMPENSATION OF DIRECTORS
The Board of Directors may compensate directors for their services as such. The
Board of Directors may also provide for the payment of all travel and
out-of-pocket expenses in connection with Directors' attendance at Board
meetings. Each board member serves for a one-year term until elections are held
at each annual meeting.
Beginning December 1, 2011 The Chairman of Board of Directors shall be paid
US$8,000 per year.
Directors are elected at the Company's annual meeting of Stockholders and serve
for one year until the next annual Stockholders' meeting or until their
successors are elected and qualified. Officers are elected by the Board of
Directors and their terms of office are, except to the extent governed by
employment contract, at the discretion of the Board. The Company may reimburse
all Directors for their expenses in connection with their activities as
directors of the Company.
FAMILY RELATIONSHIPS
There are no family relationships amongst our management and directors, except
that Graeme Hardie is John Storey's uncle.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Our directors, executive officers and control persons have not been involved in
any of the following events during the past five years:
* any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time
of the bankruptcy or within two years prior to that time;
* any conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
* being subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities; or
* being found by a court of competent jurisdiction (in a civil action),
the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed, suspended, or
vacated.
TERM OF OFFICE
The term of office of the current directors shall continue until new directors
are elected or appointed at an annual meeting of shareholders.
COMMITTEES OF THE BOARD AND FINANCIAL EXPERT
We do not have a separately-designated audit or compensation committee of the
Board or any other Board-designated committee. Audit and compensation committee
functions are performed by our Board of Directors. We will form such committees
in the future as the need for such committees may arise. In addition, at this
23
time we have determined that we do not have an "audit committee financial
expert" as defined by the SEC on our Board.
CODE OF ETHICS
The Company has adopted a Code of Ethics that applies to its principal executive
officer, principal financial officer or controller or persons performing similar
functions. Such Code of Ethics was filed with an amendment to a Form 8-K, dated
December 7, 20121.
ITEM 11. EXECUTIVE COMPENSATION.
The following Summary Compensation Table shows the compensation awarded to or
earned by our Chief Executive Officer and other most highly compensated
executive officers for fiscal 2012. The persons listed in the following Summary
Compensation Table are referred to herein as the "Named Executive Officers."
SUMMARY COMPENSATION TABLE
Non-Equity Nonqualified
Name and Incentive Deferred
Principal Stock Option Plan Compensation All Other
Position Year Salary($) Bonus($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Totals($)
-------- ---- --------- -------- --------- --------- --------------- ----------- --------------- ---------
John Storey 2012 [1] 6,787 0 0 0 0 0 6,787
President & CEO
Bruce Dunnington 2012 [1] 6,787 0 0 0 0 0 6,787
CFO
----------
[1] The officers of the company are currently considered "at-will" employees.
The company has no compensation agreements with these officers; however
simple compensation arrangements have been made and summarized as follows:
John Storey is currently under an arrangement to receive no compensation as
President and CEO of the company. No other compensation arrangements have been
made with Mr. Storey at this time. Mr. Storey is currently retained as a
consultant, and acting President &CEO for the company. Mr Storey however was
paid a nominal compensation of R60,000 (US$6,787) for the year. He has waived
further compensation at this time
Bruce Dunnington is currently under an arrangement to receive no compensation as
CFO of the company. No other compensation arrangements have been made with Mr.
Dunnington at this time. Mr. Dunnington is currently retained as a consultant,
and acting CFO for the company. Mr Dunnington however was paid a nominal
compensation of R60,000 (US$6,787) for the year. He has waived further
compensation at this time.
24
The President and CFO of the company have largely forgone salaries to an
undetermined later date defined as some point in the future when the company is
in better financial position to afford salary payments. The major shareholder
(not EAC) has agreed to personally incentivize the President and CFO when the
company meets certain milestones. This is expected to be agreed before the end
of the next accounting period and will include options underwritten by the major
shareholder (i.e. at no dilution or cost to other shareholders) and a modest
salary from the Earn-a-Car (Pty) Ltd in South Africa. Compensation for any
directors of EAC will not exceed the current US$2,000 a quarter.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
None.
OPTION EXERCISES AND STOCK VESTED TABLE
None.
PENSION BENEFITS TABLE
None.
NONQUALIFIED DEFERRED COMPENSATION TABLE
None.
ALL OTHER COMPENSATION TABLE
None.
PERQUISITES TABLE
None.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
None.
LONG-TERM INCENTIVE PLAN AWARDS
We do not have any long-term incentive plans that provide compensation intended
to serve as incentive for performance to occur over a period longer than one
fiscal year, whether such performance is measured by reference to our financial
performance, our stock price, or any other measure.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Nevada law generally permits us to indemnify our directors, officers, employees
and agents. Pursuant to the provisions of Nevada Revised Statutes 78.7502, we,
as a corporation organized in Nevada, may indemnify our directors, officers,
employees and agents in accordance with the following:
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any action, except an action by or in the right
25
of the corporation, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation, against expenses, actually and reasonably incurred by him in
connection with the action, suit or proceeding if he: (a) is not liable for
breach of his fiduciary duties as a director or officer pursuant to Nevada
Revised Statutes 78.138; or (b) acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any action by or in the right of the
corporation to procure a judgment in its favor, by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation against expenses actually and
reasonably incurred by him in connection with the defense or settlement of the
action or suit if he: (a) is not liable for breach of his fiduciary duties
pursuant to Nevada Revised Statutes 78.138; or (b) acted in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation. Indemnification may not be made for any claim,
issue or matter as to which such a person has been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals there from, to be liable
to the corporation or for amounts paid in settlement to the corporation, unless
and only to the extent that the court in which the action or suit was brought or
other court of competent jurisdiction determines upon application that in view
of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
(c) To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding, or in defense of any claim, issue or matter therein, the corporation
shall indemnify him against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense.
CHARTER PROVISIONS, BYLAWS AND OTHER ARRANGEMENTS OF THE REGISTRANT
Our Certificate of Incorporation, as amended, does not contain any specific
language enhancing or limiting the Nevada statutory provisions referred to
above.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy and is, therefore, unenforceable.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The following table sets forth information regarding beneficial ownership of our
common stock as of February 29, 2012 by (i) any person or group with more than
5% of any class of voting securities, (ii) each director, (iii) our chief
executive officer and each other executive officer whose cash compensation for
the most recent fiscal year exceeded US$100,000 and (iv) all such executive
officers and directors as a group. Unless otherwise specified, the address of
each of the persons set forth below is in care of the Company, Office 1 The
Falls Centre, Corner Great North and Webb, Northmead, Benoni 1522, Union of
South Africa. Except as indicated in the footnotes to this table and subject to
applicable community property laws, the persons named in the table to our
knowledge have sole voting and investment power with respect to all shares of
securities shown as beneficially owned by them..
26
Name and Address Amount and Nature of Percent
of Beneficial Owner Office Beneficial Owner of Class
------------------- ------ ---------------- --------
John Storey Director, CEO, 0 0%
President
Graeme Hardie Chairman of 78,750,000(1) 70.0% (1)
210 Rutgers Place the Board and
Nutley, New Jersey 07110 a Director,
Secretary,
Treasurer
Bruce Dunnington COO 0 0%
Depassez Investments Ltd -- 78,750,000 (1) 70.0% (1)
All Officers and Directors
as a group (3 Persons) 78,750,000 (1) 70.0% (1)
----------
(1) Depassez Investments Ltd is a Seychelles corporation and holds these
shares. Mr. Hardie owns all of the shares of Depassez Investments Ltd and
accordingly, is the indirect owner of these shares.
The Company does not have any change of control or retirement arrangements with
its executive officers.
CHANGES IN CONTROL
We know of no contractual arrangements which may at a subsequent date result in
a change of control in the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
During the year ended, February 29, 2012, we acquired our present business from
Graeme Hardie for 78,500,000 shares of our common stock as reported on our
Current Report on Form 8-K, dated December 7, 2011, as amended.
DIRECTOR INDEPENDENCE
We do not believe that any of our directors is considered "independent" under
Rule 400(a)(15) of the National Association of Securities Dealers listing
standards due to their share ownership or employment.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
AUDIT FEES
The aggregate fees billed by the Company's auditors for professional services
rendered in connection with the audit of the Company's annual financial
statements for the year ended February 28, 2013 in the Company's Form 10-K and
reviews of the financial statements included in the Company's Form 10-Q or
services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements was US$37,425 to Silberstein
Ungar, PLLC, our current independent registered public accounting firm.
27
TAX COMPLIANCE SERVICES
The aggregate fees billed by the Company's auditors for professional services
rendered in connection with tax return preparation were US$0.
PRE-APPROVAL OF ALL SERVICES FROM THE INDEPENDENT AUDITORS
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that
require that before our auditor is engaged by us or our subsidiaries to render
any auditing or permitted non-audit related service, the engagement be:
- approved by our audit committee; or
- entered into pursuant to pre-approval policies and procedures
established by the audit committee, provided the policies and
procedures are detailed as to the particular service, the audit
committee is informed of each service, and such policies and
procedures do not include delegation of the audit committee's
responsibilities to management.
We do not have an audit committee, however our board of directors acts as the
audit committee, established pre-approval policies and procedures as to the
particular service which do not include delegation of the audit committee's
responsibilities to management. Our board of directors pre-approves all services
provided by our independent auditors and is informed of each service.
No other services were received or paid for to/by the Independent Auditor
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation, incorporated by reference to like
numbered exhibit filed with the Registrant's registration statement
on Form S-1 filed March 11, 2010.
3.2 Articles of Amendment, incorporated by reference to Exhibit 3.1 of
Current Report on Form 8-K filed March 30, 202.
3.2 By -Laws, incorporated by reference to like numbered exhibit filed
with the Registrant's registration statement on Form S-1 filed
March 11, 2010.
10.1 Loan Agreement between Civiwize (proprietary) Limited (in the
process of changing its name to EARN-A-CAR ASSETS 1 (PROPRIETARY)
LIMITED) and ABSA BANK LIMITED, dated May 29, 2012, incorporated by
like number exhibit to the Registrant's Current Report on Form 8-K,
dated May 29, 2012.
14.1 Code of Ethics, incorporated by reference to like numbered exhibit
filed with the Registrant's amendment No. 1 to the Current Report
on Form 8-K, dated December 7, 2011.
22.1 Subsidiaries; Subsidiaries; 100 % owned by Earn-a-Car Pty Ltd,
Civiwize (proprietary) Limited (in the process of changing its name
to EARN-A-CAR ASSETS 1 (PROPRIETARY) LIMITED), a South African
corporation and Earn-A-Car (PTY), LTD., a South African
corporation.
28
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.
----------
* To be provided by amendment
29
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.
EARN-A-CAR, INC.
June 13, 2013 By: /s/ John Storey
----------------------------------------
John Storey
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Bruce Dunnington
----------------------------------------
Bruce Dunnington
Chief Financial Officer (Principal
Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Graeme Hardie Chairman of the Board and a Director June 13, 2013
-------------------------
/s/ John Storey CEO and a Director June 13, 2013
-------------------------
John Storey
30
EARN-A-CAR, INC.
CONTENTS
Report of Independent Registered Public Accounting Firm F-1
Balance Sheets as of February 28, 2013 and February 29, 2012 F-2
Statements of Operations for the years ended
February 28, 2013 and February 29, 2012 F-3
Statements of Other Comprehensive Income (Loss)
for the years ended February 28, 2013 and February 29, 2012 F-4
Statement of Stockholders' Equity as of
February 28, 2013 F-5
Statements of Cash Flows for the years ended
February 28, 2013 and February 29, 2012 F-6
Notes to the Financial Statements F-7
Silberstein Ungar, PLLC CPAs and Business Advisors
--------------------------------------------------------------------------------
Phone (248) 203-0080
Fax (248) 281-0940
30600 Telegraph Road, Suite 2175
Bingham Farms, MI 48025-4586
www.sucpas.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Earn-A-Car, Inc.
Benoni, South Africa
We have audited the accompanying balance sheets of Earn-A-Car, Inc as of
February 28, 2013 and February 29, 2012, and the related statements of
operations, other comprehensive income (loss), stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company has
determined that it is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit includes examining on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Earn-A-Car, Inc. as of February
28, 2013 and February 29, 2012, and the results of its operations and cash flows
for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Silberstein Ungar, PLLC
-------------------------------------
Silberstein Ungar, PLLC
Bingham Farms, Michigan
June 12, 2013
F-1
EARN-A-CAR, INC.
BALANCE SHEETS
FEBRUARY 28, 2013 AND FEBRUARY 29, 2012
February 28, 2013 February 29, 2012
----------------- -----------------
(Restated)
ASSETS
Current Assets
Cash and cash equivalents $ 682,096 $ 171,354
Receivables, net 418,707 99,721
----------- -----------
Total Current Assets 1,100,803 271,075
----------- -----------
Property and equipment, net 24,958 14,242
----------- -----------
Revenue-earning vehicles, net 4,858,545 2,982,060
----------- -----------
Other Assets
Loan receivable 7,037 15,312
Deferred costs 67,283 75,571
----------- -----------
Total Other Assets 74,320 90,883
----------- -----------
TOTAL ASSETS $ 6,058,626 $ 3,358,260
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts payable $ 510,994 $ 292,447
Accrued expenses 51,154 51,747
Deferred income 569,876 324,449
Current portion of leases payable 714,948 593,533
Current portion of loans payable 731,271 152,243
----------- -----------
Total Current Liabilities 2,578,243 1,414,419
----------- -----------
Long-term Debt
Loans from shareholders 0 1,000
Leases payable 634,885 741,582
Loans payable 2,031,641 726,808
----------- -----------
Total Long-term Debt 2,666,526 1,469,390
----------- -----------
Total Liabilities 5,244,769 2,883,809
----------- -----------
Stockholders' Equity
Common stock, $0.0000001 par value, 250,000,000 shares authorized,
112,250,000 shares issued and outstanding 11 11
Additional paid in capital 5,423 5,423
Accumulated other comprehensive (loss) (214,695) (29,542)
Retained earnings 1,023,118 498,559
----------- -----------
Total Stockholders' Equity 813,857 474,451
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,058,626 $ 3,358,260
=========== ===========
See accompanying notes to financial statements.
F-2
EARN-A-CAR, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED FEBRUARY 28, 2013 AND FEBRUARY 29, 2012
For the For the
year ended year ended
February 28, 2013 February 29, 2012
----------------- -----------------
(Restated)
Revenues
Vehicle rentals $ 3,478,025 $ 2,186,705
Other 20,327 11,273
------------ ------------
Total Revenues 3,498,352 2,197,978
------------ ------------
Expenses
Direct vehicle and operating 1,134,086 866,511
Vehicle depreciation 511,799 516,119
Selling, general and administrative 949,260 537,333
Interest expense 406,680 218,903
------------ ------------
Total Expenses 3,001,825 2,138,866
------------ ------------
Operating Income 496,527 59,112
Other Income
Interest income 28,032 1,680
------------ ------------
Net Income Before Provision for Income Taxes 524,559 60,792
Provision for Income Taxes 0 0
------------ ------------
Net Income $ 524,559 $ 60,792
============ ============
Earnings per Share $ 0.005 $ 0.00
============ ============
Weighted Average Common Shares Outstanding 112,250,000 41,435,997
============ ============
See accompanying notes to financial statements.
F-3
EARN-A-CAR, INC.
STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED FEBRUARY 28, 2013 AND FEBRUARY 29, 2012
For the For the
year ended year ended
February 28, 2013 February 29, 2012
----------------- -----------------
(Restated)
Net Income $ 524,559 $ 60,792
--------- ---------
Foreign Currency Translation
Change in cumulative translation adjustment (185,153) (23,750)
--------- ---------
Total $(185,153) $ (23,750)
========= =========
See accompanying notes to financial statements.
F-4
EARN-A-CAR, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
AS OF FEBRUARY 28, 2013
Accumulated
Common Stock Additional Other
------------------- Paid-in Comprehensive Retained
Shares Amount Capital Loss Earnings Total
------ ------ ------- ---- -------- -----
Balance, February 28, 2011 500 $ 60 $ -- $ (5,792) $ 437,767 $ 432,035
Loss on currency translation -- -- -- (23,750) -- (23,750)
Reorganization adjustment 233,749,500 (35) 5,409 -- -- 5,374
Cancellation of stock (121,500,000) (14) 14 -- -- --
Net income for the year ended
February 29, 2012 -- -- -- -- 60,792 60,792
------------ ------- -------- ---------- ----------- ----------
Balance, February 29, 2012 (Restated) 112,250,000 11 5,423 (29,542) 498,559 474,451
Loss on currency translation -- -- -- (185,153) -- (185,153)
Net income for the year ended
February 28, 2013 -- -- -- -- 524,559 524,559
------------ ------- -------- ---------- ----------- ----------
Balance, February 28, 2013 112,250,000 $ 11 $ 5,423 $ (214,695) $ 1,023,118 $ 813,857
============ ======= ======== ========== =========== ==========
See accompanying notes to financial statements.
F-5
EARN-A-CAR, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 28, 2013 AND FEBRUARY 29, 2012
For the For the
year ended year ended
February 28, 2013 February 29, 2012
----------------- -----------------
(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the year $ 524,559 $ 60,792
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation 511,799 516,119
Net losses from disposition of revenue-earning vehicles 0 69,010
Change in Assets and Liabilities:
(Increase) in receivables (318,986) (60,760)
(Increase) decrease in deferred costs 8,288 (75,571)
Increase in accounts payables 218,547 72,045
Increase (decrease) in accrued expenses (593) 30,713
Increase in deferred income 245,427 324,449
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,189,041 936,797
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of revenue-earning vehicles: (2,388,284) (1,196,591)
Purchase of property, equipment and software: (10,716) (11,401)
Collections of loans extended 8,275 14,540
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (2,390,725) (1,193,452)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Additional paid in capital, due to merger 0 5,374
Proceeds from (Payments on) leases payable (net) (52,476) 761,928
Proceeds from (Payments on) loans payable (net) 1,951,055 (288,144)
Proceeds from (Payments on) shareholder loans (net) (1,000) (96,879)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,897,579 382,279
----------- -----------
Exchange rate effect on cash and cash equivalents (185,153) (23,750)
Net Increase in Cash and Cash Equivalents 510,742 101,874
Cash, beginning of period 171,354 69,480
----------- -----------
Cash, end of period $ 682,096 $ 171,354
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 406,680 $ 218,903
=========== ===========
Cash paid for income taxes $ 0 $ 0
=========== ===========
See accompanying notes to financial statements.
F-6
EARN-A-CAR, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2013
1. 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 1 Pty. Ltd. - the wholly owned subsidiary Earn-A-Car (Pty)
Ltd. purchased a wholly owned subsidiary in June 2012, the name of this
purchased entity is Earn-A-Car Assets 1 Pty. Ltd. The function of this entity is
to hold title to vehicles that are purchased through financing which requires
specific assets to be held as collateral for those loans. All of the assets and
liabilities of this entity are consolidated and included in the presented
financial statements according to generally accepted accounting principles of
the United States.
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.
F-7
EARN-A-CAR, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2013
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 February 28, 2013 and February 29, 2012 the Company had
$682,096 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 February 28, 2013 and February
29, 2012 the Company had $7,444 and $264,189 in impaired receivables,
respectively. The allowance for these impaired receivables was $14,359 and
$164,259 for the years ended February 28, 2013 and February 29, 2012,
respectively.
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. Payables includes all accrued cash back
liability to clients as adjusted as required for the Company to meet its cash
back obligation to its clients. The amount is determined at contract inception
and is the approximate amount required to generate a lump sum at end of cash
back period sufficient to match the future carrying value of the car at the end
of this period. Cash back is accrued for monthly and the accrual is adjusted for
regularly as required to ensure no shortfall occurs at the end of the period.
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.
F-8
EARN-A-CAR, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2013
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. The upfront
administration fee is non refundable. However the company defers its upfront
administration fee income received at the inception of the rental contract over
the average rental period. Simultaneously the company defers direct, incremental
selling costs related to the rental of the vehicle over the same average rental
period. This is a change in accounting policy and the new basis has been used to
calculate revenue in 2013. The 2012 numbers have been restated to reflect the
new policy.
Advertising Costs - Advertising costs are primarily expensed as incurred. During
the years ended February 28, 2013 and February 29, 2012, the Company incurred
advertising expense of $84,087 and $16,494, 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 February 28, 2013.
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 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.
F-9
EARN-A-CAR, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2013
2. REVENUE-EARNING VEHICLES
Revenue-earning vehicles consist of the following:
February 28, February 29,
2013 2012
----------- -----------
Revenue-earning vehicles $ 6,212,677 $ 4,028,709
Less accumulated depreciation (1,354,132) (1,046,649)
----------- -----------
Revenue-earning vehicles, net $ 4,858,545 $ 2,982,060
=========== ===========
3. PROPERTY AND EQUIPMENT
Major classes of property and equipment consist of the following:
February 28, February 29,
2013 2012
----------- -----------
Computer equipment $ 23,353 $ 17,757
Computer software 2,368 5,649
Other fixed assets including signage 8,664 0
-------- --------
Subtotal 34,385 23,406
Less accumulated depreciation (9,427) (9,164)
-------- --------
Property and equipment, net $ 24,958 $ 14,242
======== ========
For the years ended 2013 and 2012, the Company recorded depreciation expense of
$511,799 and $516,119, respectively.
4. LOANS RECEIVABLE
At February 28, 2013 and February 29, 2012, the Company has a receivable due
under a settlement agreement with a former employee with a balance of $7,037 and
$15,312, respectively. This loan is to be repaid with interest of 10% in 48
equal installments of approximately $425; the payments began in March, 2011.
F-10
EARN-A-CAR, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2013
5. DEBT AND OTHER OBLIGATIONS
Debt and other obligations consist of the following:
February 28, February 29,
2013 2012
---------- ----------
Loan payable - individual - unsecured, interest bearing,
no fixed repayment terms $ 22,625 $ 26,546
Loan payable - individual - unsecured, interest bearing,
no fixed repayment terms 11,312 66,366
Loan payable - individual - unsecured, interest bearing,
no fixed repayment terms 56,562 90,257
Loan payable - individual - unsecured, interest bearing,
no fixed repayment terms 41,008 104,373
Loan payable - other - unsecured, interest bearing,
no fixed repayment terms 68,027 252,488
Loan payable - bank - secured by assets of the company,
bearing interest of JIBAR plus 5% per annum, repayable in
quarterly installments beginning 30 September 2012 2,356,765 0
Loan payable - other - unsecured, interest bearing,
no fixed repayment terms 151,181 0
Loan payable - Jay & Jayendra (Pty) Ltd. Secured by
company vehicles, bearing an interest rate of the prime
rate, payable within 12 months 0 159,278
Loan payable - other - unsecured, 2% per month interest,
repayable within 60 days after year end, subject to
default immediate repayment stipulation 0 119,458
Loan payable - other - unsecured, interest bearing,
no fixed repayment terms 27,943 60,285
Loan payable - other - unsecured, interest bearing,
no fixed repayment terms 27,489 0
---------- ----------
Total 2,762,912 879,051
Less: Current portion of loans payable (731,271) (152,243)
---------- ----------
Long-term portion of loans payable $2,031,641 $ 726,808
========== ==========
F-11
EARN-A-CAR, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2013
5. DEBT AND OTHER OBLIGATIONS (CONTINUED)
Expected maturities of debt and other obligations outstanding at February 28,
2013 are as follows:
Loan Amounts Lease Amounts Total
------------ ------------- ----------
Year ending February 28, 2014 $ 731,271 $ 714,948 $1,446,219
Year ending February 28, 2015 $ 970,194 $ 329,883 $1,300,077
Year ending February 28, 2016 $ 942,706 $ 293,065 $1,235,771
Year ending February 28, 2017 $ 0 $ 11,937 $ 11,937
Year ending February 28, 2018 $ 0 $ 0 $ 0
Thereafter $ 118,741 $ 0 $ 118,741
---------- ---------- ----------
Total $2,762,912 $1,349,833 $4,112,745
========== ========== ==========
Installment sales and lease contracts are secured by installment sales and
finance lease agreements over revenue generating vehicles, having carrying
values at February 28, 2013 of $1,337,101 and $3,224,012 respectively and
carrying values at February 29, 2012 of $546,796 and $1,624,501 respectively.
These installment sales and lease contracts are repayable in monthly
installments for 2013 of $16,626 and $44,874 respectively and 2012 monthly
installments of $15,443 and $58,647 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 28,
2013 and February 29, 2012 because our taxable losses and loss carryovers exceed
the income in those years. At February 28, 2013 and February 29, 2012,
respectively, the Company had net losses of approximately $524,559 and $379,175
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 February 28, 2013 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 February 28, 2013 and February 29, 2012 there were 112,250,000 common
shares outstanding.
The Company is authorized to issue 20,000,000 preferred shares of stock. As of
February 28, 2013 and February 29, 2012 there were no (0) shares outstanding.
F-12
EARN-A-CAR, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2013
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:
February 28, February 29,
2013 2012
-------- --------
Operating leases:
Premises $ 52,526 $ 13,872
-------- --------
$ 52,526 $ 13,872
======== ========
Future minimum rentals and fees under non-cancelable operating leases for the 12
month periods are presented in the following table:
February 28, 2014 $ 0
February 28, 2015 $ 0
February 28, 2016 $ 0
February 29, 2017 $ 0
February 28, 2018 $ 0
At February 28, 2013, 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:
February 28, February 29,
2013 2012
-------- --------
Loans payable to shareholders/related parties:
G. Hardie $ 4,000 $ 1,000
-------- --------
Total loans payable to related parties $ 4,000 $ 1,000
======== ========
Compensation paid to directors
G. Hardie $ 4,000 $ 0
John Storey 6,787 0
-------- --------
Total compensation paid to directors $ 10,787 $ 0
======== ========
F-13
EARN-A-CAR, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2013
10. SUBSEQUENT EVENTS
The Company has analyzed its operations subsequent to February 28, 2013 through
the date these financial statements were issued, and has determined that it does
not have any material subsequent events to disclose.
11. CORRECTION OF ERRORS AND RESTATEMENTS
The Company has restated its beginning balances for 2013, as well as the balance
sheet and statement of operations for 2013 to correctly account for the
recognition of revenue on up-front income in terms of US GAAP. Per US GAAP, the
Company has now deferred the non-refundable up-front income it receives in the
first month of the rental contract over the company's average rental period of
20 months. Simultaneously the company deferred direct, incremental selling costs
related to the rental of the vehicle over the same average rental period. The
company used to account for all the up-front non-refundable income once it was
due and payable as this is the accounting policy for the subsidiaries.
The beginning balances February 29, 2012 in the income statement and balance
sheet have been restated to correct the presentation of the deferred income and
deferred costs and to correct the errors from 2012 detailed above.
The following are the previous and corrected balances for the year ended 29
February 2012:
February 29, 2012 Financial Statement Previously
Beginning Balances Line Item Corrected Stated
------------------ --------- --------- ------
Balance Sheet Deferred Income 324,449 0
Balance Sheet Deferred Costs 75,571 0
Balance Sheet Retained earnings 498,559 753,173
Statement of Operations Rental Income 2,186,705 2,518,631
Statement of Operations Direct motor vehicle costs 866,511 943,823
Statement of Other comprehensive Income Net Income 60,792 315,406
Cash Flows Net cash provided by operating
activities 943,271 949,007
F-1
